RED SPIDER

UNDERSTANDING | STRATEGY | OPPORTUNITY

A Look into The Business Model of Red Spider

[Document Title]
PREPARED BY | Jasmine Liao (S9014156B) PREPARED FOR | Prof Mark Chong DATE | February 26, 2013 MODULE | COMM216: Communication Industry: Business Models & Practices

Jasmine Liao [Company Name]

 A LOOK INTO THE BUSINESS MODEL OF RED SPIDER

Long gone are the heydays of the advertising age embodied by Madison Avenue, Manhattan in the 60s. Consumers and brands are now part of a two-way conversation, and new brand strategies are required to reach out to them. Red Spider, an unconventional ideas agency, has managed to differentiate itself to achieve global success.

FOUR-BOX BUSINESS MODEL OF RED SPIDER

Customer Value Proposition (CVP) Conceptualization of a media-neutral and creative strategy based on the clients brand idea/manifesto to drive consumers action through creating conversations. Key Processes and Resources

Profit Formula High margin; Service based; Ad hoc project based payment based on a predetermined packaged flat fee. Infrequently, royalties from product development.

Experienced individuals in the advertising arena (specifically strategic planning) Purely creative brand ideas Three offices: virtual network of strategists Global and informal network of freelancers who are experts in different fields such as digital media, PR, research, innovation, etc Creation of a red print that emcompasses the fundamentals of the brand

STRENGTHS With its roots in advertising, Red Spider set out with a compelling CVP and profit formula to differentiate itself from its beginnings in several significant ways.

Red Spider provides an updated consultancy service that is unique and has a proven track record. Relationships between the brand and the consumers are no longer a one-way one with the brands dictation (through advertisements) being the bible that consumers place its unquestioned faith in. With the advent of social media, consumers are now engaging in online conversations about the brand that is discernible to the public. Red Spider exploits such fluid connections and translates it into brand actions that aim to do good for the consumers. Through the mantra of doing and not just saying, Red Spider creates tailored and bespoke brand ideas which convince consumers of the brand manifesto. Through a more intimate level of interaction with its consumers and showing them that the brand
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cares, Red Spiders brand ideas speak to the consumers like never before. As seen in its successful campaigns, the surprise element in its creative brand ideas further adds PR value for its clients through free publicity.

Red Spider has focused its operations on creating a creative communication strategy in an effective way that businesses today seek. Its services allow the strategic planners to be media-neutral, as it cuts away the execution portion a huge part of traditional ad agencies business model which has been heavily criticised. Without any vested interest in the choice of communication channel, Red Spider can then make more credible prescription of the brands needs, such as PR and digital media in some instances. Further, as a project-based agency, Red Spiders distance from the brand can help to offer independent and breakthrough ideas that the brand has not yet embarked on.

The passionate culture of a club-style ideas business made up by strategists with established credentials ensures that the work provided is creative, original and professional. Further, the informal structure of Red Spider removes the need to be physically in the same place. Ideas can be easily communicated through Skype and online chats, so clients and collaborators alike can communicate globally with ease. Such a structure removes the costly need to have global offices, and instead, focus on key virtual regional offices to sustain the business.

That aside, one of the greatest strengths about the Red Spider model is its cost-effectiveness as an ideas business. In addition to the lack of resource costs, working from a virtual network allows its Spiders greater mobility. If the China office gets busy, the Australian office can then take on the project. Its global and informal network of freelancers from different fields can work from anywhere in the world and this cuts the costs of having to travel and yet, allows Red Spider to source for talents anywhere in the world. Its high margins, low startup profit formula allows it to price its knowledge-based services based on value and charge a premium to its clients.

WEAKNESSES Despite its success, there are some inherent weaknesses in the Red Spiders business model. While its cost-effectiveness as an ideas business is a great plus, this also implies that this business model can be easily emulated. The low barriers to entry of an ideas business would result in increased competition in such services, as it would be easy for full-time strategists
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with similar experience and credentials to step out and start their own consultancy services as a part-time business. Despite so, Red Spider has had a first-mover advantage in starting up earlier than its potential competitors and its successful campaigns have boosted its credentials. Additionally, Red Spider has built up a network of reliable individuals over time and such networks are not easily accessible to anyone.

While Red Spiders idea of doing and not just saying is great, the risk-averse clients may need more persuasion. Doing and not just saying in some instances may also mean that it might be extremely costly and this may not sit well with the brands executives. If Red Spider has to continually come up with multiple recommendations and rework its ideas to one that is satisfactory for the clients, it may impede and dilute the creativity of its strategic recommendations and make the spiders feel exploited by its clients.

On a final note, Red Spiders business model is heavily reliant on the individuals within the agency. In such informal businesses, it is likely that the clients hire the agency only because of his/her networks with one of the members. This poses two risks. If the executive from the client side quits the company, then the agency may most likely lose this account. Secondly, if one of the key members decides to leave the agency, then the client may decide to drop the agency. The networks of the individuals also make up the team of freelancers that work with the agency. It is possible that cronyism forms the basis of selection rather than capabilities, and this could impede the effectiveness of the team working on the project. Finally, it is also easier for the team of collaborators within Red Spider to become resistant to new ideas, outside advisors and new memberships due to a perceived difference in culture.

CONCLUSION Red Spiders strengths lie in its ability to cut through the clutter of traditional advertising agencies and find greater value for strategic planning capabilities. Its brand ideas business has enabled it to cut hefty costs and successfully pursued a business model that allow them to function at a global level. While there are some inherent weakness in its business model, it owes its current success in large to the committed and passionate individuals who make up the team. Its sustainability, however, is still arguable at this point as it seeks to expand or recruit new people into their team with increased demand for its services.