There was an error in this gadget

Saturday, November 27, 2010

Is Groupon Good for a Small Business? Do the Math

Thinking Entrepreneur

I have been reading with great interest (especially here) the stories of retailers sharing their experiences using Groupon. For those of you not familiar with Groupon, the company partners with local businesses to send a daily coupon e-blast to its members. The members who buy the coupon get 50 to 70 percent off on a product or service, and Groupon splits the proceeds with the retailer — usually leaving the retailer with about 20 to 25 cents on the dollar of retail value.

I have never seen anything that is both so celebrated and demonized at the same time. There has been talk that Groupon might be worth as much as $3 billion, and yet here are some blog comments from retailers who’ve tried the service:

  • “It is for desperate businesses.”
  • “The financials just can’t work out.”
  • “Groupon is the worst marketing ever.”
  • “We did Groupon. It was O.K. It brought in new customers — we kept most of them. But the margins are a killer.”

As a retailer who has used Groupon — as well as traditional advertising — to build my business, I’ve come to the conclusion that there’s a lot of misinformation out there. Is Groupon the worst marketing ever? Or is it the best marketing ever? Probably both. One thing is for sure: Groupon is a beast.

What else would you call something that can deliver 2,000 customers to your store? It’s a beast that can propel your business or smother it. It depends on your business. It also depends on you. Here are some key factors:

The first is the type of business you have. How many potential customers in your area don’t know about you? Do you have excess capacity? Can you handle a surge?

The second factor is about branding. Do you believe that by giving out a large discount you risk damaging your brand? It is a judgment call. I am sure that it is a bad idea in some cases.

And then there is the math, which may be the most important factor. I have seen it attempted many times — but if it is not done properly, it can result in very misleading conclusions.

Groupon is advertising. If you don’t need or believe in advertising, there is no reason to look at this. It costs money. Instead of writing a check for an ad, you are choosing to lose money on sales. This can wreak havoc on the brain cells of a good retailer who is always watching profit margins. It can feel wrong, especially when the coupon customers don’t spend more than the amount of the coupon.

That is why it is critical to do the math. Math is cold and unemotional — and eye-opening. Unfortunately, it is much easier and much more accurate to do the math after you try the program, because you will not have to guess on as many numbers. There are eight key calculations you need to consider to determine whether this is a better advertising vehicle than something else you may already be doing:

1. Your incremental cost of sales — that is, the actual cost percentage for a new customer. If you are giving boat tours and have empty seats, your incremental costs for an additional customer are next to nothing. If you are selling clothes, your incremental costs might be 50 percent of the sale price. Food might be 40 percent. In any case, don’t include fixed costs that you would be incurring any way.

2. The amount of the average sale. If the coupon is for $75, will the customers spend more that that? I have seen more than one retailer complain that nobody spends more than the value of the coupon. That’s unlikely but I am sure it can feel that way, and that is my point: Keep track.

3. Redemption percentage. You don’t really know until the end, but from my experience and from what I have heard, 85 percent is a good guess.

4. Percentage of your coupon users who are already your customers. I’m sure this number varies tremendously depending on the size of your city, how long you have been around, and the type of business.

5. How many coupons does each customer buy? (The more they buy, the fewer people are exposed to your product or service.)

6. What percentage of coupon customers will turn into regular customers? Again, it can seem as if they are all bargain shoppers who will never return without a discount, but that’s almost impossible. Is it possible 90 percent won’t return? Sure.

7. What is the advertising value of having your business promoted to 900,000 people — that’s the number on Groupon’s Chicago list — even if they don’t buy a coupon?

8. How much does it normally cost you to acquire a customer through advertising? Everything is relative.

Let’s look at an example of how this might work for a restaurant. Suppose you sell 3,000 coupons with a face value of $75 for $35. Then let’s assume the following:

1. 40 percent incremental costs (mostly food).
2. $85 average ticket ($10 more than the coupon).
3. 85 percent redeemed.
4. 40 percent used by existing customers.
5. Two bought per customer.
6. 10 percent come back again — or send friends.
7. $1,000 advertising value.
8. $125 typical cost to get a new customer through other advertising methods.

Now, let’s do the math:

Number redeemed: 3,000 x 85 percent = 2,550.

Revenue:
3,000 x $35 x 50 percent = $52,500 (Groupon sends a check).
2,550 x additional $10 = $25,500 (additional money spent by each customer).
total revenue = $78,000 (plus, you also get the $1,000 advertising value of having all those people introduced to your product or service).

Expense:
2,550 x $85 (average retail value) x 40 percent incremental cost = $86,700.

In this example, the restaurant took in $78,000 at a cost of $86,700, which means it cost $8,700 to run the deal. The key question is how many return customers the restaurant will get for that expense. If you divide the 2,550 total coupons by two (the average number of coupons bought by each customer), you get 1,275 customers. Multiply by 60 percent (to exclude existing customers) and you get 765. Multiply again by 10 percent (the percentage of new customers who return), and you get 76 new repeat customers.

Divide the $8,700 cost by 76 new customers, and the restaurant paid $114 for each new regular, which in this example is roughly what we assumed it would cost with conventional advertising. The question the restaurant has to answer is whether it was worth the trouble to get 76 customers — especially given that it probably annoyed some of its existing regulars. On the other hand, maybe it kept some of  its employees busy when they otherwise would have had short hours.

But keep this in mind: because of the huge volume, if you change any of the variables, you can get very different results. For instance, if the customers had spent an average of $95 instead of $85, the restaurant would have actually made money on the promotion — something it’s almost impossible to do with traditional advertising. Of course, it goes the other way, too. If the customers spend only the $75 coupon amount, the cost to the restaurant will be $24,000 — an expense most owners probably never even consider.

Best marketing ever? Worst marketing ever? It all depends on a few little numbers. Here is the big difference between traditional advertising and Groupon: Traditional advertising requires spending some money and knowing that it can be lost if the ad doesn’t work. With Groupon, you spend no money up front but you mess with your formula for making money. You can win big and you can lose big.

It is a new world. The old math still works in it.

Jay Goltz owns five small businesses in Chicago.

Here's the best calculations I've seen to evaluate Groupons. Since most of the experiences we hear about are anecdotal, the best thing a SMB can do is approach Groupons with some ROI calculations in mind. As with all ROI calculations regarding advertising, there's always some assumptions. But if you're the owner of a local SMB you're the best person to make those assumptions.

Posted via email from Randy's Stuff

Thursday, November 4, 2010

Facebook "Deals"

Facebook Ads Provide 'Deals' for Local Merchants, Marketers

As Users Share Their Locations, a New Way for Marketers Like Gap, Starbucks and McDonald's to Reach Them

Share on Twitter Share on Facebook Submit to Digg Add to Google Share on StumbleUpon Submit to LinkedIn Add to Newsvine Bookmark on Del.icio.us Submit to Reddit Submit to Yahoo! Buzz

SAN FRANCISCO (AdAge.com) -- Facebook has a new offer for users willing to share their locations in status updates: deals from nearby merchants or big-brand marketers such as Starbucks, Gap or McDonald's.

Facebook is launching the Deals service with 22 big brand partners -- Starbucks, McDonald's, H&M, and Gap -- and 20,000 small-to-medium-sized businesses can start creating Deals on their Places page inside of Facebook.

Facebook is launching the Deals service with 22 big brand partners -- Starbucks, McDonald's, H&M, and Gap -- and 20,000 small-to-medium-sized businesses can start creating Deals on their Places page inside of Facebook.

--> The social network announced "Deals," an extension of its Places mobile feature, which allows users to check in at locations such as bars, coffee shops or malls. Users will be able to claim those deals by walking into a merchant and checking in on their phones or other mobile devices, giving marketers the ability to reach consumers and potentially attracting them into a given store.

The new service combines two of the hotter trends in local marketing: location-based check-in services such as Foursquare, and local group deals services such as Groupon or LivingSocial. "There are many changes in mobile, and there's a revolution in the social space," said Mark Zuckerberg, founder and CEO of Facebook, which has 200 million mobile users. "Mobile is as big as that -- when you combine mobile and social, industries can get disrupted."

But like everything Facebook does, it has the potential of taking a niche phenomenon now exploited by a coterie of small startups and turning it into a mass phenomenon. "While businesses have been able to use other geolocation services to incentivize customers to some extent, Facebook Deals allows global brands to do so at massive scale," said Michael Lazerow, CEO of social marketing firm Buddy Media.

Facebook announced the Deals Platform and another feature called "Single Sign On," which allows users to log into any app on their iPhones and Android phones, eliminating the need for remembering passwords and typing on tiny mobile keypads. There are 550,000 games and applications available on Facebook, and developers can now build the single sign-on into any of them or build new apps with the feature.

Facebook is launching the Deals service with 22 big brand partners -- Starbucks, McDonald's, H&M and Gap -- and 20,000 small- to medium-sized businesses can start creating Deals on their Places page inside of Facebook. Merchants create a Facebook page where there is an option for choosing the kind of deal they would like to offer: individual, loyalty, friends or charity. Individual and loyalty offers are digital versions of the traditional coupon and loyalty cards, where a customer gets a punch hole for every coffee or sandwich purchased. The friends offer is a strictly Facebook style deal, where if a user checks in his or her friends, they get a discount. The charity deal is where the merchant will donate $1 for each check to a charity.

"The Deals concept solves the long term," said Facebook's director of local, Emily White. "For a long time, merchants have been told to get online. This solves that problem for them and turns the fans into real dollars."

Gap decided to immediately participate in Deals, offering 10,000 pairs of jeans for free to all users who check into one of the 900 Gap stores nationwide. "It's important for us to connect with our customers where they are," said Olivia Doyne, a Gap spokeswoman on hand at the event at Facebook headquarters in Palo Alto. "This can be used in so many ways. If a store has too much inventory, we can use Deals for that. We can tailor the deals to our customers' locations."

Facebook does not earn money in the Deals promotions, and Ms. White said this project is very much in a beta state. But inadvertently, by having more businesses create pages on Places and having more people checking into those businesses, there will be a natural increase in Facebook traffic.

Marketers have long seen mobile phones as a powerful means of reaching consumers while they're out shopping or physically close to a given store. "This is continuing Facebook's empowering of small businesses," said Dave Marsey, senior VP of Digitas digital media. "We're gonna see the biggest response with small local businesses that can more directly and electronically manage attracting new customers and rewarding loyal customers."

Mr. Zuckerberg said that, as always, Facebook's focus is to make things better for users. "Whether the deals platform turns into something more commercial, or we choose to monetize something else -- though we have no plans of doing that any time soon -- that works for us too."

Facebook comes to the social buying deal biz. No surprise. But if Facebook's sweet spot for "local" merchants is Starbucks, Gap and McDonalds, I would think that would give local merchants not tied to national chains/franchises are real opportunity to out-maneuver them in the deal biz.

Posted via email from Randy's Stuff

Monday, November 1, 2010

Radio Shack Does Trade-In's for IPhones

We have two iPhones in our family. Yesterday we traded in the older one — my wife’s first-generation model, bought in 2007 — at Radio Shack. They gave us $72.94 for the phone and charger, against $199 for a new 16Gb iPhone 4. We’ll probably trade our other iPhone, my second-generation 3g one, pretty soon too.

Apple doesn’t have the same offer. I’m not sure who else does. I wouldn’t have known about it if I hadn’t stopped in a Radio Shack to buy an ethernet cable a few days ago, when the kid behind the counter told me about it. Turns out Radio Shack will take a lot of stuff in trade. Since my iPhone 3g is brand new (I replaced it at an Apple store last month for $79, before I knew about this deal), I can get $116.13 for it, according to the online appraisal system at that last link.

Yes, it bothers me that we’re staying inside Apple and AT&T’s joint silo. It also bothers me that Fake Steve Jobs is right about Android fragmentation. I also see a serious risk that Real Steve Jobs might succeed at repositioning closed systems as “integrated”. Just because, well, he’s Steve. We’re all in his reality distortion field now.

Speaking of which, Apple is now bigger than Microsoft, and the iPhone is now bigger than Rim.

I still see this as a phase, and not a bad one. Apple and Google have together cracked open the unholy death grip that phone makers and carriers have long had on the mobile world. At some point those two halves will come completely apart.

Until they do, we won’t have ambient connectivity, or what I call the Frankston Threshold.

But we’ll get there. It’s inevitable.

[Later...] If you do trade in an old iPhone, be sure to erase it before handing it over. Do that under Settings/General/Reset/Erase all content and settings.

You'd think Radio Shack would be better at promoting this.

Posted via email from Randy's Stuff

Thursday, October 28, 2010

Yes! Cooperation!

Seattle Times forges online ad network

Share
Send this page to your friends
Print
Create a hardcopy of this page
Font Size:
Default font size
Larger font size

Posted: Tuesday, October 26, 2010 2:14 pm | Updated: 2:15 pm, Tue Oct 26, 2010.

| 0 comments

The Seattle Times and Seattle television station KING have created a local online advertising network focused on local news sites and blogs.

Revenues from ads placed through the BeLocal Ad Network will be shared with online publishers, the companies said.

"This new partnership combines the power of The Seattle Times and KING 5 sales forces to help contribute to the viability of the great variety of local community blogs," said Alan Fisco, The Times' senior vice president of sales and marketing, in a statement.

The Times is an early proponent of working with local blogs and hyperlocal sites. The paper already shares content generated by online publishers through the John S. and James L. Knight Foundation-funded Networked Journalism Project (see News & Tech, October 2009).

The sales initiative, Fisco said, "will only make those partnerships stronger."

Early participants include Seattle local news sites MyBallard, capitolhillseattle.com and Neighborlogs.

 

 

Posted in , on Tuesday, October 26, 2010 2:14 pm Updated: 2:15 pm.

Welcome to the discussion.

Local media would crush national pureplays if they would only cooperate digitally instead of all competing. An online ad network driven my cooperating local media....powerful. Sure there will be problems in executing the strategy...so what? Don't let the naysayers sway ya!

Posted via email from Randy's Stuff

Wednesday, October 20, 2010

TV Guide Meet Internet

Does your local news or promotion department know about this guide?

www.clicker.com

Posted via email from Randy's Stuff

A rationale look at TV's Future

If you're new here, you may want to subscribe to my RSS feed, follow me on Twitter, or subscribe via email. Thanks for visiting!

Dana Settle & I are hosting a dinner tonight (10/20/10) with some of the biggest companies in entertainment to talk about the future of television, film & digital media.  Michael Ovitz, the co-founder of CAA will be the keynote speaker.

Nobody can predict 100% what the future of television will be so I won’t pretend that I know the answers.  But I do know that it will form a huge basis of the future of the Internet, how we consume media, how we communicate with friends, how we play games and how we shop.  Video will be inextricably linked to the future of the Internet and consumption between PCs, mobile devices and TVs will merge.  Note that I didn’t say there will be total “convergence” – but I believe the services will inter-operate.

The digital living room battle will take place over the next 5-10 years, not just the next 1-2.  But with the introduction of Apple TV, Google TV, the Boxee Box & other initiatives it’s clear that this battle will heat up in 2011.  The following is not meant to be a deep dive but rather a framework for understanding the issues.  This is where the digital media puck is going.

While we won’t get through all of this, here are some of the issues in the industry that I plan to bring up and ones I hope we’ll discuss tomorrow:

1. “Over the Top” video distribution –  Apple TV is brand new and is priced at $99.  Given how Apple’s products are normally delivered to near perfection it is likely to be a huge holiday hit this year.  While their past efforts at Apple TV have been mediocre it seems clear that this time they’re really trying to get it right.  That said, Apple will remain a closed system designed to drive media

consumption through a closed iTunes system and a take a toll for media distribution.

The device itself will have no storage.  So without my weighing into the pro’s / con’s of this I can say that I believe it will capture a large segment of the market but leave room for “open platforms” to play a big role.

Just as in the mobile battle when Apple goes closed it creates an opportunity for somebody that is substantively open.  Enter Google.  If you’re an OEM who wants to move more hardware but you don’t have the muscle to create an entire media ecosystem then you’re best off finding a partner who can build a software OS, app platform and search capabilities.

So it is unsurprising to see companies like Sony, Logitech & Intel partner with Google.  Google balances the universe and helps all of the hardware, software and media companies ensure it isn’t a “one horse race.”

That said, it would be an understatement to say that traditional media is skeptical about Google’s benevolence and many fear a world in which video content margins are crushed in the way that print & music have been with the primary beneficiary having been Google.  So while they enjoy a race with two major brands competing they also have three other strategies they’ll pursue.

  • they’ll try to “move up the stack” and provide some of these services themselves.  Thus you see television manufacturers rushing to create content ecosystems, app platforms, TV OS’s and Internet offerings
  • they’ll continue to partner with the MSO’s: tradition cable & satellite providers as well as the new FiOS offerings from Telcos.  The MSO’s are today’s distribution platforms and they still have a lot of muscle in the ensuing years
  • they’ll continue to look for independent technology partners.  They will find the Hobbesian power relationship more palatable than strengthening what they consider their “frenemies” (Apple & Google) and as a result will work with independent players like Boxee.

I have always thought there was room for an independent success story like Boxee or someone similar.  I’ve always believed that such a player would only succeed if they could capture an enthusiastic user base that feels compelled to use their platform to discover and consume content.  Clearly Boxee captured the imagination of this early-mover user base 2 years ago.  The launch of their new Boxee Box in November and the user acceptance of that will be telling for their future development.

2. Attempts at “moving up the stack” – In 1997 I led a project to help senior management at British Telecom define its Internet strategy.  I did some market sizing analysis and wrote a strategy paper called, “It’s about the meat & potatoes, not the sex & sizzle.”  I argued that if BT was focused there would be a large business in access services (dial up, ISDN and the equivalent of T1′s), hosting services and other infrastructure related products that would be very profitable and they had a great chance to corner the market on a high-market growth business.

My paper warned of the dangers of trying to “move up the stack” and become a content company.  At the time all telco’s were envious of Yahoo! and Excite in particular as well as all of the Internet companies with grandiose stock market valuations.  The attitude was “I’ll be damned if those young kids are going to get rich off of our infrastructure.”  Needless to say BT didn’t follow the advice of my paper and it went bananas for content deals signing a string of money-losing content partnerships.  I guess shareholders would have probably punished them for being boring and prudent.

Fast forward nearly a decade and it was unsurprising to me to see the death grip that global mobile operators placed over the handsets.  They threatened any hardware manufacturer with not putting anything but operator approved software on the phones.  In this way they locked down the device (they controlled the phone distribution market through owning retail stores and subsidizing handset costs).  The mobile operators were run largely by the same people who ran the wireline telcos a decade early and still felt screwed by the tech industry.  The created a hegemony that delayed innovation until January 2007 when the iPhone was introduced.

The iPhone broke the hegemony with hardware & software that had no telco software on it – thus the Faustian AT&T / Apple iPhone deal.  They both gained.  They both lost.  But ultimately we all won because consumers finally had enough of locked down, crappy software from telcos.  Imagine how much mobile telco money still exists in meat & potatoes.  Imagine if one of them had created a Skype competitor.

So entering 2011 why does this matter?  I see a repeat from television manufacturers and MSO’s.  They know that the world is changing and they’re shit scared of what that means for hardware and pipeline providers.  The hardware manufacturers are on razor-thin margins and see that having apps on TVs will be a way to build direct relationships with consumers and built higher margin businesses.  It’s hard to blame them.  But none of this will stick.  Not because they are bad companies – but because software is not a core competency.

They will never succeed in these businesses.  And I think the smartest hardware providers & MSOs are the ones that will sign unique and daring partnerships with startup technology firms.  But the whole market will develop more slowly as we watch this bum fight take place.  Get your seats ringside – it will take place over the next 2-3 years.

3. The “second screen” – One of the most exciting developments in television & media to me will be “second screen” technologies built initially on iPads and extended to the plethora of devices we’ll see over the next 3-5 years.  And this will be real innovation & revolutionary in the way that the iPad is, rather

than just being incremental.  It will involve 3d (see Nintendo’s moves, for example).  You’ll likely see applications that draw you into interactive experiences, connect you to your social networks, help you browse your TV better and create a richer media experience overall.

I think we’re in the 1st inning of second screen technologies & applications and this movement will create whole new experiences that the 50 crowd will lament as “ruining the TV experience.”  The 15-30 crowd will feel like this is what TV was meant to be – social.  In my opinion this will replicate what most of us 40 year olds already experienced when we were in our 20′s.  We’ll have the post show water cooler effect that was popular in the Seinfeld era.  We’ll have simultaneous viewing parties like we did for Friends or Melrose Place.  But most of it will be virtual.

4. Content bundling –  When there was one pipe capable of broadband delivery leading into our house the person who controlled this could control what we saw and it was delivered in a linear timeframe.  As a result it became popular to bundle content together and get us to pay for “packages” when all we really wanted was The Sopranos or ESPN.  We all saw what happened when technology let us buy singles on iTunes rather than whole albums pushed by record labels.  No prizes for guessing what the future holds for video.  The idea of forced bundles will seem archaic.  Smart companies will figure this out early.  The “Innovator’s Dilemma” will hold others back.  The bundle is the walking dead.  Only question is how long it survives.

5. Torso TV - Television was designed for a mass audience in a single country.  One of the things that has fascinated me over the past couple of years is the rise of global content and its ability to develop a “niche” global audience that is relevant.  Think of about the rise of Japanese Anime, Spanish Novelas, Korean Drama or the rise of Bollywood entertainment from India.  It’s not a mass, mainstream audience but I would argue that it’s “global torso” content that will be meaningful at scale.  Websites like ViiKii, which have been launched to create realtime translations of shows by fan-subbers, have huge followings already.  And I’m sure that this is what popularized the SlingBox in the first place.  British, India & Pakistani ex-pats on a global scale want to watch cricket.

I believe that NetFlix has won the battle for the “head end” of content from films.  They have such a strong base of subscribers and their strategy of “Netflix everywhere” is brilliant.  We watch it on the iPad.  We pause.  We turn on our TV and get it streamed through the Wii.  And it’s available also on the Apple TV.  It’s on Boxee.  It’s effen awesome.  Game over.  IMO.  But the torso?  It’s up for grabs.  And I think players like Boxee understand this is a juicy and valuable market. As does ViiKii and countless others racing to serve fragmented audiences the good stuff.

6. YouTube meets the television – It was funny to me to hear people say for years that “YouTube had no business model.”  It made me laugh because it is so obvious when you capture an entire market of passionate consumers in any market – especially in video – that in the long-run it becomes a huge business.  So many people are stuck in the mindset that YouTube is UGC (as defined as people uploading silly videos or watching Coke & Mentos explode) and that brands don’t want to advertise on UGC.

And meanwhile I’ve seen several LA startups focus on creating low-cost video production & distribution houses.  They are quietly accumulating audiences in the same way that Zynga did on Facebook.  And if you think that these guys can’t monetize then I’ll refer you to everybody’s arguments about games – that free-to-play would never work in the US.  And meanwhile Zynga is one of the fastest growing companies in US history.

What Zynga understood is that you need to go where the consumers are, capture those audiences, build a direct relationship and then diversify channel partners.  This is happening in spades now on YouTube as a new generation of viewers is being served up by a new generation of TV production houses that

are currently under the radar screen of many people.  This will change in the next 2 years.

And as they explode and become bigger companies YouTube becomes even more of a Juggernaut.  And don’t forget that as the Internet meets TV, YouTube will continue to be a brand to be reckoned with served up by Google TVs.

7. Content discovery – new metaphors – Anybody who tries to search for a program to watch on TV on an EPG (electronic programming guide) knows just how bad they are for finding “the good stuff.”  And for a long time the Internet has been that way, too.  The best online video search tool (in terms of usability) that I’ve seen is Clicker.  By a long shot.  Do a little test yourself.  Trying searching for something on Hulu.  Then try the same search on Clicker.  Try it first for content that is on Hulu and then for content that is not.  And Hulu’s search is actually reasonable.

Much of web video search is bad at finding “the good stuff” including YouTube itself.  Try searching “Dora the Explorer” in YouTube and then try it on Clicker.  And then try it on Hulu.  I feel confident that any user trying this will not go back from Clicker (no, I’m not an investor).

But as the Internet & TV merge it will be a major fight for how you find the good stuff.  Google isn’t that good at video search today.  Will this change in a world of Google TV’s?  Boxee prides itself on social TV & content discovery.  Will their next version blow us away and be the way we search our TVs?  Will the MSO / EPG world improve (answer: not likely)?  What about discovering content on our TVs via Twitter or Facebook?  Or some unforeseen technology?  Will we discover stuff through second-screen apps?

Technology such as that being created by Matt Mireles over at SpeakerText is trying to make video transcriptions and make video more searchable and discoverable.  Imagine that world.  I’m sure others are focused on solving this great problem.

The amazing thing about content discovery is that it can alter what is actually viewed and thus becomes a powerful broker in the new TV era where pipes don’t have a stranglehold on eyeballs.

I have no idea who will win.  I only know who won’t.

8. Gaming & TV – One of the great unknowns for me is what role the console manufacturers have on our future media consumptions experiences.  There are about 60 million 7th generatation game consoles in the US between the Nintendo Wii, Xbox and PlayStations against about 110 million homes.

And while free-to-play games are becoming hugely popular and as my own kids spend as much time playing Angry Birds (you can’t tell me you don’t want one of these – I already pre-ordered 2 for Hanukkah!) on the iPad now as they do Super Mario Bros. on the Wii – it’s clear that the games manufacturers will find a way to be

hugely relevant in the digital living room fight.

As will the media companies.  Disney acquired Playdom and Club Penguin.  EA bought PlayFish.  Google has had long-standing rumors around Zynga.  It’s clear that games will feature in the Internet meets TV meets Video world.  They’re all battling for mindshare & share of wallet.  Watch for continued game creep into TV.

Don’t believe me?  Check out what the younger generation does on Machinima these days.  People record their game experiences and make them into videos to share. Games meets videos meets TV.  To make it easier for you to understand – check out this video (NSFW – language – but good graphics & example of future. You can get through first 1.20 safely).

9. Social media meets digital content – I think the social media story is more obvious in many ways.  It’s clear that when people watch movies now they Tweet about it when they get out and this has an impact on box office sales.  Social media buzz can boost or bury content.  The current generation of players are trying to skate with the puck at their feet by simply offering “check-ins for TV” the next generation will connect us in ways we don’t even imagine now.  I’ve seen some really innovative companies trying to solve this social TV problem but their stuff is so new I feel I can’t talk about it out of fairness to them.  But I’m hugely interested to watch how this space evolves.

10. The changing nature of content & the role of the narrative – A lot of Hollywood people say that the traditional “narrative” of filmed entertainment will hold in the Internet meets TV world.  They say that long-form storytelling will be where the ad money will flow and people will still want to consume professionally written, edited and produced content.

While I agree that there is a bright future for the talent that is uniquely in Los Angeles I think the future of TV & Film will be as different as the transition from radio to TV was.  As is widely known “many of the earliest TV programs were modified versions of well-established radio shows.”  Why wouldn’t we think that 50 years from now our initial Internet meets TV shows won’t seem just as quaint.  Consider:

  • The 22-minute format with 8 minutes of 30-second commercials was designed for linear programming.  Why is the number 22 magic?  In a non-linear world do we need a standard length?
  • The world is filled with amazing writers, directors, actors and producers.  Many of them don’t have the money or access to be in Hollywood or the ones that are here lack the ability to reach an audience.  Companies like Filmaka have been trying to solve this problem.
  • What happens when content production & distribution is easy to professionally produce and distribute at mass low-cost scale?  Will we still have predictable story lines?  Or can we develop more fragmented content to meet the needs of fragmented audiences and interest groups?
  • What happens in a world where content producers have a direct relationship with the audience and can involve the audience directly in story creation?  Or maybe even as wacky as involving the audience in the story itself?
  • Isn’t Arcade Fire’s Wilderness Downtown already an example of the future where you can involve customized assets to an audience?  We each see a similar story but with different backgrounds, characters or maybe even music? In a world where the house that I grew up in can play a role in the story (as with Wilderness Downtown) – anything is possible.  Isn’t it obvious that content customization to the audience is the future?

I’m such a big believer in the power of writing, editing and producing.  When I’m given the choice I always watch independent film with complex characters and non-cliche story lines.  I see a future in which Hollywood still is the center of global video content creation in the same way that Silicon Valley remains the center of technology development.  But democratization of production & distribution will clearly change the world as we know it today.

And I’m excited to participate in that revolution.

Share and Enjoy:
  • Twitter
  • Facebook
  • LinkedIn
  • FriendFeed
  • del.icio.us
  • Google Bookmarks
  • Digg
  • StumbleUpon
  • HackerNews
  • Suggest to Techmeme via Twitter
  • email
  • Print

I read 5+ articles a week about the future of TV. Most are irrational, lack an understanding of the power of incumbency or are just hyperbole. This article is different.

Posted via email from Randy's Stuff

Monday, October 11, 2010

Local Twitter Ads - Time to Engage

In the last two weeks, the company has introduced several advertising plans, courted Madison Avenue at Advertising Week, the annual industry conference, and promoted Dick Costolo, who has led Twitter’s ad program, to chief executive — all signs that Twitter means business about business. It’s Twitter’s biggest financial effort since April, when it introduced its first, much-anticipated ad program, Promoted Tweets.

Twitter’s startling growth — it has exploded to 160 million users, from three million, in the last two years — is reminiscent of Google and Facebook in their early days. Those Web sites are now must-buys for advertisers online, and the ad industry is watching Twitter closely to see if it continues to follow that path.

“Having been in the business for as long as I have and seeing things rise, I completely have the same vibe on Twitter as Google, Facebook and DoubleClick,” said Curt Hecht, chief executive of VivaKi Nerve Center, a digital agency that is part of the Publicis Groupe. “You can tell by the client interest levels.”

Another telling sign of Twitter’s newfound interest in pushing its advertising is that although fewer than 20 of the company’s 300 employees work on advertising, that is in contrast to one just three months ago.

But many advertisers and executives say there are questions to be answered and experiments to be done before Twitter becomes a must-buy, if it ever does.

“Agencies are uneducated, brands are uneducated and to a certain extent, Twitter is uneducated,” said Ian Schafer, chief of Deep Focus, an interactive marketing agency. “There are no best practices. There are just hunches about what will work.”

Advertising Week was a debut for Twitter, as Mr. Costolo shared the stage with executives from Google and Facebook and wooed ad executives in the audience with a clear message.

“We’re definitely beyond the experimentation stage,” he told them. “It’s working.”

In an interview later, he said, “We feel like we’ve cracked the code on a new form of advertising, and we feel like we’ve got a hit on our hands.”

This is a sharp change for the company, which has so far been careful to say it will move slowly and experiment a lot. Twitter started with just six advertisers and now has about 40, including Starbucks, Ford and Microsoft. Mr. Costolo said in the interview that it would have more than 100 by the end of the year.

Last week, Twitter added three avenues of advertising. Promoted Accounts, which began immediately with Xbox and HBO, allows companies to pay Twitter to suggest that people follow their free Twitter accounts, based on shared interests. Twitter also began publishing ads on Twitter apps, starting with HootSuite; before, ads had appeared only on Twitter’s Web site. Twitter will split the ad revenue evenly with HootSuite and the other companies that make apps.

And finally, Mr. Costolo said that next year Twitter would offer a self-serve tool for local businesses to buy Twitter ads, and is working on ways to deliver those ads based on location. It will use Internet addresses, location information that users share and clues like whether someone follows a bunch of restaurants in a particular city.

Though just a few dozen advertisers have run Promoted Tweets, and some have not worked well, over all they have outperformed Twitter’s expectations.

Advertisers pay for Promoted Tweets to appear at the top of search results. Search “vacation,” for instance, and see an ad from Virgin America encouraging people to vote in Virgin’s Awkward Family Vacation Photo Contest. Advertisers bid on keywords and pay when someone clicks on a link in the ad, replies to it or forwards it to followers. Promoted Tweets will eventually show up in Twitter timelines, not just when people search, based on the interests of people that users follow.

Twitter also sells Promoted Trends, so advertisers can show up in the list of topics most discussed on Twitter, for $100,000 a day.

“It’s a cheap trick but it’s got a lot of eyeballs,” said Chad Stoller, director of digital strategy for BBDO North America.

According to Twitter, on average 5 percent of people who see Promoted Tweets are clicking on, replying to or forwarding the ads — much higher than the less than 1 percent of people who click on a typical display ad.

Trends are mentioned in Twitter conversations four to seven times as often when they are promoted.

Part of the reason so many people are clicking on ads might be the initial novelty, Mr. Hecht said. But at least one advertiser, Coca-Cola, said its response rates had been significantly higher than 5 percent, which surprised the company because it requires the user to make two clicks — first on the Promoted Trend and then on the link within the Promoted Tweet.

“At the end of the day, it’s a very different product” than traditional online ads, said Michael Donnelly, group director for worldwide interactive marketing at Coca-Cola. “People are engaged and looking for a specific topic, so it’s relevant.”

Coca-Cola has run more than 50 ad campaigns on Twitter, including during the World Cup. Coke was a sponsor and paid to promote the trending topic WC2010. Coke also showed messages whenever someone searched for words like “soccer” and “vuvuzela” with links that directed fans to Coke’s YouTube page.

Twitter ads are a work in progress, Mr. Donnelly said. Coca-Cola learned early on, for example, that dense Twitter messages about particular plays in a soccer game were clicked on or forwarded fewer times than short, simple ones about the World Cup in general.

Other advertising executives say clients are still wary. Twitter has already proved to be an effective free marketing tool, so why pay for an account?

“Every one of our clients has Twitter as a part of their social media strategy, but at the moment we’re not seeing a tremendous amount of interest in the specific packages that Twitter is offering,” said Aaron Shapiro, a partner at Huge, the digital agency within the Interpublic Group.

JetBlue advertises on Twitter, but Morgan Johnston, JetBlue’s manager of corporate communications who operates the airline’s Twitter account, said its “primary use of Twitter is really centered on maintaining a dialogue with customers,” which happens in the free account.

There is a long line of companies that want to advertise, Mr. Costolo said, but as with so many things at Twitter, where popularity with users has outpaced the company’s growth, it cannot yet handle the demand.

In August, Twitter hired Adam Bain, former president of the Fox Audience Network, an advertising unit of the News Corporation, as president for global revenue, and has plucked sales executives from Google, Facebook and Yelp to run sales across the country.

“We’re at this new inflection point, and it’s time to move forward a lot faster,” Mr. Costolo said.

This article has been revised to reflect the following correction:

Correction: October 11, 2010

An earlier version of this article incorrectly described the Publicis Groupe, rather than its subsidiary VivaKi Nerve Center, as a digital agency.

What can local businesses sponsor, share and benefit from on your site? Plenty of possibilities to empower local businesses, but the emphasis has to be on empowering your local SMB's not just selling them something.

Posted via email from Randy's Stuff

Tuesday, September 21, 2010

What are local SMB's doing with their ad budgets?

The wifi at the show has finally been fixed so here’s a summary of my notes from Steve Marshall’s presentation on SMB advertising behavior from their survey of SMB advertisers from the end of 2009.

  1. Print Yellow Pages Took a Big Hit: In 2008, 32% of SMBs advertised in the print book v. only 25% in 2009
  2. SMBs that use direct mail are relying on it much more as it’s easy to turn these campaigns on and off
  3. 77% of these SMBs are using digital media v. 69% using traditional media. This is the first time digital has beaten traditional
  4. Consumers are using 7.9 media types to make a local shopping decision. This forces advertisers to chase these media.
  5. SMBs get 40-50% of their business from new customers
  6. 43% of SMBs use SEO up from 40% in 2008. It’s likely that poor experiences with PPC and other SEM programs contributed to that growth
  7. 32% of SMBs plan to use a social site in the next 12 months as part of their marketing plan, but this skews heavily toward businesses that are less than 3 years old
More Kelsey DMS blogging coming your way soon


#3 is surprising to me. I'd be interested in what they combine in "digital media" category.

Posted via email from Randy's Stuff

Wednesday, August 25, 2010

Finally, a legit 21st Century Local TV Strategy

Under the headline, “Why the Apple iTV will change everything,” Digg’s Kevin Rose posted a glowing forecast of the next-generation Apple TV device, which is due out as early as next month. Rose said it will likely have an app store that’s similar to the iPhone/iPad, which means you could punch up your ABC app on your TV and watch “Lost” in 720p. Same goes for local TV stations that offer their own video apps.

Rose also writes that the iPad will turn into “one big badass remote control” that lets you control the iTV and extend the viewing experience, like watching other camera angles.

“This will eventually destroy the television side of the cable and satellite industry, as your only requirement to access these on-demand stations will be an internet connection,” writes Rose. “Say goodbye to your monthly cable bill.”

Rose might be a bit ahead of himself, as network content providers aren’t going to kick cable to the curb anytime soon. Or the affiliates. And set-top boxes, as standalone devices, take a very long time to reach market penetration (TiVo, anyone?) But it’s Apple, and if it does gain some traction, it will certainly throw a wrinkle into the matrix.

Local broadcasters, for example, may feel more compelled to produce web-original video — something that never really took off because the consumption never paid for the costs to create it. But distribute that same clip on the web, iPhone app, iPad app and iTV app, all in a consistent sponsored experience, and that may — may — be enough to jump-start new digital programming efforts in local TV.

Your thoughts on iTV in local markets?

Related posts:

     
Former TV anchor lands $1 million for local startup
 Is TV a better partner for local online news?
 Will local TV adopt animated news?
Filed Under  , Share

So often most of what I read about local TV's future revolve around clinging to the status quo of scarcity. It's usually some person with their net worth or career tied to keeping the local media landscape tied to a rear-view mirror. But this article is refreshing. Unfortunately, I think they buried the lead.

I don't think Apple iTV will change everything. First and foremost the TV industry has not shot itself in the foot as badly as the music industry had when Apple rolled out iTunes and iPods. But the real news in this article is the local app strategy for local tv. This seems to me to have real potential. And I don't think the local apps all have to content-driven. Imagine, for example, a local app that I could use to ask and find the best deal on anything I'm looking for. Find me the best deal on a new pair of running shoes...there needs to be an app for that!

Posted via email from Randy's Stuff

Friday, August 13, 2010

That Ain't Goin' Away

Screen shot 2010-08-11 at 8.48.02 AM.png

Yesterday I posted some thoughts on the Google-Verizon framework, offering what turns out to be a pretty widespread sensibility, at least in the punditocracy, that this whole thing feels off, not like Google, counter to the brand.

There had to be another reason Google would do this, something super important that forced its hand, something so crucial to its own perceived future that it would be willing to upset its core brand advocates.

But what? I wrote: "it gives me the sense that the two parties are colluding in some way, creating and/or obscuring potential loopholes which will allow side deals in other parts of their business."

I then suggested this had to do with Android. And perhaps it does.

But a very well placed source just sent me a thoughtful note, and it immediately stuck a nerve. Perhaps this has not to do with Android as much as it does the future of television.

Google TV, according to those that see it, is very very powerful stuff, and a major weapon on Google's war with Apple (not to mention Microsoft and others). It's streaming, interactive HD with the web folded into it (and it's based on Android). And to work, it will need a fast lane on the ol' info superhighway. Screen shot 2010-08-11 at 8.52.45 AM.pngA really fast lane. And perhaps, preferential treatment to boot.

Might Google petition that Google TV is an "Additional Online Service" outside the protected net neutrality framework it's developing with Verizon? Such a service sure would drive subscriptions for Verizon and customers and advertisers for Google.

Hmmm. I think I'll ask.

Earlier this year, during a digital strategy meeting I was having with a TV general manager, I was sharing some my perspective on the changing local advertising landscape. I always tread lightly during those meetings but this GM said something that stuck with me. He pointed to a TV monitor in his office and said, "yeah, some things are changing, but that ain't goin' away." I shook my head in agreement and kept my thoughts to myself. Perhaps I was being a coward, but I choose to pick my battles, particularly with senior managers. Here's what I was thinking: Yeah, that ain't goin' away, it's YOUR version of THAT facing challenges.

Today I come across two articles that added to my need for Pepto Bismal. Earlier today I posted about estimates by eMarketer that Facebook is reeling in $500m annually in self-served local ads. Now this article about Google TV come across my path. I have no idea if Google TV will be more hyperbole than reality (remember AppleTV?) But here's what is clear: There are many powerful, well-funded companies taking aim at TV as we understand it today. These companies have no tie or connection to the terrestrial-based, ad-supported legacy delivery system we understand today. The attacks are on two critical fronts: Local ad revenue and delivery. I'm hoping that GM allows me to help him battle.

Posted via email from Randy's Stuff

Local Ad Dollars Flowing To Facebook

EW YORK (AdAge.com) -- With its more than half billion users and privately-held status, Facebook's revenue has long been a favorite guessing game for observers from Silicon Valley to Wall Street. But a new estimate from eMarketer says the company will book $1.285 billion in global advertising alone this year, almost double the estimated $665 million the company took in last year. That figure doesn't include Facebook's so-called virtual currency trade, which would nonetheless account for a fraction of the company's overall business.

-->

Interestingly, Facebook's fastest growing area comes from its self-serve ad platform, which launched in August 2007. "We believe it accounted for about half of all ad spending on Facebook," eMarketer senior analyst Debra Aho Williamson said. "It's really become a tremendous business for the company. We didn't account for the size of that business last year in our estimate, but we found that it's become a great tool for direct-marketing advertisers."

The eMarketer analysis stands as a significant third-party verification against some of the provisional numbers floating around in the media. A July Bloomberg article, for example, cited two anonymous sources indicating Facebook would book $1.4 billion this year. A March report from the Wall Street Journal pegged the company's 2010 revenue at a wide range of $1.2 billion to $2 billion, also citing anonymous sources. In both articles, it was unclear whether the information came from inside or outside the company itself.

Like Google, Facebook's self-serve advertisers are largely local, coming from marketing dollars once spent on yellow pages listings. If those advertisers perform anything like Google's, they won't be as cyclical as national brand advertising, giving Facebook a buffer against future ad slumps.

Two things strike me here: First, is there really $500 million local ad dollars going to Facebook? If those estimates are true, it's a little staggering. Let's do a little math here. Divide $500m by 200 TV DMA's across the country. That's over $2m in local ad dollars flowing to a new competitor. Obviously Facebook's local ad dollars are not evenly divided across all DMA's, but whatever the size of market you compete in, consider what just happened in the last year.

The second thing that strikes me about the Ad Age story is that Facebook's local ad dollars are SELF-SERVED. I don't underestimate local advertiser's ability to wrap their arms around new technology. I just find most don't have the time. This number suggests they're making the time.

Posted via email from Randy's Stuff

Friday, August 6, 2010

Disruption At Every Level

Today they are standing on every corner in one town outside New York City. They are blonde, female and clearly under 25. They wear bright green T-shirts and visors that say “Patch,” and they hand out pens and stickers and leaflets by the gross. They do not live here.

“Have you read Patch?” they croon to the commuters and shoppers and mommies with strollers, many of whom stare straight ahead without stopping.

These are the new Journalists. At least they say they are.

Patch, or “Poach,” as someone here at Lost Remote once called it, is the network of identical hyperlocal sites that AOL is rolling out at a reported cost of well over $50 million this year.

In fact, the sites are parachuting down so fast they can’t even keep up with the list of “coming” sites on the Patch homepage; the town where we spotted the lovelies today isn’t even on the list yet, but they are advertising for writers on Craigslist.

In Southern Westchester New York, as well as in other affluent suburban areas in eight other states, Patch has let loose (what they say are) 75 young reporters, bloggers, marketers and sales people to cover an area that we do with two to four, depending on the day.

Editors of hyperlocal sites like mine, like Baristanet in New Jersey, OaklandLocal, WestSeattleBlog and dozens of others that were built on the passions of their founders, consider Poach, I mean Patch, to be anything from a pesky annoyance to a real threat.

My standard response when people ask me how we differ, is that Patch is like a drive-thru McDonald’s, all corporate and chain-like, and we are a comfy diner. That serves cocktails.

I think we must all be mindful that conglomo-sites like Patch, while legitimate local news gathering enterprises, could push bootstrap start-ups off the map, simply because they’re able to spend millions. It feels too much like what Gannett was able to do with dozens upon dozens of  local newspapers almost a generation ago.

Patch is hardly the only one out there. I was approached by the Publisher of  MainStreetConnect,  who told me he has bought up 3000 urls, including www.thedailynorwalk.com in Connecticut. He offered me a job editing all the sites in Westchester County (which has about 72 towns and villages) for $40,000 a year.

“We are going to put you out of business anyway,” he said.

I declined. “We’ll be watching you carefully,” he added.

It’s capitalism. We are okay with that. Media is reinventing. We are okay with that too. These are great training grounds for young journalists. Even better. I’m jus’ sayin’ let’s all keep an eye out for each other and not lose sight of why we do this to begin with: to tell stories, inform, protect, advocate and provide a platform for all voices. The voices with the best economy of scale shouldn’t automatically win.

One of the most important things I learned at the Knight Digital Media Center earlier this year is the importance of the role of the publisher as community builder. Because online journalism is often a conversation between media and readers, rather than the Voice of God of yore,  one of the most important things we can do is to help build partnerships and alliances when both sides are committed to the same community.

Last year, we at theLoop had the idea to sponsor a Bastille Day block party in our area with a local restaurant to give residents a reason to visit the village at night. We offered publicity and coverage. We paid the police overtime and the band with modest sponsorship money, and the sponsors put up their banners.  Over 500 people came. There was music, food and drinks. It was great for the partner restaurant, for the sponsoring businesses and it was great for theLoop.

This year, Patch approached our partner and offered $900 and ten staffers (in T-shirts and visors and pens, flyers…)  to sponsor our event.  The restaurant agreed.  Most of the staffers were dispatched from Patch HQ in Soho, New York City, and don’t live here. There was little we could do. We set up a table and tried to look cheerful.

But I am going to order some T-shirts.

Related posts:

     
Roundup: Google Wave, Patch, All-traffic channel
 CBS New York rolls out new website model
 Guest Post: Establishing news sites from the ground up

I was struck by this post. I work in traditional media and everyone knows what kinds of disruption this industry faces. But disruption knows no protected class. Today disruption happens at such a fast pace and on some many levels that even the disruptor is being disrupted. Amazing, really. Unsettling, as usual.

Posted via email from Randy's Stuff

Tuesday, August 3, 2010

Wow - Newsweek sells for $1!

Your email has been sent.
Thanks for recommending The Daily Beast!

X Close

');

BS Top - Lauria Newsweek Sidney Harman. Credit: Newscom Ninety-one-year-old audio tycoon Sidney Harman's purchase of Newsweek yesterday was greeted with internal cheers. But a look inside the magazine's financial records, leaked to The Daily Beast, reveals its new crisis.

Yesterday's purchase of a 77-year-old magazine, Newsweek, by a 91-year-old audio magnate, Sidney Harman, had all the makings of a feel-good story, even as editor Jon Meacham announced his departure. A legendary media franchise rescued from an uncertain future by someone who regards Newsweek as a “national treasure,” and commits himself to the highest quality, Harman the idealist also has credibility as a brilliant innovator and businessman of stature. Though he has made his fortune in audio, he loves print. He is the author of two books and said writing “enables the process of self-discovery.” He will take over with a staff overjoyed by his commitment and his manners.

"Harman was someone who was taken less seriously by the staff who worked on the deal because he had no plan."

But make no mistake, Harman's pocket change purchase of Newsweek—he paid $1, plus the assumption of liabilities for the magazine—has to be a passion play, because it certainly isn't a financial one. The Daily Beast has obtained a copy of the 66-page sales memorandum that the Newsweek seller, the Washington Post Co., gave to prospective buyers, and it paints a picture of a media property given to someone unequipped to fundamentally change the current trajectory.

Much will depend on finding a near-genius editor and an inspired publisher and their freedom and shared approach, as much as their bankroll. As with many weeklies, Newsweek’s financial freefall is jarring. Revenue dropped 38 percent between 2007 and 2009, to $165 million. Newsweek's negligible operating loss (not including certain pension and early retirement changes) of $3 million in 2007 turned into a bloodbath: the business lost $32 million in 2008 and $39.5 million in 2009. Even after reducing headcount by 33 percent, and slashing the number of issues printed and distributed to readers each week, from 2.6 million to 1.5 million, the 2010 operating loss is still forecast at $20 million.

Dig deeper into the document and the numbers get worse. Newsweek lost money in all three of its core areas in 2008 and 2009: U.S. publishing, foreign publishing and digital. Even with the smaller guaranteed circulation, it still retains $40 million in subscription liabilities owed to readers. And then there's Newsweek's lease foibles: last year, it paid $13 million in rent, a startling figure for a company of its size.

Click Image to See 10 Memorable Newsweek Covers

Article - Newsweek Gallery

Into this picture steps Sidney Harman, who is venerable enough to have read the very first issue of Newsweek back in 1933. By Harman's own admission at a gathering of the magazine's staffers yesterday, his goal isn't to make a profit any time soon, but rather to reach break-even by 2013. Clearly, while the billionaire founder of Harman/Kardon and Harman International Industries is new to the media world, he's already got the "flat is the new up" mantra down pat.

Newsweek Staffers Nervous After Sale

Who Killed Newsweek?But by the Washington Post Co.'s own account, as told via the sales memorandum, Harman's Newsweek lacks what is necessary for a turnaround: the synergies of another media company. "The right strategic partner can potentially provide scale and synergies on the digital platform," the memo states. Additionally, if another media company bought Newsweek—such as when Bloomberg rescued BusinessWeek in a fire sale last year—then the murderously inefficient $55 million in general and administrative costs that Newsweek carried in 2009 (covering everything from finance and accounting and rent to legal, HR and IT. Standalone magazines no longer work.) could be greatly reduced by sharing resources.

Yet Harman has none of that—neither the scale to juice sales or reduce costs. When the microphone had to be lowered yesterday to accommodate Harman's diminutive stature during his address to the troops, he joked, "This microphone will be the last thing I will cut down to size," in an attempt to reassure staffers that he wasn't about to order wholesale layoffs.

In fact, Washington Post CEO Donald Graham apparently considered the fact that Harman would need to retain Newsweek's back office inefficiencies as a selling point, even as his company's sales memo advised otherwise. Graham will not have all that blood on his hands. (When one of the great brands in American journalism sells for a buck, legacy is about the only tangible currency left to haggle over.)

"Harman was someone who was taken less seriously by the staff who worked on the deal because he had no plan," says a person close to the deal. "He won the bid because he had the lowest number of layoffs."

Thus, further cuts have been kicked down the road, to occur on Harman's watch—or that of his heirs, who may include his wife, California Democratic Congresswoman Jane Harman.

"[Harman] has enough money for this to be a hobby that he can have fun with while trying to fix," says prominent media banker Reed Phillips.

Adds longtime friend and Newsweek political correspondent Howard Fineman, who wooed Harman to purchase the magazine over a mid-May lunch at the Hay Adams Hotel in Washington, D.C., "I told him that it's a great nameplate, and it's worth saving for several reasons, one of which is its global reach. It really does circulate around the world."

You can buy a bottle of water or Newsweek magazine. Amazing. I guess that's what happens to valuation when you post $20+million annual loses. Good luck to Mr. Harman. I'm glad he has a commitment to philanthropy.

Posted via email from Randy's Stuff