Wal-Mart is the world’s largest retailer. Current projections are that they have over 2.1 million employees globally. Their original claim to fame remains very much intact—“everyday low pricing.” The company grew rapidly from its beginnings in 1962 where Sam Walton and his brother made sure that their markup was always less than their competitors. In the early days, they would drive all night in a rented truck to Tennessee and pick up a load of shirts. The next day they would display them prominently in their store(s) and after a week or two put them back in the storeroom for another try several weeks later. They stubbornly refused to be undersold on almost any item.
The company grew like crazy as Sam developed a unique strategy. They would invade a Nielsen DMA (media market) and build stores in smaller towns not near the major city. Slowly, they would circle the metropolitan area and then move in closer and closer to the center city but rarely would move in to highly congested and competitive areas with high real estate prices for a number of years.
Our advertising and media industries did not give then much attention as they were never significant advertisers. They relied on “everyday low pricing” to carry the day and eventually had a monopoly loyalty in some rural areas. Even today, their advertising to sales ratio is probably one fourth of that of a competitor such as Target.
Sam was not simply a great merchant. Internally, he and his team developed systems that were light years ahead of the rest of the industry. They computerized before others and had tighter inventory control than anyone. Eventually, manufacturers wound up managing Wal-Mart’s inventory for them. If Wal-Mart sold 5,000 lawn mowers on an April Tuesday, the manufacturer had to re-order and get mowers to appropriate Wal-Mart warehouses very quickly.
As they grew larger, they really put the squeeze on suppliers. The big package goods companies such as P&G, Colgate-Palmolive, Nestle, Kraft, and Kellogg among others historically strong armed retail stores regarding pricing, promotion, co-op advertising, and shelf space. Wal-Mart turned that around, often set pricing (lower than the manufacturer wanted), set minimum sales thresholds, and even made sure packaging fits their needs. Wal-Mart claims part of their green initiative is forcing companies to use less plastic in their packaging. Is it? Or does it give them more shelf space? The manufacturers soon sang and continue to dance to Wal-Mart’s tune as 25% of their volume may have come from the Bentonville wizards.
Eventually, the company branched out into groceries and did well there and soon added drugstores. They continue to try to get into banking for the underclass. Soon they had another concept—Sam’s Club, a membership club in competition with Costco and BJ’s among others.
They also keep playing the green card and are constantly adding solar panels to most new and existing stores as well as energy saving lighting. Is this all self serving? One would think so but they are probably the largest private user of solar energy in the world.
Globally, they have invaded Europe, South America and have vibrant growth in China. It appears other cultures enjoy saving money, too.
Wal-Mart is widely credited with fighting inflation, particularly in the U.S. There has been little evidence of price gouging and they buy in such volume that consumers benefit. And, in rural areas where they have put most serious competitors out of business, they are careful not to raise prices to avoid antitrust action from the Federal Trade Commission. Loyola University, Chicago found that Wal-Mart low prices saved the average working family $2,500 per year and creates 210,000 new jobs.
Is Wal-Mart really cheaper? Going back to my young days as a budding economist, I put together a representative market basket of goods (my basket may be different from yours!). In the grocery aisle, I went to Whole Foods (often called Whole Paycheck), a large local grocer, and a national chain. For OTC drugs and personal care products, I went to CVS and Walgreen’s. Without exception, I ignored sale items and found Wal-Mart 16% less expensive than all competitors for my basket of goods. Was the shopping experience pleasant? Nope. But, the savings were very real.
There are several large issues out there:
1) Professor Ken Stone, an economist at Iowa State University has written extensively on Wal-Mart. He says small towns lose their character a few years after a Wal-Mart opens. Shop owners have to adapt if they want to thrive with a Wal-Mart nearby. After several years, approximately half of local retailers shut down. The shop owners that they effectively shut down were often pillars of the community and without them, charities suffered as well as some good jobs. Wal-Mart is not famous for paying well (I grew up in a Norman Rockwell style New England village with small business owners the glue that held all the local institutions together. They were soft touches for school fundraisers and they served on school boards, town council, church committees and encouraged their employees to be part of the volunteer fire department). The shrinking pool of local leadership has also caused there to be more lower paying jobs as the closed businesses often paid better than Wal-Mart does.
2) The libertarian leaning Ludwig von Mises Institute argues the opposite stating that Wal-Mart has a positive effect on new business development. They see local retail closings as merely part of the process of “creative destruction” that takes place in a free market economy when innovation sweeps away the old and inefficient. Wal-Mart, to them is simply a living embodiment of the concept of Consumer Sovereignty where the consumer is king. The consumers feel Wal-Mart has listened to their needs via low prices so they continue to grow.
3) Labor unions often harp that Wal-Mart in the U.S. is hostile. Employees are unionized in other countries but not at home. Also, employee turnover is 70% per year implying that pay and benefits are weak.
4) Some say that Wal-Mart has worked hard and successfully on ethnic balance but claim that there is evidence of discrimination against women and gays in terms of promotion. Finally, their health coverage is considered problematic in many states. Claims have been made but are as yet unproven that they keep hours low for many employees so they do not have to provide healthcare.
The more you dig into Wal-Mart it is easy to see why views on the company are so polarized. Some commentators attack Wal-Mart as all that is evil in big business. Others say that the company is a lightning rod for criticism due to jealousy. They are a free market success story, the largest employer in the U.S. retail and people begrudge them their success.
Over the last couple of years I have lectured on Wal-Mart and used them as a case study. A few weeks ago, I outlined many of the ideas presented in this post to a group of young adults. The discussion that ensued was long and lively. Only one person admitted they liked Wal-Mart. Most said they hated the appearance of the stores, as well as the surly or invisible service but they came back again and again because the prices were excellent.
A few days letter I received a long message from someone who stayed quiet during the Wal-Mart discussion. She said her Mom was single and struggling. Wal-Mart put food on the table and truly lived up to their theme line—“Save money, live better.” To those of us who live comfortable lives, the point is well made. If Loyola is correct with the $2500 annual savings, blue collar families almost HAVE to go to Wal-Mart. Friends have told me they will not go there and admit it is for purely political reasons. They can afford to do that but a great many Americans cannot.
So what do you think?
Is it more important to lower costs for all or is it better to be a better corporate citizen in each market that the company enters? As a society are we better or worse off due to Wal-Mart’s growth and increasing dominance?
Is Wal-Mart simply a case of Consumer Sovereignty from a Consumer Behavior standpoint or is there something more sinister afoot?
To me, it remains various shades of gray and I will continue to monitor it and study it carefully.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Wednesday, May 26, 2010
Friday, May 21, 2010
Build Brand Awareness Through Social Media
Today, we have a guest contributor. Chris Maienshein is a very recent graduate of Stevenson University. This past semester he engaged in an independent study with me on emerging media. Here is his take on Social Media. It is interesting and important to get the vision of a bright 22 year old.
For years television has been the number one tool to advertise products and services to a mass audience. The landscape of advertising has begun to unravel recently due in part to the excitement of social media outlets. The only problem with these brand new outlets is the question not too many people seem to be able to answer. How do you properly use sites like Facebook, Twitter, and YouTube to reach your target audience? Many people believe that these websites will replace the need to advertise on television and could end up being the most effective way to broadcast their product. I still believe T.V. will remain the number one advertising mechanism but realize the importance of mastering the social media landscape. The fact is that Facebook has over 250 million users and continues to grow. There are 44 million users on Twitter, 72.5% of whom joined in the first five months of 2009. YouTube has 75 billion video streams reaching an audience of 375 million people. These statistics cannot be ignored by any company looking to expand their products across a broad range of people. Therefore, the time is now to learn how to market your company’s product or service effectively through social media. I believe in order to do this correctly one must realize that social media should not be looked at as advertising. Rather, it is a place to build brand awareness. Many companies are failing to understand this concept and are attempting similar strategies they would use on other advertising media. Do not approach Facebook and Twitter as a place to sell more of your product. Rather use these sites to engage your target audience. Allow them to discuss your product and give you positive or negative feedback. Social media does not automatically create sales. They can only accelerate the learning curve for the target market. Several key tips companies could use in order to master the art of social media are: Constantly updating your Facebook, Twitter accounts, and blogs are a must. In order to understand your target audience you must be heavily involved in the culture. Read other companies blogs and Facebook pages in order to determine the best route your company can take. A mistake to avoid would be hiring people to leave nice comments on your social media websites. This is not a constructive use of social media. You want the customers to feel free to say whatever is on their mind. These websites are a great place to receive constructive criticism and gives the company a chance to redeem themselves with the customer. Social media is a place to be real. Do not act like a hired marketing consultant attempting to push a sale through your readers. Show personality and enthusiasm for the product. That will allow people to gain a level of trust, ultimately creating a loyal fan base. As mentioned earlier, keeping up with each site is a necessity. That means it is going to be a lot of hard work for you. The easiest way to add new material to your blogs or Facebook pages would be offering tips or advice for the clients. For instance, if you are a financial advisor looking to reach new cliental through a blog you should consider starting a blog with your financial tips of the week. Remember you are not advertising the fact that you are a financial advisor, only creating brand awareness. Eventually you will have a large enough fan base that they will start reaching out to you for further advice. That is when you can offer them your services as a professional advisor. When writing a blog, running a Facebook page, and “Tweeting” on your Twitter account make sure you respond to all inquires. Answer their questions and be thankful for their input. Their input adds a whole lot more value to your web content and will strengthen your social media expertise. Lastly, do not get involved in just Facebook or just Twitter. Get involved in every social media website you can, the more the better. You should have links from one site to your others so that people can become even more engaged with your content. For example, using the financial advisor scenario, at the end of each of your blogs leave a link to your Twitter account, your Facebook page, and any YouTube videos that relate to your financial work. This would then allow the reader to recognize, through your Facebook page, that you are a financial advisor with valid knowledge. Your links do not have to stop at just your personal pages also. You can lead your readers to other appropriate web content that you feel would increase your audiences’ knowledge of the subject. Again, doing so gains you more credibility as a legitimate source and will leave the reader wanting more. Remember to maintain a strong reputation as a reliable source and as a respectful communicator that does not insult the opinions of others. Do not try to be someone you are not. Show your true personality through your content. Always be truthful in your statements. If you do not know the answer to a question simply reply that you will get back to them after you have researched the answer. Lastly, if you decide to use social media as a tool to build brand awareness stay timely. Participate fully with constant updates of your material and quick feedback to your readers. Getting involved in social media can grow your brand, and reinforce the connection between you and your customers. The time you invest into your social media outlets will ultimately make you aware of what people want out of your business.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
For years television has been the number one tool to advertise products and services to a mass audience. The landscape of advertising has begun to unravel recently due in part to the excitement of social media outlets. The only problem with these brand new outlets is the question not too many people seem to be able to answer. How do you properly use sites like Facebook, Twitter, and YouTube to reach your target audience? Many people believe that these websites will replace the need to advertise on television and could end up being the most effective way to broadcast their product. I still believe T.V. will remain the number one advertising mechanism but realize the importance of mastering the social media landscape. The fact is that Facebook has over 250 million users and continues to grow. There are 44 million users on Twitter, 72.5% of whom joined in the first five months of 2009. YouTube has 75 billion video streams reaching an audience of 375 million people. These statistics cannot be ignored by any company looking to expand their products across a broad range of people. Therefore, the time is now to learn how to market your company’s product or service effectively through social media. I believe in order to do this correctly one must realize that social media should not be looked at as advertising. Rather, it is a place to build brand awareness. Many companies are failing to understand this concept and are attempting similar strategies they would use on other advertising media. Do not approach Facebook and Twitter as a place to sell more of your product. Rather use these sites to engage your target audience. Allow them to discuss your product and give you positive or negative feedback. Social media does not automatically create sales. They can only accelerate the learning curve for the target market. Several key tips companies could use in order to master the art of social media are: Constantly updating your Facebook, Twitter accounts, and blogs are a must. In order to understand your target audience you must be heavily involved in the culture. Read other companies blogs and Facebook pages in order to determine the best route your company can take. A mistake to avoid would be hiring people to leave nice comments on your social media websites. This is not a constructive use of social media. You want the customers to feel free to say whatever is on their mind. These websites are a great place to receive constructive criticism and gives the company a chance to redeem themselves with the customer. Social media is a place to be real. Do not act like a hired marketing consultant attempting to push a sale through your readers. Show personality and enthusiasm for the product. That will allow people to gain a level of trust, ultimately creating a loyal fan base. As mentioned earlier, keeping up with each site is a necessity. That means it is going to be a lot of hard work for you. The easiest way to add new material to your blogs or Facebook pages would be offering tips or advice for the clients. For instance, if you are a financial advisor looking to reach new cliental through a blog you should consider starting a blog with your financial tips of the week. Remember you are not advertising the fact that you are a financial advisor, only creating brand awareness. Eventually you will have a large enough fan base that they will start reaching out to you for further advice. That is when you can offer them your services as a professional advisor. When writing a blog, running a Facebook page, and “Tweeting” on your Twitter account make sure you respond to all inquires. Answer their questions and be thankful for their input. Their input adds a whole lot more value to your web content and will strengthen your social media expertise. Lastly, do not get involved in just Facebook or just Twitter. Get involved in every social media website you can, the more the better. You should have links from one site to your others so that people can become even more engaged with your content. For example, using the financial advisor scenario, at the end of each of your blogs leave a link to your Twitter account, your Facebook page, and any YouTube videos that relate to your financial work. This would then allow the reader to recognize, through your Facebook page, that you are a financial advisor with valid knowledge. Your links do not have to stop at just your personal pages also. You can lead your readers to other appropriate web content that you feel would increase your audiences’ knowledge of the subject. Again, doing so gains you more credibility as a legitimate source and will leave the reader wanting more. Remember to maintain a strong reputation as a reliable source and as a respectful communicator that does not insult the opinions of others. Do not try to be someone you are not. Show your true personality through your content. Always be truthful in your statements. If you do not know the answer to a question simply reply that you will get back to them after you have researched the answer. Lastly, if you decide to use social media as a tool to build brand awareness stay timely. Participate fully with constant updates of your material and quick feedback to your readers. Getting involved in social media can grow your brand, and reinforce the connection between you and your customers. The time you invest into your social media outlets will ultimately make you aware of what people want out of your business.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Monday, May 17, 2010
The Future of International SKU's
A few weeks ago, I posted a story on vanishing SKU’s (Stock Keeping Units). To my surprise, it generated more mail than any other Media Realism piece to date. Some enjoyed, some agreed, many were amused by it and one reader said that I had definitely become a socialist! The mail also included requests from readers on three continents who asked me to expand on it and discuss what is happening internationally and what may the future may look like in their neck of the woods.
So here is my take. It may be different from what you see or hear elsewhere.
About 20 years ago, American multi-nationals began to realize that countries with emerging middle classes were becoming a happy hunting ground for well established brands. Colgate-Palmolive was way ahead of the pack. As early as 1972, some 52% of their sales were outside of the U.S. Other U.S. brands got religion and began to make their move abroad for several reasons:
1) Many brands were in mature mode in the U.S. and margins were paper thin. Beverages would be a good example. So, to keep growing they had to follow growth trends regardless of the passport of the new markets.
2) Foreign countries had some native brands but many were not national in scope. They did not have expertise in mass production, distribution, or branding.
3) Importantly, few had much advertising expertise as there were few media outlets available and not nearly as much TV as the U.S.
4) There was a halo effect. American pop culture traveled well whether it was blue jeans, Budweiser, Marlboro, Coke and Pepsi, McDonald’s, music and Hollywood films. So, when American products showed up, the new generation of consumers in emerging markets gobbled them up.
Since then, a few things have happened. Locals who did not have the expertise slowly began to get it. Some did knock offs of American products and succeeded as well. Countries such as India, Brazil, Korea, even Turkey now have indigenous brands that are thriving and fiercely competitive to US brands or Switzerland’s Nestle or the Anglo-Dutch conglomerate, Unilever.
So, for the next several years we may see brand and resulting SKU expansion around the world. But, then the big boys will pounce as they have done in the states for the last few decades. How will they do it? Do this exercise and you will come away convinced. I took a careful, actually boring look at the balance sheets of beverage and snack food king PepsiCo, the world’s largest food processor Nestle, and insurance giant and conglomerate Berkshire Hathaway. These companies are growing with almost armored car safety. If the present trend continues in about three years, they will be able to secure long term debt at a price far more reasonable than the US government will. This gives them access to capital that is easy and cheap relative to 99% of emerging market competitors.
These giants and others like them will buy up strong local brands across the globe at a pace far faster than the past and the cycle that we have seen in the US will only repeat itself.
Is this a good thing? Probably not as fewer SKU’s means less competition and less consumer choice. But the economies of scale that the multi-nationals provide may keep prices down for a while. Capitalism is relentless and unforgiving. The strong will get stronger and office workers in Manila will soon shave with Gillette, have Nescafe at breakfast along with a Kellogg’s cereal, brush with Colgate, and knock back a Pepsi at lunch and a Bud or two after work.
Also, if the dollar dives in a few years as our massive deficits finally catch up with us, earnings of the big multi-nationals may zing as big sales in stronger Asian currencies are repatriated back home.
Another big beneficiary will be the large advertising holding companies that have global responsibility for key brands. Right now, these accounts have the growth potential similar to many US brands in the early 1950’s.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
So here is my take. It may be different from what you see or hear elsewhere.
About 20 years ago, American multi-nationals began to realize that countries with emerging middle classes were becoming a happy hunting ground for well established brands. Colgate-Palmolive was way ahead of the pack. As early as 1972, some 52% of their sales were outside of the U.S. Other U.S. brands got religion and began to make their move abroad for several reasons:
1) Many brands were in mature mode in the U.S. and margins were paper thin. Beverages would be a good example. So, to keep growing they had to follow growth trends regardless of the passport of the new markets.
2) Foreign countries had some native brands but many were not national in scope. They did not have expertise in mass production, distribution, or branding.
3) Importantly, few had much advertising expertise as there were few media outlets available and not nearly as much TV as the U.S.
4) There was a halo effect. American pop culture traveled well whether it was blue jeans, Budweiser, Marlboro, Coke and Pepsi, McDonald’s, music and Hollywood films. So, when American products showed up, the new generation of consumers in emerging markets gobbled them up.
Since then, a few things have happened. Locals who did not have the expertise slowly began to get it. Some did knock offs of American products and succeeded as well. Countries such as India, Brazil, Korea, even Turkey now have indigenous brands that are thriving and fiercely competitive to US brands or Switzerland’s Nestle or the Anglo-Dutch conglomerate, Unilever.
So, for the next several years we may see brand and resulting SKU expansion around the world. But, then the big boys will pounce as they have done in the states for the last few decades. How will they do it? Do this exercise and you will come away convinced. I took a careful, actually boring look at the balance sheets of beverage and snack food king PepsiCo, the world’s largest food processor Nestle, and insurance giant and conglomerate Berkshire Hathaway. These companies are growing with almost armored car safety. If the present trend continues in about three years, they will be able to secure long term debt at a price far more reasonable than the US government will. This gives them access to capital that is easy and cheap relative to 99% of emerging market competitors.
These giants and others like them will buy up strong local brands across the globe at a pace far faster than the past and the cycle that we have seen in the US will only repeat itself.
Is this a good thing? Probably not as fewer SKU’s means less competition and less consumer choice. But the economies of scale that the multi-nationals provide may keep prices down for a while. Capitalism is relentless and unforgiving. The strong will get stronger and office workers in Manila will soon shave with Gillette, have Nescafe at breakfast along with a Kellogg’s cereal, brush with Colgate, and knock back a Pepsi at lunch and a Bud or two after work.
Also, if the dollar dives in a few years as our massive deficits finally catch up with us, earnings of the big multi-nationals may zing as big sales in stronger Asian currencies are repatriated back home.
Another big beneficiary will be the large advertising holding companies that have global responsibility for key brands. Right now, these accounts have the growth potential similar to many US brands in the early 1950’s.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Friday, April 30, 2010
Michael Moore's "Capitalism: A Love Story"
I have never written a movie review before in Media Realism. But, having seen Michael Moore’s latest documentary “Capitalism: A Love Story”, I feel compelled to comment on it.
Michael Moore is a 56 year old film maker from Flint, Michigan. He burst on to the scene with “Roger & Me” back in 1989 which took direct aim at General Motors. Over the years, he added many documentaries including “Bowling for Columbine” in 2002 which covered America’s love affair with guns and tendencies toward violence, “Fahrenheit 9/11”, a 2004 hatchet job on George W. Bush, “Sicko” from 2007 which discussed our lack of comprehensive health care compared to other Western nations, and most recently, his 2009 entry, “Capitalism: A Love Story.”
I must confess that I do not particularly like Michael Moore. Some people have told me not to watch his films; a few others not to write this blog entry. But, I have always held that if you do not see or read something, you cannot ethically complain about it. So, I screened the film twice (thank you, Netflix).
“Capitalism: A Love Story” covers the events surrounding and the aftermath of the financial crisis of late 2008 and early 2009. We still feel it today and will be paying for it for decades. Moore’s thesis is that capitalism or the free market is inherently unfair, even evil. Capitalists in the film are portrayed as greedy and unfeeling. This week his message probably strikes a responsive chord with many who witnessed the arrogance of the Goldman Sachs senior team testifying in front of Carl Levin’s senate committee. Repeatedly, they dismissed questions from the unusually well prepared Senators with comments such as “Senator, do you really understand what it is to be a market maker in a security?” I watched a good bit of it on C-Span and was very annoyed (Yes, I lead an exciting life!).
Moore goes to great lengths to say that those on top are in an endless search for profits. Reviews of the film in some quarters say that the investment bankers (or is it banksters) are really the true life embodiment of of Milton Friedman’s famous quotation—“There is one and only one social responsibly of business: to use its resources and engage in activities designed to increase its profits.”
Well. They never really read Friedman. I started at 19 and have since devoured virtually everything he ever published. The quote is a fragment from a now famous New York Times Magazine article in 1970. Here is the actual sentence that is rarely quoted in its entirety—“There is one and only one social responsibility of business: to use its resources and engage in activities designed to increase its profits SO LONG AS IT STAYS WITHIN THE RULES OF THE GAME, WHICH IS TO SAY, ENGAGES IN OPEN AND FREE COMPETITION WITHOUT DECEPTION OR FRAUD”. (Emphasis mine)
Friedman is actually calling for regulation and ethics! Moore throws all of us free market, free traders into the same cesspool as investment bankers who may have willfully packaged up crap mortgages and sold them to unsuspecting investors while they sold them short simultaneously. The truth is that there are millions of us who engage in honest exchange, pay our taxes, and stand behind everything that we sell. It is not the system that is evil; it is merely some of the players.
Moore is a film maker and at times, a good one. There is a lengthy scene in the film about a family in Illinois losing their farm as they could not handle increasing mortgage payments. Unless you are completely hard of heart you have to be moved by it. The segment reminded me of an updated version of Steinbeck’s “Grapes of Wrath” without John Ford’s brilliant direction and cinematography and Henry Fonda’s stunning acting.
He also has some humor. At the end of the film, he arrives at Goldman headquarters perhaps at 6 am and blocks the entrance to the building with police tape emblazoned with “Crime Scene.” It reduced me to uncontrollable laughter.
These touches give Moore’s superficial analyses some traction with many people. Compare this to the marvelous and important documentary on America’s budget crises entitled “I.O.U.S.A.” Meticulously researched and featuring deficit hawk David W. Walker, billionaire Warren Buffett, and libertarian congressman Ron Paul, it lays out our difficult future clearly. But then it becomes repetitive and very boring. Moore, on the other hand, knows that he has to make you laugh and cry and often hits the mark.
The low point of the film to me is when he interviews some priests as to whether capitalism is a moral system. Instantly, I thought okay, he will have an economics professor from Georgetown, Boston College, or Notre Dame on to discuss it. Nope. He had the parish priest who officiated at his wedding in Flint, Michigan, another who was the church’s witness at his sister’s wedding, and finally a Detroit bishop. The trio all said capitalism was not moral. They all seem like splendid fellows but what expertise do they have in the economic arena?
Those of us who are Catholics know that priests and bartenders often serve as the poor man’s psychiatrist. So, if you were ministering to the faithful in Flint or in Detroit the last 30 years you would get an earful from struggling people as the domestic auto industry went south. But does the arrogance of GM ignoring consumer behavior trends make the system immoral? I think not.
I have always counted myself lucky. Roughly 4% of us were born in the United States. That gave me and most of you a tremendous leg up in life. But imagine if capitalism never evolved into being. Our ancestors would never have escaped to our rocky shores and unlimited opportunities. Even on my worst day, I realize this. Capitalism helps people. Certainly, you have freedom to succeed and also to fail and some do. But most of us are far better off with a free market. Had we not had economic freedom, my ancestors would never have come here. I would not exist, period. But somewhere in Monaghan County, Ireland there would be a fellow with some of my genetic history scrambling for a living working a potato patch for an absentee British aristocrat.
The market system is not perfect but it is the best system known to man. Moore’s blanket condemnation of capitalism is superficial and unfair. With proper regulation and Friedman’s concept of “open and free competition without deception or fraud” we can right the ship and move forward.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Michael Moore is a 56 year old film maker from Flint, Michigan. He burst on to the scene with “Roger & Me” back in 1989 which took direct aim at General Motors. Over the years, he added many documentaries including “Bowling for Columbine” in 2002 which covered America’s love affair with guns and tendencies toward violence, “Fahrenheit 9/11”, a 2004 hatchet job on George W. Bush, “Sicko” from 2007 which discussed our lack of comprehensive health care compared to other Western nations, and most recently, his 2009 entry, “Capitalism: A Love Story.”
I must confess that I do not particularly like Michael Moore. Some people have told me not to watch his films; a few others not to write this blog entry. But, I have always held that if you do not see or read something, you cannot ethically complain about it. So, I screened the film twice (thank you, Netflix).
“Capitalism: A Love Story” covers the events surrounding and the aftermath of the financial crisis of late 2008 and early 2009. We still feel it today and will be paying for it for decades. Moore’s thesis is that capitalism or the free market is inherently unfair, even evil. Capitalists in the film are portrayed as greedy and unfeeling. This week his message probably strikes a responsive chord with many who witnessed the arrogance of the Goldman Sachs senior team testifying in front of Carl Levin’s senate committee. Repeatedly, they dismissed questions from the unusually well prepared Senators with comments such as “Senator, do you really understand what it is to be a market maker in a security?” I watched a good bit of it on C-Span and was very annoyed (Yes, I lead an exciting life!).
Moore goes to great lengths to say that those on top are in an endless search for profits. Reviews of the film in some quarters say that the investment bankers (or is it banksters) are really the true life embodiment of of Milton Friedman’s famous quotation—“There is one and only one social responsibly of business: to use its resources and engage in activities designed to increase its profits.”
Well. They never really read Friedman. I started at 19 and have since devoured virtually everything he ever published. The quote is a fragment from a now famous New York Times Magazine article in 1970. Here is the actual sentence that is rarely quoted in its entirety—“There is one and only one social responsibility of business: to use its resources and engage in activities designed to increase its profits SO LONG AS IT STAYS WITHIN THE RULES OF THE GAME, WHICH IS TO SAY, ENGAGES IN OPEN AND FREE COMPETITION WITHOUT DECEPTION OR FRAUD”. (Emphasis mine)
Friedman is actually calling for regulation and ethics! Moore throws all of us free market, free traders into the same cesspool as investment bankers who may have willfully packaged up crap mortgages and sold them to unsuspecting investors while they sold them short simultaneously. The truth is that there are millions of us who engage in honest exchange, pay our taxes, and stand behind everything that we sell. It is not the system that is evil; it is merely some of the players.
Moore is a film maker and at times, a good one. There is a lengthy scene in the film about a family in Illinois losing their farm as they could not handle increasing mortgage payments. Unless you are completely hard of heart you have to be moved by it. The segment reminded me of an updated version of Steinbeck’s “Grapes of Wrath” without John Ford’s brilliant direction and cinematography and Henry Fonda’s stunning acting.
He also has some humor. At the end of the film, he arrives at Goldman headquarters perhaps at 6 am and blocks the entrance to the building with police tape emblazoned with “Crime Scene.” It reduced me to uncontrollable laughter.
These touches give Moore’s superficial analyses some traction with many people. Compare this to the marvelous and important documentary on America’s budget crises entitled “I.O.U.S.A.” Meticulously researched and featuring deficit hawk David W. Walker, billionaire Warren Buffett, and libertarian congressman Ron Paul, it lays out our difficult future clearly. But then it becomes repetitive and very boring. Moore, on the other hand, knows that he has to make you laugh and cry and often hits the mark.
The low point of the film to me is when he interviews some priests as to whether capitalism is a moral system. Instantly, I thought okay, he will have an economics professor from Georgetown, Boston College, or Notre Dame on to discuss it. Nope. He had the parish priest who officiated at his wedding in Flint, Michigan, another who was the church’s witness at his sister’s wedding, and finally a Detroit bishop. The trio all said capitalism was not moral. They all seem like splendid fellows but what expertise do they have in the economic arena?
Those of us who are Catholics know that priests and bartenders often serve as the poor man’s psychiatrist. So, if you were ministering to the faithful in Flint or in Detroit the last 30 years you would get an earful from struggling people as the domestic auto industry went south. But does the arrogance of GM ignoring consumer behavior trends make the system immoral? I think not.
I have always counted myself lucky. Roughly 4% of us were born in the United States. That gave me and most of you a tremendous leg up in life. But imagine if capitalism never evolved into being. Our ancestors would never have escaped to our rocky shores and unlimited opportunities. Even on my worst day, I realize this. Capitalism helps people. Certainly, you have freedom to succeed and also to fail and some do. But most of us are far better off with a free market. Had we not had economic freedom, my ancestors would never have come here. I would not exist, period. But somewhere in Monaghan County, Ireland there would be a fellow with some of my genetic history scrambling for a living working a potato patch for an absentee British aristocrat.
The market system is not perfect but it is the best system known to man. Moore’s blanket condemnation of capitalism is superficial and unfair. With proper regulation and Friedman’s concept of “open and free competition without deception or fraud” we can right the ship and move forward.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Friday, April 23, 2010
The Case of the Vanishing SKU's
The other day I was in a supermarket line. A lady in front of me had a very large order and sent her 10-11 year old daughter back to the aisles to pick up a can of pumpkin as she took her many other items out of the shopping cart. The child returned moments later and the mother shouted at her saying “We don’t buy Libby’s. They are a Nestle company. Nestle is despicable”.
Relax. This post will not be a diatribe against Nestle, the world’s largest food processor. I felt bad for the little girl who was clearly embarrassed by her mother’s outburst. But then I began to laugh softly to myself as the mother hoisted a case of Poland Spring water onto the conveyor belt. Guess who owns Poland Spring? Why, Nestle, of course, which also owns Arrowhead, Deer Park, and Ice Mountain among others in the U.S. bottled water space. Even passionate activists and insensitive parents have a hard time keeping track of who owns what these days.
Over the last 30 years, there has been quite a consolidation in foodstuffs and household and personal products and I have observed a certain pattern with it. First, the company, a large one, goes on a shopping spree and buys up a few competing companies or brands. Then, heavy with debt, they shut down a plant or two (often in the U.S.), cut overall production, lay off staff, and then begin to eliminate products. It is not uncommon for 15-20% of Stock Keeping Units (SKU), the code for every item in a store, to vanish for a company within a given year. Sometimes, they pay a heavy premium for a company and several of the brands are gone very quickly. Over time, this leads to fewer niches in the marketplace except at the high end where smaller players often still abound.
Competition still exists although there are categories such as toothpaste where the two major players control 80% of the handle. Few know it because the brands are generally identified under their old corporate names on the packaging. Part of this is natural in a rapidly changing world where the concept of Creative Destruction as articulated by Joseph Schumpeter comes into play (for more on Creative Destruction, see Media Realism 1/30/09).
But, over time, our choices are getting a bit more limited and they congregate to the big companies which have a whole family of offerings in a category. Barry Lynn, an astute retail observer and author of the recent book Cornered put it this way—“Do you think it is hard to get your child into Harvard? Try getting a new product onto the shelf of a big chain of stores in the U.S.”
Each year some new ones break through and some old ones survive as independents. But they face slotting allowances for shelf space, lack of marketing dollars, lower name recognition, and tough retail demands on packaging, pricing and content if they want to play at Wal-Mart or Target. It is no wonder that some sell out. Imagine that you built a modest brand up from scratch. You are sixty years old and Coca-Cola, Nestle, Kraft, or Kellogg comes to you with a buyout offer. They offer you a tax deferred swap of your equity for 1 million shares of Coke, Kellogg, 1.3 million of Nestle, or two million of Kraft. Each company tends to raise the dividend each year so you know that your children and grandchildren will have ever increasing payouts as far as the eye can see. They give you a management contract as a consultant for a few years and then sever the ties with you. You lose your baby of a brand but the dividend checks come every 90 days. As Hemingway once said, “Money does not buy happiness but it soothes the nerves.” It has to be pretty tempting.
Invariably, we will see more of this. A small investor who e-mails me frequently buys companies that he feels will be gobbled up. His latest gambit is Heinz (HNZ). He wrote to me that sooner or later Nestle has to buy it and meanwhile you collect a nice little income while you wait. My opinion is that Nestle does not have to do anything and will make their own decision. At the same time, some people will likely make money buying large but second tier players that will at some point be gobbled up by the behemoths.
How does this relate to the communications field? Plenty, I believe. Over the years, I worked on several food brands and many financial institutions. The food brands are either extinct or owned by a conglomerate and the banks are all gone; every single one. For years, they were a mainstay for small and mid-sized ad agencies. They were immensely profitable pieces of business, let you do fairly good work, and gave you a million or two extra media dollars in your local community. Since 1980, the U.S. has lost a bank almost every working day due to buyouts or mergers. And, in the last 18 months, the Federal Deposit Insurance Corporation (FDIC) is closing 5-7 banks per week. If a larger player takes over the assets, local agencies lose nice accounts.
In foods, the same thing works. Many agencies that I know well or have worked at had package goods accounts in the $8-12 million dollar range. You get to do some nice creative, the account and media teams learn some package goods disciplines and you buy some national media. Everyone involved at the shop should become a better marketer as a result of having a food account on the roster. As these companies get gobbled up, the media immediately leaves for the conglomerate’s buying arm, and the creative almost always follows.
Broadcasters and local cable players also get hurt as the new owners either go 100% national with the brand as part of a multi-product buy, morph the entity (bank) into their national/regional name, or maybe shut down some of the product lines.
This is one more challenge that small and mid-sized agencies and local media will have to face in the years ahead. It has been there for a long time but as the economy recovers, M&A activity is likely to accelerate later this year and many will feel the pinch through no fault of their own.
Finally, allow me one more personal story. Not long ago, I was at an all day meeting at a company. We had lunch in the conference room followed by a break so people could get to their blackberries and e-mails for a bit. I used it to grab my toothbrush and Colgate from my bag and head for the men’s room. As I was applying the dental crème to the brush, a pleasant young fellow from the meeting pulled up to the sink beside me and began to do the same thing. “Why do use Colgate?”, he asked. I told him that I liked the taste as a kid, have pretty much stuck with it, and have not had a cavity in 45 years. He smiled and shook his head and said, “I avoid buying from big companies. That is why I brush with Tom’s of Maine”. I did not have the heart to tell him that in 2006 Tom’s sold out to Colgate-Palmolive.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Relax. This post will not be a diatribe against Nestle, the world’s largest food processor. I felt bad for the little girl who was clearly embarrassed by her mother’s outburst. But then I began to laugh softly to myself as the mother hoisted a case of Poland Spring water onto the conveyor belt. Guess who owns Poland Spring? Why, Nestle, of course, which also owns Arrowhead, Deer Park, and Ice Mountain among others in the U.S. bottled water space. Even passionate activists and insensitive parents have a hard time keeping track of who owns what these days.
Over the last 30 years, there has been quite a consolidation in foodstuffs and household and personal products and I have observed a certain pattern with it. First, the company, a large one, goes on a shopping spree and buys up a few competing companies or brands. Then, heavy with debt, they shut down a plant or two (often in the U.S.), cut overall production, lay off staff, and then begin to eliminate products. It is not uncommon for 15-20% of Stock Keeping Units (SKU), the code for every item in a store, to vanish for a company within a given year. Sometimes, they pay a heavy premium for a company and several of the brands are gone very quickly. Over time, this leads to fewer niches in the marketplace except at the high end where smaller players often still abound.
Competition still exists although there are categories such as toothpaste where the two major players control 80% of the handle. Few know it because the brands are generally identified under their old corporate names on the packaging. Part of this is natural in a rapidly changing world where the concept of Creative Destruction as articulated by Joseph Schumpeter comes into play (for more on Creative Destruction, see Media Realism 1/30/09).
But, over time, our choices are getting a bit more limited and they congregate to the big companies which have a whole family of offerings in a category. Barry Lynn, an astute retail observer and author of the recent book Cornered put it this way—“Do you think it is hard to get your child into Harvard? Try getting a new product onto the shelf of a big chain of stores in the U.S.”
Each year some new ones break through and some old ones survive as independents. But they face slotting allowances for shelf space, lack of marketing dollars, lower name recognition, and tough retail demands on packaging, pricing and content if they want to play at Wal-Mart or Target. It is no wonder that some sell out. Imagine that you built a modest brand up from scratch. You are sixty years old and Coca-Cola, Nestle, Kraft, or Kellogg comes to you with a buyout offer. They offer you a tax deferred swap of your equity for 1 million shares of Coke, Kellogg, 1.3 million of Nestle, or two million of Kraft. Each company tends to raise the dividend each year so you know that your children and grandchildren will have ever increasing payouts as far as the eye can see. They give you a management contract as a consultant for a few years and then sever the ties with you. You lose your baby of a brand but the dividend checks come every 90 days. As Hemingway once said, “Money does not buy happiness but it soothes the nerves.” It has to be pretty tempting.
Invariably, we will see more of this. A small investor who e-mails me frequently buys companies that he feels will be gobbled up. His latest gambit is Heinz (HNZ). He wrote to me that sooner or later Nestle has to buy it and meanwhile you collect a nice little income while you wait. My opinion is that Nestle does not have to do anything and will make their own decision. At the same time, some people will likely make money buying large but second tier players that will at some point be gobbled up by the behemoths.
How does this relate to the communications field? Plenty, I believe. Over the years, I worked on several food brands and many financial institutions. The food brands are either extinct or owned by a conglomerate and the banks are all gone; every single one. For years, they were a mainstay for small and mid-sized ad agencies. They were immensely profitable pieces of business, let you do fairly good work, and gave you a million or two extra media dollars in your local community. Since 1980, the U.S. has lost a bank almost every working day due to buyouts or mergers. And, in the last 18 months, the Federal Deposit Insurance Corporation (FDIC) is closing 5-7 banks per week. If a larger player takes over the assets, local agencies lose nice accounts.
In foods, the same thing works. Many agencies that I know well or have worked at had package goods accounts in the $8-12 million dollar range. You get to do some nice creative, the account and media teams learn some package goods disciplines and you buy some national media. Everyone involved at the shop should become a better marketer as a result of having a food account on the roster. As these companies get gobbled up, the media immediately leaves for the conglomerate’s buying arm, and the creative almost always follows.
Broadcasters and local cable players also get hurt as the new owners either go 100% national with the brand as part of a multi-product buy, morph the entity (bank) into their national/regional name, or maybe shut down some of the product lines.
This is one more challenge that small and mid-sized agencies and local media will have to face in the years ahead. It has been there for a long time but as the economy recovers, M&A activity is likely to accelerate later this year and many will feel the pinch through no fault of their own.
Finally, allow me one more personal story. Not long ago, I was at an all day meeting at a company. We had lunch in the conference room followed by a break so people could get to their blackberries and e-mails for a bit. I used it to grab my toothbrush and Colgate from my bag and head for the men’s room. As I was applying the dental crème to the brush, a pleasant young fellow from the meeting pulled up to the sink beside me and began to do the same thing. “Why do use Colgate?”, he asked. I told him that I liked the taste as a kid, have pretty much stuck with it, and have not had a cavity in 45 years. He smiled and shook his head and said, “I avoid buying from big companies. That is why I brush with Tom’s of Maine”. I did not have the heart to tell him that in 2006 Tom’s sold out to Colgate-Palmolive.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Saturday, April 17, 2010
My Man in The Arena
Almost exactly 100 years ago on April 23, 2010, former president Theodore Roosevelt gave a speech at the Sorbonne in Paris, France. The youngest man ever to serve as president (Kennedy was the youngest elected), Roosevelt was then a very vigorous 51 who had just returned from a safari to Kenya. Over two months he made a whirlwind tour of Europe meeting with heads of state, ambassadors and social leaders.
The speech at the Sorbonne was vintage Teddy. He advocated living a strenuous life and hoped for peace and harmony among all civilized peoples. One passage from it is quoted frequently even today. It is practically one long rambling clause with punctuation from T.R., not I. The quote is:
“It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat.”
I knew a man who fit that description perfectly. Roughly 30 years ago, a salesman for a magazine asked for an appointment. When he arrived a week later, I was startled at how young he was and how incredibly well prepared he was for the sales presentation. He knew more about my client’s business than the account supervisor at the agency. We talked for quite a while and I recall telling my wife that night that I had met a kid who would blast through our industry like a rocket.
It did not happen. Over the years he called on me from a variety of publications, cable entities, sales promotion firms, and finally internet startups. We would lose touch for a year or two and then he would always surface someplace new. When e-mail came on board it was rare for a month to pass without an excited message from him about some aspect of our changing industry. I used him as a sounding board for ideas and he was generous with his time.
I have never met anyone who struck me as being so alive. His energy and enthusiasm for our business stunned me and I am known as someone who loves it a great deal. One night we had dinner in Dallas followed by four hours of debate, discussion, laughter and several after dinner coffees. As I was driving home, I was humming something and cracked up when I realized it was “Lovin’ of the Game” that Judy Collins popularized so long ago.
Some key lyrics to refresh your memory are:
All my life I’ve searched around
Traveling hard from town to town
But I never found anything to tie me down
Still I would not trade my time
For a solid diamond claim
No, I would not trade my fortune
For the lovin’ of the game
My friend was not perfect. He had no patience, never learned how to stoop to conquer, and did not learn how to work around superiors who were inferior intellectually, morally, or in terms of work ethic. The rest of us usually did and survived and prospered. Money had little appeal—he loved the work and gave every day every ounce of energy that he had.
A couple of years ago I was sitting in my office on a Sunday afternoon putting together a presentation deck. The phone rang, and I knew instantly who it was by the big laughter filled greeting. He was driving through Atlanta on route to the Carolinas. Could I come downstairs and have coffee at Starbucks? Five hours later I put my caffeine laden buddy in his car and on the way to Raleigh. We had discussed the future of communications at a level of intensity and honesty that I never thought possible. I never saw him again.
When I began this blog, he was wildly enthusiastic. Some days he was full of praise; other times he had tart and brilliant criticisms. In January, the messages stopped and I got worried. When I sent him a few e-mails, they bounced back. Several weeks ago, another old media fossil wrote to me that our mutual friend was dead. He was felled by a massive coronary and he died very quickly while on the road. He left behind a much loved son whom he often told me about and, to my surprise, three ex-wives.
Since his passing I have received several messages from those who knew him. Most say gently that he was a hard worker who never made it. Others said he was an undisciplined dreamer who could have done well if he had swallowed his pride a bit and stuck it out with a few employers.
To me, he will always be Theodore Roosevelt’s “Man in the Arena.” He was not as Roosevelt noted “one of those cold and timid souls who neither knew victory nor defeat.” He knew defeat but it never seemed to get him down for an instant. His sense of life and love of our business made us all look like timid souls. He never had a “big” job and his life was not long in years. But he never settled for mediocrity and never dropped his integrity for an instant or tried to rationalize his way out of things. I really miss him.
If you would like to contact Don Cole, you may reach him at doncolemedia@gmail.com
The speech at the Sorbonne was vintage Teddy. He advocated living a strenuous life and hoped for peace and harmony among all civilized peoples. One passage from it is quoted frequently even today. It is practically one long rambling clause with punctuation from T.R., not I. The quote is:
“It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat.”
I knew a man who fit that description perfectly. Roughly 30 years ago, a salesman for a magazine asked for an appointment. When he arrived a week later, I was startled at how young he was and how incredibly well prepared he was for the sales presentation. He knew more about my client’s business than the account supervisor at the agency. We talked for quite a while and I recall telling my wife that night that I had met a kid who would blast through our industry like a rocket.
It did not happen. Over the years he called on me from a variety of publications, cable entities, sales promotion firms, and finally internet startups. We would lose touch for a year or two and then he would always surface someplace new. When e-mail came on board it was rare for a month to pass without an excited message from him about some aspect of our changing industry. I used him as a sounding board for ideas and he was generous with his time.
I have never met anyone who struck me as being so alive. His energy and enthusiasm for our business stunned me and I am known as someone who loves it a great deal. One night we had dinner in Dallas followed by four hours of debate, discussion, laughter and several after dinner coffees. As I was driving home, I was humming something and cracked up when I realized it was “Lovin’ of the Game” that Judy Collins popularized so long ago.
Some key lyrics to refresh your memory are:
All my life I’ve searched around
Traveling hard from town to town
But I never found anything to tie me down
Still I would not trade my time
For a solid diamond claim
No, I would not trade my fortune
For the lovin’ of the game
My friend was not perfect. He had no patience, never learned how to stoop to conquer, and did not learn how to work around superiors who were inferior intellectually, morally, or in terms of work ethic. The rest of us usually did and survived and prospered. Money had little appeal—he loved the work and gave every day every ounce of energy that he had.
A couple of years ago I was sitting in my office on a Sunday afternoon putting together a presentation deck. The phone rang, and I knew instantly who it was by the big laughter filled greeting. He was driving through Atlanta on route to the Carolinas. Could I come downstairs and have coffee at Starbucks? Five hours later I put my caffeine laden buddy in his car and on the way to Raleigh. We had discussed the future of communications at a level of intensity and honesty that I never thought possible. I never saw him again.
When I began this blog, he was wildly enthusiastic. Some days he was full of praise; other times he had tart and brilliant criticisms. In January, the messages stopped and I got worried. When I sent him a few e-mails, they bounced back. Several weeks ago, another old media fossil wrote to me that our mutual friend was dead. He was felled by a massive coronary and he died very quickly while on the road. He left behind a much loved son whom he often told me about and, to my surprise, three ex-wives.
Since his passing I have received several messages from those who knew him. Most say gently that he was a hard worker who never made it. Others said he was an undisciplined dreamer who could have done well if he had swallowed his pride a bit and stuck it out with a few employers.
To me, he will always be Theodore Roosevelt’s “Man in the Arena.” He was not as Roosevelt noted “one of those cold and timid souls who neither knew victory nor defeat.” He knew defeat but it never seemed to get him down for an instant. His sense of life and love of our business made us all look like timid souls. He never had a “big” job and his life was not long in years. But he never settled for mediocrity and never dropped his integrity for an instant or tried to rationalize his way out of things. I really miss him.
If you would like to contact Don Cole, you may reach him at doncolemedia@gmail.com
Friday, April 9, 2010
A Modest YouTube Proposal
YouTube has been around for a little over five years. It is a popular site for many of us. The amateur nature of it appeals to us and it is a great way to find performances from decades ago, the latest in home made films, political and economic views of uncommon opinion, and work that friends and acquaintances have produced.
In 2006, Google purchased YouTube. At the time, I remember writing to clients and colleagues and mentioning in presentations, that Google would soon monetize YouTube and probably create a whole new product that I dubbed GoogleTube. Well, several years have passed and I am still wiping the egg off my face on that forecast.
Today, I risk more embarrassment and humbly make a suggestion to the uber-smart boys and girls at YouTube.
Virtually overnight, Google could launch a new television network. Maybe they would call it GoogleTube (I don’t give up all that easily!). Google has been a financial phenomenon largely because the company rarely missteps. For nearly four years, however, they have failed to monetize YouTube much and they continue to lose hundreds of millions of dollars annually with it. Yes, Google's pockets are very deep indeed. But, those kinds of losses have to annoy someone. I am certain that some substantial shareholders are not thrilled even with the solid stock market performance of late.
Why a network and how? Well, they have the platform basically set up with YouTube. There are no affiliate relations problems, no brick and mortar to build, no owned and operated stations. Google could fund a number of TV series of varying lengths and content with rounding errors on their cash flow.
How should they do it? A simple solution to me would be to steal shamelessly from the Hulu.com model. Make the network advertiser supported from the day one. People could watch GoogleTube programming where and when they wanted it. Commercial load would be light as is true with Hulu.com
Some advantages:
1) Hulu.com is restricted to the U.S. While the new census is still going on and results will not be out for a while, it is a safe assumption that Hulu.com is ignoring somewhere between 95-96% of the world’s population.
2) From day one, think of the appeal of GoogleTube to brands with a large global presence. The big soaps, Bud, colas, Apple, Nike, Nestle, Kellogg, General Mills, Toyota, BMW and a host of other major brands would love to send out a worldwide message to young English speaking people (and those learning it) quickly and easily.
3) YouTube or GoogleTube would have instant credibility. It would be easy to navigate and hundreds of millions use it now anyway. Over the Easter break, I had coffee with two young Media Realism readers who also are easily my most severe critics. They said YouTube had no credibility as it was an amateur site with home made material. I countered that maybe that would strengthen a change to a name like GoogleTube for the network product. I disagree with them about credibility and feel that 95% of the people would not care. With good programming, the YouTube stigma, if it really is there, would fade quickly.
4) Imagine you are a producer, writer, or actor or actress. Would you like to work with a US network or cable channel or instead have your program fanned out WORLDWIDE from day one? That has to have some appeal.
5) Google is, to put it mildly, well financed. They can give it time to develop and can afford to add new programming quickly. They could even pay amateurs for some content they thought was good or split some ad revenue with them in a meaningful way.
Somewhere at Google they have to be wrestling with the monetization of YouTube. My modest idea of GoogleTube could have surprisingly strong legs.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
In 2006, Google purchased YouTube. At the time, I remember writing to clients and colleagues and mentioning in presentations, that Google would soon monetize YouTube and probably create a whole new product that I dubbed GoogleTube. Well, several years have passed and I am still wiping the egg off my face on that forecast.
Today, I risk more embarrassment and humbly make a suggestion to the uber-smart boys and girls at YouTube.
Virtually overnight, Google could launch a new television network. Maybe they would call it GoogleTube (I don’t give up all that easily!). Google has been a financial phenomenon largely because the company rarely missteps. For nearly four years, however, they have failed to monetize YouTube much and they continue to lose hundreds of millions of dollars annually with it. Yes, Google's pockets are very deep indeed. But, those kinds of losses have to annoy someone. I am certain that some substantial shareholders are not thrilled even with the solid stock market performance of late.
Why a network and how? Well, they have the platform basically set up with YouTube. There are no affiliate relations problems, no brick and mortar to build, no owned and operated stations. Google could fund a number of TV series of varying lengths and content with rounding errors on their cash flow.
How should they do it? A simple solution to me would be to steal shamelessly from the Hulu.com model. Make the network advertiser supported from the day one. People could watch GoogleTube programming where and when they wanted it. Commercial load would be light as is true with Hulu.com
Some advantages:
1) Hulu.com is restricted to the U.S. While the new census is still going on and results will not be out for a while, it is a safe assumption that Hulu.com is ignoring somewhere between 95-96% of the world’s population.
2) From day one, think of the appeal of GoogleTube to brands with a large global presence. The big soaps, Bud, colas, Apple, Nike, Nestle, Kellogg, General Mills, Toyota, BMW and a host of other major brands would love to send out a worldwide message to young English speaking people (and those learning it) quickly and easily.
3) YouTube or GoogleTube would have instant credibility. It would be easy to navigate and hundreds of millions use it now anyway. Over the Easter break, I had coffee with two young Media Realism readers who also are easily my most severe critics. They said YouTube had no credibility as it was an amateur site with home made material. I countered that maybe that would strengthen a change to a name like GoogleTube for the network product. I disagree with them about credibility and feel that 95% of the people would not care. With good programming, the YouTube stigma, if it really is there, would fade quickly.
4) Imagine you are a producer, writer, or actor or actress. Would you like to work with a US network or cable channel or instead have your program fanned out WORLDWIDE from day one? That has to have some appeal.
5) Google is, to put it mildly, well financed. They can give it time to develop and can afford to add new programming quickly. They could even pay amateurs for some content they thought was good or split some ad revenue with them in a meaningful way.
Somewhere at Google they have to be wrestling with the monetization of YouTube. My modest idea of GoogleTube could have surprisingly strong legs.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Subscribe to:
Posts (Atom)
