Advertising Run Awry

What do you call it when a very large advertiser hands out advertising contracts largely to cronies and pays no interest to the results? Well, that is what apparently happened in Canada over the last few years.

The report comes out tomorrow (Tuesday), and it will be bad news for Canadian advertising agencies, and worse news for the new Paul Martin government. Here is the sanitized overview, but insiders are saying that the full report is painful stuff:

Between 1998-1999 and 2002-2003, the federal government ran more than 2,200 advertising activities with contracts valued at about $793 million, making it one of the largest advertisers in the country. Our audit looked at whether in contracting for advertising services, the federal government ensured that it obtained best value for the Crown in a process that was transparent and gave equal access to suppliers of advertising services. We also looked at whether departments ensured that their advertising campaigns were designed to achieve the expected results.

An initial report back in 2002 said that the Canadian bureaucrats had “broken every rule in the book”, with some Canadian advertising agencies getting close to a million dollars for doing no work. The opposition party claims it has evidence the contracts were secret payments to firms for work they did for the Liberals in the 1997 federal election, which would be a violation of campaign financing laws.

The best part is how it is being played by the Paul Martin government. People close Prime Minister stress emphasize that this all happened during the 10-year reign of the prior prime minister, Jean Chretien. Critics correctly point out that Mr. Martin was finance minister for nine of those years.

Trend-spotting in the WSJ

There is a nifty supplement in today’s WSJ on the joys of trend-parsing. As part of the piece various folks, from venture capitalists to portfolio managers, talk about how they keep an eye on what’s changing and what’s hot.

The trouble is, most of these people aren’t telling the truth. It’s not that they are consciously keeping their best “world hacks” to themselves; it’s that they simply don’t know how they keep track of change and make sense of it. They almost certainly think they know, but it is unhighly unlikely that they actually have such neat and highly-privileged acccess to their own mental processes.

One interesting classic paper on the subject is Nisbett, R., & Wilson, T. (1977). Telling more than we can know: Verbal reports on mental processes. Psychological Review, 84, 231-259.

Furtive Folks with Laptops

Sitting here in the lobby at O’Reilly’s eTech it is fascinating as a sociological experience. There are a dozen people sitting around me, all of whom have laptops out (myself included). Almost certainly some of them are sending emails or messages to one another, not realizing the person they are looking for is sitting withing twenty feet.

Cruising around the room are various folks looking around couches and behind lamps. Far from being maintenance staff, they are people looking for power outlets. The “power hunt” walk is becoming something I recognize right away: eyes scan left-right-left-right, head for lamps and other powered devices. Fascinating.

Emerging Technologies Conference in SD

I’m at the Emerging Technologies Conference here in San Diego this week, so postings may be intermittent and/or particularly electic.

Speaking of digressions, it is strange living in a place that other people go to for conferences. Three out of the last four conferences I have travelled to have been about twenty minutes south of our house down the I-5 freeway i.e., in downtown San Diego. It sometimes feels like living on a movie set on Conference Planet, with people treating you as some sort of moving non-commercial backdrop.

For example, I was downtown in San Diego last Friday doing a TV spot for CBC Newsworld, and there was, of course, a conference going on. It was the International Stroke Conference of the American Heart Assocation, and doctors were everywhere. People in front of shops along 5th Avenue had that hungry look as they checked passers-by out to see if they looked requisitely doctor-like — that is, they were ready to spend heavily on meals and thingies — or if they were merely locals passing some time. My TV get-up — blazer and blue-shirt on top, worn-out jeans on the bottom — was a dead give-away that I was no stroke specialist.

George Will on George Bush

There is a fascinating George Will column this weekend on his unhappiness with current president George Bush. Having Conservative Will speak so frankly on the issue of Republican spending shows how finely balanced Bush’s position remains even in his base:

After this winter of his discontent, the president needs spring training. He is far from midseason form, and his accumulating errors are undermining the premise of his reelection campaign.

Economics of Home Renovations

There are only two reasonable conclusions from reading this study by G. Stacy Sirmans and David A. Macpherson (on the effect of various home features & renovations on resale prices):

  1. Home buyers should only consider fixer-uppers. That is where they get the best price, and that is how they increase the likelihood of a higher post-renovation resale price.
  2. Home sellers should replace all non-essential rooms with bathrooms — air-conditioned ones are best.

The overall findings are summarized below:

Encounters with Martha, Part III

More telephone encounters with Martha. Once again, it is Merrill brokerage assistant Doug Faneuil testifying to a brief but firey chat with home-decorating doyenne Martha Stewart:

Stewart was on the phone with Bacanovic, but when Bacanovic had to find some documents, he put her on hold. After a while, Bacanovic told Faneuil to pick up and let Stewart know that he would be back to her shortly.

Faneuil said Stewart immediately launched into a tirade about the music that Merrill piped through its phone lines for people on hold. Stewart “was going to leave Peter Bacanovic and leave Merrill Lynch unless the hold music was changed”.

I still think Martha should not be in court given the accusation, but I’m feeling a growing guilty pleasure — as the saying goes, you just can’t make this sort of stuff up.

WSJ on Ken Fisher’s Promotional Tactics

There is a fairly savage piece in today’s Wall Street Journal criticizing fund manager Ken Fisher of Fischer Investments and Forbes “fame”. (Whew, that was some serious “f” alliteration.)

The main complaints:

  • The firm’s 10-year figures, which show the firm handily topping the returns of its benchmark, are based on a combination of the firm’s institutional accounts prior to 1995 and on the performance on the accounts of high-net worth individuals since then.

  • Mr. Fisher was dead wrong in May 2002 when, in the span of just a few days, he put his clients back into the market at what turned out to be the brink of a significant market slide.
  • Salespeople are encouraged to go to great lengths to pursue clients.

This is dubious stuff. While the first point might be material if we had more info, the latter two are just hard-nosed business tactics in the world of managing money. Ken Fisher is a smart, tough, aggressive investor, one who isn’t afraid to market his products. Faulting him for that is nonsensical, not to mention holding him to a higher standard than CEOs of other businesses.

Is the VC Seed Pool Really Shrinking?

The National Venture Capital Association has its latest investment data out, and while returns are on the increase, one part of the market is apparently declining. Seed capital has been shrinking for some time as a percentage of total venture dollars under management, and that trend continues.

There are many ways to look at this, not all of which are as calamitous as the above figure suggests. For example, it could be that relatively few funds self-identify as seed funds, while they continue to do what used to be called seed financing. I have seen that in practise, with various large funds doing early-stage financings, but they would never call themselves seed funds.

Similarly, some of the slack at the seed end is being picked up by specialized angel funds, like Tech Coast Angels here in California. These folks put in more than grub stakes, thus reducing the need for larger funds to fill the gap. At the same time, goverment-sponsored funds continue to pop up, like the LSVCCs in Canada, and the SBICs here in the U.S. Both, in effect, fill the gap — while arguably crowding out private sector investors, of course.

Jobs Report: Good! Bad! Hazy!

The January employment report is out, and now the spinning can begin. Total nonfarm payroll employment increased by 112,000 in January to 130.2 million, seasonally adjusted. Since August, payroll employment has grown by 366,000. Over on the household part of the survey, the employment increase was more like 496,000. Either way, the 112,000 number was lower than people were looking for. For example, Reuters had the economic consensus at 165,000 jobs in the month.

But now the fun begins: people get to decide whether it was good, bad, or indifferent. Fans of “good” will point to the high household survey numbers, the tick down in unemployment, and that job creation was the fastest in three years. Fans of “bad” will say it was worse than expected, that it is likely to be revised down further in a month or so, and that we are still below steady-state job production almost two years after the recent recession ended.

The confusion about up, down, or sideways is neatly captured here. Reuters says things are bad, while the AP says things are good — in back-to-back wire releases: