Advertisements On Disposable Coffee Cups
I was watching videos on YouTube about young entrepreneurs pitching to venture capitalists when one pitch intrigued me. Normally, the venture capitalist pitching videos I see on YouTube are about pitches for software businesses or request for scientific research funding.
What this very young male entrepreneur was pitching to venture capitalists is an advertising business. You might say that: “Isn’t the majority of software businesses these days about advertising?”
Yes, this is true. A lot of software businesses these days get a majority of their revenue from advertising. Even Google, Facebook and the biggest social media and video gaming apps all derive a majority of their income from advertising.
This just proves how lucrative advertising revenues are. And this is what the young entrepreneur in the video is pitching: an advertising business. But he’s different from the rest of the young entrepreneurs we have these days who are focused on putting ads on softwares.
TRADITIONAL ADVERTISING BUSINESS
Paper newspapers and magazines were the paper versions of today’s cellphones, newspapers especially. They contained the news of the day, entertainment news, sports news, political news and so on.
They even contained weather news, classified ads, fashion and lifestyle news and so on. In short, people derived their daily information from newspapers and magazines. They attracted a lot of what we call now as “eyeballs”.
And this makes them a desirable medium for advertising. I was already past my twenties years when the age of modern mobile phones arrived. So, for a majority of my life, I derived my daily information on newspapers.
People during those days carried their newspapers with them all the time. They buy them in the morning and read them as they go to work, are having lunch, or any free time they have. This is precisely how we handle our mobile phone these days.
But of course, the age of the newspaper and magazines have to end. Although a few of them survive, they are hardly a match for the internet which is located in everyone’s mobile phone. It seems traditional printed advertising will go away soon.
In terms of traditional advertising, what the mobile phone-centric ad agencies have not defeated yet is billboard advertising. They are one of the highly prized advertising real estate in the world of advertising.
You see these printed or digital advertising billboards covering the fashionable districts of such countries as America and Japan. The cost of advertising in these billboard ad medium costs in the thousands of dollars.
These billboards are usually located in high foot traffic areas where people who likely have a lot of spending power congregate. Effective or not, these advertising billboards are one of the major products advertisers are selling to companies.
Advertisers are also selling ad space in sports games, in buses and taxis, in balloons or in airplane banners. It seems that if you are involved in the advertising business, you can sell ad space on just about anywhere the law would permit you.
I say this because in some countries in Europe or elsewhere, there is a strict no advertising sign on many of their places. In short, advertisers need to be creative on where they would next put their advertising space.
ADVERTISEMENT ON COFFEE CUPS
The preceding paragraphs may just be my own pitch as to why this young advertising entrepreneur’s business would likely thrive in the long run. Here’s the YouTube link of his pitch to venture capitalists:
YouTube Video: Elevator Pitch Winner
If you watched the video, you would easily see that he is right about a lot of things regarding coffee and people. For instance, a majority of people around the world are coffee drinkers and many of these people buy a cup of coffee on their way to work.
What especially got my attention was when he stated the fact that it takes several minutes for people to drink their hot coffee. This could be as long as seven minutes or more depending on how hot the coffee is and how busy the coffee drinker is.
This few minutes of “eyeballs” or attention from the coffee drinker is a highly desirable ad space. This is not to mention that people usually go to work five or six days a week and have at least one coffee each day. This easily translates to a minimum of 35 minutes of eyeballs a week.
HOW THE BUSINESS MODEL WORKS
Essentially, the business model of the entrepreneur works this way: His company gives away for free to coffee shops, coffee cups which have advertisements of the companies that pay his company to give away advertisement laden coffee cups.
For every advertisement laden coffee cup his company gives away, his company earn 13 cents which is paid by the companies who pay for their advertisements to be put on coffee cups. His company takes care of the printing of the advertisements to the coffee cups.
His company also takes care of the distribution of the advertisement laden coffee cups to the coffee shops. As you can see, the business model is not complex, it doesn’t require sophisticated technology like complex software algorithms to run the business model.
His company specifically partners with small coffee shops like the mom and pop types who are not yet particularly keen on the branding of their coffee shop business. These coffee shops are more concerned with the free coffee cups they would be getting from the company.
According to the young entrepreneur, coffee cups cost small coffee shop owners several thousands of dollars a month in expenses. The free coffee cups of his company are in a way earning the coffee shops owners thousands of dollars a month in expenses saved.
A LOT OF ADVERTISING SPACE
His company earns 13 cents for each free coffee cup they give away to coffee shops. I don’t know if he’s referring to gross or net sales when he mentioned 13 cents, but let’s take the safer route and consider the 13 cents as gross sales and assume his company is making a profit.
The more important issue is this: are the companies advertising to him getting their money’s worth? This is a highly subjective issue and we can only try to speculate the outcome of the coffee cup’s advertising effectivity.
We already know that coffee cups takes about seven minutes or more to be drank, this is already a long time for consumer eyeball duration. But what about advertising space? Is the coffee cup providing a lot of advertising space?
If you cut up a small sized coffee cup and tried to make a rectangle out of it. It would be around 4” X 11”. In terms of advertising space, it’s huge as compared to the ads we see on our mobile apps. I estimate that we can fit about 60 mobile banner ads on the sides of coffee cups.
But what about the coffee cup lid which is essentially the most visible ad space in a coffee cup? That’s maybe at least another 10 mobile banner ads, also, other people get to see the coffee cup and not the coffee cup drinker alone, that’s more eyeballs.
WHAT ABOUT A GAME?
Let’s say that a company or the entrepreneur’s company became creative and added simple games to the free coffee cups being handed out. The games can be as simple as a small crossword puzzle, sudoku or some other brain games.
And let us say that conveniently located near these simple games are the advertisements of companies. As a result, the more the coffee drinker plays these games, the more they are exposed to the advertisements.
Let’s say that an average brain game in the coffee cup would last for the duration of a bus or train trip which could be as long as one hour, this is a very long time to capture a consumer’s attention to your advertising.
This is just one example of how to capture for a much longer time a person’s attention to your advertisements. This is no secret, the reason why mobile game apps are so many is because every app developer is trying to get a piece of the lucrative advertising revenues.
Entertaining for the sake of advertising can take many forms and not only video game entertaining. Let us take for example if you designed a paper coffee cup to be a children’s paper toy complete with a small ad in the toy. Imagination is all that you need.
HE SEEMS TO BE SUCCESSFUL
The young entrepreneur claims that he’s making a million US dollars a month in revenues. This is the reason why I stated earlier that we could question whether the numbers he’s spewing out is either gross or net sales.
But one thing is for sure. He has already successfully persuaded a couple of companies to become his clients and of course, the reason he’s pitching to venture capitalists is so that he can grow his company even more.
WHAT IF A COMPETITOR TRIES TO UNDERCUT HIM?
I think one of the concerns that could be going into anyone’s mind is this: What if a competitor tries to undercut him? This cannot be avoided since his business model is easy to replicate, A lot of competitors can do what his company is doing.
This must be the reason why he’s pitching for more funding so he can distribute a lot more free coffee cups to a lot more small coffee shops before anyone can replicate his business and also try to attract small coffee shops with free coffee cups.
It could also happen that a company who’s a client of theirs already will try to go directly to the small coffee shops and take them out of the picture. This could happen as well. The only defense of this entrepreneur is to assure the small coffee shops that they are reliable.
This means convincing the small coffee shops that if they partner with a single company alone, the company can fail and they’re left with no free coffee cup supplier while the entrepreneur’s company can assure small coffee shops that they have several free coffee cup suppliers.
Will the coffee cup making company do the same thing and try to compete with them? This may happen as well. The best strategy the entrepreneur has will be to have his own coffee cup making machine.
Not many people buy printed newspapers and magazines anymore, but many people still buy coffee from coffee shops. There are even people who can’t start their day without having a drink of their favorite coffee from their favorite coffee shop.
Coffee cups can be a valuable advertising real estate just like what the young entrepreneur mentioned in this article is trying to prove. The physical advertising space and the long consumer advertising time they can potentially capture makes them worthwhile ad investments.
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