Undoubtedly, social media is increasingly seen as a useful additional PR, advertising and sales channel. In 2010, for the first time in 25 years, Pepsi didn't run a Super Bowl ad in 2010, but focussed on a $20 million online Cause Marketing campaign instead. Dell has reported it generated $6.5 million of sales over Twitter, Sony Vaio's Twitter account has generated over $1 million in sales, and Blendtec's YouTube campaign led to a five-fold increase in sales.
With social media activities starting to pay off for corporates (after all, they're free), they also become more attractive for investors. Paul David Hewson (better known as U2.0's Bono) and his private equity firm Elevation Partners have just acquired 5 million shares in Facebook for $120m, following the purchase of 2.5m shares for $90m in November 2009. Until now, private investors have pumped more than $830 million into Facebook which is by far outperforming Zynga (the Farmville game maker who has recently seen another funding of $147 million, bringing total funding to $360 million), Twitter ($160 million) and LinkedIn ($103 million).
Looking at current market evaluations, these investments make perfect sense: Facebook is valued at $14 billion, Zynga $2.6 billion, Twitter $1.5 billion and LinkedIn $1.3 billion. Estimated advertising revenues for Facebook in 2010 are within the region of $1.1 billion to $2 billion. Twitter (so far) makes money by partnering with Google and Microsoft, and is currently testing advertising options. The value of Twitter is now estimated at more than $1.5bn (it was already valued at more than $1bn before it had generated any revenues at all).
So the answer to the question seems to be a straightforward yes. Social media does make money and people do like Facebook & Co. Investors do invest and do make money too, and the market valuations are reasonable, given the platforms do the right things and do things right. The poster announcing the movie about Facebook sums up the current climate of self-confidence: you don't get to 500 million friends without making some enemies. If "some enemies" become "many" because of an overload of commercialisation or privacy concerns however, there might still be trouble ahead.
RR
Wednesday, June 30, 2010
Monday, June 28, 2010
The Coalition's Cuts Are Now Upon Us
After all the talk, the Chancellor's much anticipated deficit-busting budget is finally upon us. Mr Osborne termed it "tough but fair" but many might not subscribe to his verdict.
For those in the public sector, it's unpleasant. A two year pay freeze, essentially a pay cut (as Mr Cameron himself confessed), a smaller pension pot and the potential for further job cuts.
A recent Policy Exchange report revealed that on average those in the public sector spend nine fewer years at work over their lifetime and earn 30 per cent more than their private sector brethren. Despite these generous benefits – or perhaps because of them – productivity in the public sector has fallen over the past 10 years, while productivity increased in the private sector 28 per cent. Surely it's about time the gold plated public sector pensions were abolished and pay came in line with the private sector? On the subject of pay, the Policy Exchange report found that median gross pay is £22,417 in the public sector and £19,932 in the private sector.
A problem is that without public sector jobs, unemployment will obviously rise and thereby leave those in work to foot the bill – unless the Tories' plan for the private sector to increase employment is successful…I guess that is a story yet to be told.
The private sector has perhaps fared slightly better, with the eradication of the tax on jobs proposed by Labour and the national insurance threshold being raised making it cheaper for companies to employ staff. That said, it was a surprise that capital gains came down under a Labour government and perhaps more surprising that the Conservatives have increased it.
What surprises me most is the uproar of furious liberal democrat supporters over the VAT increase. It is true that Nick Clegg campaigned against it, however there is one thing that needs to be remembered – it is a Conservative led government and Mr Clegg was never going to get his way on everything. And, is being £33 a year worse off on average really worth splitting hairs about?
RS
For those in the public sector, it's unpleasant. A two year pay freeze, essentially a pay cut (as Mr Cameron himself confessed), a smaller pension pot and the potential for further job cuts.
A recent Policy Exchange report revealed that on average those in the public sector spend nine fewer years at work over their lifetime and earn 30 per cent more than their private sector brethren. Despite these generous benefits – or perhaps because of them – productivity in the public sector has fallen over the past 10 years, while productivity increased in the private sector 28 per cent. Surely it's about time the gold plated public sector pensions were abolished and pay came in line with the private sector? On the subject of pay, the Policy Exchange report found that median gross pay is £22,417 in the public sector and £19,932 in the private sector.
A problem is that without public sector jobs, unemployment will obviously rise and thereby leave those in work to foot the bill – unless the Tories' plan for the private sector to increase employment is successful…I guess that is a story yet to be told.
The private sector has perhaps fared slightly better, with the eradication of the tax on jobs proposed by Labour and the national insurance threshold being raised making it cheaper for companies to employ staff. That said, it was a surprise that capital gains came down under a Labour government and perhaps more surprising that the Conservatives have increased it.
What surprises me most is the uproar of furious liberal democrat supporters over the VAT increase. It is true that Nick Clegg campaigned against it, however there is one thing that needs to be remembered – it is a Conservative led government and Mr Clegg was never going to get his way on everything. And, is being £33 a year worse off on average really worth splitting hairs about?
RS
To cut or not to cut?
One of the most interesting aspects of last week's Budget was the divide in the press reaction. Edmund Conway writing for the Daily Telegraph said "this was – in both senses of the word – one of the most "courageous" Budgets in living memory" before going on to argue that the extent of cuts to public spending further needed is likely to test the Government to its limit. While Polly Toynbee, who David Cameron famously said he wanted the Conservative party to be more like, writing in the Guardian, said of the Budget and its central aim; "there was no necessity to create a surplus in six years, returning to depression economics with mortal risk of sinking the country into second recession or slump."
Okay so these are only two viewpoints. And yes, they're from two of the most diametrically opposed national newspapers in regards to political leaning. Yet, after twenty five years of broad ideological consensus between the main parties, the budgetary deficit we are now facing appears to be creating some clear divides in Britain's political class. The coalition government believes in the need to slash the budget and raise taxes while the Labour Party, and whoever is chosen to lead it, argue that it is important not to slash governmental spending to drastically in the midst of a recession.
Are we seeing a return to ideological politics? Are the Government's and the Labour opposition's disparity motivated by some genuine difference of opinion as to how to solve the economic crisis? Probably not, and to this extent most interesting is the response of Vince Cable, who over two months ago was against budgetary cuts but now is regularly reeled out in front of the TV cameras to justify them. Mr Cable argues that he has grave concerns that if Britain didn't start cutting today, we would be tomorrow's Greece. Whether this is correct or not is debatable. However, what is clear is that Mr Cable now believes that cuts are necessary to ensure that foreign investors who own pounds (principally emerging market central banks, who own the vast majority) don't lose confidence in Britain. It is pure political pragmatism.
So are we returning to ideological politics and does it even matter? It probably doesn't matter as even though the majority of voters, those who voted for Labour and the Liberal Democrats, were against cutting before the election, the cuts remain. This begs the question, in a global market economy, is a country's destiny no longer shaped by its own people but rather the views of outside investors, and if so what does this mean - not only for our political parties but also for the sovereignty of the nation state. "To cut or not to cut", is no longer a question for the electorate but rather the wider global economy. It's interesting in this context to refer back to comments made back in February by the then shadow Chancellor, George Osborne, warning that significant early cuts were the only way to preserve Britain's economic sovereignty.
JCL
Okay so these are only two viewpoints. And yes, they're from two of the most diametrically opposed national newspapers in regards to political leaning. Yet, after twenty five years of broad ideological consensus between the main parties, the budgetary deficit we are now facing appears to be creating some clear divides in Britain's political class. The coalition government believes in the need to slash the budget and raise taxes while the Labour Party, and whoever is chosen to lead it, argue that it is important not to slash governmental spending to drastically in the midst of a recession.
Are we seeing a return to ideological politics? Are the Government's and the Labour opposition's disparity motivated by some genuine difference of opinion as to how to solve the economic crisis? Probably not, and to this extent most interesting is the response of Vince Cable, who over two months ago was against budgetary cuts but now is regularly reeled out in front of the TV cameras to justify them. Mr Cable argues that he has grave concerns that if Britain didn't start cutting today, we would be tomorrow's Greece. Whether this is correct or not is debatable. However, what is clear is that Mr Cable now believes that cuts are necessary to ensure that foreign investors who own pounds (principally emerging market central banks, who own the vast majority) don't lose confidence in Britain. It is pure political pragmatism.
So are we returning to ideological politics and does it even matter? It probably doesn't matter as even though the majority of voters, those who voted for Labour and the Liberal Democrats, were against cutting before the election, the cuts remain. This begs the question, in a global market economy, is a country's destiny no longer shaped by its own people but rather the views of outside investors, and if so what does this mean - not only for our political parties but also for the sovereignty of the nation state. "To cut or not to cut", is no longer a question for the electorate but rather the wider global economy. It's interesting in this context to refer back to comments made back in February by the then shadow Chancellor, George Osborne, warning that significant early cuts were the only way to preserve Britain's economic sovereignty.
JCL
Friday, June 11, 2010
Oilier than thou?
It's perhaps surprising that no-one has yet calculated whether the acreage of trees felled to supply the newsprint expended on the BP oil leak story has been more environmentally damaging than the spill itself.
The still-growing oil slick in the Gulf of Mexico is, of course, a genuine ecological nightmare. But from a purely "news" perspective, what a story! It's uncommon for one incident to dominate the headlines, globally and more or less continuously, for nearly two months, and still have the potential to run for a long time yet. What makes it so enduring is the way new aspects have developed, the latest being the heightening tension between US policy makers and BP's shareholders, (of whom two significant sub-groups are Americans and UK pension funds).
Having earlier vowed to "keep its boot on the throat of BP", the US administration has continued to use strident language without, apparently, succeeding in convincing US public opinion that it is achieving much. As Philip Stephens points out in today's Financial Times, by castigating BP Chief Executive Tony Hayward and vowing to "kick ass", President Obama "has cast himself in the role of furious but hapless bystander".
Aggressive posturing from the Whitehouse may be understandable, given the imminence of mid-term elections in the US. But not only does the rhetoric have potentially damaging implications for UK pension funds, it's not doing much for Anglo-American relations either. Some UK commentators, for example, have been unable to resist dragging out examples of similarly catastrophic US corporate disasters which did not elicit quite the same level of opprobrium.
Others have sought to identify the extent to which the US government, despite its posturing, remains "in thrall" to the oil industry. And this funny contribution from the creator of the Dilbert cartoon, suggests BP could ultimately benefit from the whole affair.
AF
The still-growing oil slick in the Gulf of Mexico is, of course, a genuine ecological nightmare. But from a purely "news" perspective, what a story! It's uncommon for one incident to dominate the headlines, globally and more or less continuously, for nearly two months, and still have the potential to run for a long time yet. What makes it so enduring is the way new aspects have developed, the latest being the heightening tension between US policy makers and BP's shareholders, (of whom two significant sub-groups are Americans and UK pension funds).
Having earlier vowed to "keep its boot on the throat of BP", the US administration has continued to use strident language without, apparently, succeeding in convincing US public opinion that it is achieving much. As Philip Stephens points out in today's Financial Times, by castigating BP Chief Executive Tony Hayward and vowing to "kick ass", President Obama "has cast himself in the role of furious but hapless bystander".
Aggressive posturing from the Whitehouse may be understandable, given the imminence of mid-term elections in the US. But not only does the rhetoric have potentially damaging implications for UK pension funds, it's not doing much for Anglo-American relations either. Some UK commentators, for example, have been unable to resist dragging out examples of similarly catastrophic US corporate disasters which did not elicit quite the same level of opprobrium.
Others have sought to identify the extent to which the US government, despite its posturing, remains "in thrall" to the oil industry. And this funny contribution from the creator of the Dilbert cartoon, suggests BP could ultimately benefit from the whole affair.
AF
Thursday, June 10, 2010
Investment Banks and Gordon Banks
Finally, Goldman Sachs delivered what we've all been waiting for. No, not the FCIC requests for documents and interviews – in fact, the Wall Street giant has been hit with a subpoena for a "deliberate and disruptive" failure to co-operate with requests for information about its role in the credit crunch that shook the global economy. It doesn't have anything to do with the SEC fraud charge either...that would be far too prosaic for such anticipation and excitement. What I'm talking about is the publication of Goldman Sachs World Cup and Economics 2010 – the fourth book they've compiled since debuting at France '98. With WC2010 one day away, the only Fabulous 'Fab' that football fans want to hear about is Fabio Capello or Cesc Fabregas. So, Monsieur Fabrice Tourre, back in your box, while the rest of us watch the beautiful game enraptured.
The World Cup paper is a fairly hefty tome – some 75 pages – but makes surprisingly easy reading (provided you like football of course). Jim O'Neill, Goldman's chief economist and avid football fan, kicks off the report and as you might expect from the man that coined the Bric concept, mentions it repeatedly. Honestly Jim, it's always 'Bric this Bric that'...enough already. The acronym doesn't even hold up for the World Cup (notwithstanding Brazil) as Russia, India and China didn't even qualify.
Some may ask what all this has got to do with the world of finance and, despite my best efforts to turn this into a football blog, that would be a fair question. Well, as outlined previously – the world of football and finance are intimately acquainted and the business of the beautiful game is just as prevalent when we talk about nations as when we talk about domestic sides. In fact, the sovereign state has it all to play for as the World Cup offers real revenue and growth potential for hosts. Igor Shuvalov, First Deputy Prime Minister of Russia, makes this point in the Goldman report when discussing Russia's 2018 bid: "Modern football is a whole industry. It includes complex infrastructure, such as top stadiums, rehabilitation centres and training bases, as well as sports gear and equipment, to say nothing of advertising and TV rights....Intensive development of football infrastructure will act as a huge boost to both regional and national economic development."
Moreover, the World Cup also provides a truly global forum to highlight the ambitions and capabilities of a country. For instance, what better way for Brazil to communicate its status as an economic force, than to put on a stellar World Cup in 2014 and then Olympics in 2016. To keep with the Bric theme (sorry) – China did a similar thing with the Olympics two years ago. Beijing 2008 was a formidable event that showcased the economic might of the nation to a global audience.
Towards the end of the Goldman report, my attention turned to the section on Spain entitled "Leading in Football, Lagging in the Economy." Angel Ubide, a former Real Zaragoza FC player and Director of Global Economics at Tudor Investment Corporation, makes some great comparisons between the success Spain enjoys on the pitch compared to its economic shortcomings. He concludes: "Without a question, the football team has been more dynamic, creative and successful than the economic team, and thus the odds of success in the World Cup are certainly much higher than the economic league. Good luck to all." His erudite comments are a long way from the monosyllabic and anodyne trivialities we're used to on Match of the Day each week.
Anyway, Jim O'Neill and his gang predict that England, Argentina, Brazil and Spain make the semi-finals. I'd certainly settle for that. God bless the World Cup.
JS
The World Cup paper is a fairly hefty tome – some 75 pages – but makes surprisingly easy reading (provided you like football of course). Jim O'Neill, Goldman's chief economist and avid football fan, kicks off the report and as you might expect from the man that coined the Bric concept, mentions it repeatedly. Honestly Jim, it's always 'Bric this Bric that'...enough already. The acronym doesn't even hold up for the World Cup (notwithstanding Brazil) as Russia, India and China didn't even qualify.
Some may ask what all this has got to do with the world of finance and, despite my best efforts to turn this into a football blog, that would be a fair question. Well, as outlined previously – the world of football and finance are intimately acquainted and the business of the beautiful game is just as prevalent when we talk about nations as when we talk about domestic sides. In fact, the sovereign state has it all to play for as the World Cup offers real revenue and growth potential for hosts. Igor Shuvalov, First Deputy Prime Minister of Russia, makes this point in the Goldman report when discussing Russia's 2018 bid: "Modern football is a whole industry. It includes complex infrastructure, such as top stadiums, rehabilitation centres and training bases, as well as sports gear and equipment, to say nothing of advertising and TV rights....Intensive development of football infrastructure will act as a huge boost to both regional and national economic development."
Moreover, the World Cup also provides a truly global forum to highlight the ambitions and capabilities of a country. For instance, what better way for Brazil to communicate its status as an economic force, than to put on a stellar World Cup in 2014 and then Olympics in 2016. To keep with the Bric theme (sorry) – China did a similar thing with the Olympics two years ago. Beijing 2008 was a formidable event that showcased the economic might of the nation to a global audience.
Towards the end of the Goldman report, my attention turned to the section on Spain entitled "Leading in Football, Lagging in the Economy." Angel Ubide, a former Real Zaragoza FC player and Director of Global Economics at Tudor Investment Corporation, makes some great comparisons between the success Spain enjoys on the pitch compared to its economic shortcomings. He concludes: "Without a question, the football team has been more dynamic, creative and successful than the economic team, and thus the odds of success in the World Cup are certainly much higher than the economic league. Good luck to all." His erudite comments are a long way from the monosyllabic and anodyne trivialities we're used to on Match of the Day each week.
Anyway, Jim O'Neill and his gang predict that England, Argentina, Brazil and Spain make the semi-finals. I'd certainly settle for that. God bless the World Cup.
JS
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