Score One for the Aussies

If you’ve recovered from the ecstasy or agony of your nation-state winning or not winning “medals” (what a grown-up culture we have!) for beach volleyball, mountain biking, rhythmic gymnastics, or 10-meter air rifle shooting, here is some other news of national achievement you might find refreshing. In Australia, the Supreme Court has upheld a new law that strips tobacco corporations of the right to sell their products in containers they fully control. Hence, instead of the being able to use their packages as the last step in their larger marketing effort, cigarette pushers now must put their product in boxes designed by the public:

Australian cigarette box image

The response by corporate forces is also quite funny. Lacking any straightforward point to make, they are sounding alarms about the new law’s encouragement of black market cigarette-selling.

It’ll be interesting to see if this change makes a dent in Australian nicotine addiction rates.

Tis the Season 2011

vampire_santa This stuff pretty much speaks for itself. In a piece titled “What Brand Marketers Want From Facebook: A Holiday Wish List,” Laura O’Shaughnessey, CEO of SocialCode, a social agency that works with Fortune 100 brands and top agencies, has posted a true gem of humanity over on Advertising Age. Here you go:

Facebook is notorious for constantly evolving its platform, both for users and advertisers.

It is about that time of year and the signs are all around: stores are filled with festive decorations in hopes of enticing early shoppers, every commercial announces the perfect gift for him or her, and the Starbucks red cups have finally made their annual appearance. Yes, it is time to pull together our holiday wish lists. But it’s is not just you and me making lists; top brand and agency marketers are dreaming of what Facebook might give them this holiday season.

Among dear Laura’s wishes:

Third-party tracking within social ads.

Agency and brand marketers are also accustomed to including their own tracking urls within display advertising. While this is possible within certain Facebook marketplace ads, whenever a brand wants to use an ad with ‘social context’ (e.g. embedded like/share/read/listen button or sponsored story ad), they forego the ability to include third party tracking.

Obviously there are great benefits to running the ads with social context. They tend to be a highly efficient way of garnering ‘likes’ or desired actions since the user can engage directly within the ad unit. These ad units are also more relevant to users since they incorporate behaviors of users’ friends and provide a positive word of mouth experience.

On the flip side, the inability to include third party tracking makes it more difficult for brands to track downstream actions of these users. Perhaps Facebook will consider allowing a hybrid that serves the dual purpose of keeping users within the Facebook platform, but allowing brands to track their other activities on the brand page.

As heart-rending as Tiny Tim, isn’t it? Who among us hasn’t shed tears over corporate capitalists’ still-limited ability to track people’s downstream actions?

Not to worry, though, friends. Facebook, Ms. O’Shaughnessey reminds us, is certainly no Scrooge to its own true constituency:

Facebook is the world’s most pervasive social network and has a constantly improving advertising platform. Although the metrics and analytics are not totally comprehensive, and not an exact replica of display advertising, the power of social ads, the incredible targeting and the reach of the platform means that marketing on Facebook should be a crucial part of every brand manager’s marketing mix. As Facebook continues to innovate, marketers will certainly get some of the capabilities they long for and will continue to get new functionality that ties into the social graph [sic + wtf? + predictable explanation] and enables the most powerful advertising online.

Progress of the Corporate Spies

corps Here are a few recent items on the most predictable of all human events, the growth of big business marketing.

An ex-Yahoo spy gone “independent” reports this in Ad Age:

Well, thanks to the rise of data and audience buying, there’s a relatively new offering now available to marketers called search retargeting. Search retargeting is the ability to target display ads based on user search history. This allows marketers to show advertisements to the right “in market” consumers and entice users who are already looking to buy a specific product or use a service. This combination of search and display results in the acquisition of new customers and drives targeted awareness across all sites.

With this in mind, other “news” is rather easy to reckon:

For Facebook users, the free ride is over.

For years, the privately held company founded by Mark Zuckerberg in a Harvard dorm room put little effort into ad sales, focusing instead on making its service irresistible to users. It worked. Today more than 600 million people have Facebook accounts. The average user spends seven hours a month posting photos, chatting with friends, swapping news links and sending birthday greetings to classmates.

Now the Palo Alto company is looking to cash in on this mother lode of personal information by helping advertisers pinpoint exactly whom they want to reach. This is no idle boast. Facebook doesn’t have to guess who its users are or what they like. Facebook knows, because members volunteer this information freely — and frequently — in their profiles, status updates, wall posts, messages and “likes.”

It’s now tracking this activity, shooting online ads to users based on their demographics, interests, even what they say to friends on the site — sometimes within minutes of them typing a key word or phrase.

Facebook’s ability to pinpoint paying customers has dazzled some small-business owners, including Chris Meyer. Over the last 18 months, the Minneapolis wedding photographer had Facebook aim his ads specifically at female users who divulged the following information about themselves on the social networking site: college graduates, aged 24 to 30, who had just gotten engaged and lived within a 50-mile radius of Minneapolis.

Meyer says his $1,700 ad buy generated $110,000 in sales.

“I could not have built my business without Facebook,” he said.

And, as always, the whole enterprise rests on exploited emotions and false promises:

[A] new study, led by Thomas V. Pollet of the University of Groningen in the Netherlands, examined 117 people age 18 to 63. They filled out an extensive questionnaire about the time they spend on instant messaging and social network sites, the number of relationships they had overall and the closeness of those relationships.

The researchers found that spending a lot of time online was not linked to having a larger number of “offline” friends. Moreover, the relationships of people who socialized online weren’t any closer or stronger than people who didn’t socialize online.

And on this:

The social media giant Facebook, for example, has nine third-party data centers in the US, with plans to build a tenth in Oregon. Current estimates are that Facebook uses 60,000 servers to help its more than 500 million members reconnect with people they didn’t even like in high school.

The company’s data centers range from from 10,000 square feet to more than 35,000 square feet, and their energy use is enormous. The average leased data center uses between 2.25 megawatts of power and 6 megawatts of power. This could provide electricity for one month to somewhere between 1,730 and 4,615 homes.

Google is thought to have 36 data centers.

NYT Finds Capitalists are Capitalists

capitalist_pig Reality has gotten harsh enough to compel even the professional addlers to peek behind the curtains:

Many companies are focusing on cost-cutting to keep profits growing, but the benefits are mostly going to shareholders instead of the broader economy, as management conserves cash rather than bolstering hiring and production. Harley, for example, has announced plans to cut 1,400 to 1,600 more jobs by the end of next year. That is on top of 2,000 job cuts last year — more than a fifth of its work force.

As companies this month report earnings for the second quarter, news of healthy profits has helped the stock market — the Standard & Poor’s 500-stock index is up 7 percent for July — but the source of those gains raises deep questions about the sustainability of the growth, as well as the fate of more than 14 million unemployed workers hoping to rejoin the work force as the economy recovers.

“Because of high unemployment, management is using its leverage to get more hours out of workers,” said Robert C. Pozen, a senior lecturer at Harvard Business School and the former president of Fidelity Investments. “What’s worrisome is that American business has gotten used to being a lot leaner, and it could take a while before they start hiring again.”

And some of those businesses, including Harley-Davidson, are preparing for a future where they can prosper even if sales do not recover. Harley’s goal is to permanently be in a position to generate strong profits on a lower revenue base.

In some ways, the ability to raise profits in the face of declining sales is a triumph of productivity that makes the United States more globally competitive. The problem is that companies are not investing those earnings, instead letting cash pile up to levels not reached in nearly half a century.

“As long as corporations are reinvesting, the economy can grow,” said Ethan Harris, chief economist at Bank of America Merrill Lynch. “But if they’re taking those profits and saving them, rather than buying new equipment, it hurts overall growth. The longer this goes on, the more you worry about income being diverted to a sector that’s not spending.”

“There’s no question that there is an income shift going on in the economy,” Mr. Harris added. “Companies are squeezing their labor costs to build profits.”

The trend is hardly limited to Harley. Giants like General Electric and JPMorgan Chase, as well as smaller companies like Hasbro, the toymaker, all improved their bottom lines despite slowing sales in the second quarter. Among the S.& P. 500 companies that have reported second-quarter results, more than one in 10 had higher profits on lower sales, nearly twice the number in a typical quarter before the recession, according to Thomson Reuters.

“Whole industries are operating at new levels of profitability,” said David J. Kostin, chief United States equity strategist at Goldman Sachs. “In the downturn, companies managed to maintain higher profit margins than ever before.”

Profit margins — the percentage of revenue left over after expenses — crumble in most recessions, as overall sales fall but fixed costs like infrastructure, commodities and rent remain the same. In 2002, during the recession that followed the bursting of the technology bubble in addition to the Sept. 11 attacks, margins sank to 4.7 percent. Although the most recent downturn was far more severe, profit margins bottomed out at 5.9 percent in 2009 and quickly rebounded. By next year, analysts expect margins to hit 8.9 percent, a record high.

[Source: The New York Times, July 26, 2010]

The New York Times, of course, implies that all this is some kind of anomaly, rather than still more evidence that corporate capitalism works as it is intended to work — it puts the rich first in any and all situations.

The truth is that the basic institutional logic of the system was explained in 1966 by suppressed Harvard and Stanford men Paul Baran and Paul Sweezy. Take a look at that book, plus Harry Braverman’s sequel, Labor and Monopoly Capital, and see if the above reportage conveys anything that ought to be surprising.

The Supply-Side Bailout

Reader Julian Dawson (love that name!) asks:

We know that the US Fed and Treasury pledged approximately 23.7 trillion dollars to save the FIRE sector of the US economy. How much of that was actually transferred to FIRE sector corporations in the last two years?

I’m working on posting a more substantial answer to that excellent question.  A post from Paul Krugman today, however, included a graph that speaks volumes about the nature of the Bush/Obama Great Giveaway.

Now, this “bailout” has been premised on the core gospel of capitalism, which is the claim that economic crisis can only be caused by an under-supply of capital, and therefore the answer to each and every crisis is to provide more money to those who are already rich, on the theory that they are the “entrepreneurs” who would always make the investments society needs, if only they could lay hands on enough cash.

This claim, of course, is heart of the doctrine known as “supply-side economics.”  It might also be known as late-imperial overclass dogma #1.  It might also be known as the latest embodiment of what Adam Smith — yes, THAT Adam Smith — saw as “the vile maxim of the masters of mankind — all for ourselves and nothing for other people.”

Supply-side economics is the inverse of Keynesian, demand-side economics and the Baran/Sweezy emphasis on corporate capitalism’s tendency to over-accumulate, not under-accumulate, capital.  In this school of thought, the key problem is that, in the age of corporate capitalism, “entrepreneurs” tend to have too much, not too little, money on their hands.  Because they over-exploit the masses, they wind up somewhat too rich and find themselves having increasing trouble locating new investment opportunities, which always require a population of prospective new buyers.  So, instead of investing in new jobs and production, they start stashing increasing amounts of investable capital in Wall Street gambits, or simply sit on it.

Now, one way to test whether a real world economic crisis stemmed from supply-side or demand side problems would be to give away a mega-shitload of money to “entrepreneurs,” and watch to see what happens to the new money.  If their problem were supply-side, the entrepreneurs would be just itching to lay hands on the new capital and, once they did so, they would instantly start making huge new investments, thereby creating an economic boom.  Conversely, if the main problem were on the demand-side, giving a new mega-shitload of money to the already-rich would lead them to hoard the new money, since they would have nowhere to invest it, thanks to the lack of popular purchasing power out in the wider economy.

Suffice to say, this strikes me as a test that’s about as easy to read as anything could possibly be.  As Business Week reported in its November 5, 2009 issue, “[a]n oversupply of money is what pushed commercial real estate over the edge.”  It’s also what pushed the whole economy over the edge.

To wit, Krugman’s graph, which shows what’s happened to the banks’ share of TARP and TANF:

fredgraph

This trillion dollars in hoarded capital is going absolutely nowhere but in circles, since nobody can think of ways to make a profit investing it in new production.  The masses are maxed out and under water, so the entrepreneurs keep their cash parked.  Getting small interest payments from the Fed — as part of, you guessed it, a Great Giveaway program known as the Emergency Economic Stabilization Act of 2008 — looks far better to our “entrepreneurial” class than just about anything they can find in the real economy.

Obama, Market Fundamentalist

obamapreach Despite his proud proclamation that he has no idea that imperial armies are bad at squashing enraged and desperate guerrillas, the 2008 Marketer of the Year still has people still saying he’s smart.  Meanwhile, here’s his latest claim/statement of policy:

Ultimately, true economic recovery is only going to come from the private sector.”

Jesus!  For Wall Street and car corporations, it’s the biggest give-away in human history.

For unemployed people, “our resources are limited.”

The man certainly has chutzpah.

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