There are crises that make your stock plummet and customers flee, and then there are avoided crises, when all of your preparations ensure that nothing whatsoever happens.
Somewhere in between is that rare occurrence when bad news does little harm and maybe even some good.
The most recent spate of attacks on leading Web sites was just such a crisis. In fact, after seeing the stock price of several of the targeted Web sites rise, one pundit
postulated that soon we'd have Web sites hacking themselves purely for the publicity value.
Which brings up yet another difference between the new and old economy. If you are a dot.com star in the new economy, like eBay and E*Trade, normal crisis rules don't apply. We
wrote about E*Trade's service disruption over a year ago, and despite all the crises around that, no one's exactly fleeing that service. Even more astounding is that despite
skyrocketing fraud complaints, more people than ever are clicking onto eBay.
On the other hand, if you are a traditional brick and mortar company, it's still crisis as usual. This was more apparent than ever when a price fixing scandal erupted at the
two leading traditional auction houses, Christie's and Sotheby's.
The chief executives of both companies resigned, dozens of lawsuits have been filed, and both companies' sterling 200-year-old reputations have been terminally tarnished.
Normally in this column, I'd now be saying that communications held the key to eBay's success and Christie's downfall, but like everything else in the new economy, things are
turning on their heads. eBay was entirely silent during the hacker attacks, letting the CEO of E*Trade and the Justice Department do all the talking. Christie's did all the right
things. The chief executive resigned, they cooperated with the Justice Department's investigation, and yet the crisis continues. The lesson here is that life is what happens while
you're busy making crisis communications plans, and that in the new dot.com world, the old rules don't apply.
Katharine Delahaye Paine is President, Delahaye Medialink (603/431-0111). Image Patrol is based on a subjective content analysis of major news sources covering a crisis.
Comments are not intended to criticize the work of the company in crisis, but rather to illustrate the role the media plays in shaping the perceptions of various stakeholder
groups.
eBay
HQ: San Jose, Calif.
1999 Sales (mil.) $224.7
1998 employees: 138
Est.: 1995
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eBay
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Criteria
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Grade
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Comments
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Advice
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| Extent of coverage |
A
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It was a sign of eBay's brand strength that it was mentioned in every single article about the hacker attacks, even though no spokespeople were quoted. |
When your entire industry is under attack, there is a huge opportunity to come forward as the responsible leader in the industry. E*Trade's president clearly filled this role during and after the hacker attacks, positioning the company as caring and concerned. Comparatively, eBay lost a huge opportunity to capitalize on the crisis. |
| Effectiveness of spokespeople |
F
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No eBay spokespeople were quoted. | See above. |
| Communication of key messages |
F
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Because their spokespeople were invisible, there was no opportunity to communicate key messages. |
Any time a microphone is pointed at you, it's an opportunity to communicate key messages. Have a trained spokesperson available to the media at all times, since they'll quote whoever is easiest to reach. |
| Management of negative messages |
F
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See above... eBay was simply described as one of the sites that had been hacked, with no additional information about what percent of visitors were unable to be served. E*Trade came across as the leader by speaking out and by offering to reimburse customers. The press noticed, and E*Trade came across as the most together of the companies hit. |
No matter what the crisis, a company must set its own agenda and not let the crisis or the competition to set it for you. Without a credible spokesperson, you are giving the competition license to own positioning, and dominate the discussion. |
| Impact on customers |
C
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I haven't been on eBay since it happened, so at least one customer was scared away. But according to Nielsen NetRatings, eBay has once again cracked the top 10 most visited sites. |
When a crisis is a first time event, rather than something people can relate to, popular psyche will be even more affected. New things, especially new bad things, have a tendency to make customers paranoid and send the media into a frenzy. Your best bet under these circumstances is to emphasize whatever "normal" you can find. In this case, the message was, only 20% of customers were affected. |
| Impact on shareholders |
F
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The attacks brought down stocks in the entire category. At least for a few days. |
Paranoia has no boundaries, and when customers and the media are in a frenzy, chances are "the street" will follow suit. Under normal circumstances I'd be emphasizing the company's stability and profits, but since this is the dot.com world, catching the perpetrators, and investing in new security systems may be the only solution. |
| Impact on employees |
C
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Despite a crazy week, I'm sure most eBay employees felt that there was little harm done. |
Crises are as hard on employees as they are on the communications department and the CEOs. Take into consideration what it must be like to be relatively oblivious to what's going on internally, and then watching the evening news. Express the same concern internally as you do externally. |
| Overall score |
D
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With a bit more opportunism, this would have been a windfall for eBay. |
Crisis can be turned to your advantage as long as you follow the rules of good crisis communication. |
Christie's
HQ: London
1999 Sales: Private
1998 Employees: 1,900
Est. 1766
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Christie's
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Criteria
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Grade
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Comments
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Advice
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Extent of coverage
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F
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When your crisis hits the front page of papers on both sides of the Atlantic, you know you're in deep... The problem the auction houses encountered is that most journalists are union members, champions of the underdog, and do not necessarily come from upper-crust backgrounds. So when crisis hits the upper echelon's of society, like proverbial sharks, they smell blood and begin to swarm. Christie's and Sotheby's were bastions of the elite, best known for their parties and their glamour... the feeding frenzy was inevitable. |
Any type of class action lawsuit, coupled with FBI investigations, is bound to attract prolonged media attention. Communicators should settle in for a long one, even if the auction houses prepare to settle the claims. Emphasizing that policies have changed, but business continues (after the appropriate top brass resignations) is the best way to maintain the corporate reputation under fire. |
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Effectiveness of spokespeople
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D
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Christie's top executive resigned, turning evidence over as he left. That alone was a virtual admission of guilt. When his departure was followed by two more high-profile departures at Sotheby's, it was clear that SOMETHING was going on. |
The toughest part of legal crises is dealing with gag orders. No one can speak on the record, but that doesn't mean that information can't get out through unnamed sources. |
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Communication of key messages
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A
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By having major players step down immediately, Christie's didn't just pay lip service to the problem. They took action. The message was clear that they were concerned, and cooperating with investigating officials. |
As always, actions speak louder than words ever will. |
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Containment of negative messages
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B
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The speed with which the investigation is moving forward, complete with settlement of lawsuits, is actually helping keep down negative messages. |
Speed is always of the essence. The sooner the crisis is no longer news, the faster people will forget the story. |
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Impact on customers
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D
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Attendance and prices at the big May auctions will tell all. However, the 70 or so class action suits on the part of customers is a pretty telling indicator of the impact on customers. |
As in any service business, customer loyalty is key. Price fixing scandals are one of the fastest way to erode customer trust. Christie's needs to pull out all the stops to ensure customer loyalty. Lowering buyers' premiums and dealers' commissions is a good first step, but they will need to do far more. |
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Impact on investors
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F
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While Christie's is privately held, Sotheby's stock lost more than a third of its value. |
Lawsuits will inevitably spook investors. If possible, give them solid financial news to counteract the negatives. |
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Impact on employees
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F
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It's one thing to lose a top executive, but only in rare cases is that top executive the only person involved in wrongdoing. |
Employee morale has got to be at an all-time low. Listening to employees and working to rebuild the organization should be a top priority since studies have shown that employee attitude is the single biggest factor in regaining customer loyalty. |
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Overall
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C
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They took action early, they've cooperated with the investigation, showed their concern, and it still won't go away. While their behavior warrants at least a B+, the net impact is enormously negative. So they end up with a C. |
This was a crisis created entirely by the decision-makers at the top. Removing those decision-makers early was the best thing that could happen, but it will still be hell in the PR office for a long time to come. |