Monthly Archives: September 2008

Speaking of falling markets, McCain’s odds are now 29.5%

If you haven’t read The Wisdom of Crowds by James Surowiecki, all you need to know is that groups of people can be pretty accurate in their guesses. Ask a room of 100 people how many marbles are in a jar and every individual will miss, but average all the collective estimates and you’ll be right on the money.

One huge impartial group is guessing McCain’s odds of winning the presidency are now less than 30%.

The Iowa Electronic Markets is a prediction market experiment in which thousands of real people bet small sums of money on the outcomes of things such as the U.S. presidential election — and for years has achieved remarkable success. The idea is similar to betting on a horse race; the demand of people picking winners sets a price for the two horses, and those “odds” come extremely close to the actual outcome … since the group intelligence of all betters ends up predicting the real odds.

The IEM expresses odds in cents on the dollar, similar to percentage. After the bailout debacle yesterday, McCain’s odds in the “winner takes all” betting pool fell 17% from a recent high of 47 cents on Sept. 12 to 29.5 cents at midnight last night — or a 29.5% predicted chance of winning the election vs. Obama’s 70.3%. It’s noteworthy that these bets are not political opinions; they are the wisdom of people trying to make a profit by predicting the real outcome, which makes the guesses extremely accurate. Also note that this is not a guess on what percent of the voters will go for each candidate (which is much closer), but a “winner takes all” prediction on who, Obama or McCain, will win the entire election.

Crazy times. A lot could happen. Play this forward and you know that both Obama’s and McCain’s camps, who watch this type of thing, will be preparing bold chess moves to try to secure/dislodge the momentum. But bookmark IEM if you want to keep an eye on what the free market thinks about the U.S. political process.

Bailout dies. Cause of death: bad branding.

The jaw-dropping failure of the U.S. government’s $700 billion bailout package was remarkable not because of the histrionics in Congress but rather that most Americans were against it. A survey by CNN found that 54% of U.S. citizens were opposed to the bill, even if most couldn’t explain it.

The bill failed because it had a lousy brand.

In communications, sound bites matter — and explaining that most businesses such as your employer operate thanks to credit called commercial paper that allows businesses to meet the ebbs and flows of cash balances, and that credit markets behind commercial paper might lock up and cause every business in the U.S. to stop buying supplies or not make payroll, is rather complicated.

But saying a $700 billion bailout is bad ’cause it helps rich guys on Wall Street is easy.

So the bill died, not because it was good or bad, but because the nuances of credit markets can’t be explained in 10 seconds. The bill’s backers should have known better. Think of the history of political spin: the estate tax was renamed the “death tax“; anti-abortion groups call their movement “right to life”; abortion advocates on the other side say they are “pro choice.” Both sides of most debates pick a powerful brand name that creates an immediate, emotional response.

The bailout sponsors forgot to build a brand. It’s a good lesson for marketers everywhere who have complex stories. If you can’t keep it simple, you, like a bank, will fail.

Why everything won’t be ‘Free’ tomorrow

If you want to know why everything won’t be free within a few years, just think about your airport luggage.

Wired editor Chris Anderson is about to publish “Free,” a look at how the proliferation of free media online is expanding into other business dynamics. The über-designer David Armano explains the entire book in one graphic, above: Either you give something away by subsidizing it with sales of something else (either cross-sales of other products, or third-party advertising for free media), or you give something away while charging a small portion of your customers for premium service.

It’s a simple get-this-but-pay-for-that trade-off. And it seems to make sense; consumers have put up with advertising-supported free radio and TV for years, so why wouldn’t free expand?

Trouble is, when you push “free” models that work online to real-world goods or services, people rebel — because in the real world you see what other people get, and transparent cross-subsidies tick you off. The perfect example is the U.S. airline industry. When fuel prices skyrocketed, airlines had a big problem — they could either raise ticket prices or pass the extra charges along in other fees. Raising travel prices in a day when any consumer can shop for the best deals on is suicide; if you jump $25 on your ticket price to Vegas, consumers flow easily to a competing carrier.

So airlines did what Chris Anderson recommends — move to Free Model 1, where the price of one good is subsidized by sales of others. Airlines held ticket prices steady but tacked on a range of surcharges, for baggage check-in, food on planes, etc., to cover their higher operating costs.

And people screamed.

The problems were many. First, surcharges forced lower-income consumers to bear a disproportionate share of the fuel increases; families going on vacation with four kids and 10 bags where walloped with high baggage fees, while affluent business travelers waltzed aboard with a single carry-on bag. Second, the perception of unfairness abounded as everyone in the real world could compare what others were paying; if you bring bags, you get charged, and your fellow passenger may not. And third, each surcharge created yet another negative touchpoint in the travel experience — a bump here, an unexpected fee there, a series of unfortunate events.

In theory, someone always has to pay and “free” models that move the cost around can work on many levels. But in reality, consumers going through a customer service experience do not like surprises, and they hate any perception of unfairness. A utility could reduce your electric bill by 30% and then charge you $350 every time a serviceman comes to check your electric meter. In this new model you’d pay the same amount every year, but the fact you pay so much for a home visit would probably be infuriating.

The online media world is moving to the free. Just don’t expect the offline world to meet it there anytime soon, because in the real world, the costs transfers are much more visible.

Hey. Be clear.

We spent some time on a creative project last week and at the end asked ourselves: Is the message perfectly clear?

There is so much chatter in communications today. Yet often designer committees and creative chiefs come up with messaging that is subtle, showcasing their intelligence with ironic nuance that might win awards. But is it clear? Consumers don’t digest ads the way they are presented to clients (typically in a boardroom on a flat-panel TV with dimmed lights, a hush in the audience, and everyone staring excitedly at the screen to see what they, the clients, just bought for tens of thousands of dollars). No, consumers glance at ads and turn the page. They see a TV spot and get up to use the bathroom.

So take the test. Is your message clear?

(Image via Million Monkeys.)

Hulu: Will web users embrace long-form video?

OK, we’re digging Hulu. In the past few weeks since seeing CEO Jason Kilar at OMMA in New York, we’ve played around with the online TV-video site — and love how the clean interface provides easy access to thousands of movies or TV shows with only 2 minutes of commercials per half hour vs. 8 minutes on regular television.

But we’re still wondering if Hulu, or any online site, can entice web users with long video clips. BusinessWeek reports that Hulu users are up to 4 hours and 16 minutes of video per month –Robert D’Asaro, a media strategist at OMD, noted “now that’s an engaged viewer … (not) somebody bouncing from clip to clip on YouTube.” However, Nielsen notes that U.S. consumers now spend 121 hours and 48 minutes a month watching TV — putting Hulu consumer usage at only 3.4% of that spent with the regular boob tube.

To be fair, users of Hulu also surf the internet, and their cumulative time online adds up. Hulu is getting traction, online video is surging, and overall hours spent per month watching TV is down 4% year-over-year as consumers begin watching more on PC screens or mobile phones. Advertisers are worried about traditional broadcast, and so they’re paying close attention to Hulu’s test that consumers will watch online for a long duration. For now, Hulu is charging three times as much for impressions vs. regular television; the novelty, fewer interruptions, and attuned audience may make that worth the price.

Zinio the research tool

Need to know what competing advertisers are doing in a local market? And need to know in, say, 10 seconds?

Zinio, an online magazine subscription site, offers a quick look into a range of publications as part of its free trials. Hit the main site, go to regional pubs, pick a market, and you’ll see onscreen the entire publication in its original hardcopy format, ads and all. A nice tool for competitive research.