Recession

When a recession hits, it’s expected that branded ad campaign spending drops in favor the clear ROI boost provided by direct response. Well, at least in the case of digital marketing agency Razorfish, that didn’t happen. According to the Publicis Groupe-owned shop’s 2010 Outlook report, 60 percent of Razorfish clients who did altered the approach of their ads actually moved to a more brand-focused message. “Clients didn’t have any real giant pendulum swings, they pretty much stayed the course and kept the strategies that they had used prior to the recession,” said Jeremy Lockhorn, vp of emerging media, in an interview with paidContent. “We would have expected the opposite to have occurred.”

The company also pointed to a slight benefit from the ad recovery that began tentatively in the second half of ‘09.  Razorfish’s average client upped their media spend by 4 percent last year, versus the 13 percent cut in budgets in 2008.

For the most part, Razorfish’s Outlook found a great deal of stability, despite the tremendous upheaval in the general marketplace. In terms of other trends Razorfish spotted last year, investment in portals declined for the second year in a row, while there was some growth in ad networks. But ad networks would have grown more had it not been for ad exchanges, which saw real gains for first time since appearing on the online ad scene five years ago. Both ad nets and exchanges are also taking money away from portals, Lockhorn noted.

“The definition of a portal is changing,” he said. “It’s going through an evolution of its own. We’ve counted the big four—AOL (NYSE: AOL), Yahoo (NSDQ: YHOO), MSN as well as Google (NSDQ: GOOG)—as portals for long time. We may have to include Facebook in that group, since it’s getting so broad in the kind of content that appears in members’ news feeds. You have to ask, is that social net becoming a portal? Especially as the portals themselves adopt more community features. We’ll be considering that for next year’s report.”

Other findings from the Razorfish Outlook included:

—Ad verification systems – Instead of turning to direct response for ROI, Razorfish’s clients increased their spending dramatically on tools that would tell them whether or not an ad was placed correctly. Razorfish expects more growth for ad verifiers over the course of this year as well.

—Local online advertising – As the iPad and other similar devices breathe new life into local newspapers, local display and local search should also see a return to robust spending.

—In-game advertising – Gaming ads drove less than 3 percent of clients’ spending last year. But with gaming and social media continuing to mix with geo-based services, that’s expected to leap over the next several months.

Yahoo! today announced that it has won approval from the city of Santa Clara for a new 46-acre headquarters. Reaction to this news has been harsh in social media circles. People can’t believe that Yahoo! would have the audacity to build a 15 building state-of-the-art campus with all of the perceived problems that they have. So what gives? Well, believe it or not, I’m here to make the case that Yahoo! is going to be just fine.

Let’s start with the reasons that Yahoo! has faltered over the last couple of years.

Economy hit them hard

Maybe more than any other major web property, Yahoo! was hit hardest by the recession. Yahoo! was a main destination for home buyers and raked in tons of display ad revenue from crooks (sorry, banks) like Countrywide, home improvement businesses such as Lowe’s and credit card companies. Most of that is gone now. Drop in display ad revenue really hurt Yahoo! more than any other web company, so it makes sense that they were hurting for a long time.

Yahoo! failed to become or buy a social network

Hard to point all the blame onto Yahoo! on this one – the Big Three (Google, Microsoft & Yahoo!) all missed this boat, and let Facebook become what it is today (including just passing Yahoo! in display impressions). No way to turn the clock back on this one either unless they merge with Facebook, or someone (i.e. Microsoft) buys both Yahoo! and Facebook and merges them, both of which are extremely unlikely.

They failed to attract enough developers to their platform

Although they’ve certainly tried, Yahoo! just never was able to grab enough attention of developers to really get things off the ground with a  platform. Sure, Y! Combinator and even Yahoo! Pipes have been moderate successes, but are nowhere on the scale of Facebook’s, Apple’s or Google’s platforms. It’s really too bad too, because of all of these companies, Yahoo!’s platform has consistently been the most open, or at least as open as Google’s.

I could throw up a lot of other reasons they’ve faltered, but I think that these are the main ones, and other reasons can be grouped into especially the last two buckets. Now onto what Yahoo! has right now that is working.

Flickr

Make no mistake, Flickr is Yahoo!’s most valuable social media asset. It’s their one property that is at the head of the class (social bookmarks are dead, so Delicious doesn’t count). Other than Facebook’s photo features, there really isn’t a contender to Flickr on the horizon, so this should be a strength for Yahoo! for some time to come.

Yahoo! Mail

It’s certainly not the best web-email out there (that would be Gmail if you weren’t aware) but the sheer number and usage of Yahoo! Mail makes it the second most important webmail on Earth. More on Yahoo! Mail below.

Content

Yahoo! has a legion of dedicated writers, has countless partnerships with other content providers (including Hulu, the AP, etc), and has a well defined (and familiar to users) content structure. Yahoo! articles get lots of comments and discussion, and their Sports pages especially are still very closely followed.

Gaming

Although somewhat on the decline (especially as Facebook and iPhone games have risen), Yahoo! Games still attracts plenty of casual gamers and is another strength for them to build on going forward.

Large sales force

This is good to have, but of course isn’t unique to Yahoo! However, this could give them an advantage over smaller organizations (such as Facebook) that are still ramping up their advertising sales forces.

Ok, those are the main strengths that I believe Yahoo! possesses right now. Now here is what they should do moving forward.

Go mobile

Yes, Yahoo! already has some mobile apps and they have mobile versions of their site, etc. But they are all sub-par. With Flickr, Yahoo! Mail, games and their vast amount of content, they could have some very strong and entertaining mobile apps. They need to scrap everything they’ve built before and go all out with iPhone/iPad, Android, Blackberry and Windows 7 Phone apps as soon as possible.

Update Yahoo! Mail to take on Gmail

Yes this is a hard task that makes it harder because Yahoo! does not have the kind of productivity apps that Google has (esp Calendar and Docs) that can be integrated into Mail. However, as I mentioned above, Yahoo! is still a giant in email, and their offering is not a dinosaur like Hotmail – it’s just not Gmail. If they can get this right they’ll certainly regain some momentum (oh, and they need to make everything free and forget about charging for POP3 etc).

Take advantage of Facebook’s PR problems NOW

Facebook is offering Yahoo! a tremendous window right now. Say what you will about Yahoo! but they have a pretty decent track record (China excluded) of keeping people’s data relatively safe. Add to that the fact that many of the same people that use Facebook have Yahoo! accounts, and Yahoo! should be thinking of ways to lure disenchanted Facebook users away (they’ve got to be able to do it better than Diaspora at least). People still like Yahoo! and they need to take that by the horns and make it into something people love.

Let the portal die

Someone, whether it’s CEO Carol Bartz (she certainly makes enough) or someone else, needs to make the ultimate decision that will get Yahoo! going in the right direction: they need to let the portal die and make the site a stream of entertainment and news that fits each user. We simply don’t need portals anymore (as familiar as they are to many) and Yahoo! has to accept this and move to something new.

Go all out on location & local

As I’ve said before, location is the next web, and if Yahoo! can use location as at least one of its cores going forward, they will be well positioned to leverage their local business directories (another strength I didn’t mention above), maps and mobile applications. Baking location into the core of a new generation of mobile apps (and maybe buying a hot location startup) would certainly help them down this path.

Win internationally

This is a very strong advantage of the Big Three – all of them have strong presence and brand equity worldwide, and Yahoo! is not exception. They need to continue to expand and fortify their advantage in all markets, whether through completely branded Yahoo! experience or on the very successful model of buying 39% of Chinese powerhouse Alibaba (super-investor George Soros was also today announced as a major private investor in Alibaba, which, case in point, let to stock gains for Yahoo!).

Work with Microsoft/Bing in the right way

Yahoo! made the right decision to more-or-less get out of search. They had lost and needed to tack on with either Google or Bing, and now that it’s Bing, they need to do it right. This can’t be overstated – they need to make this work and get strong revenue from this deal to hold them over while the above changes are made.

Finally…

Yahoo! could still very well go the way of AOL and disappear from being important or worth caring about. That said, they seem to have weathered the storm to a point where things are starting to go in the right direction (though still too slowly). I’ve been a Yahoo! user since 1995 and I’ll stick with them for a few more years regardless, but they better not wait to move into their new digs before they start reinventing themselves.

Oh, and by the way, Yahoo! is more popular than Facebook or Google or Twitter or any other service for that matter for logging into sites on popular commenting system Echo.

It's counterproductive to discuss whether we have a talent shortage or high unemployment. We have both. Even as the economy recovers, the Obama administration's Council of Economic Advisors earlier this year projected that the unemployment rate would stay well above 6% until 2015.

At the same time, the argument that my coauthors and I put forth in 2006 in our book Workforce Crisis remains true: There are significant, growing shortages of skills in critical job categories. The recession may have obscured this trend for a couple years, but it marches steadily onward. Even at the height of the recession in 2009, U.S. companies were struggling to fill certain kinds of positions.

These two seemingly paradoxical conditions exist because many of the jobs now being created require skills that the workforce doesn't possess in sufficient quantity. This structural mismatch will be difficult to overcome, even in a climate of growth. The "workforce crisis" is a painful reality in both directions — for companies looking for the talent required to grow and, of course, for the individuals struggling to find jobs in a shrinking pool.

Which is why I find politicians' promises to "restore jobs" a bit puzzling. I sincerely wonder: What are they thinking?! While government policy can support job creation broadly, most of the pain in the system today is not in the loss of jobs but the mismatch between the skills needed for available jobs and the skills workers possess. We need to address both sides of the equation.

In the middle of the last century, the United States had one of the closest matches between jobs and skills of any country in the world. At a time when most European countries limited advanced education to the economic elite, the U.S. made it broadly available and, as a result, created a workforce that had the right skills, at the right time, for our rapidly expanding industrial economy. U.S secondary schools have been free and generally accessible since early in the 20th century. By the 1950s, nearly 80% of older teens (aged 15 to 19) in the United States were enrolled in high school, compared with fewer than 40%in Western Europe. The widespread expansion of state colleges and universities, begun under the Morrill Land Grant Act of 1862, led to even further advances in American education. For decades, the number of educated American workers grew faster than did the demand for them.

But beginning with the cohort that completed its schooling in the early 1970s, the supply of highly educated Americans slowed significantly, while the demand continued to increase. At one point in our history, most American workers were engaged in producing food and manufactured goods, often through physical labor that did not require a great deal of training. The U.S. is now shifting to a knowledge-based society where workers produce services using knowledge, expertise, and analytical skills.Traditional manufacturing has been shrinking as a share of the economy for decades.

The impact of the decline in manufacturing jobs hits men in the workforce particularly hard. As Lawrence H. Summers, director of the White House's National Economic Council, said at Davos in January, "Just to put it in a way it's not usually put, one in five men in the United States between the ages of 25 and 54 is not working right now. A reasonable extrapolation would be that following a reasonable recovery, it will still be one in seven, or one in eight, who are not working. That is in contrast to the mid-1960s, when 95% of men between 25 and 54 were working. That suggests quite profound issues."

As this year's Economic Report of the President on Strengthening the Workforce concluded, the best way to prepare our workforce for the challenges and opportunities that lie ahead is by strengthening our education system — creating a seamless, efficient path for every American, from childhood, to acquire the skills need to fill the gaps.

Confession: I’m a social media junkie – an enthusiastic blogger, active Twitter user, reluctant member of the ever-growing Facebook empire, and YouTube watcher. I like to share my thoughts and interesting content and online services.

The chances, however, of me using Blippy are zero, nil, nadda, nunca.

Why anyone would give a third-party their credit card information so their purchases can be tracked and broadcast is bizarre. Over the past week, I have been beating the drum about the changes that Facebook made to its API that now make more of your information public, and Blippy is just another strange part of the “tell-all” ecosystem that has emerged in recent years.

Really, what are the benefits of telling the world about your purchases? Seriously, what’s really in it for you, your friends or strangers who see this information.

Is it vanity? Is it a way to provide real-world suggestions about the best products and services to purchase? Is it just another creature of consumerism, which seems to have survived the recession relatively unscathed? Or is Blippy just another beast to feed our growing addiction to sharing.

I’m sure there are people who get some value from Blippy by getting a better idea of what people are buying so they can make better purchasing decisions but let’s be real here: Blippy’s in the business of collecting massive amounts of data so it can aggregate and leverage it to make money. In other words, your activity fuels the fire.

To me, the common theme between Facebook and Blippy is how the balance between the benefits offered to users, and what these companies get from all their users’ activity is starting to tilt in the direction of the companies. While users get a few social media crumbs, Facebook and Blippy are gorging at the data buffet.

By the way, here’s Blippy mea culpa in the wake of reports that some of its users credit card information was accidentally disclosed via Google.

Hiring activity in the technology sector is heating up rapidly, according to the Wall Street Journal and other sources in Silicon Valley. Companies such as Google, Intel and LinkedIn are adding staff at a rapid clip, and say that they intend to continue doing so over the next year. That’s good for the tech sector, which has been struggling to rebound after a downturn caused by the recession, and it’s good news if you’re an unemployed engineer or developer. If you’re a startup, however, you now have to worry about competing for staff in a rising labor market, along with your other concerns, such as staying in business, paying your phone and power bill, and so on.

On Thursday, Google told analysts on its earnings conference call that it hired 768 new employees in the first quarter, and that it expects that rate to continue, if not accelerate. “We expect to continue hiring aggressively through the year,” Google Chief Financial Officer Patrick Pichette said. Intel has also said that it plans to hire between 1,000 and 2,000 people this year, its first major hiring wave in five years, and Cisco is planning to expand its workforce by 2,000-3,000 employees as well.

On a smaller scale, LinkedIn said it’s already hired 154 people so far in 2010 after adding 184 people last year, and Twitter has boosted its headcount to 170 from about 45 in just the past year and says it plans to continue hiring. Technology recruiting firm SC Palo Alto, which places about 100 candidates a year with small and midsized companies in Silicon Valley, told the Journal that right now “it’s common for us to have an engineer with the right skills talking to three or four companies at a time.”

Is this a sustainable move in the job market? It’s a little early to say for sure. As recently as February, the economy in Silicon Valley was said to be “sputtering,” according to a report by two Valley non-profit groups. “We show no evidence that the recovery has arrived,” Russell Hancock, chief executive of one of the groups, told the New York Times. But a report released today by the Silicon Valley Leadership Group said that hiring is definitely picking up, according to the San Jose Mercury News. Over half of those companies surveyed said they expect to see job growth in their sector, compared with just 17 percent the previous year.

For startups, however, that not only puts the squeeze on the available talent pool, but also pushes the price of labor up. Which is fine if you are Google, or Facebook or even Twitter and you have lots of venture capital dollars to spend. But for those still crammed into a two-room apartment with the server in the kitchen, the days of finding talent easily — and cheaply — could soon be over.

Post and thumbnail photos courtesy of Flickr user vlauria

Cloud computing creates enough disruptions for small businesses that it seems almost folly when we hear some of the stories we do.

We heard one story about an IT department that said that the company could not afford to have more people accessing the Internet. Yes, the Internet is too expensive for small business. Maybe it's time to scrap the dial up?

Sponsor

Cloud computing is one of those classic disruptions to a business that over time becomes part of the fabric for a how a company operates.

You can either get into it now and be a leader or wait and join with the rest of the masses. That's not to say going with the masses is a bad thing. Every company has a different timeline.

But take this into consideration:

Think you can't take on the big companies in your market? Think again. A study by K2 Advisory finds that adoption rates by smaller organizations of public cloud and SaaS services from vendors such as Amazon and Google will outpace the adoption rate of larger enterprises by a factor of two.

That means while the big guys are scratching their heads, the smaller, smarter players can potentially make inroads into markets where they could not go before. Why? It's just easier to scale and integrate on a global scale.

"In five years' time the provision of IT to mid-sized and smaller businesses (of less than 1000 employees) will be quite distinct in terms of cloud adoption from enterprises," said Kathy Ring of K2. " 'Indeed, it could be argued that small and mid-sized business use of cloud computing will enhance their agility and their ability to bounce back more quickly from the recession of 2009/10. Many Western enterprises, however, will continue to find that their IT systems are increasingly sclerotic, constrained by client-server ERP systems.' "

Cloud services leverage the massive server capacity available. It's elastic in nature, meaning it can scale up or down, based on demand for the service. A small business can expense the cost as opposed to purchasing an IT asset such as a server.

It's a big reason why online services for small business have grown at such a clip. For example, online conteny management systems are now available that can be used as an alternative to making investments in services that require substantial IT investments. It has meant that small startups are competing in much larger markets against very big competitors. Box.net, for example, just received $15 million in funding. Their target: Microsoft Sharepoint.

Of course, technology companies provide the ability to scale in different ways than other types of services. But there are plenty of examples for how this movement is taking hold. Really, any company can leverage the cloud to take advantage of its storage and application infrastructure.

So, where do you start? Start by trying out some services to get a feeling for what you can do:

Google Docs. See how it compares to Microsoft Office.

Skype. Explore how you can use Internet-based services to replace voice and video.

SugarSync. Get access to your desktop from anywhere, any time. Services like SugarSync offer the capability to access your file and desktop from anywhere you may be:

Small businesses may feel overwhelmed by cloud computing. But it's worth the effort in experimenting. There is a small window that is open now. Companies that can take advantage of it may be best positioned to compete against their larger counterparts.

There’s a major shakeup to report at Digg today: Jay Adelson is stepping down as CEO, effective immediately. Adelson will be replaced by Kevin Rose, who founded the site back in 2004 and has to much extent remained the face of the company through his role as co-host of online video show Diggnation.

In a statement to be released shortly, Adelson says that “the entrepreneurial calling is strong, and I am ready to incubate some new business ideas over the next twelve months. As the economy exits a very deep recession, I believe that it is an excellent time for new companies to develop.”

While we don’t yet know what those ideas might be, the news comes in the midst of a major overhaul at Digg. I talked to Adelson in-depth about the new Digg last month, who described his company’s plans to reinvent itself as an aggregator of what people are sharing around the web. Since then, the company has moved swiftly into mobile, unveiling both iPhone and Android apps in recent weeks.

Now, execution of the company’s ambitious game plan falls squarely on Rose, who says of the shakeup that he is “excited to be taking on the role of Chairman and acting CEO, driving Digg forward on our promise to enable social curation of the world’s content and the conversation around it.” Nonetheless, this news comes as a huge surprise given the timing.

We’re hearing that the company held an all-hands morning moments ago to share the news with employees. More to come …

Jay Adelson Statement

Got some news. After five years, forty million users, and an amazing ride, I’ve decided to step down as CEO of Digg. With the new Digg getting ready to launch, Digg Ads doing well, our sales force growing, our hiring ramping, and the company maturing well beyond its startup phase, I feel that now is the right time.

The entrepreneurial calling is strong, and I am ready to incubate some new business ideas over the next twelve months. As the economy exits a very deep recession, I believe that it is an excellent time for new companies to develop. Of course, I will continue to serve as an adviser to Digg. In the interim, Kevin has agreed to step in as Chairman and CEO.

I’d like to thank Kevin, the Digg staff and the Digg community for their support, insight and, most of all, their loyalty in turning Digg
into the force that it is today.

Kevin Rose Statement

I want to be the first to thank Jay for the last five years of amazing work. You’ve been a great friend and mentor, we wouldn’t be where we are today if it wasn’t for you.

While I’ll miss working w/Jay day-to-day I am excited to be taking on the role of Chairman and acting CEO, driving Digg forward on our
promise to enable social curation of the world’s content and the conversation around it. We’ve been super busy on the product side
getting ready for the upcoming Digg redesign and delivering our mobile apps for the iPhone and Android.

Thank you very much for your on-going support of Digg, I’m truly excited about the next five years, big things coming!

Tags: digg, jay adelson, kevin rose

Google it ain't

Unlike Google, Mozilla says it's not committed to the idea of integrating Adobe Flash with its web browser.…

What is your recession sales strategy?

Sony anti-hack firmware to be hacked

Hacker George Hotz, the guy who opened up the Sony PlayStation 3 earlier this year, has vowed to find a way to allow Linux buffs to install their favourite OS on the console after an upcoming firmware update renders this impossible.…

What is your recession sales strategy?