May 2012

Blitz of Campaign Ads Is Early and Aggressive

The presidential campaign is erupting into a full-scale advertising war, with both candidates and their allies pouring huge sums into early and aggressive efforts to define the fight on their terms.

At least $50 million worth of ads will appear in swing states in the next several weeks as President Barack Obama and Mitt Romney move swiftly to win over voters now, casting aside concerns that their money will be wasted on people who are not paying much attention five and a half months before Election Day. The latest volley came on May 16, when Crossroads GPS, a political group formed by Karl Rove and other top Republican strategists, unveiled a $25 million advertising campaign. The Crossroads campaign matches the $25 million advertising offensive that the Obama campaign began last week. Other outside political groups and “super PACs” have committed at least an additional $15 million in recent weeks, mostly to Romney’s benefit, according to Kantar Media. There is almost certainly more to come before the highly viewed spring television schedule winds down for the summer.

A DVR Ad-Eraser Causes Tremors at TV Upfronts

Broadcast television executives came to New York this week, as they do every year, to talk up their new TV shows in front of advertisers. This year, they are having to talk about yet another technology trying to tear them down.

The disruptive technology at hand is an ad eraser, embedded in new digital video recorders sold by Charles W. Ergen’s Dish Network, one of the nation’s top distributors of TV programming. Turn it on, and all the ads recorded on most prime-time network shows are automatically skipped, no channel-flipping or fast-forwarding necessary. Some reviewers have already called the feature, named Auto Hop, a dream come true for consumers. But for broadcasters and advertisers, it is an attack on an entrenched television business model, and it must be strangled, lest it spread.

Facebook Courts a Skeptical Madison Ave

General Motors, the third-largest advertiser in the country, shut down its Facebook budget, about $10 million, saying that those ads were simply not doing enough to sell automobiles. For Facebook, the loss of $10 million is not a big deal. The company generated $3.7 billion of revenue last year, 85 percent from advertising. But the loss underlines the company’s need to convince a skeptical Madison Avenue that Facebook pages are the perfect vehicle for marketers and to convince eager investors that it can increase its advertising revenue, and quickly. “It’s one of the most powerful branding mechanisms in the world, but it’s not an advertising mechanism,” said Martin Sorrell, chief executive of WPP, the giant advertising agency. G.M. aside, many companies remain committed to the social media platform as a way to engage and connect with consumers. Advertising executives, industry analysts and institutional investors just aren’t convinced that activity will translate into huge and growing profits for Facebook. It is a concern shared by some of the company’s bankers, according to people with knowledge of the matter.

As Google Tweaks Searches, Some Get Lost in the Web

Google recently tweaked the way its search engine ranks websites, seeking to downplay sites it suspects of artificially boosting their rankings. Now some small businesses say they are scrambling to avoid being relegated to the Internet's junk bin.

Google declines to divulge specifics of its search-ranking algorithm, but it discourages paid links and low-quality website links. According to Google, the recent shifts in its algorithm, known as "Penguin," will enhance the user experience and don't punish businesses that follow its guidelines. "The Penguin algorithm update was designed to reduce Web spam, which is when websites try to get a higher search ranking than they deserve by deceiving or manipulating search engines," says Matt Cutts, a Google engineer. "In many cases, the affected sites had been spamming for a long time," Cutts adds. Among the tactics Google dislikes are "keyword stuffing," or overloading Web pages with keywords, and paying for inbound links as a way to artificially boost search rankings. Google makes about 500 changes to its algorithm annually. Penguin, the most recent update, affects only 3.1% of U.S.-based Google search queries, Cutts says.

In the era of Angry Birds, the challenge is finding the great things amid the junk

[Commentary] For every Angry Birds there are a hundred games to waste your money and time on.

Our challenge is no longer about making great things, it’s about finding those great things. It’s about how we filter, how we separate the good from the bad, and how we learn to trust when everything is flat. I think we’re at the start of one of the greatest booms in innovation and creativity the world has ever seen. But this time around, if you don’t like what you see, you’ve only got yourself to blame.

Social media is reinventing how business is done

Beyond advertising on Facebook or Twitter, companies are using social networks to build teams that solve problems faster, share information better among their employees and partners, bring customer ideas for new product designs to market earlier, and redesign all kinds of corporate software in Facebook's easy-to-learn style.

After a slow start, Big Business is embracing social media in a big way. Forrester Research says the sales of software to run corporate social networks will grow 61% a year and be a $6.4 billion business by 2016. Two-thirds of big companies surveyed now use Web 2.0 tools such as social networks or blogs, with use of internal social networks up 50% since 2008, according to a survey by McKinsey & Co. Nearly 90% said they have reaped at least one measurable business benefit, though most say the improvements have been modest. Heavy use of social tools has a statistically significant correlation to profitability, said Michael Chui, senior fellow at the McKinsey Global Institute. But it's early: Only about 3% of respondents used social business tools for all three major uses — reaching customers, connecting employees and coordinating with suppliers, McKinsey said.

What Will Facebook Do with All Its Cash?

[Commentary] What's Facebook going to do with all that money?

Depending on the price it sets for its shares, the company is on track to raise $6.1 billion to $6.8 billion in its initial public offering. Facebook's new wealth will be added to the $3.9 billion that's already in its coffers and will give the company one of the largest cash hoards of any nonbank public company. Because it's already profitable, Facebook doesn't need the new money. The company has talked only in broad terms about how it might use the cash, but analysts say it's likely to go on a buying, building and hiring binge to try to extend its dominance in social media. In recent regulatory documents filed with the Securities and Exchange Commission, Facebook said it is likely to use some new cash for working capital, the pocket money for corporations that's used to pay bills without having to dip into savings or sell off investments. Facebook said it also may use some to pay taxes, make investments or buy other businesses. "However, we do not currently have any specific uses of the net proceeds planned," Facebook said.

Fight continues for critical infrastructure protections

Rep. Jim Langevin (D-RI) is continuing to push the House to pass mandatory cybersecurity standards for critical infrastructure, such as electrical grids and gas pipelines, despite the fact that House leaders oppose the regulations. Rep Langevin offered an amendment to the Defense authorization bill that would require critical systems to meet security standards. His amendment is based on the language in Rep. Dan Lungren's (R-CA) Precise Act, which cleared a House Homeland Security subcommittee earlier this year.

Mayors question Verizon-cable deal

A group of nine mayors from upstate New York want the Federal Communications Commission (FCC) and the Justice Department to look closer at the proposed deal between Verizon and a consortium of cable companies.

The mayors of Binghamton, Buffalo, Cortland, Elmira, Kingston, Syracuse, Troy, Utica and the state capital, Albany, sent a letter to the FCC and DOJ expressing "deep concern" that the deal between Verizon and some of the largest cable providers in the country would have a "devastating effect" on their communities. The mayors say the proposed deal would deter any expansion of Verizon’s high-speed fiber-optic FiOS network, which would harm minorities because Verizon would no longer have reason to expand its FiOS service to the predominately minority-inhabited urban centers of the state. “We are deeply worried that the anti-competitive partnership between Verizon Wireless, the nation’s largest wireless provider, and four of the leading cable companies will have a negative impact on economic development and job creation in our cities, leading to higher prices, fewer service options, and a growing digital divide,“ the letter reads.

NTIA’s Strickling: Government Needs Paradigm Shift in Spectrum Thinking

National Telecommunications and Information Administration chief Larry Strickling said that the government needs to come up with a "new paradigm" for freeing up government spectrum, saying the problem with NTIA's own report on a timetable and cost -- 10 years and $18 billion -- was too long and too costly.

That report was based in turn on government agency assessments, so it was not a criticism of his own agency. Instead it was to support NTIA's recommendation that it needs to look into more spectrum sharing as a way to speed the recovery of spectrum, which that report also recommended. Assistant Sec Strickling was pressed by Rep. Bob Latta (R-OH) and others on why it might not be quicker to focus on a 25 MHz swath adjacent to already available commercial spectrum -- something the FCC favors -- rather than on the whole 95 MHz in the 1755-1850 spectrum band it has identified for clearing and sharing. According to the NTIA report, DOD has said the lower 25 MHz could be fairly quickly cleared, while it could take 10 years and many billions to clear the whole 95 MHz. Strickling said it was not that easy, that some government users who moved into the band on the advice that they would not be moving again were using all 95 MHz.

Benton

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