Why this recession will be different

There seems little doubt that the US economy is in some form of recession. Whether that recession is impacting all the states and all parts of the economy is another matter. The auto industry seems to be getting hit while tech remains relatively strong. Perhaps that has something to do with the fact that modern cars will last decades, whereas computers still seem to need replacing every three or four years. Anyway, that's a whole other subject.

What I've been giving thought to is how this period of economic change will differ from the time of the dot com crash. One item really stands out to me and that's stock options. When the dot com market was booming tech companies were giving staff relatively large amounts of stock and lower basic salaries. As a result when the crash happened staff were left with big tax bills on stock that wasn't worth anything and salaries that were artificially low. This made many employees nervous about accepting options as a form of compensation even in companies that had good prospects. Couple this with changes in accounting rules that made the idea of issuing stock options less attractive and you had a situation where companies have been forced to look at more traditional rewards. They have also had to sell people on the idea that the job they were offering would actually be worth taking.

So if we assume that the market does take a beating at stocks drop 15%, the impact on the economy could be quite different. Last time around, those with stock in public companies were trying to sell fast before their tax burdens grew too great. This time around the magnitudes are so different that the rush to sell shouldn't be as dramatic. Also, this time around people are earning higher basic salaries. This has two implications: 1. People are less dependent on stock for compensation so a bad day on the market won't mean as much 2. If companies need to trim costs they shouldn't need to lay as many people off in order to achieve the same cost saving.

As you can probably tell, I'm no economist but I do believe that the relative absence of stock options in the current economy could have a big bearing on how a recession plays out.

No news is bad news

Yahoo! may not want Microsoft to buy them but I suspect they are enjoying the attention the Microsoft offer has brought to the brand. For a while now Yahoo! has been struggling to regain the spotlight from Google. With Microsoft's offer they suddenly have that spotlight albeit for different reasons. I'm curious to see whether this attention translates into increased sales revenues - I suspect it could. If it does, the old saying that: "no news is bad news," may well prove correct.

btw - for those of you that track this blog, you may recall my YouTube measure. Since I last checked (which was back in December) Google's postings have increased from 169,000 to 192,000 (an increase of 13.6%), while Yahoo!'s have increased from 123,000 to 149,000 (an increase of 21%).

Creston spins out of a difficult US market

If you read the latest PR Week UK front page news that Creston has pulled out of the US you may have come to the conclusion that the US was a dangerous place for PR agencies to be right now and that firms such as ours and Huntsworth must be struggling. I’d like to refer back to our recent AGM update where we talked in positive terms about our business here in America and also refer people to Huntsworth’s update where they suggested they too were trading well.

The story inferred that large agencies are going to find it harder if a recession strikes (shocking news) but fails to make a coherent argument as to why – there only real suggestion is that in tough times people go to smaller less expensive firms. As an agency head that has worked through a recession or two I’ll tell you that in recessions clients get cautious, which means they tend to want to work with firms they know will still be there when a recession ends. Equally, better talent tends to also play it safe and opt for agencies that are likely to survive and that tends to be the bigger firms. So as you can see I’m not really following the logic of this news piece.

My next observation is that even having read the following paragraph several times I’m still not sure what it means: “Agencies under the umb¬rellas of mid-sized conglomerates such as Chime, Next Fifteen Group and Huntsworth, which are reliant on central costing, could now find their budgets under close scrutiny from clients, according to analysts.” What exactly is “central costing?” Do they mean that PR budgets are somehow managed centrally by big customers across the globe? If so I suggest they interview a few clients and they’ll soon learn that the vast majority of budgets are set market by market.

My last point is that I’m rather surprised PR Week didn’t contact the midsized holding companies they referred to for a perspective on this news. Perhaps if they had the Creston spin would have been exposed. My hat goes off to Creston though. Let's face it, they did manage to deflect some pretty bad news and suggest that they were now better placed than others to deal with the US. I just wonder who really bought that news.

Is there a link between Green and the economy?

Six months ago Green was everywhere in the media. Major companies were clamoring to be seen as the greenest business with Dell perhaps being one of the most ambitious in this regard. As economic uncertainty has increased Green appears to have slipped from the agenda. It is almost as if Green was a luxury companies and consumers could afford when times were good. Interestingly it has also failed to be a pillar of any of the Presidential nominee campaigns. I find this rather disturbing but not that surprising. This does present a challenge for those of us that believe Green is more than just a convenient way of appealing to certain consumers. The answer, I believe, is in adapting the Green message to suit the market. Right now the message needs to be less about good citizenship and more about how Green can actually help companies be more efficient and reduce costs. For example, companies that adopt advanced video conferencing now in lieu of having staff flying back and forth will be doing the environment a favor but will also be saving huge amounts of staff time and thus increasing productivity. In other words Green needs to think like a business and listen to its customers. If it doesn't I fear it will take a back seat for a while to come.

Same destination, different route

It's easy to believe that when the economy changes, so does the mission of a business. The reason it's easy to believe is because it's at least partly true. If the economy changes, so does the economic opportunity... at least in the short term. However, I would argue that looking longer term the goals of a business should remain unchanged. This means if a business is aiming to lead or create a market it should still aim to do so. Of course its timescales may get modified but the destination shouldn't (Unless of course the economy wipes that market off the map!). So if the commercial objectives remain unchanged but the means of achieving them get modified, then I'd also argue that the communications objectives should remain while perhaps the strategies may be reviewed. So as the storm clouds around the US economy continue to build, I'd encourage communications professionals to remind their staff not to take their eye off the prize but instead to look again at the route they may take to get there.

People like good adverts and bad PR

If you search online for 'great' or 'best advertising' you'll find sites such as bestadsever.com and bestadsontv.com. If you search for great or best PR, you'll find very little. Indeed there isn't a site (yet) that collects all the great work done in this area of marketing. There are however a host of sites that collect all the bad work done. One being prdisasters.com. It just goes to show that people love to see talking babies, horses with flatulence and dancing lizards just as much as they like to see CEOs stumbling to handle the media when things go wrong. Maybe PR Week should start a Best PR site and each month upload their winners.

Borderless Communities and Flat Issues Build Global Brands

Global PR is nothing new, nor is the concept of a global economy. However, now for the first time we are seeing what a global economy really means and that in turn is changing PR thanks to what I’d call Flat Issues and borderless communities. In the past a global economy meant new business models and new markets for goods and services. Now it means common attitudes to brands and common fears about issues. Consumers around the developed world pay little attention to where their products are made but they do care about many of the same things. "Are these bananas organic?" "Is Microsoft evil?" "Should America leave Iraq?" Ten years ago I'd theorize that only a small percentage of the issues people cared about in one country were shared with people in another. Today I'd suggest that on any given day almost a third of the issues on people's minds are common across multiple markets.

Now this both poses a challenge and creates an opportunity for anyone trying to build brands. On one level brands need to worry about where input to issues will come from. For example a firm in Sunnyvale CA may well get berated online by someone in Frankfurt, Germany even though they don't officially do business in that country. On the other hand, a brand that is having a tough time in one country may turn to customers in another to help them shift perceptions. This idea isn't new but for the first time people may actually find it works thanks in large part to the rise of social networks/media. Social media offers the chance to break out of a country by country approach to influencing opinions and instead focus on communities with common interests. For brands wanting to take advantage of this they need to know where there is common ground (the flat issues) and understand the scope of a community. This means either doing some research or making an educated guess. I'd of course vote for the former.

So for anyone trying to build a global brand, I'd suggest they start by identifying both the communities that break borders and the flat issues that unite them. That's where the opportunity to take advantage of global markets really lies.

Google's stance is hard to swallow

Google is clearly scared that if Microsoft succeeds in buying Yahoo! it will lose it's dominance in the search/online ad sales business. So it is using the idea that if a deal gets done Microsoft will suddenly become the dominant email and instant messaging player as a way to get the deal called off by antri-trust lawyers. There are few things that make this a hard line to swallow:

1. Microsoft is already the dominant email supplier in the workplace thanks to Outlook. Indeed if you taker the email market as a whole I'm sure Microsoft is way ahead of any rival thanks to Hotmail so this doesn't really change things that much.
2. They are so obviously picking a fight that has nothing to do with the real... fight. The real battle is about online ads. Google has been killing the competition for several years now thanks to the dominance of its search engine. A deal with Yahoo! would simply make Microsoft a real competitor as opposed to a potential competitor.
3. They think it is OK for them to be a dominant player but not Microsoft. In effect they are suggesting that Microsoft's history suggests that if they become dominant in the Internet business then they will treat the Internet just like they did the PC business and that will be a bad thing. I think we all know that even if Microsoft pulled off this deal and even if they then de-throned Google, the governments around the world would be watching them like a hawk. And the governments have been pretty successful in getting their way when they take on Microsoft in court.

Of course you can't blame them for reacting to the deal but judging by the drop in Google's share price (now below $500 for the first time in over six months) it is clear that the market thinks they are running scared. I almost wonder whether they would have been better to play down the deal rather than look as if they are scared by it.

PS - I know Yahoo's name has an exclamation mark after it but Google's Blogger won't allow me to use one in the labels section...