blogads for the opinion makers

Here’s a stunning comparison of Huffpo’s new valuation versus that of publicly traded TheStreet.com. Thank you T!

As friends who read this blog know, I’m pessimistic about the economy. My pessimism sank to new lows last night as I read John Cassidy’s New Yorker overview of Bernanke’s flailing in the face of the crisis. A tiny excerpt:

The most serious charge against Bernanke and Paulson is that their response to the crisis has been ad hoc and contradictory: they rescued Bear Stearns but allowed Lehman Brothers to fail; for months, they dismissed the danger from the subprime crisis and then suddenly announced that it was grave enough to justify a huge bailout; they said they needed seven hundred billion dollars to buy up distressed mortgage securities and then, in October, used the money to purchase stock in banks instead. Summing up the widespread frustration with Bernanke, Dean Baker, the co-director of the Center for Economic and Policy Research, a liberal think tank in Washington, told me, “He was behind the curve at every stage of the story. He didn’t see the housing bubble until after it burst. Until as late as this summer, he downplayed all the risks involved. In terms of policy, he has not presented a clear view. On a number of occasions, he has pointed in one direction and then turned around and acted differently. I would be surprised if Obama wanted to reappoint him when his term ends”—in January, 2010.

The article assumes there was (or is) a solution to the minefield we’ve dropped into the middle of.

Fun to see my Twitter habits graphed. Turns out my prime time for twittering is Wednesday at 8am. I’d love to see the same type of graphic for my e-mail habits.

Arianna pulled off a miracle, raising $25 million in the most brutal funding environment since the invention of VC. She should take Paulson’s job and help bail out the banks next.

Michael Greenberg in NYRB:

members of the Cambridge Psychological Society were asked to reconstruct a meeting of the society that had taken place two weeks before. The average person was barely able to recall 8 percent of what had happened, and almost half of this was incorrect, peppered with the recollection of events that had never occurred or that had occurred elsewhere.

Sean-Paul Kelley, who spearheads LBAN, at Angkor Wat.

Huffpo is apparently on the verge of raising $15 million from the likes of Oak Investment Partners to replenish the political web publisher’s nearly depleted coffers.

Word was the site needed to raise at least $5 million by January to make it another year.

If I were investing in a political site, I’d want to see three months worth of post election traffic data to get a baseline for projections. And if I were investing in a publisher at a time when ad revenues are in an as-yet-undetermined downtrend, I’d do my best to delay buying for another month or three. And if I knew my negotiating partner was a few days from the abyss, I wouldn’t be catching the express train to conclude a deal. Why not walk?

So Arianna has got to be a hell of salesperson to get VCs to accomodate her burn-driven timeline in this dire environment.

Arianna’s feat is triply impressive because VCs rarely invest in publishers. While tech companies can grow exponentially (for a period), a publisher’s growth is linear.

The key words are at the end of the video (below) are “ad infinitum.”

Credit default swaps (wikipedia article) sound like pretty abstract stuff, but it’s huge (>$60 trillion) and deadly. And when they start exploding they explode ad infinitum.

Unfortunately, none of the credit default swap risks are offsetting (since almost never done with the same counterparty). They are cumulative. The weakest player’s insolvency becomes everyone’s insolvency. The CDS infinite loop may be the unstoppable nuclear reaction that destroys all concepts of money, credit and trust that our economy, culture and society rest on.

It’s possible that the collapse in insurance company shares (MET, PRU, HIG) and certain banks (C) versus the relative stability of the Dow Industrials (green), reflect CDS risk.

And the fact that gold prices have been relatively stable for three months even as all other commodity prices tumbled also suggests an undercurrent of positioning for risk. At the edges, society is already starting to price for this instability. Cans of spam, shotguns and gold coins are in high demand. (Is there also a quiet run on penicillin and water filters?)

Sounds crazy, right? The collapse of a giant edifice of reason and rationalization is, by definition, crazy.

Untangling credit default swaps from Marketplace on Vimeo.

Also here’s an overview from This American Life.

Few things better than Wonkette deconstricting Peggy Noonan’s weekly column.

Six Apart has launched a grand sounding scheme to rescue journalists from their capsizing employers. Simon Owens, writing for PBS’s MediaShift, forced me to think hard about the scheme. Turns out I gave it low odds of success:

Copeland told me that journalists — even good ones — often don’t adapt well to blogging. The medium requires more than good writing and reporting skills. You also have to know how to network and promote your content, something about which many journalists are clueless.

“Journalism is kind of like being a monologist, and journalists are very used to pontificating,” he said. “And I know a lot of people think that’s just what bloggers do, but bloggers are more like someone in an improv theater group. It’s just a different skill set.”

What makes a blog successful, Copeland argued, is its personality — or rather the blogger’s ability to connect that personality to his readership. Though he wouldn’t go so far as to say that these laid-off journalists weren’t cut out to be bloggers, he said at the very least they would need to understand that in the blogosphere you often have to become your own marketer.

“There’s just an awful lot of competition, which these people have not experienced recently,” Copeland said. “At a newspaper the competition is really at the corporate level, and once you’ve won your slot as the metro reporter for City Hall, you might have competition with one other reporter in the town, you might have zero competitors — either way it’s not very competitive. And for every 100 reporters that look for jobs online, only one of them is going to be paying the rent a year from now. And whether that’s with Six Apart or Blogads or Federated [Media], that’s really beside the point. The point is that only one of them will have an appreciable audience that can be monetized.

When we created Blogads in 2002, we dreamed of saving journalists from the inevitable collapse of their uneconomical employers. Turns out a lot of what I wrote then has come true:

As an information processor, the blogosphere superfluizes old media’s expensive and carefully constructed infrastructures and franchises.

Suddenly, Vivendi, AOL-Time Warner, EMAP and Newscorp are factories whose economies of scale are swamped by infinity, networks that have come unplugged, refrigerator salesmen trudging into the next ice age.

And

The old economics of media – he who controls distribution wins the most readers and serves advertisers best – will be plowed under by a new economics – she who relates best attracts the most valuable audience. (Since relate means connect and tell.)

The metrics do not yet exist to describe the blogosphere’s commercial potential. Anyone who blogs knows we are operating in a new dimension beyond brand or marketing footprint. The newspaper or TV station with 10 viewers has, um, let’s count them, 10 connections. The blogger read by nine other bloggers participates in a network of up to 45 direct human relationships. (I don’t know the formula — draw ten dots in a circle, connect each dot to every other dot, then count the lines.) 1,000 bloggers generate more communication value than 100,000 readers.

(Sure, a power law distribution may result, but the possibility of 500 million bloggers boggles traditional media — 10 blogs each may serve 100 million unique users a day, 1000 each will serve 10 million readers a day, 100,000 each will serve 1 million readers a day, 10 million will draw 1000 readers a day and 489,898,990 will serve 100 readers a day.)

Blogs serve passionate, activist citizens who eat, drink, drive, argue, influence and buy more voraciously than their couch-potato neighbors. (The blogger’s energy is a cause and effect of blogging, I think.) Blog readers, wired to value peer knowledge over brand, are a prime audience for new messages.

The blogosphere’s self-organized networks offer adventurous advertisers the opportunity to target unique and previously unarticulated demographics.

Advertising in a blog or blogset will enable an advertiser quickly to communicate with a critical mass of thinkers.

Too many words, but the sentiments were right. (Particularly if you substitute “social media” for “blogosphere.”)

The Suxorz has been approved for SXSW ‘09!

The Suxorz panel, for those of you who weren’t in Austin last year, seeks to identify and vilify the year’s worst social media marketing campaigns. Last year, we did three rounds of four nominations, with each round followed by a vote, then a final pitch and round.

HP won followed closely by Cisco. (My favorite line from the morning was when someone in the audience from Target (a runner-up) was overheard huffing “this wasn’t us, it was the agency.”)

This year’s panelists will be Zadi Diaz, video-auteur at EpicFu, Jeff Jarvis aka The Buzzmachine, Mike Monello, creative director at CampfireNYC and Blair Witch.

I had a bunch of great women in mind for the fourth panelist. Spoiled for choice, I’d like to throw the fourth seat open. The fourth panelist is whichever woman you nominate and select.

Go to the Suxorz Facebook group to make your nomination this topic thread. Then we’ll either have a vote among Suxorz FB members or throw it open to the whole world-wide web.

(Like the rest of the panel, she’ll be responsible for contributing a bunch of nominees to the FB page, pitching three of them on stage. She’ll get a SXSW badge and cover her own transport and lodging.)

Some recaps of ‘07 from Scott Monty, BFG, Jess Kutch and mine. And a photo:

by Rohit Bhargava.

After over 1.5 million nominees, you can now vote for the Perezzies. Here are my choices.

Surveying its readers, PR week discovered that their favorite newspaper was the New York Times, their favorite TV show was Mad Men, their favorite journalist was a tie between Thomas Friedman and Diane Sawyer and their favorite blog was… Perez Hilton. Gawker was the runner up.

“In the week ending Nov. 15, the advance figure for seasonally adjusted initial claims was 542,000, an increase of 27,000 from the previous week’s revised figure of 515,000. The 4-week moving average was 506,500, an increase of 15,750 from the previous week’s revised average of 490,750.”

We’re solidly in crisis territory. Previous peaks were:

10/82: 695,000
3/91: 509,000
9/01:517,000

Here’s a graph for historical context.

Citigroup, formerly the biggest financial institution in the world, fell 25% today. (Off 80% this year.)

Is this really just “the housing slump,” or did C and MET and others have lots of wrong way CDS bets on GM and others?

As shares in banks and insurance companies do a new nose dive, we have to ask: is this the beginning of the next leg down in the recession?

Banks, crippled and recrippled, will be in no position to lend. The government’s next logicl step is to send everyone with a Social Security number a check for $100k.

Gold, which has for weeks traded in sync with shares, seem to be decoupling and trading up as equities drop.

Is “the market” — a billion intuitions and actions distilled into a sequence of decisions and prices — realizing that inflation is the only way out of this mess? In theory, it should take years for this kind of scenario to play out, but gold’s price bears watching.

Wow, Hoder Derakhshan, the gentle godfather of Iranian blogging, has been tossed in jail as an Israeli spy.

Looks like the boom times are officially over. Tech Crunch crunches some numbers and finds that the biggest folks online saw NO growth in Q3 versus last year. Q4 must surely be lower year over year, given what’s happened since October 1. Note that on inflation adjusted terms, this amounts to a 3 or 4% decline. (Via Mr. Golis.)

Leave it to Mad Men to do some TV advertising innovating.

Motrin has now retracted their ad. The good news is that the retraction is signed by a human being. The bad news is that the text, but not the signature, is enclosed in quotation marks.

A new service assumes that anyone who writes about something once is worth following on Twitter.

“Hey you can build up lots of followers this way!”

And if you want lots of e-mail, I know some people who will be happy to e-mail you too.

Quick Twollow.com Demo from jon on Vimeo.

This article from today’s Times is worth rereading:

In the span of just a few weeks, orders for both business and consumer tech products have collapsed, and technology companies have begun laying off workers. The plunge is so severe that some executives are comparing it with the dot-com bust in 2000, when hundreds of companies disappeared and Silicon Valley lost nearly a fifth of its jobs.

October “was like turning a switch,” said Robert Barbera, chief economist at the Investment Technology Group, a research and trading firm. “Everything pretty much shut down.”

It’s also worth recording that yesterday brought horrible retail sales data. The three month average decline in retail sales annualized was 10.9%, or 7.4% ex autos.

Somebody thinks I should be secretary of commerce.

Earlier this week Nick Denton suggested that “from conglomerates to internet ventures, executives should be planning now on a decline of up to 40% in advertising spending during this cycle.” He was quoted as saying “Anyone who isn’t prepared for ads to go down 40 percent is crazy.”

Crying wolf?

Some think Denton is crying wolf, trolling for links. One biz journalist told me, “even in the Great Depression, when GDP fell 50% and unemployment reached 25%, advertising only fell by 50%.”

Unfortunately, I think Denton’s got it right. (Mostly.*) Even mild downturns can devastate the ad industry. During the recession of 2001, when GDP turned barely negative for a couple of quarters, ad spending dropped nearly 10%.

And in the first year of the Great Depression, when GDP fell by 10% and unemployment went from 3.2% to 8.7%, newspaper ad lineage dropped by 29%. But that’s just a raw count of ad space, not dollars spent, so the figure doesn’t account for the discounts and freebies that were surely rampant in a market turning from boom to bust. So, in real terms, the decline was more likely on the magnitude of 50 or 60% even in the first “mild” year of the Depression. (Checking newspapers’ books would be one way to see what the real numbers were, but 10 minutes of Googling didn’t turn up anything.)

The Macro Economy turns Micro

Until we see more data and a firm trend line sideways rather than down, we should all err on the side of extreme caution in projecting sales. The macro-economic fundamentals just get uglier with each passing week. The only good news, and it’s a sick flavor of good news, is that banks are not failing. Every other indicator is bleak. In recent weeks, we’ve seen consumer confidence hit an all time low (38, down from 61 the prior month); learned that factory orders were off 2.5% in September, reflecting just half a month’s credit freeze; seen auto sales plunge by 30-40% year over year. We’ve seen countless layoffs at industrial companies, and significant budget cutbacks at media companies like NBC, CBS, Sony. Foreclosures can only go higher as more people get laid off. Over-leveraged under-invested consumers can only increase their savings rate, not consume more.

(I realize this pessimism comes despite the fact that that stock market has traded sideways since September — if you can call oscillating up and down 10% a week sideways. We can ignore the stock market. Most stock analysts and investors, busy looking in their rear view mirrors, are only revising downward past earnings estimates by some fixed percentage, rather than creating entirely new valuation models to take into account how radically maimed the economy is. Anyone buying now thinks the average stock is cheap relative to last year’s prices, rather than understanding that today’s price is expensive relative to next year’s dividend cuts and potential bankruptcies.)

It’s clear that the post-bubble economy will be far tougher and weirder than any of us have ever experienced. In theory, Internet advertising will not be hurt as much as other mediums because it cheaper and more measurable. But advertising, whether online or not, is a discretionary budget item and therefore extremely easy to eliminate in a downturn. The reality is that when agencies fire whole teams and clients put all ad buys on hold, every media company will suffer.

There’s always lots of noise in measuring a sales pipeline. Total contract signings per month fluctuate up and down. Individual deals are so heterogeneous it’s impossible tell whether a delayed order or hearing “the budget was cut” is signal or noise. And it’s hard to know whether the individual buyers we know lose their jobs just because of normal turnover or because their entire division is undergoing a mandatory downsizing. But, viewing all the data together, we know everyone is experiencing a dramatic slowdown.

In short, Nick’s 40% sounds entirely reasonable to me. And 60% seems possible. Most importantly, 15-20%, the current “extreme” position for media analysts, seems unlikely.

The future for blogs and Blogads

The good news for indy bloggers and Blogads: our competitors — with higher overheads, less skin in the game, higher turnover and less devotion to the connecting advertisers with bloggers — will suffer more than we. Eventually, as competitors like NYTimes, TMZ, HuffingtonPost, OMG, Buzznet, TheAtlantic, Blogher, People, Myspace, Newsweek and Glam fold, scale back or lose their staff to greener pastures, ad buyers will spend more than ever with indy bloggers and Blogads.

But this will come only later in the game, after everyone has bled for a while and many have fallen. What should we do in the meantime? At a corporate level, we’re conserving cash to ensure a cushion against the bleak times ahead. While we’re looking for places to economize — evening leaving the corporate jacuzzi unheated — we’re also still expanding. On the programming side, we’re continuing to create new tools and products that will help advertisers and bloggers. And on the sales side, we’re putting even more resources into building relationships with current and potential clients. We see small pockets where there’s potential for tremendous growth next year, and we’re busy working to capture those opportunities. Our staff get annual bonuses rather than monthly commissions, which means we’re each incentived to invest in relationship-building even when sales volumes fall or good contacts lose their jobs temporarily.

Overall, I’m confident that we’ll gain market share and mind share during the downturn, and that we’ll be positioned to pillage and plunder when the economy turns.

* Denton is wrong to fret about political advertising. More on that another day.

Unemployment claims spiked this week into territory not seen since the 80s. “In the week ending Nov. 8, the advance figure for seasonally adjusted initial claims was 516,000, an increase of 32,000 from the previous week’s revised figure of 484,000. The 4-week moving average was 491,000, an increase of 13,250 from the previous week’s revised average of 477,750.”

The whole market trades like a swamp, but NYT in particular looks like it’s in a relentless death spiral. Are its lines of credit gone?

Hanging together.

With Google trading at ~$335, down from $700 a year ago, the folks at Woot offer up this subtle ad when you search for GOOG, Google’s stock symbol.

In the week ending Nov. 1, the advance figure for seasonally adjusted initial claims was 481,000, a decrease of 4,000 from the previous week’s revised figure of 485,000. The 4-week moving average was 477,000, unchanged from the previous week’s revised average of 477,000.