Tag Archives: Company coverage
by Chris Roush
Eric Starkman, a public relations professional, writes that Vanity Fair magazine and Fortune magazine appear to have switched roles with the hard-hitting business coverage appearing in the former about Yahoo’s CEO.
Starkman writes, “I can’t do justice summarizing McLean’s prodigious reporting in this space, but suffice to say that McLean shatters many myths, including that Mayer’s departure was a major loss for Google. McLean reveals that many of the accomplishments that have been attributed solely to Mayer during her time at Google were more a team effort. Indeed, her star had been losing its luster there when she left for Yahoo! (a point underscored by McLean’s reporting that there was no shortage of people who actually cheered Mayer’s departure). It’s noteworthy that code-writing Google engineers didn’t follow her out the door despite the fact that Mayer is an engineer; the only Google recruit was a PR person, who, quite tellingly, was Mayer’s first Yahoo! hire. McLean also suggests that if Mayer hadn’t given Dan Loeb a sweetheart deal to go away, the savvy investor quite possibly might have fired her.
“Reporting excellence aside, McLean’s article is also notable for where it appears. Vanity Fair, a glossy monthly better known for its stories on the lives and scandals of the glitterati among Hollywood, Washington, Wall Street and the like, has emerged as a bastion for more thoughtful and insightful explanatory business journalism. The magazine has published a slew of impressively provocative business features, including Sarah Ellison’s reporting on Rupert Murdoch’s empire (here, here, and here, among others) and her profile on CNN host Piers Morgan, Michael Lewis’ story about Goldman Sachs’ seemingly undo influence with federal prosecutors, and William Cohan’s less-than-flattering profile of investor Dan Loeb.
“McLean wrote for Fortune magazine a few years back. At the time, standard-setting expository and investigative journalism was the magazine’s raison d’être. As I predicted, however, the magazine didn’t fare well under the stewardship of Laura Lang, who was forced out last year, and is no longer the leader of the pack, partially due to a top talent exodus. In addition to the departure of Hank Gilman, a highly respected managing editor known to favor hard-hitting stories, the magazine also lost James Bandler, a Pulitzer-prize winning reporter who was responsible for some of Fortune’s most noteworthy features (see here).”
Read more here.
by Chris Roush
The 23-year-old CEO of Snapchat criticized journalists on Twitter Monday morning, claiming that some details in a recent Forbes cover story about his startup were misreported, but Forbes responded hours later with a transcript from Spiegel’s interview with the story’s author, reporter J.J. Colao, essentially proving that Spiegel misled the publication during its reporting.
Kurt Wagner of Mashable writes, “The details in question were included in the story’s lead, and depicted an email exchange between Spiegel and Facebook CEO Mark Zuckerberg. In the story, Zuckerberg emailed Spiegel in late 2012 asking for a meeting to discuss the new startup. Spiegel’s response: ‘I’m happy to meet … if you come to me.’
“At least that’s what Spiegel told Forbes.
“Few people can pull off a demand like that, especially when speaking with the multibillionaire CEO of the world’s largest social network. And it turns out Spiegel is not, actually, one of those people.
“After a Business Insider reporter called Spiegel ‘arrogant’ after reading the Forbes article, Spiegel responded on Twitter by publishing the actual email chain between him and Zuckerberg from November 2012. The emails confirmed that Spiegel did not, in fact, set the terms for the meeting as originally described by Forbes. Instead, Zuckerberg simply had plans to be in Los Angeles a few weeks later, and the meeting was established during his trip.
“At first, it looked as if Forbes goofed — until the publication released a transcript of its interview, in which Spiegel ‘fabricated a story full of swagger,’ according to Forbes editor Randall Lane.”
Read more here.
by Liz Hester
One of the more dramatic stories continuing from last year is the merger drama between Jos. A Bank and Men’s Wearhouse, two men’s wear retailers battling for control and over a potential combined company.
The New York Times’ Michael J. de la Merced reported Monday that Men’s Wearhouse decided to take its offer directly to shareholders:
Men’s Wearhouse went hostile on Monday in its pursuit of Jos. A. Bank, raising its offer to $1.6 billion and taking it directly to the company’s shareholders. It also said that it intended to press for two new directors.
The moves signal a new stage in the takeover battle, one that began last year with Jos. A. Bank in the role of unwanted bidder. Now the pursuer is the pursued, one that has so far deemed the takeover bids too low.
And the onetime target has gone fully hostile, something that not even Jos. A. Bank was willing to do in its own aborted merger campaign.
“Although we have made clear our strong preference to work collaboratively with Jos. A. Bank to realize the benefits of this transaction, we are committed to this combination and, accordingly, we are taking our offer directly to shareholders,” Douglas S. Ewert, Men’s Wearhouse’s chief executive, said in a statement.
In its announcement on Monday, Men’s Wearhouse said that it had raised its offer by 4.5 percent, to $57.50 a share, and would start a tender offer for Jos. A. Bank stock that will expire on March 28.
Ronald Barusch wrote for the Wall Street Journal’s Dealpolitk blog that they key to completing the offer would be replacing two of the Jos. A. Bank directors, a task that could take a while given its structure:
Assuming the Jos. A. Bank board wants to fight the bid, which seems likely since it rejected Men’s $55 per share offer last month, it could take Men’s a year and a half to complete its tender offer. That is because Jos. A. Bank has a poison pill which effectively prohibits Men’s from buying a controlling stake in Jos. A. Bank without approval of the Jos. A. Bank board. The only people who can remove that impediment to the Men’s bid are the Jos. A. Bank directors. So on Monday, when it announced its tender, Men’s said it planned to seek to replace two of Jos. A Bank’s seven directors as well.
Jos. A. Bank has a staggered board, so directors serve three-years terms and under Delaware law cannot be removed prior to the end of their term. That means that even if the Jos. A. Bank shareholders fully support its bid, without the support of management it will take Men’s until the 2015 annual meeting (which if held at the same time as last year’s meeting would be in June of 2015 and could even be a couple of months later) for Men’s to replace a majority of the Jos. A. Bank board.
Lots could happen between now and then, including significant counter-moves by Jos. A. Bank. Jos. A. Bank started this situation by making a bid for Men’s at $48 per share. Undoubtedly, if there is to be a merger of the two companies, Jos. A. Bank management would prefer to end up on top as it proposed last September. And if Jos. A. Bank were to make a new bid for Men’s, with the cooperation of Men’s shareholders, it could move much faster than Men’s can to close a deal.
Men’s does not have a staggered board, and its entire board is up for election in at the 2014 annual meeting. (Its 2013 annual meeting was held in September.) So Jos. A. Bank could replace a majority of the Men’s board in the fall if it had a compelling offer on the table for Men’s. And that schedule could be significantly accelerated.
Elizabeth Lazarowitz wrote for The New York Daily News that an earlier offer was rejected, but investors liked the combination sending the stock of both companies higher since the initial bid:
The $57.50 per share cash offer is about 6% above the stock’s Friday close at $54.41 and higher than Men’s Wearhouse’s earlier bid of $55.
Jos. A. Bank had rejected the earlier offer in December, saying it “significantly undervalued” the company.
“Jos. A. Bank should be reluctant — in the best interest of its shareholders — in order to strengthen its position and maximize what Men’s Wearhouse will pay,” Stifel analyst Richard Jaffe told the News.
Jos. A. Bank kicked off the merger battle last year, offering $2.4 billion for Men’s Wearhouse. The bid came just months after Men’s Wearhouse booted founder and TV spokesman George Zimmer as executive chairman after he clashed with the board.
Shares of Jos. A. Bank, up about 8% since Men’s Wearhouse’s initial November bid, rose 4.5% to $56.87. Men’s Wearhouse shares also ticked higher, rising 2% to $51.68.
While the combination seems to make sense on paper, given the board structure it’s hard to see the hostile offer actually succeeding because it will take so much time. Investors believe that some type of deal will get done, but the moderate gains in the stock signal they’re still uncertain about the price – and the timing.
by Chris Roush
Noami Wolf writes for The Globe and Mail of Toronto about how the business media do a bad job when it comes to covering a female chief executive officer such as the new one at General Motors.
Wolf writes, “Then there is the ‘Potemkin CEO’ approach, which implicitly assumes that powerful men would never really choose a woman to lead an important institution. According to this cliché, Ms. Barra’s promotion must be a public-relations ploy, with men retaining the real power behind the façade. So we get this headline from Fortune magazine: ‘Is GM’s Board Setting Up Mary Barra To Fail As New CEO?’ The article goes on to explain that being surrounded by male rivals may fatally weaken her, as if male CEOs are not also surrounded by would-be rivals.
“Perhaps that is because she really is just a lady first, not a manager. An interview in the Times business section manages to focus the entire discussion on how things have changed for women at GM, rather than on what Ms. Barra intends to change at GM, or even on how things have changed in the car industry – surely an important question. The interviewer even asks at the end whether her husband is a GM employee.
“With coverage like this, news becomes more than news; it becomes a real-world outcome that negatively affects a company’s bottom line. Why would a major corporation – especially one like GM, which suffered a serious crisis that led to a massive government bailout in 2008 – risk appointing leaders, no matter how talented, who are bound to generate devaluing news coverage such as this?
“I cannot fathom why serious journalists commit such egregious breaches of basic professional norms of fairness and impartiality. When they do, they are performing the role of guard dogs of an endangered patriarchy, defending and thus strengthening the glass ceiling.”
Read more here.
by Liz Hester
The smallest U.S. auto company will now be fully owned by Italian firm Fiat, ending a dispute about ownership and clarifying the future for both firms.
The Wall Street Journal had this story by Christina Rogers:
Fiat SpA said it would get full control of Chrysler Group LLC in a $4.35 billion deal, ending a standoff that had clouded the future of both companies.
The deal, which helps clear the way for consolidation of the two auto makers, assumes a value for Chrysler at just over $10 billion, within the $9 billion to $12 billion valuation that banks underwriting a proposed initial public offering had been considering.
The IPO now will be called off, a person familiar with the plans said.
Analysts said the agreement is largely a win for Sergio Marchionne, the chief executive of both companies. The total price being paid for the 41.5% in Chrysler that Fiat didn’t already own is lower than some analysts had predicted. And averting an IPO gives Mr. Marchionne the freedom he needs to further consolidate the companies’ engineering and manufacturing operations.
The agreement also will allow him to spend more time on reworking Fiat’s operations in Europe, where it has suffered from a long slump in sales.
Jaclyn Trop of the New York Times added this background about the dispute between the autoworkers union and the company:
The agreement, which is expected to close on Jan. 20, will allow the carmaker and the union to end months of negotiations over the value of the U.A.W.’s stake. Union leadership had been pressing to force a public stock offering to cash out its shares on the open market amid arbitration in a Delaware court over the value of the trust’s stake.
Mr. Marchionne, who became Fiat’s chief executive in 2004, has been clear about his ambitions to create a company with a global scale to challenge the world’s leading automakers: General Motors, Volkswagen and Toyota. Fiat has held the majority stake in Chrysler since 2009 and has made no secret about wanting to acquire the remaining stake.
Fiat will pay the trust $1.75 billion in cash, and Chrysler will make a $1.9 billion contribution. Chrysler also agreed to pay the trust $700 million over four annual installments once the sale closes.
U.A.W. officials did not comment on the deal on Wednesday.
The merger will help both companies operate with a single set of financial statements, said Jack R. Nerad, the executive editorial director at Kelley Blue Book. “Their ability to move capital around is going to be a big advantage for them,” Mr. Nerad said.
USA Today also pointed out in a piece by James R. Healey that the agreement came as a surprise since the company had just announced plans for a stock sale:
The agreement, announced Wednesday, heads off a public stock offering of Chrysler shares that Fiat and Chrysler didn’t want, but the UAW was forcing, in order to set a value on its stake.
It puts to an end months of cantankerous wrangling between the union and automakers about the value of the retirement trust’s shares. And it’s happened suddenly, in an unexpected way, as firm plans had been announced late last year for the IPO.
UAW’s employee retirement trust — VEBA — owns the stake, and it and the automakers have been unable to agree on a price. The matter went to court, but the judge declined to set a price. As part of the buyout agreement, the retirement trust won’t pursue any further legal action.
Marchionne wants to own all of Chrysler so he can tap its cash to help support ailing Fiat, and to streamline operations of a merged company.
The Reuters story by Stephen Jewkes and Deepa Seetharaman pointed out that now it’s Fiat that needs Chrysler more than the other way around:
But it remains to be seen whether a merger will be enough to cut Fiat’s losses in Europe. Marchionne’s plan to shore up Fiat depends on the ability to share technology, cash and dealer networks with Chrysler, the No. 3 U.S. automaker.
“This is an increasingly American company now, because in Europe, and especially in Italy, the business conditions remain difficult,” said Andrea Giuricin, transport analyst at Milan’s Bicocca University. “Fiat has already lost many of its market positions in Europe and it won’t be easy to recover that.”
While Fiat is working to return to profitability and regain market share, Chrysler is working to conquer the American market and remain profitable in a tough environment. The combination seems to make sense on several fronts. Fiat gets access to cash and the American market, while Chrysler gains a simplified management structure and certainty about its future.
by Liz Hester
In a massive data breach, Target Corp. admitted Thursday that data from as many as 40 million credit and debit cards had been stolen. Coming during the busiest shopping season, the public relations nightmare is huge.
Reuters had this story by Jim Finkle and Dhanya Skariachan:
Target Corp said hackers have stolen data from up to 40 million credit and debit cards of shoppers who visited its stores during the first three weeks of the holiday season in the second-largest such breach reported by a U.S. retailer.
In terms of the speed at which the hackers were able to access large numbers of credit cards, the data theft was unprecedented. The operation was carried out over just 19 days during the heart of the crucial Christmas holiday sales season: from the day before Thanksgiving to this past Sunday.
Target, the third-largest U.S. retailer, said on Thursday that it was working with federal law enforcement and outside experts to prevent similar attacks in the future. It did not disclose how its systems were compromised.
Target did not detect the attack on its own, according to a person familiar with the investigation.
The story from Wired by Kim Zetter chronicled many recent incidences where customer data was compromised from point-of-sale terminals:
The breach, which was first reported by security journalist Brian Krebs on Wednesday, continued through December 15 and may have affected all locations nationwide. Customers who shopped through Target’s online storefront are not believed to have been affected.
The thieves breached the point-of-sale system (POS) and stole customer magstripe data, including names, credit or debit card numbers, expiration dates and everything else needed to make counterfeit cards. Target did not indicate if PIN numbers were also taken, which would allow the thieves to use the account data to withdraw cash from ATMs.
It’s unclear how the breach of the point-of-sale system occurred. It’s possible the thieves installed malware on the card readers at stores or breached the transaction network and sniffed data at a point that it was not encrypted.
Last year, thieves breached the point-of-sale system of 63 Barnes and Noble stores in nine states. In that case, the hackers installed malware on the point-of-sale card readers to sniff the card data and record PINs as customers typed them.
In July 2012, security researchers at the Black Hat security conference in Las Vegas showed how they were able to install malware onto POS terminals made by one vendor, by using a vulnerability in the terminals that would allow an attacker to change applications on the device or install new ones in order to capture card data and cardholder signatures.
USA Today’s story by Jayne O’Donnell focused on how stores are struggling to stay ahead of criminals who are finding it easier to steal information:
Increasingly sophisticated fraudsters can replace checkout line credit and debit card readers with ones that wirelessly transmit data to banks but also the criminals. But breaches as large as Target’s, reported to involved some 40 million cards, are more likely to involve network or software breaches, perhaps when an employee of the company or a contractor provides access to the “back door” of the system, says longtime retail crime expert Joe LaRocca, former head of loss prevention for the National Retail Federation.
The access can be done intentionally or unwittingly, says LaRocca.
“In my opinion, someone found a way to manipulate the system to extract the numbers,” says LaRocca, founder of RetaiLPartners, a loss prevention consulting company. “When a network intrusion occurs, typically a vulnerability is discovered and may involve some Inside collusion. Someone opened the back door or carelessly left the back door open” by not using proper security practices.
Target said it began investigating the incident as soon as it learned of it, but didn’t disclose when that was. The problem was first reported on a blog by security experts and former reporter Brian Krebs.
A third-party forensics firm is working with Target to investigate the incident and to determine what else the retailers can do to prevent the problem in the future.
Retailers are struggling to stay ahead of the criminals in this area, experts say.
Bloomberg’s Matt Townsend, Lindsey Rupp and Lauren Coleman-Lochner reported that the U.S. Secret Service was looking into the incident along with attorneys general in two states:
The U.S. Secret Service said yesterday that it was probing the incident, and two states’ attorneys general said today that they’ve begun inquiries.
Target’s challenges come as U.S. retailers gear up for the end of a holiday shopping season that ShopperTrak predicts will be the slowest since 2009. The last thing Target needs as rivals pour on discounts in a last-ditch grab for market share is for its customers to wonder if they should use their cards, said Ken Perkins, an analyst for Morningstar Inc. in Chicago.
“The timing could be a concern, especially only a few days before Christmas,” he said in an interview.
Target, which has 1,797 stores in the U.S. and 124 in Canada, fell 2.2 percent to $62.14 at the close in New York. The stock has gained 5 percent this year, compared with a 42 percent gain for Standard & Poor’s 500 Retailing Index.
The breach occurred when a computer virus infected Target’s point-of-sale terminals where shoppers swipe a credit or debit card to make a purchase, said a person familiar with the matter who asked not to be identified because the investigation is private. Molly Snyder, a spokeswoman for Target, didn’t respond to a request for comment on the cause.
Whatever the cause, Target is going to have some public relations work to do, especially since some people will be out money during the holidays. It’s never easy to tell customers you’ve got a problem but adding to the stress of the holidays could cause even more headaches and backlash for the retailer.
by Liz Hester
Facebook announced Tuesday it plans to start selling video ads that will appear in users news feeds. It’s another way for marketers to reach audiences, but will users actually want to watch the videos?
That’s the question posed by the Wall Street Journal’s story written by Reed Albergotti, Suzanne Vranica and Ben Fritz:
Marketers “have to be sensitive,” said Tony Pace, chief marketing officer for the Subway sandwich chain, which advertises on Facebook. “If someone said [this video ad] is going to run whether consumers want it or not, that would give me pause,” he said.
Facebook said its first video ad, a teaser for the coming sci-fi film “Divergent,” would begin appearing Thursday, marking an effort by the world’s largest social network to grab a slice of the $66 billion annual U.S. TV advertising pie.
The video ads, which the company says are still being tested to a limited number of users, will start playing automatically as users scroll through their news feed, the central real estate in Facebook’s desktop and mobile platforms. They will initially play without sound; users can stop the ad by scrolling past it in the news feed.
In a November survey of 735 Facebook users by global marketing consultancy Analytic Partners, 83% of users said they would find video ads “intrusive” and would likely “ignore” them.
USA Today’s story, by Scott Martin, pointed out the revenue potential of the move, saying investors welcomed the new source of income for the social networking site:
Facebook’s new video ad units could fetch between $1 million and $2.5 million per day to reach the social network’s entire audience, according to an ad industry source not authorized to speak on behalf of Facebook.
Spending on television ads in the United States is expected to reach $68.5 billion next year, according to eMarketer, up from $66.4 billion this year. U.S. digital video ad spending is expected to soar 39.5% to $5.79 billion in 2014.
“Big brands are eagerly awaiting to increase their FB spending through video,” says Brian Nowak, an analyst with Susquehanna Financial Group, who increased his price target to $68 from $52 ahead of the announcement.
Facebook’s video ads will begin running automatically across its News Feed but will remain muted unless people turn on the audio of the ads. The new ad forms will begin on both desktop and mobile.
Alexei Oreskovic wrote for Reuters that the move is an important one for the company’s stock, and Wall Street analysts have been waiting to see what the service will do:
Wall Street has been counting on video ads to open up a potentially lucrative market as the company tries to sustain its rapid growth. That market is considered crucial for Facebook’s market valuation, and poses a potential long-term threat to traditional TV networks.
The company’s shares, which have surged roughly 30 percent since September, gained 1.4 percent to $54.57 in morning trading on Tuesday, aided by Susquehanna and Oppenheimer price-target upgrades.
“In terms of monetization, the video ads are very important,” said Robert Baird & Co analyst Colin Sebastian.
“They’re priced a lot higher than traditional display or text ads. And it also opens up for Facebook a larger group of advertisers.”
The move could escalate competition between Facebook and Google Inc, which owns popular video website Youtube, and which is aggressively courting marketers to run video ads on its website.
Jenna Wortham wrote in The New York Times Bits blog that the opportunity is a huge one for Facebook as advertisers are looking for more ways to spend money on video content:
The video ads, if poorly received, could risk that growth, but they also present a tremendous opportunity. Digital video advertising spending is expected to hit $4.15 billion by the end of this year, a 23 percent increase over last year, according to the market research company eMarketer. YouTube has the biggest slice of that spending, at about 20 percent.
Sterne Agee, a research firm, projects Facebook could command as much as $3 million a day in video ads, which could represent as much as 10 percent of the company’s advertising dollars in 2014. Facebook had $1.8 billion in advertising revenue in its most recent quarter.
Facebook has taken steps to assure people its video ads won’t be too annoying. The videos are silent unless a user taps, clicks on the ad or enlarges it to a full screen.
For data-guzzling mobile devices, the company said that videos would be downloaded in advance when the device was connected to Wi-Fi. So if someone checks Facebook when a device is connected through a cellular network, it will rely on predownloaded versions of the video ads, keeping it from consuming too much data, a concern for people whose phone contracts have a monthly limit on the amount of data they can use.
At the end of each video ad, Facebook will show two other video advertisements that they can click or tap to view, if they choose.
If Facebook can show that users are watching and interacting with the videos, they’re sitting on a fortune. Advertisers are looking for new, innovate ways to reach consumers, especially younger audiences. But only time will tell if the new ads are intrusive and people begin to leave the site for other social media options.
by Chris Roush
Jack Flack writes on his blog about how drug company GlaxoSmithKline used its public relations might to spin a story.
Flack writes, “But GSK seemed to get that new plot point last night, when it announced it would curb its sales rep incentives and stop paying doctors to give speeches and attend conferences. The announcement made GSK the first major pharma to shift away from those long-time, often-criticized industry practices.
“The timing was essential to the news value of the story. By moving first in the industry, GSK is generally getting credit in today’s coverage for showing leadership among its competitors, many of whom will likely soon follow. The practices being ended are not only highly criticized by the public, but also have become increasingly ineffective as marketing tools, giving pharmas less and less reason to stick with them.
“From a spin perspective, GSK did not waste the opportunity, maximizing the news value of the story by apparently brokering a shared exclusive between the NYT’s Katie Thomas and the FT’s Andrew Jack. Both reporters got to interview CEO Andrew Witty for stories seemingly embargoed for midnight GMT, though the FT’s time-stamp shows they couldn’t resist jumping a minute early.
“Exclusives usually provide two benefits to a company breaking news. First, exclusives ensure the story will be played loud and large in the selected media outlet, which will naturally seek to give prominence to its ‘scoop.’”
Read more here.
by Liz Hester
The New York Times business columnist David Carr set off a debate Sunday about the state of local journalism and what a giant like AOL is planning to do with its platform. In a brutal column, Carr called CEO Tim Armstrong’s attachment to the pet project “sentimental, and some would say debilitating.”
Here’s the top of his column:
Tim Armstrong, the chief executive of AOL, is finally winding down Patch, a network of local news sites that he helped invent and that AOL bought after he took over.
At a conference in Manhattan last week, Mr. Armstrong suggested that Patch’s future could include forming partnerships with other companies, an acknowledgment that AOL could not continue to go it alone in what has been a futile attempt to guide Patch to profitability. He called it, somewhat hilariously, “an asset with optionality.” There may be a few options for Patch, but none come close to the original vision for the site.
The hunt to own the lucrative local advertising market, Mr. Armstrong’s white whale, is over. But Patch did not go quietly — hundreds of people lost their jobs over the last six months — and neither will Mr. Armstrong.
“Patch has more digital traffic than a lot of traditional players have,” he said in a phone call on Friday, still defending his pet project. “The long-term vision was clear: If you get the consumer, can you get the revenue? And we have a whole bunch of Patches where the answer is yes. But we rolled it out on a national basis and we’ve had to adjust based on the investor commitments that we have made.”
Bloomberg’s Megan McArdle followed with her own opinion piece on Monday, agreeing with Carr that Patch isn’t a viable business model. Here are some of her reasons:
That’s ironic, because hyperlocal news isn’t necessarily a bad business to be in; small-town newspapers are arguably faring better than small-city papers. Small-town papers don’t have as much competition from Craigslist Inc. for classifieds, and people still buy them to see their kid’s name on the honor roll or a picture of their church pageant.
But that sort of local news doesn’t scale. You have to have reporters to write the stuff and ad salesmen to sell advertisements to small businesses, but once you’ve written the story and sold the ads, there’s a limit to how much you can sell in small towns and cities. In larger areas, you have more scale — but also much, much more competition from people who were running a lot leaner than Patch was. Yes, you save something by being able to provide business services and information technology centrally. But you also lose some efficiencies to bureaucratization in a large organization. The core problem remains: Local news doesn’t scale that well. Which means that there’s not much benefit to linking a lot of local sites together on a single, large service.
Jeff Bercovici argues — correctly, I think — that Armstrong’s obsession with scaling up Patch rapidly doomed the site. But in some ways, this was inevitable. It’s hard for a big organization to do things on a micro scale — hard to keep managerial focus on such projects, hard to sell it to investors.
Wired’s Ryan Tate had a smart piece analyzing the problems with hyper local media and its inability to make money. He pulled in examples from Four Square and Curbed, both of which are going after national advertisers:
The takeaway here goes far beyond one startup: Though endlessly hailed as a huge opportunity, local online media has largely turned into a vortex of failure and disappointment. As failures pile up, you have to wonder how other high-profile startups will ever find ways of wringing big profits from what has proven to be a decidedly low-margin and slow-moving market.
Part of the reason it’s so tough to sell to local merchants is that they are struggling with tight margins and a lack of online sales infrastructure and savvy. The same technological disruptions that make it possible to launch local websites and apps tend to undermine the very businesses that could support those startups, while also making it easier for online competitors to join the fray.
One local site whipsawed by these forces is Groupon, as much a poster child for local media failure as Patch. After witnessing an explosion of competitors on the one hand and a slog of a sales effort on the other, Groupon has been able to stop its own stock slide only by getting into the humdrum, old-school business of credit card processing.
Sometimes, old-fashioned penny pinching can get a locally-focused startup farther than technological innovation. Yelp, for example, is still losing money. But as the use of its service on mobile phones expands, it has brought its costs under control compared to last year. The stock tripled in 2013.
That’s the sort of performance spike that’s rare in local media. The norm is Patch. But there is at least some hope for the future.
Let’s hope Tate is right that there’s a future for these models because the landscape seems to be littered with apps and sites focused on local markets that are struggling to make money. While there may be a lot of consumer appeal in finding the best martini in town, there’s little reason for local merchants to spend money reaching these audiences when Facebook, Pinterest and Twitter are free.
by Liz Hester
There were two technology stories published Sunday about companies that couldn’t be in different places — Samsung and Blackberry.
While the Wall Street Journal was reporting executives departing Blackberry, the New York Times had a profile of the successful Samsung.
Let’s first look at the Blackberry story in the Wall Street Journal by Will Connors:
The leadership upheaval at BlackBerry Ltd. continues under interim Chief Executive John Chen, according to people familiar with the matter.
The smartphone maker’s executive vice president in charge of global sales, Rick Costanzo, will be leaving the company by early next year, according to these people. Chris Wormald, who was in charge of BlackBerry’s mergers and acquisitions strategy, will be gone by the end of this month, according to one of these people.
Both men, long-term employees, couldn’t be reached for comment. The company declined to comment.
Their departures would come just weeks after BlackBerry’s chief marketing officer, chief operation officer and chief financial officer left the Waterloo, Ontario, company, which scrapped a plan to sell itself last month when it named Mr. Chen interim chief executive.
When Mr. Chen took over, he told employees during a town-hall meeting, “Things are going to get worse before they get better,” and that, “Not all of you will be here,” according to a person in attendance that day.
Which is true not only for those executives but also for the more than 4,000 people Blackberry is planning to lay off. It’s hard to get ahead when you’re cutting staff, production and retrenching.
Lee Kun-hee, the man who built the most successful, most admired and most feared business in Asia — a $288 billion behemoth that is among the most profitable in the world — had a message for his employees this year: You must do better.
At other companies, congratulations might have been in order. His companies were headed to another extraordinary year. But this was Samsung, the South Korean industrial group that Mr. Lee, an elfin man with a stubborn will, transformed from a second-rate maker of household appliances into a conglomerate with a flagship electronics business that has left most rivals eating its silicon dust. There would be no pat on the back for Samsung’s 470,000 employees. Instead, in June, he sent a companywide email sternly urging them to raise their game.
“As we move forward, we must resist complacency and thoughts of being good enough, as these will prevent us from becoming better,” Mr. Lee, who is 71, wrote. Samsung’s management, he said, “must start anew to reach loftier goals and ideals.”
Two decades earlier, having taken over the company from his father, Mr. Lee met with dozens of his executives and gave them a similar order, one that remains embedded in company lore: “Change everything but your wife and children.”
That message was effective. Samsung’s sales are equal to about one-quarter of South Korea’s economic output. Samsung Electronics, the flagship, posted $190 billion in sales last year — about the same sales as Microsoft, Google, Amazon and Facebook combined.
Last year, Samsung shipped 215 million smartphones, about 40 percent of the worldwide total, analysts estimate; this year, it is expected to ship more than 350 million. Interbrand, a marketing consulting firm, ranked Samsung as the eighth-most-valuable brand in the world. Mr. Lee is one of the world’s richest men.
The contrasts between these two mobile phone makers are stark. Blackberry, once the darling of business and ubiquitous in every meeting, is being replaced as other devices move in offering faster, smarter and sleeker phones. Samsung is at the top of its game right now, dominating the market along with Apple Inc. and pulling in money.
The Times reported that one key to Samsung’s success is its vertical integration:
The company’s sweet spot has become electronics: It makes chips, display panels and many other electronic parts, and then assembles its own smartphones and other devices.
This kind of vertical integration has fallen out of fashion in the West, where it is considered unwieldy. While Apple designs its hardware and software, for example, the company buys chips from other companies, including Samsung, and outsources the assembly of iPhones, iPods and iPads.
The only problem is that Samsung often finds itself in first place and needing to create the next trend, the Times said. With competitors such as Blackberry cutting employees and struggling to stay alive, that should give Samsung an advantage if they can stay focused.
It’s hard to see how Blackberry regains a foothold in the market. The technology and brand already seem outdated. The departure of more talent just makes it harder for the company to turn things around.