My social media friends who think I hate the stuff will only receive confirmation of that misconception from today’s post. But really, this is something they have to think about.
Yesterday’s San Francisco Chronicle reported that there’s been a sharp falloff in venture capital funding for social media companies, which received “only 2 percent of the venture capital headed to Internet enterprises last quarter.”
That was down sharply from the 6 percent (at least) of all venture funding social media companies received in each of the quarters in 2010-2012, with the peak occurring in the third quarter of 2011, when Twitter launched.
Here’s the interpretation from a tech investment guy quoted in the article: “We are certainly in another bubble.” In fact, the article’s reporter, who writes for Bloomberg, compares this slowdown with “the deflating of the Internet bubble of the late 1990s” which led to the dot-com collapse.
No one is saying this defunding of social “bleedia” is going to result in a stock market crash. But it does seem to me that it represents a turning point in the evolution of social media: the moment when the investment community realized that social media–big and important as it is–isn’t as big, and won’t be as big, as some people had hoped.
Where the smart money now is going is to business intelligence, analytics and performance management, advertising, sales and marketing, and anything to do with the cloud.
Having said all this, it’s important to point out that the drop-off in social media funding applies only to new startup companies. It may simply be that the social media field is now mature, stocked with existing companies, leaving no room for new ones. But if use of social media was continuing to skyrocket as it did in 2008-2012, you’d think there would be continuing opportunities for savvy young entrepreneurs to enter the field. But apparently, that’s not what investors think.
It’s true that use of Twitter and of Facebook continues to rise. But both of these companies face revenue and earnings issues, and it’s not clear that they’ll be able to increase income without resorting to some kind of premium service that will turn off millions of current users (as YouTube is experiencing right now), or without getting deeper into advertising, which also is not without problems: Facebook, at the very least, is seriously annoying people with these new popup ads that appear in our feeds, and it’s not clear to me how much more users will take before they revolt.
You would think that these existing problems and challenges confronting Facebook, Twitter and YouTube would encourage young entrepreneurs to come up with alternatives. But I think the venture capitalists have realized that these revenue and earnings problems are endemic to the Internet, and not specific weaknesses of individual companies. Any social media startup will face the same problems.
Which gets us back to where I started: the problems inherent in the social media model seem unsolvable, at least by any means that are now apparent, even to Silicon Valley’s top angel investors. Social media companies can’t figure out reliable ways to earn profits because end users can’t figure out reliable ways to use social media to make money. The great investment bleedia is a clear sign that social media has hit its first significant speed bump, forcing it to slow down.
What’s the killer social media app for a winery?
I can remember back in the early 1990s when the Internet, or the World Wide Web as most of us called it, was so new that nobody knew precisely what it could be used for. The search was on for “the killer app,” the thing that everybody would want to do, which would therefore earn its users a great deal of money.
As it turned out, some young guys, like Sergei Brim and Larry Page, realized that a search function–the ability to find anything amidst the vast (and growing vaster) hoard of information–was the classic example of a killer app: they created Google and got rich. A little while later, Mark Zuckerberg realized that social networking was the most natural thing in the world for a World Wide Web to do. He created Facebook and also got rich.
(A lot of porn site entrepreneurs also got rich. Enough said about that.)
So those were at least three things the Internet could do (aside from obvious B2B functions that are boring but crucial to companies, not to mention email). The question of the last 5 or 6 years has been, what is the killer app on the Internet for small businesses, and particularly for small wineries–the thing that will help them make money?
I’m not prepared to say, because I don’t know; but yesterday I asked my Facebook friends how they use social media at their wineries, and the overwhelming response was typified by this: “As a tool, FB, Twitter, Pintrest, WEM , are all wonderful ways to connect to your clientele” and this: “I rarely use FB/Twitter for promo and sales. Mostly just to reinforce the simple ‘voice’ of [the winery] and stay in front of my ‘likers’.”
In other words, communication. Several people warned that, as soon as the winery is perceived as trying to sell stuff, it turns friends and followers off. This remains the irony and contradiction within social media.
Central Coast Wrap-up
The Central Coast wine industry seems to be booming, according to this report from the Pacific Coast Business Times. Indeed, you can feel this buzz everywhere you go in wine country. Such a contrast to a few years ago, when a gloomy atmosphere pervaded. I’ll be heading down to Santa Barbara next week for the Chardonnay Symposium, and am stoked by the thought of seeing all the winemakers and tasting their wines.
Blind tasting the cults
Interesting article by my old editor and colleague, Jim Gordon, in Wines & Vines, where he writes of an event at the Culinary Institute of America in which winemakers tasted each other’s wines blind, something they “rarely” get to do.
Winemakers really should do it more often. In fact, they should do it all the time. I know certain cult winemakers who’ve never tasted their own wines blind, much less tasted them against competitors. They might be surprised to find less expensive wines out-performing their own–according to their own palates! But then, that potential danger in blind tasting is probably why more winemakers don’t do it. And anyhow, when it comes to sales, it’s about image as much as it’s about quality. Along these lines, yesterday my sister emailed to ask why some bottles of wine are so heavy. She wanted to know if they cost more than lighter bottles, and, if so, how do the wineries make up for the difference? I explained to her, of course, that some wineries package their wines in heavy bottles in order to make the consumer think the wines are more important. This works very well, and the consumer is willing to pay more for a heavy bottle than for a light one. My sister was surprised, but she needn’t have been. P.T. Barnum spelled this out more than a century ago in his famous dictum about suckers.
(This post was inspired by a “Viticulture Brief” that appeared in the Santa Rosa Press Democrat yesterday.)
My blog is just over five years old now, and what a crazy five years it’s been. In 2008 the wineries-and-social media arena was like the Wild West, filled with danger, opportunity, chaos, confusion, rattlesnakes and gunslingers. It was a bold proprietor who dared to jump in. Most held back, unsure of what to do, not wanting to make blunders. Like good businessmen, they preferred to let others blaze a path into terra incognita they could then follow.
Now it’s 2013. It would be sweet to say that the formula’s been figured out, but unfortunately, it hasn’t. There still is no template for wineries to trek the social media landscape–although social media consultants claim otherwise!
So what do we know now that we didn’t know in 2008?
In a way, nothing. The only difference is that what we knew then was obscure. Today, the outlines are clearer. We know for sure that direct-to-consumer (DTC) is just as important as we thought it was, and even more so for small wineries who find it hard to get distributed post-Recession. Whether it’s through a tasting room or a wine club, DTC remains the lifeline by which the family winery avoids being cast adrift and drowning.
We know, however, that DTC doesn’t happen all by itself but must be developed. There are several elements to this. One is for the consumer who’s Googling her way through the world wide web to come across your winery’s website. And not just come across it as, for instance, being #37 on a search result, but being one of the first hits, and having a provocative headline that will prompt the searcher to click on it.
For example, I just Googled “best Napa Valley Cabernet” and two of the first three hits are from me. (Yes, I was surprised, but not entirely.) Number one is an article I wrote for Wine Enthusiast, number two is Schrader’s website, and number three is a post from my blog.
Finding myself with such high visibility on such an important search topic is gratifying, of course; but the question for wineries is how they can do it. Schrader did; so did Robert Mondavi and Napa Cellars, albeit on page 2, and by the time we come to page 3, nobody’s reading anymore. This tells me that Napa Valley wineries are not doing a good job at search engine optimization.
Let’s suppose they were, through the usual tricks: Google+, key word use, extensive hyperlinks as well as linking all of your online presences to each other, and so on. But a key to landing in a top search result is frequency of online publishing. You can’t update your blog or website once a month and expect anyone to find it. It’s got to be everyday. That’s why people come back to steveheimoff.com Monday through Friday. They know they’ll always find something new (and not just some rehashed reviews).
This raises the issue of loyalty. Ask a brand manager what’s the best thing a brand can have and she’ll tell you customer loyalty. You can’t buy it (although it often money to establish). You can’t force the consumer to be loyal or do it with some gimmick. There’s magic how it happens. Jordan and Silver Oak have earned customer loyalty; their examples stand as inspirations to other wineries. This blog has earned reader loyalty. My readers never feel pandered to, or spoken down to (I would hope). They don’t get the feeling I slap-dashed some fast food together for them. Instead, they get something that appeals to their intelligence–they feel engaged. Engagement: that’s the soul of social media. Don’t talk at me, talk with me, and let me talk with you. Together, we’ll have a conversation.
Admittedly, it’s easier for me to have a conversation with readers than for a wine company. A company has too many levels of management. Everyone gets a veto; creativity is stifled in favor of white bread. But people don’t want mush; they want something substantial. Give them something real to chew on, and they’ll come back. Withhold it, and all the social media consultants in the world can’t help you.
It’s interesting, in the light of this new report on the status of direct-to-consumer wine shipments in the U.S., to project the trend into the future and imagine what the American distribution system might look like in 15 or 20 years.
The report’s most startling discovery is that DTC’s dollar value last year “was greater than the total value of U.S. wine exports.” Almost as noteworthy is the fact that “The direct shipping channel continues to grow at a faster rate than the overall wine market.” DTC is said to be more important to “small and medium sized wineries” than it is to large wine companies that dominate supermarket and big box sales, presumably because the Big Boys have a lock on a distribution system that’s been consolidating in their favor for decades.
Which brings me to the crystal ball part of this tale.
Let’s imagine that it’s 2030 and, all other things being equal (the U.S. still exists, there’s no internal civil unrest to discombobulate markets), consumers are still healthy and buying wine. At the present rate of expansion of DTC, one can easily see the day coming when small and mid-sized wineries sell pretty much everything they produce direct, either through tasting rooms or through some sort of postage.
The result would be a schizoid market: Giant companies (Constellation, The Wine Group, Diageo, etc.), with their scores of individual brands, still dominate the supermarket aisles where most Americans continue to shop. At the same time, more and more consumers are getting their wine direct from the winery.
The situation is roughly analogous to what happened to traditional bookstores with respect to Amazon.com and other online sources of books. The trad bookstores found themselves confronted with a huge challenge: how to stay relevant. It was much easier for busy shoppers to buy something online and wait a few days to get their hands on it, than it was for them to actually get into their cars and drive to a mall or downtown, find parking, wait in line at the register, etc.
As similar-sounding as the situations are, though, there are important differences. Consumers don’t have to go to bookstores, but they do still have to go to the supermarket to buy their groceries, so as long as they’re there, it’s no hassle at all to swing by the wine aisle. This is good news for the big wine companies, who should continue to enjoy robust sales for decades to come.
Still, there are lessons for everyone. The big wine companies are going to have to “act small.” This means creating new brands that seem eco-friendly and appeal to individual niches in the market: young people, urbans, ethnic and racial groupings, housewives, singles, older retirees, liberals, conservatives, hipsters, etc. Although these brands may be mass-produced in the tens, if not hundreds, of thousands of cases, the consumers don’t know that. All they can see is a bottle they can relate to, and that seems to relate to them. To a great extent, the big wine companies are already doing this. They’re going to have to keep doing it, and do it better, if they want long-term dominance.
The small and medium-sized wineries have this lesson: They have to “think big.” They have to put on their businessman’s hat and come up with real marketing plans. After all, direct-to-consumer doesn’t happen all by itself, like Athena springing fully-born from Zeus’s brow. DTC has to be planned, created, executed and followed through; and once you have a loyal customer base, you have to keep it and make sure the competition doesn’t poach it away.
This is where communicating with the customer comes in. If a small winery has a tasting room on, say, Highway 49, in Gold Country, and is selling 90% of their wines “through the screen door,” they’re very lucky. But most wineries aren’t in that position. They may sell 30% in the tasting room, but the rest has to be cultivated, through clubs and the like. This is where social media comes in. Consumers like to feel connected to the producers of goods and services they buy, especially when the product is something as mental as wine. (“Mental”? Yes. There’s nothing emotional about buying a screwdriver. But there is something emotional about buying clothes, a car, wine. Think about it.) I’ve long said that wineries can’t put all their eggs in the social media basket, but they should put at least one or two and, depending how it goes, maybe even three or four.
I sometimes feel like some wine writers are losing their minds.
From about the time I started this blog, in May, 2008, there’s been this constant din about how “Print journalism is dying” and “Wine writers are dinosaurs” and “Social media is changing the world as we’ve known it” and so on and so forth.
To which I say: balderdash. Most of this is journalistic blather, the product of reporters who need to be seen as saying something important, even though it’s not true.
Look, human nature doesn’t change just because some fancy new technology comes along. In fact, human nature is pretty resistant to change. People are more or less the same, in their habits and predilections, as they were a thousand years ago, and we’ll remain so–despite Twitter and Google+!
The latest example of “Henny Penny the Sky is Falling” is courtesy of Jon Bonné, the wine writer for the San Francisco Chronicle. His article, Wine Criticism Faces a Shifting Future, has gotten quite a bit of play. After rehashing all the recent news about Parker, the Wine Advocate and Galloni [which actually no longer is news], Jon postulates a “broader set of questions about wine criticism” that sounds as if he’s about to say something pontifical. Among these contentions are rehashes of dreary points that have been repeated so often, by so many bloggers, that they’ve become clichés.
Let me deconstruct a few of Jon’s quotes by explaining that just because a writer says something is new and revolutionary doesn’t make it so.
1. “the Millennial surge [is] compelled by a wine’s story, not its score.” The implication here, of course, is that the generation that preceded the Millennials, the Baby Boomers, wasn’t interested in stories, just scores. This is transparently incorrect and insulting. Every generation likes “stories” in its newspapers and magazines. My generation, no less than any other, wanted to read about people, personalities, personal histories. I can’t believe Jon is implying that the Milllennials want to read “stories” more than their parents did. If anything, the Millennials are reading less. Their attention span has been miniaturized by social media and twitter to 140-character tweets. Some story! And scores are not going away, not soon, probably not ever. If anything, scores and other graphic indications of quality (stars, puffs, letter grades) are on the increase.
2. “This generation of new drinkers… want[s] wines that are relevant and forthright.” Again, is Jon implying that the Baby Boomers wanted wines that were irrelevant and–well, what is the opposite of “forthright” anyway? Whatever this statement means (and I don’t think it means much), this generation of wine drinkers wants the same thing its parents wanted: the feeling that the wines [and other beverages] they drink are interesting and cool. Whatever wine seems cool at the moment (Muscat, Bull’s Blood, Malbec, orange wine) is what they’ll drink–until something cooler comes along, and then they’ll drink that. That’s human nature, and it doesn’t change.
3. The new generation, according to Jon, wants to know all about “a winemaker’s ethical and technical decisions – about farming, about intervention in the cellar,” about issues of “broader cultural commentary.” This sounds like solid reporting, but it’s built on sand. First of all, the Baby Boomers wanted to know everything, and I do mean everything, about every technical aspect of wine, from soil pH and irrigation systems to the type of fermenter and crusher to the source of the oak, its toast level and how long the wine remained in barrel. If anything, Boomers got too obsessed with technical issues, an obsession that thankfully began turning around some time ago. I don’t believe Millennials care about “intervention in the cellar.” Some writers are always telling consumers they should worry about reverse osmosis, or mega Purple, or whatever, but really, aside from some geeks, nobody cares about these things, and rightfully so. Concerning “a winemaker’s ethical decisions,” I assume Jon means being green. Who isn’t green, to some degree or another? Everybody says they are, and since there’s no way to prove it, we have to take them at their word. But when I go to a club or bar at night and the kids are lining up for their drinks, I don’t hear anyone asking about whether the grapes were grown biodynamically. They’re more interested in feeling good and getting laid. This implication that Millennials care more about “farming” than simply enjoying a delicious glass of wine is the kind of reporter’s BS that proves the old adage, just because it’s in a newspaper doesn’t make it true.
Since Jon bases all his premises on the Parker/Advocate thing, he has to return to it, in the form of a paeon of praise for Galloni’s new venture [and I wish Anthony all the luck in the world]. I’m not sure why Antonio Galloni quitting the Wine Advocate should stand as the symbol of The End of Wine Writing As We Know It, or of anything else, except, possibly, the continued weakening of the Parker brand. Along the way, Jon also references Wine Spectator–twice–although for what reason is unclear, except that Jon has always been bizarrely obsessed with the Wine Spectator. Perhaps he feels that an important article about the Future of Wine Criticism has to drop the S-word (Spectator) and P-word (Parker) in order to be taken seriously. Or to maximize search engine optimization. Whatever.
My point, folks, and I’ve been making it for going on five years now, is that the revolution is not at hand. We have new technology, in the form of smart phones, tablets, the Internet and social media, but humankind has always had new technology. Yet people remain the same. Consumers still want and need experts to guide them in purchasing decisions, whether it’s cars, DVDs, restaurants or wine. They still want to buy things that make them feel cool and plugged in. The Millennials are not so different from their parents. Journalists who wish to be serious need to get over their breathless embrace of social media and pseudo-intellectual analyses of how it’s changing the role of wine writing. It hasn’t, isn’t and won’t.
“2013 will be the year that big brands and advertisers can finally expect to start making money from social media sites,” is the hopeful prediction of a company, Millward Brown, an international advertising and marketing company specializing in “brand equity.”
They say there’s been a big psychological turnaround in how we use social media. “[S]hoppers are now not only open to being targeted through intelligent digital advertising, they expect it.”
Really? I suppose I do “expect” to get pitched 24/7 to buy stuff, by telemarketers on my phone, by ads on Facebook, and everywhere. I also “expect” to occasionally step in doggie doo-doo after some idiot doesn’t clean up after his/her mutt. But that doesn’t mean I like it!
And what does “open to being targeted” mean, anyway? Do we have a choice in the matter of how Facebook figures out what to advertise on our pages? Nobody asked me for permission to search through everything I do on the Internet and then decide what I’m in the mood to buy. I’m not “open” to (in Millward’s words) “new, richer advertising opportunities,” they’re being foisted on me by forces against my will. The word “open” therefore is bunk, although Millward did get it right with that word, “targeted,” as in seeing us Facebook users through the crosshairs on a rifle.
They have a newish term for the marriage of “retail” and “social media” and it’s called, appropriately enough, “retail social media.” Sounds like an oxymoron to me. Check out the colorful graphic on this site that purports to explain how “community hubs – conduits for people with similar interests to gather” – such as Facebook – can now be used as digital billboards. In the graphic, you see symbols for the following conceptual parts: Staff, HR, Marketing, Operations, Merchandising, Products, Events, Stores, Tactics, Analytics, Strategy, and Business Goals, with arrows showing how all these moving parts are interrelated. But nowhere in the graphic will you see the Facebook user—you and me, the human being at the center of the whole thing. That’s because, from a “retail social media” perspective, the human being has ceased to exist. Instead, there’s only a transactional purchaser with a credit card, a demographic, a, yes, customer whose exclusive function is to buy.
Mind you, I’m not against advertising on websites, per se. I understand that the people who work to give us a free Internet have to make a living. Zuckerberg isn’t doing this for charity. We’re free to ignore the ads if we want to, which is exactly what I do. I’m just increasingly concerned that advertising is going to move from something on the fringes of our social media to something dominant.
It’s sad for me, as a lover of social media, to see it getting hijacked in this way. I guess it was inevitable. But I wonder how the heart of social media—the free, communal spirit in which it has thrived up until now—will survive this assault by the forces of marketing, which are so antithetical to authenticity, transparency and sharing—the traditional pillars of the social use of the Internet. I said as much in my remarks a couple of weeks ago at U.C. Davis’s class on P.R. and Social Media for Small Wineries, although some people didn’t want to hear it.
You know how wine geeks talk about the “True” Sonoma Coast, as opposed to the formal AVA? I see social media the same way. There’s “true” social media in which individual, real people express themselves to other real people and engage in dialog. Then there’s “formal” social media, something that looks and behaves like “true” social media, but isn’t. Instead, it’s a Trojan horse designed to trick people. It’s probably asking too much for big corporations to be authentic (although they can pay people to make them appear to be authentic). But authenticity is what small family wineries do best. I hear over and over again from them that they don’t have the time to do social media, or they don’t know what to say. I tell them over and over again: You do have the time. Facebooking or tweeting only takes a few seconds. As for what to say, Say whatever is real at the time you’re saying it. “Hated to get out of bed this morning cuz it was freezing, but needed get out into the vineyard.” That’s real and authentic and interesting.