Accelerating in a stalled economy?

HP likely to be Hurd-ing for a while, but business spending on equipment and software among few bright spots in sluggish new economic report. Companies investing for the future, but spending more on infrastructure than on people. Are you seizing the day or still hunkering down?

I ran into a neighbor of mine on the beach yesterday who thought I still toiled for a high brow financial publication. “So are we out of this thing or not?” he asked me, after mentioning his plans to subdivide his property and start building on both lots – both “scaled down” versions of his current abode. He’s a teacher at an upscale private school and his wife works in a stable healthcare organization. So while neither occupation is as “recession-proof” as they’ve led themselves to believe, they’re feeling pretty good about life right now.

“How the heck should I know if we’re out of this economic S--storm?!” I thought to myself, since nothing I could say was going to dissuade him from his renovation plans. But, then thought I better respond with something a little more scholarly in case anyone else was listening in. I took a deep breath, admired the sailboats and kayaks frolicking on the water and came up with this pearl of wisdom: ”It all depends,” I said. “Depends on what?” he replied, with some impatience.

I said it depends on whether you think things are getting better or whether you think things are getting worse. Overall personal incomes dropped nearly two percent last year, according to US Department of Commerce stats and my neighbor and I live in one of the five wealthiest -- but hardest hit metro areas in the country (see stats)

My neighbor's obviously pretty optimistic about the future and that’s my point. He may not be earning a king's ransom, but his kids go to an elite private school for free. He's got summer's free, doesn't commute far and his wife's doing well, too.

People and companies who think things are getting better are hitting the ground running with expansion plans, they’re hiring, they’re pulling the trigger on delayed purchases, refinancing their mortgages etc. with the thought that “things may never be this cheap again for a long, long time.”

At my neighbor’s elite school, he said they haven’t lost a single family during the recession, “but they’re sure re-thinking that country club membership.” At the other end of the spectrum, we know have close to 2 million people going on 99 weeks of unemployment benefits and that’s not counting the discouraged, early retired, independent contractors, etc. which is probably three to four times that number.

Switch gears to Middle America. WalMart’s still doing well (Net sales for the first quarter of fiscal year 2011 were $99.1 billion, up six percent from a comparable quarter last year), but Nascar events that continually sold out in the middle of the decade drone on in front of acres and acres of empty seats. Nielsen says Nascar’s TV ratings are down 25 percent 2005 Nascar merchandise sales are down 23 percent from its 2006 peak according to The Licensing Letter. Consumers saved a whopping 6.4 percent of the after-tax income in June, according to a new report. It was one to two percent before the recession, and for most of the Baby Boom generation’s adult lives.

They don’t see any improvement from September 2008, when most folks think we officially went into the tank, and they’re hoarding cash like there’s no tomorrow. Millions of homeowners would unload their homes tomorrow if anyone would actually buy em. Millions of employees still lucky enough to have their jobs are fed up with being paid the same as they were five years ago, despite handling double the workload and three times the stress. They’d leave in a heartbeat if there was anywhere else to go.

So it all depends on whether you think things are get better at a better rate, or things are getting worse at a worse rate.

On Friday, HP’s remarkable turnaround was derailed temporarily by sexual harassment allegations against CEO, Mark Hurd. The company’s stock price took a 10 percent hit on the news, but the company will find a way to shake it off, stay focused and get back on track in the same matter of fact way it issued Friday’s press release about Hurd’s termination.

Outside the corner office, the U.S. economy lost 131,000 jobs in July, but that number was distorted as the government let go 143,000 temporary Census workers during the month. The more closely watched private payrolls numbers were also disappointing, showing just a 71,000 increase, less than the 100,000 that economists expected. To make matters worse, the June data were revised lower to a loss of 221,000 jobs from a previously reported 125,000. But the official unemployment rate improved to 9.5 percent, which is a few ticks less pathetic than 9.7 percent last month.

Great. So, things really are improving you say? Not so fast.

Ben “the Bummer” Bernanke, said last Monday that while the U.S. economy continues to grow at a moderate pace – 2.4 percent in Q2, down from 3.7 percent in Q1 -- significant restraints remain on the recovery. In prepared remarks, The Fed Chairman said the U.S. had a "considerable way to go to achieve a full recovery in our economy, and many Americans are still grappling with unemployment, foreclosure and lost savings."

Companies spending on equipment, processes – not people

But, the government report showed a bright spot continuing in the economy: the growth of business spending on equipment and software. This spending continued to surge, increasing by 21.9 percent in the second quarter, compared with a 20.4 percent rise in the first three months. The figures highlight the contrast in the economy between high company profits and a persistently feeble jobs market keeping consumers at bay.

Many management and turnaround consultants I’ve talked to said business has never been better. And if you’re selling productivity tools and processes, things are looking pretty rosy too. So if you’re in the business of helping organizations do more with less – you’re liking this long-term state of flux and uncertainty. But, if you’re trying to get in, stay in or sell to an organization who’s trying to do more with less, than it’s kind of a sucky time.

So if you’re trying to reach B2B decision-makers then we recommend you hit it as hard as possible right now as we’re about to enter the Q4 selling season. There could be several years of pent up demand unleashing itself between now and year-end and you don’t want to be kicking yourself this time next year wishing you had made one more phone call to that VP or Purchasing, or sent one more e-mail blast to that Sr. Manager of Technology or tried one more time to get that white paper over to the Web marketing manager who asked for it two months ago, even though they said budgets were frozen? And what about that Webinar you scrapped mid-summer, because you thought too many thought influencers would be out of the office? Could you have just blown a chance to make the sale of the year in order to save a few bucks in your marketing budget?

When it comes to long-term purchase decisions, you never know if it's six time you touch a prospect, the ninth time or the 12th time that will do the trick.

If things are so bad, then how come business magazine ad pages are up 40 percent at Forbes from this time a year ago (Source; Mediaweek or 36 percent at Wired or 33 percent at Inc?

As we’ve been trumpeting all summer, we’re fast approaching the tipping point in which the “Opportunity Seizers” will be zipping past the “Hunker Downers” and the “Shoulda-Woulda-Coulda’s.”

Which train will you be on?


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Ad Spending Plans, Economic Indicators Trending Up

Will agencies, consumers join the party? Business Week on the block.

Business Week is officially up for sale and there ain’t exactly a bidding war brewing for the once venerable bible of the business world. The nationwide unemployment rate closes in on a generation-high 10 percent and housing prices languish, yet new research indicates economic pessimism among marketers, and to a lesser extent, agency media buyers appears to have bottomed out last spring. NOTE: If you recall, we called the recession statistically all but over in this blog back in early April although we cautioned it could take 12 months or more for spending, confidence and decision-making to improve.

Ad spending was miserable in the first half of 2009 –- down nearly 15 percent according to Interpublic group -– but ad spending PLANS are now trending upward, according to a new report from Advertiser Perceptions Inc (API). API says Cable TV and outdoor media also are improving and now have more media decision makers planning to boost their budgets than to decrease them over the next six months, and while broadcast TV, radio, magazines and national newspapers all are still negative on balance, they are also all improving from low confidence points earlier this year.

"Leading the way are marketers, who are more optimistic than their agencies," said API partner, Ken Pearl, in a statement. API historically conducts big semi-annual surveys tracking the perceptions of advertisers and agency media buyers about the major media, including their confidence levels, but opted to conduct the confidence tracking more frequently this year to monitor an inflection point in the advertising economy.

The most recent survey, which is based on the responses of more than 200 media decision makers over the past several weeks, indicates that their plans for most major media are once again ascending, especially among marketers who seem slightly more optimistic than their agency counterparts.

Ad Optimism Is Improving For Most Media, High For Mobile/Online

MEDIA ....“OPTIMISM”...........STATUS........TREND
Mobile ......57............. Optimistic....Improving
Online.......53..............Optimistic....Improving
Cable TV.... 17..............Optimistic....Improving
Outdoor......12..............Optimistic....Improving
Broadcast TV.-7..............Pessimistic...Improving
Radio........-12.............Pessimistic...Improving
Magazines....-17.............Pessimistic...Improving
Natl. Newsp..-36.............Pessimistic...Improving
Local Newsp..-47.............Pessimistic...Declining

Source: Advertiser Perceptions Inc. "Optimism" is defined by the number of percentage points separating the percentages of respondents citing plans to increase or decrease their advertising budgets in each medium over the next six months. Trends are based over three bi-monthly tracking reports conducted so far this year.

“It's imperative that we begin to shake up the way we think about traditional media,” commented a reader of Joe Mandese’s popular MediaPost column. “It's a fallacy that each medium is an island unto itself. We must move into a new phase of using all the media we have available to us in concert with one another.

Said another poster: “Being in Media ad sales it is good to see a positive trend at last. This generally means that business is starting to move past the current recession. Since the Fall is buying season it would be nice to hear something other than ‘no budget’”.

Let’s hope marketers and agencies are putting their money where their mouths are and focusing on the road ahead, not the rear view mirror. Just make sure you folks stay off your cell phones when driving.

Headfake or a Legit Rally?

Nobody knows. But at least some folks are out on the field and they're “in it to win it.”

New numbers from Forrester Research predict that interactive marketing spending will hit $25.6 billion this year -- up 11 percent from $23.1 billion in 2008, despite being flat, as marketers shift money from traditional media to digital channels. That total, which also includes search, email, social media and mobile marketing dollars, is expected to more than double to nearly $55 billion by 2014. "This growth is due to marketers seeking lower cost, more accountable channels which are also widely used by their customers," wrote Forrester analyst Shar Van Boskirk, in a blog post previewing the firm's interactive spending forecast due out in June.

A recent Forrester survey of more than 200 marketers found that 60 percent planned to increase interactive budgets by pulling back spending on traditional outlets. The biggest victim of the trend will be direct mail, which stands to be slashed by 40 percent. Print will not fare much better, with spending on newspapers expected to be cut by 35 percent, and magazines by 28 percent.

By contrast, mobile and social media will enjoy the biggest spending gains in interactive -- increasing nearly 70 percent to $391 million and almost 60 percent to $716 million, respectively, in 2009. But the recession's toll on other segments will leave display advertising virtually flat at $7.8 billion, and email up only slightly to $1.2 billion. Search marketing, which will get a lift from the shift of traditional and online display ad dollars, is expected to grow 14% to $15.4 billion.

Over the next half decade, however, Forrester expects online display advertising to grow at a faster compound annual growth rate (17%) than search (15%) or e-mail marketing (11%). We’re reaching out to Forrester to see if they will explain this phenomenon in their next report due out in June.

As a harbinger of things to come, American Business Media's just-released 2009 Media Financial Survey, showed B2B media company revenue declined 2.2 percent in 2008 versus 2007, but revenue growth in online, live events, and data products helped offset declines in revenue for magazines. Of the six key B2B media company revenue categories (Magazines, Custom Publishing, Data, Online, Tradeshows and Conferences), Online revenue showed the strongest growth, increasing 15.1 percent in 2008, and rising at a CAGR of 26.8 percent from 2006. Magazines were the weakest performers, showing an 8.4 percent decrease in 2008, and a decline of 3.9 percent on a CAGR basis over the three year period.

Search and display ads work together

Just as global marketers are learning to weave together old and new media into their campaigns, it no longer has to be an either/or decision about which form of digital to deploy. New research from iProspect indicates display ads do influence search behavior. The findings rely on data to support industry rhetoric that display ads and search work together to provide a bigger impact on campaigns. The "Search Engine Marketing and Online Display Advertising Integration Study" suggests that while 31 percent of people click on display ads, nearly as many – 27 percent -- go to search engines to provide a search. More than 20 percent type the company Web address into their browser and directly navigate to the Web site, and 9 percent respond by investigating the product, brand, or company through social media.

More signs of things at least not getting worse

• Although unemployment (8.9%) is at its highest level in decades, NEW claims for state unemployment benefits fell sharply last week, the fourth decline in five weeks. Many economists say this trend provides further evidence that the pace of layoffs has slowed after months of steep job cuts.

• Nonfarm payrolls fell 539,000, the smallest decline in six months

• The equity markets are not giving back their historic gains of the past two months – the Dow and S&P are up nearly 30 percent from their March lows and at or near positive territory for the year to date…..Bring on the headfake.

• OpenTable, the online restaurant reservation service, could soon become the first venture-backed company to be brought to the public markets in nine months. It’s a real company, whose service is easy to use, widely adopted with a legit balance sheet behind it. {Disclosure: We have perused its SEC filings, but have no financial stake in this company}

Fred Wilson, a partner at Union Square Ventures and a blogger about venture capital, recently wrote that the I.P.O. drought for venture-backed companies would end in the next year and perhaps by the end of this year. “I don't know if this market rally we've been having is a headfake or the end of the bear market. My gut says we'll see at least one more pronounced down move before we see bottom.”

For one, he said, venture capitalists have been punished long enough for selling shares of so many undeserving companies during the dot-com bubble. There are many high-quality companies sitting in the pipeline, ready to go public as soon as they can, he said. He argued that many of them — including OpenTable — have business models such as subscriptions, which make for strong public companies.

It’s similar to the equity markets in which many traders and analysts remain cautiously bullish on stocks. How come? In part it’s because pressure is rising for investors sitting on the sidelines to put to work their excess cash, which is garnering little interest because of the Federal Reserve's rock-bottom target aimed at spurring an economic recovery.

"The fundamentals almost don't matter at the moment," Cantor Fitzgerald strategist Marc Pado, told the Wall Street Journal today, pointing to recent data from the Investment Company Institute showing that retail investors are holding almost $4 trillion in cash reserves. "If we even get a small percentage of that money come into the market, you can easily get another leg to this rally."

Back to I.P.O.’s, the picture is not exactly rosy. I.P.O. filings are down 94 percent compared to last year and there have been only four I.P.O.’s this year, versus 28 by this time last year, according to Renaissance Capital’s IPO Home.

Still, there are some good signs for technology companies in the pipeline. Over the last 12 months, tech I.P.O.’s have been the most popular. Technology I.P.O.’s have returned on average 28 percent and health care and biotech I.P.O.’s have returned 24 percent, while all other sectors, including clean energy, have posted negative average returns, according to IPO Home.

Can the Big 3 business magazines save themselves?

Like the Big 3 automakers, the Big 3 business magazines may have to undergo a dramatic and painful restructuring to stay in the media game, says TechCrunch columnist Sarah Lacy. She says it’s a near certainty that Forbes, Fortune and BusinessWeek, will be cutting staff and frequency, but can still maintain some form of long-form investigative stories they’re famous for.

Here’s Lacy’s call for competing with blogs, Web pubs and other immediate, lower-cost forms of journalism: "ruthlessly collapse" the print and online versions into one unit, churn out one or two cover-length pieces per print issue while filling the rest with the best stories and user comments from the Web.” Then cut the money spent on courting new subscribers, and shift the entire marketing budget to promoting the Web product or real-life conferences and branded events. You’ve now got one publication, not two pretending to be one. One publication is a lot cheaper, even if it's printed on dead trees. Under this system, Lacy says, 99 percent of your staff's focus is on the online product, with the other one percent devoted to writing lengthy features for the print pub, which will continue to attract a separate audience. Yes, your pub will operate more like a blog, but it won't sacrifice the print ad revenue stream, either.

Food for thought.

As we’ve mentioned numerous times in recent months, every crisis breeds opportunity. You’re never going to get an “ALL CLEAR” memo in your inbox saying “The Great Disruption” is finally over, so it’s OK to resume hiring, spending and innovating. So if you think there’s even a reasonable chance things are not getting worse, then they’re probably a lot better than you think.

As Daniel Pink , author of Free Agent Nation, notes, our nation’s continued viability depends on what he calls the “imagination economy” – things like creativity, vision and playfulness – that cannot be outsourced. Now’s the time.

Millionaire Returns to Prime Time. Investors and Home Buyers Return to Markets

And you just had your budget slashed and headcount trimmed. How to sell beyond the spreadsheet.

It’s just so predictable. We’re on the verge of one of the greatest economic recoveries in a generation and Corporate America is still figuring out how to hunker down and get even leaner and meaner. At HB we’re all for spending wisely, but at some point, you can’t keep asking what’s left of your staff to run on fumes, smoke, mirrors and duct tape.

Sooner or later you’re going to have to start investing in talented people and regaining your market share with some smartly placed ad spending. If not, you’re not only going to be left alone on the launch pad; you’re going to be singed by your competitors’ after-burner fumes. Pink slips continue across all sectors of the workforce, including the media business. Conde Nast shutters Portfolio. More marketing directors report cuts in spending. IDC's marketing barometer study, which looked at b-to-b marketing trends for the first quarter of 2009, noted overall spending was down about 10 percent.

So what. Back in March on this blog, we called the statistical end to the Great Recession (aka “Great Disruption”) of 2008-2009. Since then, positive indicators keeping cropping up like dandelions in the northern climes of this country. You don’t have to look too hard to find them.

The Equity Markets: The S&P 500 is in positive territory for the year – having rebounded more than 34 percent from its 12 year low in March. The Nasdaq Composite Index is up nearly 12 percent for the year.

Housing: Pending sales of previously owned homes rose for a second month in March, while construction spending edged higher. A Federal Reserve survey of loan officers showed demand for prime mortgages rose in the first quarter for the first time since early 2007. The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in March, rose 3.2 percent as first-time buyers waded into the market to take advantage of favorable prices and mortgage rates, and an $8,000 federal tax credit.

Consumer Confidence: For the first time in five years, more Americans than not think the country is “headed in the right direction” (48% to 44%) according to the latest Associated Press/Roper GfK Roper Public Affairs poll released last week.

Popular Culture: The game show “Who Wants to Be a Millionaire” – which got a nostalgic boost from “Slumdog Millionaire’s” dominance of the Oscars this spring, will return to prime time (ABC-TV) for a two-week tournament this summer, with Regis Philbin again as host. (Disclosure: my wife works in production for this show). Millionaire, which has been quietly chuggling along nicely in syndication for years, since being dropped from prime time in 2001 (with “only” 10 million viewers). At its height in the late 1990s, it had 30 million viewers. Wealth and life-altering hope is back.

Macro Economy: The U.S. economy is on track for a recovery later this year, but the pickup is likely to be sluggish and the jobless rate is likely to rise further, Federal Reserve Chairman Ben Bernanke said Tuesday. "We expect economic activity to bottom out, then to turn up later this year," he said in testimony prepared for delivery to the congressional Joint Economic Committee. Bernanke said the expected recovery will only gradually gain steam and that the economy would grow below its longer-run potential for a while. "Businesses are likely to be cautious about hiring, implying that that the jobless rate could remain high for a time, even after economic growth resumes," he said. Go back and review your history books. That’s a green light if we’ve ever seen one! He didn’t even mention that borrowing rates, oil prices and inflation rates are at the lowest levels in a generation.

What Online Publishers Can Learn From Print Sales

Since we’re sometimes accused of being too hard on print media, we’d like to point out a smart pro-print piece in Online Publishing Insider blog the other day by Kevin Mannion of Sky Road Consulting. Again, we don’t believe in bashing print or any other media. We just don’t believe the days of a single media dominating the landscape are likely to return.

Here are some excerpts of Mannnion’s commentary: “As a rule, digital media is numbers and results-oriented, while print has traditionally relied on a more conceptual sell. Online selling is geared to the spreadsheet; print to the PowerPoint presentation. Print selling emphasizes market knowledge, educating clients --especially on the marketer side -- on buying dynamics, and telling a compelling sales story that shows clients how they will succeed. Digital selling is fast, RFP-oriented, emphasizing media technology knowledge and campaign metric optimization.

Successful digital selling requires going beyond the spreadsheet, while selling print ads needs to be more metrics-oriented than ever before. But the best online sales teams have learned from the legacy of print selling. They don't rely on hits and clicks and answering RFPs with agency spreadsheets neatly filled in with the right numbers. They know how to move beyond the RFP to market creation. And most important, they know how to sell their audience engagement story -- and sell it as a highly compelling advertiser/audience engagement story.Simple truth: Advertisers care about how you can help them see more business through their sales funnel.”

Sure, we could spend the rest of this space hedging our optimism with talk about “bear market rallies”, less-tha-stellar bank stress test results and fears of inflation. But if you want your organization to be a leader rather than a follower, you’ve got to throw out your lifelines, commit to business as usual and start gobbling up market share that your rivals are leaving on the table. If you don’t someone else will.

Final answer!