As 2009 draws to a close, I wanted to list a few of my favorite ad campaigns.  These ads stand out to me for a number of reasons.  In no particular order:

Ford: One More Reason
This is a well done campaign and a bright spot in what has been a terrible year for American auto manufacturers.  Traditionally, auto ads focused on features and value: “With stow and go seating, dual differentials, and the best towing capacity in its class, the Super Mobile is now a superior value with 3.8% financing for 48 months.”  Some have deviated with a focus on other factors like “sportiness,” but few have ventured into the territory of real people who actually drive real cars.  Instead, most auto ads are a never ending parade of either feature lists or people driving 100 mph on roads that you aren’t allowed to use in real life.

Ford’s new campaign breaks that mold with a whole series of 15 second ads featuring real individuals talking about the things they care about with their cars.  The people in the ads were told they were participating in a focus group, and only after participating were they asked if the video could be used in the ads.  The results show: the ads are honest and highlight features in a way that matters to people on a personal level.

HTC: You
Cellular phone maker HTC has a bit of a quandary.  Outside of the US they’re well known, but inside the US they’re relatively unknown.  Which isn’t to say they don’t do a lot of business in the US – it’s just that most of their phones are rebranded and sold by other companies.

HTC has another problem: Apple and Motorola.  Apple is obvious – because of the iPhone.  But Motorola has been winning accolade after accolade for the Droid, a smartphone powered by Google’s Android operating system.  But guess who made the first Android phone?  HTC, except it was rebranded as the T-Mobile G1 (see above).

HTC wants to start selling phones and needs to be taken seriously as a smartphone manufacturer, but to do that they need to be taken seriously as a brand.  It would be all too tempting to produce an ad that dives right into feature comparisons (why the Droid doesn’t match the power of the HTC Passion), but first they need all those basic things a consumer brand needs: trust, likability, awareness, etc.  The You campaign works because it solves the branding part of a broader strategic problem with a very enjoyable and memorable ad.

Levi’s: Go Forth
I like these ads because they’re just so beautiful and well made.  The Walt Whitman poetry coupled with the brilliant camera work captures my attention every time the ad comes on.

But do they sell jeans?  No idea.  Don’t care.

Verizon: There’s a Map for That
While Apple did well with the iPhone this year, AT&T did not do so well with their network.  Enter Verizon with a well timed and well made ad campaign that highlights the sad differences between their nationwide network and AT&T’s lousy 3G network.

While it’s not a groundbreaking campaign, the ads worked so well that AT&T tried to sue Verizon for all kinds of random things just to make them stop.  It didn’t work, so instead AT&T launched their own campaign comparing download rates between the two networks.  I guess we’ll have to see which one works better, assuming a CDMA iPhone ever appears.

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Post tags: 2009, advertising, ford, htc, levi's, verizon

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Another post I wrote about software testing and crowdsourcing from the uTest blog.

House MD, one of the most popular television shows in the US and globally, is a weekly medical mystery where a patient with a rare and unsolvable disease is diagnosed by Dr. Gregory House – the title character.  Dr. House is a brilliant diagnostician who can solve almost any medical puzzle, but this past Monday the show featured an entirely different way of diagnosing a medical problem: crowdsourcing.  Over the course of the episode, House’s team dealt with many  advantages and disadvantages of crowdourcing while trying to diagnose a patient with a tricky disease.

Even though House is fiction, there’s a lot we can learn about crowdsourcing from the characters’ experiences.  Here are four of my favorite crowdsourcing lessons from House MD.  Be warned, MAJOR SPOILERS BELOW!  Stop reading now if you don’t want the episode spoiled for you.

Update: The full episode is now available for US viewers on Hulu.

Keep reading…

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Post tags: crowdsourcing, house, utest

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These days, I’m writing more about software testing for the uTest blog than for my own, so I want to begin linking to some of my posts as I write them.

First up:

The Hassles of Supporting Older Products – Adobe vs. Apple

On Friday, Apple released version 10.6 of their Macintosh OS X operating system.  “Snow Leopard,” as this new version is called, is an unusual release for Apple.  Whereas previous updates of OS X often brought big usability changes, Snow Leopard is all about under the hood improvements.  It’s faster and better, but not different.

So it came as a huge surprise last week when John Nack, senior product manager for Adobe Photoshop, announced that Adobe wasn’t supporting the two and half year old CS3 version of their products on Snow Leopard and would instead encourage their customers to upgrade to CS4.  Nack later clarified that the CS3 products actually work fine – Adobe just couldn’t allocate resources to fix any undiscovered problems.  Despite these assurances, many people were confused and upset, especially because Snow Leopard wasn’t supposed to be a major upgrade for Apple.

Keep reading…

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Post tags: adobe, apple, cs3, cs4, john nack, macintosh, os x, photoshop, software testing, utest

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Paddy Hirsch of American Public Media’s Marketplace has a new video about toxic bank assets.  As banks begin to “recover” and pay back some of the TARP funds, many are wondering what happened to the various toxic assets that were bothering them so much last fall.

The short summary: nowhere.  We’re still stuck with them.

Where’s the toxic waste? from Marketplace on Vimeo.

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With so much unhappiness over AIG, I thought I would write some thoughts and perspective about who they are and how their problems came about.

What is AIG?

AIG is the American International Group.  They sell insurance to customers around the world – individual, corporate, non-profit, and more.

In the past AIG’s business depended on their AAA debt rating which allowed them to borrow money very cheaply.  Whenever they had to pay out for claims (accidents, disasters, etc), they would borrow the money they needed from the markets.  The insurance premiums they charged their customers more than covered the debt repayments while leaving plenty leftover for profit.

That AAA debt rating seems kind of silly now, huh?

Yup.  But people have been skeptical about it for a while.

What’s a CDS?

A CDS is a Credit Default Swap.  It’s basically insurance on a bond.  If a bond defaults (can’t make its payments), then the insurer will pay some agreed upon value to the CDS buyer.  In exchange, the buyer pays the insurer some kind of premium.

What did AIG do?

They sold lots of CDSs.  Lots and lots and lots of CDSs.  More than a trillion dollars worth of them.  Most of these were viewed as safe bets during the good times because AIG never expected the economy as a whole to fall apart.  In exchange, they basically viewed the premiums as free money.

That didn’t really work, did it?

Nope.  AIG made a very classic mistake in that it did not realize that all of its CDS contracts were highly correlated.  In other words, they thought that only a few bonds they insured would ever default.  What they didn’t realize was that these bonds were all so related that one failure would mean lots of failures.

So where is all of this government money going?

Because so many bonds are defaulting, AIG is on the hook for a huge number of CDS claims.  There’s no way they could borrow the money from the markets (their AAA debt rating is now a joke), so they have essentially defaulted.  The government is now providing AIG with funding to pay for their CDS obligations.

What if the government just stopped funding AIG?

Then all of the banks, pension funds, and other bond holders would be required to take the losses from the bond defaults.  Right now, AIG is meeting its obligations to cover all of these bond defaults with government funds while taking the corresponding losses.  For all of the banks and other institutions around AIG, even though their bonds are worthless, AIG is providing them with the required insurance payouts.

How bad would it be if the government stopped funding AIG?

That depends, but probably bad.  All of the losses that AIG is incurring (and the government is supporting) would be spread around all of the banks instead.  In the best case, the government would bail out all of the banks.  In the worst case, the banks would fail.

What most people don’t realize is that every bank owes money to practically every other bank.  Their debt agreements usually have terms like “if your stock drops below $X, then you have to pay back $Y early.”  Things like large losses to their bond portfolios can force banks to pay back huge sums of money that they just don’t have right now.  This essentially forces the banks to default, which forces more banks to default, and so on.

American law makes it pretty much impossible for a bank to ever “restructure” in bankruptcy.  Regular companies can do the Chapter 11 bankruptcy thing, fight off their creditors, make a new plan, and come out stronger and better.  Banks are pretty much required to die and liquidate.  For that reason, bank defaults are really really really bad.  Really bad.

Shouldn’t the banks have known better themselves?

Yeah, probably.

Did AIG actually cause any of this overall economic mess?

Not really.  They were just well positioned to take all of the losses and pain.

So that makes AIG…?

The fall guy.  Yeah, they’re pretty much the fall guy for this whole mess.

When will this all end? We can’t keep paying them billions of dollars!

There are two ways to end this.  One is for the economy to improve, meaning the bonds will stop defaulting.  The other is for the government to stop paying AIG, but that means having a plan somewhere for supporting the banks and institutions that rely on AIG’s CDSs.

The other possibility is for banks to restructure themselves so that a total failure at AIG wouldn’t impact them as strongly.  The good banks (JP Morgan, Goldman) are probably already doing this.  The bad banks (Citi, Bank of America) likely have too much else to worry about right now.

Either way, beware of a plan that stops paying money to AIG that doesn’t at least address what happens to the various CDS holders.  They would need funding and various legal changes to allow for restructuring.  Alternatively, they would need to announce that they’re ok now, and the loss of AIG would not adversely impact them.

What about those bonuses?

Many of the top AIG executives were awarded large year-end bonuses.  Honestly, they’re a drop in the bucket in the grand scheme of things.  Those bonuses were originally agreed upon by Henry Paulson during the Bush administration as a way of retaining staff at AIG to help manage things while the government dealt with other problems.  One of the concessions was that AIG CEO Robert Willumstad was forced to leave (making the whining about how Obama is treating GM so much more harshly than the banks very perplexing – he’s treating them nearly the same).

The bonuses were almost all returned, but frankly they’re irrelevant in the grand scheme of things.

What will happen to AIG?

Ironically, the rest of AIG was relatively profitable, and their regular insurance businesses could probably survive on their own.  Expect the government to break apart the company and create several mini-AIGs that offer various different insurance products.

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Post tags: aig, banks

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Seth Stevenson at Slate just reviewed what may be the best worst ad ever.  He describes it as the most sexually explicit ad he’s ever seen, and I have to agree.  This one is pretty out there for American audiences.  Honeslty, it’s probably out there for international audiences as well.

You can click the link to the Slate article to watch it.  I’m not posting it here.  But to keep things short, here’s the summary:

A super hot secretary is called into an office by her manager.  The next scene shows the manager looking like he’s, umm, having the time of his life with someone under his desk.  Then there’s a pitch for a 6 hour energy product, and then the manager jumps up and shouts that “he’s ready.”

So why is this ad “best” in any way?  If the target audience is college aged men who party a lot and who watch Comedy Central, Cartoon Network, and Spike after 10:00 PM, then this ad probably hits the mark.  It’s memorable, and this demographic can consume energy drinks like water.

Why is this ad the “worst?”  Well, take this quote from the article:

Other ads in the 6 Hour Power campaign target slightly different demographics. An ad for the G4 network shows a video gamer first-person-shooting for hours on end, his focus sharpened by the energy drink. Another ad shows a harried mother chasing a toddler and airs on stations like E! and ABC Family. “There’s no one type of person we’re trying to reach,” Finnochio explains. “Everyone needs energy.”

So basically this company is going to try to reach lots of demographics with different kinds of ads.  There’s nothing wrong with that except for one small detail: the Internet has a nasty habit of combining demographics together.  In other words, plenty of “harried mothers” who watch ABC Family will see this ad on Slate or other places.  It will get plastered on Twitter, Facebook, and everywhere else.  Soon, all those other groups will have only one association in mind when they see this product: disgust.

Companies have to be really careful when they put together memorable ads meant for one market when they also want their product to be adopted by other markets as well.  Sometimes, they can be trapped into a segment with no way to escape.

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Post tags: advertising, marketing, slate

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Here’s a short and very interesting video by Jonathan Jarvis that nicely explains the current financial crisis.  If you’re wondering just how all of this mess could have happened, this is the video for you.  It covers a lot of ground with very user friendly language and animation.  Good stuff!

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

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Post tags: banks, links, mortgage

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A while back, I made a mental list of the “next to goes” after the Bear Stearns failure.  The list included Lehman, AIG, WaMu, and Wachovia.  At the very end of that list was Citi.  I never thought any further about who would go after that because a failure at Citi would be a freaking disaster.

Well, here we are.  So here’s the deal: there are three big banks on Wall Street that dwarf all the others: JP Morgan, Bank of America, and Citigroup.  A failure at any one of those would be an economic catastrophe.  They each manage so much money, both American and international, that any kind of failure would end up costing the tax payers billions for insured deposits while absolutely killing off billions more in uninsured global capital.  And don’t fall for the FDIC is magically going to make it all better thinking: the FDIC insures American deposits up to $250 thousand.  If you have more, or you’re global, then you’re screwed.  If you think this only affects rich Saudi billionaires, consider the deposits belonging to businesses who need more than $250 thousand in working capital.

So my message to the government is this: fix Citi.  I don’t care what it takes or how much it costs.  If that means making its problems go away, then do it.  If that means helping it fail gracefully, then do that too.  I don’t care.  Just don’t make me have to think up another “next to go” list because the names on that would be truly frightening.

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Dear Democrats:

Congratulations!  You won on Tuesday and you deserved it.  Your planning, development, and evangelizing have earned you a legion of new and happy voters who are tired of the past and interested in your new brand of hope.

However, even though history doesn’t repeat, it frequently rhymes.  With that in mind, I would like to offer you five pieces of advice:

1.) Don’t get cocky

The Republicans made a habit of jumping the shark time after time, but the party movement as a whole did so around the time they proclaimed their “permanent majority.”  It was a ludicrous thing for Republicans to say, even when their power looked strong.  Any student of history will tell you that nothing is permanent – especially political majorities in a democratic government.

Your majority is a gift from the American people to be used for doing our will.  Don’t think for a second that it’s permanent, and never forget that we can and will remove your privileges if we think you no longer represent our interests.  If you want our votes in 2010 and 2012, you’ll have to earn them.

2.) The Republicans aren’t a regional party

There’s this belief going around (see various posts on DailyKos) that the Republican party is now a regional party.  They’re not.  While Republicans won strongly in the South while losing most of the rest of the country, the votes were still very close in the Southwest and Mountain West.  Much of the new Democratic strength is fairly soft right now, and it remains to be seen if these new Democratic voters represent the future of the Democratic or Republican parties.

Also, never forget that the Democratic party was once declared a regional party of the coasts just a few years ago.  Middle America would never go for such “left wing” values, and so on.  Right now, Middle America appears to go for a whole lot of things when it suits them.

3.) “Change” was a brand, now it must be policy

Take it from a guy with an MBA: Americans make a ton of decisions based on brand.  But take this from a guy with an MBA: if the brand fails to meet expectations, Americans will drop the product like a hot potato.  Coke created a flop with New Coke.  Democrats: don’t make a flop out of Change.

Americans expect a number of things from this product of Change: more transparency, less corruption, a more intelligent level of dialog, and less single mindedness.  These are easy things to promise, and I actually think that Obama wants this kind of government.  What I’m not convinced is that the rest of the Democratic party wants this kind of government.

So Democrats be on notice: your party leader has created a very powerful brand with high expectations.  Your new ascendency to power has been built on those expectations.  Live up to them, or you will end up like New Coke, Crystal Pepsi, and the Ford Edsel.

4.) Yesterday’s movement is today’s establishment

Over the past eight years, one of the most interesting things to watch has been the downfall of Bill O’Reilly.  Remember him?  I’m not talking about the blowhard commentator who sits on Fox News and spits out right-wing press doctrine.  I’m talking about the guy who led Fox News to incredible highs in the 2000 election by making the populist case against Bill Clinton and the Democrats.

O’Reilly has always been a jerk – just find the old video on YouTube of his meltdown on Inside Edition in the 90s.  It’s just that eight years ago, O’Reilly was able to tap into a willing public consciousness looking for a new future.  He spoke of the ills of eight years of Clinton rule, ranted against the perceived failures of Clinton policy, and made the frequent case for a new Bush based future.

Today, the role of O’Reilly has been replaced with the likes of Keith Olbermann, Rachel Maddow, and Markos ‘Kos’ Moulitsas.  They are the voices of the underdog movement, but as of Tuesday, their roles have now completely changed.  Their movement is now more powerful than ever, and they are certainly no longer the underdogs.

As leaders of the underdog movement, they are now faced with a choice.  They can become pundits, like O’Reilly, and try to support their new found power by promoting themselves and their party, even in the face of overwhelming evidence of failure.  Or they can wait until the time is right, jettison many of their previous followers, and rebuild a new movement around tomorrow’s problems.  The second choice is obviously harder, requires more work, has less payoff, and creates many new enemies.

Kos, Olbermann, Maddow, and others be warned: you are now establishment pundits until proven otherwise.

5.) Your party is a fractured coalition

The Republican party must now rebuild out of a mess of competing interests, and it’s a wonder that these people were ever able to form a party in the first place.  Religious evangelicals, corporate executives, and libertarians have absolutely nothing to do with each other.  All of this mess has to be put back together, and getting any kind of consensus will be nearly impossible.

But wait, before you Democrats find too much schadenfreude in all of this, remember that you too are a party of competing interests.  You have a mess of high-tech nerds, union laborers, greens, “new” corporates, social liberals, and moderate conservatives.  It is absolutely inevitable that this new coalition will collide, and the first conflict to come will be the unions vs. everyone else.

A rebuilding Republican party will almost certainly come cherry picking whomever loses in this coming battle of self-interested supporters.  You can sometimes push off the conflict, but you can’t do that forever.  There’s really no way to stop the collapse of a coalition government, and that’s what keeps a real permanent majority from forming.  See #1.

Conclusions

Democrats, you are on notice.  Your clock is ticking, and we as Americans expect results.  All of us want a new direction, but the new directions we want are all completely different.  Figure it out, or we’ll find someone else to do it.

(Coming Soon: Advice for Republicans.)

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Post tags: democrats, elections, republicans

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The bailout failed, and I’m not sure if that’s a good thing or a terrible thing.  To be honest, nobody is sure.  As I mentioned previously in my post about Thoughts on the Bailout, I hated this plan.  It contained no new regulation, and there was nothing to prevent the Return of the Bubble (the Echo Bubble?).

That said, we need something.  We need it now.  Here’s what’s going to happen without a plan in place.

There are lots of ways for companies to finance projects, but the biggest two are debt and equity.  Debt is just what it sounds like: a company takes out a loan and uses the cash to buy stuff.  Equity means that a company sells shares and uses the cash to buy stuff.  The problem is, without any kind of intervention, the debt option is essentially gone for all but those with the very best credit.  Equity is also pretty tough to pull off because most companies are loath to sell shares in this market, especially if it means accepting a lousy valuation and taking unfavorable terms.  Goldman Sachs just got equity financing from Warren Buffett, and he was able to get an insanely good deal.  Quite a few companies won’t be able to get money for equity anyway, because nobody else can afford to buy their shares.

So what does this mean?  We can expect rapid slowing of the economy and a long recession.  Unemployment will jump, probably to double digits.  Market returns will be abysmal.  Retirement funds will shrink.  Our position as a global economic leader will be in peril.

Why is that?  Because there’s no money for new growth and development.  Companies built on the principles of easy debt will be the worst off – and we’re not talking about shady subprime lenders here.  Think of companies like Boeing: their airplanes cost millions of dollars to build, and then they’re sold to buyers like airlines and leasing companies.  What powers these transactions?  Debt.  The buyers borrow money to buy the airplanes, and then repay their debt using cash they earn over time.  Without debt, nobody can buy an airplane that costs $200 million up front.

The end result is that companies will need to finance their projects using other sources or accept incredibly challenging terms from lenders.  They can spend their existing cash, although few companies have large enough cash piles to make that a viable reality for big projects.  They can also seek private cash, but cash is pretty hard to find regardless of the source right now.

Hence, I find it frustrating when I read that this is all about rewarding dumb Wall Street fat cats with our hard earned tax dollars.  Sure, without government intervention, those bankers will likely end up in the bread lines.  But then again, so will you.

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Post tags: banks

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