PeppercomBlog

Taking Down the Dow

Posted by Milos Sugovic

The Dow Jones industrial average is a misnomer -- it’s an unreliable representation of the broader market. The media can’t get over its 777.68 point (6.98 percent) drop yesterday, which is understandable as it’s the most popular index. But it’s misleading. And to those affected (that’d be all of us), it might make sense to use a more accurate yard-stick.

Take a look at the umbrella indices: The S&P 500 dropped 106.59 points, or 8.79 percent. The Nasdaq Composite lost 199.61 points, or 9.14 percent. Does this mean the stock market plummeted more than just 6.98 percent? You bet.

The Dow has many big problems. Let’s revisit the basics: It’s based on 30 companies only. There’s no way this fully reflects economic trends on Wall Street and Main Street. It’s price-weighted, meaning a dollar change in stock price translates into points. But not all stock price changes are created equal. Since when does relative size not matter?

There’s clearly a disconnect between reality and the 107-year-old index, and yesterday’s stock market (or bailout) failure makes it evident.  So when using any index, make sure you understand the math behind it. And if you don’t or can’t, make sure it reflects what you’re trying to measure. More often than not, you’ll find the most popular metric to be the most misleading.

The Morals of Econ Lingo

Posted by Milos Sugovic

Those that understand the ramifications of economics see through the moral content attached to “econ lingo.” Economic jargon is repeatedly abused in the press, and to mock this trend “an occasionally tactless economist” posted the following juxtaposition on Bluematter:

The moral content of economic terminology in the popular press: A guide

Foreign direct investment (inbound): Good
Current account deficit: Bad
Trade deficit: Catastrophic
Capital account deficit: Not used. Presumably bad.
     Weak national currency: Bad
     Exports: Good
     Imports: Bad
Rising house prices: Good
Falling house prices: Bad
Affordable houses: Good
Unaffordable houses: Bad
     Free trade: Neutral
     Unfettered free trade: Bad
     Fair trade: Good
     Outsourcing: Evil
     Buying local produce: Divine
Pay rises: Good
Low interest rates: Good
Inflation: Bad
     Communism: Very Bad
     Socialism: Bad
     Capitalism: Bad

Many of these are amusing and subtly humorous. Economic systems work such that any change often leads to other changes, frequently in an unambiguous pattern. So what seems “bad” might actually be “good,” and vice versa. 

Take for example weak national currencies and the “bad” connotation. A weak dollar helps reduce imports, which are “bad,” and increase exports that are considered “good.” That helps to reduce the current account deficit, another “bad,” and the trade deficit, which is “catastrophic.” So why do we consider a weak national currency that reduces the trade deficit a “bad” thing?

Look at foreign direct investment (good) and its complementarity with trade. Outward FDI is associated with additional exports (good) and imports (bad). Conversely, inward investment (good) is associated with a trade deficit (catastrophic) of the host country. Does that make FDI “good” or “bad?”

What about wages and inflation? Pay increases are considered to be “good.” But that leads to inflation via a price/wage spiral, which is “bad.” Similarly, low interest rates are considered “good,” but that increases money supply, which causes inflation (bad). So are pay increases and low interest rates as “good” as we think?

Finally, rising house prices are considered “good,” but that creates unaffordable housing in the long run (bad). Falling house prices, on the other hand, are “bad,” yet it leads to affordable housing (good). So which is it?

When it comes to communism, socialism, and capitalism, I’ll leave that one to the political scientists and sociologists. In the mean time, public relations professionals and journalists should be careful when using economic jargon. After all, if you use it correctly (good) you might make friends with a few economists (bad).

Gates to Success?

Today's guest blog comes from Clare Abdalla, Peppercom

Is all news good news? Seems like the folks at Microsoft think so.

Monday’s WSJ article demonstrates that bad news about a bad ad can still create buzz, as the Bill Gates/Seinfeld Windows commercial hit the streets. Blogs, the business community and mass media picked up the pointless ad which showed Gates and Seinfeld shoe shopping. Microsoft and Windows weren’t even mentioned.

Which makes one wonder: Is the lack of substance in the message a tactic? 

How is it to draw in customers?

Microsoft is already a household name with a hurting reputation. Every consumer has an opinion, and Mac commercials aren’t helping - they point out the disadvantages of owning Windows machines.

So how will shoe shopping re-establish the business superiority of Windows? Am I supposed to be assuming that the process of buying a computer is similar to buying shoes? Too many degrees of freedom that Microsoft needs to explain, fast.

Microsoft swears that this was an icebreaker commercial and more are to come. Maybe they’ll bring some meat to the table, but with Seinfeld as the star, seems like they’re relying on cash instead of creativity.

Giants like Microsoft are too big to fail, but they suffer from their own success; and that need not be a bad thing. Microsoft dominates in terms of market share, and that results in high levels of compatibility, economies of scale and scope, and the luxury of being very close to a monopoly. But capitalizing on the history of success is a challenge oversized organizations face. Marketing pink iMacs is catchy, but translating economies of scale into jingles has never been easy.

So maybe the Seinfeld commercial is an attempt to keep Microsoft in the media, even though its products cannot do so alone.

Power to the People

Posted by Matt Purdue

It seems that my colleagues, particularly Ed Moed, are on a bit of an Olympic blogging kick lately, so, OK, I’ll bite. Like Ed, I was glued to NBC’s coverage the other night when one of those pop-up teasers appeared in the corner of my television screen. (Yes, I know I’m a dinosaur for watching this on television instead of via online video stream.) NBC pinged me that swimmer Natalie Coughlin’s race was coming up in a few minutes.

At the time, I didn’t know anything about Natalie Coughlin. I felt a little bit like I was watching a Spanish-language telenovela: I sensed something dramatic was about to happen, but I was clueless as to what it could be. In a few seconds, despite NBC’s exhortations, I decided that missing Natalie Coughlin’s race wouldn’t change my life. I flipped channels.

But NBC’s Olympic strategy should not be lost on PR professionals: At the end of the day, it’s the people, stupid. In other words, take a lesson from NBC’s playbook. They’re coverage has focused on people, people, people. The Olympic swimming competition has been full of interesting side stories. For example, the Beijing pool is actually deeper than most, which enables faster swimming. Also, new swimsuit technology is making competitors speedier than ever. But NBC gives us Michael Phelps’ mom and, of course, Natalie Coughlin. And guess what? This may turn out to be the most-watched Olympics. Ever.

The lesson should be clear by now: Often a client’s greatest asset in getting the word out is its people. We work so hard on developing “thought leadership” and pitching new products that we often forget that journalists and other influencers crave real conversations with real executives. Every one of us should stick a Post-it on our monitor that reads: “Get to the CEO.” We absolutely must convince the C-level executives at our clients that their voices are all-important to the press, and that to move the strategic needle for an account, they need to get involved. Sometimes the quickest way to opening a door to a key stakeholder is by offering a meeting in the C-suite. Try it.

It’s too late, baby, now it’s too late

Posted by Matt Purdue

You know there’s trouble when your friendly neighborhood blogger starts quoting Carol King in the hed. Here’s the bad news: Newspapers will lose their long-held spot as the leading recipients of advertising dollars by the end of 2008, according to media M&A shop Veronis Suhler Stevenson. Broadcast TV will take over. I’m betting that newspapers will never again be kings of the ad dollar.

Yep, it’s too late. As someone who got his start in communications at a local newspaper, I’m grieving. But there’s also some schadenfreude, too. Over the years, newspaper executives never took digital seriously. They knew the strength of their brands. After all, hundreds of thousands of consumers—millions in some cities—had been coming to them day in and day out for decades. Publishers only had to gather news and print it, and eyeballs would come running. But that led to hubris. Instead of leveraging their incredible brands and moving them onto digital platforms, newspapers waited. They were terrified that web news would cannibalize their print products. When they eventually moved to the web, they started by charging consumers to read archives.

Now most newspapers offer free articles. And many are smart enough to realize that their “news” is old the minute it hits a reader’s doorstep, so they offer web updates of articles in their print edition. But, as Carol sang, it’s too late, baby. Advertisers have taken their dollars and walked out. They’re moving to more dynamic platforms that have momentum, and they’re not coming back. With declining ad revenue and a group of consumers who have been burned so badly that they’ll never “buy” digital news, papers are caught in a viscous circle.

And newspaper execs have no one to blame but themselves.

For PR professionals, it’s time to start talking about how to deal with this. Today everyone of your clients would probably love a mention in the morning edition of Washington Post. But in three years there may be no Washington Post as we know it now.

Today's lesson: One journalist = one battalion

Posted by Matt Purdue

If you want to know what gives a serious journalist goosebumps on the back of his/her neck, or, in today's communications parlance, what "resonates" with them in terms of "engagement," read Gideon Rachman's recent column in the FT. Rachman sets out to describe the perceived differences between American and British journos, in so doing, he presents in 900 words perhaps the finest description of journalism as craft that I've ever read. (Thanks to my colleague Joe Becker over in our digital practice for dropping it on my desk.)

American journos, Rachman writes, see their job as a civic duty. This partly explains why they are willing to work for peanuts, and partly explains why many newspaper executives have been so slow to adopt new technologies and business strategies in the face of digital competition. One portion of pride, an equal portion of hubris. Rachman hits at what beats inside the chest of every journalist when he quotes the UN commander in Rwanda during the genocide as saying, "A reporter with a line to the west was worth a battalion on the ground." Most journalists truly believe (or at least hope) they have this power to change things. 

Certainly reporters rake muck and sensationalize. For every Watergate story, there are 100 bits about rats at a KFC. But most PR folks could find more success in what they do if they remembered that journos have a bit of the idealist in them. Clients may continue to insist that a PR rep get the latest new product announcement printed word-for-word in their favorite trade pub. But, in the long run, that's not going to do anyone much good. Reporters know they aren't going to make a difference in the world (let alone in their careers) by covering the latest upgrade to the widget of the month. But help a reporter develop an angle that just might alter the status quo, and rest assured they'll come back to you again and again.

Mission Viejo Masala

Posted by Matt Purdue

It had to happen. The U.S. newspaper business is headed for India. CNBC’s Julia Boorstin blogs today about the Orange County Register’s plan to outsource some work to a firm in India. And we’re not talking about the more traditional outsourcing arrangement that involves customer-service positions or IT jobs. We’re talking about newspaper editors -- copy editors, to be exact. (Full disclosure: I previously worked as a journalist for the Register’s parent company, and in my teens wrote a small sports article or two for the Register. I’d posit that any copy editors who get laid off from the Register are the lucky ones.)

While most newspapers don’t employ copy editors to make decisions about what gets covered and how, good copy editors are absolutely essential for producing a quality newspaper. They generally handle much of a newspaper’s quality assurance on facts, grammar, punctuation and style. It’s a thankless job. Copy editors rarely get credit for catching a false “fact,” but usually get blamed when a typo slips through in a headline. (Although the New York Times recently ran a rare copy editor encomium, apparently missed by the honchos at the O.C. Register.)

Now this is not to imply that India-based employees, with access to the same digital research tools used by their counterparts in the U.S., can’t do the job. But this does mark a dramatic turn in the U.S. newspaper business. Ink-stained wretches all across America will be adding a little extra kick to their coffee as deadline approaches tonight in their newsrooms. Outsourcing might not be a bad thing, however. Newspaper business models need to change—and fast. Advertising revenue is in the toilet. Offshoring copy editing might, just might, staunch the blood a bit.

But what’s next, I wonder? If an editor with an excellent command of English can copy edit a story for the Orange County Register, who’s to say that in two years, when he really knows that paper inside and out, he can’t start reporting stories? After all, a great deal of today’s reporting is done with a cellphone and an Internet connection. Does it really matter if a phone interview with a lifeguard in Laguna Beach is conducted from Buena Park or Bangalore?

Pat Punditry: Tax Rebates to the Rescue

Posted by Gene Colter

Americans are paying a lot more to drive to the malls, and they return to homes that are worth a lot less than they were a year ago. So how come consumers continue to patronize the nation’s chain stores with some vigor?

As any pundit will tell you, the answer is tax rebate checks from Uncle Sam. Any number of articles in recent days has cited this found money as the reason that retailers’ sales and net incomes, while down from prior periods, nonetheless have held up reasonably well.

That’s good news for the Bush administration, which is counting on one-time infusions of $600 a person or $1,200 a household to keep the party going in an economy that gets about three-quarters of its economic activity from consumer spending.

But is it credible? As Ethan Harris, the prescient and deservedly popular chief U.S. economist at Lehman Brothers puts it, the consumer has been spending like a drunken sailor on shore leave for a long time now.

And while the bar isn’t quite as rowdy as it was in the days when mortgage lenders didn’t bother to ascertain whether people could afford to pay usurious loan rates, the taps are indeed still flowing.

To attribute much of the still-decent performance of retailers to tax rebates is, at best, guesswork. It’s also overly simplistic analysis and lazy journalism. And it ignores the fact that the checks aren’t all in the mail: Many Americans won’t get theirs until mid-July.

Of course, the retail industry is known for pat explanations. Same-store sales losses are often attributed to adverse weather, an explanation that makes some sense when it’s 75 degrees in November and the down coats aren’t moving but that surely can’t account for all of the lousy quarters Mother Nature has had to answer for. 

Best Buy, the electronics chain that’s nice enough to make otherwise sane people drive on roads such as New Jersey’s belief-in-a-higher-being-destroying Route 22, is among the latest retailers whose better-than-expected earnings were attributed to the rebate checks.

Kudos to Best Buy CEO Brad Anderson for throwing a little cold water on that explanation. While he may have been trying to manage future expectations, Anderson nonetheless injected some needed perspective into the conversation when he told Bloomberg News: “If I had to guess, I'd say a third of what we're seeing is coming out the rebate checks.''

Mean Dregs and Sam

Posted by Gene Colter

It is axiomatic that journalists and many ex-journalists (this blogger falls into the latter category) will treat as feckless folly any attempt by a corporate type to inject new thinking into the newspaper business. Part of what ails the industry is the result of knee-jerk poo-pooing by the press.

But that doesn’t mean the journos are always wrong.

Real-estate Mogul ™ Sam Zell closed on an acquisition of Tribune Co. just before Christmas last year and immediately sat about remaking the place in his professionally iconoclastic image. The changes so far include all kinds of cost cutting and any number of Colorful ™ public pronouncements.

Now come a couple of dregs of ideas that may sound logical to the balance-sheet guys but that in reality may end up making about as much sense as Zell’s personal invitation to reporters at the Tribune-owned L.A. Times to use newsroom computers to surf the Web for porn.

Last week Tribune Chief Operating Officer Randy Michaels revealed plans for the company’s newspapers to “right size” staff through the use productivity data gathered on every journalist. "This is a new thing," he told Editor & Publisher. "Nobody ever said, 'How many column inches did someone produce?'"

Uh, no. Maybe the data weren’t always broken down by column inches, but I guarantee you that even the faltering Tribune papers have in the past measured the productivity of their reporting staff. They did this through the work of professionals known as “editors.”

Gathering detailed productivity data is by and large a waste of the time and money that news organizations don’t have. There is not an editor worth his or her weight who doesn’t have a feel for which reporters are excelling, humming, just getting by or not cutting it.

Please pardon a personal example: Early this decade I was the No. 2 editor at a large news agency. My boss liked data and insisted that his managing editors collected byline counts (i.e., story counts) for each reporter, formulating them into a report to land on his desk sometime around the first of each month. I wasn’t great at getting these reports in on time. I resented having to slog through scores of stories that I had already read to tell me what I already knew: Some reporters wrote a lot, especially if they had newsy beats. Some reporters wrote very little, especially if they were on investigative beats where they had to break the news rather than chronicle the events of the day. Others fell somewhere in between. Suffice to say I was never, ever surprised by the numbers, and the hours spent on the task did nothing to sway my view of reporters’ performance. Somewhere along the way I convinced a tech to write a program that would do story counts for me. The program was good enough, and I took my own counsel come review time.

My point: It’s all well and good to apply traditional business metrics to the business of journalism, but productivity data are right there for the knowing in the newsroom every day. It’s not a widget factory. Read the paper, work with the reporters. You’ve got your data.

Cue the rolling of the eyes from readers who think that this blog is questioning the right of a business owner to run the shop the way he sees fit.

That’s not the case. It’s Zell’s Tribune – except, well, it kind of isn’t. To recap the “deal” terms: Zell put up $315 million and Tribune employees’ stock plan took on billions of dollars of debt to finance the rest of the going-private concern, making the employees majority owners but not the bosses. It’s a classic real-estate transaction: Use other people’s money to gain control.

OK, so maybe productivity data are too picayune to kvetch about. But what about this report from today’s New York Times that explains how the LA Times will turn control of its monthly magazine over to the paper’s business side and replace all of the magazine’s editorial staffers?

No one is disputing the right of Tribune to try to make the magazine profitable, but disenfranchising the newsroom by definition compromises the integrity of the product – not just for readers but also for advertisers who supply the revenue stream. Disagree? Go back and look at coverage from 1999 when a certain paper published a special magazine about the new Staples Center arena in a certain city and agreed to share revenue from the publication with the arena.

Hey, turns out it’s not even new thinking.

Visit the Leaning Towers

Posted by Matt Purdue

Thirty-six hours later, I'm still bleary-eyed from watching late-night cable coverage of Barack Obama clinching the Democratic nomination for president. No matter how the media slice it, this is a historic occasion, one that our children will read about in history books.

Unfortunately, how the media slice it is becoming curiouser and curiouser. At the risk of getting drummed out of the Journalists Alumni Association and Social Club, I will admit that reporters and their editors have always been biased. Journalists are human beings, after all, and work for for-profit companies; it is nearly impossible to remove all bias from that equation. But what journalists need to forever be is balanced. The media must present as many sides of an issue as possible. That's job No. 1.

It's become a running joke just how unbalanced the cable news networks have become. Conservatives still refer to CNN as the Clinton News Network. And Fox News Channel hardly even tries to serve up anything but the far-right perspective. MSNBC, which I happened to watch Tuesday night, has been bashing the Administration openly for so long that VP Dick Cheney even joked about MSNBC host Keith Olbermann in a recent bit of stand up. MSNBC is practically Obama TV now. The network interrupted John McCain's speech Tuesday night to announce that Obama had mathematically clinched the nomination. That was bizarre because media such as the AP had reported hours before that Obama's clinch was a foregone conclusion. Interesting timing. At one point, Olbermann likened Obama’s clinch to NASA landing a man on the moon in 1969. A few minutes later, Tim Russert compared McCain to an “old shoe.”

The major newspapers have their leanings, too, although they're more subtle. Wednesday's New York Times painted Obama as a tough guy, noting his clinch following a "grueling battle." The paper trumpeted that he "inspired millions of voters from every corner of America to demand change." Funny how they ignored the fact that Hillary Clinton actually collected more votes (if you count her votes in Michigan, where Obama was not on the ballot), but instead described Obama as "prevailing through an epic battle." For the Times, it's all about establishing the Democratic nominee as the embodiment of the American dream.

Now check out the Wall Street Journal, the bastion of free-markets. The WSJ headline called the Democratic primaries "bitter" and reminded us that Clinton refused to concede, two obvious digs at a party that often seems to be unable to run itself, let alone the country. Instead of prevailing, Obama simply "captured enough convention delegates." Then, in the third graf, the paper twisted the knife, reminding readers that Clinton’s “surprise win” in South Dakota “underscored some of Sen. Obama’s weaknesses.” Ouch. The guy becomes the first African-American to head a major-party ticket, and the Journal rips him for losing a flyover state with three electoral votes. His loss there, by the way, was hardly a surprise.

The lesson here is that the media is made up of many individuals and organizations, all with their own points of view. For any type of strategic media plan to work, PR professionals have to study their target audiences with a microscope and know what makes them tick. It’s always been that way, and always will be.