cost

CPM (cost per thousand) compression YOY

SOURCE:  Demand Media (DMD) 2011 Annual 10K  ( http://bit.ly/zBiIVF  )

 
 
 
 
 
 
2009 to
2010
 
2010 to
2011
 
Year ended December 31,
 
%
Change
 
%
Change
 
2009
 
2010
 
2011
 
Content & Media Metrics (1)
 
 
 
 
 
 
 
 
 
Owned & operated
 
 
 
 
 
 
 
 
 
Page views (in millions)
6,849

 
8,234

 
10,378

 
20
 %
 
26
 %
RPM
$
10.69

 
$
13.45

 
$
15.14

 
26
 %
 
13
 %
Network of customer websites
 
 
 
 
 
 
 
 
 
Page views (in millions)
10,009

 
13,155

 
17,436

 
31
 %
 
33
 %
RPM
$
3.45

 
$
3.20

 
$
2.77

 
(7
)%
 
(13
)%
RPM ex-TAC
$
2.39

 
$
2.28

 
$
2.06

 
(5
)%
 
(10
)%

 

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Friday, March 9th, 2012 digital No Comments

What Most Economists Get Wrong About The Rise In Gas Prices

source: http://www.businessinsider.com/what-most-economists-get-wrong-about-the-rise-in-gas-prices-2012-3

Not only is the increase in credit, without a subsequent increase in consumption, a sign of strain on the American consumer; but they shifted from buying new goods to used goods in recent months in a big way.  An era of "frugality" has impacted the average American home and with high unemployment, underemployment and wage pressures weighing on the family budgets – cost increases hit home much faster than in past years.

chart


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Tuesday, March 6th, 2012 news No Comments

Jeremy Lin Is Causing Knicks Ticket Prices To Skyrocket

Source: http://www.businessinsider.com/chart-jeremy-lin-knicks-ticket-prices-skyrocket-2012-2

We have already seen what Jeremy Lin’s popularity means on a world-wide scale. But there has also been a huge impact at the local level. And one of those factors is the cost of going to see the Knicks play.

Courtesy of SeatGeek.com, is a look at how prices for last night’s game between the New York Knicks and Sacramento Kings on the secondary-market changed over the last week. In the six days leading up to the game, prices rose 245%.

So if you were hoping to see the Lincredible Circus, it is going to cost ya…

Knicks ticket prices

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Friday, February 17th, 2012 news No Comments

P&G To Lay Off 1,600 After Discovering It’s Free To Advertise On Facebook (PG)

Source: http://www.businessinsider.com/pg-ceo-to-lay-off-1600-after-discovering-its-free-to-advertise-on-facebook-and-google-2012-1


old spice

Reality appears to have finally arrived at Procter & Gamble, the world’s largest marketer, whose $10 billion annual ad budget has hurt the company’s margins.

P&G said it would lay off 1,600 staffers, including marketers, as part of a cost-cutting exercise. More interestingly, CEO Robert McDonald finally seems to have woken up to the fact that he cannot keep increasing P&G’s ad budget forever, regardless of what happens to its sales.

He told Wall Street analysts that he would have to “moderate” his ad budget because Facebook and Google can be “more efficient” than the traditional media that usually eats the lion’s share of P&G’s ad budget.

This is coming from the man who increased P&G’s adspend by a staggering 24 percent over the two years through October 2011, even though sales rose only 6 percent in the same period.

Note that P&G’s revenues were up 4 percent to $22 billion in the quarter but the company’s costs for sales, general and administrative work were flat.

P&G’s staggering ad budget has become a bit of an issue among analysts. On the call, McDonald and his crew were asked about ad costs three different times! . McDonald eventually said:

As we’ve said historically, the 9% to 11% range [for advertising as a percentage of sales] has been what we have spent. Actually, I believe that over time, we will see the increase in the cost of advertising moderate. There are just so many different media available today and we’re quickly moving more and more of our businesses into digital. And in that space, there are lots of different avenues available.

In the digital space, with things like Facebook and Google and others, we find that the return on investment of the advertising, when properly designed, when the big idea is there, can be much more efficient. One example is our Old Spice campaign, where we had 1.8 billion free impressions and there are many other examples I can cite from all over the world. So while there may be pressure on advertising, particularly in the United States, for example, during the year of a presidential election, there are mitigating factors like the plethora of media available.

P&G’s Old Spice campaign is a textbook example of what the entire company should be doing. The problem is that the entire company isn’t doing it. Check out Mr. Clean’s Twitter stream, for instance. Oh, right—he doesn’t have one.

McDonald’s recent discovery that digital media is free comes after the long-delayed launch of Tide Pods, now scheduled for a month from now but with only a limited supply. It was originally planned for July 2011. The ad budget for that campaign is estimated at $150 million and will come from agency Saatchi & Saatchi.

The problem is that while P&G has struggled to get a single U.S. pod out the factory door, several of its competitors have already launched competing laundry pod products.

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Monday, January 30th, 2012 news No Comments

One Of The Most Impressive Cases Of Efficiency Growth We’ve Ever Seen

Source: http://www.businessinsider.com/chart-of-the-day-one-of-the-most-impressive-cases-of-efficiency-growth-weve-ever-seen-2012-1

Airlines don’t deserve credit for much — they’re notoriously loss-making, bankruptcy-prone, and customer-aggravating.

But with oil prices elevated for much of the past decade, they have done a great job battling the need for more fuel.

The below chart shows the massive divergence over the past decade between traffic growth (as measured by passenger miles) and jet fuel demand.

Says Barclays

According to Airbus and CERA, although cumulative growth in air traffic has totaled roughly 45% since 2000, fuel consumed by the global fleet of aircraft is up less than 5% over the same period, as airlines have accelerated aircraft parking/retirements of older airplane models and ordered newer more efficient replacements at a record pace. Greater efficiency (i.e. load factors) and fleet renewal are at the heart of an airline’s competitiveness in a world where fuel is now an airline’s largest single operating cost; this became the case mid-last-decade for the first time since the late 1970’s US deregulation.

chart of the day, jet traffic vs. fuel consumption, jan 17 2012

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Tuesday, January 17th, 2012 news No Comments

Here’s The Math Formula For Structuring A Groupon Deal That Doesn’t Lose Money (GRPN)

Source: http://www.businessinsider.com/heres-the-math-formula-for-structuring-a-groupon-deal-that-doesnt-lose-money-2011-12


groupon cupcake girl

We’ve all heard the nightmare stories about Groupon merchants who lost tons of money because they were suddenly overwhelmed with thousands of customers whom they were forced to serve at a loss: The British bakery that made 102,000 cupcakes. The Irish hairdressers whose customer base now consists entirely of people who only want their hair cut a discount. The Portland cafe that lost $8,000 because the owner failed to cap the number of deals she offered.

It’s not just Groupon, of course. There are loads of other daily deal sites — Living Social, Thrillist, Google Offers, etc — but they all present merchants with the same problem: The conflict between offering below-cost deals to customers in hopes of attracting long-term “regulars” and structuring a deal so that you can still make a profit. The math can be tricky because merchants have to account for two different sets of discounts: The discount to the customer and share of the payment taken by the daily deal site for publicizing the offer.

Now TheDealMix, a site that aggregates daily deals into an impressively complicated map of your neighborhood, has produced an infographic that can help businesses calculate daily deal offers so th! at they won’t accidentally go bankrupt.

And, yes, The DealMix has presented its formulas in the form of cupcakes — particularly useful given the number of bakery-related Groupon disasters that have made the headlines.

The formulas include:

Offer Price – Cost of Goods > $0

Average Customer Spend – Value of Offer + Price > Cost of Goods



See the rest of the story at Business Insider

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Monday, December 12th, 2011 news No Comments

Why Loyalty Credit Cards May Soon Be A Thing Of The Past

Source: http://www.businessinsider.com/credit-suisse-retailers-loyalty-programs-2011-12


loyalty credit card

Credit cards have been a staple for retail rewards programs for decades (you know, like that Visa card they try to make you sign up for every time you go to Gap). They’ve been an effective way to reward customers, and for retailers to get additional funding.

But a new report by analysts Michael Exstein, Chrisopher Su and Trey Schorgi at Credit Suisse says that it’s time for retailers to abandon the credit card. Why are credit-based rewards programs not the right way to go anymore?

1. The cost of rewards programs keeps rising for banks. As rewards competition ramps up, issuer margins are pressured.

2. As the programs get more expensive, banks will offset costs in other areas. This will result in either less beneficial terms for retailers, or higher fees for consumers. Retailers may have to increase their own rewards programs to remain competitive

3. Retailers’ relationships with their customers could be hurt, because banks (who are now in control of many retailers’ credit businesses) could squeeze consumers. Since the programs are branded for retailers, not the banks, consumers would deem them responsible.

Credit Suisse instead suggests that the answer to these woes is simple. Switch over to programs based around membership fees or other upfront investments. “Going forward, we think the emerging trend will be the need for consumers to “invest” in loyalty programs, thereby creating a “vested interest,” says the report.

So what brands are doing it right so far?

Amazon — The Amazon Prime membership program has been vastly successful. Consumers pay an annual membership fee of $79, and get shipping benefits, free use of Amazon Instant Video and perks for their Kindle.

Costco — The largest membership warehouse club in the world has three levels of membership. There’s a $55 annual fee for businesses, a $55 ‘Gold’ card for individuals and a $55 executive member upgrade, which gives folks a 2% discount on most purchases.

Sam’s Club — Walmart’s warehouse subsidiary has a similar system, with a $40 per year Advantage card for individuals ($100 for Advantage Plus which offers extra savings) and a $35 per year Business membership ($100 for Business Plus).

Macy’s — “Thanks for Sharing” is a program that’s working for Macy’s to generate loyalty. It requires a $25 upfront investment (which is actually a donation to charity), in exchange for rewards.

Target — The REDcard is a ‘hybrid’ method which has been working well since the retailer started it up in 2010. It offers 5% savings on everything and includes shipping benefits.

These programs all capitalize on the concept of creating that “vested interest.” Customers, having already paid a set of promised benefits, will be more likely to keep spending to use those benefits that they’ve already paid for. They’ll keep coming back.

NOW SEE: The 20 Brands With The Most Loyal Customers >

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Tuesday, December 6th, 2011 news No Comments

The World’s Largest Blockbuster Drug Just Went Generic — Here Are The Winners And Losers (PFE, WPI, ABC, TEVA, MRK, MYL, CVS, WAG)

Source: http://www.businessinsider.com/the-nations-largest-blockbuster-drug-just-went-generic-2011-11


pfizerap1017

With the expiration of Pfizer’s patent exclusivity on Lipitor, the nation’s top selling drug will go generic and see a market share split that will force manufacturers into a share race.

Lipitor, a cholesterol drug that reduces cholesterol, came to market in 1997 and ultimately peaked with sales of $13 billion. Last year, it contributed $10.7 billion in revenue to Pfizer.

Analysts remain divided over how much market share Pfizer will be able to hold on to. The company is aggressively discounting the drug through a program to entice patients to remain on Lipitor. Over the coming 180 days, Watson Pharmaceuticals and Ranbaxy Laboratories of India will enter the market.

Eight Citi analysts poured over data and see Pfizer retaining 40-50% of market share over the next half year. Delays out of Ranbaxy, which were prompted by U.S. regulatory bans over questionable quality concerns, will aid Pfizer.

But after the 180 days, when another round of pharmaceuticals like Teva and Aurobindo are allowed entry, the cost of Lipitor will drop to “pennies a day,” Citi analyst John Boris writes.

However, most of Lipitor’s decline has already been priced into Pfizer stock over the past year. “We maintain our Pfizer 4Q11E/2012E Lipitor sales/EPS contribution at $930M/$640M,” Boris continues. That represents a Lipitor sales contribution of 14-18% of fourth EPS, before falling to just 2% of earnings in 2012.

The largest to benefit from the change may be drug stores like CVS and Walgreens, which may see an uptick as more patients can afford to take cholesterol medications, even as average drug prices decline.

“In addition, we believe that the drugstores will be able to generate stronger gross profit dollars as the average gross margin for generic drugs is generally 50 to 60%, while the average gross margin for branded drugs is approximately 20%,” Boris says. 

Meanwhile, Pfizer is betting its name on smaller blockbusters in other drug categories to contribute $4 billion in new revenue by 2014 as it re-emerges in a world post-Lipitor.

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Wednesday, November 30th, 2011 news No Comments

Spending Tons Of Money To Attract New Customers Is A Stupid Idea

Source: http://www.businessinsider.com/spending-tons-of-money-to-attract-new-customers-is-a-stupid-idea-2011-11


If you’ve ever tried to explain the concept of “make new friends but keep your old ones” to a five-year-old, you have a pretty good perspective on how many high-growth businesses approach customer acquisition and retention.  Growing businesses tend to spend so much of their time and money acquiring new customers that they often overlook their best source of growth: retaining and growing their existing customer base.

One of our clients has more than 90 percent of its resources–people, marketing budget, etc.–focused on creating millions of new customers a year. Their business model is based on monthly recurring feeds, much like the cable or wireless industries. Customers come in and they stay…until they don’t. An analysis of the client’s historical data shows that the average customer stays for an average of 2.5 years. Because their customer acquisition cost is lower than their expected customer lifetime revenue, they reach a break-even point in less than two years. So it’s a great business, as long as they keep generating new customers, right?

Wrong. The problem is that as the management team’s growth expectations increase, it gets increasingly harder to acquire more customers. As a result, customer acquisition costs go up and the quality of customers, in terms of how long they stick around, goes down.

To solve this growth dilemma, the client needs to ask three key questions:

  • What revenue growth will we achieve if we keep our existing customers for just one additional month, on average?
  • What will it cost us to do this by, say, improving customer service or adding customer benefits?
  • How does this growth compare, both in magnitude and cost, to acquiring new customers?

The answer for our client will be the same as it is in almost all businesses. It’s cheaper, easier, and more effective to retain current customers than it is to acquire new ones. In fact, if this business can retain all of its customers by just one additional month on average, they can achieve an additional 3 percent of annual growth. If they can retain their customer base for four additional months, they can create double-digit growth–without adding a single customer.

It’s simple math–something that even a five-year-old might understand.

This post originally appeared on Inc.

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Tuesday, November 29th, 2011 news No Comments

Dr. Augustine Fou is Digital Consigliere to marketing executives, advising them on digital strategy and Unified Marketing(tm). Dr Fou has over 17 years of in-the-trenches, hands-on experience, which enables him to provide objective, in-depth assessments of their current marketing programs and recommendations for improving business impact and ROI using digital insights.

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