Business

For U.S. Households, the $534,000 Elephant in the Room

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It doesn’t matter where you may be on the political spectrum, the most recent financial figures about the U.S. economy and our financial obligations have to be stunning in their import.

It turns out that the federal government’s financial condition has deteriorated much more rapidly and significantly than is commonly understood – far more than the ~1.5 trillion in new debt that was incurred to finance the budget deficit.

Instead, USA Today is reporting that the government took on some $5.3 trillion in new financial obligations during 2010. Not surprisingly, a big chunk of these unmet obligations fell under Medicare and Social Security.

Adding these new obligations to the existing ones translates into a record of nearly $62 trillion in financial promises not paid for.

And if that particular number isn’t striking enough, perhaps putting it this way will get your attention: It translates into ~$534,000 in unfunded obligations for each individual household in the United States.

In addition to $534,000 being a breathtaking number in and of itself, it represents more than five times what Americans have borrowed for everything else (mortgages, car loans, college loans, etc.).

Now there’s certainly a big difference between the government and the private sector, of course. Corporations would be required to account for these new liabilities when they are taken on – and thereby report big losses to their shareholders. But unlike businesses, Congress can conveniently stave off recording these commitments until it’s ready to write the check. “See no evil … hear no evil …”

And here’s another big difference between the federal government and everyone else: the ability to “manufacture” greenbacks to pay for debt obligations. Whether we call it euphemistically “quantitative easing” or more bluntly “printing money,” that’s a solution that comes dangerously close to the famous quip attributed to H. L. Mencken: “For every problem, there’s a solution that is simple, elegant, and wrong.”

Sheila Weinberg, founder of the Chicago-based Institute for Truth in Accounting advocacy organization, raises another key point: “The [federal] debt only tells us what the government owes to the public. It doesn’t take into account what’s owed to seniors, veterans and retired employees. Without accurate accounting, we can’t make good decisions.” She has a good point.

The blind leading the deaf: It certainly doesn’t portend well for the future. But there’s always the hope that if we can somehow create robust future annual economic performance in the 4-5% range, we’ll grow our way out of the problem.

We’ll have to see about that.

The Fortunes of the Fortune 500

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Global Business: 28% of the 500 largest multinational companies are U.S.-based.Time was when the United States accounted for the largest contingent of the Fortune 500 global companies. Not so anymore. According to stats reported recently by international business expert Ted Fishman in USA Today, only about one-fourth of the 500 largest global enterprises are based in the U.S.

And those that remain on the list aren’t behaving particularly “American,” either. This group of ~140 companies has eliminated nearly 3 American million jobs since 2000.

Is that a consequence of the recent global recession? Hardly … the same companies added ~2.4 million jobs overseas during the same period.

The particulars behind each company’s employment choices are varied, of course. But certain factors seem to come up often in the analysis, including:

 Gaining closer geographic proximity to the world’s fastest-growing economies such as India, China and other Far Eastern countries.

 The availability of workforces that are “cheaper” to hire and require fewer employee benefits.

 A relatively unattractive U.S. corporate tax rate compared to other countries – hard to believe, but America’s 35% top corporate rate is eclipsed only by Japan’s (39.5%).Going forward, it would be nice if America’s largest corporate entities could be more sensitive to the need for additional investment here at home. Then again, it would be equally gratifying if government adopted policies of lower tax rates and easing regulations to make business growth and job creation in America easier.

The truth is, both parties will continue to pursue their own self-motivated interests, which is only natural.

The problem is, it’s a lopsided game. With a big wide world out there, the multinationals have a host of options at their disposal … and thus hold the winning cards. Tax laws and new regulations can be put on the books time and again, but the multinational crowd continues to float above it all, seemingly unaffected by anything – at least not to any great extent.

Meanwhile, U.S. small business gets hammered.

The European Union Versus Marketers

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EU e-Privacy Initiative attacks ad tracking via cookiesI wonder how many marketers are focused on what’s happening in Europe on the digital marketing front? While companies here are busily engaged in making sure ad tracking is being done to the nth degree, in the UK and Continental Europe, new legal restrictions on advertising tracking threaten to upend a lot of these efforts, particularly for multinational brands.

In short, the EU’s e-Privacy Directive restricts the use of “cookies” and virtually all other digital ad tracking methods. And the legal frameworks set up around this directive would require any marketer with users in any EU country to be subject to EU-wide and country-specific privacy legislation.

The new privacy initiatives are far more restrictive than the present US-EU “safe harbor” agreement, which merely requires American companies to notify users when cookies are used on a website. The new regs covering web pages, web apps and mobile apps would require giving notice each time a cookie is used, thereby setting up a flurry of endless notifications that promises to seriously degrade the online browsing experience.

The seemingly reasonable compromise of adding information to a “terms of use” agreement isn’t acceptable to the EU either, unless all users are issued the new agreement and they certify their acceptance.

And just to make sure everyone knows how serious all of this is, the new regs call for the imposition of financial and/or criminal penalties for the non-compliant use of cookies. But for the moment at least, only two relatively small countries besides the UK – Estonia and Denmark – have implemented controls to enforce the EU directives.

Here in the United States, privacy legislation slowly wends its way around Congress, with many legislators understanding that the key to successful commerce online is the ability for marketers to match marketing messages to interested consumers. It’s in Europe where governments appear more than willing to cripple the ability of marketers to do the job they’ve sought to do for decades: Target their audiences with as much precision as possible.

As a result, some European businesses are making noises about abandoning Europe for the United States. The problem is, in the digital age with so much of the branding and commerce blurred between countries, it’s impossible for restrictive moves in one region not to cause negative repercussions somewhere else.

The “ol’ college try” … Not good enough anymore?

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The questionable college degree ... along with crushing student debt.I’ve blogged before about the increasing concerns many people have regarding the quality of college education in America. Now, several new data points should make every parent of college-age kids – or children who will be ready for college soon – take additional notice.

The first interesting news tidbit is that total student debt, which surpassed the country’s credit card debt for the first time in August 2010, now tops $1 trillion. Compare that to student debt being only around $200 billion as late as 2000.

So we’re talking an increase of ~400% in a little over a decade, which is miles more than the inflation rate over this period. Average debt now stands at almost $23,000 per student, which is a spike of ~8% over the past year alone.

And just what are students getting for all the money they’re spending (or borrowing) for their higher education? If you want to know the ugly truth, check out the recently published book Academically Adrift by sociologists Josipa Roksa and Richard Arum [ISBN-13: 978-0226028569 … also available in a Kindle edition].

Based on the information presented in this book, some grads might wish to haul their colleges up on charges of educational malpractice. Full-time instructional faculty has declined from 78% of college teachers in 1970 to only around 50% today.

Roksa and Arum also report that college faculty members spend, on average, just 11 hours per week on instructional preparation and delivery … the rest of their time is spent on research and a slew of administrative activities.

And how about the “quality” of the education that’s being delivered? If we wish to view that in terms of the amount of time students are spending on their studies, the stats aren’t trending in the right direction. The book claims that whereas the typical college student in the early 1960s devoted an average of 40 hours each week to academic work, today’s students now spend only about 27 hours per week on studies. So in what way is the substantial extra money being extracted from students being used to delier a better quality product?

Here’s the next shocker: ~85% of college graduates are moving back home following graduation. This information comes from a 2011 field survey conducted by Philadelphia-based market research firm Twentysomething, Inc. Compared to the firm’s prior surveys, that represents a spike of nearly 20 percentage points in only five years.

Of course, we all know the economy has been a major problem over the past few years, with jobs hard to come by even for seasoned workers. But to learn that fewer than one in six college students are moving out on their own following college graduation means that precious few grads are coming out of school with the ability to land jobs that can sustain an independent lifestyle — however modest.

With stats as dismal as these, is it any wonder why some people are seeking an alternative paradigm for higher education other than the “four years away from home” model? Enrollment figures at America’s community colleges have been skyrocketing. Online education is also booming, despite lingering concerns about learning standards and accreditation.

Some economists such as Richard Vedder are suggesting making radical reforms in the way that financial aid is provided – and to whom – while other observers are pushing for more recognition of learning credentials that take us beyond a BS or BA degree.

Many of these ideas strike at the very heart of what we’ve always been conditioned to believe about a four-year college education as the gateway to a better life. But with today’s reality being so far removed from the theory (fantasy?) … some out-of-the-box ideas and approaches are exactly what are needed now.

A surprise? Corporate reputations on the rise.

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Corporate reputations on the riseWhat’s happening with the reputations of the leading U.S. corporations? Are we talking “bad rep” or “bum rap”?

Actually, it turns out that corporate reputations are on the rise; that’s according to findings from the 2011 Reputation Quotient® Survey conducted by market research firm Harris Interactive.

Each year since 1999, Harris has measured the reputations of the 60 “most visible” corporations in the United States. The 2011 survey, fielded in January and February, included ~30,000 Americans who are part of Harris’ online panel database. Respondents rated the companies on 20 attributes that comprise what Harris deems the overall “reputation quotient” (RQ).

The 2011 survey contained 54 “most visible” companies that were also part of the 2010 survey. Of those, 18 of the firms showed significant RQ increases compared to only two with declines.

The 20 attributes in the Harris survey are then grouped into six larger categories that are known to influence reputation and consumer behavior:

 Products and services
 Financial performance
 Emotional appeal
 Vision and leadership
 Workplace environment
 Social responsibility

Each of the ten top-rated companies in the 2011 survey achieved between an 81 and 84 RQ score in corporate reputation. (Any RQ score over 80 is considered “excellent” in the Harris study). In cescending order of score, these top-ranked corporations were:

 Google
 Johnson & Johnson
 3M Company
 Berkshire Hathaway
 Apple
 Intel Corporation
 Kraft Foods
 Amazon.com
 Disney Company
 General Mills

At the other end of the scale, the ten companies with the lowest ratings among the 60 included on the survey were:

 Delta Airlines (61 RQ score)
 JPMorgan Chase (61)
 ExxonMobil (61)
 General Motors (60)
 Bank of America (59)
 Chrysler (58)
 Citigroup (57)
 Goldman Sachs (54)
 BP (50)
 AIG (48)

Clearly, BP and AIG haven’t escaped their bottom-of-the-barrel ratings – and probably won’t anytime soon.

What about certain industries in general? The Harris research reveals that the technology segment is perceived most positively, with ~75% of respondents giving that sector a positive rating.

The next most popular segment – retail – had ~57% of respondents giving it a positive rating.

For the auto industry, the big news is not that it’s held in high regard (it’s not) … but that its ratings jumped 15 percentage points between 2010 and 2011. That’s the largest one-year jump recorded for any industry in any year since the Harris RQ Survey began.

What industries are bouncing along the bottom? Predictably, it’s financial services firms and oil companies.

But the news from this survey is, on balance, quite positive. In fact, Harris found that there were actually more individual companies rated “excellent” than has ever been recorded in the history of the survey. Considering the sorry state of the economy and how badly many brands have been battered, that result is nothing short of amazing

The Business World: Hazardous to your Health?

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Overweight Business TravelersWord of two recent medical studies should give pause to those of us in the professional world who do our share of traveling on the job.

First up, researchers at the Mailman School of Public Health at Columbia University are reporting that businesspeople who travel two weeks or more during an average month are significantly more likely to have a higher body mass index and to be obese.

The conclusions were drawn from reviewing data from medical records of ~13,000 participants in a corporate wellness program, as provided by preventive health services firm EHE International.

In comparing frequent business travelers (those who typically travel 20 or more days per month) against light travelers (only 1-6 days per month), not only did the evaluation discover poorer health results for the first group, it also found that those individuals were 260% more likely to rate their own health as “fair” or “poor” compared to the less frequent travelers.

The Columbia University study notes that since ~80% of business travel is carried out using personal automotive transport, often this means long hours of sitting.

Poor food choices on the road are no help, either. Of course, this is a challenge for all business travelers no matter what mode of transport they choose to take, what with the high sodium and fat content of restaurant fare – and oh, would you like sour cream and butter on your baked potato?

Not surprisingly, the Columbia study concludes that those who travel extensively for work “are at increased levels of risk and should be encouraged to monitor their health.”

But if that news isn’t enough, along comes another study that links middle age obesity to mental degradation in later life. As reported in the most recent issue of Neurology, the medical journal of the American Academy of Neurology, researchers in a study conducted at the Karolinska Institutet in Stockholm, Sweden conclude that controlling body weight during the middle years can significantly reduce the risk of developing dementia in later years.

This study analyzed time-lapse information from ~8,500 twins aged 65 or older, and within that sample, evaluated the results from the ~475 individuals diagnosed with dementia or possible dementia against factors such as height, weight and BMI measures that had been recorded 30 years earlier.

The Swedish study found that those who were overweight or obese during midlife were at 80% greater risk of developing dementia or Alzheimer’s disease in later life.

Connecting the dots between these two studies makes things quite clear: If you want to lessen you chances of Alzheimer’s or dementia in old age, keep your weight under control today. And to keep your weight under control today, beware of the traveler’s lifestyle and get off your duff in the office.

Now if you’ll excuse me, I need to go exercise.

What’s the Latest with Employee Satisfaction?

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Coming off the worst recession in memory, just how happy are Americans in their jobs today?

An online survey of ~450 American adults conducted in late February by enterprise feedback management and research firm MarketTools has found that only ~34% consider themselves “very satisfied” in their current job positions:

 Very satisfied: ~34%
 Somewhat satisfied: ~40%
 Neither satisfied nor dissatisfied: ~10%
 Somewhat dissatisfied: ~10%
 Very dissatisfied: ~5%

Those results would seem to portend that a significant number of people will be looking to change jobs in the near-term future.

And in fact, nearly 50% of these respondents reported that they’ve “considered” leaving their current positions – and more than 20% have actually applied for another job within the past six months.

What’s causing dissatisfaction among employees? They’re the usual things, beginning with salary, although many respondents cited multiple contributing factors to employee dissatisfaction:

 Salary level: ~47% of respondents
 Level of workload: ~24%
 Lack of opportunity for advancement / career development: ~21%
 Relationship with manager / supervisor: ~21%
 Medical benefits issues: ~20%
 Work environment: ~14%
 Length of commute / distance from home: ~14%

It shouldn’t be too surprising to witness an increase in job-hopping behavior following economic downturns. For those lucky enough to have held onto their positions during the recession, the working environment has likely been more stressful, as employers required more productivity from fewer workers.

It’s also likely that benefits packages were reduced to some degree. So it’s only natural for people to nurse some residual negative feelings about the situation and to possibly consider jumping ship to another employer.

But would that be the best move?

Often, moving to a new employer doesn’t result in the improvements the employee expected to find. And smarter companies will use the improving economic climate (such as it is) to reward those employees who hung in there when times were tough. After all, these are their better workers!

Salary and benefit increases are always going to be appreciated … but so is the opportunity for continued growth and career development.

It’ll be quite interesting to see what the job-hopping statistics show a few months from now.

Outdoor advertising that’s really “out” there.

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Adzookie House
Adding a lot of class to the neighborhood: Adzookie puts the "outré" in outdoor advertising.
There’s an interesting story that’s been swirling around the past few days about out-of-home advertising. Evidently, mobile ad network firm Adzookie is on the prowl for using someone’s house as an advertising placard.

As in “the entire house.” Or nearly all of it; Adzookie plans to place its logo, marketing messages and social media icons along with highly visible hues on every inch of surface save the rooftop, windows and awnings.

And what’s in it for the homeowner? Adzookie is claiming it will pay the mortgage on each house it selects for the honors.

Already, well over 1,000 applications from property owners have been received. The vast majority involve houses, but there are also restaurants, other businesses, and even a house of worship that have been submitted. You can click over to Adzookie’s Facebook page to view many of the pictures and pitches received.

How will Adzookie make its decision? Key, of course, will be traffic density; homes in sleepy sub-divisions or cul-de-sacs won’t have much of a chance. Then there’s also the issue of restrictive homeowner associations or the howls of protestation over “eye pollution” from nearby neighbors. That’ll knock quite a few more out of contention.

But here’s another tidbit that may turn out to be a deal-breaker for most of the remaining applications: CNNMoney magazine is reporting that Adzookie’s budget for the entire program is only ~$100,000 … and that includes the cost of painting the home(s) in question.

Even in this depressed real estate market, there aren’t too many houses that have a mortgage that low – unless you’re talking about a home in the City of Detroit, perhaps.

This capricious initiative proves yet again that in today’s world of advertising and promotion, pretty much anything goes. And if the idea is quirky enough, it’ll generate publicity in and of itself – thereby helping to bring about the desired awareness and interest even before the first slaps of the paintbrush ever hit the house.

Good going, Adzookie.

Click Wars Opening Round: Plaintiffs 1; Facebook 0

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I’ve blogged before about the issue of click fraud, which has many companies wondering what portion of their pay-per-click campaigns are simply wasted effort.

Until now, Google has been the biggest target of blame … but now we’re seeing Facebook in the thick of it also.

It’s only been in the past year that Facebook has made a real run for the money when it comes to paid search advertising. There are some very positive aspects to Facebook’s advertising program, which can target where ads are served based on behavioral and psychographic factors from the Facebook profiles of members and their friend networks. This is something Google has had a difficult time emulating. (Not that they haven’t been trying … which is what the new Google +1 beta offering is all about.)

But now, Facebook is the target of a lawsuit from a number of advertisers who contend that there are major discrepancies between Facebook’s click volume and the companies’ own analytics programs which suggest that the purported clickthrough activity is significantly inflated.

As an example of one company that is a party to the lawsuit, sports fan site RootZoo alleges that on a single day in June 2010, its software programs reported ~300 clicks generated by Facebook … but Facebook charged RootZoo for ~800 clicks instead.

While contesting the allegations vigorously, Facebook’s attorneys have also argued against the company having to disclose the source code or other details of how it calculates clickthrough activity, citing fears that the proprietary information could be leaked to outside parties (competitors) as well.

But that argument fell on deaf ears this past week. Instead, Facebook has been ordered by the U.S. District Court in San Jose, CA to disclose a wide range of data, including its source code for systems to identify and filter out invalid clicks.

In making this decision, Magistrate Judge Howard Lloyd stated, “The source code in this case implemented Facebook’s desired filtering, and whether that filtering [has] lived up to Facebook’s claims and contractual obligations is the issue here.”

This ruling appears to call into question the sweeping terms and conditions that Facebook advertisers are required to sign before beginning a media program. The relevant language states: “I understand that third parties may generate impressions, clicks or other actions affecting the cost of the advertising for fraudulent or improper purposes, and I accept the risk of any such impressions, clicks or other actions.”

[This isn’t the only incidence of Facebook’s broad and restrictive stipulations; another particularly obnoxious one deals with “ownership” of content posted on Facebook pages – basically, the content creator gives up all rights of control — even if the content came to Facebook through a third-party source.]

But in this particular case, evidently the terms and conditions language isn’t sweeping enough, as Judge Lloyd ruled that the plaintiffs can sue on the basis of “invalid” clicks, if not “fraudulent” ones.

Touché! Score one for the judges against the lawyers!

Of course, it’s way too soon to know how this particular case is going to play out – or whether it’ll even get to court. It’s far more likely that Facebook will settle with the plaintiffs so as not to have to disclose its source code and other “trade secrets” — the very things that cause so many marketers to see paid search advertising as a gigantic black hole of mystery that is rigged against the advertisers no matter what.

But one thing is easy to predict: This won’t be the last time the issue of pay-per-click advertising is brought before the courts. Whether the target is Facebook, Google or Bing, these skirmishes are bound to be part of the business landscape for months and years to come.

Magazine advertising finally sees an uptick … sort of.

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Print Magazines
An uptick in print magazine advertising -- however modest -- appears to be occurring.
Could it be that print magazines are finally on the positive side of the “U” in their recovery? The most recent stats on print advertising activities suggest that this may be so – if only slightly.

In statistics released this past week by Publishers Information Bureau, this data aggregator found that across all of the magazines tracked by the bureau, print advertising rose ~2.5% during the first quarter of 2011 compared to the same period last year. While not large, it is a gain, which is better news than most publications have had in quite a while.

PIB charted advertising growth in seven of the twelve advertiser categories it tracks, with the following segments showing increases year-over-year:

 Apparel and accessories
 Automotive
 Cosmetics and toiletries
 Drugs and remedies
 Financial, insurance and real estate
 Media and advertising
 Technology

As for the other categories, advertising was roughly even in women’s fashion and beauty magazines, while advertising categories that continued to decline were retail, food, home furnishings, and travel.

More specifically, how did some of America’s largest and most famous magazine brands fare? The answer is: “It depends.”

BusinessWeek: +49%

Elle: +15%
Vogue: +11%
Glamour: +6%
The Economist: +4%
The New Yorker: +4%
Time: +3%

 InStyle: -4%
Cosmopolitan: -9%
Harper’s Bazaar: -11%

Newsweek: -31%

There are explanations behind the outliers’ advertising performance. BusinessWeek has undergone an extensive redesign since its purchase by Bloomberg, and major resources have been poured into the publication to raise its profile and editorial muscle.

At the other end of the scale, Newsweek has struggled in the wake of its purchase by nonagenarian Sidney Harman, the retired chairman of Harman International Industries (Harman/Kardon) and husband of Jane Harman, executive director of Wilson International Center for Scholars and an ex-congressperson from California. Bringing Tina Brown onboard as “celebrity editor” at Newsweek hasn’t paid big dividends yet – at least in terms of advertisers returning to the magazine.

Does the uptick in advertising mean that print magazines are out of the woods yet? Hardly. Let’s not forget that the improved advertising figures are coming off of 2010’s low base levels that are nothing short of ugly. Print advertising is slowly emerging from the worst business environment faced by magazines since the Great Depression, after all.

But at least the direction is now “up” …