The Two-Speed Economy and 2017 US Media

Economists generally define a “two speed economy” as one in which different sectors are performing significantly differently at the same time. Generally, I have observed the two speed occurrence in markets where there has been significant natural resource activity. Venezuela, Nigeria, even Canada during oil or metal booms were great examples and Australian in 2012 was a recent entry when it seemed that their entire commodity, coal and base metal output was shipped to China. Those involved with the boom sector(s) were doing great while some miles away boarded up storefronts and unemployed citizens were the norm.

Today, we see the two-speed economy really hitting its stride in the United States consumer arena.  Online shopping continues to boom and brick and mortar retailing is to put it charitably, challenged. Look at our holiday season sales if you need verification.

Why bring this up in MR? Well, a number of people have asked me to provide a 2017 media forecast. I have politely responded to each with the comment that I have never in my life been more uncertain about the US or global economy or what our new political leadership will do next year. So, a forecast with any specificity seems impossible at this point.

What I am certain of is that a “two-speed media economy” will likely get even more pronounced relative to 2016. Conventional or legacy media will continue to garner a smaller share of the advertising pie with absolute declines likely in Local TV, newspaper and national magazines. Digital and social media should see solid gains with mobile being a big winner regardless of overall economic performance.

I wish all of you a happy, healthy and very prosperous 2017. This year I heard from readers in over 100 countries and appeared to have been read by professionals in 152 countries. I love to hear from you and thank you for your constant encouragement.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Mr. Market and The Media World

Sometimes people refer to markets as if they were actually people. If you watch CNBC and Bloomberg as I often do, a commentator or Wall Street type may something akin to “the market thinks that stocks are overextended” or that “the world is awash in oil.” Where did this come from? As best as I can tell, it came from Benjamin Graham’s 1949 book, THE INTELLIGENT INVESTOR. He was more famous for his early book SECURITY ANALYSIS and for being Warren Buffett’s teacher in the Columbia M.B.A. program and his first real employer (I reread the Intelligent Investor annually with emphasis on his discussion of Mr. Market and also “the Margin of Safety”).

Graham essentially says that Mr. Market is bi-polar. He toggles back and forth between crazy optimism and downright despair. Graham says that there are times when Mr. Market offers you ridiculously high prices for your shares (no matter how small a piece of a business) and others when his offer is obscenely low. The trick, according to Graham, is to give your shares to Mr. Market when they are high, and buy more when he offers you little for them provided the underlying business is sound.

Some years back, I tried to use this approach with advertisers. In the 1970’s and in to the early “80’s, media pricing in broadcast moved pretty much in lockstep. In good times, all 200+ markets were able to mark their prices up and in recessions, prices fell across the board in a fairly predictable pattern. Since then, prices have been less uniform. Boom towns experienced booms and rust belt and rural areas tended to have little pricing power.

So, when recession or booms times hit, I would sit with clients and sometimes tell them to avoid certain Nielsen Designated Market Areas (DMA’s) as they remained pricey on a per person basis but go stronger in to other areas where things were so soft that we could find no bottom in pricing or receive great RELATIVE value.

This did not go over well within my shop. Management reps would tell me that I was walking away from easy billing. My response was that we were tossing money down the toilet as the prices were way too high and there were many markets out there where we could do well with recession resistant products and sell more cases given how much more bang we received for our advertising buck.

I would also suggest that we shift to radio as sales often skewed toward metro areas rather than an entire TV market. My internal critics saw me as a troublemaker. I wanted to do more labor intensive market by market work and sometimes cut budgets back until there was a return to normalcy in media pricing in certain localities.  When attacked, I always said that I was thinking of the long term interests of the client(s). It generally did not play well.

In the early days of digital, a similar pattern occurred when players did not know how to price their on line properties. We witnessed some temporary spectacular bargains as well as ripoffs. Today, with more knowledge of delivery and huge players buying on exchanges, wild inequities are not so prevalent.

With conventional media, the Mr. Market approach still has some validity. A smart client may see you as a hero if you save them a seven figure sum and still increase case sales for their product. Just do not expect a warm welcome inside your shop unless management has a true long term horizon.

May I wish MR readers around the world, a very Merry Christmas.

If you would like to reach Don Cole directly, you may contact him at doncolemedia@gmail.com

Something Will Turn Up

A long time ago I went to a Christian Brothers Academy in Rhode Island. I did not like the brothers and they did not like me. Yet, the school had one redeeming feature. In each of my high school years several lay teachers exposed me to some good literature. I recall having to read three Charles Dickens novels--Great Expectations, A Tale of Two Cities, and David Copperfield.

My favorite Dickensian character was Wilkins Micawber who was in David Copperfield, published in 1850. He was always in financial straits and was said to be loosely based on the author's father, John Dickens, who once served time in debtor's prison.

A famous Micawber quote from Copperfield is "Annual income twenty pounds, annual expenditure nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pound nought and six, result misery."

Micawber could never live within his means. Yet, he was a buoyant optimist. I vividly remember the Cliff notes describing him as "living in hopeful expectation."

The struggling character, Micawber, when up against the financial wall, would often say--"Something will turn up."  This phrase or attitude strikes me as how companies and governments are reacting to the tech revolution both in terms of long term employment and effective marketing.

Let’s face it. We are in a period of creative destruction. (See Media Realism, “Schumpeter Lives in 2009 Media, 1/30/09). The problem is that the technology or digital boom is different from previous business cycles. What people do not seem to grasp is that tech does not move smoothly or predictably. Technology is not there to create jobs; it is growing as it allows innovators to cut costs and steal market share from old tech forms (i.e., conventional media or brick and mortar retail). The benefit of tech is that it allows you to do more with less, especially people. Government solutions are often more spending in existing systems that would not alleviate the problem.

So, many jobs lost as technology grows (robots in factories or in fast food joints, self drive cars and trucks, and in mining) will never be replaced. Can anyone turn this around? Some World War II style mobilization to move us from reliance on fossil fuels to  alternative energy would be a possibility but no clear program has seen the light of day and political resistance from pressure groups would be huge. A massive infrastructure build-out would create many blue collar jobs for a few years but, again, is it politically viable as it is sure to be a budget buster?

In the media world, I continue to talk with people who remain in denial about the last 15 years. Local broadcasters say that when the economy bounces back more strongly, so will they in a big way. Have they forgotten about commercial avoidance? Do Netflix, Hulu, Amazon Prime and DVR’s have any significance? How about viewing with another device in play as well?  Even the most slow witted broadcasters have to see this but the denial continues.

Clearly, old models no longer apply. The psychological foundation for a conventional media revival no longer exists. Our world has changed for good.

So, will something turn up for either displaced workers or conventional media? Sorry, Mr. Micawber. I just do not see it.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

The Public Relations Renaissance?

Let me be candid upfront. Historically, advertising people did not always have the highest regard for those who practiced Public Relations (PR). The take was that the advertising and marketing people felt that they did the heavy lifting when it came to getting a brand recognition and acceptance while the PR people would get a blurb in a local newspaper and be strutting while sitting down about what they had accomplished. Some found them to be such lightweights that behind their backs they referred to PR staffers as “the flak.”

Well. Having said that, I am convinced that things will change somewhat over the next several years. Of the seven pillars of Integrated Marketing Communications (Advertising, Direct Marketing, Internet Marketing, Promotion, Public Relations, Publicity, and Personal Selling), Advertising is clearly on the decline. Commercial avoidance continues to get stronger with each measurement period as more of use our DVR, watch Netflix or Amazon Prime or simply have another device going when advertising appears. So, conventional advertising simply is not and cannot work as well as it once did even a decade ago. Something has to pick up the slack among the remaining Integrated Marketing Communications (IMC) pillars. While each brand or service will have a different mix of IMC components, I would bet that a surprise gainer in the emerging new reality will be PR.

Why PR? Studies in recent years have clearly illustrated that adults are increasingly getting cynical about advertising. This is especially true of millennials who rely heavily on social media, Amazon reviews, and the opinions of friends before making purchases. PR, executed properly, can help a company. Remember, PR is not a 30 second spot or a print ad. It is a PROCESS by which a company can assess where they stand with any number of their publics--consumers, employees, shareholders, government, the media and their local communities and then take action to repair perceptions. Essentially, it is a long game. A company in the 21st century needs to refine and rebuild its reputation continually. Running and hiding from the press only raises more issues than it solves. Meet with your opponents be they political, press or community groups. Today, we live in a 24/7 world of communication. If you let outside groups know who you are and what explicitly that you stand for, you will likely come out way ahead of what advertising (as we know it) could ever do for you.

Finally, a few words about “spin.” The late presidential speechwriter and wordsmith William Safire defined spin as a “deliberate shading of news perception; attempted control of political reaction.” PR people are often referred to as “spin-doctors” who can put a positive face on anything. Sometimes, they get away with it but it appears to be less so today. True PR pros put the best foot forward of their client but they should never spin. Remember when as a child you were told something to the effect that if you tell a lie you will eventually have to tell 10 more to cover it up? Well, in the business world that is oh so true when it comes to spin. As PR guru Fraser Seitel put it, “The crisis will hurt you, but the cover-up will kill you.” If you always tell the truth, even the painful truth, you never have to keep track of what you have said in the past. Spin is manipulation and people today, especially millennials, do not want to feel as if they are being toyed with or lied to in any way.

So, keep an eye on PR. Perhaps upgrade your PR staff or service provider. It may prove to be inexpensive and effective over the next decade.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

The Importance of Encouragement

Managers and executives often talk about the benefits of encouragement. In interviews, they often say how encouragement is an important part of their management mantra and many trot out the old saw about “catch someone doing something right.” In the real world, I must say that I have seen far too little of it. A few people fresh from a seminar or sensitivity training session would start praising staffers for insignificant things but that would wear off soon and it was back to business as usual.

Yet managers who do encourage staffers generally do get good results. Sometimes, even great ones.

I am going to tell a story from my childhood that up to now I have never revealed to anyone. It makes my point better than anything I have ever experienced. Here goes:

In the summer of 1957, I celebrated my seventh birthday. Relatives dropped off a few dollars, my aunt in Houston sent me three dollars, and I received a couple of gifts from my parents. It was a really nice day. The next morning, I asked my father if he would drive me to the bank in the village so I could deposit my birthday cash haul. He smiled and a few minutes later we were approaching a teller’s window at the bank. I was so tiny that she could not see me. My dad boosted me up and I handed her my passbook and the $9 I wanted to deposit. She took the deposit but did not seem happy. A minute later she returned with my bankbook having the new entry. She said to both of us, “A small deposit like that. It does not seem worth the effort.” My father got very still. He gave her a withering glance that was far more frightening than any he ever gave me. After a few seconds, he said evenly, “The little boy has good instincts. You should encourage him to bank here.” Visibly flustered, the mean old biddy said, “Of course. Is there anything else I can do for you, Mr. Cole?” Fishing a dollar bill out of his pocket, my father said, “Yes, do you have any silver dollars lying around?” A minute later she returned and handed him a 1924 Peace dollar and he gave her a one dollar bill for it (sic).

In the car, my dad said, “You seem to understand saving better than other seven year olds.” He handed me the silver dollar. “Donny, keep this.” My eyes must have gotten huge. I remember asking him if it were real money. He said yes and told me how as a junior in college he had a summer job working a cement mixer at a construction site. The first week he worked some overtime in the hot Iowa sun and received a pay envelope on Saturday afternoon. It contained two $10 gold pieces, a $5 gold piece and three Peace dollars which he said everyone called cartwheels. A few minutes later I was surely the only seven year old in Rhode Island who knew the difference between fiat money and specie (As an aside, the following spring, my father won the NCAA wrestling championship in his weight class. He had paid his room, board and tuition with his earnings from the cement mixer job. It boggles my mind to think what a soon to be NCAA champion would be given on a campus today!).

When we arrived at home, I did not show my siblings or my Mom my new cartwheel. I made a beeline to the toy safe that my parents had given me for my birthday. It did not look like much but it was made of steel and had a real lock and only I knew the combination (still do). I took the passbook and the Peace dollar and placed them in the safe next to my other prized possessions--my Mickey Mantle, Ted Williams, and Yogi Berra baseball cards and my Bob Cousy and Bill Russell basketball cards.

A few years ago I sold the cards at an auction for a staggering profit. The silver dollar? I still have it. Every 12-18 months, when visiting a safe deposit box, I hold it in my hand for a few moments. More than once, I am not ashamed to admit, my eyes have filled up with tears when I stare at it. I am convinced that my father’s standing up for me to the dismissive teller and his encouraging me to save, changed my life. He set me on a path toward being a private investor that I never veered from for an instant.

So my friends, there has to be someone you know, work with or for, or love who needs some encouragement. Give it freely. It costs you nothing and it just may change someone’s life or career.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Can Doing Nothing Be A Strategy?

Last week, a bright young person asked me the precise question of today’s post. In a slightly indirect way, this leads us in to a brief discussion of the concepts of cost benefit analysis and opportunity cost.

Many times in life and in business we face a tricky situation.  We then generally draw up  a list of factors and calculate what something costs and how it might benefit us. It might be a new job, evaluating a media property, buying a house or a business or moving to a new city. Interestingly, few people seem to attempt to calculate the cost of NOT making the choice. In essence, what happens if we go on as we are?

In answer to the young person’s question, I had a few examples to draw on from my career. Late in 2001, I was asked to provide an analysis of buying some kind of special package or media effort in Salt Lake City for a multi-unit retail client during the 2002 Winter Olympic Games. A team member and I hopped out to Salt Lake City and literally gave them a “baker’s dozen” of options of customized media efforts for the Games. People all listened politely but I could see some unease on their faces with the pricing that each package had. Many had an enormous premium over normal rates for similar efforts in a non-hyped environment. When I came to the recommendation page, someone whispered, “Here it comes.”

The recommendation was DO NOTHING. Our thesis was that with the metro area teeming with tourists, business would pick up on its own and they should pocket the money for later in the year when they might need it to fight a competitive fire. My clients were shocked and thrilled. Sales jumped low double digits during the Games and they were even more delighted and my team had great credibility going forward.

A few years earlier, I was having lunch with a friend in Dallas. He told me about a hot company that he had purchased shares in and strongly advised me to back up a truck and buy as many shares as he had. I went back and researched the company and did not quite understand what they were doing. So, I stuck with my cash and waited for another opportunity. The company was Enron!  In essence, I gained by doing nothing rather than buying shares in the soon to be bankrupt company. I profited by not doing what my friend suggested.

At other times in my life, I did not buy Microsoft, Apple, Facebook at their IPO’s so I had an “opportunity loss” by not getting in to them at the earliest possible moment. Hindsight, of course, is always 20/20.

To conclude, the point to take away is that sometimes doing nothing is the right thing. I looked at thousands of media opportunities over the years and, in reflection, only recommended a small fraction of them and bought even fewer as I could not pull the trigger without client approval.

My young friend’s question was slightly off kilter. Doing nothing is not literally a strategy but it is more often than you might think a wise decision.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Tiresome Terms

Over the years, certain turns of phrase have crept in to the American business lexicon. Some are wildly overused; others can be code for something else. We have all heard them and perhaps we still use them even though they are annoying. Here are my pet peeves:

“Think Outside the Box”--why can’t we simply say, “think creatively” or “think differently”

“Give 110%”--total nonsense. You cannot never give more than 100%. Also, most psychologists and others involved in study of humans posit that most of us only use 25-30% of our brainpower.

“Hit the Ground Running”--a worn out cliche if there every was one. Why not say, “get started immediately.”

Synergy--this one perhaps irks me the most and will be the focal point of this brief post.

Back in the 1970’s, media people and advertising folks often talked about a synergistic effect in media plans. The chosen media types in a plan would produce a result where the sum of the individual components would be less than the actual effects on consumer awareness. Certain media types were said to work unusually well together and by receiving messages from different media and, in different ways, the total effect of the campaign was magnified in the eyes and ears of the consumer.

Okay, I can accept synergy in a media mix analysis. Over the last 15 years or so, synergy has been used in a different context--generally it surfaces with mergers or corporate buyouts. These days when I hear the word synergy it means that two companies are getting together. Should they have similar products, services, warehouse or delivery operations, it usually is code for many people losing their jobs.

I have a long standing acquaintance who has been “synergized” three times. He was at an ad agency for many years and was part of the team that departed after the buyout of his shop by a much larger firm. At the time, he told me he was going for a media job as he wanted something more stable. Since then, he has been let go twice due to one corporate buyout and the second a merger. He is getting bitter and was terrified when he heard of the AT&T/Time Warner proposed marriage. Well in to his fifties, he said the following-- “If I get whacked again, I will be virtually unemployable. No one is going to take a chance on me at my age and salary level. My CEO was asked at a staff meeting about the AT&T/Time Warner deal and he said that there were interesting synergies in the merger of the two giants. My young colleagues all nodded. I had to be stone faced.”

The truth is that most mergers end up costing money despite the much discussed “synergies” that will emerge. In the real world, financial and equity analysts usually evaluate a deal by looking at how big a reduction in force will occur and and how much can be saved as a result. Generally speaking, the higher the number, the better. Have you ever noticed when a company does a layoff of 5000-10,000 employees? Invariably, the stock price jumps the next day. That is what synergy is and does. In a free market society, it is inevitable. The victims tend to be those who believed the boss(es) when she spoke about the new, stronger company. Why is it impossible for leaders to speak in plain, American English?

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com