I only just came across Pandora, a web site that essentially allows you to create your own radio stations. You input the name of an artist or song that you like. It plays an appropriate track and then follows it with other similar music. If you don’t like a track you can skip to the next (it only allows six tracks to be skipped per hour). If you really like a track you can bookmark it and of course buy it on iTunes with one click. Pandora is of course perfect for the iPhone, except for the fact that it drains the pathetic battery this device houses. If like me you hadn’t heard of this site, you should try it. I was instantly puzzled how they are dealing with the royalty issues, to which Sean Garrett at 463 immediately said they are in DC dealing with that very issue right now… Hopefully they will be allowed to continue to offer the service.
It would seem that supply and demand economics rule. For years the valuation of commodities have been driven by this, while the valuation of companies have clung to various guiding metrics such as PE ratios or multiples of EBITDA. All this seems to have changed as the stock markets around the world essentially ignore all multiples and focus instead on whether there is actually someone willing to buy a company’s stock. Classically it has been quite normal for businesses to to have PE ratios of between 10 and 20 and yet right now there are hundreds of companies with PE ratios of 5 and below. Many of these companies are small cap stocks which investors fear because of their liquidity. Ironically though many of these businesses are better run than large companies because a) the managers have some meaningful stock interest in the business and b) because these same managers are closer to the real customers and therefore simply run their businesses better.
Sadly for small business owners this shift to supply and demand valuations is unlikely to change anytime soon. This has broader implications than simply unrealistically low share prices for businesses. The ability of many companies to carry out acquisitions is tied to their valuations. When they are highly valued, companies can use paper (stock) as a means of buying other companies, either by issuing stock to the shareholders of the company they want to buy, or by getting investors to buy a new issue of equity, the proceeds of which can then be used for the acquisition. When stock prices plummet so do the possibilities for these companies to do any buying. As a result, the supply and demand economics then starts to impact the value of private companies. In the PR world there were quite a number of deals done last year based on high multiples. These prices would simply not get paid today unless there ended up being an auction. I therefore confidently predict that the market for acquisitions will become very quiet in the next year. This isn’t because there aren’t companies for sale or companies looking to buy. It is simply because until the valuations of public companies start to rise, a key currency (new shares) will not be available for purchases. At the same time, the better companies will likely defer sales until conditions improve.
Of course companies can still be bought for cash. Here again there is a problem. The global credit crunch has made it harder for companies to raise debt. At the same time, shareholders who, in good times, encouraged businesses to gear up are now demanding that debt be paid down. As a result, companies are hanging on to cash or ignoring the potential of their banking facilities, thus again taking a currency (a very real one) off the table for acquisitions.
You could describe this as the perfect storm for small companies looking to do deals. I would suggest that this storm may be with us for while. Then again I’m British so I’m used to bad weather.
Nicholas Carr who has in the past questioned with some success the value of technology, has again scored a bit of a stir, this time by exploring the impact the Internet is having on the way we think and our ability to concentrate. His article “Is the Internet making us stupid?” is published in Atlantic Magazine. The article uses a mix of anecdotes and new research on the topic and makes a good case. In essence he argues that our brains are adapting to the way the Internet serves up information, making us less interested in long articles and books. His point was well made when I noticed I was skimming through the article…
If we assume Carr is correct, then his point has some important implications for those of us involved with managing perceptions of companies, organizations and individuals. At its simplest level it reinforces the view that information needs to be disseminated in bite size chunks. People will no longer read two page news stories and sadly they will no longer read two page news analyses. Instead they want their information one paragraph at a time. This brings in to question the most basic of PR tools, the press release. The press release has been questioned in recent years. Carr’s article potentially buries the notion of a long press release and calls on companies to create one paragraph news announcements that in turn link to other documents that provide the extended detail.
If you follow this ‘bite sizing’ of communication to its logical conclusion with other PR tools you soon start to see a very different world. What you realize is that companies will soon avoid trying to communicate anything complex and instead find ways of breaking the information down into a series of announcements that people can absorb. Indeed, some companies may find themselves saying remarkably little and instead focusing on get snippets of bad news about their competitors on the Internet.
Aside from testing the ability of PR people to tell stories in seconds rather than minutes, we are also being challenged to create ways for people to get their information that are more rewarding. The very act of web surfing has become tiresome. High speed internet connections, coupled with great search tools mean we get our information on demand. Put another way, there are fewer and fewer gaps between information, giving us less time to think and make sense of the content. The companies that can somehow reverse this trend and allow us time to really absorb information, rather than have it wash over us, will ultimately win. To do this we need to think not simply about the content but also the tools we use to get information across. This is something the advertising industry has already been working on for decades. Indeed they are masters of dealing with short attention spans. I would therefore encourage all PROs to take a long look at the tools this industry uses and see if there are ways PR can be adapted to a SASW (short attention span world). I’d give you some of my own thoughts but I suspect most of you have stopped reading by now and have moved on to another blog…
Trying to buy an iPhone in Silicon Valley means calling around to find out which Apple stores have them and then going and standing in line. Oh and before you try it, the Apple Store on the Apple campus doesn’t actually sell iPhones (I struggle with the logic of that). This approach to selling products is not terribly customer friendly. If they simply wanted to sell as many as they could they would sell the phone online and then allow you to visit an AT&T store to get it activated. Of course they don’t sell them online, as again this would be a tad customer friendly which Apple tends not to be. Instead, Apple values hype and the prestige that a mix of product shortage and funky distribution brings. At one level this is terribly smart. By making it hard to get, the have made the iPhone even more desirable. Yet once again it shows how a brand can get caught up with being ‘cool’ rather than customer centric. Apple could create a system that keeps you informed on shipments and lets you pre-order like they did when the iPod came out but they have decided not to do that this time. In essence they are saying we want queues of people outside our stores and we don’t care if this is annoying for people. What is more they have made PR mileage out of this by having camera crews interviewing those waiting in line.
Of course I fully expect that Apple will find people to be very patient and very few customers will give up and buy a Samsung or Palm product instead but I do question the logic here in terms of the long term customer relationships. By making the customer suffer to get their products in ways that could be avoided they are weakening the bond with those customers. That will mean that when someone does come out with an iPhone beater (which admittedly no one has yet but I am sure they will) then Apple will find a whole group of people ready and willing to jump to that brand.
I should note that I love the iPhone. I loved the first iteration and I love this version even more. I have some minor gripes with the keyboard and with the fact that you can’t sort emails by sender but the other functions of this device are so impressive that I can live with these draw backs. Guess I’d better call the Apple store and see how long the line is.
As the economy continues to struggle forward I was reminded today on two occasions how easy it is for a company to lose customers through poor service. The first came when a technician came to ‘fix’ our washing machine at home which is all of six months old. He left after an hour saying he needed a part to be shipped and would return in 10 days!!! Now he could have handled this well but he laughed when asked if he could perhaps come back sooner given we have three young kids and rather need a machine. So lesson one here was don’t buy a Whirlpool Duet washing machine and expect it to last and lesson number two was you can expect lousy service when it does break.
My second encounter with poor service was with WalMart. I want to buy my son a Star Wars chess set. Searching online I noticed WalMart has them in ‘Limited stores’ but not online (odd I know). I called our local store with the WalMart product number in hand. First they put me through to Toys where the first person I talked to had no clue what I was talking about. The second person said I needed to talk to customer service and that he’d put me through. After three rings the line went dead and I was cut off… I called back and asked for customer service. This time the lady asked me for the product number (she actually did this twice) and then put me on hold for twenty minutes, after which I hung up and gave up. My son will have to wait I decided.
In both cases I could have come away feeling people were doing their best and I would have been OK with the outcome. Yet in both cases I encountered people that never once put themselves in the shoes of the customer. Doing this in times when the economy is doing well isn’t good but you may survive. Doing this when times are tough is asking for trouble. Customers will walk away and never come back. For PROs this is something to consider. You will quite often be dealing with less than good news in the next year BUT you can make the experience of dealing with that news a whole lot better if you for a moment put yourself in the shoes of the person you are dealing with and imagine how they may react. Think customer service.
Silicon Valley is an odd part of America. For a start most of the people you tend to meet are transplants from either some other corner of the world or some other part of America. So when you live here you tend to get distorted view of what America is really like. I recently got a good chance to observe ‘real’ America. Not by visiting another part of it but by leaving it for a while. In the last month I did a trip to Europe and witnessed first hand how the Europeans view America. I think it would be fair to say that America is no longer viewed the way it was when I lived there. America used to be a super power with money to throw at any problem. America used to be a place where everyone had a great standard of living. America used to have people that travelled to Europe for a vacation. Instead, America is a place where the banking industry is in turmoil and the economy is ‘challenged.’ It is the place where people have suddenly realized that SUVs are a dumb idea for most average motorists. It is a place where tourists now go carrying an extra suitcase so they can restock their wardrobes at a fraction of the cost they would at home. Put simply America has become a place that is cheap to visit and yet has pretty impressive infrastructure. Indeed America is perhaps the first highly sophisticated third world country in the eyes of many. It seems hard to imagine that America has become this in such a short space of time. Ten years ago, the economy here was flying and Wall Street was in charge. Today Wall Street is in hiding and the economy is hardly firing on all cylinders. Indeed if it weren’t for the weak dollar then the US economy would likely be in a recession of some magnitude. As it is it is prompting people to buy product and services from here as if this were China or India. Only yesterday VW announced it is to open a manufacturing plant in Tennessee. It did this it was said, because of the weak dollar. All I can say is that they obviously assume America is set to have a weak dollar for some time to come as they are spending $1 Billion on this plant. So I return to my observation that America is perhaps becoming a new class of country. It is clearly ‘developed’ and yet thanks to a weak dollar is now competing for jobs and contracts shoulder to shoulder with the developing nations. Ten years ago, such a thought would have been impossible to imagine.