Tag Archives: Business model

What Has Happened?

Maybe it’s because the start of the year is also a time of reflection, but I continue to be appalled at the state of the online advertising business. It’s not so much about the fact that 2 players – Facebook and Google – gobble up the majority of money spent. In fact, in terms of ad revenue, Facebook by itself is twice as big as the newspaper business, according to eMarketer, and will be bigger than the entire print business shortly. Google is twice as big as Facebook. There’s a third player – Amazon – on the way to suck up a huge share of the ad pot as well.

While that isn’t the problem, it does mean that the rest of the industry is fighting over relative crumbs. When you’re desperate, you might do things that you know are wrong or foolish and that’s where I think we are. In fact, I think we’ve gone way over the line from foolish to criminal.

Some examples. Yesterday while I was reading an article via the web browser on my phone, up popped the screen you see on the right. Those of you who have an Android phone know that what you see looks very much like the Google Play store and it seems as if there is a critical app update I need to make. It is an ad, of course, trying to get me to install what I assume is malware. Had I not noticed that it was in a web browser and not in the native Play Store, I just might have clicked.

This is why the online ad business is doomed or at least the part that’s outside of the big 3. On the consumer side, people are forced to use ad blockers to prevent malware from infecting their devices as well as interrupting their tasks with annoying popups. On the business side, publishers keep pushing ads knowing that some percentage of them are scams or worse yet unable to do anything since in many cases they’re not the ones selling the ads. They’ve offloaded that to third parties and 74.5% of US digital display ad dollars transacted programmatically will go to private marketplaces and programmatic direct setups.

Speaking of those third parties, they might just be the worst thieves in the bunch. They claim to be there to help publishers increase revenues or marketers to buy efficiently yet they inject numerous fees, both known and hidden, into the process, siphoning off at significant (upwards of 25%) amount of the available money in the transaction. Those hidden fees, by the way, might just violate any number of local and federal laws.

So what has happened to the ad business in which I grew up? What has happened to agencies being honest brokers and nearly full transparency on all sides? Where is someone in the ad chain (looking at you, ad networks) saying “no” to scams, malware, and the other crap that serve no purpose other than to encourage adblocking or to harm someone? Anyone?

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Most Read Foodie Friday Post Of 2017

It’s only fitting that we end the week of most read posts published in 2017 with the food-themed post that was most read. After all, we end each week with something of that sort and I kind of like ending not just this week but this year with one. This post was published last October and was originally called “They Don’t Make It  Like That Anymore.”  Have a healthy and happy New Year and we’ll see you on the other side. Enjoy!

This Foodie Friday I am going to run the risk of sounding like the grumpy old man I’m slowly becoming. Rather than admonishing you all to get off my lawn, I want to share the sentiment I had a week or so ago as I fired up my smoker. My smoker, or as it’s lovingly known, “The Beast”, was made by the New Braunfels Smoker Company at least 20 years ago, How do I know that? Well, that’s today’s food and business thought.

The Beast is made of heavy steel that’s quite thick and it weighs well over 100 pounds even without my usual load of meats inside. As I was cleaning up the old Rancho Deluxe to get ready for its sale, the smoker was one of the very few things that I was adamant about saving for the move. Why was that, especially when I also gave away or junked a Caja China and two other grills? In a sentence:

Because they don’t make them like that anymore.

The New Braunfels Smoker Company was sold to Char-Broil 20 years ago. Almost immediately, the quality of the products went downhill, and this was especially noticeable on the gauge of the steel. The steel was thinner and didn’t hold heat as well. When a rust spot developed, it was difficult to sand and paint it without almost going through the area that has rusted. The products were similar in design and name, but that was about all that was the same. The bbq forums, home to serious meat smoking aficionados like me, were deluged with negative comments and, more importantly to the business, better alternatives to what had been a superior line of smokers.

This is something from which any business can learn. We’re always under pressure to improve our margins. Some folks look to cheaper materials, other to cheaper, less-skilled labor, and still others to cutting customer service. Sometimes we just skimp on quality control. While margins might improve, there is a strong chance that revenues will decline as the customer base figures out that “you’re not making it like that anymore.” As an Apple user, I recently switched to a Chromebook because my Mac OS isn’t as smooth and there are glitches that were never an issue before. For you cooks out there, Pyrex changed their formula and “new” Pyrex is not as good. Recent Craftsman tools, once the industry standard, are now made in China and aren’t nearly as good. I can go on and I’m sure you can as well.

If you’re successful, resist the temptation to cut corners. People notice (so does your staff). Don’t be part of a conversation that claims you don’t make it like that anymore.

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Filed under food, Consulting, Huh?

Most Read Post Of 2017

This post was far and away the most read thing I published this past year. It is a rumination on a business I’ve worked in and loved for decades – sports. It’s a lot longer than my typical screed and several prominent folks were kind enough to link to it and encourage people to read it. I guess they did since this had roughly triple the readership of the next most read post. Written last July 12, it asks the question “Is The End Near For Sports?” I hope not!

I know you might be thinking that my headline is just some outrageous form of click bait and that I can’t seriously think that big-time professional sports are heading down the same path as traditional big media. Let me throw a few recent articles at you and maybe you’ll come to a different conclusion (which I do hope you’ll post in the comments).

The sports business is based on a few large revenue streams. One is income from the games themselves: ticket sales, concessions, merchandise, etc. What makes many of those things possible is a nice facility – an arena or stadium. We’ve seen franchises move (and piss off their fans) over the stadium issue, sometimes even before the bonds on the last stadium built for the team are paid off. I urge you to watch the John Oliver piece on the relationship between teams and towns but here is why I suddenly think there is an issue. As reported by Mondaq:

bill has been introduced that would eliminate the availability of federal tax-exempt bonds for stadium financing… The bill would amend the Internal Revenue Code to treat bonds used to finance a “professional sports stadium” as automatically meeting the “private security or payment” test, thus rendering any such bonds taxable irrespective of the source of payment.

In other words, it will make public spending on a private facility way more difficult. That will lead to fewer new facilities and a much harder path to growing that revenue stream. Strike 1.

Then there is the largest revenue stream for most big leagues: TV. Kagen recently reported that the U.S.pay-TV industry will lose 10.8 million subscribers through 2021, according to their latest forecast. You might already know that ESPN has been losing subscribers – May 2017 estimates were 3.3% lower than the year before. For every million subs lost, ESPN takes in roughly $7.75 million less PER MONTH – or $93 million a year, and they have already lost multiple millions of subscribers. Yes, some are being replaced via the sale of OTT services, but that requires spending to sign customers, something ESPN hasn’t had to do before. The same subscriber loss issue is true of every other sports network albeit to a lesser degree since their monthly fees are less than ESPN’s. Smaller subscriber fees mean a diminished ability to pay those large rights fees. Sure, other channels (some would say suckers) will step up – Facebook, Twitter, YouTube, and others. But my guess is that the outrageous increases many entities have secured over the last few rights cycles are gone for good. Strike 2.

Finally, costs are not going to go down, at least not without major disruptions such as the two recent NHL lockouts. Players aren’t going to make less (the downside of the salary cap), team personnel probably won’t, at least not without a lot of turnover, and many of the other costs are either already low (minimum wages) or difficult to cut (food costs in the concessions, etc.).  In an effort to mitigate some of the lower revenue and growing costs, some of the entities involved in sports are beginning to do what the airlines have done and make what was once part of the deal (in-flight meals, free bag check) part of an a la carte menu to grow revenue. Specifically, look, for example, at what NBC has done with their Premier League package. They are doing away in part with their NBC Sports Live streaming coverage in favor of a new premium streaming service called “Premier League Pass” that will be in addition to the matches that are already broadcast on live TV. The stand-alone streaming service will cost $50 in addition to whatever you’re paying for your cable subscription. That will bring in more dough but it will also anger fans. Strike 3?

Don’t misunderstand me. I think interest in sports generally has never been higher, and I think any sports entity that doesn’t rely on a big TV contract and employs athletes as independent contractors (I’m looking at you, LPGA) will be in good shape. I just think there is a major disruption coming in the next few years as we’ve seen in the TV and music businesses. Watch out as the next cycle of TV deals begins and if this bill is passed. It’s going to be a bumpy ride, don’t you think?

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Filed under Thinking Aloud, sports business

The Spanish Inquisition

I’m a big fan of Monty Python, as I am of anyone or anything that provides great insight amidst great silliness. One of my favorite Python sketches is The Spanish Inquisition. Not only is it funny (if you like really silly) but it also provides a great business reminder:

Nobody Expects The Spanish Inquisition

It’s a phrase I’ve found myself saying many times in business as some unforeseen circumstance causes great disruption. You see examples of it every day. Just this morning, there was a report of a newspaper closing in Houston which is blamed primarily on the effects of Hurricane Harvey. I’m sure there wasn’t a business plan built around that sort of natural disaster.

Sometimes, the disruptive event can be seen but its dramatic effects aren’t. Take, for example, the discussions I used to have with some higher-ups during Internet 1.0. One person was totally convinced the explosion in web properties and the dawning digital age was “a scam.” He didn’t believe that people wanted to watch TV on their computers when a brand new HD-TV was in their living room (HD was pretty new at the time). Of course, he also didn’t expect that broadband would make delivering video to any device wirelessly as good an HD experience as that same TV, nor did he understand that it literally was the same bits that comprise the “broadcast” signal.

Those same broadcasters denied that cord-cutting would have any effect on viewing. Nobody expects the Spanish Inquisition, you see. However, ESPN has lost more than 12 million subscribers since 2011. You think the recent waves of layoffs aren’t related to cord-cutting? When cable is losing hundreds of thousands of subscribers each month, you can count on there being an effect on the business.

The hardest part of being in business is seeing over the horizon. Brexit? President Trump? China leading the charge against climate change? The Cubs winning the World Series?? Who expected those things? Equally as difficult can be in believing what you’re seeing. Nobody may expect The Spanish Inquisition, but part of our job as businesspeople is to be ready when it pops into the room. Are you?

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Keeping It Real

Back in 2015, an engineer at Twitter asked his security team to look into fake accounts. He said he was stunned to find that a significant percentage of the total accounts created on Twitter had Russian and Ukrainian IP addresses and he also found that they were, for the most part, fake. They were “bots”.

Photo by Alex Knight on Unsplash

No, today isn’t a political rant about how our Democracy might just have been hijacked by a foreign power. Rather, what happened next, as told in this piece by Bloomberg, is instructive to any of us in business because it raises a few issues that are common to us all.

The engineer was part of the security team. That team was tasked with keeping the platform secure. He took his findings to another team – the growth team – which had the responsibility for increasing the user base. That user base number is critical for every business since how the business is valued is based in part on how many users (we can’t really say people in this case, can we?) are active. Discovering that a significant percentage of the user base was fake could have a negative effect on the business’ balance sheet, and in this, we begin to see the problem.

There is a misalignment of goals. If part of security is keeping the platform free from spambots, the people responsible for deleting the spambots can’t have any goals which make deleting those bots counterproductive. In this case, the engineer was told to “stay in his lane”. In other words, pay no attention to the man behind the curtain – the reality of our user numbers – it’s not your job.

No organization should have these kinds of silos. No organization can base its public statements about growth and user engagement on numbers it knows are fake. It’s one thing for users to inflate their follower numbers by buying fake followers but it’s quite another for Twitter itself to be aware of these non-human accounts and to do nothing about them because they want to keep their user numbers up.

I don’t mean to single out Twitter. The same issue persists on Facebook and other social platforms and it’s way more insidious than research can find. There is a term – dark social – that refers to sharing activity among the network’s members that isn’t easily measured. Let’s say a fake account spreads a lie and maybe even buys an ad to do so. We can see how many impressions the ad had or how many followers the fake account has. What we can’t easily see is the network effect. I see the post and am outraged about it. I tell five friends, who tell five of their friends, etc., particularly when it’s shared off the network itself via email or text.

I am fairly certain that each of these networks could identify and stop this activity despite what you might have seen in Congress last week. Those were the lawyers testifying, not the engineers. The point for your business is to keep everyone’s goals in alignment, don’t build silos, and to be honest with yourself and with your investors. These are public companies who might just be committing fraud, but every company has the same responsibility for honesty and transparency.  You with me?

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Filed under digital media, Huh?, Thinking Aloud

They Don’t Make It Like That Anymore

This Foodie Friday I am going to run the risk of sounding like the grumpy old man I’m slowly becoming. Rather than admonishing you all to get off my lawn, I want to share the sentiment I had a week or so ago as I fired up my smoker. My smoker, or as it’s lovingly known, “The Beast”, was made by the New Braunfels Smoker Company at least 20 years ago, How do I know that? Well, that’s today’s food and business thought.

The Beast is made of heavy steel that’s quite thick and it weighs well over 100 pounds even without my usual load of meats inside. As I was cleaning up the old Rancho Deluxe to get ready for its sale, the smoker was one of the very few things that I was adamant about saving for the move. Why was that, especially when I also gave away or junked a Caja China and two other grills? In a sentence:

Because they don’t make them like that anymore.

The New Braunfels Smoker Company was sold to Char-Broil 20 years ago. Almost immediately, the quality of the products went downhill, and this was especially noticeable on the gauge of the steel. The steel was thinner and didn’t hold heat as well. When a rust spot developed, it was difficult to sand and paint it without almost going through the area that has rusted. The products were similar in design and name, but that was about all that was the same. The bbq forums, home to serious meat smoking aficionados like me, were deluged with negative comments and, more importantly to the business, better alternatives to what had been a superior line of smokers.

This is something from which any business can learn. We’re always under pressure to improve our margins. Some folks look to cheaper materials, other to cheaper, less-skilled labor, and still others to cutting customer service. Sometimes we just skimp on quality control. While margins might improve, there is a strong chance that revenues will decline as the customer base figures out that “you’re not making it like that anymore.” As an Apple user, I recently switched to a Chromebook because my Mac OS isn’t as smooth and there are glitches that were never an issue before. For you cooks out there, Pyrex changed their formula and “new” Pyrex is not as good. Recent Craftsman tools, once the industry standard, are now made in China and aren’t nearly as good. I can go on and I’m sure you can as well.

If you’re successful, resist the temptation to cut corners. People notice (so does your staff). Don’t be part of a conversation that claims you don’t make it like that anymore.

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Filed under Consulting, food, Huh?

Do We Really Want Mullets?

Anyone remember the mullet? You know what I’m talking about: the haircut that’s “business in the front, a party in the back.” I think the last time the mullet was popular was when it was sported by members of the Pittsburgh Penguins when they won The Stanley Cup in the early 1990’s. Since then, it’s become more of an object of ridicule than a hairstyle to be admired. I think we’ve come to recognize that we can’t be both businesslike and a party at the same time.

I thought of the mullet the other day when I read that Facebook was testing resume-building features so that users can share their work history with their Facebook friends. They’re obviously trying to hone in on a space dominated by LinkedIn. The curious thing is that your “resume” doesn’t really display. It seems as if Facebook is simply gathering the information which one can assume they’ll use to fuel a service for headhunters and active job seekers. There’s actually a couple of points we can think about here.

The first is that most of the people I know (myself included) use different social sites for different purposes. Many of my Facebook friends are not work-related. We’re not generally connected on LinkedIn. I don’t cross-post (other than the screed) content on the two sites since I don’t especially think my business contacts care about what food I’ve eaten or what concerts I’ve attended or my political views. Conversely, I don’t bore my non-work friends with the three or four business-related articles I might come across that I find interesting.

From what I can tell, most users can distinguish between the appropriate content for the two sites. Frankly, I think Facebook knows way too much about each of us anyway, and I’m not sure that I want them to know much more about my work life, my contacts, or anything else I keep in the workplace. I certainly don’t want potential clients considering anything other than the professional qualifications available to them on LinkedIn – not my musical tastes, not my politics and not my sad attempts at humor with friends.

More importantly, every business needs a focus. Facebook, in particular, seems to have decided that anything is fair game. They’re trying to out video YouTube, to out marketplace Amazon, and to compete in areas such as food delivery. In the meantime, they can’t even decide if they’re a media business (hint: they are).  Each of us needs to figure out what business we’re in so we can channel our resources, focus on our competition, and understand what problems our solutions can solve to serve our customer base. Chasing the next shiny object or growing beyond our core competence generally is more trouble than it’s worth. That’s how we end up with a mullet and is that what we really want?

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