Will Washington’s Sequestration Sequester Our PR Budgets?

It’s time to add “sequester” to the list of words we could do without. In case you don’t already know, dictionary.com defines it as “to remove or withdraw into solitude or retirement; seclude?” You know, terms like, “fiscal cliff,” “kick the can down the road,” “move the needle,” and my election-year favorite, “47%.” I’m starting to think so.

Maybe it was because the mainstream media already began referring to Wednesday’s Mid-Atlantic snowstorm, which was supposed to “retire” DC for a day, as “Snowquester.” Then again, maybe I’m just wondering what communications wiz chose “sequester” as the clunky, if euphemistic, word describing $85 billion in mandatory government spending cuts that went into March 1.

Whether Uncle Sam calls it sequestration or the “Sh*% Hits the Fan Act,” make no mistake, these cuts, if implemented fully, are predicted to have far-ranging negative consequences. They range from an estimated 1%-1.5% drop in GDP, (resulting in nearly zero annual US economic growth) to reduced satellite coverage and lower resolution (read: accuracy) predicting the weather.

But a recent AdAge article brings up another good point that hits very close to our PR home. Government ad spending is one of the first expenses on the sequestering chopping block. The army, for instance, spent $47 million in the US in advertising in 2011. And government PR is essentially a DC cottage industry, ripe for additional reductions.

Sequestration sucks for PR in other ways too. As a profession that cares deeply about the implied messages of things, draconian communications spending cuts by Washington might send a powerful signal to private industry that they too, can do without in-house or outsourced public relations. The sequester might sequester spirits as much as it does budgets.

It’s what’s known as the proverbial “chilling effect.”

I truly hope this will not be the case. Yet with congressional gridlock at historic highs and approval ratings hovering near an all-time low of 15%, there’s growing fear that the full weight of the spending cuts will take hold across the entire advertising, PR and marketing sectors.

After that, the chilling effect gets downright cold. If government stumbles under its own bloated fiscal weight, you can be sure the private sector will follow as the two are inexorably linked. The fact that the Dow Jones achieved two days of record closes and February’s jobs report (which comes out Friday) is predicted to add a respectable 175,000 jobs might not be enough to offset DC’s disarray.

The irony is that, were such a scenario to unfold, each political party would be working overtime to spin the causes of these problems as the other party’s fault, requiring some fancy communication skills in the process. Our services would again be deemed “needed.” Unlike the sequester, now is not the time for the PR industry to “withdraw into solitude.”

Effective communications is essential in good times and bad. So what can we do as an industry to lobby Washington in reconsidering its actions? I guarantee 100% of Americans are in favor of that (not 47%) with no needle moving or can kicking required.

Daily Deal Dilemma: Does Groupon Need a Refund, a Reboot, a Stern Reprimand or Just a Little Maturing?

The answer depends on whom you ask. If you ask Groupon CEO Andrew Mason, 31, he’s likely to say the latter.

But before we get to Mason, let’s recap.

Back in February 2012, I wrote about how Groupon, the daily deals “Mecca” was launching a PR blitz to help rewrite its then recently soiled reputation after a slew of communication missteps:  a fumbled Super Bowl ad and a case of fuzzy earnings math just prior to its November 2011 IPO.  It revamped its website and added the public relations might of Paul Taaffe, the former chairman and CEO of Hill & Knowlton. (For history buffs, that’s the 85-year-old Manhattan-headquartered PR agency once known for its support of Big Tobacco and its infamous “A Frank Statement to Cigarette Smokers,” 1954 newspaper ad, that claimed the “statistics purporting to link cigarette smoking with [lung cancer] could apply with equal force to any one of many other aspects of modern life.”  Gotta love this industry!)

In that earlier post I puffed on about the tough job that Taaffe had ahead of him, referring to the journey as a “rocky road” while going on to say that, “taming the daily deal beast just doesn’t seem like a job anyone should embrace,” and that “public relations leaders can only craft a message so far. Too much spin and a message – and a company – can spin out of control. Let’s see what happens next.”

And (nearly) spin out of control it has.

Earlier this month it was reported that the Securities and Exchange Commission had begun a preliminary investigation into Groupon’s questionable financial accounting practices after the company announced that it was revising its 2011Q4 earnings, cutting it by $14.3 million to $492.2 million from $506.5 million. The announcement left many Groupon naysayers crying, “I told you so,” while investors are jumping ship in search of…. better deals.

Fast forward a few weeks since the troubling news and Groupon’s stock slide continues. On Thursday April 26, 2012, Groupon’s stock price was nearing bargain-basement levels, trading at $12.06 a share, after its $20 a share opening in November and its 52-week high of $31.44. The reason for the downward revision? Groupon hadn’t set enough money aside for customer refunds.

So in light of all this communications turmoil, one would expect that Paul Taaffe and his team would be out in full force defense and crisis mitigation mode.  To date, however, Taaffe’s strongest defense was when he told reporters: “Every three months Groupon is a different company.”

Somehow I don’t think that’s what investors wanted to hear.

But to give credit where it’s due, Groupon CEO Andrew Mason at an informal town hall meeting on Wednesday admitted his company no longer has “any margin for error,” adding that Groupon is “still this toddler in a grown man’s body in many ways.” In helping the company grow up, the company has announced plans to bring on board additional senior management, and according to a recent Wall Street Journal article, at least two new board members – all designed to show that the company can mature, mature quickly and rebuild investor confidence.

As a public relations professional, one of the most important pieces of advice I can give is telling clients to be up front about their actions and intentions and if there’s no substance behind a marketing campaign, then there’s no point selling the message.

Frank town hall meetings that get section-front coverage in the Wall Street Journal (check out Marketplace in the print edition) is probably not enough to quell all investor fears. But as Groupon closes out another challenging month and is only two and a half weeks away from its next quarterly earnings report, it’s nice to see a maturing response.

Perhaps then – and in an ironic way - Paul Taaffe was on to something after all. Just maybe, Groupon is beginning to change. And just maybe this change is here to stay and the company will not be something different three months from now.

We’ll have to wait and see.

Groupon’s Dodgy Deal: Can a PR Blitz and Site Overhaul Save the Company From Itself?

When it comes to Groupon, the daily deals digital Mecca, my, my, how the dot com angels have fallen.

Even as a public relations professional who’s seen and navigated her fair share of client missteps, I’m a bit gobsmacked by how a company that less than two years ago snagged the front cover of Forbes magazine with the eye-catching title “Meet The Fastest Growing Company Ever,” has managed to have its PR rug so skillfully pulled out from under them. What’s especially noteworthy is that Groupon’s recent rotten deal has been entirely self-made.

For readers who aren’t up on the latest Groupon happenings, the company has for the past several months, endured a barrage of PR setbacks, helping re-write the company’s until-now spotless public narrative. Here’s the errrr…..deal: In 2011 the Chicago-based company was roundly sacked following a Super Bowl XLV (45) ad that appeared to mock the decades’ long Tibet-China conflict. A few months later, and just ahead of Groupon’s November initial public offering (IPO), the company that had since its founding been branded based on its hyperactive growth, had to slice its reported revenue in half due to questionable accounting practices. Tsk tsk tsk.

Even the company’s opening stock price, fittingly perhaps, came in at a bargain $20 compared to an earlier valuation that said the couponing site was worth $30 billion. Re-tweaked fuzzy math brought that value down to $12 billion.

And while the company’s NASDAQ stock as of this writing is hovering near its opening price, only down .2 percent, and they’ve managed to start the new year with no additional public relations faux pas – that is if you exclude their announcement last week of a 2011 fourth quarter loss of $9.8 million – a sense of Wild West mentality combined with deck-of-cards-like fragility (some would say Ponzi scheme) continues to deal the company a PR blow.

To be sure, Andrew Mason, Groupon’s 31-year-old CEO, isn’t going down without a fight. In the effort to build back its image as a leader in the online deal-a-day world where coupons attract customers to once-hidden brick and mortar establishments and where everyone wins, the company announced this week major revisions to its website. Among the changes includes adding “thumbs up” and “thumbs down” capabilities so that Groupon users can help the site be more selective when doling out its latest offerings. And in another striking move, Groupon announced the hiring of public relations veteran Paul Taaffe to better manage the company’s image. His arrival comes after only a two-month stewardship by Brad Williams, formerly of EBay Inc.

Whether or not Taaffe, 50, paired with Mason,31, is the right combination of relative youth and relative years remains to be seen. But the fact that his arrival comes after his predecessor barely had time to break in his desk chair’s seat cushion, more than even erroneous math or disgruntled business owners crying foul over the supposed Groupon “deal,” is the best indication yet, that Groupon might be sick. Very sick.

As PR professionals we are tasked with helping keep our client’s message on track, being consistent and accurate with the media, and when calamity strikes, honest and up front about our mistakes. But that hard work should always be predicated on a company that gets its facts and its story straight –before it goes public. To do anything less is like having one hand tied behind your back during a boxing match. Or if you’re a lawyer, having your client reveal a critical detail that could alter a defense only moments before opening arguments. That type of handicap serves no one.

There’s no denying Groupon’s had a tough year. And while it may be easy to say “what’s 365 days in the course of a life?” Groupon, much like its leader, is still very young, having just celebrated its third birthday. But if you’re three years old and already a third of your life has been troubled with a mixed marketing message, what does that suggest going forward?

Taaffe’s got a rocky road ahead of him, for sure.

Good press or bad press aside, Groupon and its thousands of employees and millions of dedicated users aren’t going anywhere anytime soon. But taming the daily deal beast just doesn’t seem like a job anyone should embrace and revamping a website is just not enough. Public Relations leaders can only craft a message so far. Too much spin and a message – and a company – can spin out of control.

Let’s see what happens next.