Ready, Fire, Aim! - Mihail's Public Blog

Although still a small fraction of the overall online advertising market [subscription required], pay-for-placement advertising is one of the few bright spots in the slumping online advertising segment these days. In 2001, keyword searches accounted for 4% of the $7.2 billion in online advertising revenue, according to the Internet Advertising Bureau, an industry trade group -- but that number is likely growing. In July, Overture reported second-quarter net income of $17.5 million, compared with a year-earlier loss of $2.9 million. Revenue more than doubled to $152.5 million, from $62.5 million the year earlier.

But it's not always obvious which terms will bring in the big bucks. Ms. Morita says that some advertisers have paid up to $16 to $18 a click to be listed prominently on the results page for "data recovery," one of the highest-bidded terms. Other words that fetch a premium: "Viagra," which currently costs $7.27 a click; "Flowers," which costs $4.26; and "Mortgage," which costs $6. The company has put a $50 ceiling on bids to guard against inadvertently high bids.

According to Forrester Research, the Wall Street Journal reports (subscription required), online cigarette sales will be over $1 billion this year and over $5 billion by 2005 (or 14% of total sales). At that point, states will be losing $1.4 billion a year in taxes. For example, cigarette sales in New York City have dropped dramatically as new sales taxes have boosted prices to more than $7 per pack.

At the same time in Goldsboro, sales surged from about $15,000 a month to $25,000 at nccigarettes.com, said owner Scott Herring, who runs the year-and-a-half-old Internet tobacco shop from his house.

The reason is simple: He can pay North Carolina's nearly negligible five-cent-a-pack tax and still sell cigarettes to New Yorkers for less than half of what they pay at their corner store.

...The federal Jenkins Act requires online cigarette retailers to furnish purchase records to customers' home states so officials can collect state and local taxes. But the penalty is a misdemeanor and the law isn't enforced, say antismoking advocates.

"It's just like the Wild West," said Eric Lindblom of the Campaign for Tobacco-Free Kids, a Washington advocacy group. "There's no marshal in town and these Web sites are flaunting the fact that they're ignoring the law."

From the Wall Street Journal (subscription required)

CNET reported last week that after some digging through old backup tapes from Carnegie Mellon University, Mike Jones, a Microsoft researcher, has pretty solid evidence that the smiley face now central to e-mail and instant messages (for better or worse) was first introduced in 1982. As it happens, the first smiley face wasn't meant to show happiness, or sarcasm, but rather to indicate that something was a joke. (A gag about a mercury spill in an elevator didn't go over too well.) The first smiler, Scott Fahlman, had long been credited with the invention (as he was in a front-page Journal article from 1992), but no one could remember exactly when the note was written.

The full message string shows that Mr. Fahlman's smiley face was just one of several suggestions on how to indicate one was joshing -- ranging from an asterisk to a pound sign to an ampersand. (He invented the sad face in the same note.) There was a push from Gandalf fans for an apparently pre-existing joke symbol \__/ but it never got traction.

The actual date on Mr. Fahlman's posting was Sept. 19, 1982. So this coming Thursday, the smiley turns 20 years old. Happy birthday. Now all we have left to do is wait for the birthday of ROTFLMAO and other overly complicated acronyms.

According to a new survey by the Pew Internet & American Life Project, 86% of the college students use the Internet compared to only 59% of the U.S. population according to this Wall Street Journal/AP story (subscription required).

"For this group of college students, the Internet just works. It's like turning on the tap and getting water or turning on the TV," says Steve Jones, the report's lead author and chairman of the communications department at the University of Illinois at Chicago.

Anyone walking into a college computer lab, or classrooms that have computers, is likely to find students flipping through any number of Internet activities. They surf for information for assignments, download music files and play online games -- all the while taking time to message friends who may be across campus or across the world.

It's what David Silver, an assistant professor of communication and the director of the Resource Center for Cyberculture Studies at the University of Washington, calls "social multitasking."

The survey found that much of students' Internet surfing is not related to schoolwork. In fact, 42% of students who use the Internet say they use it most often to keep in touch with friends by instant message or e-mail, compared with 38% who use the Internet most often for academics. Nearly three-quarters say most of the e-mail they send is to friends.

Wall Street Journal (subscription required) on how an aging rapper (OK, he's 30) is reinventing himself. Calvin Broadus was known to his fans as Snoop Dogg:

Among his most-profitable cinematic ventures to date is "Snoop Dogg's Doggystyle," winner of several adult-film-industry awards. In that movie, shot at his home, Mr. Broadus narrates as actors have sex. The scenes are interspersed with new Snoop Dogg music videos, which expose his musical artistry to a new audience.

"It's all done in good taste," he says. And it has made him some new friends. He was invited, for instance, to the Playboy mansion, where he hobnobbed with Hugh Hefner. "It's good for him to be hanging with that caliber of people that are real businessmen, instead of on the streets," a member of his security detail said the next morning.

...Mr. Broadus works with a small team of advisers. Stephen Barnes, his lawyer, handles the bulk of business negotiations, which have helped Mr. Broadus land a steady stream of movie parts and product-endorsements for Nike and XM Satellite Radio, among others. Ted Chung, a 25-year-old graduate of the Wharton School of Business at the University of Pennsylvania, handles the label business.

The New York Times story (registration required) on Jack Welch's continuing problems starts with a reference to a recent Wharton School conference that addressed the "once-soaring corporate captains" who "have crashed to earth" -- Kenneth Lay, Bernard Ebbers and, yes, Jack Welch.

A close friend of Mr. Welch, who said he spoke to him last week, said Mr. Welch was deeply upset that G.E.'s reputation was being affected by the revelations about his benefits and also said the G.E. board was particularly angered that Mrs. Welch had revealed the details of the agreement, which had been kept secret from G.E. shareholders.

Meanwhile, a close friend of Mrs. Welch said that before the pay package was revealed, she turned down a $20 million offer on grounds that it was an insulting amount from a man said to be worth $900 million.

...Even before the recent revelations, Mr. Welch left G.E. more with a whimper than a bang. A proposed $45 billion takeover of Honeywell was blocked as his tenure was about to end. It fell victim, many say, to Mr. Welch's underestimating the concerns of the European Union and an arrogance that the European regulators did not count for much.

More fundamentally, especially in the wake of recent accounting scandals, many are now raising questions about the quality of G.E.'s earnings under Mr. Welch and wonder whether the company manipulated earnings so that G.E. would show the same level of growth and reach its earnings targets year after year. Many say G.E. used one-time sales — it acquired and sold more than 100 companies a year in deals arranged by its financial arm, GE Capital — to smooth the ups and downs of its industrial products divisions.

According to this New York Times story:

G.E. issued a short news release on its Web site this morning acknowledging that it had received a request from the S.E.C. last Friday for voluntary cooperation in what it termed "an informal investigation" in connection with the employment and post-retirement agreement with Mr. Welch.

"G.E. will cooperate fully with the S.E.C. in connection with this matter," the company said, although it was not immediately clear what the S.E.C. would be looking at. A press spokeswoman for the S.E.C.,, Christi Harlan, declined to confirm or deny whether an investigation was being made, but she said it was the agency's standard practice not to comment on such matters.

In morning trading G.E. shares gained 45 cents to $27.50 on the New York Stock Exchange.

Mr. Welch's post-retirement benefits received close attention after his estranged wife, Jane. B. Welch, filed an affidavit in Superior Court in Bridgeport, Conn., last week indicating that a large amount of their expenses, including a Manhattan apartment, were paid for by the company.

Mrs. Welch is seeking more than the $35,000 a month that Mr. Welch, who headed General Electric for 21 years, has been providing.

I think by some estimates, Jack Welch is worth $900M. But he's providing less than $0.5M a year to his wife?

From the Wall Street Journal (subscription required):

Say cheese. Now say cheese-by-mail.

Americans eat about 30 pounds per person a year of the stuff, according to the U.S. Department of Agriculture, about 11% more than just five years ago. But as the American palate gets more adventurous, there's more on the cheese board than cheddar. There are now about 250 boutique cheesemakers operating in the U.S., and their wares are increasingly available online to buyers eager to taste something new...

Conde Naste's new magazine has rapidly surpassed its guaranteed readership. Paid circulation grew to an average if 780,000/month. Of that 207,095 copies were sold at newsstands which this New York Times story says is "a telling indicator of consumer interest, outperforming fashion stalwarts like Harper's Bazaar and W."

Internal company figures indicate that Lucky has brought in about $16 million in advertising revenue this year through the October issue, compared with $7.6 million in the period a year ago. And the magazine is on track for about $20 million in ad revenue for its second full year, although it is still no threat to the likes of Glamour, its Condé Nast sibling, which is expected to bring in almost $100 million this year

..And Lucky does break a few rules of the fashion and beauty publishing niche. While magazines like InStyle and Marie Claire have introduced ad-like elements, with Lucky the catalog is all there is. Historically, women's magazines have encouraged aspiration, but Lucky is all about acquisition. And celebrities, the clotheshorses for much of the last decade of fashion coverage, are nowhere to be found in Lucky.

...[Lucky editor, Kim] France said: "I don't know how serious a person I am. Maybe I am a serious person with a seriously superficial side. I think that Lucky is a really smart magazine. I'm using my brain a lot more rigorously than I was when I was writing 1,000-word profiles of 23-year-old rock stars."

Many in the advertising community appreciate the mental effort. "What Lucky does, because of its simplicity, is provide a very different magazine experience," said Avery Baker, vice president of marketing at Tommy Hilfiger. "It makes the fashion experience very turnkey."

..."The magazine about shopping," as Lucky proudly announces, is as much a declaration of principles as the tag line of "Sex, sports, beer, gadgets, clothes and fitness." that adorns the cover of Dennis Publishing's Maxim. The plainspoken fealty to common, some would say base, reader needs, seems to be catching on.

"I take that as a compliment," Ms. France said. "The people at Dennis have done a great job of giving the readers what they want."

And Malcolm Gladwell, the author of "The Tipping Point" and a contributor to The New Yorker who is a longtime friend of Ms. France, does not have a problem with the editorial populism, either. "Reading a magazine is a habit," he said. "Anything that makes that habit more pleasurable rebounds to all magazines, and I think Kim's magazine is a pleasure to look at."

Venture Reporter.net interviews (registration required) Yahoo entertainment head Dough Hirsch for an interesting update on how Terry Semel's arrival is changing Yahoo. According to this article, "the Web giant has been investing significantly in Yahoo Entertainment, which contains its Yahoo Movies and Yahoo TV destinations. The former now the top ranked online movie destination. Yahoo boasts marketing deals with every major film studio and just signed its first major network deal. According to a recent article in Variety, the average studio spend per movie on a Yahoo deal is $300,000." Hirsch says,

Getting quantitative data was one of the first things we tackled when we arrived in L.A. We have an in-house research team that we complement with frequent surveys and exit polls using recognized measurement companies like NRG and Nielsen. Our data has consistently shown that the Internet, and Yahoo in particular, plays a huge role in the decision-making process for Entertainment. We have repeatedly surveyed small and large films and found that the Web regularly beats out newspapers, radio and billboards as a first source of information on films, and that almost 25% of moviegoers use the Web to choose the movie they will see that day.

According to a study on a recent opening weekend for one of the summer's biggest blockbusters, 51% of men under 25 learned about the film online, and almost half of them saw about it on Yahoo. Research like that and our recent successes at promoting nine number one box office films this summer are making our story resonate with the industry.

A very different article on 9/11 on Salon.com a few days ago that I just saw.

"I was actually moving the week of 9/11 and I just wanted to find a way to get out of work so I could pack. When the attack happened, I was thinking, This is so cool. I can go to the dentist and still have time to get everything done." -- Ruth Wagner, 28, an editor in New York

"It's gorgeous out. Turn the television off." -- Author Barbara Garson's response to her husband's phone call telling her that the towers had been attacked.

There's more, lots more, where this came from.

"If someone says their company is a dot-com now, I know what that means," Wharton School of Business professor Peter Fader told the E-Commerce Times. "It tells the consumer what to expect. It's part of the brand message."

What is different this time around is that "dot-com" it is being used more judiciously. Where there once was a rush to append the suffix to every company title, now it is found more often where it logically fits.

"There has been a realization that it's not just a phrase to toss around; it means something," Fader said.

For instance, Expedia (Nasdaq: EXPE) is appending "dot-com" to its name in its advertising tagline jingle. Doing so makes sense because the company is unlikely ever to require a real-world presence, in contrast with some early dot-coms that could have benefited from straddling the Internet and the physical world.

According to AdAge, research conducted online by Nielsen/NetRatings' @plan and Minnesota Opinion Research, in conjunction with washingtonpost.com (surveying nearly 1,000 business decision-makers) found that,

60% of those polled said the Web is the best way for advertisers to reach them. Nearly 50% of participants said the Web has influenced them to make a purchase or obtain a service for their business, and 50% of the respondents who increased their Web usage in the last year said they decreased TV viewing.

Other traditional media were also affected, the study found: 47% of those polled decreased their newspaper readership; 45% magazine readership; and 18% decreased radio listenership. Of those polled, 77% said the Web is the place they find out about new products and companies.

Excluding e-mail, 92% of respondents said they read general news during the workday; 45% read financial news and checked stocks.

President Bush returned to the Republican fund-raising circuit Monday after an 11-day hiatus — one of his longest breaks this year — as he campaigns in Iowa for a Republican who is in a tough re-election fight.

...The president's record-breaking campaign-cash drive has reeled in more than $111 million for GOP candidates this year, in 52 appearances. With Monday's travel to Iowa, he adds $225,000 for Nussle to that total with a $100-per-plate picnic at a local fairgrounds, Bush spokesman Scott McClellan said.

USA Today story on Jack Welch on his compensation.

Welch, who retired from GE a year ago after 21 years as chairman, said in a signed essay on the editorial page of The Wall Street Journal that he had asked the GE board to modify his post-employment contract "by eliminating everything except the traditional office and administrative support given for decades to all retired GE chairmen and vice chairmen."

..."Papers filed by my wife in our divorce proceeding became public and grossly misrepresented many aspects of my employment contract with General Electric," Welch wrote. "I'm not going to get into a public fight refuting every allegation in that filing."

Nevertheless, he said that one of the things he learned as CEO of GE was that perception matters, especially during a time when news of lavish compensation packages and executive malfeasance have soured public confidence in American business.

USA Today has a poll today on who's value meal would you buy: Wendy's, Burger King, McDonald's or Taco Bell.

Burger King will announce Friday plans to introduce 11 menu items — from burgers to salads — that will sell for 99 cents each. The move comes at the same time McDonald's is gearing up to introduce over the next two months a similar $1 menu, including its Big 'N' Tasty burger and McChicken sandwiches.

These are not one-time promotions. They are permanent menu items. With sales stagnant at many of the big chains, the need to drive new business is clear. And the magnitude of the response is unlike any the $105 billion industry has seen in years.

My college classmate Chris Miller's in charge of advertising at Taco Bell which came up with the concept of the sub-$1 value meal in 1990 with 59-cent tacos, burritos and tostadas and a few 79-cent and 99-cent items.

Today, Taco Bell has 14 menu items less than $1, including a 99-cent Double Decker taco and 69-cent bean burrito.

"We defined what value was," says Greg Creed, chief marketing officer at Taco Bell. "Value is the core part of our DNA."

Wall Street Journal (subscription required) on public dismay about Jack Welch's continuing compensation:

Jack Welch did a lot of good for a lot of General Electric shareholders and employees as CEO. But that makes it all the more unfortunate that his contribution will be tarnished by the public airing (in a divorce case) of a retirement package that makes him seem greedy, or at least too attached to the playthings of corporate opulence.

...It wouldn't be a bad thing, though, if CEOs began to show more regard for their own dignity, which tends to be undermined by displays of excess. We'll catch grief for saying so, but business executives are part of this country's natural leadership class. Their practical wisdom and advice are crucial to intelligent policy-making. And they have (or would have) more public respect if they bothered to show a modicum of concern about nurturing that respect.

In April, AOL Time Warner told investors (subscription required) that $1.8 billion was the "floor" for AOL's advertising and commerce revenues could go this year. But now AOL is warning that the floor may come in as low as $1.6 billion or approximately 10% lower than the previous forecast.

At the peak of the boom, the average online ad cost about $6 per thousand viewers. Some Internet-related companies wanted so badly to get on AOL that they gave up chunks of equity in their companies to pay for the ads.

Now, average online ads hover between $1 and $3 per thousand viewers, and Web sites are going to extremes to survive. Many are running ads free and only getting paid when customers click on the ads. Other sites are running what appear to be news articles written by advertisers. And one Web site, Forbes.com, has even promised advertisers a money-back guarantee if their ads don't work at generating "brand awareness," as measured by surveys and other follow-up.

Forbes.com President and Chief Executive Jim Spanfeller said he decided to offer the money-back guarantee out of a "desperation to put the proper perspective on Web advertising."

The desperation appears to be working. The Online Publishers Association said it surveyed 14 of its members, including Forbes.com, Slate.com, USAToday.com and the Wall Street Journal Online, and found their collective ad sales were up 33.5% this year over last year. "I think there's been a flight to quality," says Michael Zimbalist, executive director of the association.

But it may be more of a flight to bargains. The kind of deal Nutri/System made with America Online -- known as pay for performance -- is in increasingly popular in Internet-ad industry. GartnerG2 Analyst Denise Garcia estimates 30% of online-ads are pay for performance -- a sign, she says, that media companies have a glut of inventory.

A will he-won't he Wall Street Journal story (subscription required) on angry staffers wanting Steve Case to follow Geral Levin's departure.

AOL Time Warner Chairman Steve Case likes to say he spends most of his time thinking about business issues with at least a five to 10-year time horizon. The big question at AOL, however, is whether Mr. Case will still be at the company in 10 months, let alone a decade.

...Having the chairman pursue a "strategic thinker" role while the CEO runs the company isn't the usual corporate structure in U.S. companies. But it's not unheard of. Jeffrey Sonnenfeld, associate dean of the Yale School of Management, estimates it occurs in 10% to 15% of companies, including Microsoft Corp. since Chairman Bill Gates ceded operational control to Steve Ballmer.

But Mr. Sonnenfeld says AOL may find it harder to make the arrangement work well than other companies. He says it works better where the chairman and CEO have worked together for a long time -- which isn't the case at AOL -- and where there is a clear demarcation in the roles of the top two executives. While Mr. Parsons is supposedly in charge of operations, he leaves most of the operational details to his two operating lieutenants, Jeff Bewkes and Don Logan, and his role appears to overlap a bit with that of Mr. Case.

The venture capital numbers for the second quarter are in according to the Wall Street Journal (subscription required):

According to the latest PWC/Venture Economics/National Venture Capital Association MoneyTree Survey, the venture firm New Enterprise Associates topped a list of 11 venture outfits, cutting 20 deals for the second quarter. Silicon Valley's Draper Fisher Jurvetson came in second with 18. Then New York's Venrock Associates, with 16, and J.P. Morgan Partners with 15. InterWest Partners, of Menlo Park, Calif., tied with Polaris Venture Partners with 13 deals. And with 12 each: Intel Capital, Oak Investment Partners, Sequoia Capital and St. Paul Venture Capital.