How WeWork's implosion applies to media, metrics and spinning yarns
You might have heard a little bit about WeWork, the global coworking startup that made news in August when it filed its S-1 IPO paperwork. With significant questions raised about the business model, and assertions of CEO mismanagement, the $47bn unicorn now faces the prospect of bankruptcy.
Regular listeners of NYU Professor Scott Galloway’s podcast Pivot might have heard him dryly deconstruct their business fundamentals (a few times actually) but Recode’s post mortem is probably the most comprehensive overview of the most spectacular corporate woopsie since Fyre Festival.
- WeWork offers shared workspaces for small business and entrepreneurs across 280 locations across the globe. Its stated valuation in January was US$47bn.
- Its prospectus issued prior to its IPO drew immediate criticism, and within a few weeks its charismatic CEO Adam Neumann resigned, accused of self-interested and erratic behaviour. His $1.7bn golden handshake hasn’t endeared him to many in the media or politics.
- Principal investor Softbank, which runs a $100bn technology investment fund, has been criticised for entrusting WeWork with close to $10bn in investment, given what they must have known about its business fundamentals. Questions have been asked about the degree to which SoftBank CEO Masayoshi Son was lured by the charm of the entrepreneur.
- Under new leadership, WeWork has withdrawn its IPO and started to restructure the business to improve its fundamentals, including potentially laying off up to a third of its workforce.
WeWork's spectacular rise and fall raises obvious questions about supposed technology company valuations and the cult of entrepreneurs. But if you take a broad view, we’re presented with three interesting parallels to the media industry today.
Measuring what matters
Galloway highlighted WeWork’s use of confected business metrics including ‘Community-based EBITDA’, or ‘profitability, before the BITDA’. Rather than standard financial reporting. I was reminded of any number of media metrics that give the illusion of progress. Ultimately, we need to be brought back to measuring what matters. This is especially the case for digital media, where the measurement challenge lies in picking the right notes. Whilst input media metrics like CPM, or attribution proxies like last touch might be helpful for optimising, the focus is often far removed from measuring what actually made a difference against the campaign objectives.
All that glitters
Australians could hardly be accused of too little cynicism, but I’ve observed how often media decisions sometimes resolve back to how a decision-maker ‘felt’ about an opportunity. Evidence based thinking might seem dull sometimes, but I’ve been struck by how much we focus on the ‘story’, when we could be focused on the ‘proof’. In the case of WeWork, it seems as though the narrative is what charmed investors rather than the reality. Reflecting on the last time you saw some really compelling evidence on which to base a decision should hopefully be illustrative.
Trading short for long
Much was made of the precarious position of WeWork’s cost base, with multi-year real estate contracts that needed to be funded by a very short-term revenue model. Much has and will continue to be made of brands and marketers’ short and long-term objectives; brand vs performance, Binet and Field. Avoiding the obvious conclusion, that WeWork should simply have focused on short-term profitability, I think a more enduring lesson is that in all areas of business we need to take a balanced view, one free of bias and the lure of a good story, but based soundly on the evidence in front of us.