stark contrast

Advertising: Super Bowl Ad Previews Draw Online Attention, With Criticism

January 31, 2013 by NewsMaker Leave a Comment

Still, he is disappointed that consumers can already watch an extended version of the commercial online, in stark contrast to a decades-old strategy of building anticipation for Super Bowl spots by keeping them under wraps until the game.

“I’m more of the old school; I like the element of surprise,” Mr. Norman said. “If I ruled the world, I’d go back to holding out and waiting.”

His client, the PepsiCo Beverages division of PepsiCo, which makes Pepsi Next, sees it differently. The company is among a long list of Super Bowl sponsors jumping the gun by sharing commercials — shorter versions, longer versions or the versions that will appear on Sunday — hours, days or even weeks before the game.

“The world has changed,” said Angelique Krembs, vice president for marketing for the Pepsi trademark at PepsiCo Beverages. “The conversation used to happen after the game. Now, enabled by social media, there’s a lot of conversation before the game about what’s coming up, and we want to be the most talked-about brand in that conversation.”

The willingness of consumers to watch ads on social media like Facebook, Twitter and YouTube — and to discuss and share them with friends and family — is rewriting the Super Bowl playbook for Madison Avenue. Marketers and agencies are deciding that it’s better to give up the benefits of surprising viewers during the game in favor of gaining additional attention before.

“We don’t see any down side” to forgoing the “aha!” moment during the game, said Scott Campbell, general manager for integrated marketing communications at Colgate-Palmolive, which bought a Super Bowl commercial for its Mennen Speed Stick deodorant and uploaded the spot to the brand’s YouTube channel on Wednesday.

“I don’t think we’ll get 110 million viewers before the game,” Mr. Campbell said, referring to the number of people expected to watch the Super Bowl, “but whatever we get by giving it to our online community is all to the plus.”

Another reason Colgate-Palmolive released the commercial early on social media was that it is part of “a campaign that was social from the get-go,” he said. The campaign began with a contest on Twitter, and the commercial was produced through Tongal, a company that uses a crowdsourcing model to develop creative ideas for ads.

To be sure, priming the pump before a Super Bowl spot runs does not guarantee success.

“Pre-announcements can build up hype, but if the ad isn’t seen as dynamic, innovative or exciting, I don’t think the sneak peeks work,” said George R. Cook, executive professor of marketing and psychology at the Simon Graduate School of Business at the University of Rochester. “There may not be so much ‘wow’ or positive bounce.”

Another risk, Professor Cook said, is that “the message can wear out” before the game, lowering the return on the large investment in a Super Bowl campaign. CBS, which is broadcasting Super Bowl XLVII, is charging an estimated $3.7 million to $3.8 million for 30 seconds of commercial time, with some going for $4 million.

Opening the kimono before Super Bowl Sunday may also backfire if consumers dislike what they see. For instance, Volkswagen of America has been fending off negative responses to its Super Bowl ad since previews began online on Monday.

The Volkswagen spot features an actor playing a white Minnesotan who speaks with a lilting “Yah, mon” Jamaican accent, meant to encourage drivers to “get happy.” The commercial, by Deutsch L.A., has been denounced as culturally insensitive or racist.

“We didn’t go in saying, ‘Could there be a backlash?’ ” said Tim Mahoney, chief marketing officer at Volkswagen of America, because testing showed that the ad conveyed “the message we want to deliver, that this is a brand that can put a smile on your face.”

“I’m pretty pleased that within 24 hours we had 1.1 million people watch the spot” on YouTube, Mr. Mahoney said. That figure had grown to more than 2.1 million Wednesday night, and despite the criticism, he said, reactions have been “overwhelmingly positive.”

The additional time to scrutinize the contents of Super Bowl commercials also means a much earlier start to the postgame tradition of challenging the ad industry’s creativity by pointing out all of the spots that echo one another. For example, several commercials, including Pepsi Next’s, will promote free coupons and other giveaways.

And at least two commercials, for E*Trade and Kia, include images of baby astronauts, while a third, for the new Axe Apollo line of products, sold by Unilever, features a young male astronaut.

Matthew McCarthy, senior director of brand development for Axe North America at Unilever, said he was undaunted by pregame comparisons. “Do I hope having assets out there before the Super Bowl generates buzz?” he said. “Of course I’d like that.” The Axe Apollo commercial was created by Bartle Bogle Hegarty.

As for E*Trade, “luckily, our spot has only one second” of a baby astronaut amid a variety of images, said Tor Myhren, president and chief creative officer at Grey New York, which creates E*Trade’s ads.

The commercial, scheduled for social media on Friday, features the “talking” E*Trade baby advising investors not to waste money on 401(k) fees. In addition to visiting space, the baby indulges in pursuits like playing polo and drinking — milk — at a nightclub.

“I have mixed emotions about running Super Bowl spots early,” Mr. Myhren said, because it dilutes the appeal of the game as “America’s last campfire, where everyone gets together to watch the same thing at the same time.”

Even so, “you spend a lot of money on a 30-second commercial in the Super Bowl,” he said. “You may be a fool not to leverage the opportunities.”

Article source: http://www.nytimes.com/2013/01/31/business/media/super-bowl-ad-previews-draw-online-attention-with-criticism.html?partner=rss&emc=rss

Filed Under: Media Business Tagged With: element of surprise, madison avenue, stark contrast

You’re the Boss Blog: The Biggest Banks Tell Us a Little More About Their Small-Business Lending

October 1, 2012 by NewsMaker Leave a Comment

Searching for Capital

A broker assesses the small-business lending market.

Last week, I wrote a post about a joint announcement from the Small Business Administration and 13 of the largest banks in the country that they had increased their small-business lending by more than $11 billion over the past year. As I noted, this number stands in stark contrast to the number these banks self-report to the Federal Deposit Insurance Corporation, which shows that their lending has fallen by more than $2 billion.

Getting capital into the hands of small-business owners and entrepreneurs at affordable prices is a critical issue for our economic recovery. And that’s why it is important, when the largest banks in our country and the S.B.A. administrator make an announcement, that we understand what it means. I am happy to report that the Financial Services Roundtable, an organization that represents those 13 big banks, provided a statement in response to my post. We’ve decided to share the full statement, because we feel it provides some important clarification (while also raising some additional questions). Here it is, followed by a few of my thoughts:

After reading Ami Kassar’s Tuesday column (“The Big Banks Say They Are Meeting Their Lending Commitment”), we want to make sure you have information on F.D.I.C. call report data, what it shows and how it differs from the lending commitment reported by Karen Mills, U.S. S.B.A. Administrator, so this data is reported accurately.

In the conclusion of his article, Mr. Kassar wrote: “According to Ms. Mills, the banks are up by $11 billion; according to the F.D.I.C. call reports, the banks have fallen behind by more than $2 billion. We are still hoping the banks will explain what exactly they have committed to do.”

There is a straight-forward explanation behind the seeming contradiction Mr. Kassar cites. The lending commitment measures the increase in credit the 13 participating banks have made available. So, for example, if a bank provides a small business with a line of credit totaling $50,000, that bank is making $50,000 of credit available to the customer. If in the following year, the bank raises the customer’s line of credit to $75,000, that would be an increase of $25,000 which would be reported as part of measuring success against the lending commitment referred to by Ms. Mills.

The F.D.I.C. call report numbers measure the amount of credit small-business owners are actually using. If the customer in the example above has an outstanding balance of $20,000 against their $50,000 line of credit, the F.D.I.C. calculation would reflect only $20,000. If that same customer decides in the second year to pay their balance down to $15,000, this would result in a $5,000 decrease in the F.D.I.C. reported borrowing – even though the amount of credit made available to that customer by the bank has increased $25,000. Paying down the balance is the customer’s decision.

The banks participating in the lending commitment are working to make more credit available to small businesses and have made great progress in increasing new lending, as Ms. Mills reports. How much actual borrowing businesses do against their available credit is a decision made by business owners based on a number of factors, including how confident they are about the economic environment and the prospects of their business.

Just as consumers recently have been paying down their credit card balances, F.D.I.C. data shows us that small businesses are paying down their bank debt too (and not just cards and lines of credit). This is not something banks control nor should they try to influence what small-business owners do with their credit. It would be like saying to a consumer: we’ve increased your credit card limit so you need to increase your outstanding balance owed. Banks only determine the amount of credit they make available to small businesses, which has been increasing as reported in the lending commitment numbers. It’s business owners who decide how much they actually borrow at any given time.

The F.D.I.C. call report data gives us some insight into the use of credit by small businesses. Yet it does not show new lending commitments and should be not be used as a measure of a bank’s new lending to small businesses.

The Financial Services Roundtable is correct in that the F.D.I.C. numbers reflect actual monies borrowed by small businesses. These numbers tell the precise amount of loans to small businesses with a balance of $1 million or less.

Judging by the banks’ statement, I believe it remains very difficult to determine whether these banks have really done anything to make credit more available to the small businesses that need it. First of all, the banks’ numbers still include loans to companies with revenue of as much as $20 million. With a few strokes on an excel spreadsheet, they could tell us the corresponding numbers for companies with revenue of $1 million or less.

Second, this statement confirms that the loan dollars noted in their commitment include credit card debt. That means a significant portion of the $11 billion they are bragging about comes from the millions of small businesses who use credit cards for convenience or to earn cash-back and frequent flier points — not as capital to build their businesses. The statement also makes clear that when it comes to lines of credit, small businesses have only borrowed a fraction of the money that the banks are taking credit for lending.

Given these issues, as I have previously discussed, I still believe that the F.D.I.C. call numbers are a better barometer of small-business lending. The Obama administration has talked a lot about transparency. Wouldn’t it be appropriate for the S.B.A. administrator to demand clarity from the banks and share it with the small-business community? As a starting point, they could at least pull the credit card loans out of their numbers.

Ami Kassar founded MultiFunding, which is based near Philadelphia and helps small businesses find the right sources of financing for their companies.

Article source: http://boss.blogs.nytimes.com/2012/10/01/the-biggest-banks-tell-us-a-little-more-about-their-small-business-lending/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: deposit insurance corporation, kassar, stark contrast

DealBook: British Takeover Rules May Mean Quicker Pace but Fewer Bids

September 19, 2011 by NewsMaker Leave a Comment

Paul Hackett/Bloomberg NewsThe London Stock Exchange building.

Britain’s new takeover rules take effect on Monday.

Many lawyers and investment bankers believe that the new rules will speed up the pace of British takeovers and produce more competing bids for companies. These same lawyers and bankers, however, argue that the new rules may also lead to fewer takeovers being made.

While the consequences of these new rules can be debated, there is little doubt that the British takeover rules stand in stark contrast to the takeover regime in the United States, which is much more protective of targets from hostile and competing bids.

The Takeover Panel of Britain acted as a result of Kraft Foods’ successful bid for Cadbury. Amid the public outcry in Britain against this deal, the panel began review of the takeover code. The panel wanted to conduct a general review but also examine claims in light of the Kraft bid that bidders could manipulate the takeover process to acquire control of British companies unfairly.

At the start of its review, the Takeover Panel asked for comment on a wide array of rules, including one that would have required a takeover to be approved by a two-thirds vote of a company’s shareholders instead of a majority.

The panel also considered rules that would have required shareholders to disclose interests of 0.5 percent or more instead of the current threshold of 1 percent, and disenfranchised shareholders who acquired shares while an offer was pending. All of these requirements would limit the power of arbitragers to determine the outcome of a competing bid.

They were intended to meet complaints that the Cadbury takeover had been decided by arbitragers who did not care about Cadbury’s long-term prospects merely the short-term premium offered by Kraft.

The final rules avoided these controversial rule changes. Instead, the new rules largely focus on regulating how and when competing bids are made.

As an initial matter the new rules are intended to limit the period a target is subject to a competing bid and forestall undue rumors about a takeover. Companies that are subject to such a bid or rumors often experience instability that can harm the company or otherwise force it to accept a bid it otherwise would have preferred to reject.

Two new rules will force takeover bids to progress faster than previously. Targets will now be required to identify by name any acquirer it is in talks with or an approach has been received when the talks or approach are made public. There is also new “put up or shut up” rule. Once a bidder is so identified, it will have 28 days to make a bid. Otherwise the bidder will have to sit through a cooling off period of six months.

Deal Professor

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Merger negotiations leaks are rampant in London. When discussions start between a target and bidder, one of the first to-do items is often to draft the “leak announcement” — the news release acknowledging that talks are taking place once a leak occurs. And the Takeover Panel is vigilant in forcing companies to acknowledge talks are occurring or an approach has been made once a leak occurs.

These rules will thus make bidders and targets try to keep a tighter control on leaks in order to negotiate for a longer period without identification. But if the old practices hold and leaks regularly occur, bidders will be forced to act quite quickly and bid in 28 days.

In Britain, a bidder using financing cannot make a bid unless the financing is agreed to and firmly committed. There is talk that these requirements could hamper private equity bidders who are unable to secure their financing in time. And other bidders may not be able to organize a bid in that time period. The result may mean that there are fewer bids, as bidders are deterred from bidding.

The rules also enhance the disclosure required for fees paid to advisers such as investment banks and also provide a platform for employees to express a view on any takeover.

The second significant new rule limits termination fees and other deal protection devices. Under the old rules, targets were restricted in the amount they could agree to pay to a bidder to compensate an initial bidder if a third party subsequently agreed to acquire the company. The limit was 1 percent of the value of the transaction.

The new rules forbid termination fees. They also go a step further. In the United States, in addition to termination fees targets typically agree to provide bidders a whole array of other deal protection rights, including information rights that provide an initial bidder the right to information about the terms of a competing bid and matching rights which allow an initial bidder to match any subsequent bid. Targets also agree to not solicit other bidders and to not talk to other bidders unless certain conditions are met.

The new British rules ban all these other types of arrangements. The Takeover Panel has stated that these types of protections may “deter competing offerors from making an offer, thereby denying offeree company shareholders the possibility of deciding on the merits of a competing offer.”

The new rules thus set up a nice dichotomy with the American takeover scheme. In the United States, targets can agree to large termination fees and provide extensive deal protections to an initial bid. Targets can also adopt a shareholder rights plan, or poison pill, which can prevent a company from acquiring the target.

But in Britain none of these devices are allowed. There is a level playing field. Bidders cannot gain any advantage over another bidder, and target directors cannot prevent shareholders from accepting a bid.

By providing such advantages, bidders are theoretically more eager to initially bid in the United States and will pay more for the privilege. The reason is that these initial bidders have a more certain deal and thus are more willing to incur the costs associated with making an initial bid. However, because these protections allow targets to steer deals to chosen bidders, there will be fewer hostile and competing bids.

In Britain, because bidders are not compensated for making the first bid, they will be less incentivized to ever bid and will bid at a lower price in order to adjust for this lack of recompense. There will be more competing bids, however, because initial bidders cannot hinder them through termination fees and deal protections. There will also be more hostile bids because targets cannot as easily fend off such bids.

Professor John Coats has provided some evidence that this is all true, although no full-scale study of these issues or a comparison of the British and American takeover regimes has ever been conducted.

We now have a golden opportunity to study this comparison, though. We are about to get a real-time experiment as we see how the British system is affected by these new rules.

Steven M. Davidoff, writing as The Deal Professor, is a commentator for DealBook on the world of mergers and acquisitions.

Article source: http://feeds.nytimes.com/click.phdo?i=0433098e3175c94aad76ddb56c49b5ed

Filed Under: Business News Tagged With: public outcry, stark contrast, threshold

DealBook: Goldman’s Safer Positions Eat Deeply Into Its Profit

July 20, 2011 by NewsMaker Leave a Comment

Yuri Gripas/ReutersDavid Viniar, chief financial officer of Goldman Sachs, told analysts that he would not “sugarcoat” the firm’s second-quarter results.

Goldman Sachs has long been known as a Wall Street firm with a Midas touch, wringing out significant trading profits in good times and bad.

But another major market miss has analysts and investors wondering if the company has lost its way.

On Tuesday, Goldman reported lackluster profit of $1.05 billion in the second quarter, or $1.85 a share. The results fell significantly short of analysts’ expectations of $2.27 a share.

The firm’s earnings reflect its struggles with navigating the market. Worried about the global economy, the bank moved to protect itself from potential volatility by taking a more conservative stance and hedging some trading activities.

But the costly positions ate into profits and robbed the firm of opportunities in oil and other markets. Revenue in the powerful fixed-income, currency and commodities department fell to $1.6 billion in the latest period, down 53 percent from a year ago.

“Goldman often does things better than their competitors,” said Richard Bove of Rochdale Research, who has a sell rating on the stock. “But that doesn’t mean they can escape the markets.”

It is the second notable hit at the firm in about a year.

In the second quarter of 2010, Goldman did not move fast enough to hedge against customers betting that volatility would rise. As a result, the firm reported earnings of just $453 million during the period.

Goldman’s financials — which stood in stark contrast to the healthy profits at JPMorgan Chase, Wells Fargo and Citigroup — took analysts by surprise. On a conference call, Glenn Schorr, an analyst with the investment bank Nomura, asked David Viniar, Goldman’s chief financial officer, if it was a bad trading quarter or if something bigger was going on that was “impacting the Goldman franchise.” Guy Moszkowski, an analyst at Bank of America Merrill Lynch, wondered if jobs were at risk in the risk management department.

“I don’t want to sugarcoat this and say, ‘Oh, no big deal,’” Mr. Viniar told analysts. “We underperformed in the quarter.”

Mr. Viniar said investors should not read too much into isolated stumbles. He noted that clients continued to trade at a decent clip. He also highlighted other major areas that were doing well, like investment banking, where revenue increased 54 percent from a year ago. The troubles in trading — among the worst in the firm’s 12 years as a publicly traded company — have “nothing” to do with Goldman’s franchise, Mr. Viniar said.

But the poor results did underscore management’s earlier decision to slash expenses and reduce staff. Mr. Viniar said Goldman planned to cut $1.2 billion in compensation and noncompensation expenses by the end of the year. That will translate to roughly 1,000 layoffs, or nearly 3 percent of all staff members — a culling that has already begun, according to a firm spokesman. Goldman has indicated that at least 230 employees in New York State will lose their jobs.

The remaining staff members will probably collect smaller year-end bonuses if Goldman remains on the same trajectory. Revenue dropped 18 percent in the second quarter compared with a year ago.

With the numbers falling, Goldman, which typically reserves 40 percent of its revenue to pay employees, earmarked less money for compensation, roughly $8.44 billion compared with $9.3 billion in the same period of 2010. “If performance is lower, compensation is going to be lower,” Mr. Viniar said.

The payoff for investors is in question, too, amid the lingering concerns about Goldman’s prospects in an anemic economy. The stock closed Tuesday at $128.49 and is down about 24 percent for the year. Goldman is now trading below book value, an important financial measure that refers to the liquidation value of the company. The stock has not traded at that low a level since the financial crisis.

For Goldman, it is another number that is no longer a point of pride.

Article source: http://feeds.nytimes.com/click.phdo?i=aa1011f15d2040af1cbd0858c3abfb6f

Filed Under: Business News Tagged With: chief financial officer, david viniar, stark contrast

Drilling Down: Insiders Sound an Alarm Amid a Natural Gas Rush

June 26, 2011 by NewsMaker Leave a Comment

But the gas may not be as easy and cheap to extract from shale formations deep underground as the companies are saying, according to hundreds of industry e-mails and internal documents and an analysis of data from thousands of wells.

In the e-mails, energy executives, industry lawyers, state geologists and market analysts voice skepticism about lofty forecasts and question whether companies are intentionally, and even illegally, overstating the productivity of their wells and the size of their reserves. Many of these e-mails also suggest a view that is in stark contrast to more bullish public comments made by the industry, in much the same way that insiders have raised doubts about previous financial bubbles.

“Money is pouring in” from investors even though shale gas is “inherently unprofitable,” an analyst from PNC Wealth Management, an investment company, wrote to a contractor in a February e-mail. “Reminds you of dot-coms.”

“The word in the world of independents is that the shale plays are just giant Ponzi schemes and the economics just do not work,” an analyst from IHS Drilling Data, an energy research company, wrote in an e-mail on Aug. 28, 2009.

Company data for more than 10,000 wells in three major shale gas formations raise further questions about the industry’s prospects. There is undoubtedly a vast amount of gas in the formations. The question remains how affordably it can be extracted.

The data show that while there are some very active wells, they are often surrounded by vast zones of less-productive wells that in some cases cost more to drill and operate than the gas they produce is worth. Also, the amount of gas produced by many of the successful wells is falling much faster than initially predicted by energy companies, making it more difficult for them to turn a profit over the long run.

If the industry does not live up to expectations, the impact will be felt widely. Federal and state lawmakers are considering drastically increasing subsidies for the natural gas business in the hope that it will provide low-cost energy for decades to come.

But if natural gas ultimately proves more expensive to extract from the ground than has been predicted, landowners, investors and lenders could see their investments falter, while consumers will pay a price in higher electricity and home heating bills.

There are implications for the environment, too. The technology used to get gas flowing out of the ground — called hydraulic fracturing, or hydrofracking — can require over a million gallons of water per well, and some of that water must be disposed of because it becomes contaminated by the process. If shale gas wells fade faster than expected, energy companies will have to drill more wells or hydrofrack them more often, resulting in more toxic waste.

The e-mails were obtained through open-records requests or provided to The New York Times by industry consultants and analysts who say they believe that the public perception of shale gas does not match reality; names and identifying information were redacted to protect these people, who were not authorized to communicate publicly. In the e-mails, some people within the industry voice grave concerns.

“And now these corporate giants are having an Enron moment,” a retired geologist from a major oil and gas company wrote in a February e-mail about other companies invested in shale gas. “They want to bend light to hide the truth.”

Others within the industry remain optimistic. They argue that shale gas economics will improve as the price of gas rises, technology evolves and demand for gas grows with help from increased federal subsidies being considered by Congress. “Shale gas supply is only going to increase,” Steven C. Dixon, executive vice president of Chesapeake Energy, said at an energy industry conference in April in response to skepticism about well performance.

Studying the Data

“I think we have a big problem.”

Deborah Rogers, a member of the advisory committee of the Federal Reserve Bank of Dallas, recalled saying that in a May 2010 telephone call to a senior economist at the Reserve, Mine K. Yucel. “We need to take a close look at this right away,” she added.

A former stockbroker with Merrill Lynch, Ms. Rogers said she started studying well data from shale companies in October 2009 after attending a speech by the chief executive of Chesapeake, Aubrey K. McClendon. The math was not adding up, Ms. Rogers said. Her research showed that wells were petering out faster than expected.

Robbie Brown contributed reporting from Atlanta.

Article source: http://feeds.nytimes.com/click.phdo?i=a382f707e5573df93d50f7a7dce09fbb

Filed Under: Business News Tagged With: data from thousands, ponzi schemes, stark contrast