The “brutally honest” Swedish solution

History shows solutions exist to the current banking crisis : try the Swedish one. It can be summed-up in one concept : guarantee the assets, punish the shareholders. The massive rescue of the Swedish economy in the 90′s was recounted last week in a Wall Street Journal article :

” In December 1992, Sweden guaranteed its entire banking system, insuring creditors and depositors — but not shareholders — of 114 banks against losses. Sweden imposed strict terms. To shore up confidence among creditors, the new authority required banks to disclose expected losses immediately, and it quickly assigned values to other assets, rather than let banks postpone reporting losses and take gradual write-downs. Banks receiving capital injections or loans surrendered shares to the government to avoid the possibility of rewarding shareholders, and to give Swedish taxpayers a chance to profit when the market improved”.

We are not here yet. The international financial system is still in the privatized-profit-socialized-losses mood. In the meantime, questions increasingly focus everywhere on the excesses of the system. In this interesting cover story “How to fix Wall Street”, Fortune magazine is pointing fingers at the flaws of the financial system. Compensation mechanisms, for example, have gone out of control : in 2007, employees of the Wall Street Big Five (Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley) have captured 60% of the firms revenues, versus 32% for JP Morgan and 28% for bank of America, both run more conservatively. In the meantime, ratio of assets to equity was 41:1 in 2007 vs. 30:1 in 2002, an interesting evolution knowing that, if a portfolio is leveraged 33:1, it takes a mere drop of 3% to wipe out its entire capital, as Fortune recalls. Did we reach an inflexion point ? Not so sure. Maybe the situation has not gotten ugly enough yet. But everyone is working on it.

Is Orange a TV channel ? “You Bet!” says Canal+

If Orange is becoming a paid-TV channel, it has to abide by the same rules as the TV networks. The CEO of Canal+ is accusing the French Internet and cellphone operator of anti-competitive practices and is about to challenge Orange’s position before French regulators. Bertrand Meheult said so last week in Le Figaro.

In play : the ever increasing packages Orange is proposing to its subscribers of all stripes: mobile phone, internet or ADSL-TV. The French carrier recently acquired broadcast rights for soccer matches, TV series and even first-release movies such as the next Harry Potter. Hence the ire of Canal+ chief. According the French law, any French broadcaster must abide by the so-called “production diversity” law and acquiring a quota of “genuine” French productions (even if they are not often audience attractors). Bertrand Meheult says mobile phone operators are now competing in the same area and must be submitted to the same constraints.

WSJ.com’s audience jumps at records high. Newsroom integration works

The online version of the Wall street Journal is roaring. According to its editor, Alan Murray, quoted in the business monthly Portfolio , WSJ.com got 15 million unique visitors (UV) in March, a 175% jump over a year ago. In page views, figures for the same month came at 165m a 75% increase. Those figures have been compiled by internal traffic measurement tools (counting tags on each page). Nielsen measurement, is different : it gives 6m unique users for the WSJ.com versus 3.4 for March 2007. Nielsen is relying on panel — people are asked to tell what site they look. Why has this approximate, anachronic, measure become such a standard on the Internet? This remains a mystery – or a miracle of PR.

What is driving the WSJ.com audience ? Two things from a reader’s perspective : First, the site is good ; it is has depth, it is reactive, its interface is neat. Second, its content has been boosted for months by a stream of great stories ; the endless subprime saga, the debate about the scope of the recession, the difficulties and collapse of major institutions like Bear Stearns.

According to management, the creation of a unified, print and online WSJ newsroom, is a key element: “That had two really important effects,” says Alan Murray. “First, it got the entire news operation thinking on a more systematic basis about the online edition. Second, it really freed up my team to focus on making the product better, because we weren’t managing the daily news flow anymore.”

Others factors include the usual tools of the trade : better search engine optimization (SEO) ; clever approach of the “aggregator factor” with links from Google News giving access to one article even if it is part of a paid-for segment of the site. (Unlike many newspapers that ignore, or even reject any cooperation with Google — even if 40% of their traffic often come from search engines — , the WSJ.com is using the power of Google as promotional tool. This policy doesn’t affect his subscription policy. As the site is gradually opening to free users, its subscriber’s base of 1 million is growing 10% a year.

Microsoft vs. Yahoo!– Covering yourself with feces…

“That seems sort of like trying to keep a wild animal from eating you by covering yourself with feces.

It might make awful sense for about a second, but it’s just a bad, bad idea. First, it’s unlikely to work — and, second, it’s just pathetic.”

To save itself from Microsoft’s jaws, Yahoo! considers buying AOL, the fallen leader of the consumer Internet. Crudely but accurately stated by Techdirt, the idea is to cause Microsoft to give up the chase, turned off by the smell. Complications piling upon an already convoluted deal. More incompatible systems, more hostile cultures, more risk of customer going “elsewhere”, meaning Google. To say nothing of added anti-trust scrutiny and talent flight.
But Microsoft isn’t any saner. Steve Ballmer wants the deal really badly: he’s willing to get in bed with Rupert Murdoch. News Corp’s wily patriarch got snookered into buying MySpace only to find the epicenter of social networking moving to Facebook.
Wait, there is more: Yahoo!, the deposed Internet king, wants to outsource search to Google. Better search results get a higher price for Yahoo! ads. According to our favorite Internet Bubble repentito, Henry Blodget, the putative outsourcing deal is worth $5 per share to Yahoo!

So….

First, this mess shows again how far Silicon Valley is from Wall Street. Yahoo’s management, led by its founder Jerry Yang, opposes the deal: It will kill the company they care so much about. Never mind the years of mismanagement, delusion or neglect, never mind the sinking market share, the number one position lost to Google, the bad decisions made by the board of directors, the string of CEOs, Tim Koogle, gone, Terry Semel and his Hollywood connections, gone, Sue Decker and her consultant-speak memos, out of sight…. Is this really about the company, about shareholders? Or is it a few people trying to keep their phallus extender?

Speaking of Wall Street, all shareholders want is for the pain to stop: they lost 50% between January 2006 and January 2008, right before Microsoft’s offer at a 25% premium. How can they trust management’s promises to right the ship when the rosy predictions came as a reaction to the ogre’s appetite? Now, if Yahoo’s posturing results in Microsoft adding another 10-15% to their opening offer, I take back the sarcasm: management played a weak poker hand well, the bluff worked. In “real life”, we’re told, Jerry Yang is a good poker player….
Still on shareholders, those owning Microsoft shares aren’t so thrilled. They don’t distrust the directors and the CEO, Steve Ballmer, but they don’t see what the board sees either, that cloud computing spells the end of the Divine Earnings Stream, profits from desktop applications, mainly Microsoft Office. Microsoft shareholders see the short-term threat of the messy acquisition, not the longer term trouble with Google becoming the new Microsoft in the cloud.

Second, I wonder if there is another bluff taking place. Let’s assume Ballmer and his advisers hadn’t expected this much hostility. They now see the deal as substantially riskier than planned, they want out. Microsoft secretly welcomes Yahoo’s intransigence, postured and real. Ballmer doesn’t raise the offer and hopes Yahoo won’t budge. The deal dies of a “natural” death. Yahoo’s fault.

We’ll know soon whose bluff worked. –JLG

InterActive Corp backing the “Queen of Buzz” for a news site

Best editor money can buy. At least, that’s the pitch. Internet media mogul Barry Diller is teaming up with former Vanity Fair and New Yorker editor Tina Brown to launch an aggregator news site, reports Radar. In a conversation with the Monday Note last September in Monaco, Diller hinted that he was up to launch a news site, saying that, news media were far for having grasp all the potential of the internet.

Neil Budde: From Yahoo to the Daily Me

From Yahoo to the Daily Me In the Internet publishing world, Neil Budde is seen as both a pioneer and a reference. He created the Online Wall Street Journal that now enjoys one million subscribers. Then he left for Yahoo!, raising speculations that the search company will make a major move into publishing (it didn’t happen). Last week Budde announced that he was leaving Yahoo! for the customization-aggregator Daily Me. Is it simply a career move from a bureaucratic Silicon Valley giant to a more startupish venture? Or is it the expression of a vision ? Judge by yourself with Budde’s explanations.

Patience, blog 2.0 is coming

Schizophrenia at work. Many web publishers are working hard to increase all forms of interaction with readers they ignored during decades. They are adding comments to articles, opening blog platforms (getting sued and loosing sometimes). Sites are lining up legion of low paid bloggers ($10 a post), where productivity becomes the obsession at the expense of relevancy or quality. Some even literally die on the job as recount in this amazing story in the New York Times).

At the same time, everyone is struggling with an increasingly noisy background. Web editors are working on algorithms (good luck pals) to enhance the visibility on the most interesting contributions, others are spending a lot on moderation. Results varie as shown in this study made by Ball State University, which concludes that blogs have, in fact, done very little to increase the quality of dialogue with the public.

What could be next ?Probably a more decisive quest for better contribution. Not through software filters and algorithms but through human, professional, judgment. Interaction with readers should (and ultimately will) be seen as a tool to enrich the content of a website, rather than a trick to increase pageviews (a cheap one by the way since blogs and reader-generated comments are the lowest priced space — a fifth or a tenth of the average Cost Per Thousand).

Call it blog 2.0 or “relevant interaction”, it will inevitably come. And it will benefit on all parties: readers will be rewarded to think rather than shout ; journalist will be challenged; publishers will see their content improved, and CPT will increase.

Magazines — What works and what doesn’t

At a recent speech at Columbia University, Newsweek editor Jon Meacham asked which students read the magazine. None of them did. As reported in the Wall Street Journal, he delivered this stern response: “It’s an incredible frustration that I’ve got some of the most decent, hard-working, honest, passionate, straight-shooting, non-ideological people who just want to tell the damn truth, and how to get this past this image that we’re just middlebrow, you know, a magazine that your grandparents get, or something, that’s the challenge,” Mr. Meacham said. “And I just don’t know how to do it, so if you’ve got any ideas, tell me.”

You want ideas? See if there are some in The Economist’s success on the global market. The magazine’s top bosses have been awarded the Executive Team of the Year by AdWeek as much as the overall product as for the business performance. First, here are some figures of the trade :

circ USA…………..rev…………..rev…………..pages…………..pages2007 (m)………….. 2007——- 2006 —–chge 2007— 2006 chge ————————————————————————– ECONOMIST 0.73…………..31…………..24…………..+28%…………..693…………..613…………..+13%
NEWSWEEK 3.12 159 155 +2,4% 613 631 -2,8%
TIME 3.4 174 218 -20% 692 762 -9,2% ————————————————————————— Source : MPA- For The Economist the US circulation is half of the total. Even though the UK-based magazine is still five times smaller than Newsweek and Time, it is leaving the two others in the dust both in terms of volume and value growth. To prevent further erosion of its profitability, Newsweek has offered a buyout to 20% of its staff. What’s makes The Economist performing so well ? According to the editor John Micklethwait and publisher Paul Rossi, several factors are in play :

- The magazine’s global perspective. “It became more relevant when a Milwaukee factory worker can loose his job to somebody in India”, as Micklethwait puts it. Or even more since 9/11, “People have suddenly seen how their world can be turned upside down by a lunatic in a cave in Afghanistan”.

- Editorial positioning. The Economist is liberal on social issues and liberal on economic issues as well – that blurs traditional boundaries (and that is unthinkable in a country like France for instance where you must choose your side). – Depth, tone, pitch. The average readers spend 57 minutes a week. Writing is sharp, precise, informed, sometimes funny. Opinions are strong and argued. Angles are original (particularly in special surveys).

- Creativity to capture big ads. For example the interactive Energyville game made for Chevron by the Economist Group (supreme luxury : the magazine is trustable enough to avoid suspicion of coziness with such a big advertiser). - Even the website, that tends to be less and less paid-for by the way, is very thorough, with clever, often recursive, levels of reading.

- Its independence, protected by a board of trustees (and by its economic performance).

The Economist’s success is quite reassuring from a journalistic perspective. No one, not a single marketing egghead, would have a bet a cent on the success of such global positioning in the era of proximity obsession.

Google owns 69% of the internet advertising

Here is why Google was so eager to buy the ad-server company DoubleClick : their combined market share reaches 69% of unique visitors, according to Attributor, a start-up specialized in tracking monetization on the web (January numbers). The split gives 35% for Google itself and 34% for DoubleClick. And, if we measure by domains (instead of Unqiue Visitors), it’s even better — or worse, depending on your free market beliefs: Google contros 77% of the market and DoubleClick less than 6%. Basically, as Attributor puts it, DoubleClick owns the head of the market, Google owns the tail, as shows the table below : audience*……<100kUV…………..100-1m UV…………….>1m UV DCLK……………… 9.1 %……………… 29.9%………………48.0% Google ………….. 71.4% ………………41.6%………………15.9% …………………………………………………………………………………… * in Unique Visitors per month In comparison, on a global UV basis, Yahoo has a market share of 11.5%, MSN 10%, AOL 5%. To measure this, Attributor crawled 68 million domains and 25 billion pages instead of using the traditional panel. Attributor plans to release such data on a monthky basis.