USPS: The Losses Keep Piling Up

The latest financial results for the U.S. Postal Service are in, and they’re a continuation of the same old story line: Tons of red ink and fingers pointing in every direction.

The USPS posted a net loss of $3.9 billion for FY 2009, “only” $1.1 billion worse than the previous year. And that’s even after receiving a $4 billion deferment on paying an annual $5.4 million obligation to pre-fund healthcare premiums for its retirees.

Not surprisingly, total postal revenues were down about 10% to ~$68 billion, not only because of the economic downturn but also because of the continuing shift to digital communications. Total physical mail volume declined ~13% to around 177 billion pieces.

Given the sorry financial stats, one would assume that the USPS would be moving forward in all haste with its plans to shutter as many as 10% of its post offices and branches around the country.

But if you thought that … you would be wrong. What started out as a potential closure listing of ~3,200 stations (the impressively named Station & Branch Optimization Initiative) quickly became ~700 stations and branches that were actually slated to close. Then that figure was trimmed to just over 400. And now we have word that the closure figure is down to ~370.

Given more time, the number of closures may well slip even further … and at some point the whole exercise becomes completely meaningless as cost-cutting endeavor.

And then there are the persistent rumors that mail delivery will be cut back to five days from six. But that never seems to be anything more than just an idle threat.

Welcome to the wonderful world of government agencies: Stultifying bureaucratic procedures that are near-Byzantine in their complexity, coupled with reacting to every conceivable interest group while being too timid to make any hard choices at all when it comes to managing their operations like any business in private industry must do.

Anyone for government-managed healthcare?

Firefox Turns Five: All grown-up now … and with a few grown-up challenges.

Firefox logoMozilla’s Firefox web browser marked a milestone this past week, celebrating its fifth birthday.

No question about it, the open-source browser has been a big success, with growth that has been impressive by any measure. As of the end of July, Firefox had been downloaded more than 1 billion times.

Indeed, a mainstream site like this one here (WordPress) reports that Firefox now represents a larger share of activity than Internet Explorer — 46% versus 39% of traffic.

But now that Firefox has come of age, it’s facing some of the same “grown up” challenges that other browsers face.

In fact, application security vendor Cenzic has just released its security trends report covering the first half of 2009. Guess what? Firefox led the field of web browers in terms of reported total vulnerabilities. Here are the stats from Cenzic:

 Firefox: 44% of reported browser vulnerabilities
 Apple Safari: 35%
 Internet Explorer: 15%
 Opera: 6%

Compared to Cenzic’s report covering the second half of 2008, Firefox’s figure is up from 39%, while IE’s number is down sharply from 43%.

Welcome to reality. As Firefox has grown in importance, it’s gained more exposure to vulnerabilities. A significant portion of those vulnerabilities have come via plug-ins.

Mozilla is trying to take steps to counteract this, including launching a plug-in checker service to ensure that users are running up-to-date versions. It also offers a “bug bounty” to anyone who discovers security holes in Firebox.

And the good news is that even though Firefox had the highest number of vulnerabilities, even Cenzic admits that this doesn’t necesarily mean Firefox users are more vulnerable to security threats. Plus, those vulnerabilities tend to be patched more quickly than those found in other browsers.

So on this fifth anniversary milestone, Firefox can be justly praised as a major success story in the web browser world.

Newspaper publishers and online news consumers: Still miles apart on paid content.

How can the views and perspectives of newspaper publishers and readers be so out of kilter? It might have something to do with “wishful thinking” on the part of the publishers.

Case in point: American Press Institute has just released the results of a field research study that compares the opinions of readers and publishers on paying for news content.

Naturally, this issue is of paramount concern to newspapers that are trying to create a new business model that is profitable. In fact, nearly 60% of the publisher respondents in the survey reported that they’re considering requiring paid access for online news — news that is currently provided to readers free of charge. At the same time, these respondents seem to believe that consumers will willingly “pay to play” in a new paid-content environment.

But I wonder about that.

Here’s an example of the disconnect between newspaper publishers and news consumers found in the survey: More than two-thirds of the publishers believe it will be “not very easy” or “not easy at all” for consumers to find similar news content online from alternative free sources once the shift to paid content happens. Do consumers agree? Well … only ~43% think the same way.

And where do newspaper publishers think people will go for news if their paper’s free online information is no longer available to them? Again, we see a big disparity in the results. The top three sources publishers think consumers will turn to are:

 The publisher’s own print newspaper: 75%
 Other local media: 55%
 Television: 53%

For consumers, those alternate sources all rated lower – in two cases, dramatically so:

 The publisher’s own print newspaper: 30%
 Other local media: 17%
 Television: 45%

[For the record, the alternative free news source identified by the most consumers was “other local web sites,” cited by 68% of respondents.]

With such dramatically different views held by newspaper publishers and their consumers, it’s clear that both sides can’t be correct. I’ll to bet that the consumers’ responses are closer to the reality.

For this reason, it would be advisable for publishers to tread very carefully as they attempt a shift to a paid content business model. Does the term “evaporating audiences” mean anything to them?

Norton’s “Online Living Report” Gives Us the Latest Trends in Adults’ and Kids’ Online Behaviors

With the constantly changing online world, it’s always helpful when a new survey comes along that give us the latest reading of just what’s going on with online behavior.

Harris Interactive has just conducted its second survey of online users for Norton® Symantec. The survey was taken across 12 countries, including the U.S., five European nations, plus Australia, Canada, China, India, Japan and Brazil. The total number of people taking the 15-minute online survey was very large: nearly 6,500 adults plus ~1,300 kids age 8 to 17. That’s close to double the number of respondents who participated in Harris Interactive’s first such research project conducted in 2007 — and it gives us some very good data to chew on.

The Harris survey, published as the Norton Online Living Report, found that the average number of hours spent online per month for adults was ~89 hours. That’s well more than three full days in a month. But a look at the numbers found in some of the countries surveyed shows dramatically different results:

 China: 141 hours spent online per month on average
 Brazil: 119 hours
 India: 87 hours
 Japan: 85 hours
 United States: 56 hours
 Canada: 46 hours

No doubt, these figures will challenge the perceptions of some who have thought that citizens in the developed world are more “wired” than those in the developing nations. Could it be that there are fewer exciting alternative activities competing for consumers’ time and attention in China or Brazil?

As for kids’ online activities, one very interesting finding from Harris is that American and British youth report being online twice as long as their parents think they’re online:

 U.S. kids report being online 42 hours per month, versus 18 hours their parents estimate they’re spending online.

 U.K. youths report being online 44 hours per month, versus 19 hours their parents estimate.

Clearly, the age-old disconnect between parents’ perception and kids actual behavior is alive and well – and hasn’t changed at all in the Internet age!

What’s more, even with parents’ wildly inaccurate estimate of the time their kids are online, nearly three-fourths of U.S. and Canadian parents believe their children are spending too much time at the computer. So the perception-versus-reality gulf is even more stark.

[The only country where a clear minority of parents feel this way is Japan, at ~30%.]

Basically, when it comes to their children, the Harris survey quantifies what any parent already knows: for the kids, it’s online all the way. Consider these stats that Harris Interactive gleaned from surveying U.S. children:

 American kids have an average of nearly 85 online friends – the highest among all 12 countries surveyed.

 They “out-text” the rest of the world, too – with U.S. kids spending upwards of 10 hours per week texting compared to ~4 hours for kids elsewhere.

And yet … it appears that the kids themselves have an inkling there are healthy limits that should be placed on the “online, all the time” experience. Half of the American youths surveyed agree that “instant messaging and texting make learning to write more difficult.”

Anyone who has frustratingly received e-mail messages from their children in college … with nary a capitalized letter or punctuation mark to be found in them … will surely identify with this last bit!

The Berlin Wall Looking Back 20 Years: What Caused the Fall?

Austro-Hungarian Border
Border guards dismantling the fence dividing East and West: Austro-Hungarian border, Summer 1989.

This month, the world commemorates the momentous events of 20 years ago when the Berlin Wall fell and a divided Germany came together amidst the wreckage of the Soviet Empire.

Already, there have been poignant tributes such as the recent celebration in Berlin honoring three elder statesmen who were at the center of the events at that time: Mikhail Gorbachev, President Bush (the elder) and Germany’s Prime Minister Helmut Kohl.

But what seems lost among the commemorations is the fact that the Berlin events were set in motion earlier in 1989, some 350 miles to the south. And they involved neither East nor West Germany.

In fact, the first “hole” in the iron curtain came about at the Austro-Hungarian border, masterminded by Hungarian Prime Minister Miklós Németh and his equally brave Austrian counterpart, Chancellor Franz Vranitzky.

A reformer who was also a Communist Party member, Németh had come to power in 1988 and was determined to bring Hungary into a more close economic and political relationship with the rest of Europe. Faced with horrific economic conditions at home, he knew had had limited time to effect positive change or he would be replaced.

Students of history know that the “ties that bind” Austria and Hungary date back ~700 years, through centuries of the Habsburg Empire to the early 1900s when Vienna and Budapest were two of the most glittering cities of Europe.

In a sense, the forced separation of the two countries between East and West Bloc factions was as unnatural as the division of Germany itself; a quick look at the bevy of German and Hungarian surnames in the Vienna telephone directory proves the point.

Secret communications between Hungary and Austria culminated in a public ceremony held on the Austro-Hungarian frontier on May 2, 1989, where, documented by television cameras, the electric fence running the length of the border was declared an “anachronism” and a hole was ceremoniously cut in it.

“What are those Hungarians up to?” bellowed East German premier Erich Honecker at an East German Politburo meeting the next day. The answer was obvious. Soon throngs of East German citizens, traveling to a fellow Eastern Bloc country on tourist visas, simply moved across the Hungarian border into Austria from where they could continue on to West Germany to be reunited at long last with relatives and friends.

The die was cast. Faced with the prospect of its citizens draining out of the country, the East German government had little choice but to announce a relaxation in travel restrictions to West Germany.

This attempt at accommodation was a classic case of “too little, too late”:  The avalanche that was soon to come was simply overwhelming. Down came the Berlin Wall – and down went the East German government.

In hindsight, it’s easy to recognize the important role Mikhail Gorbachev played in the events of 1989. By signaling that Soviet troops would not necessarily come to the aid of beleaguered Eastern European satellite regimes, Gorbachev gave the restive citizens of East Germany the courage to seize the moment and take decisive action while they had the chance.

But the most credit must go to the governmental leaders of Hungary and Austria. It was these unsung heroes who took the biggest risks from the very beginning, bravely plotting their moves in the face of potentially severe political and military repercussions. (After all, memories of the ill-fated Hungarian Revolution of 1956 and the subsequent refugee flight across the Austrian border weren’t all that distant.)

In a sense, history came full circle in 1989. At the beginning of the century, Germany had been dragged into World War I because of problems faced by its Habsburg neighbor, Austria-Hungary. So many of the major political challenges in the 20th Century – communism, fascism, the Cold War, even the Middle Eastern conflict – stemmed from that struggle. And none of these were more searing for Germany than World War II and the subsequent division of the country between East and West.

Once, Austria and Hungary had created problems for Germany. Seventy-five years later, they helped solve them. Not a bad result in the end!

$100 cost-per-click on Google AdWords? It’s already here.

How much is one clickthrough to your web site worth? If you’re a legal firm specializing in bringing mesothelioma cases to court, it turns out it’s worth a lot.

In fact, the search term “mesothelioma” was the highest-priced keyword in the U.S. during the third quarter of 2009. That’s according to a recently-released AdGooroo Search Engine Advertising report.

Just how expensive? For Google’s AdWords program, the highest price paid for a #1 ranking on that search term was a whopping $99.44 per click. (Over at Yahoo, the high figure for this paid search term was a little less rich: $60.68 per click.)

One wonders how many times the advertisers have actually had to pay out this king’s ransom. Whether it’s for a few or many clicks, it’s clear that some legal firms recognize a highly lucrative revenue opportunity in filing mesothelioma lawsuits related to asbestos and lung cancer.

Interestingly, the highest paid search term in Bing’s paid search program isn’t “mesothelioma,” but rather “auto insurance comparison.” At $55.20 per click, the dollars aren’t as high, but it would seem like the potential payoff isn’t nearly as great, either. After all, there’s a pretty big difference between a multi-million dollar legal verdict and the value of an automotive insurance policy.

But beyond the eyebrow-raising stats of these extreme examples, the larger issue is how much more costly search advertising has become in recent times. A few short years ago, it was common to talk about search terms costing an advertiser 50 cents or $1.00 per click. Now, those same terms are far more likely to cost $2.50 or more.

Google, being the 500-pound gorilla in search engine marketing (SEM), has certainly contributed to the price inflation. That’s one reason why many are rooting for alternative search options like Bing to succeed (dream on).

More fundamental to the increase in keyword click pricing is the realization that advertising to people at the precise time they’re searching for particular goods and services is a far more effective way to engage customers and prospects and drive actual sales.

And that’s even more the case compared to trying to get their attention or otherwise “intrude” on them when they’re online for other purposes. The abysmal clickthrough rates experienced for banner advertising bear this out.

But paying $100 per clickthrough? That does seem excessive – even for ambulance-chasing lawyers!

Disappointing News from Both Sides of Business

Amazon logoCaterpillar logoTwo announcements this week from opposite ends of the economy prove how challenged the business environment continues to be. On the “old industry” front, Caterpillar has announced that it will be permanently cutting ~2,500 employees from its operations.

At the same time, a few hundred hourly workers are being called back by Caterpillar to select factories that manufacture certain types of road construction equipment. That softened the blow a bit, but the overall message is clear: Despite the expected growth in infrastructure projects, the stimulus legislation isn’t having much if any “ripple” effect on related or ancillary business segments.

On the other end of the scale is the über-hip, “new economy” Amazon – an enterprise that has achieved so much success selling products of all kinds online. But Amazon seems to have laid an egg in one product category: selling fine wines. After spending several years attempting to organize a mail-order business around wine products – even with the enthusiastic cooperation of boutique wineries all across the country – Amazon has had to throw in the towel on this enterprise.

The hurdles that turned out to be so insurmountable? Everything from the logistics of shipping products that must be delivered directly to the recipients’ hands to avoid problems with perishability … to the Byzantine state laws that regulate the shipment of wine across state lines. (Taken as a whole, those laws are probably more complicated than the provisions of the health care insurance reform bills being debated on Capitol Hill!)

In the end, even the vaunted Amazon – so used to success in practically everything it undertakes – has had to give up on trying to sort through the myriad governmental laws and regulations along with the challenges of wine shipping and delivery, while also turning a profit on the enterprise.

Incidentally, this isn’t the first time Amazon has gotten burned in this business. Back in the late 1990s, the company sank ~$30 million into an ill-fated venture with Wineshopper.com that likewise came to nothing. I guess when your company is made up of mostly twenty-something-aged workers, the institutional memory is pretty short!

Sour grapes, anyone?

e-Books on the March

The Nook e-Reader, released by Barnes & Noble just in time for the holiday shopping season.
The Nook e-Reader, released by Barnes & Noble just in time for the holiday shopping season.
The e-book revolution continues apace. In the past week, Barnes & Noble announced the introduction of its own electronic book reader – the Nook – to compete against Amazon’s Kindle and Sony’s e-reader. Amazon promptly responded by lowering the price of the Kindle to match Barnes & Nobles’ Nook e-reader price. No doubt, both companies are looking to the holiday season, hoping their products will turn out to be among the few that are “stars” in what will otherwise be a season of tepid merchandise sales.

And now Google has gotten into the fray as well. It has announced new details on the pending launch of its e-bookstore, Google Editions. This is an online bookstore that will deliver digital books to any digital device such as e-readers, laptops and cellphones. Google plans to offer up to 600,000 book titles during the first half of 2010 alone, nearly matching the number of volumes that Barnes & Nobles will be offering with the Nook.

True to form, Google seems bent on taking an idea that is gained acceptance in the market – and then scrambling the deck to create a new set of game rules. In this case, it’s attempting an end-run around Amazon’s and Barnes & Nobles’ proprietary e-reader devices by offering the ability to download books to any digital device.

Google’s hope is that e-readers will eventually lose their luster once books are available for download to any device. But Forrester Research is estimating that ~3 million e-readers will be sold in 2009 — ~1 million higher than its earlier estimate. And some observers think that Google may be underestimating the importance and value of the proprietary e-readers; they note that Kindle users have been highly satisfied with the product and how it performs. (Besides, the audience for reading entire books on a cellphone device is probably pretty limited!)

In Google’s program, publishers will set the price of books, while Google will earn over half of the profits and share them with its retail partners. But there is an aspect of Google Editions that might turn out to be a significant “negative” for at least some users. Google is toying with the idea of including AdWords or AdSense advertising in its book offerings. Cramming a bunch of advertising surrounding the book contents could be a big turnoff. Even having blue-highlighted links in the text — while normal and expected when reading an online article such as this NonesNotes blog post – could be a major distraction when plowing through the contents of an entire book volume.

Regardless of how things play out, it’s clear that the ~$150 million e-book segment is going nowhere but up in the coming years, and it will be interesting to see how each of the key industry players ends up faring in the coming months. (And the story line gets even juicier with reports that Apple is also nosing around this market and may have something important to unveil before long.)

What are the very latest trends in media usage?

TargetCast TCM logoWith all of the rapid changes occurring in the media world today, it’s hard to know just what kind of impact they’re having on the media usage patterns of consumers. Now a just-released report by TargetCast Total Communications Media based on a September ’09 survey of ~900 American adults age 18-64 is providing some interesting clues as to what’s going on out there.

The report provides a host of interesting statistical figures, but I find a couple broad conclusions from the report more interesting:

 Men and women are consuming media differently. Men are more likely to adapt their usage habits to incorporate more digital and online platforms, while women are more apt to stick with traditional media forms.

 Radio, which surprised many by successfully surviving the challenges of broadcast TV in the 1940s, cable in the 1970s and the Internet in the 1990s, may finally have met its match. As a “passive” media, it’s being tuned out in large degree by a younger generation of people far more attracted to programmable MP3 players, iPods and interactive multimedia devices.

 Newspapers continue to be respected for their role in covering major news events, but they’re losing ground in the face of increasing digital and mobile news media use. What’s more, nearly three-fourths of the respondents in the survey expect their online news to be available for free. (Rupert Murdoch, are you listening?)

So overall, what media has become less popular with consumers? Answer: Newspapers and magazines, with around one-third of the TargetCast TCM survey respondents indicating they’re using these media less than one year ago. Conversely, ~40% reported higher usage of the Internet for informational purposes … and ~28% higher Internet usage for entertainment.

These findings help explain why print magazine advertising is still in the doldrums. In fact, Media Industry Newsletter reports that November 2009 ad pages are down nearly 20% from November 2008. This comes as a surprise for some people because the full brunt of the economic crisis had already hit the media by November of last year. But instead of showing flat performance or maybe even a slight rise in ad pages, the numbers tanked yet again this year – making the two-year drop-off between 2007 and 2009 a whopping 35%.

Sure, some of the blame for the sorry ad numbers can go to the continuing economic downturn. But the rest is due to the fundamental change in media consumption habits that are continuing to happen – as cleanly illustrated in the TargetCast TCM report.

Next on Wal-Mart’s Low-Price Hit List: Cell Phone Service

Wal-Mart logoIf you’re like many people, your monthly cell phone bill has been creeping higher and higher over time. The addition of second and third lines, family plans, text and data messaging has provided big leaps in functionality at the cost of just modest additional fees … but those fees do add up.

Today, just in time for the recession, the average monthly cell phone bill for Americans, at nearly $80, is as high as it’s ever been. So it’s no wonder that new suppliers have been nosing around this market for awhile now, including those offering VoIP phone services over the web at a fraction of the cost.

And now Wal-Mart has gotten into the fray. On course to become the low-price leader in seemingly every imaginable consumer product and service, Wal-Mart has decided to roll out a new wireless cell phone service called Straight Talk.

Instead of the plethora of “complicated, convoluted and confusing” contracts that seem to be so common in the industry, Wal-Mart’s Straight Talk is offering just two plans – and neither of them requires a signed contract.

One plan offers unlimited minutes, texting and mobile web user for $45 per month. A cheaper, $30 monthly plan allows for 1,000 voice minutes, 1,000 text messages and 30 megabytes of web usage. Consumers may refill their monthly balances by buying refill cards at Wal-Mart stores or by registering online.

And what about those irritating “add on” charges that always seem to add $10 or $15 extra to your monthly bill? Wal-Mart’s aiming to limit those as well. For example, 411 directory assistance calls are free.

A pilot program, conducted this summer partnership with TracFone Wireless at 234 stores, was so successful that Wal-Mart has decided to introduce the program nationally in time for the holiday shopping season. In fact, the rollout begins this week at 3,200 Wal-Mart stores across the country. Wal-Mart is promoting the service as one that will save consumers ~$500 a year.

Considering how cost-conscious people are at the present time, the promise of savings like that are enough to encourage even those families saddled with early termination penalty clauses in their service contracts to ditch their current suppliers.

Here’s a prediction: It won’t be long before Verizon and AT&T begin to offer similarly discounted and/or no-contract services to their customers. Now, if only they had done so before … they might actually have higher customer satisfaction scores than their current mediocre (or worse) ratings.