A Facebook friend’s debate has me writing too much over there in private that should be written here in the bright light of the blogging sunshine where everybody can check in and …. YELL about it!
The question over there from my pal in Wisconsin was this: “What will be the benefit and what will be the cost of removing the right of public workers to form collective bargaining groups?”
We went round and round about what I see as a critical issue in that debate which are the unfunded liabilities – mostly pension obligations – that seem to have come from collective bargaining aggressiveness. Surprisingly to me there are still a few large hold out advocacy organizations claiming we don’t have a pension crisis – NIRS is the best example. But clearly we DO have a crisis and it’s potentially very serious.
I’m hoping to hear from Fools Gold and Horatiox on this one as I think we may be coming close to an informed answer. The benefit to society: Slightly lower taxes from the reduced pressure on public spending. Assuming that bargaining bumps up public compensation costs by 10% (based on a conservative CATO paper that should not tend to make this a low number) we are probably talking about something like 5-7% “savings” to taxpayers if we eliminate bargaining (I’m assuming 50-70% of the cost of public sector is in form of compensation and related liabilities).
The cost to society: reduced public worker morale, perhaps reduction in productivity, and probably a reduced quality of workers who chose public service. Although these costs are hard to measure, it seems to me that the modest tax increase is probably worth those benefits to the extent the government services are justified.
A caveat for me would be whether collective bargaining tends to increase total public sector employment. To the extent it does it presents potentially much higher costs to the system. I do not believe the public sector is sustainable in current form and size without tax increases that are politically impossible (and ill advised anyway).
So for me a far more important current question is how we can get the softest landing as we scale back the bureaucracy from its current bloated conditions to a manageable size.
Twitter continues to soar in terms of traffic and Comscore reports on some of the reasons Twitter is one of the most interesting applications to come around in a long time. I think the demographics analysis helps us understand why “Twitter is different”. For the first time in Social Media history the earliest adopters of the application are not the youngsters, but rather a very representative cross section of America. This is important because it’s an indication Twitter will have considerable staying power and also is appealing to a crowd that has the resources to make it more valuable than otherwise, and potentially more valuable than Myspace or Facebook, the clear 800 pound social media gorilla that remains the most significant player by far in the social media space. However at Twitter’s current rate of growth it will surpass Myspace by next year and Facebook within a few years, though it’s not clear from this the data that Twitter will continue at the current phenomenal growth rates.
From my own experiences I do think Twitter represents something really different and superior to the Facebook experience, and that is the real time large group interaction. On Facebook I usually don’t have enough friends online at the same time to interact, and more importantly I usually just want to say “hi”, trade a bit of news, and eavedrop on other conversations. This is easier on Twitter. Much like a large party filled with interesting people where you know “some” people and are learning to meet others, Twitter allows you to follow interesting threads and then hop over to some other one, in the meantime dropping notes or your own quips as you hop around. It matches will with the short attention spans that are natural to our human conditions but also allows detailed follows ups with experts or company representatives or close friends.
Watch Twitter – it is the most significant new online application in many years.
Dr. Eric Clemons from the Wharton School of Business has written a provocative post over at TechCrunch called ” Why Advertising is Failing on the Internet“. It’s a very interesting perspective even though – very surprising to me – Dr. Lemons has really missed the boat in a major way on this issue.
Clemons argues that both offline and online advertising are failing because people are rejecting deceptive, unwanted intrusiveness of ads pushed at them during their experiences ….
Henry Blodget is whining that the Yahoo Microsoft deal is back to where it started, but I think Henry’s wrong … again!
I’m glad Henry was wrong about the rumor that Yahoo’s Q4 would beat expectations because it was part of the reason I bought YHOO then, and even though the stock dipped due to a bad Q4, it surged on Microsoft’s offer of $31 per share so I’m well in the black. But now he’s wrong to say the deal is not almost done. I think this Yahoo Microsoft merger is coming very soon to an internet near you.
Citibank Analyst Maheney upgraded Yahoo this morning, anticipating a boost in the MS bid to $34. Hey, maybe he read my blog post of about 6 weeks ago where I suggested Microsoft raise their bid to $34?
Unlike Henry, I think this is not back to where it all started at all!
Yang didn’t want to merge, now he sees it as almost inevitable. Yahoo board wanted more, now they know anything past initial offer is gravy. Part of the show was probably the board protecting itself against lawsuits from the unlucky minions who bought their Yahoo at $35+, some at over $100.
Barring a Q1 miracle that would recalibrate Yahoo prices without help of MS bids, I think the fat lady is now almost done singing on this deal.
Update: Silicon Valley Insider is reporting that there is an additional 75MM in the deal as an “earnout” over the next several years. That may make this deal sweeter than it appears at first.
At first glance you’d think the sale of website COMPETE.com, which measures web traffic, for 75MM must have been a big payday for a lot of folks. However as Venture Beat notes some 43MM of venture capital had been poured into COMPETE over the past 8 years.
Assuming most of this came at the beginning of the cycle, and assuming most of the 75MM is going to the VCs, the return on this VC investment would be a very modest 8-10%. If the founders and workers also had a decent stake in the sale this return could be lower – approaching what the VCs might have realized with long term CDs over the same time period. Break out the champagne?
I’ve noted before the dirty little secret of many “successful” venture capital deals – they often make a very modest return when time is factored in properly. In fact it appears that *most* VC deals lose money for the players. Data is sketchy, and obviously only the winners are happy to share the details making it very difficult to analyze this since many (most) of these deals are not in the public record.
Sure there are VC winners like Fred Wilson and Jeff Clavier, both very clever VCs who blog some of the details of their failures and successes. However I think this is not typical, as Jeff even suggested here at the blog some time ago.
The Google / Comscore clicking clash is really an interesting story from a lot of angles. Comscore’s recent report that came earlier this week about Google pay per click metrics sent Google stock into something of an immediate tailspin, losing Google tens of billions in market capitalization as soon as the report came out. However, today Comscore is claiming their report does not directly support the ideas that Google click ads are in trouble and that the recession is going to kill online ads.
1) a potentially weak first quarter outlook for Google, and
2) an indication that a soft U.S. economy is beginning to drag down the online advertising market.
And then says their report does not directly support these conclusions:
While we do not claim that these concerns are unwarranted, we believe a careful analysis of our search data does not lend them direct support. More specifically, the evidence suggests that the softness in Google’s paid click metrics is primarily a result of Google’s own quality initiatives that result in a reduction in the number of paid listings and, therefore, the opportunity for paid clicks to occur. In addition, the reduction in the incidence of paid listings existed progressively throughout 2007 and was successfully offset by improved revenue per click. It is entirely possible, if not likely, that the improved revenue yield will continue to deliver strong revenue growth in the first quarter. Separately, there is no evidence of a slowdown in consumers clicking on paid search ads for rest of the US search market, which comprises 40% of all searches.
I’m still digesting the larger report but it seems to suggest that Comscore sees *no reason whatsoever* from their data to assume Google will have a bad first quarter, and if I’m reading them correctly they are effectively saying there is reason to think the quarter’s earnings will *improve* because the revenue per click is improving and paid clicks are increasing? Confusing because these are the almost exact opposite of the conclusion made by market watchers based on the same data.
Initially I read the Microsoft engagement mapping announcement thinking this would be a remarkable innovation. They are claiming that EM will track a consumers interaction with advertising all the way to the point of sale which if done accurately would be a watershed in advertising accountability.
We’ve noted in many posts before how poorly advertisers track offline and even online advertising effectiveness, usually resorting to opportunisic reporting and explanations by their advertising agencies or reporting firms that stay in business because they support the agency advertising spends using questionable metrics.
Enter Engagement Mapping. Microsoft says:
“The ‘last ad clicked’ is an outdated and flawed approach because it essentially ignores all prior interactions the consumer has with a marketer’s message,” said Brian McAndrews, senior vice president of the Advertiser & Publisher Solutions (APS) Division at Microsoft. “Our Engagement Mapping approach conveys how each ad exposure — whether display, rich media or search, seen multiple times on multiple sites and across many channels — influenced an eventual purchase. We believe it represents a quantum leap for advertisers and publishers who are seeking to maximize their online spends.” (bolding mine)
Read the bolded sentence again. Although I’ll have to see the methodology before rejecting it as bogus, that last line does not really suggest objectivity here. Rather it appears this is yet another way for a metric to support a course of action (increase online ad spending) rather than measure the effectiveness of that action.
This is standard fare for ad agencies who feed their kids by exaggerating the effectiveness of their campaigns so I guess it’s no surprise that Microsoft is going to help them do that for the online spends, which benefit…..wait for it ….. GOOGLE! And Microsoft too. But given Google’s approximately 50% share of all online spends I think Eric Schmidt should send Steve Ballmer a really nice gift. Maybe a even a Lazy Boy CHAIR?
Thanks to Metroknow for this link to a study about online activity including kids. Symantec, maker of Norton Security, did the study and here are some highlights from the study of kids activity:
Making friends. About a third of U.S. online children ages 8-17 have made friends online (35%). When you look at teens, the percentage increases, with 50% of U.S. teens ages 13-17 reporting they have made friends with people online. One in three U.S. children (33%) report that they prefer to spend time with their online friends the same amount or more than their offline friends.
Social networking. Seventy-six percent of U.S. teens ages 13-17 years old “constantly,” “frequently” or “sometimes” visit social networking sites. Globally, about half of boys (51%) and girls (48%) visit social networking sites. Like mother, like daughter and like father, like son! That’s right…kids take after their parents when it comes to social networking. Case in point: 47% of U.S. parents “constantly,” “frequently” or “sometimes” use social networks while 46% of U.S. children report the same. When you look at China, the numbers are 78% of adults and 85% of children.
Shopping online. About one in three (35%) U.S. children report being “very confident” or “confident” in shopping online. This number shoots to 69% among children in China.
Getting requests for personal information. About 4 in 10 U.S. teens (42%) ages 13-17 have received an online request for personal information.
Being approached by strangers. U.S. children report that 16% of them have been approached online by a stranger; however, U.S. adults believe that just 6% of children have been approached online by a stranger.
This Internet Advertising Bureau report notes that online advertising is still showing explosive growth. Interesting is the fact that the types of online advertising – with search ads at the top – seems to have stabilized somewhat with “pay for performance” one of the few categories that has clearly increased from last year.
I don’t think this stability reflects the “optimal” mix of ads, rather it is more an indication of how the big players take some time to get comfortable with innovations in advertising, and still stick to more traditional CPM style approaches rather than the clearly superior PPC and pay per performance models. Clearly even many of the big advertisers and agencies still have fairly weak SEM and SEO departments so they’ll choose to use big CPM campaigns that are easy to analyze rather than the more productive – but more complicated to manage – PPC and performance approaches.
Online ads are now a mainstay of any good campaign, but it’ll take some years before advertisers realize the foolishness of many online advertising approaches which generally include bloated CPM impression campaigns. Much more effective are targeted organic and PPC ad campaigns, but these require more analysis and a newer perspective.
The most conspicuously stupid type of campaign – still extremely popular in travel – is to use expensive print advertising in an attempt to boost online visitation. I studied this *extensively* across many print ad types during my work marketing southern Oregon several years ago and despite the clear results that showed print ads lead to only a tiny number of online visits, many travel marketers still think print is an effective way to promote online. It’s not, but it will continue until the incentives and simplicity of squandering money on ineffective print advertising go away. The lack of research in this area is odd to me given the huge total travel advertising spend, but most travel research is self-serving and often sponsored or conducted by the very agencies or entities that benefit from certain results, so stupid biases remain intact for a long time.
If advertising worked as well as is commonly thought, there would far fewer advertising salespeople. I’m not saying in all cases “advertising does not work”, rather in *almost all cases* image advertising is not as cost effective as online marketing, and in *many* cases I’d suggest that offline advertising has a negative ROI for the sector with which I’m most familiar – marketing travel destinations and tourism related businesses.
Yes, I can easily prove this. Just give me any offline advertising campaign set of “successful results”, using whatever measure you care to define as “successful results”, and I’ll show how you can duplicate the effect for 1/2 to 1/10th the cost online. I may even be willing to fund this “experiment” for a destination or travel business if I could blog the results here.
I think big ticket / big brand advertising may work because it scales well. ATT can do a national campaign, reach people at a low cost per impression. Since almost everybody above age 15 is a very strong potential ATT customer there are far fewer “wasted impressions” than, for example, with a national campaign for Oregon Travel where you are advertising to many who simply can’t afford to make the trip or are very unlikely travel candidates.
Obiviously promotion of a destination or a business is critical to success. However promotion of things is done in many ways direct and nuanced. I’m suggesting that image advertising is low on the list of important promotion forms. I eat at the best restaurant here in Talent – Avalon – because experience shows the food, service, and ambiance is consistently very nice. When travelling I like to ask locals for recommendations rather than read a bunch of advertisements, though best is to have internet available so you can surf around to find the best restaurant. (I don’t like surfing with my Treo but I think with the iPhone we’ll pass the tipping point with mobile browsing for travel stuff).
For destinations here in Oregon like Southern Oregon or the Oregon Coast I’d suggest, somewhat educatedly based on 10 years promoting travel here online, that websites are responsible for more than 50% of the “promotion related increases” in Oregon travel economic activity. I’d guess, also somewhat educatedly, that the largest share of travel related economic activity is best attributed to word of mouth and general life trends rather than free internet or advertising or direct promotion (e.g. people visiting relatives, attending events, or people retire and finally have the time to “drive the west coast”, etc, etc).
The advertising mythos is as pervasive as many others, and the more I study “image advertising” the more skeptical I become. With auctions becoming increasingly popular offline and online it’ll be very interesting to see how prices will shake out. If the markets are as efficient as they could theoretically be, we’ll soon have some great data sets for comparing values of offline and online ads.