Brand Innovators: Virtual Reality




Amazon.com founder Jeff Bezos built the premier cyberspace brand – but will his empire endure?
What does it take to build a great brand? Innovation and guts. Then throw in people who grasp the essence of that brand for good measure.
Years ago, conventional wisdom deemed that once you understood the product, you ran commercials on network TV to promote it. Now, agencies and their clients realize that a 30-second spot on the Super Bowl does not a brand make.
Our series “Brand Innovators” tells the success story of three brands. In each case – Amazon.com, Tommy Hilfiger and VH1 – we examine how a pioneering company built, nurtured and sustained its name and appeal.
Each brand, while distinct, forged its path by relying on one of two essentials: nontraditional advertising or unconventional marketing methods.
This week, we explore an emerging brand: Amazon.com. Born just four years ago, Amazon has become a household name – and the gold standard for Internet retail. Yet given this state-of-the-art enterprise, Amazon did it the old-fashioned way: word of mouth. Forget million-dollar creative budgets; the site experience doubles as a TV ad campaign.
In part two, we focus on a brand that has maintained its leadership position: Tommy Hilfiger. We detail how the fashion king established a cult following by clothing rappers gratis – and how he parlayed his line’s urban appeal into a company worth $1.6 billion.
Finally, we conclude our series with a comeback story. VH1 has staged a remarkable revival by creating original programming for a neglected audience: middle-aged boomers. As the anti-MTV, it zoomed in on those largely ignored by pop culture and turned this lucrative demo into a loyal following – all the while establishing a brand credibility of its own.
Few companies have built their brand faster or better than Amazon.com.
When founder Jeff Bezos opened the doors of his virtual bookstore in July 1995, the Web was still “the World Wide Wait” and e-commerce was a pipe dream.
Today, Amazon is the world’s leading online retailer of books, videos and CDs – and its brand is a household name. Last year alone, Amazon’s sales grew a staggering 313 percent to $610 million, and the company is expected to post 1999 sales of at least $1.5 billion. Plus, the company continues to expand into new areas, such as online auctions, groceries and gifts. Its near-maniacal emphasis on consumer satisfaction has turned its customer base of 10 million into one of the world’s biggest fan clubs. More than 60 percent of customers are repeat business.
Now the brick-and-mortar retailers that initially scoffed at e-commerce – including Barnes & Noble – are making a mad dash into a business projected to generate more than $1.2 trillion in sales by 2002, according to Peterborough, N.H., research firm ActivMedia.
On Wall Street, Amazon’s 1997 initial public offering was one of the most successful in history – and the stock is still the darling of many analysts. With a market capitalization of roughly $20 billion and a war chest of $1 billion in cash on its balance sheet, the company is an undisputed powerhouse.
How did Amazon do it? In essence, Bezos, 35, employed every tool in the marketing kit – including good old-fashioned myth making – to invent the world’s premier cyberspace brand.
Take the company’s version of its birth, which is already part of Internet folklore.
In 1994, Bezos – watching Web usage grow 2,300 percent a year – abruptly quit his high-paying job as a hedge-fund manager at D.E. Shaw & Co. on Wall Street, packed his wife and dog into an old Chevy and headed west. As the Chevy Blazer hurtled down Interstate 90, Bezos drew up his business plan while recruiting allies on his cell phone. Arriving in Seattle, Bezos launched his new company out of his garage.
The Bezos saga is a clever retelling of an Old West legend – ’90s style. Bezos is the East Coast tenderfoot who followed Horace Greeley’s advice – “Go west, young man” – and hit the destiny trail. The SUV doubled as the covered wagon; the cell phone was his six-shooter; Interstate 90 replaced the Oregon Trail; and the garage was the log cabin from which young Jeff civilized the Wild, Wild Web.
So who cares that Bezos didn’t start his road trip from Wall Street? That he flew to Texas first. Most of the story is true. As the newspaper editor in The Man Who Shot Liberty Valance told Jimmy Stewart: “This is the West. When the legend becomes fact, print the legend.”
And as the pseudo tall tale of Amazon’s founding illustrates, everything connected with the company is carefully scripted to create the image of a scrappy underdog that cares more about people than profit.
Bezos’ first decision – the company name – may have been his most important. He spent months trying to come up with a moniker signifying size and power. His first choice was “Cadabra,” but he junked it after his lawyer misheard it as “Cadaver.” He settled on Amazon – the Earth’s biggest river – as a metaphor for its biggest bookstore. The name immediately grabbed the attention of netizens. So did Amazon’s work ethic.
For example, the company’s ramshackle headquarters is in a seedy part of Seattle. The place is a notorious dump where overcrowded staffers work on desks made out of old doors and two-by-fours. (Stock options lessen the discomfort.) The message? We’ll sacrifice our comfort to bring you discounted books.
Amazon was also one of the first marketers to snap up banner ads and create Web links. As Jerry Yang, co-founder of search engine Yahoo! noted during a recent interview on The Charlie Rose Show, Bezos “built a very strong brand” by “tying up some of the best real estate on the Web.”
Just as important, Bezos delivered on his promise to make Amazon a consumer-focused brand. The company has parlayed a virtual store into an innovative, easy-to-use site personalized for each user. As consumers enter the site, they are greeted by name. “Collaborative” software enables Amazon to suggest books, movies and CDs based on their previous purchases. The site uses e-mail to communicate with customers. Amazon’s invention of “1-Click” technology allows customers to take care of business quickly – the equivalent of paying at the pump in a gas station. Amazon even encourages users to post their own book reviews on the site – and thousands have done so. The medium is the message. Moreover, the experience users enjoy on Amazon’s fun site, coupled with its top-tier service, has proved to be an extraordinarily successful – and free – ad campaign.
In another break from marketing tradition, Amazon didn’t do much conventional advertising during its startup phase to attract consumer attention. It didn’t have to. Instead, Amazon was savvy enough to stand back like a corporate Tom Sawyer and let everybody else paint the picket fence, including customers, financial analysts and the press.
“[Amazon] did it the old-fashioned way: word of mouth,” says Martyn Straw, president of New York-based branding consultancy Interbrand Group. “More recently, it has been such an incredible stock, the investment community did their advertising for them.”
After all, everybody loves a dark horse, and Bezos smartly employed guerrilla marketing tactics – such as deploying mobile billboards – to portray Amazon as the feisty David in its war with Goliath Barnes & Noble.
The strategy helped put the client in the forefront of consumers’ minds, which is essential to cyberspace success. “The Internet is all about branding. It’s more important here than it is offline,” says Mark Breier, the former vice president of marketing for Amazon. “People have to remember your name and type it in. There are no Golden Arches or Coke cans to remind them.”
Consumers, according to a recent “Brandz” poll of roughly 500 people conducted by WPP Group’s Millward Brown, are bullish on the brand. Amazon is the top-ranked brand in the “home shopping” category, which includes offline retailers like 1-800-Flowers and QVC. “They are a cult brand and have a strong following. Even among non-Internet users they have a
certain mystique and allure,” says Mary Ann Villanueva, a consultant at Naperville, Ill.-based Millward Brown.
Amazon, however, is at the point where a cool name, a charismatic founder and word of mouth aren’t enough. Bezos and Amazon are being asked if the emperor has any clothes.
“The good news is they are brilliant marketers,” says Gary Stibel, a founding partner of the New England Consulting Group in Westport, Conn. “The bad news is they have not achieved dollar one of profits. If they can convert their marketing brilliance into commercial success, they will be very dangerous.”
Bezos declined to be interviewed for this story, but he admitted as much on Charlie Rose, explaining that Amazon has yet to build an “important and lasting” company.
“We could still be a footnote in the history of e-commerce,” he warned. “If you look at the history of pioneer companies, it isn’t pretty.”
Ironically, upstart Amazon is now a victim of its own success – and inflated expectations. Many Internet stocks, including Amazon, watched their share prices plummet in recent weeks. When the company reported a sales boost of 236 percent in the first quarter of this year, some analysts were disappointed.
“They were very good but not spectacular,” says renowned Internet analyst Henry Blodget of Merrill Lynch about the results. “People are used to spectacular with this company.”
Stibel wonders whether Amazon will ever show a profit. “This could end up being a very large Ponzi scheme – a big company that makes no money,” he says.
Even the financial press, one of Amazon’s main promoters, is now turning on the company. “Amazon.bomb,” screamed a recent cover of Barron’s. “The idea that Amazon CEO Jeff Bezos has pioneered a new business paradigm is silly. He’s just another middleman and the stock market is beginning to catch on to that fact,” claims Barron’s.
The big question is: What’s next? For openers, more traditional advertising.
Bezos told analysts recently that he plans to boost his advertising and marketing budgets – despite a net loss of $61 million in the first quarter. (Amazon spent nearly $18 million on measured media in 1998, up from only $3 million in 1997, according to Competitive Media Reporting.) In February, he recruited Allen Olivo, one of the architects of the acclaimed “Think different” campaign at Apple Computer, as his new vice president of marketing.
Shortly after Olivo’s arrival, Amazon told San Francisco agency Foote, Cone & Belding it was unhappy with its ad campaign and was considering a review, say sources. Recently, though, a global FCB team led by worldwide creative director Geoff Thompson and EVP/group management supervisor Jane Gardner presented a new campaign to succeed the current “Earth’s biggest selection” effort. Amazon, say sources, liked the proposed creative and is currently testing various strategies.
One thing is certain: Size will no longer matter. The company, sources say, plans to focus on its service and loyal customer base. The Web is virtual, so championing itself as big annoys some people. “It’s dumb. I only want one book. I don’t care if you have 4 billion,” says Interbrand’s Straw.
FCB, which operates under standing orders from Amazon that it can be fired for talking to the press, declined comment.
So did Olivo.
Still, advertising has been a slow climb for Amazon. Early on, it relied mostly on banner ads and some radio spots from CKS, Portland, under the theme, “Earth’s biggest bookstore.”
After Breier, now president and CEO of Sunnyvale, Calif.-based online software retailer Beyond.com, conducted an agency review in early 1997 and hired FCB, the client slowly ventured into TV. The agency’s current work takes a funny, irreverent approach.In various executions, two guys in hard hats travel to the Pentagon, an aircraft carrier, the Taj Majal and other places in a fruitless effort to find a space that can hold Amazon’s millions of items.
The ads themselves get a mixed review. “It’s not a great campaign; it’s a good campaign,” says one source. “You could argue that the greatest Internet brand should have the greatest campaign – its own bunny or chihuahua.” While the ads have been effective at combatting consumers’ fear of Web shopping, some say it’s time to move on.
Amazon’s inability to create breakthrough ads can be attributed in part to the company’s scientific approach. As a client, Bezos is described as high energy, brilliant and down to earth. Felicia Lindau, a former account supervisor at FCB who founded her own e-commerce greeting-card company, Sparks.com, in San Francisco last year, says he’s inspirational. “To meet a client that intelligent, who knew exactly what he wanted to do, was great,” she says.
At the same time, observers say Bezos is a micromanager of the creative process. “The creative was always a struggle,” admits Lindau. “[Amazon is] definitely a demanding client and doesn’t make the leap to a really big brand idea without the data to back it up.” Getting Bezos to even consider TV work required a mountain of research. Bezos, who graduated from Princeton University with a degree in
electrical engineering and computer science, is “deductive, not intuitive,” says one source. “As an engineer, I’m not sure if he has that left-brain magic.”
On Charlie Rose, Bezos joked that he hates waiting for a computer to boot up. That impatience is also present in the ad process. Breier’s advice? Amazon shops need thick skins. “He likes to tell an agency what to make. It took a lot of coaching to teach him how to work with creative people.”
Breier says he tried to introduce traditional marketing techniques to Amazon – with strange results. At one meeting, he presented consumer research on the Amazon brand which stunned Bezos and company. “I had a room full of people completely dumbfounded – they all thought the brand was Jeff Bezos,” he says. “Sometimes, these entrepreneurs find themselves in a very foreign world.”
Breier recalls one advertising meeting that summed up Bezos’ approach. After the client and agency met for hours without coming up with an idea, Bezos turned to him and said, “Mark, this is a lot harder than computer programming.”
Bezos, who likes to carry a camera in his pocket in order to study the present, might save himself heartache by studying the past. Like Silicon Valley entrepreneurs who were tested by the brand-building process two decades ago, Bezos and the new generation of e-commerce CEOs must find their way.
The rite of passage for Bezos is whether he’ll let Olivo work his magic. And the clock is ticking.
Amazon now has rivals everywhere. On its home turf of books, Barnesandnoble.com recently took Amazon up on its challenge of a price war and slashed prices on New York Times bestsellers by up to 50 percent. The company, with backing from deep-pocketed
Bertelsmann A.G., recently raised over $400 million with its IPO.
In newer categories like music, Amazon is battling entrenched competitors like CDnow, which has no intention of “getting Amazoned.”
In addition, the success of Amazon keeps attracting big new players. The latest: Microsoft co-founder Paul Allen, who wants to turn his new venture, Mercata, into the world’s biggest Web retailer.
What worries Amazon watchers most is that anybody – from corporate giants like Barnes & Noble to one-person startups like Lindau’s Sparks.com – can arguably do what Amazon does. Bezos himself referred to Amazon as a “one-trick pony” in an interview with Business Week. “It’s just a good trick,” he added. Others are more blunt.
“I think the bloom is off their rose. I don’t know what they’ll do for an encore,” says Straw. “Right now, they are teaching everybody how to beat them. They have a business model that’s being replicated all over the place. There’s nothing unique about them, except their reputation and the hype.” Straw cautions Amazon not to continue devaluing one of its strongest assets – its friendly site – by adding categories in a cluttered fashion.
Competition isn’t Amazon’s only worry. Still looming on the horizon for e-commerce companies is whether the government will decide to impose a tax on transactions. Such a move would raise prices and operating expenses.
A second worry is closer to home.
Amazon has successfully created the image of a smiling, all-American company. Yet it runs the risk of becoming its own worst enemy by projecting an arrogant image. When the New York American Marketing Association inducted Amazon into its hall of fame last week as a “current brand,” Amazon told the AMA that nobody would show up at the Effie Awards to collect the award.
Hallmark, the other inductee, was expected to send its CEO. (An Amazon representative says the client is besieged by appearance requests and can’t accommodate all of them.)
Despite these challenges, Merrill Lynch’s Blodget says it’s foolhardy to underestimate Amazon. “You are getting indisputably the most powerful e-commerce franchise around, and one of the best management teams,” he says. Let’s not forget raw ambition, he adds. In short, don’t rule them out.
Of course, the question of whether
Amazon will be an emerging brand or an enduring one will be decided by its customers, not its critics. Lindau cautions that future ad efforts need to remind loyalists that the company is David, not Goliath. Right now, their loyalty shows no sign of abating. “Customers just love them,” says Lindau. “They are convinced there are book lovers behind the facade.”
Like the pioneers who built the West, Amazon has no intention of riding off into the sunset. They staked their claim during the Web’s commercial infancy and provided the model for “e-tailing.” It remains to be seen whether Amazon will fulfill predictions and become the “Wal-Mart of the Internet” or as one Web expert put it, “Amazon.toast.” ¡