5 PR cherry bombs of last year: what went wrong & what it teaches startup entrepreneurs, corporate executives and PR reps

This past year saw a number of innovations across consumer and enterprise technologies. The tech IPO, funding and M&A markets were lively. And we saw big changes and personnel moves unfold across the blogosphere and news outlets, such as Michael Arrington leaving TechCrunch. As a result of all this activity, 2011 boasted plenty of big news stories about everything from the cloud and Big Data to social networking, mobile apps and tablets.  Nonetheless, some of the biggest tech stories were born out of poor PR. Let’s take a look back at some of this year’s biggest players in the tech community – and the PR Cherry Bombs they dropped. With the benefit of hindsight, we’ll discuss what can be learned from all this. We’ll dissect what these companies did, and didn’t do, to diffuse and transform their situations into good PR.

PR Cherry Bomb #1 – GROUPON The company’s CEO and PR rep are both culprits in this Cherry Bomb. In June, Groupon filed its IPO, officially entering the SEC’s mandatory quiet period that prevents companies from promoting its own stock. Over the course of the next two months, Groupon was criticized in the media for pre-IPO financial losses, prompting the CEO to write an internal memo debunking these claims that was subsequently leaked to the press. Meanwhile, the company’s PR rep was caught lambasting a journalist for her reporting on Groupon’s pre-IPO financials, directing her to review the “leaked memo.”  Press and the SEC came down on the company for violating its quiet period.

Perhaps they were feeling anxious about their IPO, but the CEO and PR rep should have been familiar and in compliance with pre-IPO communication rules. With regard to how they handled some of the negative press on the company: they could have served as a resource and provided third-party references to help the reporter get the facts straight rather than blasting her for purportedly misquoting sources. It’s better to build and maintain a positive, ongoing relationship with media, because if anything, a carefully cultivated relationship greatly increases the likelihood of them writing favorably about a company going forward.

PR Cherry Bomb #2 – PAYPAL One of the most recent PR Cherry Bombs occurred just a few weeks ago. Regretsy, a blog spotlighting handcrafted items mostly from Etsy.com, organized a gift drive for needy kids in the Regretsy community. Just as Regretsy’s owner had done many times before, she set up a PayPal account customized with a “donate” button. Because donations came in so fast during the first few days, PayPal’s internal system triggered a review of Regretsy’s account. Different PayPal reps deemed Regretsy in breach of an existing policy, froze its account, and demanded the company refund all the money, but that it was keeping the transaction fees.

From an outsider’s viewpoint, PayPal’s response appeared rigid and it negatively impacted how people viewed their customer loyalty and service – very important qualities in today’s taxing economic times. Regretsy’s owner immediately blogged about what was happening, setting off a social media firestorm. The backlash was immense, with some saying “PayPal Stole Christmas.”

As it turns out, Regretsy did nothing wrong; PayPal policies were so ambiguous that even its own agents assigned to review the account misunderstood them. In the end, PayPal recognized its mistake and moved quickly to publicly apologize and do the right thing for its longstanding customer. Within 24 hours, a PayPal executive called Regretsy to apologize, unfreeze the account, eliminate any fees for the rest of the year and very generously offer $200 gift cards to each family in the fundraiser.

PR Cherry Bomb #3 – AIRBNB Airbnb faced one of this year’s biggest PR nightmares. The online housing rental company was fast-becoming a media and tech darling. Then a blog post surfaced by an Airbnb user named EJ who rented out her apartment through the service and came home to find it ransacked and vandalized, her valuables stolen and possessions burned. Although the blogosphere didn’t get wind of the incident until a month after it happened, the details became known about how Airbnb handled the situation and it set off an immediate negative reaction.

The CEO issued what some called a “mild” apology on TechCrunch and the Airbnb user EJ rebutted the apology instantly, stating Airbnb had not been in contact with her in a month, that the agent who helped her transact the rental went silent three days after her initial report of the incident, and - most condemning - the CEO was making veiled threats for her to whitewash her posts since they were damaging to the company. These claims really put Airbnb in the hot seat.

Startup entrepreneurs, corporate executives and PR reps can all learn a lot from this particular incident about how to best handle a crisis. For starters, it’s best to proactively address an incident publicly rather than letting it surface on its own, forcing a companyto later assume a defensive, reactionary position. Also in this case, the company had little to say about how it helps keep customers safe. In times of crises, customers appreciate hearing from the company what they are doing to give their users peace-of-mind. Lack of contact and radio silence tends to only incite more anger and disappointment.

On the bright side, the young company took a hard look at itself and started making substantial improvements to gaps in its offering. To be more responsive to customers, Airbnb established a customer service department, improved security procedures and introduced an insurance guarantee program. In the face of controversy, it’s applauding to implement new measures to demonstrate how the company is committed to dealing with any customer problems.

PR Cherry Bomb #4 – GODADDY This PR Cherry Bomb comes from a company known for pushing the envelope that finally went too far. GoDaddy.com’s CEO triggered international outrage when video and photos surfaced of him hunting big game in Zimbabwe and boasting about “bagging an African elephant.”  The CEO’s public response was that his participation in this kind of hunt was to aid local villagers, who were being harassed and pushed to the brink of starvation by elephants eating local crops.

Once the video went viral, though, the damage was done. Anger and rallying cries to protest GoDaddy.com were rampant, with individuals canceling their accounts and PETA amassing several thousand signatures in only a couple of days to boycott GoDaddy. Boycott GoDaddy websites and Facebook pages began to crop up. Even a competitor, Namecheap.com, ran an entire PR campaign and promotion to get people to dump GoDaddy and switch over, with 20% of the proceeds donated to savetheelephants.com. GoDaddy’s CEO seemingly didn’t anticipate the emotional response and professional fallout that his actions would cause.

Our personal and work lives are blurred more than ever because of social media and an always-on, connected world. Personal Facebook profiles are tied to professional brand pages; Google+ circles and 1+s are publicly visible; Twitter is a firehouse of permanent public remarks; YouTube and Flickr are easily tagged and searchable. All of these social media channels usher in a new way of conducting our professional and personal matters online, and careful thought needs to go into how we behave, lest the brands and companies we’re tied to suffer the consequences.

PR Cherry Bomb #5 - SONY It started in the spring for Sony – a security breach where the names, addresses and credit card numbers of 77 million PlayStation Network (PSN) accounts were hacked. It took Sony a whopping seven days to alert the public about the massive security breach. Then in the fall, Sony’s PSN was hacked again, affecting about 93,000 accounts. And then while already under scrutiny for ongoing security flaws and weak links, Sony was blasted for surreptitiously updating its PSN terms of service with a clause prohibiting people from suing the company without first obtaining its consent to do so.

Any security breach involving stolen personal and financial information is a grave matter, as is the amount of time a company takes to report a breach to its affected customers. In the spring hacking incident, Sony took a full week to confirm rumors that were already swirling around on the Internet. It was bad enough that PlayStation users couldn’t log on to their PSNs without even a peep from Sony as to why, but failure to notify PSN users that their personal and private information was stolen (and likely subject to criminal activity) certainly didn’t help matters.

Companies facing a data-hacking incident should alert their customers immediately about the security breach, explain how the company is handling it, and inform customers what they can do to protect themselves. Even under the best of circumstances, it is important for companies to anticipate customer needs, and clearly and transparently communicate changes to their terms of service, pricing, products/services, etc. The poor timing and communication of Sony’s updated TOS led many to believe – right or wrong – it was still tackling security holes.

In Closing As we move into 2012, we can learn from these PR Cherry Bombs before us, and also take a page from some of the good PR tactics we saw come out of them such as with PayPal and AirBnB.  Some of our upcoming blogs will likewise examine good PR practices and highlight examples where companies got things right from the get-go.

Which incident profiled above do you think stands out as the most deserving of this year’s Cherry Bomb award? And what are some other PR strategies and actions companies could have employed to better handle the bad PR situations they were facing? Let us know what you think!