After being eclipsed on many fronts, going private looks better
Back in 2001, with the Internet industry adrift after the bubble burst, I asked aloud whether anything would be left of Yahoo Inc. in the future, other than the exclamation point in its brand name.
At the time, which seems like generations ago on the Internet, Google was not yet a public company. Social networking was still just a term for what we did at parties in the real world. "Second Life" referred to the hereafter.
And Yahoo had 210 million unique visitors on its Web site -- half of what it has today.
Hollywood veteran Terry Semel was just getting his feet wet, having taken the helm of Yahoo in May 2001. Yahoo's market valuation after he settled in was some $9.8 billion, and the stock traded at a split-adjusted level of $10, after having tumbled with the overall market since the spring of 2000. It was a period of "pain," as a big investment firm put it at the time.
Particularly painful for those at Yahoo. It was also a year that saw Semel cut jobs and revamp dozens of business units.
Six years later, Yahoo which reports fourth-quarter results Tuesday seems to be at a place of, if not of exactly similar circumstances, certainly painful ones.
After collapsing 36% last year, Yahoo sports a market valuation of about $39 billion and its stock looks more like that of an old-line media company than a nimble, fast-growing Web dynamo.
The average traditional media vehicle like Walt Disney, Time Warner or Viacom trades at 22 times estimated free cash flow for this year, according to Stanford Group Co. Yahoo currently has a multiple of 23 vs. 50 for Google.
If you look at 2008 estimates, Yahoo's multiple would be lower than those of traditional media giants.
Its stuck-in-the-mud price and relatively low multiple raises the question of whether the company is ripe, or close to that, to be a leveraged-buyout candidate.
After all, private-equity honchos are flush with cash and very active these days.
Just over a third of the value of mergers and acquisition deals last year (through mid-December) were conducted by private firms. That's up from 23% in 2005 and a 10-year average of 17%, according to PricewaterhouseCoopers. According to Thomson Financial and the National Venture Capital Association, buyout and mezzanine funds recorded the highest year ever, with 138 funds raising $102.9 billion.
"Yahoo's one that's had a lot of execution problems in the last 12 months," said Mark Mahaney, analyst at Citigroup. "If you have a good strategy for turning around an asset with still a lot of traffic, it's an interesting candidate."
Losing search, now branded?
The question is whether Yahoo will be able to maintain that traffic.
Although third-party traffic statistics are questionable these days, it appears that MySpace.com already has surpassed Yahoo's page views as of November, according to comScore Networks, and MySpace maintained that lead in December.
December was the first month that Google as a parent company (including its recent acquisition of YouTube) overtook Yahoo in unique visitors. Google properties attracted a unique audience of 112.2 million while Yahoo-owned sites had 111.184 million, according to Nielsen//NetRatings.
That's not a good sign for Terry Semel's company.
As recently as 2005, Fortune magazine thought that if any Internet company would define the Internet advertising future, it would be Yahoo, even more so than Google.
It didn't take long for Google to prove them wrong. In the second quarter of 2005, it eclipsed Yahoo in terms of net sales.
Then Google quickly outranked both Yahoo and eBay in terms of market valuation.
Since conceding search to Google, Yahoo focused on its media image.
Wall Street and other observers believed that even if Yahoo couldn't win in search, at least its massive breadth in properties would make it the go-to place once marketers put their brand dollars to work.
Today, however, that dominance in media is questionable.
Google, through the YouTube acquisition and its MySpace relationships, has a lot of display-advertising inventory at its disposal.
What does Yahoo have? Lack of certainty at the helm.
In December, Yahoo reorganized its operations into three groups -- audience, advertising and publishing, and technology. Yahoo also announced the departures of top executives, including Dan Rosensweig as chief operating officer, and Lloyd Braun, who led Yahoo's media group, and CFO Sue Decker got a more important managerial role as head of the advertiser & publisher group.
And, there's shaky loyalty within the management. To wit: Its Yahoo's ails were aired in a leaked internal memo, the now famous Peanut Butter Manifesto. Of course, much of the shakeup and public venting followed a year of the many blunders, such as the delay in the newly installed Panama advertising platform, losing out to Google in striking a search deal with News Corp. and failing to buy its own big social network at a time when Google snapped up YouTube.
In a recent edition of Fortune, Google was rated the No. 1 company to work for; Yahoo was 44th. Then again, Fortune isn't exactly a leading indicator of what's to come.
But what is to come is more branded advertising around video and across social networks.
That means less is riding on the shoulders of Yahoo's search group while a lot more pressure's on its media bosses like Vince Broady, head of games and entertainment, or Scott Moore, his counterpart in the news and information division.
After all, Yahoo lost the search wars to Google; it certainly doesn't want to the same to happen to its first-mover status in the online entertainment world.
Yahoo burst onto the stock market in April 1996, at a split-adjusted IPO price of 54 cents. Now it trades in the $27 range.
A buyout of the company would only occur at the right price. And even if Yahoo trades at a relatively low multiple based on its cash flow, Yahoo's multiple on earnings is still very high.
In its heyday, everyone understood what it meant "to Yahoo." It was a way to get around the Web. Maybe the Yahooligans need to reconsider what it means to say, "Do you Yahoo?"
And, maybe they need to do it in the private-investor market.
MarketWatch
Tuesday, January 23, 2007
Album sales slump as downloads rise
As music-buying habits increasingly shift toward digital downloads, the industry experienced dramatic ups and downs in its 2005 sales results.
Down:
• Total album sales, falling from 666.7 million in 2004 to 618.9 million, according to Nielsen SoundScan, a drop of 7.2% after a 1.5% gain over 2003's sales total.
• CD sales (95% of total album sales), off even more dramatically, from 651.1 million to 598.9 million (down 8.0%).
• Most musical genres, many (soundtracks, classical, metal and R&B) suffering double-digit drops. Latin was the sole exception, rising 12.6%.
Up:
• Digital track downloads, rising from 150% to 352.7 million.
By the numbers
After a one-year gain, CD sales dropped again in 2005, by 8.0%. They're now 15.5% below 2000's record level. Digital track downloads continued to explode in 2005, rising 150% over 2004.
• Digital album downloads, climbing 194% to 16.2 million from 5.5 million.
• Internet album sales, up 11%, accounting for nearly 25 million sales.
• Overall music purchases (encompassing albums, singles, music video and digital downloads), which were up 22.7% over 2004 and passed 1 billion units for the first time.
Though the jumps are cause for long-term optimism, the overall picture for the year was far from rosy, because a digital track download sale amounts to one-tenth or less the revenue of a CD sale. This year, SoundScan began to tally track equivalent albums (TEAs), counting 10 track downloads as one album sale in an attempt to create a more realistic overall sales picture. Adding in the year's TEAs, the 2005 album-sales decline is just 3.9% (from 680.7 million units in 2004 to 654.1 this past year).
Geoff Mayfield, Billboard's director of charts, says the year is a disappointment for the music business but adds, "What we're seeing here and in other recent decline years is an industry transition."
He calls the digital-download sphere "a different business. It tends to lend itself to buying individual songs rather than albums. There was a pent-up demand on the consumer's part to be able to buy individual songs that wasn't being catered to."
Mayfield thinks the raw total of track downloads may surpass total CD sales "in the next year or two," but he is hopeful the industry will devise new ways to capitalize on the shift in music purchasing practices.
"The record industry tends to be challenged by hard times — the problems of the '70s and '80s led to a rethinking of business practices. The transformation from this round of innovation and suffering will be much more radical."
USA Today
Down:
• Total album sales, falling from 666.7 million in 2004 to 618.9 million, according to Nielsen SoundScan, a drop of 7.2% after a 1.5% gain over 2003's sales total.
• CD sales (95% of total album sales), off even more dramatically, from 651.1 million to 598.9 million (down 8.0%).
• Most musical genres, many (soundtracks, classical, metal and R&B) suffering double-digit drops. Latin was the sole exception, rising 12.6%.
Up:
• Digital track downloads, rising from 150% to 352.7 million.
By the numbers
After a one-year gain, CD sales dropped again in 2005, by 8.0%. They're now 15.5% below 2000's record level. Digital track downloads continued to explode in 2005, rising 150% over 2004.
• Digital album downloads, climbing 194% to 16.2 million from 5.5 million.
• Internet album sales, up 11%, accounting for nearly 25 million sales.
• Overall music purchases (encompassing albums, singles, music video and digital downloads), which were up 22.7% over 2004 and passed 1 billion units for the first time.
Though the jumps are cause for long-term optimism, the overall picture for the year was far from rosy, because a digital track download sale amounts to one-tenth or less the revenue of a CD sale. This year, SoundScan began to tally track equivalent albums (TEAs), counting 10 track downloads as one album sale in an attempt to create a more realistic overall sales picture. Adding in the year's TEAs, the 2005 album-sales decline is just 3.9% (from 680.7 million units in 2004 to 654.1 this past year).
Geoff Mayfield, Billboard's director of charts, says the year is a disappointment for the music business but adds, "What we're seeing here and in other recent decline years is an industry transition."
He calls the digital-download sphere "a different business. It tends to lend itself to buying individual songs rather than albums. There was a pent-up demand on the consumer's part to be able to buy individual songs that wasn't being catered to."
Mayfield thinks the raw total of track downloads may surpass total CD sales "in the next year or two," but he is hopeful the industry will devise new ways to capitalize on the shift in music purchasing practices.
"The record industry tends to be challenged by hard times — the problems of the '70s and '80s led to a rethinking of business practices. The transformation from this round of innovation and suffering will be much more radical."
USA Today
The Inevitable Death of DRM
Notwithstanding Apple’s announcement today of the sale of 2 billion songs on iTunes (all with DRM), most of the recent market signs suggest that the eventual demise of DRM is inevitable. Consumers are more frustrated than ever that certain file types are playable only on certain devices. The only real questions are when, and will it be replaced with something far more sinister?
The signs:
A year ago, Yahoo Music GM David Goldberg urged labels to abandon DRM
CD sales continue to drop and are down at least 15% from 2000, and current digital sales are not offsetting that lost revenue
eMusic, which sells only MP3s, is the no. 2 digital music reseller behind iTunes
Amazon is rumored to be opening a MP3-only music store
Sony Exec says “DRMs are going to become less important” as time goes on
etc.
Then there’s the Apple factor. The digital music market is starting to look like a monopsony for the big labels, with Apple as the only real reseller (20x the sales of no. 2 eMusic). No one else can gain enough critical mass to get users to buy a player and the music, or otherwise make much of a dent in iTunes. The only way others can sell music playable on the iPod is if it’s DRM-free. The labels will see it as a poison pill, but Apple is on a roll and their lead is getting stronger over time.
I spoke with Yahoo Music GM David Goldberg and VP Product Development Ian Rogers last week about their views on the future of DRM, given Goldberg’s comments about DRM a year ago (see above). The forty minute podcast is up at TalkCrunch. While they don’t quite agree that DRM’s demise is inevitable, they do have valuable insights as music insiders as to what may happen in the short term. One interesting prediction that Goldberg made is that we might see DRM and DRM-free tracks being sold side by side, with DRM music sold at a discount. I think that the general availability of illegal and quasi-legal alternatives may not allow that market to develop, but we’ll see. They also predict the rise of music subscription services.
Our advice remains the same. For legal reasons we do not condone the acquisition of music via BitTorrent or AllofMP3. We think Bill Gates’ advice is a pretty good way to go - buy the CD, rip and and do what you like with the music. You can listen to it on any device you own. But whatever you do, don’t buy DRM’d music. You’ll regret it down the road.
TechCrunch
The signs:
A year ago, Yahoo Music GM David Goldberg urged labels to abandon DRM
CD sales continue to drop and are down at least 15% from 2000, and current digital sales are not offsetting that lost revenue
eMusic, which sells only MP3s, is the no. 2 digital music reseller behind iTunes
Amazon is rumored to be opening a MP3-only music store
Sony Exec says “DRMs are going to become less important” as time goes on
etc.
Then there’s the Apple factor. The digital music market is starting to look like a monopsony for the big labels, with Apple as the only real reseller (20x the sales of no. 2 eMusic). No one else can gain enough critical mass to get users to buy a player and the music, or otherwise make much of a dent in iTunes. The only way others can sell music playable on the iPod is if it’s DRM-free. The labels will see it as a poison pill, but Apple is on a roll and their lead is getting stronger over time.
I spoke with Yahoo Music GM David Goldberg and VP Product Development Ian Rogers last week about their views on the future of DRM, given Goldberg’s comments about DRM a year ago (see above). The forty minute podcast is up at TalkCrunch. While they don’t quite agree that DRM’s demise is inevitable, they do have valuable insights as music insiders as to what may happen in the short term. One interesting prediction that Goldberg made is that we might see DRM and DRM-free tracks being sold side by side, with DRM music sold at a discount. I think that the general availability of illegal and quasi-legal alternatives may not allow that market to develop, but we’ll see. They also predict the rise of music subscription services.
Our advice remains the same. For legal reasons we do not condone the acquisition of music via BitTorrent or AllofMP3. We think Bill Gates’ advice is a pretty good way to go - buy the CD, rip and and do what you like with the music. You can listen to it on any device you own. But whatever you do, don’t buy DRM’d music. You’ll regret it down the road.
TechCrunch
News Corp. hopes to not 'screw up' MySpace
Peter Chernin, the president and chief operating officer of MySpace parent News Corp., says company doesn't want to "Fox-ify" social networking site.
The president and chief operating officer of News Corp., the parent company of top social networking site MySpace as well as traditional media properties such as the Fox television network and movie studio, told investors that News Corp. plans to invest more heavily in MySpace this year but will be careful to not make changes that could alienate the site's users.
Peter Chernin, speaking at Citigroup's annual entertainment, media and telecommunications conference in Las Vegas, said that MySpace should remain popular as long as News Corp. (Charts) doesn't meddle too much with how the site looks and is run.
"Our job is to continue to do a couple of things. One, is to not screw it up, not make it restrictive or look to Fox-ify it," Chernin said. "Beyond that you have to continue to give users new tools. You don't shove it down their throat but you do offer them new ones and see what they like."
Chernin said that what makes the site work so well is that users aren't forced to use MySpace services if they don't want to on their pages. To that end, even though MySpace has its own online video and photo-sharing services, Chernin said that it would be a mistake to not let users post links on MySpace sites to competing sites, such as Google (Charts)-owned YouTube for videos or Yahoo! (Charts)-owned Flickr for photo sharing.
Investors have been excited about the prospects for MySpace, which News Corp. acquired in 2005 for $580 million, as online advertising spending is expected to increase strongly in 2007 and beyond. As such, last year, MySpace struck a multi-year online ad-revenue sharing agreement with Google. Google will be the exclusive provider of contextual ads on MySpace and MySpace is expected to receive a minimum of $900 million over three years as a result of the deal.
Chernin added during his comments that MySpace also will look to expand more aggressively in international markets this year. "We want to be not just the dominant social networking site in the U.S. but also globally," he said.
Turning to the topic of online video advertising, Chernin said that online video has the potential to be the biggest positive story for media companies in 2007. But he was quick to point out that, despite all the hype about user-generated video, he did not believe advertisers would embrace this medium.
"Many big advertisers are not advertising on YouTube yet. One, they're not sure about the content and there is no scarcity value. If you put an ad on a minute- long clip of someone falling off a skateboard, people can find that somewhere else. With user-generated videos there is little way to monetize the content," he said.
Instead, Chernin said that he believed more and more marketers would look to shift more and more of their ad dollars from traditional forms of media like television to copyrighted versions of TV shows and other videos that appear online.
cnnmoney.com
The president and chief operating officer of News Corp., the parent company of top social networking site MySpace as well as traditional media properties such as the Fox television network and movie studio, told investors that News Corp. plans to invest more heavily in MySpace this year but will be careful to not make changes that could alienate the site's users.
Peter Chernin, speaking at Citigroup's annual entertainment, media and telecommunications conference in Las Vegas, said that MySpace should remain popular as long as News Corp. (Charts) doesn't meddle too much with how the site looks and is run.
"Our job is to continue to do a couple of things. One, is to not screw it up, not make it restrictive or look to Fox-ify it," Chernin said. "Beyond that you have to continue to give users new tools. You don't shove it down their throat but you do offer them new ones and see what they like."
Chernin said that what makes the site work so well is that users aren't forced to use MySpace services if they don't want to on their pages. To that end, even though MySpace has its own online video and photo-sharing services, Chernin said that it would be a mistake to not let users post links on MySpace sites to competing sites, such as Google (Charts)-owned YouTube for videos or Yahoo! (Charts)-owned Flickr for photo sharing.
Investors have been excited about the prospects for MySpace, which News Corp. acquired in 2005 for $580 million, as online advertising spending is expected to increase strongly in 2007 and beyond. As such, last year, MySpace struck a multi-year online ad-revenue sharing agreement with Google. Google will be the exclusive provider of contextual ads on MySpace and MySpace is expected to receive a minimum of $900 million over three years as a result of the deal.
Chernin added during his comments that MySpace also will look to expand more aggressively in international markets this year. "We want to be not just the dominant social networking site in the U.S. but also globally," he said.
Turning to the topic of online video advertising, Chernin said that online video has the potential to be the biggest positive story for media companies in 2007. But he was quick to point out that, despite all the hype about user-generated video, he did not believe advertisers would embrace this medium.
"Many big advertisers are not advertising on YouTube yet. One, they're not sure about the content and there is no scarcity value. If you put an ad on a minute- long clip of someone falling off a skateboard, people can find that somewhere else. With user-generated videos there is little way to monetize the content," he said.
Instead, Chernin said that he believed more and more marketers would look to shift more and more of their ad dollars from traditional forms of media like television to copyrighted versions of TV shows and other videos that appear online.
cnnmoney.com
Put up or shut up time for Yahoo!
After a rough 2006, Yahoo must reassure Wall Street that new search tool Panama will be a success and that it has a plan to compete with Google and MySpace.
Will Yahoo's fourth-quarter earnings and guidance for 2007 be smooth or chunky?
That's the question on investors' minds in the aftermath of the now infamous Peanut Butter Manifesto - a memo by a Yahoo (Charts) executive leaked to the media last November that took the online media firm to task for spreading itself too thin - and a subsequent management shake-up.
The company will report its fourth-quarter results, and give investors their first taste of how 2007 is shaping up, on Tuesday January 23. Wall Street expects the company to post revenue (excluding ad sales it shares with affiliates) of $1.22 billion and earnings of 13 cents a share in the quarter, according to figures compiled by Thomson Financial.
For the full year, analysts are predicting that Yahoo will report revenue of $5.5 billion, an expected increase of 20 percent from 2006, and profits of 59 cents a share, an anticipated jump of 28 percent.
Yahoo typically does not provide earnings per share guidance, however, so analysts and investors will be paying close attention to what the company's forecast for earnings before interest, taxes, depreciation and amortization (EBITDA) is. Analysts are predicting that Yahoo's 2007 EBITDA will be $2.2 billion.
Yahoo, the world's second most popular search engine behind industry leader Google, had a rough 2006. Shares of Yahoo plunged 35 percent due to concerns that the company was falling further behind Google (Charts) in search and was at risk of losing users and advertising dollars to the likes of popular social networking kingpins MySpace and Facebook as well as online video upstart YouTube.
Compounding matters, the release of Yahoo's much-anticipated new search platform, dubbed Project Panama, was delayed by a couple of months. (Yahoo is rolling Panama out to advertisers now, however).
And in September, Yahoo told Wall Street that third-quarter revenues would be at the low end of the company's expectations, news that stunned investors and sent the stock reeling. Yahoo blamed weak demand for online advertising from auto companies and financial services firms.
All this culminated in a management shuffle at the top of Yahoo in December. Chief financial officer Susan Decker was promoted to a new role - heading a unit dealing with advertisers - a position that many analysts said puts her in line to eventually succeed Yahoo chief executive officer Terry Semel.
Now investors are hoping that Yahoo's nightmare year is behind it. Analysts say they are looking for reassurance from the company about the adoption of Panama, which is meant to improve the relevancy of keyword results for advertisers and users and therefore boost the amount of revenue per query that Yahoo receives from its search business as well as Yahoo's market share in search.
Investors do seem to be betting that the worst may be behind the company. Shares of Yahoo have gained more than 10 percent so far this year, a possible sign that investors care more about what will happen in 2007 than how Yahoo did in the fourth quarter.
"The stock has definitely bounced nicely. The dirty laundry is out in the open," said Tim Boyd, an analyst with Caris & Co. "I don't think investors are too interested in the fourth quarter results. The 2007 guidance, which should be given on this call, will be vital because everyone will read into that what management's expectations for Panama are."
And Yahoo could clearly use a lift from Panama. According to figures from Web research firm comScore Networks released earlier this week, Yahoo trails Google by a fairly wide margin, with Google commanding 47.3 percent of the U.S. search market in December 2006 and Yahoo coming in second with 28.5 percent market share.
But Yahoo's market share did increase slightly from November and some analysts are optimistic that Panama will help Yahoo get back on track.
"The feedback we've gotten from agencies and advertisers about Panama is that it's a vastly improved product that is similar to Google. It allows advertisers to buy a greater breadth of keywords so there is strong enthusiasm for Panama," said Stewart Barry, an analyst with ThinkEquity Partners.
The company will also need to signal to investors that the weakness it cited last year in auto and financial services advertising was just temporary. There is already some skepticism about how real this slowdown was.
Jim Lanzone, chief executive officer of IAC/InterActive (Charts)-owned Ask.com, the number four search engine behind Google, Yahoo and Microsoft's (Charts) MSN, said that Ask.com did not see any weakness in online advertising at the end of 2006.
And Yahoo has to do more than just improve its search business to get investors excited again. Yahoo has been criticized by many investors and analysts for not being as aggressive as competitors in the burgeoning world of social networking. Media giant News Corp. (Charts) bought MySpace in 2005 and Google acquired YouTube last year.
Although the company has made acquisitions in the social networking arena, including photo sharing site Flickr and Web bookmarking site del.icio.us, some have argued that this isn't enough. To that end, there has been on-and-off speculation that Yahoo could buy Facebook in order to boost its presence in social networking.
"Aside from worries about search and Panama, the biggest concern is Yahoo's relative lack to exposure in social networking. One of the strongest assets Yahoo has is its enormous traffic base but if it doesn't find new ways to drive growth, that advantage will rapidly deteriorate," said Boyd.
The risk for Yahoo is that sites like MySpace and YouTube could begin to steal some of the so-called display advertising dollars from Yahoo. Display ads, which include banners, online video and other non-text based forms of ads, are an important part of Yahoo's business since it is area where it still has a lead over Google and other rivals such as MSN and Ask.com.
"Yahoo is known for being a leading company in display. But with the emergence of properties like MySpace, Facebook and YouTube, to what extent do those companies and similar offerings result in a degradation of the value proposition that Yahoo offers to advertisers?" said Scott Kessler, an equity analyst with Standard & Poor's. "Right now it's being concluded that Google and others will be the winners when it comes to social networking."
But before Yahoo can make bigger forays in social networking, it's probably going to need to find an executive to lead this push. When Yahoo announced its management changes in December, the company said it was also forming a new division that would be in charge of building Yahoo's audience base but it did not name a head of that unit.
Kessler said it is crucial for Yahoo to hire a new executive for this position soon, as well as find a replacement for Decker, who will give up the CFO spot to focus full-time on working with advertisers once her successor is hired.
"There are still a lot of questions about the new management structure. Last I checked you have important positions still open," Kessler said. "Investors are looking for details about a new CFO and a new head of the audience business. The lack of news frankly can't be construed as anything but problematic."
So it's clear that Yahoo quickly needs to prove to Wall Street that it has a plan to fend off challenges from new online media rivals like MySpace as well as get its growth back on track in search. If Yahoo doesn't deliver, Boyd said that the company may be forced to make more management changes or even look for a merger partner.
"This will definitely be a make or break year for Yahoo. If it's not a successful year then Semel, rightly or wrongly, would be gone," he said. "And if Panama does not succeed in improving Yahoo's search revenue growth, Yahoo could be an attractive buy for somebody like Microsoft."
cnnmoney.com
Will Yahoo's fourth-quarter earnings and guidance for 2007 be smooth or chunky?
That's the question on investors' minds in the aftermath of the now infamous Peanut Butter Manifesto - a memo by a Yahoo (Charts) executive leaked to the media last November that took the online media firm to task for spreading itself too thin - and a subsequent management shake-up.
The company will report its fourth-quarter results, and give investors their first taste of how 2007 is shaping up, on Tuesday January 23. Wall Street expects the company to post revenue (excluding ad sales it shares with affiliates) of $1.22 billion and earnings of 13 cents a share in the quarter, according to figures compiled by Thomson Financial.
For the full year, analysts are predicting that Yahoo will report revenue of $5.5 billion, an expected increase of 20 percent from 2006, and profits of 59 cents a share, an anticipated jump of 28 percent.
Yahoo typically does not provide earnings per share guidance, however, so analysts and investors will be paying close attention to what the company's forecast for earnings before interest, taxes, depreciation and amortization (EBITDA) is. Analysts are predicting that Yahoo's 2007 EBITDA will be $2.2 billion.
Yahoo, the world's second most popular search engine behind industry leader Google, had a rough 2006. Shares of Yahoo plunged 35 percent due to concerns that the company was falling further behind Google (Charts) in search and was at risk of losing users and advertising dollars to the likes of popular social networking kingpins MySpace and Facebook as well as online video upstart YouTube.
Compounding matters, the release of Yahoo's much-anticipated new search platform, dubbed Project Panama, was delayed by a couple of months. (Yahoo is rolling Panama out to advertisers now, however).
And in September, Yahoo told Wall Street that third-quarter revenues would be at the low end of the company's expectations, news that stunned investors and sent the stock reeling. Yahoo blamed weak demand for online advertising from auto companies and financial services firms.
All this culminated in a management shuffle at the top of Yahoo in December. Chief financial officer Susan Decker was promoted to a new role - heading a unit dealing with advertisers - a position that many analysts said puts her in line to eventually succeed Yahoo chief executive officer Terry Semel.
Now investors are hoping that Yahoo's nightmare year is behind it. Analysts say they are looking for reassurance from the company about the adoption of Panama, which is meant to improve the relevancy of keyword results for advertisers and users and therefore boost the amount of revenue per query that Yahoo receives from its search business as well as Yahoo's market share in search.
Investors do seem to be betting that the worst may be behind the company. Shares of Yahoo have gained more than 10 percent so far this year, a possible sign that investors care more about what will happen in 2007 than how Yahoo did in the fourth quarter.
"The stock has definitely bounced nicely. The dirty laundry is out in the open," said Tim Boyd, an analyst with Caris & Co. "I don't think investors are too interested in the fourth quarter results. The 2007 guidance, which should be given on this call, will be vital because everyone will read into that what management's expectations for Panama are."
And Yahoo could clearly use a lift from Panama. According to figures from Web research firm comScore Networks released earlier this week, Yahoo trails Google by a fairly wide margin, with Google commanding 47.3 percent of the U.S. search market in December 2006 and Yahoo coming in second with 28.5 percent market share.
But Yahoo's market share did increase slightly from November and some analysts are optimistic that Panama will help Yahoo get back on track.
"The feedback we've gotten from agencies and advertisers about Panama is that it's a vastly improved product that is similar to Google. It allows advertisers to buy a greater breadth of keywords so there is strong enthusiasm for Panama," said Stewart Barry, an analyst with ThinkEquity Partners.
The company will also need to signal to investors that the weakness it cited last year in auto and financial services advertising was just temporary. There is already some skepticism about how real this slowdown was.
Jim Lanzone, chief executive officer of IAC/InterActive (Charts)-owned Ask.com, the number four search engine behind Google, Yahoo and Microsoft's (Charts) MSN, said that Ask.com did not see any weakness in online advertising at the end of 2006.
And Yahoo has to do more than just improve its search business to get investors excited again. Yahoo has been criticized by many investors and analysts for not being as aggressive as competitors in the burgeoning world of social networking. Media giant News Corp. (Charts) bought MySpace in 2005 and Google acquired YouTube last year.
Although the company has made acquisitions in the social networking arena, including photo sharing site Flickr and Web bookmarking site del.icio.us, some have argued that this isn't enough. To that end, there has been on-and-off speculation that Yahoo could buy Facebook in order to boost its presence in social networking.
"Aside from worries about search and Panama, the biggest concern is Yahoo's relative lack to exposure in social networking. One of the strongest assets Yahoo has is its enormous traffic base but if it doesn't find new ways to drive growth, that advantage will rapidly deteriorate," said Boyd.
The risk for Yahoo is that sites like MySpace and YouTube could begin to steal some of the so-called display advertising dollars from Yahoo. Display ads, which include banners, online video and other non-text based forms of ads, are an important part of Yahoo's business since it is area where it still has a lead over Google and other rivals such as MSN and Ask.com.
"Yahoo is known for being a leading company in display. But with the emergence of properties like MySpace, Facebook and YouTube, to what extent do those companies and similar offerings result in a degradation of the value proposition that Yahoo offers to advertisers?" said Scott Kessler, an equity analyst with Standard & Poor's. "Right now it's being concluded that Google and others will be the winners when it comes to social networking."
But before Yahoo can make bigger forays in social networking, it's probably going to need to find an executive to lead this push. When Yahoo announced its management changes in December, the company said it was also forming a new division that would be in charge of building Yahoo's audience base but it did not name a head of that unit.
Kessler said it is crucial for Yahoo to hire a new executive for this position soon, as well as find a replacement for Decker, who will give up the CFO spot to focus full-time on working with advertisers once her successor is hired.
"There are still a lot of questions about the new management structure. Last I checked you have important positions still open," Kessler said. "Investors are looking for details about a new CFO and a new head of the audience business. The lack of news frankly can't be construed as anything but problematic."
So it's clear that Yahoo quickly needs to prove to Wall Street that it has a plan to fend off challenges from new online media rivals like MySpace as well as get its growth back on track in search. If Yahoo doesn't deliver, Boyd said that the company may be forced to make more management changes or even look for a merger partner.
"This will definitely be a make or break year for Yahoo. If it's not a successful year then Semel, rightly or wrongly, would be gone," he said. "And if Panama does not succeed in improving Yahoo's search revenue growth, Yahoo could be an attractive buy for somebody like Microsoft."
cnnmoney.com
Investors: Stay Out Of Media
We might have expected the traditional media companies to enjoy robust circumstances longer than they did. But with advertising numbers for 2006 beginning to filter in for the television broadcasters and the magazine publishers, it is becoming increasingly clear that the same sort of malady that has been so often discussed for newspapers is also pervasive for many traditional media companies.
At the newspaper publishers -- companies like New York Times (NYSE: NYT), Tribune (NYSE: TRB), and McClatchy (NYSE: MNI) -- a somewhat vicious circle of lower circulation is propelling reduced advertising revenues, which in turn is leading to talk of outright company buyouts in some cases and asset divestitures in others. The lower circulation figures themselves can be tied largely to the inherent lack of immediacy in the newspaper format and frequency.
A first pass at counting television advertising revenues for 2006 by accounting firm Ernst & Young -- and limited to a sampling of six New York stations -- now appears to substantiate somewhat the notion that advertising revenues for television may also have dipped for the second year in a row. According to the survey, the six stations billed about $1.402 billion, or about 0.3% below 2005.
Even given the biannual one-two punch provided by Olympic games and federal elections, the lack of growth was expected. And according to those who study broadcast advertising trends carefully, the "base market" -- total advertising dollars minus Olympics and political ads -- was up ever so slightly in 2006. Looking ahead, the expectation appears to be for that same base market to continue to grow in the low single digits this year, with a similarly expected decline in the overall market.
Interestingly, television broadcasters have experienced a variety of share price reactions amidst these market circumstances. Hearst-Argyle (NYSE: HTV), for instance, perhaps the purest play in television broadcasting, watched its share price increase by about 10% last year, while Belo (NYSE: BLC), which is both a newspaper publisher and a television broadcaster, experienced about an 18% share price reduction.
The world of magazines did not fare better than broadcasting last year. For instance, Time Warner's (NYSE: TWX) Time Inc. publishing unit experienced a 4.8% drop in ad pages, although its flagship Time held relatively steady, with just an 0.8% dip. At the same time, People dropped 2.8% and Sports Illustrated fell by 3.5%.
Over at Hearst Corporation, total ad pages were down 0.7%, but Esquire increased its count by 4.1% and Redbook was up 3.5%. Conversely, Cosmopolitan was 4.0% lower, and Country Living was down 4.4%. At Meredith (NYSE: MDP), which publishes mostly women's interest titles, the total decline was 1.4%, although Family Circle increased its advertising pages by a healthy 8.9%. Ladies' Home Journal was, however, essentially flat, with a 0.5% decline in ad pages, and Better Homes and Gardens fell by 8.2%.
What, then, is the lesson in these figures for Foolish investors? My take, quite simply, is that the optimum way to invest in the media space as we move into 2007 is either through those companies that were formed specifically to serve the Internet or those -- the cable operators are a noteworthy example -- whose fate is not highly dependent on advertising. The more traditional media companies clearly need more time for strategic redirections.
msnbc.com
At the newspaper publishers -- companies like New York Times (NYSE: NYT), Tribune (NYSE: TRB), and McClatchy (NYSE: MNI) -- a somewhat vicious circle of lower circulation is propelling reduced advertising revenues, which in turn is leading to talk of outright company buyouts in some cases and asset divestitures in others. The lower circulation figures themselves can be tied largely to the inherent lack of immediacy in the newspaper format and frequency.
A first pass at counting television advertising revenues for 2006 by accounting firm Ernst & Young -- and limited to a sampling of six New York stations -- now appears to substantiate somewhat the notion that advertising revenues for television may also have dipped for the second year in a row. According to the survey, the six stations billed about $1.402 billion, or about 0.3% below 2005.
Even given the biannual one-two punch provided by Olympic games and federal elections, the lack of growth was expected. And according to those who study broadcast advertising trends carefully, the "base market" -- total advertising dollars minus Olympics and political ads -- was up ever so slightly in 2006. Looking ahead, the expectation appears to be for that same base market to continue to grow in the low single digits this year, with a similarly expected decline in the overall market.
Interestingly, television broadcasters have experienced a variety of share price reactions amidst these market circumstances. Hearst-Argyle (NYSE: HTV), for instance, perhaps the purest play in television broadcasting, watched its share price increase by about 10% last year, while Belo (NYSE: BLC), which is both a newspaper publisher and a television broadcaster, experienced about an 18% share price reduction.
The world of magazines did not fare better than broadcasting last year. For instance, Time Warner's (NYSE: TWX) Time Inc. publishing unit experienced a 4.8% drop in ad pages, although its flagship Time held relatively steady, with just an 0.8% dip. At the same time, People dropped 2.8% and Sports Illustrated fell by 3.5%.
Over at Hearst Corporation, total ad pages were down 0.7%, but Esquire increased its count by 4.1% and Redbook was up 3.5%. Conversely, Cosmopolitan was 4.0% lower, and Country Living was down 4.4%. At Meredith (NYSE: MDP), which publishes mostly women's interest titles, the total decline was 1.4%, although Family Circle increased its advertising pages by a healthy 8.9%. Ladies' Home Journal was, however, essentially flat, with a 0.5% decline in ad pages, and Better Homes and Gardens fell by 8.2%.
What, then, is the lesson in these figures for Foolish investors? My take, quite simply, is that the optimum way to invest in the media space as we move into 2007 is either through those companies that were formed specifically to serve the Internet or those -- the cable operators are a noteworthy example -- whose fate is not highly dependent on advertising. The more traditional media companies clearly need more time for strategic redirections.
msnbc.com
eBay Protects PayPal From Google
When it comes to online commerce, Google seems to have eBay spooked.
At least that's the way it seemed at eBay's eCommerce Forum in San Jose, Calif., this week. Though Google Checkout--the online payment system Google unveiled to consumers in June--is just a tiny fraction of eBay’s PayPal business, eBay unleashed a host of new initiatives to keep PayPal dominant in the market.
Last July, eBay banned the use of Checkout. This week it went further, looking to shore up revenue in the face of the nascent rival. At the event, to which 250 of the company’s most powerful sellers were invited, eBay decreed Wednesday that new sellers must offer PayPal or credit cards for payment.
“We know that PayPal is the safest way to pay on eBay, and we want to make sure our buyers have this option with new sellers,” eBay North American President Bill Cobb wrote in on a blog Wednesday. And though he spun the new requirement as a security feature, enforced PayPal revenue certainly doesn’t hurt the company's bottom line.
In addition, eBay added some PayPal-only rules and perks, which could motivate sellers to stick with eBay’s payment system. Want to sell your goods across country borders? You’ve got to become PayPal certified. Want $2,000 in free listings insurance coverage? You can have it if you use PayPal only.
Pushing sellers to choose PayPal is one thing, but eBay also tried Thursday to fight back against Checkout’s recent seller promotions by dropping its own listing fee down to 20 cents per day from the typical 30 cents. Checkout is free for sellers until the end of 2007. EBay is either unable or unwilling to engage in a real price war with Google.
Why so worried? Because slipping PayPal revenues might scare Wall Street. When eBay reports fourth quarter earnings on Jan. 24, analysts will check out PayPal’s net revenue, which totaled $350 million in the third quarter, out of the company’s $1.5 billion total revenue for the quarter. PayPal is a good gauge of the health of the company’s listings business. Shrinking PayPal revenues would signify a poor job of defending eBay’s payments market share against upstarts like Google.
EBay says its PayPal moves aren't defensive. "We don't make policy decisions based on competitors like Checkout," says eBay spokesman Hani Durzy. "We just do what's good for the community."
Google, meanwhile, spent as much as $20 million during the holiday quarter to get people to use Checkout, according to a Goldman Sachs estimate, and looks to be waiving any immediate revenues from Checkout.
The millions were spent to pay sellers' transaction fees, as well as to offer buyers $10 off purchases during the holidays. The company renewed that promotion Tuesday, as advertised by a prominent notice posted to Google.com. Google also highlights Google Checkout sellers among its most prominent ads in search results.
While Google won’t disclose how many consumers have tried buying something using Checkout, JPMorgan analyst Imran Khan polled consumers on their Internet shopping habits and found that 6% of them have used Checkout, he reported Wednesday.
That’s impressive for six months on the market, but 42% of those polled had used PayPal in 2006. Only 2.3% of Khan’s respondents said they would switch permanently from PayPal to Checkout, making eBay’s recent PayPal-driven announcements seem like an overreaction. These defensive moves could worry analysts and investors who may not have thought Checkout was such a threat. They’ll be looking for some reassurance at the company’s earnings call next week.
Forbes.com
At least that's the way it seemed at eBay's eCommerce Forum in San Jose, Calif., this week. Though Google Checkout--the online payment system Google unveiled to consumers in June--is just a tiny fraction of eBay’s PayPal business, eBay unleashed a host of new initiatives to keep PayPal dominant in the market.
Last July, eBay banned the use of Checkout. This week it went further, looking to shore up revenue in the face of the nascent rival. At the event, to which 250 of the company’s most powerful sellers were invited, eBay decreed Wednesday that new sellers must offer PayPal or credit cards for payment.
“We know that PayPal is the safest way to pay on eBay, and we want to make sure our buyers have this option with new sellers,” eBay North American President Bill Cobb wrote in on a blog Wednesday. And though he spun the new requirement as a security feature, enforced PayPal revenue certainly doesn’t hurt the company's bottom line.
In addition, eBay added some PayPal-only rules and perks, which could motivate sellers to stick with eBay’s payment system. Want to sell your goods across country borders? You’ve got to become PayPal certified. Want $2,000 in free listings insurance coverage? You can have it if you use PayPal only.
Pushing sellers to choose PayPal is one thing, but eBay also tried Thursday to fight back against Checkout’s recent seller promotions by dropping its own listing fee down to 20 cents per day from the typical 30 cents. Checkout is free for sellers until the end of 2007. EBay is either unable or unwilling to engage in a real price war with Google.
Why so worried? Because slipping PayPal revenues might scare Wall Street. When eBay reports fourth quarter earnings on Jan. 24, analysts will check out PayPal’s net revenue, which totaled $350 million in the third quarter, out of the company’s $1.5 billion total revenue for the quarter. PayPal is a good gauge of the health of the company’s listings business. Shrinking PayPal revenues would signify a poor job of defending eBay’s payments market share against upstarts like Google.
EBay says its PayPal moves aren't defensive. "We don't make policy decisions based on competitors like Checkout," says eBay spokesman Hani Durzy. "We just do what's good for the community."
Google, meanwhile, spent as much as $20 million during the holiday quarter to get people to use Checkout, according to a Goldman Sachs estimate, and looks to be waiving any immediate revenues from Checkout.
The millions were spent to pay sellers' transaction fees, as well as to offer buyers $10 off purchases during the holidays. The company renewed that promotion Tuesday, as advertised by a prominent notice posted to Google.com. Google also highlights Google Checkout sellers among its most prominent ads in search results.
While Google won’t disclose how many consumers have tried buying something using Checkout, JPMorgan analyst Imran Khan polled consumers on their Internet shopping habits and found that 6% of them have used Checkout, he reported Wednesday.
That’s impressive for six months on the market, but 42% of those polled had used PayPal in 2006. Only 2.3% of Khan’s respondents said they would switch permanently from PayPal to Checkout, making eBay’s recent PayPal-driven announcements seem like an overreaction. These defensive moves could worry analysts and investors who may not have thought Checkout was such a threat. They’ll be looking for some reassurance at the company’s earnings call next week.
Forbes.com
Coming Soon: Free, Ad-Supported Mobile Service
People often say they do not like advertisements, but that may change if the ads start lowering their cellphone bills.
Cellular phone carriers like Verizon, Sprint and Cingular, now the new AT&T, are beginning to test and roll out advertising on mobile phone screens, and by next year, cellphone advertising is likely to be more common.
In exchange, the companies say, their subscribers will enjoy improved mobile Internet services and content provided free or at reduced prices. Other companies like Virgin Mobile USA and Amp’d Mobile are taking the idea a step further, rewarding customers for viewing ads by lowering their cellphone bills.
Amp’d, a cellphone company that aims its marketing at 18- to 24-year-olds in the United States, will begin offering an opt-in advertising plan this year. Customers who sign up will gain access to free shows and other content — if they are willing to put up with some ads.
“When people are consuming this stuff on their phones, it adds up to a lot of money,” said Brian Mullen, director for content business development for Amp’d.
Another company, Xero Mobile, plans to distribute one million free cellphones on college campuses across the United States this year and give customers 40 percent off on their calling plans, if they watch up to four commercials a day, said Rich Clayton, a spokesman for Xero. In Britain, a company called Blyk plans to provide a completely free plan on phones that are paid for by ads.
It was inevitable that advertising would hit the small screen sooner or later, industry analysts said. Cellphones are the most pervasive media device, beating out computers and televisions, as consumers keep their mobile phones at their side nearly every moment of the day.
A small but growing number of consumers, in particular, younger ones, are using their mobile phones for text messaging, surfing the mobile Internet, watching short shows, taking photos or videos and checking e-mail messages. Only time will tell if cellphones are destined to become like all other forms of media — supported by both subscription costs and by advertising.
Still, these new phone services will become mainstream only if their prices are lowered, possibly through advertising, analysts said. On average, consumers in the United States spend $50 to $60 a month for cellphone service, including data features. The average total bill has been flat for the last few years, even as voice call charges have decreased, because of the increase in fees for text messages and mobile e-mail messages.
“Advertising absolutely makes sense to extend expensive multimedia services and mobile TV to the mass market,” said Linda Barrabee, an analyst with the Yankee Group, a technology research and consulting firm based in Boston. “I think we will see consumers say, ‘You know what, I’m only going to spend this much money on my mobile phone.’ ”
In Asia, by contrast, multimedia mobile applications are more commonly used, and those services became more affordable there without advertising because of quick adaptation by consumers, analysts said.
The new uses of cellphones present vast opportunities for consumer brand companies, which are finding it difficult to reach customers through traditional media like magazines and television. Mobile phones can handle ads in many forms, including video, text messages, search and banner displays. And cellphone ads can be fine-tuned based on customer data.
But there is a chicken-and-egg factor when it comes to advertising. Big advertisers generally want to see further adoption of services before they pour significant money into mobile ads. Advertisers like Procter & Gamble, Burger King and Pepsi have been experimenting with mobile phone ads, but, in total, cellphone advertising generated only about $421 million in the United States last year, according to eMarketer, a digital advertising research firm. EMarketer predicted this month that mobile advertising would reach $4.8 billion across the country by 2011.
Despite the hopeful thinking, there is no guarantee mobile ads will catch on. “I would not want them on the phone even if that would help cut costs,” said Conor Kelly, 20, a student at Savannah College of Art and Design in Georgia. Mr. Kelly said he did not mind subtle sponsorships of content on his phone, but he would not want it go beyond that.
“It gets to a point where you’re almost encroaching on someone’s privacy,” Mr. Kelly said.
In the early days of the commercial Internet, some service providers tried giving away online access in exchange for showing ads to users, but those efforts did not pan out.
For the subsidized approach to work this time around, cellphone companies must prove that consumers pay attention to ads. “We have to ensure that the models that we pursue are those that actually get seen and acted on by consumers,” said Marc Lefar, chief marketing officer for AT&T’s wireless unit, which used to be called Cingular Wireless. AT&T is testing various forms of cellphone advertising, with introduction of ads planned this year.
As of now, text messaging is the most common venue for mobile phone ads. Signs, food packaging and even TV spots feature a code that phone users can text to be entered in promotions. 1-800-Flowers, for example, is running a sweepstakes in the New York area for a flower arrangement that comes in a small margarita glass. Next week, Nike will allow consumers to alter one of its TV commercials online and send their creations to their friends’ phones.
Some consumers may not realize that opt-in text message ads generate a charge for those who pay for each incoming text message. Such costs have deterred some marketers from creating mobile ads, said Sarah Kim Baehr, vice president for media at Avenue A Razorfish, an interactive ad agency that is part of aQuantive.
As mobile phones are used for more tasks, ads will pop up increasingly in more varied forms, ad executives said. Preroll video ads have already started to appear. Advertisers like Toyota have created 10-second commercials to run before miniepisodes of Fox shows, and the network promotes the strategy as a great way to reach a young audience.
“Look around,” said Mitch Feinman, senior vice president of Fox Mobile Entertainment. “All the young males and kids, they’re on their mobiles.”
Advertisers are generally paying a high price to try cellphone ads, about $40 for a thousand viewings of their ads, or twice as much as many TV spots, analysts said. The performance of these ads over the next year or so will determine whether they are likely to provide enough income to justify giving customers a price break on service fees.
Some companies are not waiting to find out. Virgin Mobile USA introduced a program last summer it calls Sugar Mama that compensates its phone users with free calling minutes for watching commercials, reading advertiser text messages and taking surveys from brands. Since last July, about 250,000 phone users have participated, earning a total of about three million minutes, said Howard Handler, chief marketing officer of Virgin Mobile USA.
Advertisers like the United States Navy and Levi Strauss Signature are showing ads through Virgin Mobile USA’s program, in part, because they liked the idea of compensating consumers for the time they spend watching their ads. “It gives us the assurance that our message is being heard,” said Stacy Doren, director for media and online at Levis Strauss Signature.
The carriers have so far been wary of exposing their customers to ads because the wireless marketplace is so competitive, said Scott A. Ellison, vice president for mobile at IDC, a technology and communications research firm.
“Advertisers are always hungry for new ways to reach people, however that’s a little scary for the carriers because they’re concerned over how the end user experience will be impacted,” Mr. Ellison said.
Google and Yahoo are also investing in mobile advertising, moving their search capacities to phones and selling sponsored search ads. Google executives have said publicly that they think phone service will one day be free and supported by advertising.
If advertising on mobile phones generates enough income to offer significant phone subsidies, many companies will probably allow phone users to choose whether they want ads, analysts said.
There are some consumers who would not want much advertising, no matter the price break. Younger consumers, whose parents do not want to upgrade their phones, and lower-income shoppers who cannot afford the upgrades may be the most receptive to ads.
Future ad packages might include free text messaging for people who agree to receive text message ads, said Roger Wood, senior vice president and general manager of the Americas region for Amobee Media Services, a company that is working with cellphone companies to test advertising-financed services in the United States and abroad. Underwriting mobile phone services would be a good opportunity for brands to provide value to customers rather than just blasting them with messages, said Mark Kingdon, the chief executive of Organic, a digital ad agency and part of the Omnicom Group.
Danny Herb, an avid text messager, said he would welcome advertising if it helped him cover his phone’s mobile video and Internet capacities. Mr. Herb, 25, said he did not use other features on his phone because they were expensive. But he said he would use them if they were free with ads.
“I wouldn’t pay for mobile Internet or video,” Mr. Herb said. “My text messaging costs me too much.”
Cellular phone carriers like Verizon, Sprint and Cingular, now the new AT&T, are beginning to test and roll out advertising on mobile phone screens, and by next year, cellphone advertising is likely to be more common.
In exchange, the companies say, their subscribers will enjoy improved mobile Internet services and content provided free or at reduced prices. Other companies like Virgin Mobile USA and Amp’d Mobile are taking the idea a step further, rewarding customers for viewing ads by lowering their cellphone bills.
Amp’d, a cellphone company that aims its marketing at 18- to 24-year-olds in the United States, will begin offering an opt-in advertising plan this year. Customers who sign up will gain access to free shows and other content — if they are willing to put up with some ads.
“When people are consuming this stuff on their phones, it adds up to a lot of money,” said Brian Mullen, director for content business development for Amp’d.
Another company, Xero Mobile, plans to distribute one million free cellphones on college campuses across the United States this year and give customers 40 percent off on their calling plans, if they watch up to four commercials a day, said Rich Clayton, a spokesman for Xero. In Britain, a company called Blyk plans to provide a completely free plan on phones that are paid for by ads.
It was inevitable that advertising would hit the small screen sooner or later, industry analysts said. Cellphones are the most pervasive media device, beating out computers and televisions, as consumers keep their mobile phones at their side nearly every moment of the day.
A small but growing number of consumers, in particular, younger ones, are using their mobile phones for text messaging, surfing the mobile Internet, watching short shows, taking photos or videos and checking e-mail messages. Only time will tell if cellphones are destined to become like all other forms of media — supported by both subscription costs and by advertising.
Still, these new phone services will become mainstream only if their prices are lowered, possibly through advertising, analysts said. On average, consumers in the United States spend $50 to $60 a month for cellphone service, including data features. The average total bill has been flat for the last few years, even as voice call charges have decreased, because of the increase in fees for text messages and mobile e-mail messages.
“Advertising absolutely makes sense to extend expensive multimedia services and mobile TV to the mass market,” said Linda Barrabee, an analyst with the Yankee Group, a technology research and consulting firm based in Boston. “I think we will see consumers say, ‘You know what, I’m only going to spend this much money on my mobile phone.’ ”
In Asia, by contrast, multimedia mobile applications are more commonly used, and those services became more affordable there without advertising because of quick adaptation by consumers, analysts said.
The new uses of cellphones present vast opportunities for consumer brand companies, which are finding it difficult to reach customers through traditional media like magazines and television. Mobile phones can handle ads in many forms, including video, text messages, search and banner displays. And cellphone ads can be fine-tuned based on customer data.
But there is a chicken-and-egg factor when it comes to advertising. Big advertisers generally want to see further adoption of services before they pour significant money into mobile ads. Advertisers like Procter & Gamble, Burger King and Pepsi have been experimenting with mobile phone ads, but, in total, cellphone advertising generated only about $421 million in the United States last year, according to eMarketer, a digital advertising research firm. EMarketer predicted this month that mobile advertising would reach $4.8 billion across the country by 2011.
Despite the hopeful thinking, there is no guarantee mobile ads will catch on. “I would not want them on the phone even if that would help cut costs,” said Conor Kelly, 20, a student at Savannah College of Art and Design in Georgia. Mr. Kelly said he did not mind subtle sponsorships of content on his phone, but he would not want it go beyond that.
“It gets to a point where you’re almost encroaching on someone’s privacy,” Mr. Kelly said.
In the early days of the commercial Internet, some service providers tried giving away online access in exchange for showing ads to users, but those efforts did not pan out.
For the subsidized approach to work this time around, cellphone companies must prove that consumers pay attention to ads. “We have to ensure that the models that we pursue are those that actually get seen and acted on by consumers,” said Marc Lefar, chief marketing officer for AT&T’s wireless unit, which used to be called Cingular Wireless. AT&T is testing various forms of cellphone advertising, with introduction of ads planned this year.
As of now, text messaging is the most common venue for mobile phone ads. Signs, food packaging and even TV spots feature a code that phone users can text to be entered in promotions. 1-800-Flowers, for example, is running a sweepstakes in the New York area for a flower arrangement that comes in a small margarita glass. Next week, Nike will allow consumers to alter one of its TV commercials online and send their creations to their friends’ phones.
Some consumers may not realize that opt-in text message ads generate a charge for those who pay for each incoming text message. Such costs have deterred some marketers from creating mobile ads, said Sarah Kim Baehr, vice president for media at Avenue A Razorfish, an interactive ad agency that is part of aQuantive.
As mobile phones are used for more tasks, ads will pop up increasingly in more varied forms, ad executives said. Preroll video ads have already started to appear. Advertisers like Toyota have created 10-second commercials to run before miniepisodes of Fox shows, and the network promotes the strategy as a great way to reach a young audience.
“Look around,” said Mitch Feinman, senior vice president of Fox Mobile Entertainment. “All the young males and kids, they’re on their mobiles.”
Advertisers are generally paying a high price to try cellphone ads, about $40 for a thousand viewings of their ads, or twice as much as many TV spots, analysts said. The performance of these ads over the next year or so will determine whether they are likely to provide enough income to justify giving customers a price break on service fees.
Some companies are not waiting to find out. Virgin Mobile USA introduced a program last summer it calls Sugar Mama that compensates its phone users with free calling minutes for watching commercials, reading advertiser text messages and taking surveys from brands. Since last July, about 250,000 phone users have participated, earning a total of about three million minutes, said Howard Handler, chief marketing officer of Virgin Mobile USA.
Advertisers like the United States Navy and Levi Strauss Signature are showing ads through Virgin Mobile USA’s program, in part, because they liked the idea of compensating consumers for the time they spend watching their ads. “It gives us the assurance that our message is being heard,” said Stacy Doren, director for media and online at Levis Strauss Signature.
The carriers have so far been wary of exposing their customers to ads because the wireless marketplace is so competitive, said Scott A. Ellison, vice president for mobile at IDC, a technology and communications research firm.
“Advertisers are always hungry for new ways to reach people, however that’s a little scary for the carriers because they’re concerned over how the end user experience will be impacted,” Mr. Ellison said.
Google and Yahoo are also investing in mobile advertising, moving their search capacities to phones and selling sponsored search ads. Google executives have said publicly that they think phone service will one day be free and supported by advertising.
If advertising on mobile phones generates enough income to offer significant phone subsidies, many companies will probably allow phone users to choose whether they want ads, analysts said.
There are some consumers who would not want much advertising, no matter the price break. Younger consumers, whose parents do not want to upgrade their phones, and lower-income shoppers who cannot afford the upgrades may be the most receptive to ads.
Future ad packages might include free text messaging for people who agree to receive text message ads, said Roger Wood, senior vice president and general manager of the Americas region for Amobee Media Services, a company that is working with cellphone companies to test advertising-financed services in the United States and abroad. Underwriting mobile phone services would be a good opportunity for brands to provide value to customers rather than just blasting them with messages, said Mark Kingdon, the chief executive of Organic, a digital ad agency and part of the Omnicom Group.
Danny Herb, an avid text messager, said he would welcome advertising if it helped him cover his phone’s mobile video and Internet capacities. Mr. Herb, 25, said he did not use other features on his phone because they were expensive. But he said he would use them if they were free with ads.
“I wouldn’t pay for mobile Internet or video,” Mr. Herb said. “My text messaging costs me too much.”
To Keep Your Brand Going Strong, Shake It Up
NEW YORK -- Want to make sure your brand is still viable? Then rip it up and start over every three to five years. And that doesn't mean overhauling the packaging.That's the key the finding of a new survey sponsored by the American Marketing Association, and independent firms Luth Research and MiresBall. The trio's State of the Brand Report found that brands that were refurbished within that time period scored highest on its success index.According to the survey, almost two-thirds of the 100-plus marketers polled online in the latter half of 2006—the majority of which were director level or above—believed their brand would benefit from a revitalization. Thirty-eight percent said they would like to fully reposition their brand; 57% of brands have been revitalized during the past two years and 83% during the past five. The efforts appear to be paying off: Brands that were refurbished during the past three to five years scored the highest on the survey's success index, which is based on market share, the ability to derive premium pricing and internal brand perception. Marketers surveyed said the challenges facing their brands motivated them to change things up. The top driver was strong competition, according to 59% of respondents. Thirty-six percent of those surveyed cited changing customer demographics/psychographics, pricing pressure and lack of brand awareness as their motivation. Surprisingly, despite all the revitalization efforts under way, marketers anticipate very little change in their brand's positioning over the next five years. "Brands seem to be clustering around premium, value and innovation. Brand positioning by definition should by differentiated," said Rachel Thomas, marketing director at design firm MiresBall in San Diego. "They're spending a lot of time and money keeping their brands fresh, but they're not making a whole lot of moves when it comes to positioning."As for marketing tactics, Web and interactive initiatives were deemed the most valuable for brand communication behind only word-of-mouth. Still, despite ranking 13th in terms of importance, broadcast advertising ranked No. 1 in terms of spend, largely because it's considered one of the best media for driving awareness. A third of respondents said driving such awareness was their primary goal. Another third said their priority was to create brand preference, while creating loyalty (24%) and understanding (11%) rounded out the mix. Though the study didn't cite any brands by name, recent refreshes by AT&T and Citibank (which is changing its name to Citi and considering ditching its red umbrella brand icon) underscore the trend. AT&T rebranded itself last year with a new logo and tag to battle rivals Verizon and Comcast. When it comes to wireless, landlines, cable, DSL and other services, "customers have articulated that they want to do business with one company, not a patchwork of providers," said Wendy Clark, svp-advertising at AT&T, San Antonio, Texas. Pepsi, meanwhile, is working with the Arnell Group, New York on refocusing itself around the concept of "sustainable discovery." For starters, the brand's bottles, cans and cups will have 35 new looks each, including Web addresses for exclusive online content, games and contests. The repositioning will also include a new tagline, likely: "Feel the Pepsi."James Miller, director of brand Pepsi in the U.S., said brand revitalization is "increasingly important these days, especially among youth-related, "badge" brands. What we found is young people are embracing change and constantly exploring for the next big thing. We need to deliver that on an ongoing basis." Martyn Tipping, co-founder of TippingSprung consultancy in New York, said such periodic changes are the best way for marketers to avoid obsolescence: "You don't want to get to a stage of the cycle where you say, 'Yikes we need an overhaul.'"
Brandweek
Brandweek
McDonald's Tests Bottles Of Pepsi-Made Products
COLLEGE STATION, Texas - The dinner rush is on, and counter clerks at a McDonald's near Texas A&M University fill paper bags with cheeseburgers and hot french fries for slap-happy students in the throes of exams.
Every once in a while, instead of filling a cup with ice and a stream of fizzy Coke, the clerks reach into a cooler case and hand over something customers in only a few McDonald's around the world can get - a Pepsi-made Mountain Dew.
A quiet little test project in College Station and metro Kansas City is threatening Coca-Cola's more than 50-year-old monogamous relationship with McDonald's. For nine months, the fast-food giant has experimented with bottled drinks as it tries to win back revenue from burger-buying customers who get their bottle of pop from a convenience store next door. It also wants to keep customers who prefer energy and sports drinks to carbonated soft drinks.
The test includes popular drinks made by Coke and its archrival, PepsiCo, an unsettling reality for executives 800 miles away at Coke headquarters in Atlanta. Coke has had exclusive pouring rights at McDonald's since the chain's founding in 1955.
The test project represents a crack in the wall Coke has built around the burger company.
It's unlikely Pepsi could steal the lucrative McDonald's account from Coke anytime soon. But if the bottled drink test is expanded nationwide, especially with Pepsi products, it could chip away at Coke's profitable fountain drink business, which accounts for an estimated one-third of the company's U.S. profits.
For years, Coke has dominated the U.S. fountain drink market. The company now controls an estimated 70 percent share, according to industry newsletter Beverage Digest. Pepsi's share is about 20 percent.
McDonald's, with its nearly 14,000 outlets, sells more Coke than any other fast-food chain.
Coke sells large volumes of fountain syrup to McDonald's directly. For bottled and canned drinks, on the other hand, Coke sells concentrate to its bottlers, who mix the drinks with carbonated water, pour them into bottles and cans and sell them to retailers. That middle-man bottler soaks up part of the profit.
In Kansas City, the McDonald's test includes Mountain Dew, Gatorade, Propel Fitness Water, Lipton tea and Tropicana Pure Premium juice, all of which lead their categories in the United States. Pepsi's regular and diet colas have not been brought in to compete with the bottled Coke and Diet Coke in the test. A Pepsi "strategic initiatives team" has collaborated with McDonald's to price, promote and display the drinks, which are delivered by Pepsi trucks.
The test has included Coke competitors Arizona tea and Red Bull energy drink, as well as Coke's own canned energy drinks.
Carbonation going down
The drinks are kept in coolers like those you might find at the grocery checkout aisle or at the front of a convenience store. Customers can choose to have a bottled soda instead of a fountain drink with their combo meals - costing them about 10 cents extra for a medium-sized meal.
The 16.9-ounce bottle sells for $1.29 to $1.39, about the same price as a medium fountain drink at McDonald's or a 20-ounce bottle in a convenience store. The 16.9-ounce bottle holds about as much as McDonald's small fountain cup, which costs $1 in Texas. Clearly, customers are paying for convenience and portability.
McDonald's is testing the bottles for the same reason Coke and its competitors have developed a panoply of new drinks and packages in recent years: People want variety and convenience, said Matthew Reilly, a Chicago-based stock analyst for Morningstar.
"Consumers want the brands they know, and they want them wherever they are buying," Reilly said. "It's not going to be, 'Coke is the only thing,' anymore."
If customers like Josie Mejia of College Station want Pepsi's category-leading Gatorade and Mountain Dew, McDonald's may want them, too.
"That's my favorite drink," said Mejia after ordering a bottle of Mountain Dew with her McChicken sandwich.
Wall Street analyst William Pecoriello of Morgan Stanley recently warned that an expansion of the McDonald's test "could have significant profit implications for Coke" because it could open the door to Coke rivals. He also said that noncarbonated options could erode demand for traditional carbonated soft drinks, which are already on the decline in North America even though they are still a significant part of Coke's overall business.
McDonald's is so important to Coke it has an entire division devoted to the burger company. When McDonald's executives visit, a flag goes up in Coke's atrium.
Coke is important to McDonald's, as well. Coca-Cola has spent years developing a system that can service drink fountains at a moment's notice. If a fountain breaks down, Coke gets there fast to keep the profitable drinks flowing.
The relationship has been lucrative enough for both sides that Coke's pouring rights at McDonald's aren't sealed with a contract. It's a handshake deal held together by years of successful innovation and profit. The companies together developed the successful "extra value meal," for example, to drive up sales of Coke and hamburgers.
A spokeswoman for McDonald's wouldn't say whether the bottle test will be expanded to other parts of the country.
"We've certainly been encouraged by what we're hearing from customers, but it's still too early to speculate about test results or whether the tests will be expanded," said McDonald's spokeswoman Danya Proud.
Bottles catching on
In Texas, the test shows signs of permanence. McDonald's has built drink coolers right into the walls in some locations. At others, McDonald's has installed drive-up vending machines stocked with Coca-Cola products for people who want to grab and go.
The bottled drinks were heavily and consistently marketed in the half a dozen stores visited by The Atlanta Journal-Constitution. And McDonald's had just begun radio ads touting the bottled drinks, according to one manager.
Coke North America spokesman Ray Crockett deferred most questions about the test to McDonald's, saying, "Companies routinely test their products against competitors to better understand how their products interact in their product category.
"The beverage tests in McDonald's are no different," he said.
Fast-food restaurants have experimented with bottled drinks during recent years. Subway carries them, for example, and most McDonald's already sell bottled water marketed by Coke.
Dawn Hudson, president and CEO of Pepsi-Cola North America, said fast-food chains can't afford to ignore the trend, which they already are coming to late.
"They make a majority of their revenue not from what's in the center of the plate, but what's around the side," she said at an industry conference in New York last month.
But the higher-margin fountain drinks still rule. The McDonald's test includes a new strategy to boost those sales, too. The fountains at the Texas stores have been fitted with spigots that allow customers to add a shot of flavor, such as vanilla or cherry, to their drink. The restaurants also are experimenting with smoothies.
Joe Cunningham, manager of a McDonald's off George Bush Drive next to Texas A&M, said his morning rush includes customers who pull up to the drive-though window for a fountain soft drink and nothing else. So far he hasn't seen a clear shift to bottles during the test.
But on football game days, students often choose bottles because they are easier to carry to the stadium across the street.
Isiah Montemayor, a 20-year-old Texas A&M sophomore, said he prefers bottles.
"You don't have to worry about ice," he said as he climbed into a Mustang for a road trip home last month.
Montemayor, who ordered a Powerade with his Big Mac meal, said he doesn't like the way the ice melts and waters down a fountain drink when you take it with you.
Recently released research by Morgan Stanley found that 62 percent of people ages 13-65 would drink something different at quick-service restaurants if given the choice. Teens were most likely to move away from fountain drinks, primarily in favor of energy and sports drinks.
So what is Coke's next move in this latest phase of the Cola Wars?
For now, like it's famous formula, the company is keeping its strategy a secret.
DetNews.com
Every once in a while, instead of filling a cup with ice and a stream of fizzy Coke, the clerks reach into a cooler case and hand over something customers in only a few McDonald's around the world can get - a Pepsi-made Mountain Dew.
A quiet little test project in College Station and metro Kansas City is threatening Coca-Cola's more than 50-year-old monogamous relationship with McDonald's. For nine months, the fast-food giant has experimented with bottled drinks as it tries to win back revenue from burger-buying customers who get their bottle of pop from a convenience store next door. It also wants to keep customers who prefer energy and sports drinks to carbonated soft drinks.
The test includes popular drinks made by Coke and its archrival, PepsiCo, an unsettling reality for executives 800 miles away at Coke headquarters in Atlanta. Coke has had exclusive pouring rights at McDonald's since the chain's founding in 1955.
The test project represents a crack in the wall Coke has built around the burger company.
It's unlikely Pepsi could steal the lucrative McDonald's account from Coke anytime soon. But if the bottled drink test is expanded nationwide, especially with Pepsi products, it could chip away at Coke's profitable fountain drink business, which accounts for an estimated one-third of the company's U.S. profits.
For years, Coke has dominated the U.S. fountain drink market. The company now controls an estimated 70 percent share, according to industry newsletter Beverage Digest. Pepsi's share is about 20 percent.
McDonald's, with its nearly 14,000 outlets, sells more Coke than any other fast-food chain.
Coke sells large volumes of fountain syrup to McDonald's directly. For bottled and canned drinks, on the other hand, Coke sells concentrate to its bottlers, who mix the drinks with carbonated water, pour them into bottles and cans and sell them to retailers. That middle-man bottler soaks up part of the profit.
In Kansas City, the McDonald's test includes Mountain Dew, Gatorade, Propel Fitness Water, Lipton tea and Tropicana Pure Premium juice, all of which lead their categories in the United States. Pepsi's regular and diet colas have not been brought in to compete with the bottled Coke and Diet Coke in the test. A Pepsi "strategic initiatives team" has collaborated with McDonald's to price, promote and display the drinks, which are delivered by Pepsi trucks.
The test has included Coke competitors Arizona tea and Red Bull energy drink, as well as Coke's own canned energy drinks.
Carbonation going down
The drinks are kept in coolers like those you might find at the grocery checkout aisle or at the front of a convenience store. Customers can choose to have a bottled soda instead of a fountain drink with their combo meals - costing them about 10 cents extra for a medium-sized meal.
The 16.9-ounce bottle sells for $1.29 to $1.39, about the same price as a medium fountain drink at McDonald's or a 20-ounce bottle in a convenience store. The 16.9-ounce bottle holds about as much as McDonald's small fountain cup, which costs $1 in Texas. Clearly, customers are paying for convenience and portability.
McDonald's is testing the bottles for the same reason Coke and its competitors have developed a panoply of new drinks and packages in recent years: People want variety and convenience, said Matthew Reilly, a Chicago-based stock analyst for Morningstar.
"Consumers want the brands they know, and they want them wherever they are buying," Reilly said. "It's not going to be, 'Coke is the only thing,' anymore."
If customers like Josie Mejia of College Station want Pepsi's category-leading Gatorade and Mountain Dew, McDonald's may want them, too.
"That's my favorite drink," said Mejia after ordering a bottle of Mountain Dew with her McChicken sandwich.
Wall Street analyst William Pecoriello of Morgan Stanley recently warned that an expansion of the McDonald's test "could have significant profit implications for Coke" because it could open the door to Coke rivals. He also said that noncarbonated options could erode demand for traditional carbonated soft drinks, which are already on the decline in North America even though they are still a significant part of Coke's overall business.
McDonald's is so important to Coke it has an entire division devoted to the burger company. When McDonald's executives visit, a flag goes up in Coke's atrium.
Coke is important to McDonald's, as well. Coca-Cola has spent years developing a system that can service drink fountains at a moment's notice. If a fountain breaks down, Coke gets there fast to keep the profitable drinks flowing.
The relationship has been lucrative enough for both sides that Coke's pouring rights at McDonald's aren't sealed with a contract. It's a handshake deal held together by years of successful innovation and profit. The companies together developed the successful "extra value meal," for example, to drive up sales of Coke and hamburgers.
A spokeswoman for McDonald's wouldn't say whether the bottle test will be expanded to other parts of the country.
"We've certainly been encouraged by what we're hearing from customers, but it's still too early to speculate about test results or whether the tests will be expanded," said McDonald's spokeswoman Danya Proud.
Bottles catching on
In Texas, the test shows signs of permanence. McDonald's has built drink coolers right into the walls in some locations. At others, McDonald's has installed drive-up vending machines stocked with Coca-Cola products for people who want to grab and go.
The bottled drinks were heavily and consistently marketed in the half a dozen stores visited by The Atlanta Journal-Constitution. And McDonald's had just begun radio ads touting the bottled drinks, according to one manager.
Coke North America spokesman Ray Crockett deferred most questions about the test to McDonald's, saying, "Companies routinely test their products against competitors to better understand how their products interact in their product category.
"The beverage tests in McDonald's are no different," he said.
Fast-food restaurants have experimented with bottled drinks during recent years. Subway carries them, for example, and most McDonald's already sell bottled water marketed by Coke.
Dawn Hudson, president and CEO of Pepsi-Cola North America, said fast-food chains can't afford to ignore the trend, which they already are coming to late.
"They make a majority of their revenue not from what's in the center of the plate, but what's around the side," she said at an industry conference in New York last month.
But the higher-margin fountain drinks still rule. The McDonald's test includes a new strategy to boost those sales, too. The fountains at the Texas stores have been fitted with spigots that allow customers to add a shot of flavor, such as vanilla or cherry, to their drink. The restaurants also are experimenting with smoothies.
Joe Cunningham, manager of a McDonald's off George Bush Drive next to Texas A&M, said his morning rush includes customers who pull up to the drive-though window for a fountain soft drink and nothing else. So far he hasn't seen a clear shift to bottles during the test.
But on football game days, students often choose bottles because they are easier to carry to the stadium across the street.
Isiah Montemayor, a 20-year-old Texas A&M sophomore, said he prefers bottles.
"You don't have to worry about ice," he said as he climbed into a Mustang for a road trip home last month.
Montemayor, who ordered a Powerade with his Big Mac meal, said he doesn't like the way the ice melts and waters down a fountain drink when you take it with you.
Recently released research by Morgan Stanley found that 62 percent of people ages 13-65 would drink something different at quick-service restaurants if given the choice. Teens were most likely to move away from fountain drinks, primarily in favor of energy and sports drinks.
So what is Coke's next move in this latest phase of the Cola Wars?
For now, like it's famous formula, the company is keeping its strategy a secret.
DetNews.com
Google Starts Syndicating Sony BMG, Warner Music Videos
GOOGLE IS NOW DISTRIBUTING MUSIC videos from Sony BMG and Warner Music to select AdSense publishers, the company announced on its AdSense blog Monday.
The initiative expands on a beta test that began in September, when Google first distributed clips from MTV Networks shows, including "Laguna Beach" and "SpongeBob Squarepants."
Although Google has added new content partners, the search giant isn't adding any new publisher partners. The content will be monetized by video ads billed on a cost-per-impression basis. Participating publishers will be able to embed a "channel" that will show music videos in different genres--like "rock" or "divas"--on their pages. Ad revenue is split three ways--one share for Google, one for the content owner, and one for the publisher.
Greg Sterling, principal with Sterling Marketing Intelligence, said that the video content network could serve to make AdSense a more attractive offering to publishers and advertisers. "It's been sort of the less attractive of the two major programs that Google has--it has not performed as well as AdWords, so they're putting a lot of effort into making it appealing to attract and retain new advertisers," he said. "Google's pushing out to the Fortune 1000 advertisers, and this has appeal to them, and it also makes the AdSense program sexier."
Online MediaDaily
The initiative expands on a beta test that began in September, when Google first distributed clips from MTV Networks shows, including "Laguna Beach" and "SpongeBob Squarepants."
Although Google has added new content partners, the search giant isn't adding any new publisher partners. The content will be monetized by video ads billed on a cost-per-impression basis. Participating publishers will be able to embed a "channel" that will show music videos in different genres--like "rock" or "divas"--on their pages. Ad revenue is split three ways--one share for Google, one for the content owner, and one for the publisher.
Greg Sterling, principal with Sterling Marketing Intelligence, said that the video content network could serve to make AdSense a more attractive offering to publishers and advertisers. "It's been sort of the less attractive of the two major programs that Google has--it has not performed as well as AdWords, so they're putting a lot of effort into making it appealing to attract and retain new advertisers," he said. "Google's pushing out to the Fortune 1000 advertisers, and this has appeal to them, and it also makes the AdSense program sexier."
Online MediaDaily
Breakfast Dollar Menu: Burger King Beats McDonald's
IT LOOKS LIKE EARLY-BIRD BURGER King has gotten the worm. It has beaten McDonald's out the door with a planned Feb. 19 national launch of its value breakfast meals. Ten items will be priced at $1 each, one of the fast-food sector's most effective traffic builders at lunch and dinner. The category is worth more than $30 billion in annual sales.
A McDonald's spokesperson said the company is continuing to test its Breakfast Dollar Menu in more than 20 markets nationwide and has received positive feedback, but that it is too early to say when McD's might follow suit.
Burger King's menu items will include a new ham, egg and cheese sandwich dressed with honey butter and served on a sesame-seed bun dubbed the Hamlette--the "star" of the 11,100-unit chain's breakfast menu.
Research firm Mintel has reported an increase in the number of people eating breakfast outside the home as adults consolidate commuting time with mealtime. Half the surveyed consumers between the ages of 18 and 24 reported that they are eating on the go more frequently than they were two years ago.
MarketingDaily
A McDonald's spokesperson said the company is continuing to test its Breakfast Dollar Menu in more than 20 markets nationwide and has received positive feedback, but that it is too early to say when McD's might follow suit.
Burger King's menu items will include a new ham, egg and cheese sandwich dressed with honey butter and served on a sesame-seed bun dubbed the Hamlette--the "star" of the 11,100-unit chain's breakfast menu.
Research firm Mintel has reported an increase in the number of people eating breakfast outside the home as adults consolidate commuting time with mealtime. Half the surveyed consumers between the ages of 18 and 24 reported that they are eating on the go more frequently than they were two years ago.
MarketingDaily
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