Message from Michael -- May 19, 2008

SWEEPS

HOW DEEP IS YOUR MOAT

AMERICAN I-O-U’S

IT PAYS TO ADVERTISE

USER GENERATED DOLLARS

MORE TWITTER-PATION

SOCIAL NETWORKS VS. TV NETWORKS

FACTOID OF THE WEEK

AMERICAN IDOL FACTOIDS


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SWEEPS: It’s almost over. The most critical sweeps period of the year. The one that could make or break you. The one your sales department will rely on for more than half the year. The one that… Oh, never mind. You get it. It’s important. But don’t feel any pressure.

HOW DEEP IS YOUR MOAT: According to superinvestor Warren Buffett, that is one of the key questions he asks in deciding on whether to buy or invest in a company. And he knows a bit about investing. His company, Berkshire Hathaway, has interests in everything from, as he put it, “lollipops to motor homes” -– from insurance giant GEICO to candy-maker See’s Chocolates, from FlightSafety which trains more than half of the U.S. corporate jet pilots to BoatUS, which is sort of the AAA of boating. In his latest annual letter to shareholders, Buffett says the good moat is “a metaphor for the superiorities that make life difficult for their competitors.” It is a barrier that protects the company “castle” from the assault of competitors. For example, he says, GEICO and Costco have captured the low-cost producer niche while Coca Cola and American Express possess powerful world-wide brands. He says business history is filled with “Roman Candles” whose moats “proved illusory and were soon crossed.”

IT PAYS TO ADVERTISE: Insurance giant GEICO has one of the best growth records among auto insurers in the country. It now controls 7.2% of the auto insurance market, on sales of $12 Billion, up from 2.5% when Berkshire Hathaway acquired it in 1995. Buffett notes in his letter that, “not coincidentally,” ANNUAL ad expenditures have risen from $31 Million to $751 Million.

QUOTABLE QUOTES: Talking about the idea of buying controlling interest in a mediocre business versus investing in a great business, Buffett writes, “it’s better to have a part interest in the Hope Diamond than own all of a rhinestone.” Talking about how the airline industry is a bad investment, Buffett writes, “if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.” He compares the use of money from one company to invest in another to Adam and Eve who “kick started an activity that led to six billion humans.” Buffett also quotes others in his report. Talking about how he made a mistake in not buying the NBC station in Dallas-Fort Worth, he compares himself to a politician described by columnist Molly Ivins who, “if his I.Q. was any lower, you would have to water him twice a day.” And he says he will continue to make mistakes, explaining that acquiring companies is like the line from a Bobby Bare country song: “I’ve never gone to bed with an ugly woman, but I’ve sure woke up with a few.” John Stumpf, CEO of Wells Fargo, talking about the recent behavior of many lenders: “it is interesting that the industry has invented new ways to lose money when the old ways seemed to work just fine.”

THE RICHEST MAN YOU DON’T KNOW: Everybody has heard of Warren Buffett, but few have heard of his partner – Charlie Munger. Not because Buffett hogs the limelight… he actually talks about Munger a lot. Quite frankly I don’t know why. And although Buffett is known for his sharp writing wit, Munger is no slouch. For some idea of his thoughts, you can read (and/or purchase his book) at poorcharliesalmanack.com.

BUFFETT FACTOIDS: The net income of Berkshire Hathaway in 2007 was $2.353 Billion. When Buffett sold the company’s share in PetroChina, it paid $1.2 Billion to the I-R-S – or, as Buffett points out, enough to pay for all of the costs of the U.S. government – defense, social security, you name it – for about four hours. Since Buffett took over the Berkshire Hathaway company in 1965, the book value of a share of Class A stock has risen from $19 a share to $78,008 a share.

USER GENERATED DOLLARS: Research firm In-State predicts that the revenue from User Generated Video is expected to top $1.19 Billion worldwide by the year 2012. The firm says that will translate into 160 Billion videos that year. The company chalks up the growth in part to the proliferation of cheap HD cameras. Meanwhile, a group has formed to provide ‘pre-screened’ User Generated Content to television stations. The website, icnewstv.com, has so-called ‘citizen journalists’ shooting and producing material, ranging from breaking news such as brush fires to features about bees. The site appears to be an outgrowth of a British news website, icnews.co.uk.

MORE TWITTER-PATION: In MfM two weeks ago, I talked about how people are getting twitterpated over micro-blogging site Twitter. Now add to the list of the ‘twitterpated’ – the Society for New Communication Research, Global Voices, The Poynter Institute, Business Week, ClickZ and Graeme Newell of 602 Communications. From Poynter Online, writer Fons Tuinstra found out more through Twitter about the earthquake in China than many people in China in just a few hours. Several others echoed that sentiment. Blogger Matthew Ingram says Twitter provided ‘the first draft of history’ on the China earthquake. Tech geek blogger Robert Scobble was at the ‘epicenter’ of the earthquake information dispersal, ‘twittering’ with links to stories and early videos and photos. Global Voices, a project of the Harvard Law Schools’ Berkman Center for Internet and Society, provides a detailed look at the earthquake twitter. Presidential candidate Barack Obama has nearly 30,000 people following him through Twitter. BusinessWeek says ‘devotees’ of the Twitter microblogging site believe it has the potential to rival Facebook and MySpace even though its audience is ‘small’ by Web standards with half a million to a million regular users. BusinessWeek writer Stephen Baker used Twitter to ‘crowd source’ his article on Twitter. Marketing guru Graeme Newell talks about the same ‘wisdom of crowds’ value of Twitter in finding the best options to solve problems, and talks about reporters using it and other social networks because it “exponentially amplifies the rolodex of every person in the newsroom.” Add to that, the Society for New Communication Research has released a report titled “Twitter: Best Practices for Business Use” which provides a ‘Tip Sheet” for increasing sales, listening to and interacting with customers, conducting an instant, informal focus group, building a community and brainstorming ideas.

SOCIAL MEDIA MELANGE: Those same social media methods are a critical factor in how people decide on a product, according to a survey by the Society for New Communications Research. More than half (59.1%) of those surveyed say they use social media to “vent” about a customer care experience and nearly three quarters (72.2%) research customer care online before buying a product or service. The survey indicates that the use of social media to research how companies treat their customers is particularly prevalent among a very powerful and highly desirable group – 25 to 55 year old, college-educated people earning $100,000+. As you would expect, the study shows people rely heavily on search engines to do this type of research while micro-blogging sites like Twitter or Pownce are rated of no value by a substantial number (39%) as are YouTube (27%) and MySpace (22%). Members of the study group warned that the research should serve as a wake-up call to companies to “listen, respond and improve” because “the customer’s voice is louder and travels further than ever before.”

SOCIAL NETWORKS VS. TV NETWORKS: In a sidebar piece to an article questioning why the soaring social networks have failed to turn into raging revenue generators, writer Jon Swartz of USA Today draws an interesting analogy between social networks and TV networks. He argues that behemoths MySpace and Facebook will assume the role of the major networks (ABC, CBX, Fox and NBC) as advertising vehicles. Second tier sites like LinkedIn, Bebo and Ning will fill the role of cableTV networks like CNN, MTV, USA Network. And vertical sites like Xing and Global Grind will fulfill the role of niche TV properties like Food Network and SciFi Channel.

FACTOID OF THE WEEK: Search giant Google accounted for two-thirds (67.9%) of ALL searches in the U.S. in the month of April. And as a side note to this week’s factoid, Billionaire entrepreneur and Yahoo investor and invader Mark Cuban raises the idea of companies ‘recusing’ themselves from the Google Index, of common search items. In other words, you or your company wouldn’t appear in a Google search of key items. Cuban says it would cost a Microsoft or Yahoo upwards of $1 Billion to do this, but he says it would slow down the ‘juggernaut’ known as Google.

AMERICAN IDOL FACTOIDS: Despite the youth image of the program, the largest demographic group watching is actually the 35-49 year olds who comprise nearly a third (29%) of the total audience. Further, according to Nielsen, the average fan using mobile text messaging voted 38 times in April. Last year, there were 4,349 instances of product placement while this year there has been 3,291 occurrences BUT that was just in the first quarter of the year.

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