Yahoo! is advertising to advertisers, and it’s pretty funny stuff.  Think ‘Mad Men’ made topical.  The descriptions were spot on, and so was the dialogue.  Yahoo! feels your pain.  Or something like that.  Still, saying that we are exactly like you undermines what it means to be creative, but who’s to quibble?

The best line comes at 3:14 when the male client says, “I don’t even know what tweeting means, but this isn’t going to make me want to do it.”  Truer words were never spoken.  In a large, meta-sense, none of us know what tweeting actually means.  It is not readily quantifiable.  Sure there are trending topics, but what is the Twitter equivalent of the click-through?

So I think this is just another variation of what we have been dealing with this semester.  How do you connect advertising and media in this new age, making each viable?  Perhaps as students, we are now asking better questions about this topic, and better questions lead to more robust answers, even if those answers are not yet apparent.

By Derek Thompson, in the Atlantic

The three biggest magazine publishers in the country -- Hearst, Time Inc and Conde Nast -- are investing in a separate company that is being touted as an "iTunes for magazines." Or a Hulu for magazines, if you prefer. It would be a online storefront for digital versions of these publishers' magazines (Esquire, Time, Vanity Fair, etc) that you could read on your computer or smartphone. The site would also try to sell print subscriptions to readers.

But if these publishers want to make money, they can't sell a product (online news) that's already free. Does that mean we're about to see a deluge of paywalls across magazine websites? 

Early reports don't mention price points, or many specifics at all. But I don't see another way around it. Time magazine is basically all online. The New Yorker gives away a surprising amount of content for free. If that doesn't change, there's no reason to register at a new site. 

On the other hand, once the paywalls are up, the best way to get people to pay for something they consider nearly-free is to bundle diverse content and convince readers they're getting a deal. For example, you could sell me Esquire, Time and Vanity Fair subscriptions -- along with access to all of their online content -- for the price of two yearly magazine subscriptions. Print magazines increase their rate base (the readers they guarantee to advertisers) and the publishers pad their bottom line. The publishing platform would also have to take a cut.

But would this work? It's hard to know. I subscribe to three magazines. But I don't pay for any online news, and I'm not sure how much I would pay to read news online. The important thing is that magazine publishers are doing something. If online advertising isn't bringing home the bacon, with its banner ad straitjacket and paltry click-through rates, salvation must be sought elsewhere. Holding hands with your arch-rivals to open an online store for magazine stories? That's certainly elsewhere.

My thoughts:  I don’t know that I’d be willing to pay for online content.  That’s partly my fault because when it comes to news and information, I blur the distinction between goods and services.  Providing information is a service, but when I pay for it, it has always been something tangible for me to touch and hold onto, like a newspaper or magazine.  When it is provided as a service, I do not have experience paying for it.  I have never paid for network news.

But bundling magazines might work if they come with other content.  I honestly don’t know.  Upon reflection, I do pay for news and information as a service.  Cable news provides a service (or disservice, as the case may be) that is bundled in with other content.  And donations to public radio and PBS support NPR and other news content.

Regardless, advertisers are in a buyer’s market when there is an information glut.  It is good that the MSM is seeking new avenues to create revenue now that journalism cannot count on advertising to subsidize its product.  I still believe that the winners will be the ones that provide not only already over-abundant information, but actionable knowledge.  Unfortunately, that belief does not readily translate into specific suggestions.

Last week, Xbox updated its dashboard, adding Facebook, Twitter, Zune and Last.fm.  This is in addition to its Netflix instant streaming compatibility.  Sure, it was nice playing with friends, and I’ve worn out a couple of headsets (and a lot of controllers), but I consider my Xbox an extension of my personal space.  Space Invaders was so 1978.

So I was disappointed to see Facebook added to my Xbox.  And more disappointed in myself when I installed it.  And then bummed to see that I couldn’t play Farmville.  Why install social media on my video game console if I can’t play the video games?  Status update: fail.  I’m just wondering how long it is until I read about someone being fired from work or losing benefits for sending status updates from Xbox.  Sometimes, it feels like we’re getting our fingers smashed in the social media convergence.

Zune is OK though.  But just like Netflix, it prompts you to set your privacy settings and whether you want to share what you are watching with other members.  I was super-nerdy when episodes of ‘Mystery Science Theater 3000’ became available in the instant watch queue, but that’s nobody’s business but my own.

Last.fm is almost great and far outpaces the music channels on cable.  Like on the Internet, I love the personalized radio stations.  And instead of on the laptop or computer speakers, I’m now playing it in surround sound.  And anytime my Xbox recommends Ralph Stanley, Miles Davis, Ry Cooder and The Killers, it’s a win.  Still, I’d like to see the ability to stream Last.fm while I’m playing video games.  That would make my alone time that much more enjoyable.

At the turn of the last century, there was a revolution in information access.  Andrew Carnegie donated the funds to build 1,679 new library buildings in the Unites States alone.  This initiative not only nearly doubled the amount of public libraries, but these new libraries were revolutionary because they featured open stacks.  That meant that the patron could browse and find whatever they wanted to read.  Up until that point, most libraries had featured closed stacks, in which a patron would have to ask a clerk to retrieve their selection.

The catch with any Carnegie library was that after the building was built, the community had to support it.  And while Carnegie built the building, it was BYOB (bring your own books).  These days, libraries are full of books, but not people.  So it’s gratifying to see that libraries are stimulating foot traffic by introducing what prepared a generation for the current revolutions in information access: video games.

Mike Musgrove of the Washington Post reported that last Saturday, the American Library Association celebrated its second annual National Gaming Day.  Thirty thousand participated at 1,365 libraries nationwide.  Why at libraries?  In the article, ALA President Camila Alire cited a study showing that video game fans spend four times more time reading strategy guides, blogs and message boards about games than actually playing the games themselves.

So while it’s not sophisticated literature, participatory media of all types encourage literacy.  And while there is no substitute for the subtle humor in ‘Pride and Prejudice,’ and the pleasurable escape it provides, libraries should encourage literacy of all types.  So gaming at libraries is a good thing, and let me humbly submit a different title for National Gaming Day.  Something like, ‘Pride and Prejudice and Zombies.’

Recently, TechCrunch’s Paul Carr criticized the monetization of tweets.  Individuals are now being paid to place ad content within their tweets, and Warner records has had its celebrity stable tweet up each other’s products so that they end up in the trending topics.  Twitter COO Dick Costolo said that Twitter would begin using an “organic” advertising approach that people would love when they see.

We’ll see.  But along with the increase in the amount of social media ads, we’ve seen a decrease in the way that ads subsidized traditional media.  And like Carr, I believe that when you monetize Twitter, you devalue the conversation.  It’s debatable how valuable that conversation was anyway, but an “organic” ad stream sounds like it will sprout like a weed.  The good news is that when ads are everywhere, they become white noise.  The bad news is there is more noise.

When I was a kid and said something stupid or took something a little too far, someone would usually say something like, “too much information.”  I haven’t heard that since yesterday.  But that’s how I would describe the Twitter style newsfeed that Facebook implemented in the summer.  Really, I don’t care what decapitated ‘80s glam rocker the personality quiz said you most resembled.  And while I think it’s great that you milked your horses in Farmville, I’m even happier when I don’t hear about it.

So I was happy to read Tony Bradley’s Business Week article detailing changes to the home page.  But just like with anything else, there are people who dislike change.  There are now fan pages on Facebook that have over half a million followers who want a return to “normal Facebook.”  All of this hoopla was enough incentive to get me to actually log into my Facebook account again.  And I was happy to see that there was a toggle between the News Feed and the Live Feed.  That way, I can now see when it’s somebody’s birthday, or they are doing something neat, and I don’t have to get through all the clutter to see it.  What’s nice about the new Facebook filter algorithms and the personalization found on other sites, like iGoogle, is that these are the basic building blocks in the shift from Information Technology to Knowledge Technology.

Recently, Time announced that it was cutting the number of issues of Fortune published every year from 25 to 18 starting next year.  Despite the number of subscriptions hovering at 850,000 for about a decade, ad pages are down 34.9 percent this year according to Richard Pérez-Peña.

Yesterday, in surveying Technorati’s “State of the Blogosphere,” Fast Company’s Kit Eaton suggested that we reconsider blogging as journalism.  He used some interesting facts from that report to build his case.  Here’s some: the average full-time blogger makes $122,000 per year while the average part-timer earns close to $15,000 blogging.  He then compares that to the losses in traditional journalism during the recession and concludes that to make a living both through their blogs and marketing themselves for events, professional bloggers have to be serious journalists with links to sources.

Interestingly enough, most bloggers who responded to the Technorati survey did not believe that newspapers would disappear or that blogs were the death of traditional media.  And most bloggers still get their information from traditional news sources.

So where does that leave traditional journalism?  Obviously, the days of “breaking news” are over.  That information is available in a million places from a million sources now.  While traditional journalism might still be the first to report complex stories such as political corruption, the five-alarm fire no longer needs continuous coverage.  That type of coverage usually sounds like a Bing commercial.  But at least those commercials keep presenting new information.

Fortune is probably headed in the right direction by providing deeper, more probing articles.  Journalism is analysis, not punditry, and analysis is not just providing information.  Besides, Google already provides information better than journalists do.  What’s exciting about this media transition is that to survive, traditional media outlets are going to have to start providing what many of them have recently found to be anathema: in-depth reporting.

Wal-Mart's Painful Lessons

by Matthew Boyle
Thursday, October 15, 2009provided by

Having grown in fits and starts, Wal-Mart's international unit has a new game plan. Can it master world markets?

It's rare that a $100 billion business can be marginalized, but such is the case with the international arm of Wal-Mart Stores (WMT). As a stand-alone company, it would rank among the top five global retailers. Inside the $401 billion retail giant, though, the business has traditionally received short shrift. Its Bentonville (Ark.) headquarters is underwhelming—a drab, largely windowless, one-story structure named after Bill Mitchell, a former Walmart executive whom nobody seems to remember.

 

Since venturing into Mexico in 1991, Walmart International has grown haphazardly. During the 1990s the retailer exported its big-box, low-price model. While that strategy worked in North America, the results were so bad in Germany and Korea that Walmart withdrew from those countries in 2006. In response, Michael T. Duke, the former international chief and current CEO, gave local managers more autonomy while instituting more stringent financial goals for each region.

The results are mixed: International sales rose 11.5% in the second quarter (before the impact of exchange rate fluctuations), while U.S. sales barely budged. But over the past few years, operating profit margins have declined on the international side, which now has 3,805 stores operating under 53 distinct banners in 15 markets. As international chief C. Douglas McMillon says, Walmart is "progressing from being a domestic company with an international division to being a global company."

 

A Tale of Four Countries

The trick is how to get there. Four countries illustrate the challenges the world's largest retailer will face in the coming years as it seeks new sources of global growth. In Japan, managers are trying to revitalize a business that has hemorrhaged money for years—weighed down by a ho-hum brand, the country's byzantine distribution system, and cultural resistance to the discount model. In India, restrictions on foreign ownership have forced the company to team up with conglomerate Bharti, an odd coupling that has so far resulted in one store. Walmart has spent more than five years in Russia, maintaining a team of 30 executives who are still trying to plot an entry strategy at a time when other foreign retailers, like Carrefour, are bulking up their presence. And in Chile, a decade-long courtship finally led to the acquisition of the country's leading supermarket chain earlier this year, bringing with it a different business model, based in part on financial services.

All four demonstrate the perilous but potentially lucrative terrain that lies outside the saturated retail markets of Europe and North America. And Walmart's success will ultimately hinge on its ability to learn from past mistakes and adapt quickly to the shifting realities of these markets. Ahead, a look at the company's strategies.

Japan

It's lunchtime at a newly remodeled Seiyu supermarket in Tokyo, and shoppers are swarming around bento boxes that sell for 289 yen, or about $3. In the back, peaches, bananas, and pears are stacked neatly in the bins they were shipped in while the front of the store houses bottles of Chianti and Burgundy from Asda, Walmart's British chain. Nami Misawa, 26, is looking through near-empty discount bins. The recession prompted her to come back to Seiyu, and she's glad she did. "This store used to be a mess," she says, "but now it looks great."

Misawa's newfound enthusiasm is welcome news for Walmart, which has taken a beating in Japan. It entered the country seven years ago with the purchase of a 6% stake in the 371-store Seiyu chain. Despite continued losses, Walmart gradually raised its stake, making Seiyu a wholly-owned subsidiary in June 2008.

Walmart has had to confront numerous issues in Japan, from longtime Seiyu managers resisting its initiatives to a tendency among Japanese shoppers to equate low prices with inferior products.

Bulk deals don't play well in a country where many live in small urban apartments, and the country's grocery distribution system is populated with wholesalers who broker deals between suppliers and retailers, skimming profits. Rival Carrefour abandoned the market years ago. "I have no idea why [Walmart is] still there," says Neil Z. Stern, a senior partner at consultancy McMillan/Doolittle.

Tapped for a Turnaround

Edward J. Kolodzieski is the man in charge of turning Seiyu around. As CEO of Walmart Japan, Kolodzieski has slashed expenses, closed 20 stores, and cut 29% of corporate staff. In-store butchers were removed, with most meat now processed in a central facility. With the freed-up floor space, Seiyu bulked up meals-to-go offerings. To bypass the middlemen, Seiyu has also boosted the number of products it imports directly from manufacturers by 25% over the past year, and is also focusing on increasing sales of its own private-label brands.

The biggest change, however, is a shift away from weekly specials to "everyday low prices" in areas like baby care and pet products, and, eventually, throughout the store. Taking a page from Britain's Asda, Seiyu instead uses its marketing dollars to compare prices against competitors. With the depth of the current recession, argues Tokyo-based business consultant Ken Hasebe, Japanese consumers "have finally accepted that you can buy quality merchandise for a lower price."

One positive sign: Seiyu has been posting positive comparable store sales since last November, including a 1.3% gain in same-store sales in the second quarter. (Comparable or same-store sales is a key retail metric that tracks the results of stores open a year or more.) Still, profit margins declined in the same period, proving that progress is slow: "It's taking a little longer than any of us would have liked," says CFO Thomas M. Schoewe.

India and Russia

India and Russia are widely regarded as two of the world's fastest-growing retail markets—and two of the most frustrating for foreign retailers. Walmart boasts one wholesale outlet so far in India, and it has only a 30-person development office in Moscow to show after more than five years of scouting in Russia. But through a combination of joint ventures, acquisitions, and expansion, the retailer is hoping to become a major player in both.

India's $350 billion retail sector is composed of small family-run ventures, with organized chains accounting for less than 5% of sales. To get around government restrictions on foreign retailers selling to consumers, Walmart recently teamed up with Bharti Enterprises to open a cash-and-carry operation in the northern city of Amritsar. Best Price Modern Wholesale, as it's called, technically caters to merchants and small businesses. But with few restrictions, more than 30,000 members have signed up for the first store.

As in the U.S., the emphasis is on a wide selection of goods in one location at a low cost—everything from Castrol motor oil and sneakers to milk in large canisters that can be tied to the side of bicycles. Best Price employs 25 people to go around the region each week and check prices at mom-and-pop shops, to ensure that they're consistently offering the best value. Raj Jain, a former Whirlpool executive who now heads Walmart's Indian operations, also opened a training institute in Amritsar last December in partnership with Bharti and the Punjab government.

Have Tractor, Will Shop

With so few retail chains, employees have no background in the kind of merchandising and customer service skills needed to work at a large store. They also need to learn how to help customers with goods they have not seen before, such as the Japanese guava that some restaurant owners sampled on a recent visit.

Jain is also tapping Walmart's expertise to buy from farmers directly, cutting out local distributors. About 10% to 15% of Best Price's produce currently goes right from the field to the shelves, and Jain says he wants to increase that to 40% by next year.

Though small, the venture shows promise.

Jaideep Singh and his sister, Shalini, now drive a tractor 25 miles to pick up goods for their father's store. Jaideep says profits are up about 20% because of the low-priced goods that Best Price stocks. "We come two or three times a week," he says.

Confronting Russian Corruption

Walmart plans to open 10 to 15 outlets through the partnership over the next three years, eventually employing about 5,000 people. But McMillon wants to see Walmart running its own retail stores there, too. He pressed his case with commerce and agriculture ministers in New Delhi in July. "What I tried to convey is that we would invest more, and faster, if we had the opportunity to do so," he says. A representative from the Indian government declined to comment.

In Russia, the impediments to retail development are less visible but no less worrisome. Corruption is rampant with various administrative authorities capable of gumming up operations if payments are not made. Anticorruption group Transparency International ranked Russia 147th out of 180 countries on its most recent corruption perception index. In June, Swedish furniture retailer IKEA said it would halt further investment in Russia, citing the "unpredictability of administrative processes." The retailer's stores have been temporarily shut down in the past due to various questionable violations, and IKEA founder Ingvar Kamprad went on Swedish radio earlier this year to link those problems to IKEA's refusal to pay bribes in Russia. (A Russian government representative declined to comment.)

While Walmart is looking at opening its own stores in Russia, it's far more likely it will start by acquiring a local retailer. Analysts say the prime candidate is Lenta, a fast-growing, privately held chain of 34 hypermarkets and the nation's fifth-largest retailer. Lenta founder Oleg Zherebtsov is saddled with debts and sold his 35% stake to the investment group of private equity firm TPG and the private equity arm of Russian state bank VTB in early September. "There was a time when we felt that market was overpriced, and that has changed somewhat," says McMillon. With rivals such as Metro expanding their presence through new stores, and Carrefour opening its second outlet in September, "they cannot wait," says Planet Retail analyst Milos Ryba.

Chile

Chilean shoppers strolling through the aisles of their local D&S supermarket recently came across something not usually offered by the discounter: Apple (AAPL) iPods. That's not the only change coming for the 224-store chain, which sold a majority stake to Walmart earlier this year for $1.6 billion. (It now owns about 75% of D&S.)

In acquiring D&S (short for Distribución y Servicio), the nation's leading grocer and third-largest retailer, Walmart hopes to cement its dominance in Latin America, where it is by far the biggest retailer with $38 billion in sales, estimates research firm Planet Retail, double that of its closest rival, Carrefour. In Chile, Walmart enters a market that has long been inhospitable to foreign retailers. Home Depot (HD), Carrefour, and J.C. Penney are among the companies that have tried, and failed, to make it in Chile, a nation of 17 million with the sixth-largest retail market in Latin America.

Rather than go it alone, as others have attempted, Walmart cultivated close ties with D&S for more than a decade: Bob L. Martin, who ran the international division in the 1990s, says he first visited Chile in 1997. D&S, in turn, modeled much of its business practices on Walmart, looking to Bentonville "as an icon," says Claudio Pizarro, a professor at the University of Chile. (Walmart also imports products like salmon from Chile.)

Financial Services a Draw

Walmart has increased D&S's expansion budget from $150 million to $250 million, which will go toward opening nearly 70 stores this year, many of them small stores that cater to lower-income shoppers, according to Vicente Trius, Walmart Latin America's president and CEO.

The appeal of D&S goes well beyond its stores. About 1.7 million Chileans carry a Presto card issued by its financial services unit, up from 1.2 million in 2004. "There is a saying here that large retailers generate sales with [stores] and earnings with their credit cards," says Rodrigo Rivera, a partner with the Boston Consulting Group in Santiago.

Indeed, some South American retail chains generate upwards of 70% of their profits from financial services, analysts estimate. (At D&S that figure is just 17%.) Walmart already offers financial services in Mexico and Brazil, though its attempts to launch a bank in the U.S. have failed. The retailer is keen to grow the Presto business by adding more low-risk services such as selling life insurance for outside vendors.

Achieving the right balance between local knowledge and global scale is not easy. "We're in the early stages," says McMillon. "But we know you can't run the world from one place."

Jeff says:

In some ways, the world is not, and will not become flat.  This is demonstrated through Walmart’s international growth pains.  Walmart’s international underperformance shows that the US market retains the greatest transportation infrastructure in the world coupled with government regulations which allow for the maximization of supply-chaining.  This allows for the homogeneity and speed of reshelving that allows Walmart to position itself to provide everyday low prices.

But shoppers in foreign markets place less value on homogeneity of products, are less likely to see lower prices as adding value, and are generally more resistant to Walmart’s business model.  Foreign regulations, physical infrastructure and purchasing mechanisms also hinder Walmart’s growth.  One size does not fit all, and local flavor remains.

If Walmart’s international growth is in any way analogous to the changes taking place in journalism, it might provide some measure of hope.  Individuals still value local content. The organizations that can best understand and capitalize on their roles as local news providers, providing a specific, limited service might be able to do so by recognizing that value is intrinsic within the product.  And that value is defined by how well it appeals to their local customers.

 

For Comm Week, at the Elliott School of Communication, I attended a question and answer session with journalism students.  The event was hosted by John Stossel, formerly a co-anchor with ABC’s 20/20, and now host of a FOX Business Network weekly, titled Stossel.  He has won 19 Emmy’s.  Dr. Susan Huxman said Stossel’s stories buck conventional wisdom in three ways: they are not five-alarm stories, he provides context within his reporting, and has a healthy dose of suspicion when reporting the facts.

According to Stossel, many reporters measure themselves by what laws are passed due to their reporting.  Somewhat self-deprecating, Stossel said he won his Emmy’s by showing up to businesses with a camera.  And looking for confrontation when his crew caught businesses being dishonest.  Politicians always lauded his reports, and proposed new laws.  But those politicians were seeking face-time and created more bureaucracy through bureaus of consumer affairs.  He said, “There were always new laws being passed... the bureaucracy always does more... but this regulation doesn’t even work on those people that are obviously crooks.  All this regulation didn’t even affect them.”  Stossel decided that the best way to succeed in business is to serve your customers well.  Stossel said, “The free market polices business better than the government ever will.”

Stossel believes that between central planning and ruthless market competition, market competition is always better.  He asks how big government should be and notes that government now equals 40% of GDP before Obama.  He identifies himself as a consumer reporter defending business.

He claims that something is very wrong in news coverage today because journalists report on things that will scare their public.  He believes that America’s heroes are not Ralph Nader and the busybodies in government but those innovative individuals who operate in their own best interest.

Stossel was asked about some of his views that run contrary to the majority of FOX News viewership.  While he strongly supports deregulated free market capitalism, he thinks homosexuality is OK, is pro-immigration, believes in legalizing drugs and doesn’t believe in nation-building.  He says he is looking forward to some arguments with Sean Hannity and Bill O’Reilly.

While I don’t agree with many of his assertions about the evils of regulations in a market economy, he was articulate in making his points.  I had attended the event hoping he would field questions about how he thought journalism had changed and would change due to new technologies, market fragmentation, and shifting ownership and priorities within the industry.  Unfortunately, his plane had been delayed and we started late so many of these questions were not addressed.  However, it was a pleasure listening to him speak.

I just read an article in Business Week about how much office IT has changed since the time of Mad Men, and how much it will change in the next five years.  Since the article was already two days old when I came across it, it seemed quaint.  Antiquated.  Even the term, IT, sounds so dotcom.  We should now call it multi-platform knowledge distribution collaborative networking.  OK, maybe IT sounds OK after all.

In the article, Gene Marks provides a nice, short overview about how office and mobile technologies are poised to change.  Most of this is old hat for anyone nerdy for the new, but there were a couple of nice highlights.  More offices are now using Apples.  That’s nice because Apples can now do most of the things that PCs do.  Except Apple software does most of it better.  And since they make everything Apple-easy (Appleasy), more time can be spent actually working on projects versus time spent trying to find the right commands to format the projects.

But Marks missed some of the big changes.  As far as collaboration goes, Google Wave is a game changer.  I suspect being one of the first 100,000 was a lot like being a Jehovah’s Witness.  You were one of the select few delivered to the cloud.  I was not so lucky, but it’s been demonstrated to me.  And multiple people being able to chat and simultaneously edit documents while those changes are tracked in real time brings a new level of functionality to the office or newsroom.  It basically turns any document into a forum and a wiki.  Collaboration has never been so easy or instantaneous.  Forget five years.  By the time I post this post, it’s out of date.