What Wix can teach small business about spending on advertising
Wix is a successful Israeli start up, whose platform is the base for nearly 60 million websites. It is outperforming analyst predictions on NASDAQ. And this week, its clever advert during the Superbowl ensured that another 100 million plus people were exposed to its capabilities.
According to one Hebrew financial commentator, 2014 will see revenues of around US$140 million. Of that, US$10 million – about 7% – was spent on the Superbowl publicity stunt. And I am not sure if that included payments to the star performers.
Is it worth it? Yes, loads of new potential users, but for that price? Surely, Wix could have found a more effective medium? Worth considering, and yet……..
Tomorrow, I will start to work on the file of a new client, an established enterprise based just outside Jerusalem. They are in trouble, looking for an other loan, which will simply allow them to pay off a previous loan. A quick glance at the financials reveals that sales peaked 2-3 years ago. There has been an attempt to close down the overheads, and that includes advertising. Here, expenditure has shrunk by half.
Whoppee! A substantial saving, it would seem.
However, here is the catch. One of the lessons of the Great Recession of the 1930s is that those companies who survived the economic downturn tended to be those that had invested in advertising. They ensured that their customers and potential new customers knew where they were.
My client, like many before him, has opted for the opposite direction. Thus, faster than he can control his costs, I believe that his core revenue base is shrinking. Bad news. As his business mentor and consultant, it will be my task to point out the misfit.
Wix is a young, arrogant and assertive company with a bright future ahead. Its understanding of dragging eyeballs to view its service – the importance of not relying on past glories – is a lesson for all small companies around the globe.
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