The Death of Advertising, Sports Edition

The BBC World Service’s show Newshour had an interview yesterday with an advertising executive. The hook was the troubles US swimmer Ryan Lochte has been having with his sponsors. But along the way, he may have given away the entire masquerade. Here’s the interview. OBJ stands for Owen Bennett-Jones, the BBC presenter. PA stands for Pedro Avery, the executive in question.


OBJ: Warren Buffett once said, It takes 20 years to build a reputation, and five minutes to ruin it. And then, of course, the question comes, How long will it take to rebuild that reputation again? Well, the US swimmer and six-time gold medalist Ryan Lochte was dropped by four sponsors including ones that sound quite lucrative like Speedo and Ralph Lauren at the beginning of this week. But then 24 hours ago a maker of throat lozenges said, Yeah, we’ll take him on. Lochte lied about being robbed at gunpoint in Rio and that’s why his reputation is in such trouble. So, has the throat drops company got him on the cheap?

Pedro Avery is global CEO at Havas Sports & Entertainment, an expert in brands and sports.

PA: I wouldn’t say they got him cheap. I would say they probably paid the fair price for what he’s now valued at. I mean, in our business we spend a lot of time advising brands on what is the right price to pay for these types of endorsements and sponsorships where they work together. I would say that after the escapades in Rio recently, that his market value would have come down significantly. So I would imagine he’s just– They paid the right price for the man that he is now.

OBJ: When you’re putting these financial numbers on people, it works does it? They can bring that money to the company?

PA: Absolutely. We work, for example, with a number of football clubs, and we advise those football clubs on… even pre-transfer now, in terms of the commercial value (not just on the pitch and the performance there, but off the pitch), and you can very directly see the relationships between a particular athlete and endorsement, and the sales that come from it.

OBJ: And when you’re trying to work out that value, quite a difficult job, I’d think. You’re not just throwing darts at a darts board or sort of coming up with a number.

PA: No, you’re looking at, sort of, direct sales, but also you’re looking at some of the intangible values. One thing that I think is very interesting for sponsors is that the athletes themselves are probably held in higher regard, and more often more trust, than brands themselves. The reality is most consumers probably don’t really care much about a brand anymore, if truth be told. And our research demonstrates that if 75% of all brands were to disappear tomorrow most consumers wouldn’t care. {emphasis added}

OBJ: But they do go with the sports stars.

PA: They do go with the sports stars. Because the sports stars invariably have higher trust, have higher value. And they are a very efficient form of communication for a brand. So for a brand that’s looking for goodwill, and are looking for things that come from those associations, they work very hard.

OBJ: And you’re looking for charisma? Ability?

PA: Each brand will be looking for different things.

OBJ: Not lying about being held up at gunpoint?

PA: No, I don’t think so. And, you know, a lot of people are humans and we’ve seen relationships like Tiger Woods or even recently Maria Sharapova, etc., where those relationships have broken down with their sponsors. Each sponsor takes, I think, a very dim view on these.

OBJ: And that was Pedro Avery there, global CEO at Havas Sports & Entertainment.

More bumpiness on the road to utopia

Back in 2002, I wrote a post about an article in the New York Times and an interview on Fresh Air, both by Jefferey Rosen.

The main point was this:

“(I)t’s notoriously difficult to find parking (at Oracle’s headquarters), and the space (Rosen) finally found was far enough away from the door that he had to walk something like 15 minutes to get to the building.

Here’s the big question: If Oracle can’t even reliably predict how many people will park at their own building — which is presumably why they haven’t built adequate facilities, and not because, say, Larry Ellison is a cheap bastard who doesn’t care about his employees much — how reliable do you think they’ll be at predicting terrorists (which is what they were touting their software for as a tool)?”

So now it’s 13 years later… and the state of the art when it comes to using software to make large-scale complicated predictions hasn’t advanced very much. Or such is the implication of this story from the radio show Marketplace, which is all about how UPS is having a more difficult than usual stretch of predicting their delivery times… Which in turn is because they’re being handed bad predictions from their customers about how much product they’re going to be shipping to end customers like you and me for Christmas.

The really interesting part of that, when it comes to looking back up the logistics tail, is many of the companies UPS is delivering for are companies who are mainly or solely online. Which means all the “magic” Amazon, Google, Facebook and others use for their “targeted” advertising… isn’t very good at predicting what, and how much, you’re going to buy.

“The problem that challenges both online retailers and carriers is the increasingly unpredictable shopper. Now that people can buy anything, anywhere, on their phones, retailers and carriers are having a hard time figuring out their next moves.”

That’s a much more systemic criticism than it looks at first glance. Because it reinforces the idea that the relationship between these companies’ advertising and enterprise management tools to how people behave in the real world is fairly… well, random.

This is also reinforced by Facebook’s page for your Ad Preferences. This page, algorithmically generated, is a concise list of what Facebook thinks it “knows” about you, from scanning your posts. And for many, many people I’ve seen, it’s laughably inaccurate. Which means the ads Facebook sells, oh-so-targeted at just the right people to respond to them (or so they tell the people paying to place such ads), are also laughably inaccurate in their targeting.

Which is part of why UPS can’t get your package to you in time.

A joke too serious to be funny

The title of this piece at Stratechery — “If Steve Ballmer Ran Apple” — makes it sound like a one-liner, but it isn’t. It’s a very thoughtful analysis, and has a great closing paragraph:

“Ballmer did exactly what our capitalist system dictate he do: he maximized profits to the benefit of Microsoft’s shareholders. The implications of suggesting he was a failure are far more profound than most of his many critics likely realize.”

Profit? Cash is king!

Well, unless you don’t have that, either. From this article in Inc.:

“As Griffin explains, “Bezos sees a competitor’s love of margins and other financial ‘ratios’ as an opportunity for Amazon since the competitor will cling to them while he focuses on absolute dollar free cash flow and slices through them like a hot knife through butter. Bezos spelled out his focus on absolute dollar free cash flow in his 2004 letter to shareholders…””

Sounds great, except for one thing.  Not only are Amazon’s profit margins terrible, its cash flow is fairly dire as well. From their financials:

3 months ending 2014-03-31: -$3,584.00 (in millions, so a drop of almost $3.6 billion).

12 months ending 2013-12-31: $574.00   

9 months ending 2013-09-30: $-4,212.00

6 months ending 2013-06-30: $-4,380.00

3 months ending 2013-03-31: $-3,603.00

2004 Bezos probably does a facepalm whenever he thinks about 2014 Bezos. 

Samuel Johnson on James Altucher (urban legend dept.)

The quote is usually attributed to Samuel Johnson, though it appears to be an urban legend:

“Your manuscript is both good and original. But the part that is good is not original, and the part that is original is not good.”

Which is to say…

Have you ever read the internet email joke, “So, you want a day off?

It appears Mr. Altucher has. Because today, his humour column in the Financial Times does a startlingly similar breakdown of a friend’s US$1 million bonus as “a vice-president at a top-tier bank.”

Again, just like last week, it’s within the realm of possibility that Mr. Altucher doesn’t intend his writing to be humorous, and that he’s being in deadly earnest over the whole matter. But if the “Mike” character in the column isn’t a creation for exaggeration, but a real friend — real enough that Mr. Altucher was one of, “a select few friends” and family invited to Mike’s wedding back when he was of means closer to the median… well, if so, then it seems that for a man who only a week ago was complaining about things getting needlessly personal, then he himself is revealing a large number of very personal financial details of Mike.

For the sake of giving a column a hook. A derivative hook at that.

Some friend.

Pulled up from comments

Like Harry Chapin used to say, “The excitement continues to build.”

Mr. Altucher replies(NB, 2013: In comments to a LiveJournal post, the original source for this), in a thread on my recent post. He’s in italics this time.

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“the fact remains that your stats have nothing to do with my article.”

You make a statistical claim — that, “There’s no way,” an investment of a certain amount of money will see a return. You do not support this claim from any source. When evidence is presented from a reputable source that your claim is factually incorrect, you then say that the evidence is irrelevant.

This is somewhat like saying that the sound barrier will never be broken, and no one should waste their time investing in such tomfoolery. When an eyewitness report from Chuck Yeager is brought in, you deem it to be irrelevant.

“Then you decide to get personal in order to make your point.”

You wrote your article in personal terms. Using the Winer Defense (if one comments on the personal aspects, it’s business; if one comments on the business aspects, it’s personal) is only either a) an intentional evasion on your part, or b) an unintentional failure to recognize just how personal your own writing is, and then failing to acknowledge the consequences.

The Altucher Chronicles

Like I said, that column by Mr. Altucher in the FT made a number of strange claims.

So I wrote a letter to the Editor of the FT about one of them, cc’ing Mr. Altucher’s email as given at the bottom of his column. Mr. Altucher replied.

Hilarity ensued.

For the purposes of this discussion, I’m in italics. Mr. Altucher is in bold.

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Sir,

In what I presume to be the FT‘s humour column, Mr. Altucher writes,

“First, and foremost, (college is) too expensive. To send a kid to college you need from $200,000 to $400,000. That’s insane. There’s no way the incremental advantage they get from having a diploma will ever pay back that amount.”

In 2002, the US Census Bureau reported the following:

“As shown in Figure 3, for full-time, year-round workers, the 40-year synthetic earnings estimates are about $1.0 million (in 1999 dollars) for high school dropouts, while completing high school would increase earnings by another quarter-million dollars (to $1.2 million). People who attended some college (but did not earn a degree) might expect work-life earnings of about $1.5 million, and slightly more for people with associates degrees ($1.6 million). Over a work-life, individuals who have a bachelor’s degree would earn on average $2.1 million — about one third more than workers who did not finish college, and nearly twice as much as workers with only a high school diploma. A master’s degree holder tops a bachelor’s degree holder at $2.5 million. Doctoral ($3.4 million) and professional degree holders ($4.4 million) do even better.”

So we see a BA holder gets an incremental advantage of $900,000, for a ROI of at least 125%. Would Mr. Altucher’s clients were so lucky.

Sincerely,

Hal O’Brien

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Those stats mean nothing. Its what a self-initiating proactive person can do instead of college (as opposed to what the avg person can potentially do) that I’m interested in.

Sent via BlackBerry from T-Mobile

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Ah. And all your children are from Lake Wobegon, and thus, above average?

Interesting. This might be a nice one for Mr. Taleb. Someone who insists that black swans are the norm (and not rare).

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I’m only saying if someone is proactive they can find better things to do than waste their parents’ money. I’m not saying my kids are special. No need to get personal.

Sent via BlackBerry from T-Mobile

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Sir,

The entire premise of your column was that this is what you personally are doing with your children. I quote:

“What I said was that I had no intention of sending my kids to college. I was dead serious.”

…and that the remainder of your column were your reasons for this.

If this is not what you meant (and merely what you wrote)… well, you need to brush up on your skills.

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Just because I have “no injtention” doesn’t mean that’s what will happen.

*^*^*^*

Then, congratulations! I am laughing; Your name is the successor to Martin Lukes as the new FT humour columnist; and I claim my five pounds!

=================================

Updates if events warrant.

Did I mention that he kept writing to me directly, and that I kept cc’ing the Editor? No? Might be interesting.

FT running humour?

After the incarceration of Martin Lukes, the FT appears to have a new humour columnist, James Altucher. I’ll gloss over the many strange claims he makes today, but this one may be of special interest to my writerly friends. He’s explaining why college is a bad deal:

“I have high school and college kids working for me who are making over $50,000 a year from writing gigs on the internet. Scour Craigslist for opportunities, your favourite blogs, or websites related to your favourite interests. Companies are dying for good content. Create your own blog, get yourself noticed, build relationships with other content companies and communities.”

So, dear readers… Who are these high school (and college, too!) kids who are making (“over”!) $50,000 a year from blogging? From which markets? And still keeping down investment banking jobs? Remember — they’re not just making that much money for writing, they’re working for him, too. (At a domain that has no publicly available web site.)

Inquiring minds want to know.

Speculate freely.