Tuesday, April 21, 2009

Still Optimistic About Media Recovery Despite Print Woes

Tech sector and digital advertising leading early sorties against stubborn downturn. A ‘wall of money’ is coming. Stop staring at your feet.

If your business model depends on print advertising, then the first three months of 2009 is a quarter you’ll no doubt try to bury and forget. Magazine ad pages were down 26 percent from the first quarter of 2008 and according to one report in the New York Times, newspaper ad dollars could fall as much as 30 percent in Q1 when those numbers come in.
“The latest Publishers Information Bureau (PIB) data reflect the advertising paralysis triggered by the late 2008 economic meltdown. Marketers froze ad budgets, which affected placement in first quarter magazines,” said Ellen Oppenheim, Executive Vice President & Chief Marketing Officer, Magazine Publishers of America. Advertising page declines were seen in the ad categories most affected by the slowdown: automotive (-47%), finance (-46%) and retail (-34%).” Of the more than 220 magazines tracked by PIB, only 15 posted ad page gains. Of the remaining titles, 75 percent were down significantly, posting double-digit ad page losses. Ouch.

So where are the bright spots?

Technology is one sector that’s poised for a rebound -- both in how it makes things and how it markets those things. For instance, tech companies spent only 23 percent less in print advertising this year than they did in Q1 of 2008’s. While painful, this looks pretty rosy compared to the stinginess of auto, finance and retail advertisers. And unlike those in other industries, tech company marketers are aggressively shifting their budgets to the Web and other emerging media.

“About 15 percent of our spend is on digital,” Beth Comstock, CMO of General Electric told BtoB Magazine this week. “In my mind that is not enough. One of my goals is to increase that spend.” GE is believed to be the first major advertiser to use live streaming video within a banner ad, which it introduced on 10 Web sites last year featuring CEO Jeff Immelt.

Overall, Internet advertising totaled $23.4 billion in 2008, up nearly 11 percent over 2007 according to the Interactive Advertising Bureau and PricewaterhouseCoopers. The IAB’s March Internet Advertising Report showed digital video revenue more than doubling in 2008 to $734 million. One driver of this growth, said IAB’s Jeremy Fain, is that marketers can now take advantage of video without even having video assets. They’re starting to create Web-specific video content instead of repurposing it, and increasingly, they’re including clickable “hot spots” within the video for deeper exploration by the viewer.

Expect to see more video from B2B marketers, particularly from companies with medium to long range sales cycles. Intel CEO, Paul Otellinie said recently that PC sales have reached bottom and he forecasts moderate growth. Intel also said consumer demand remained relatively stronger than corporate demand and demand in US and China is recovering more than it is in Europe, Japan and emerging markets. One area of the computer business that has been relatively strong has been sales of low-cost Internet machines the industry calls mini-notebooks or netbooks. By and large, these devices are being marketed to supplement, not replace, units already on the desktops and travel bags of personal and business users.

Another positive indicator is the health of tech-oriented stock indices, which are in positive territory for the year. Yes we said positive. While the Dow is down more than 10 percent for the year and the S&P 500 down almost eight percent, the Nasdaq Composite is up two percent for the year and the Nasdaq 100 is up more than eight percent. That’s right, up.

Last week, David Resler, a Nomura Securities analyst told the Wall Street Journal: “The data we got today fit into the idea that companies are slashing production at a breakneck rate and that's paring inventories pretty aggressively. Once those inventories are depleted, it doesn't take much to start spurring a little demand," One promising sign last week was a dip in the inventories-to-sales ratio. That is where the signs of recovery or rebound will show up first."
Recessions Spur Innovation

“Recessions have always been incubators for innovation and personal initiative,” wrote Forbes columnist, Richard C. Morais, this week. He points to The Kaufman Foundation’s entrepreneurial activity index, up 15 percent from two years earlier and the fact that 60 percent of recently laid-off workers are considering changing industries or careers – about twice the normal rate.

As Morais’ colleague, Ken Fisher, admonished: “Investors refuse to think a few years out to the resurgence of the economy because they’re busy staring at their feet. This huge bear market has presented huge opportunities. Beyond simple cheapness, we’re on the cusp of the biggest global monetary and fiscal stimulus relative to the world’s GDP in history. There is a wall of money coming. And then a boom!”

Or as comedienne, Lily Tomlin once quipped: “No matter how cynical you get, it is impossible to keep up.”

Sunday, April 12, 2009

Recession Petering Out? (Part 2)

Readers express cautious optimism laden with caveats.

Last week’s post: “Recession Running Out of Steam?” seemed to hit a nerve with many of you. While no one actually called us crazy, feedback fell generally fell between “not getting worse” and “cautious optimism with lots of caveats.” Mike, who runs a small regional law firm in the Southeast, was pretty representative of our readers:

“Hank, I like your optimism. In certain sectors and regions, the recession/depression will bottom by the end of this year. In others, like credit card debt, commercial real estate and commercial debt and vacation home and high end housing ($500K+) (no realistic financing), I think we are a long way from bottom.

Much depends on how the world reacts to whatever happens with GM, some recovery in international activity (China, Panama Canal, etc.) and some private money coming back into the credit markets. The banks will not get anybody out of this mess and they never have been a part of any solution.”

Whether or not you really do feel more optimistic right now, it’s important continue projecting an upbeat attitude within your organization and when dealing with clients, customers and investors. Here’s why. Winners like to associate with winners. People naturally gravitate to companies and leaders who seem to have things going in the right direction and they’re more likely to stay in contact with you and make referrals if they think there’s going to be a positive “rub off” effect by associating with you.

Here’s are some more upbeat factoids you can use in your sales scripts and Powerpoint presentations:
• The percentage of Americans who think this country is headed in the right direction just hit 39% up from 15% when Obama took office (Source: NYT/CBS News poll).

• 20% of Americans now think the economy is getting better -- up from 7% who thought so in mid January (Source: NYT/CBS News poll).

• The equity markets finished five consecutive weeks of gains. The 25% surge in the S&P 500, for instance, was its best performance over that span since 1938.

• The Index of Volatility (VIX) on the Chicago Options Exchange reached to its lowest close since late September, just ahead of Wall Street's meltdown. That means financial markets are stabilizing and hopefully moving back to fundamentals over fear.

• We’re starting to see signs of life in the credit markets: The 30-year fixed mortgage dropped to 4.61% -- believed to be the lowest level on record.

• Thomson Reuters said businesses with better credit ratings issued $200 billion of debt in the first quarter of 2009, up from $188 last year.

• The London Interbank Offer Rate (LIBOR), which tracks short-term/overnight borrowing costs between banks, fell to 1.16%, down from 1.27% last month and from 4.8% a year ago. The next to nothing rates banks are charging are among the lowest levels ever recorded.

• The U.S. Federal Reserve said consumer borrowing on credit cards dropped last month at an annualized rate of $7.8 billion (9.7%), the sharpest drop since the Fed began keeping records in 1968.

How does this help me?

On one hand, high levels of consumer saving, means folks are still pretty fiscally constipated. They're reluctant to open their wallets to increase spending as employers cut millions of jobs and and reduce pay and benefits for those still hanging on to their jobs. But this reluctance to spend also means consumers are saving more than they have in decades. That’s not great if you’re in retail and consumer staples, but it’s actually a good sign if you market financial services, electronics, autos, high-end appliances, professional services and other goods and services with a long term sales cycle or purchase consideration phase. In other words, advertising’s going to matter more than it has in a long time as both an awareness builder and decision influencer.

Both consumers and businesses are doing more homework than ever before they commit to a purchase decision. You better be out there – and you better be out there with a compelling story to tell.

How top agencies are helping clients tell stories

“We live in a time of extraordinary change—change that will be amplified and accelerated by the recession, ushering in perhaps a new age of business transformation,” said John Favalo, managing partner-group B2B at Eric Mower & Associates, the #2 midsize agency in 2008 according to BtoB magazine’s Top Agency rankings

“Business models, marketing and communications will transform, and successful agencies will be instrumental in helping clients through the dramatic changes.” Eric Mower also had its best year on record last year, increasing its total agency revenue by 30% and winning major new clients such as GE Energy.

Favalo said one of the most important things an agency can do to succeed during these challenging times is deliver relevant, personal solutions to clients, based on their unique needs. “We make business-to-business person-to-person,” he said. For example, the agency developed an online application called “Solutions Advisor” for Motorola's Enterprise Mobility unit. The tool serves up custom solutions for clients and prospects based on their information needs.

Agencies of all sizes say they are expanding their social media and video practices to keep up with client demand.

“Our work in social media is increasingly essential to the needs of our clients,” said Tom Stein, president-CEO of Stein Rogan+Partners, winner of BoB’s small the small agency category. “We see some very interesting vectors between search marketing, social media and more traditional media such as print, broadcast and online.”

For example, Stein Rogan created a social community of school district administrators for client SchoolWires, a provider of communications technology. Called “Share,” it enables users to share templates, forms, reviews and other user-generated content.

So whether or not you’re convinced the recession has hit bottom, it’s time to start behaving as though the recovery has started. Now is the time to crank up your marketing, R&D and staffing so you’re locked and loaded when two years of pent up spending and decision-making finally lets loose. It’s going to be a time of dramatic change with unprecedented opportunities for those who have been making – not struggling to follow -- the new rules of the marketplace.

Friday, April 03, 2009

Recession Running Out of Steam

When will decision-making freeze start to thaw?

Remember back in late 2007 when you got that disturbing memo from the U.S. Department of Commerce announcing plans to kick-off the next great global recession? Of course not. So what makes you think you’re going to be notified when this painful economic downturn finally ends? Trust me, you’re not.

By the time you get the “all clear” signal and spread the good news to your colleagues, it’ll be too late. Your competitors -- who smartly put new products and services into the pipeline during the depths of the downturn – will have passed you by. Their salespeople will have a leg up on yours, with a much better story to tell potential customers. And since they didn’t can all their experienced (i.e. more expensive) people and slash their marketing budgets as severely as you did during the “panic,” they’re taking away big chunks of your market share and mindshare every day. Good luck getting that back …..It’ll only take a few years.

Granted, we’ve got a long way to go. As I write this, the U.S. Labor Department is announcing 663,000 more U.S. jobs vaporized in March. That’s pushing the official unemployment rate to 8.5 percent, its highest level in 25 years. But, in this hyper-speed global economic climate, you’ve got to have new products, services and people at the ready to support them in advance when pent up demand for your goods is finally unleashed. And this is going to be one heck of a release.

Not convinced we’re on the road to recovery. Read on (or go jump off a ledge).
1. Economists and Wall Street analysts (egged on by the media) have successfully predicted 15 of the last three recessions. They have the same lousy battering average predicting recoveries and no bona fide “expert” has stepped up to give the green light on this recovery yet. So I like our chances.

2. The labor market historically lags the stock market and other economic indicators by six to 12 months. Even today’s depressing news about the job market was largely discounted by investors as the grim job loss numbers, albeit painful, were in line with what analysts and investors expected. The market actually went up again today and continued its four-week rally in which it has gained 21 percent– its best four-week advance since July 1938.

READER NOTE: I recommend Barton Biggs’ tome: “Wealth, War and Wisdom” (Wiley & Sons, 2008) for a great perspective on the stock market’s ability to forecast global economic conditions during the 1930s and 1940s. The parallels are striking between today’s climate and that of the Great Depression and World War II. It’s a scary, but interesting read (Disclosure: we have no financial interest in sales or promotion of Mr. Biggs’ book).

3. Manufacturing. The Institute for Supply Management said its March report index rose 36.3, from 35.8 a month ago. New factory orders increased 8.1 percent and General Motors isn’t going to be allowed to make cars anymore unless it starts making them affordable, reliable and environmentally sound.

4. Housing. The National Association of Realtors reported that sales of pending homes rose a seasonally adjusted 2.1 percent in February from a month earlier, bolstered by double-digit increases in the Northeast and Midwest. The index of pending-home sales — which encompasses deals that have signed contracts but have not closed — bounced off a record low. The group’s index of affordability rose to a record as home prices continued to slide and mortgage rates declined to a microscopic 4.61 percent.

5. Huge cash on the sidelines. The stock market is rallying at a time when four out of five institutions and affluent individual investors are planning to switch advisors. “It’s an amazing time with huge upside potential for everyone, including financial advisors,” notes HB client, John Bowen, founder of CEG Worldwide, LLC the nation’s leading coaching, research and advisory firm for wealth management professionals. “This is not a recession or The Great Depression again. It’s The Great Disruption,” says Bowen. The rules of the game are changing fast and will never go back to where we were before. Despite massive erosion of investor wealth over the past 12 months, John’s firm and his clients are actually having one of their best years ever.

6. Broad-based rally. On most positive trading days the Russell 2000 has outgained the S&P500, which has outpaced the Dow Jones index. Companies of all size, industries and market caps are starting to rebound.

7. The Financial Accounting Standards Board (FASB) might finally change the rules on "mark to market" ccounting so bank assets will be measured by their cash flow, not the last trade. Not only is this a healthy dose of pragmatism but it could dramatically impact bank financial statements, valuations and profitability.

8. Labor shortage. That’s right, we said shortage. Even with unemployment rising, some companies now realize they may have cut back their payrolls too aggressively. Duh! Workers who survived the cuts are doing at least twice the work they did before for the same pay or less. They’re burned-out, paranoid, dispirited, and planning their exit strategies, not thinking about company growth.

A neighbor of mine runs an online lead generation company and customer acquisition service. He said some of his clients’ sales reps are taking days, even weeks, to respond to even high-priority leads. They simply don’t have enough manpower to handle demand. He said one of his clients in the mortgage finance is begging her boss to hire back at least 80 of the loan officers they let go in 2008 to handle the workload.

9. Some of the more innovative and adaptable sectors of the advertising industry are still growing at impressive rates. For instance, Internet advertising rose in 2008, according to a report released earlier this week by the Interactive Advertising Bureau and PricewaterhouseCoopers. Internet advertising in the United States grew to $23.4 billion in 2008, an increase of 10.6 percent from 2007, according to the Internet Advertising Revenue Report from the Interactive Advertising Bureau, a trade group representing online advertisers. That was the only category of advertising spending that grew in 2008 other than cable television, which rose 7.8 percent, according to Nielsen figures supplied for the report.

10. Weather. While our hearts go out to those in the flood-ravaged upper Midwest, spring has come to the Northeast, where let’s face it, a great deal of major companies and investment firms reside. There’s always a feeling of accomplishment in these parts that you’ve survived another winter and the onset of spring make everyone feel better and more optimistic. And for many home owners in the northeast, heating oil prices (our biggest worry nine months ago…HA!) ended up being only half as high as what we were dreading as recently as last summer.

11. Hero redemption. Tiger Woods is back on the pro golf tour and Lance Armstrong is cycling again. I don’t play golf, but a great number of corporate decision-makers still do and more than a few are biking and triathloning. After surviving cancer, drug allegations and now a broken collar-bone, Lance will some how manage to get himself into contention for an unprecedented 8th win at the Tour de France, the world’s toughest athletic event. Meanwhile, Tiger won the Arnold Palmer Invitational in typically dramatic last-hole fashion, his first competition after a year-long injury layoff. TV ratings were through the roof and that’s yet another sign for the corner office-set that things may be finally returning to normal in the world.

12. Even lawyers are taking a hit. The days of fat retainers, exorbitant hourly rates and paying first year associates more than the President of the United States makes, may be coming to an end. Law firms may have to start charging clients on a fixed-fee project basis, like every other professional service firm does. Leading law firms have historically avoided mass layoffs, concerned that their reputations would take a hit. But some have been putting those inhibitions aside. The Law Shucks blog now has a “layoff tracker,” and it is pretty telling. Top firms are rapidly thinning their ranks, and several — including Heller Ehrman, a venerable 500-plus-lawyer firm founded in 1890 — have closed. While not a lawyer basher by nature, having law firms align their fees and associate compensation with the rest of us will make everyone’s goods and services a little more affordable.

13. Perspective. Whether or not you believe the worst of this crisis is over, we may finally be taking a healthier approach to work-life balance in this country. “Today’s average business person exists in a perpetual state of exhaustion and stress that is born out of feeling that they are burdened by more responsibilities to meet than they have time and energy to devote to doing so,” said Chuck Peck, CEO of Cape Coral, Florida-based Wealth Intelligence Network. “They work, work, work, yet feel they are merely chasing their own tails. They never seem to be able to meet all the obligations of life without neglecting their commitments to themselves, their relationships, and their families, and vice versa.” The key, says Peck, is to keep moving. “An object at rest stays at rest; an object in motion stays in motion. Always stay in motion.”

Words to live by.

So let’s get back to work. Hire good people to help us and treat them right. Market the heck out of what we have to offer and let’s start making money again.