Long Tail....Dead?

A very interesting study was published by Chitika and the University of Texas saying that the top 50 blogs generated $50 million in revenue total (via TechCrunch). Not bad. That gives the average top 50 blog $1000 of annual revenue. Of course this number is skewed since Perez Hilton and Michael Arrington aren't really scraping by. Arrington points out that 15% of total blogs accounts for 90% of the revenue out there. That could be true. However, I do believe in the long tail although money might not be the best way to measure it. True, there are a lot of blogs out there that really mean nothing (a teenager's diary, personal notes, family photos) but there are other random blogs that discuss all types of obscure topics, ranging from Transformer toys, to a Shih Tzu's life, to life in Topeka, KS. Someone's gotta be reading these things! And the more niche the blog the better. You can sell toys, dog gear, and local services on the above mentioned blogs, respectively. Sure the big blogs will always work best for Coke and Pepsi type products, but we can now compare blogs and the target demographics to cable television....

I think ad networks have yet to realize the power of the long tail, and until that happens you'll get these skewed numbers....

Jackson's Back - Fortune 500 Beware!

Eric Jackson is back! He's the activist shareholder behind Yahoo! Plan B and perhaps one of the reasons that Terry Semel was ousted from office. His tools: MySpace, YouTube, a blog, a wiki and never ending energy. Now he's back and has set his sites on Motorola, the fledging cell phone manufacturer. He specifically states on his Motorola Plan B website that Ed Zander of Motorola has led to 13.5% returns for the stock versus 35% for the S&P and 37% for Nokia. Through another social media tool, youchoose.net, he's been able to aggregate 422,430 shares of stock so far (the campaign is 3 days old). Dominic Jones from IRWebReportDaily has some interesting insights into the evolution of the web and how Jackson is taking things to the next level. With low commission online brokerages popping up, ownership in stock has risen to all time highs. Similarly, the web has brought together like minded folks in a type of shareholder activism. However, while people like Jackson are targeting the tech savvy, Jones still believes that true power lies in the "soccer moms" that can pull money out of their mutual funds as the ones with the true power. He cites the Disney debacle a few years ago as the first and strongest of these showings.

Wow. From an IR perspective this could be a logistical nightmare. Before all we had to worry about were the few fund managers and maybe now a few hedge fund managers that owned our stock. Now how do we answer every question out there that every mom and pop shareholder want answered yesterday? While most of these individual investors are not Eric Jackson, we don't know who will be and that's scary. So what's the answer to this?

I think transparency is the key to effective communications with the public and especially to the masses. Apple did it with their defective iPod battery and folks realized that although Steve Jobs is sometimes a god, he's still human. Dell didn't do it with their firey laptop batteries and they paid the PR price. Yahoo didn't admit its mistakes in losing Google, then Facebook, and Semel paid the price. Is blogging the way to go? Perhaps. Johnathan Schwartz from Sun Microsystems keeps a blog that sometimes gets him into trouble.

I think the general public will accept mistakes but they won't accept dishonesty or cover up. Admit mistakes and let your investors know about them before they leak out and there's a PR nightmare....

David Beats Goliath

We've been talking about this story for a while....Activist shareholder Eric Jackson using Web 2.0 tools (social networking, his blog, a wiki, YouTube, MySpace etc) to organize Yahoo shareholders against Yahoo management. Well, unless you've been under a rock yesterday, you would have seen that Terry Semel, the man that Jackson was calling for to step down, resigned as CEO of the company to be replaced by Jerry Yang, co founder of Yahoo and one of Jackson's suggestions. I'm not saying that Jackson single handedly caused Semel's resignation but what I am saying is that Jackson was able to control a little under 2 million shares with his 100 shares from these Web 2.0 tools and a bit of publicity.

The story here is not necessarily one of how Semel stepped down but its about how good ideas can be spread rapidly through these new Web 2.0 tools. Diet Coke and Mentos was another interesting idea that caught on because of online video and its popularity soared with the video sharing sites (including YouTube). Ipods dirty secret also attracted many viewers and caused backlash against the popular mp3 player. The Dell laptop fires are another. Communication online is becoming ever more transparent and the Jackson example is an extreme one of how one person asked how Semel was able to justify his salary and his options given how Yahoo has fared against Google. Sure, the rest of the Street also did not favor him but I think that Jackson proved that sometimes a meritocracy works.

On the other hand, I'm sure IR folks that read this blog are wondering about how something like this could affect their company. No one wants a guy like Jackson against you. He's relentless. However, I think Apple's response to dirty secret is the suggested way to go: Admit that your product is not perfect. Dell tried to sweep the dust under the rug. Bad move. People will out you and your deception will simply add fuel to the fire. Be open. Admit mistakes. Admit that you're not perfect. No one can fault you for that. Not even Eric Jackson (who is now having dialogues with Semel according to his blog).

Trouble for US IR Sites?

The latest statistics from Alexa (via IR Web Report) show that traffic to Thomson's IR sites (corporate-ir.net) have hit an all time low. With a large number of US blue chips and mid cap companies using Thomson, along with the recent run up in the S&P 500, one would expect a positive correlation between page views and stock price. However, the latest statistics do not corroborate this. It seems that investors are turning more to blogs (like Seeking Alpha and tons of other blogs talking about industry, companies, products, etc), portals (like Yahoo! Finance) and message boards/social networks (like Stockpickr and Bullpoo) for their information. Is it a Web 2.0 thing? Doesn't appear to be, as Dominic Jones also notes that European companies' traffic is hitting an all time high.

What is happening here? I think its a few fold. The web is becoming more dynamic and static 'push' sites like Thomson's are just not cutting it. Investors would like a voice and an opinion in what is going on and the blog makes for a perfect forum for it. Social networks like stockpickr and bullpoo have become increasingly popular. Everyone wants to know what everyone else thinks. (I hate to bring it up again, but the Wisdom of Crowds effect.) Further, social networks give everyone an equal footing to be judged based solely on performance. Portals like Yahoo! Finance are not "Web 2.0" ified but then again, its been a staple since pre-Web 2.0 days. WHAT? What I mean is that "if it ain't broke, don't fix it." Another example: Bloomberg. In my opinion most traders are using Bloomberg as an instant messaging platform. Why? Because they've been using it since pre-email and they are comfortable with it. People have been using Yahoo! Finance since Web 1.0 and they have all of their data inputted and so forth (and since its customized, techincally it could be Web 2.0).

Investors relying on third party information like this is truly dangerous. As an IR/PR/Marketer you have no control over what message is being broadcast to the investment community about you. What to do about this? Well, as I mentioned before, about 5% of the Fortune 500 has a blog, and yes we are still waiting for the SEC ruling on Reg FD. However, its clear that instant gratification/communication is what the investment community wants, not day old or even half day old IR information. While it may mean more communication, I think that in the long run investors will be won over and you'll be able to broadcast your true message.

Blogging Trends

Yesterday I spoke at a NIRI conference. The other panelists included Henry Blodget, David Vinjamuri, Paul Blalock, and myself, Roger Wu. I think most of us believed that the blog is a great way to communicate with shareholders in terms of receiving honest and open feedback. Many IRO's in the audience were afraid of opening up the blog to detractors and "hecklers," but Paul reassured the audience by saying that commenting could be fully moderated. We went on about some of the tools available in the blogosphere and how blogs are becoming integrated via search and some of the popular finance portals out there. I concluded the panel by mentioning that while we focused on the text based blog, blogs can also include any type of ongoing communication which can also include audio and video.

I am still honestly surprised that there are so few corporate blogs out there. I think a big part of this still has to do with Regulation FD and if the SEC allows blogs to be included in FD well, I'm sure more companies will do so. Still, the blog is such a great way to get honest feedback about ideas, strategies, etc that it surprises me that not more companies do so. Sure, there are strategies and ideas that are proprietary but I think that companies can harness the collective intellect of its constituents through the blog. While some ideas would be off the wall, the company is still the one to make the final decision. Mark Cuban did this in his blog a while back. He offered a job to anyone that could come up with a model that would lower the volatility and risk of feature film production and distribution. He knows that himself and his legion of minions wouldn't be able to come close to a fraction of the ideas that potentially the entire world could come up with.

Linux, Wikipedia, YouTube, MySpace, the Human Genome Project, Second Life etc were all built collectively. Further, I think that people would offer in their opinions not because they would want some kind of monetary compensation but because in this new Web 2.0 - everyone wants to be recognized.