Social Word of Mouth Marketing


As social networking explodes on the scene I’m wondering about legitimate vs questionable marketing tactics that involve one’s social network.   Here at the JoeDuck blog I’ve avoided advertising (though I have taken a few liberties with posts that help rank other sites or promote friends, etc).

At my commercial sites I’m more aggressive with advertising and find it’s very hard to decide what levels of advertising are best suited to all the factors that come into play such as generating revenue, being honest,  keeping Google happy, etc.    Although I increasingly buy into the idea that “user friendliness” is a good guideline I don’t think it’s the best one from a revenue standpoint.   Even Google, which I think built a grand online empire partly on the basis of limiting the advertisements around search,  has very gradually increased the aggressiveness of their advertising at some “user centric” expense such as the ads that appear on top of the organic listings.    Although Google insists they are clear about identifying advertising the proof is in the perception and many people still do not understand the difference between clicks when Google is getting paid and when they are not.

I don’t object to Google’s current standards which I think are more than reasonable, though it’s always annoying to hear them pretend (or think delusionally) that their only consideration is optimizing the *user experience* without regard to revenues.   That would not be good business and arguably would deprive them of revenue they can use to provide the raft of great free services we enjoy from Google like blogger, search, mail, maps, and more.

But the real point here is to find a balance between social networking and marketing.    I certainly don’t want to pester people with advertising after they have nicely  come to Twitter or the blog to “interact” about politics, technology, or travel.     But are there appropriate advertisements that do not offend people?

More importantly, how should one handle paid or unpaid endorsements of businesses?     Over at Technology-Report we are now sponsored by Ipswitch Imail  Server, an Enterprise email system.   What’s really intriguing me is at what point one crosses the line between using and abusing the relationship you have with people to promote your business “allies”.  The link I just provided helps them.  I think that’s fine but some might say it’s using the blog inappropriately. Adding “nofollow” to the link would tell Google not to consider the link as an endorsement of the company but I’m happy to endorse them – they are smart enough to sponsor our Tech blog so they must be good, right?

I think the best working rule here at the blog is transparency, where people know the money relationships between you and those you talk about.   For stocks I use a disclosure blip, for companies an explanation of the relationship.  However for websites I’m not as transparent and I think I need to reconsider that and provide more disclosure than I have in the past to help combat the growing “economy of lies” that is far more pervasive than we tend to think.

From bank lending and “promotional offers” with fine print that traps even savvy borrowers to blatant phone credit card ripoffs that prey on the gullible to the Madoff stock scandal to bogus “get rich quick” training programs, the “economy of lies” is everywhere.    Online, it becomes even more difficult to check credentials and make sure an offer is real.

Then there are the “somewhat misleading special offers” which I think may be impossible or even undesirable to combat.    For example I’m shopping for Las Vegas hotels, flights, and show tickets and notice there are often dozens of offers for the same rooms, each with different rates.  Although the conditions vary a bit, basically these are marketing experiments designed to optimize revenues and collect information for the future.   Not perfectly “honest”, but not scams.   I’ll talk about this more at my Las Vegas Travel blog.   Hey, see, there’s a tiny SEO helpful pitch for my own site – is that legitimate?

An interesting idea – though bureaucracy alerts are kind of sounding for me now – might be to create some sort of volunteer disclosure standard that was monitored by a third party.    For example no site could endorse more than one product of the same kind.    Sites that abided by those rules would be listed and allowed to slap up a logo, those that did not would not.   Policing this probably could be done via an online “complaint” system, and the neat part would be to help screen out the huge number of junky sales sites that have no content of value and offer dubious offers.

Still, that option does not really seem workable on a grand scale because too few would participate.

Mr. President: This budget won’t work.


I remain a fan of President Obama but it has been painful to watch him and congress move to adopt the most reckless example of massive and excessive government spending since the founding of our remarkable American experiment.    The founders knew that solutions spring not from large and cumbersome governments, but from the hard work and inspired innovation of a free and vibrant people.

The budget problem is another great example of how chickens tend to come home to roost, and expensively.    After inheriting a spectacular financial situation from the Clinton years, GW Bush managed to drive up the national debt by about $6,000,000,000,000,  doubling this critical measure of our future prosperity potential even as Republicans whined about how “tax and spend” liberalism was ruining the country.   Note also that only a small part of this was war spending and war is not a legitimate economic  excuse for long term deficit spending.     As they shifted our costs to the far future rather than balanced the bloated budgets  Republicans adopted a “don’t tax, just spend!” philosophy that  is now …. wait for it …. being used by Obama and the Democrats to speciously justify spending of  far-greater-than-biblical proportions.    Meanwhile, having lost almost all of their “fiscal responsibility” credibility over the past 8 years Republicans *very correct* concerns about the new budget are reaching a lot of deaf ears.

Republican Senator Judd Gregg, who turned down a major administration appointment probably due to these differences –  has been one of the most articulate critics.   He notes that the proposed budgets for the next decade will create a massive wall of debt – probably an insurmountable debt  – such that our children will have to choose between massive taxation levels or dangerous inflationary measures such as printing money to repay the huge sums we are borrowing now from other governments.

Senator Gregg is right on with this, and it will be tragic if he does not become a key architect of the solutions needed.

Democrats, who tend to choose optimism over realism, suggest that we’ll jump start the flailing economy and restore the prosperity train and live happily ever after.    It’s probably true that the current budget and high spending will help keep the economy from tanking.  Most economists agree we need a massive injection of Government money to stimulate things.     However I think few experts – and even fewer real people (who often have at least as good a power of prediction) would make the case that we aren’t heading for major trouble down the line.

Much of the solution is clear:

Stimulus should be smaller, more targeted, and eliminate the tens of billions in costly projects with dubious benefits.

Health Care cost reductions should be massive, aggressive, and all options must be kept on the table.   Europe and Canada have vastly superior models to our system with comparable care at half the cost.    Whining about the relatively small numbers of underserved patients isn’t convincing anybody anymore.   If free market enthusiasts can come close to Canada / Europe health costs then propose plans that do this NOW.     Otherwise shut up and adopt a single payer or nationalized health care system.    The “quality of care” arguments are largely bogus and designed to scare people into opposing cheaper solutions.   The current system is not sustainable and we have alternative cheaper and viable models.

Defense cost cuts should be massive and aggressive.   We’ve massively overspent on defense since WWII and both parties refuse to view this spending rationally, where ROI is measured in logical terms of achieving objectives.  Simply eliminating the military pork projects will cut *tens of billions*  We need to use our highly effective targeted strike capabilities, humanitarian assistance, and public relations to gain far more international support at a fraction of the cost.     Note to Republicans – stop your knee jerk nonsensical support of indefensibly massive defense spending.

Entitlements should be cut gradually but eventually massively and as soon as the economy shows clear signs of stability.    We’re living on the money of future workers, not our own, and if this does not stop soon it could be the greatest case of intergenerational theft of all time.     With respect to many entitlement programs we are all little Bernie Madoffs, pushing the Government to pay us from money they are borrowing from America’s children.
Note to Democrats:  stop your knee jerk nonsensical support of excessive entitlements.

These three measures would allow a balanced budget as soon as the economy stabilizes.   

We must end the era of  tribal thinking and “political finance” where the government – to please constituents and party hacks – keeps running things wrong and not in the long term best interests of the country.

DOW 7000: It is almost over


Update:  Monday’s brought the DOW near 6800.  Could I have been too optimistic?

Sure it’s presumptuous for me to think I can call the DOW low at 7000 even though I said so back in November, and sure you’d be foolish to believe me more than you believe anybody else or any other source. But you’d also be foolish to believe that *anybody* can call these shots. Even the market makers fail *routinely* to offer much insight into the process and the CNBC pundits and analysts have a very consistent pattern of performance = market averages.

Many people use a backtracking analysis or cherry picking to “prove” they or others have insights you can’t get otherwise, but this is meaningless, in some ways analogous to “predicting” I can toss a coin 10 heads in a row, then videotaping myself tossing the coin 1000 times during which I’ll have some 10 heads runs, and then showing people only the 10 heads segment. Although my prediction power in this case is *random* and can be duplicated by anybody, a gullible person would watch my videotape and think I’ve got insight I don’t have.

So, is it impossible to predict the future? Certainly we can predict many things with some accuracy. Bank accounts and certificate of deposit returns are predictable, solid, safe (and thus tend to be lower than riskier investments) and there are obviously “good deals” in real estate and business, esp. when you are looking at local circumstances with which you are familiar.

Yet like most people I flatter myself and think I as Joe Duck have better insights than that foolish old “Joe Sixpack”. However even if that is true those insights do not necessarily translate into stock or other profits, and as I become more experiences watching the world and watching markets I’m increasingly convinced that the best way to make money is to avoid individual stock picking or even stay away from the stock market altogether, choosing to invest in “close to home” projects such as local real estate and perhaps friends who you know and trust (unless of course the conversation goes along these lines: Bernie! How are you doing? What, you need me to loan you money and order you a plane ticket online?

Of course if I’m right that we are now pretty much at the lows for most of the three major indexes, and that the market is correctly assuming that the stimulus spending will be kicking in after a few months to stabilize the economy, then it’s probably a good time to take a stake in America with some form of index investing. A lot of folks seem to be advising this is a fine time to “get into” this market though of course these are the same folks who failed to call the huge declines. I wish I had time to create a “hall of shame” for any financial pundit who did not scream out “irrational exhuberance” at least a dozen times in the last decade. Oh, wait, that’s easy – put *every financial pundit in the USA* in the hall of shame.

Microsoft to Aquire Yahoo Search for 20 Billion… or not?


While the Times of London is reporting that Microsoft is close to announcing a Yahoo search aquisition at 20 billion with a slew of details suggesting they have a lot of inside information, Venture Beat is suggesting this might be a bogus report as they’ve been told by a key player in the deal, Ross Levinsohn, that he knows nothing of this.   Although it’s possible Levinsohn is … covering for the deal it seems odd he’d issue a flat denial if there was something to the rumors.

My wild guess is that the Times had a hot tip about one of the dozens of potential deals that are surely percolating around Yahoo as the stock (and thus buyout value) dips to very low levels, and that they ran with it rather than spend much time researching.   This has become a major pitfall of “real time” media, where there is increasing pressure to shoot first and hope your story is correct later.   Another possibility is that this is a carefully contrived rumor to pump and dump the stock on Monday – without more denials this is likely to spike Yahoo a few bucks or even more Monday morning.

Disclosure:  Long on Yahoo

How low can stocks go? DOW drops to 7997. Panic or just … Palindromic?


Answer:  Very low, though I wildly speculate (putting me in the same expert category as any expert you can name) that DOW at 7000 and S&P at 700 will be the bottom of this megabear market, after which we’ll continue to see major trouble with the economy continue for at least 2 years during which many businesses will die, successful ones will consolidate and just keep in the game, and a handful of nimble and clever new businesses will thrive and lead the new “post recession” economy forward, probably based on impressive technological innovations now testing in a handful of big company R&D departments and literally *millions* of small business efforts around the globe.

Thanks to the internet, the rise of highly social media, and the plummeting cost of powerful computing I remain optimistic that technological innovation will pull us out of this crisis and remain for yet another century the key force behind most socioeconomic progress.

What’s pushing things down in stocks?    I think the main factor is simply that the market, which is predictive rather than reactive, overvalued how fast technology would trump other considerations and continue to lift mediocre companies ever higher.    It’s not as if many companies were doing profoundly brilliant stuff out there – on the contrary the auto companies were up to the same old stupid nonsene they’ve been doing for decades.   Financial companies were gambling with Credit Default Swaps and fueling the mortgage crisis with fundamentally irresponsible and misguided profiteering.   Even high tech companies, home to many of the globe’s best and brightest working for Yahoo, Intel, [Google?], and MSN found themselves in huge battles to protect market share and profitability while containing the onslaught of online spam.    Google may be something of an exception here as their profitability and advertising brilliance has – until recently – kept them squarely above much of the fray and on the path to more innovation.

About eight years ago this foolishness led to the bubble of 1990 where the internet company valuations were out of line with their potential for innovation.    The commercial internet revolution was an amazing thing in the 1990s and remains the most profound new development in history, but the companies were not all that inspired and most companies were destroyed by the very markets they had convinced to fund them in the first place.

So a far better question than “why are my stocks dropping?” is “Why were all these companies valued so highly in the first place?”     We needed a contraction to square the values with the prices, and now we are watching that happen.

Why 7000 DOW and 700 S&P?    At that point the markets will have dropped just over 50% from the highs of a few years ago.    I see that as a significant practical and psychological milestone.    “half off” is a very accessible notion as we know from retail, and we already know there’s a lot of money waiting on the sidelines to buy into a “market bottom”.     It’s reasonable to assume that at least some, and probably many of the companies hammered by this have been penalized irrationally by the broader market downturn.  As prices drop to 5 and 10 year lows some of these bargains will be irresistable to those with cash on hand, and this buying should  stabilize the market.

Will it rise quickly from 7000?    I say no – I think the globalized chickens have largely flown the coop and many of the unfair advantages we have enjoyed as Americans … will be no more.      I see no major depression looming and I see the USA as the economic “safe harbor” and leader for at least the next decade, but the days of easy prosperity are probably gone for some time so … buddy …. can you spare …. a dime?

George Soros on Zakaria GPS


Hedge fund manager George Soros is one of the world’s richest and most successful market watchers (and market manipulators?). Zakaria reports that Soros’ recent plays have netted him over 2 billion. He’s very controversial for his political views though my take is that great business folks can easily separate their politics from their business decisions.

Consuming more than you produce:/ That game is over.

Houses as piggy bank, instead of savings. [BAM! We are seeing this obvious but profound observation coming up a lot]

Misconception: Markets will correct themselves. They won’t. We have reached the end of a bubble cycle started in the 1980s when massive global markets and deregulation frenzy began.

Mortgages as the “detonator” of the nuclear bomb that is the current global crisis. Stock market in capitulation phase that has followed credit problems.

Can’t predict future because it depends on decisions. He says he was wrong in 1998 to predict some sort of climax to the bubble.

“The cost will be greater, the damage will be greater”.

“You need a government that believes in government”

Paulson bailout plan as ill concieved – same kind of financial engineering that got us into the mess. Paulson as behind the curve “all the way” because he buys into market fundamentalism.

The authorities have lost control of the situation.

Soros recommends: Mobilize private capital to buy into distressed banks and lift minimum reserve requirements to free up lending.

Reduce number of foreclosures by renegotiations to sound mortgages that will not exceed 85% of house value. Loss to be absorbed by mortgage owners (banks?). Govt will then guarantee mortgages to 85% value, which would encourages renters to buy. Some losses, short recession.

Soros: I understand the flaws which allows me to profit, but as a citizen I want better regulation. Markets and Govts are flawed. Less regulation, better regulation.

Soros (like Gates and Buffett?)  believes the anti-tax positions are false because supporting infrastructure with taxes is so critical to wealth formation.

Soros said he does have inordinate influence as a rich person on politics but , unlike many other rich folks, does not use it to improve his financial positions.  He thinks market fundamentalism abets power abuses in politics.

China built assets while we built debts.   Tremendous power shift.   But America will remain a leader and could be *the* leader with some changes.

Sequoia’s Slide Show on the Economy


Sequoia’s Advice to startups has been the subject of speculation for the past few days, but now VentureBeat has posted the actual slide show from a recent major meeting where startups were told to prepare for some seriously bad economic stuff and a recession that could last for many, many years.

Sequoia Slide Show

———————–

I was particularly glad to see the slide noting that people have been using home equity as a “piggy bank”.

My current take on the huge Government actions trying resurrect the prosperity economy is subject to change faster than you can say “The Dow’s Down 500”.  However I would like to hear more talk about how the economy got too big for it’s britches and most of us, and certainly the country as a whole, have been living pretty large for no good reason, fueling both economic growth and personal living off of home equity that …. ain’t … here …. no …. more.     We’ll need to work harder and get less for awhile, and perhaps forever as the rest of the world catches up to our levels of prosperity.    Welcome to the new global economy.

Another factor I’m confident about is that the banks are going to act very opportunistically with the new sources of funding, though I’m not sure what form this will take.  Assume, for example, that you run a totally solvent bank and have managed risk appropriately.   Yet you know the feds are about to absorb disproportionate risks in order to get the macro economic juices flowing.    Your best play is to lay low for awhile, waiting for potential free money, lower risks, and most importantly saving up the benefits of your solvency so you can scoop up smaller banks and deals as they become available.    Although I assume there are some safeguards in place I think one of the Fed’s miscalculations right now is that the big bank players *want to play* when in fact the best of them *want to hang out and make a killing* as the insolvencies rip through the system and are removed at taxpayer expense.    This behavior by solvent banks *also* increases uncertainties because nobody currently knows who is good to go and who will be dead later in the month.   I *absolutely* agree with those calling for a massive increase in financial transparency throughout the banking sector – e.g.  requiring banks to place much more itemized information about assets and liabilities online for all to see.   This should be a condition of *doing business with the Federal Government*, which means every bank would be required to do it.   The initial effect would probably be a massive shift in resources toward the healthier banks but this is where the Government, again with total transparency, could balance things out to avoid potential catastrophic failures.

AOL and Yahoo star in “Spawn of the Ugly Ducklings”


After Yahoo turned down Microsoft’s offer of over $31 per share there has not been much good news for a troubled Yahoo, with a price now right about *half* what Microsoft offered.   However it does appear that Yahoo will merge with another struggling internet empire:  AOL.    Time Warner’s merger with AOL years ago will probably go down as one of the most misguided corporate marriages in history leading as it did to nothing but heartaches and lowered TW values, but the Yahoo deal actually seems to make a lot of sense to me if Yahoo can get it’s management act in gear.   With AOL Yahoo will control even more valuable internet items such as about half of all the email accounts in the world.     Some reports suggest that Microsoft may have even more interest in a combined Yahoo AOL. In today’s challenged fiscal environment it seems unlikely Yahoo could refuse another MS takeover even at a reduced cost per share.

TechCrunch Reports

Disclosure:  Long on YHOO

Yahoo Shareholder non-meeting


Today Yahoo Shareholders are meeting in San Jose.   Or maybe we should say non-meeting since there are apparentely mostly empty chairs and uneaten pastry in a venue that was to hold 1000.

With shares now trading about $19 you’d think shareholders would be out in force with torches and pitchforks, but Yahoo management – at enormous cost to shareholders and the company – has kept the corporate raiders and Microsoft at bay partly by granting a newly sheepish Carl Icahn a seat on the board and two more seats.     Icahn noted last week that enough large shareholders were sticking with the current board, making it impossible for him to take over the company.     His plan was fairly simple – buy a lot of Yahoo and then sell the company to Microsoft at a huge profit.    As a shareholder I remain  *totally* confused as to why large shareholders were unwilling to support this move – the obvious choice in terms of maximizing shareholder value with minimum risk.

However with challenges come opportunities.  Yahoo at $19 is looking pretty ripe right now given that Microsoft offered $31 just months ago when Yahoo’s prospects were not significantly different than they are right now.    Either MS is horribly miscalculating Yahoo’s value, or the Market is underestimating that value.     Clearly the current board is convinced there is a lot more value, and in this at least I would agree with them.

It’ll be interesting to see how the rank and file Yahoo folks are feeling at SES San Jose in a few weeks.   SES is the biggest search conference of the year in the heart of Silicon Valley, and hundreds of Yahoo folks will be there.  It will be interesting to get a feel for the current morale challenges at the company.

Disclosure:   Long on YHOO.  Considering buying more.

Yahoo’s Don Quixote


The Yahoo Microsoft fiasco saga continues as Jerry Yang, in today’s interview with Kara Swisher, seemed to suggest he’d basically go down with the ship.   Or perhaps more accurately he’s willing to take the ship down with him in what appears closer and closer to a Quixotic vision of what to do about Microsoft.   Yang seems to suggest two incompatible things – first that Microsoft has not given a clear offer to Yahoo and second that:

“Their motivations are suspect and there is simply no good reason to think they will actually show up at the end of the day.”

Huh?   MS is clearly prepared to buy Yahoo.   This is obvious to everybody including Jerry.   He could argue that they are going to screw up Yahoo after buying it, but that rings a bit hollow given the sad conditions of the company right now.     In fact it’s hard to imagine how Yahoo, a key brand in the key global sector, can be doing so poorly right now.   How in the world could Microsoft screw the company up more than Yahoo is screwed up right now?

Even if Microsoft *is* going to bring devastating changes to Yahoo, there is a shareholder obligation here that probably is not met without a sale to Microsoft.     It is simply no longer viable to suggest that an independent Yahoo is likely to show the revenues required to bring the stock to 33+ within a year.    Without any Microsoft interest  YHOO would be trading at about $18, so the likely Icahnesque MS offer can arguably be viewed as a premium of close to 100% on what shareholders can expect if this deal *really* crumbles, which is what Yang clearly wants to happen.

I agree with Swisher:

… even with all the noise, it should be entirely clear by now that Microsoft and Yahoo need each other.

Disclosure:  Long on YHOO