The US government should offer to take over - ie. acquire - banks outright if they need help.
It is ludicrous to take over toxic assets off of a company’s balance sheets and essentially bail out the management of these companies. I know, it’s not a bailout of the management or of Wall Street, but that is what it accounts to.
If a bank fears that it might go down, then it should outright sell itself to the US government, if taxpayers are to pay for toxic assets, they might as well buy equity in these governments.
Trust me, these banks that will belong to the US government will continue to give loans and grow their businesses… but banks that simply spin off toxic assets will remain on the sidelines.
Over time, the government can spin off the banks to the public, again.
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WatchMojo NewsletterExpect to see a convergence between the price of pre-roll video advertising, and a user initiated video ad in a companion display banner ad placement.
I’ve covered this so many times on this blog, I sound like a broken disk player. But the logic is simple:
- when a pre-roll starts, users tend to turn away and look for their headphones or anything else but watch the video, or simply close the video altogether.
- yet because with video, people do not scroll down, the real estate next to a video player is much higher. I expect the value - and cost - of a static display ad in the companion ad to rise at the expense of pre-roll video ads, and in fact, I also expect the value - and cost - of a user initiated video ad in the companion real estate to eventually be greater than a pre-roll.
Jason Calacanis - who supposedly stopped blogging - pontificates on the fact that the economic meltdown will kill 50-80% of startups. Jason has his boosters and his denigrators, I do not know him enough to know which side I would be on. But I would add some comments:
- Over 90% of startups fail, period, even in good times; so right off the bat, I am scratching my head wondering what he is referring to: 50-80% of otherwise successful startups, perhaps?
Not sure. Regardless, I think that is bull. The easiest time to succeed in startup-land is precisely when the shit hits the proverbial fan. Why? If the measurement of success for a startup is either:
a) attaining cash flow positivity
b) realizing a successful exit
c) becoming #1 (or #2) in your market.
Here are 10 things I recommend you to do:
1 - VCs will put more pressure on profits, hurting company’s ability to operate
Speaking of venture-backed businesses, it’s worth noting that as I outlined in a previous post on what kind of companies recently-laid off firms need to look for, VCs gladly pick up the tab in good times, but when the going gets rough, they bail before the bill is even at the table. As such, VCs will be putting more pressure on startups to become profitable all the while making bad decisions which trickle all the way down.
If you raised a ton of money, tell your Board to back off and stand behind you. Not in front of you and not beside you, but behind you. Otherwise, ask yourself if you want to be their CEO.
If you were smart and did not raise a ton of money, the coast is clear. All you need to do is move the ball down the field. Why? Read on.
2 - Fat management salaries will weigh and slow down company’s execution
When those same VCs come on board, the quickly brush off the heart of a company’s momentum and stamina and bring on the adults that they are comfortable with. However, these come with expensive salaries. However, as older brass, they are less willing to work startup hours. This behavior is acceptable in boom times where rising tide lifts all boats… but when the going gets rough, this type of person wishes to be back in more established companies. Not only do they start to polish their resumes and lose focus on their startup employer, but their burgeoning salaries weigh down a company’s path to profitability.
However, their mere presence hinders younger employees’ desire to grab the bull by the horns because, well, VCs parachuted these older guys in the room… adding insult to injury, the same VCs that supposedly know how to build businesses, ended up showering these guys with gray hair with too much equity… which takes time to vest… meaning that they will hang around long enough to score some shares as the company starts to stall. This all creates a state of paralysis while leaner companies begin to outperform these VC backed firms.
3 - Invest in hungry talent
We’ve been seeing a flood of resumes, job inquiries. Test people before committing long term, don’t be shy to ask for more. But, don’t step on people either, don’t waver in the respect you afford to others, particularly employees and clients.
4 - Corporations get trigger shy
You would figure that companies learned from their mistakes of 2001-03: those who invested and got more aggressive were better positioned than their peers who did nothing. Yet we simply do not learn from history, and companies with deep pockets scale back, too.
5 - Your competitors become your clients
A funny thing happens when times get rough. Companies that had raised money to bury you all of a sudden realize it’s wiser to tone down the belligerent rhetoric and start to make overtures… seeking to a) partner with you, b) pay you for your products or services or c) outright merge with you or acquire you.
6 - Undercut others on price, retain on service and quality
Once you give something away for free, people put a value of $0. However, so long as your costs have been kept in check, then you can win business on lower prices. Once the business is secured and relationships secured, you can start to leverage pricing power and charge more.
7 - Content Prevails
Regular readers know my thoughts and bias on this, but here is a simple fact: in both good and bad times, people consume content. In bad times, however, people push off technology investments because they know they can score a bigger deal a) right before the end of the quarter (when software salesmen want to hit targets) or worst yet b) “next week”…
8 - Cash Flow is King
Some say now is the time to go out and raise money. Huh… no. It’s hard enough to raise money in good times, it’s impossible to raise it in bad. It is also a distraction. Listen, if someone calls you and says “here’s a check” then yeah, sure, maybe you should listen. But realistically, focus on revenues, reducing costs and hitting break even.
9 - Focus on winners
I am not saying you should drop all non-revenue generating units… but I for one have not spend much time in ages on our search engine, database marketing products, I am even blogging less… however, I am spending so much time reading business deals, signing clients and partnerships and growing the main business: WatchMojo.com. Might want to note, when I am blogging, it’s on the soap opera known as Election 2008 on WorldMojo.com.
10 - Study history, analyze previous winners.
Sounds simple, no?
I sure hope this analyst isn’t paid all that much:
Collins Stewart analyst Sandeep Aggarwal said in a research note that he believes Yahoo has been hurt more seriously by the weak ad display market, that the Google-Yahoo ad deal has only a 50 percent probability of a positive outcome and the restructuring actions - such as the hiring of consultants Bain & Co. - doesn’t bode well for internal retention.
What kind of observation is that? A 50% chance of success? Just flip a coin, why don’t you.
Say it ain’t so Hef! Apparently, Playboy is having some trouble.
Tycoon Hugh Hefner has been advised to cut back on staff at his multi-million dollar glamour empire as it struggles to cope during the global economic turmoil.
The 83-year-old has been told to lay off some of his staff at his Los Angeles and New York offices as soon as this month or go bankrupt.
The company has recently seen shares fall from £6.20 to £1.55.
An insider at the company told the Daily Star that bosses had been aware of the worsening situation for “a while”.
“Only the top brass has known for a while how bad things have been for Hef recently.”
I am not sure what will happen to Playboy, clearly, it remains one of the strongest brands in all of business, let alone media. I don’t understand why Playboy does not open up its amazing content (not the pictures, I swear) to online audiences. Playboy has conducted and published some of the best interviews ever, they also have a lot of comic strips etc., why on earth hasn’t Playboy had a free, ad-supported “clean” site (no nudity, basically) with pictures of somewhat dressed attractive women to go along a paid racy site with nudity, I do not know?
As well, Playboy sure could have been more aggressive on the M&A front. For example, why Playboy never approached to buy my old company AskMen remains one of the better mysteries in the world. There remain other sites today that Playboy can buy…
This got me thinking to the broader question, do advertisers embrace or shun racy content?
There are two trends, one being a general one in society and one being related to advertising:
- things that were once taboo are less so.
- advertisers are continuously behind trends.
Examples:
When I was at AskMen running ad sales, we began to move away from poker clients, for example… then lo and behold, poker became a pop culture phenomenon… everywhere on mainstream media and even advertisers (Degree for example being just one, who seems to have) began to jump on the bandwagon.
Then, I realized porn was becoming more and more mainstream. For example, we always knew we did not want adult content on the site… we even struggled with the decision to simply interview Jenna Jameson (I did the interview) - but before we knew it, Jenna was all over the mainstream media… and you see that slipping into mainstream media today, what with Britney Spears and Lindsay Lohan’s (and sadly, Chris Crocker’s, too) crotch popping up on cover pages of magazines.
I think the next, latest trend is extreme violence… look at mixed martial arts, the fastest growing sport in the US. Not to pass judgment (at all), but why is this becoming mainstream? Why? Because society is accepting this even though it’s simply shock value… which sells. Think Chris Crocker.
Connecting my two trends: advertisers are always behind the 8-ball. Another example?
Blogs blew up in 2003-2004. 2003 due to mainstream media not caring to cover the Iraq war and then 2004 because of the US presidential elections… yet the next year, a number of advertisers began to implement blogs in their campaign. One example? Captain Morgan, whose agency Real Branding did a “The Captain’s Blog” initiative…
I think society is [sadly] far more eager and willing to consume racy content and you will see more and more of it in years to come. Note, as well, that as European markets outgrow US growth… the US’ threshold for what is accepted will resemble that of Europe, not vice versa…
If I were looking for media assets, maybe I’d consider buying Playboy and making it far more Web centric.
the company has a market cap of $130M, with an enterprise value of $210M… but the crazy part is the company did $350M in revenues and $12M in net income. Not sure about the company going bankrupt, but maybe a takeover target?
Would Hef sell? Not sure, but his daughter Christine is running operations… judging by the largest holders, maybe Playboy might become in play.
Fortune has a good list of 10 strange sales stories. I’ll add an 11th, something I did back in the day:
As the VP of Ad Sales for AskMen, I would frequently lose ad business to the print mag’s online websites. A highlight of mine was losing a deal to Bacardi early on to Maxim’s website, and then upon finding out about it, emailing the media buyer a Letter from Maxim’s Editor Keith Blanchard titled “The Internet Bites.” It was from the February 2001 issue. Suffice to say after that, I managed to secure some business from Bacardi…
I could think of about 100 such stories.
I always wondered about what happens to your holdings when you accept a government job. I figured you had to sell them… but I did not know about the tax free loophole.
Henry Paulson sold his 3.23 million shares in Goldman, worth about $500 million at the time, when he took the Treasury job, according to regulatory filings. He was exempted from paying capital gains tax on the sale of those stakes under a rule meant to avoid penalizing wealthy people who take government jobs and are forced to sell assets.
Hmm… I think I need to get me a government job. Read more. On the one hand, it seems like a great way to avoid paying taxes (accept a government job even if your heart is not in it), it’s not, after all, like the government ever appoints unqualified people.
Update 1: More on Slate, and here is the government paperwork. I wonder if there’s an equivalent thing in Canada.
Update 2: Thank Goodness, it’s not an open-ended exemption, it’s simply a deferral: “the act lets you defer capital-gains taxes triggered by the transaction.” More interestingly, the Slate article was written in 2006 and suggests letting Paulson keep his shares, asking “what’s the worst thing that can happen”:
The most likely scenario is that Paulson will sell his Goldman shares and place the money in a blind trust. That would be a smart move, and a profitable one, since he’d gain some tax benefits. When you sell assets to conform to government ethics requirements, the U.S. Office of Government Ethics issues a certificate of divestiture that lets you defer capital-gains taxes triggered by the transaction. That will likely save Paulson several million dollars in the next few years. And when your annual salary is falling from $35 million to $183,000, every penny counts. The blind trust would also give Paulson an excuse to dump all his Goldman shares at once and diversify, just as things are getting choppy—something he couldn’t do if he stayed on the job.
Once he sells, Paulson—or whoever will manage his blind trust—will have a new problem. In order to qualify for the certificate of divestiture, the cash must be invested in a diversified fund, such as a stock mutual fund. But Paulson’s portfolio is so large that it doesn’t make sense to put it into a mutual fund, or even into a whole bunch of funds. A nest egg of this size should be broadly diversified—some real estate and a few hedge funds, a few private equity funds, commodities, stocks from all over the world, a private island or two. And of course, all of these have the potential to be affected by Paulson’s actions while he is in office.
Given recent activities in Washington, the notion of suggesting that we make exceptions to ethics rules seems highly dangerous. But here’s a bold idea: Maybe we should just let Paulson keep his shares. That would be the simplest and least costly thing to do—for him and for the government. The transparency provided by Goldman’s daily trading would act as a great inhibitor to favoritism.
What’s the worst thing that could happen if Paulson held on to his Goldman stock? It’s possible that a government in which the treasury secretary had a gigantic stake in Goldman might recklessly cut marginal income taxes on the very rich so that he and his fellow executives could keep more of their bonuses. Or he might push to cut income taxes on capital gains and dividends so that Goldman employees and clients would pay fewer taxes. He could help enact legislation to reduce and ultimately eliminate the estate tax so Goldman’s private banking clients would be able to pass on as much cash to their heirs as they want. Why, such an administration might run up massive deficits so that the bond desks of Wall Street firms like Goldman would have plenty of material to buy and sell! Oh, wait—the Bush administration has already done all that.
Judging by events that are unfolding this week, I’d say the answer to that question is a “flagrant conflict of interest”.
With the financial markets and firms in the toilet, there are more and more calls for regulation.
As such, I am not sure if Google is playing it smart by rushing into the Yahoo! deal without the government’s blessing.
Politicians will be looking for someone to make an example of… and Google might become a victim of bad timing.
From CNBC:
The financial system is ceasing to function effectively. The government needs to step in to support the financial system, or else capitalism is over, says Paul Donovan, senior international economist at UBS. He speaks to CNBC’s Stephen Sedgwick & Maura Fogarty.
Enjoy. Watch and weep. At what point does the US government’s own balance sheet becomes untenable?
