For more than a decade, I’ve been involved with the Digital Content Lab at the American Film Institute, as both an advisor and supporter. The DCL, as it came to be known, was where Apple‘s Quicktime technology was launched, among other technologically important milestones. A recent winner of the Technical Achievement Award at the Machinima festival, the DCL was responsible for the deployment of such groundbreaking tech as the mobile interactive apps for WARPED, the Planet Illogica digital artist support network, and the development of the Federally supported ITVS initiative (funding a wide swath of indie films), among others.

This has been a relatively discreet enterprise, known and loved by all of us in the digital media and entertainment industries, but not much of a self-promoting organization, at least when compared to many other non-profits in the entertainment and media industries. This seems, ultimately, to have been to the organization’s disadvantage, as the AFI DCL will apparently be closing its doors shortly, to ostensibly go in to “hiatus” – a direct result of funding shortfalls.

I won’t digress too much into the whys and wherefores of this situation, only to suggest that – like many non-profits today – I suspect that the AFI Board kept focusing too much on large sponsors, and too little on grassroots individual donor channels. The game of fundraising has changed, but for some reason many of the players are still way behind the ball…Social network fundraising demands a commitment, and I wonder whether that commitment was made in support of staff efforts to adopt new models for revenue generation…

When I think of the extraordinary influence that the DCL has had over our industry’s technological advancements, I wonder whether such undeniably admirable enterprises as the ETC or IPG Emerging Media Lab will be able to step in to the breach left by the DCL. These other organizations, impressive as they are in their respect, carry with them their own agenda that inevitably color the value of their offerings. Even though the DCL presented one or two projects of less than astonishing creative, business, or technical merit, the lab’s overall output was nothing short of groundbreaking, game changing, paradigm shifting, and ultimately socially impactful. Under the guidance of Nick De Martino, Anna Marie Piersimoni, Marcia Zellers and, most recently, Suzanne Stefanac, the AFI DCL has left an indelible mark on multiplatform landscapes of entertainment and media production and content delivery.

Those of us who have had the pleasure of attending DigiFest, The Digital Content Festival, the Enhanced TV Workshop, or other DCL gatherings, retain fond memories of all that has been accomplished there (If you would like to share some of your memories, feel free to leave your thoughts on their Facebook Page, at “The AFI Digital Content Lab”).

For a fully interactive roster of the AFI Digital Content Lab’s projects over the years, click here

Sources say that there still remain efforts to keep the Institute’s annual DigiFest event afloat. In the meantime, expect an official announcement about the Lab in the next few weeks. Who knows, perhaps this article and others will encourage people to step in and save the day..? Stranger things are happening.

—UPDATE—2:00pm, Friday, March 11—

Here is a partial list of AFI DCL projects, since 1999:

• EXPEDITION 360 (Discovery Europe)
• News Center 4 NIGHTBEAT (KRON-TV)
• SPACE STATION ODYSSEY (Discovery Networks)
• TALK SOUP (E! Entertainment)

• BLIND DATE (Universal Worldwide Television)
• DAY ONE (Granada Television, Granada Entertainment)
• EXTREME RIDES (Discovery Channel, Discovery Channel)
• PERFECT CRIME (Wegelius Television [Denmark])

• ARLI$$ (HBO)
• CALLAWAY GOLF, RULE 35 (Syndicated)
• CNN HEADLINE NEWS (Turner Broadcasting System Inc)

• P.O.V. (PBS)
• THE BEST OF (The Food Network)
• TURNER CLASSIC MOVIES (Turner Broadcasting System)

• BATTLESTAR GALACTICA (SciFi Channel/Vivendi Universal Games)
• CELEBRITY MOLE II (ABC Television Network)
• KIM POSSIBLE (Disney Channel)

• DINOSAUR HIGHWAY (The Science Channel)
• DORA THE EXPLORER (Nickelodeon)
• LIVING FOR THE WEEKEND (Scripps Networks)
• THE L WORD (Showtime)
• HIJACK (MTV Networks)
• TV411 (The Adult Literacy Media Alliance/PBS)

• DoD PERSONALS (Simmons Lathan Media Group)
• HISTORY DETECTIVES ROAD TRIP (Oregon Public Broadcasting)
• MOMENT IN TIME: WWII (A&E/History Channel)
• REUTERS ONE (Reuters)
• TOYO (Zodiac Gaming)

• BEN 10 MEGASERIES (Cartoon Network)
• E2: GREEN MAP FOR LIVING (kontentreal)
• BUZZ (Cynergy Films)
• MC EVERYWHERE (Music Choice)
• SíTV Pure (SíTV)
• XXXL (Hit Start)

• LEAVING THE GAME (Method, Inc.)
• PLAYERS (MTV, EA, Mekanism)

• WARPED ROADIE (EarthEcho International)

• ENVISOR (One Economy)

In an article that I wrote last month for Global Human Capital Magazine, I stated that “2009 was the year of acquisition of market share, and I want to see 2010 become the year of refinement and quality of service.”

What I meant by this was that businesses and consumers had been inundated with new tools, devices, platforms, channels and applications. This past year has seen many of us scrambling on an almost weekly basis to qualify the value of each and every hot new social media application (while others among us simply gave up and found that life still carried on!). Elsewhere (though not so far removed), the battle continues to rage between Internet Explorer, Safari, Firefox, Opera, Google Chrome et al.

Businesses have, for the most part, fully recognized the need to reinvent their commitment to marketing and positioning, but their understanding of how to manifest that reinvention is still very primitive, for the most part.

It requires an immense time commitment, for example, to grasp the nuances and undulations of the social media landscape. Only an insomniac or unemployed web addict would presently have the time to exercise the granular approach needed to explore all the various social media offerings, to the degree necessary to be able to offer the kind of counsel that would represent any real value to most businesses.

So, it is more than compelling to learn that one of the technological innovations (among the many) presenting itself right now promises to offer us a way of parsing all the possibilities out there, and absorbing their potential and nature, without necessarily having to fully digest their often complex ingredients. It brings a whole new meaning to the words “search” and “browsing”, and promises to truly deliver on my aforementioned hope that “…2010 become(s) the year of refinement and quality of service.”

…and it comes from Microsoft!

Imagine 2.3 million Wikipedia articles automatically indexed in a graphically appealing manner, and collected in new and thrilling ways…

…All the Kiva loans in the world, sorted in whatever way you can imagine…

…every research paper ever written, re-ordered into a 3D Venn diagram of astonishing proportions…

… operational efficiency data collected by geography, chronology, age, gender, location, function, etc…

How might your business benefit from this sort of contextual refinement?

Think of the Risk Management potential; data management; research aggregation; client/vendor/partner behavior patterns…

I originally posted the “official video” for this song a couple of months ago. Following some legal wranglings with their label, EMI (which recently removed the embed functionality from all the band’s videos on YouTube), OK GO  went and got an independent sponsor to support a wholly autonomous remake of the video, over which EMI had no authority! Here it is:

Former equity analyst, domain name broker, and social networking early adopter Lou Kerner shares here his (and his co-author, Eli Halliwell’s) research in to the true market value of Facebook:

Current trading price in private market: $38      Target price:     $100



  • Facebook is the most powerful website the world has known : With over 400 million reported users spending an average of 55 minutes per day on its site, Facebook is the most ubiquitous and transformative media company on the planet poised to create tremendous shareholder value as it begins to monetize its vast audience. Facebook already has ¾ the reach of Google and three times the average time spend per user, yielding Facebook double Google’s aggregate global time spent; and Facebook is on a dramatically steeper growth curve, growing its reach by 150%+ in 2009 vs. 40% growth for Google.
  • Facebook already drives more traffic to the leading portals than Google: While Google has long been the major driver of traffic to the majority of websites in the world, “friendcasting” on Facebook (when a friend uploads a link to content and someone clicks on it) is already a larger driver of traffic to sites like Yahoo and MSN than Google, according to If Facebook successfully leverages its new relationship with Microsoft’s Bing, implements more social search tools, grows its fan pages, and enables the continued natural growth of “friendcasting”, Facebook should surpass Google as the largest driver of traffic globally later this year.
  • Facebook is tracking to be a $100B company: Google has demonstrated how to monetize the time and data users give to the site daily. Facebook’s potential to monetize both time spent and data shared may be even greater than Google as it generates more time and significantly greater data on its users. Facebook also benefits from a network effect that doesn’t exist at Google. Each incremental user adds geometric value to the network. As Facebook achieves its goal of building the dominant global networked communications platform, it will begin to leverage its reach and earn its share of global advertising, ecommerce and payment revenues, possibly rivaling Google’s earnings potential. We estimate that Facebook will be worth more than $100 billion by 2015 using the same multiples on Facebook’s forecast 2015 EBITDA as Google is valued at today. More aggressive (but still reasonable) multiples and growth rates would yield values rivaling Google’s market cap of $140+ billion, ex cash.
  • Facebook is worth $50B today: If Facebook is worth $100 billion in 2015, discounting that valuation back to today with a 15% discount rate, gives the company a current value of ~$50 billion. Regardless of the discount rate you use, Facebook offers a very compelling investment opportunity at current prices.
  • Facebook is privately traded at 60%+ discount to its current value: Most investors don’t know you can buy Facebook shares today, pre-IPO. While the market for Facebook shares is not robust, there were millions of shares traded last year through private marketplace websites like Second, and others. Only accredited investors are allowed to participate. Currently, ask prices are about $38/share, implying a market cap for Facebook of ~$19 billion. Relative to the $50 billion fair market value we see in the company, this represents a 60%+ liquidity discount.
  • Facebook only has to earn $7 per user in EBITDA to justify our valuation: Dividing our $50B target by Google’s current trading multiple of 18X EBITDA implies that Facebook currently has earnings power of $2.8B in EBITDA. Dividing the $2.8B by the current base of 400 million users implies $7 of EBITDA per Facebook user. Facebook will have far more than 400 million users in 2015, so this is a conservative estimate. Even at $7/user, our projection is that Facebook would earn significantly less per user than other major internet companies. Amazon earns $15/user; Google earns $20/user; and eBay earns $34/user. While each of these companies operates with different business models, they all rely on aggregating huge volumes of users to create value for their investors. Facebook will earn ad revenue like Google, commissions on transactions like Amazon and eBay, and fees on payment processing like eBay. In presenting this metric we are demonstrating that even if Facebook’s earnings power is significantly less per user than other major internet players, it would still command a $100B market cap.

Quick Facts (according to Facebook , and

  • #2 website globally in total page views behind Google; should pass Google in first half of 2010.
  • At 30%, Facebook has the same global reach that Google had 1 year ago.
  • Both Google and Facebook should have global reach of ~50% by end of 2010.
  • 2 years ago Facebook’s global reach was just 6%.
  • Internet users spend 3x as much time on a Facebook page as they spend on a Google page.
  • Over 700mm pieces of content are uploaded on Facebook daily (eg. 100mm photos daily).
  • Average user spends 55 minutes/day (~23% of total time online) on Facebook, 50% of users log on daily.
  • 67% of US online users are on Facebook.
  • ~70% of Facebook users live outside the US.
  • Among top 36 countries: Facebook’s page view rank is #1 in 4 countries; #2 in 23 countries; #3 in 9 countries.
  • Facebook just received approval for patenting its news feed, the core functionality of its website.

Investment Thesis:

Facebook is already the world’s dominant website

  • However you measure it, Facebook’s global scale and growth are astounding. Of its reported 400+ million users, ~120 million are in the US.That’s 120 million out of ~180 million US internet users (according to Commscore); indicating that about two-thirds of all US internet users are now on Facebook. Facebook says the average user is on Facebook 55 minutes per day, out of a total average of four hours per day of total internet usage by the average US internet user. Those statistics are consistent with recent research based on statistics indicating that Facebook now accounts for 25% of total US internet page views and 15% of page views in the UK. As a result of its dramatic surge in uniques and page views, Facebook is now directing more traffic to major portals like Yahoo and MSN than Google through “friendcasting” – the name given to the process of clicking on a link your friends post in their Facebook newsfeed.In this report we want to discuss two implications of Facebook’s dramatic growth.

Facebook has blown by MySpace in social networking and is poised to pass Google in 2010 in directed traffic

  • The world of television presented us with about 10 channels in the 70’s, which grew to 500 channels as digital proliferated in the late 90’s. The internet now brings us hundreds of millions of channels (i.e. websites, Facebook profile pages, blogs, etc.), which we have only been able to navigate with search. Yahoo dominated search in the early days, but they were passed by Google when Google came up with a better algorithm presented in a simpler design. Because they are the dominant search engine, Google emerged in the early part of the last decade as the dominant source of traffic for most sites.
  • MySpace was the early dominant “social network”, but the users weren’t really networked. We had to surf MySpace or hope someone came to our MySpace page to get any real value, and significant technical improvements were glacial.
  • Facebook’s improvements were simple but monumental. They used basic newsfeed technology to enable us to know what our friends are doing, thinking, buying, playing, or posting, simply by going to our own newsfeed.They also opened up their platform to third party developers, who quickly provided the Facebook community with a wide array of incredibly popular applications like Farmville, which has over 80 million players. In fact, Facebook states that there are more then 250 applications that have more then 1 million active users. While many of us used to go to Google to find the latest news, or would surf major or minor news sites to see what was going on in our world, our news and information is increasingly brought to us by friends who post news of interest to them or about them, which appears in our newsfeed. Friendcasting on Facebook will be complimented by Facebook’s increasingly deep integration of Bing’s search tools on Facebook, as well as by other social search applications on Facebook that let us mine the behavior and opinions of our friends. We believe Facebook will pass Google in terms of traffic generation to other websites in 2010.
  • Because we tell Facebook so much about ourselves, and because we spend so much time on Facebook, Facebook knows dramatically more about us than any other website in history, and Facebook’s willingness to share this data makes them an incredibly attractive partner to websites who like user data (which is almost every website). The question now is: how will Facebook leverage its powerful position to generate revenue and profits for their shareholders?

Facebook will be worth over $100 billion

  • Facebook will generate revenue from advertising, both display ads and through increasingly integrated search tools. Microsoft’s Bing, as the search provider on Facebook worldwide, compliments Facebook’s powerful “friendcasting”. Rather than merely offering links, the Bing integration will present more of the features available on the search engine itself. For display advertising, Facebook will increasingly be presenting ad formats that feature social actions. Social integrated ads perform better and provide a better user experience since they are consistent with the context and feel of Facebook. Facebook ads will also be increasingly targeted to people based on the information they provide Facebook. This combination of targeting and social relevance will drive enhanced performance and rates for Facebook display ads.
  • Global internet advertising is poised to grow to $96 billion in 2015 (according to Magna), a 10.5% five year CAGR. Traditionally in media, companies with scale are able to grab outsize share of ad spend. Therefore, as Facebook has the most global scale, its safe to assume that Facebook will attract its fair share of the market. While Facebook is still growing rapidly, we assume in our valuation thesis that they account for only 15% of total internet traffic in 2015. According to Drake Direct, based on data, Facebook is already at 15% in the UK, and they are at ~25% in the US. We believe 15% is a conservative view of Facebook’s page view and time spend share in 2015, given its current trajectory. We estimate that Facebook’s 15% share of the global internet audience yields them a 15% share of the global internet advertising market, yielding a forecast of $14.5 billion in advertising revenue in 2015. Today this may seem like an aggressive assumption based on the fact that Facebook currently does not command a comparable CPM to many other websites for their display ads. But Facebook has just really begun to monetize their traffic and weave in targeting and social relevance, and they haven’t even begun monetizing social search. Where Google offers advertisers strong targeting for purchase intent, Facebook is the holy grail of targeted brand advertising, and is posed to make significant headway in search.
  • Facebook Connect is another powerful platform for Facebook to leverage and eventually monetize its user data. Facebook Connect is quickly becoming a de facto registration platform on the net. Currently, over 80,000 sites have already implemented Facebook Connect, including many large sites like CNN. Facebook Connect is emerging as the internet “passport” that enables people to enter any website, as well as interact with their friends who are also on that website. This will likely become another significant revenue platform, as Facebook could potentially harness Facebook Connect to create a leading ad network, leveraging their deep relationships with advertisers and their mountains of user data. For purposes of this analysis, we’ll assume they derive zero revenue from Facebook Connect in 2015. Therefore, in our analysis, investors are getting a free call on this massive business opportunity.
  • Next up, and just as interesting, is Facebook’s recently introduced payment system. Initial testing on Facebook indicates Facebook consumers prefer Facebook’s system to the other payment systems available on Facebook.Facebook is charging a whopping 30% fee to the publishers selling virtual goods (similar to Apple’s 30% take on applications sold on its iPhone platform). The system includes many other benefits for publishers (e.g. preferred placement in the gaming directory, better advertising rates) that only Facebook can provide. Analysts estimate that Facebook’s payment system will grab more then 50% share of payments on Facebook and generate $200 million this year based on projected sales well north of $1 billion in virtual goods in 2010. But payments on Facebook will be just the beginning for the payment system. Facebook Payments is well positioned to take meaningful share from PayPal all over the internet as users will increasingly be using Facebook Connect on ecommerce sites around the net. Paypal is expected to generate $3.3 billion in revenue on a base of 88mm active accounts in 2010. We believe Facebook Payments could grow to a $2 billion dollar business by 2015.
  • Given the simple analysis above, we project Facebook will drive $16.5 billion in revenue in 2015. While this is a big number, it is just over 1/3 of what Google would be projected to generate in 2015 if Google grew revenue at a 12% CAGR (about ½ it’s recent revenue CAGR of 20%). For ease, we assume Facebook achieves the same 35% EBITDA margin as Google is currently experiencing. Let’s similarly assume that Facebook, as a public company, would be valued using the same EBITDA multiple as Google is valued at today, which is 18X 2009 EBITDA. The math above implies a value of $103 billion based on 2015 projections.

Facebook is worth $50 billion today

  • If we discount $103 billion back by 15% per year, we get a price target of $51 billion today. This implies a value that is more than two-and-a-half times the $19 billion value Facebook shares are currently trading at on secondary private marketplaces. The table below looks at how our valuation would vary depending on various multiples and discount rates. Even at a 21% discount rate, Facebook would be worth more than 2x the current share price.


  • Another way to value Facebook helps put our target in to perspective. Based on current membership levels, we are valuing Facebook at $125 a member.If Facebook were valued on an 18X multiple of EBITDA today, that implies that Facebook has the power to generate $7 in EBITDA on average off its members, or $20 on average per member in revenue (assuming 35% margins). Neither number appears a stretch. Amazon earns $15/user in EBITDA, Google currently earns $20/user, and EBAY earns $34/user. We recognize these companies all have different business models, but we think it is helpful to put some context around our $7 EBITDA per Facebook user projection.
  • Is a 15% discount rate too low given that we’ve seen other social networks appear and then fade, most recently MySpace? We’ve seen other internet leaders founder – is Facebook like Yahoo? Is it possible Facebook is just a fad, as some argue? Our thesis is that Facebook is already deeply ingrained in our daily lives, and this is just the beginning. There are many reasons why the switching costs are significant, and Facebook keeps adding new ones – most recently Facebook was granted a patent on “the feed”, a core feature of Facebook’s functionality. Facebook is averaging over 100 million photos uploaded per day. People don’t like to leave those behind. With an average of 130 friends per user, almost everyone has many connections that only exist on Facebook. The average person is a member of 13 groups. As we increasingly move to mobile, we are bringing Facebook with us. The Facebook iPhone app has been downloaded by over 28 million people. In addition, every wireless operator is advertising the availability of Facebook apps on their phones.
  • Maybe our estimates are too conservative? 15% share of online ad revenue and 35% operating margins could prove too low. The data table below shows that each 1 percentage point of share of the online ad market for Facebook is worth $3 billion present value at a 35% margin. With 30% reach of global internet usage today, it is conceivable that Facebook ad share could be well over 15%.

Facebook shares are available for accredited investors to buy and sell, and the current value is $19 billion

  • There is a secondary private market for Facebook shares on sites like and that make markets in shares of dozens of private firms, enabling employees to monetize some of their options.
  • After proving you’re an accredited investor, the transaction is papered, with the seller paying transaction costs.
  • While Facebook enables employees to sell their shares, the buyers of these common shares are prohibited from subsequently trading their shares until Facebook goes public or is acquired.
  • Right now, shares are being offered at $36-$38 per share, implying a market cap of $19 billion.


  • With only $600 million in rumored revenue in 2009, Facebook has done little to monetize its vast reach. As Facebook revenue generating initiatives start to scale, private market values should increase.
  • When the company goes public, the liquidity discount will evaporate and prices will rise to fair value.


  • Shares bought in the secondary private market are not liquid and do not entitle the owner to the information usually provided by public companies to their investors.
  • Another competitor could arise and take market share from Facebook. In fact, to the degree that Facebook attracts 15%+ of all internet time, every other website on average is generating 15% less traffic. So it’s easy to imagine other sites working together to try and thwart Facebook. But like Google, other websites will increasingly see Facebook as a “frenemy”, a strong competitor for the mindshare of internet users but also a driver of massive traffic.
  • Facebook either may not be capable of or may not be concerned with generating massive revenue or going public. This is unlikely since history has shown that once eyeballs are assembled, advertising and other monetization opportunities present themselves. Some people thought no one would advertise on MySpace, and they were proven wrong. And Facebook is far more advertising friendly than MySpace as pages are much less free form. While a few companies (most notably CraigsList) appear uninterested in maximizing revenue, Facebook’s significant VC investors will help drive both monetization and an eventual liquidity event. In addition, like Google, Facebook will need to generate cash to help finance its increasing spend on R&D to drive innovation.
  • Privacy remains a significant concern of internet users globally, and with all the data Facebook aggregates and make available, they are walking a fine line. Facebook has clearly had some missteps in the past, most notably its Beacon information sharing product in 2007 that caused an outcry from privacy groups. They have also had technical glitches, one as recent as last week where messages were misrouted. As a result of these lapses, Facebook is acutely aware of the privacy issue and they appear to be thoughtful in their approach. Google also struggles with privacy, as evidenced by their recent bungling of the introduction of Google Buzz.
  • Given Facebook’s increasing stranglehold on internet usage, governments in the U.S. and elsewhere could step in and, in some way, break up the near natural monopoly on social networking that Facebook will have.

Lou Kerner currently runs a portfolio of parked domain names and is COO of Gamers Media, an ad network for online casual gaming sites. Lou has a BA in Economics from UCLA and an MBA from Stanford University. This article is reprinted from a research report published yesterday on the research site, a subscription site featuring the work of ex-Wall Street analysts.  Mr. Kerner’s personal website can be found at

Our resident political opinionator, Jeremy McGuire offers the following book review:

In the middle of a recession there are invariably questions about how we got into it and what we can do to get out of it.  Politically, it quickly devolves into a conflict between the market driven laissez faire economists and the interventionist Keynesian ones.  Television and radio infotainers yammer on, using their own peculiar jargon that leaves the rest of us – who are not economists – as much in the dark as we were before.

I wanted to know more, so I picked up Liaquat Ahamed’s detailed history of how the world stumbled into the Great Depression, “Lords of Finance.”  Ahamed is a twenty-year veteran of investment banking and some paragraphs have to be read over a few times, but generally it’s written for the layman.  It comes in at 508 pages, without notes, but it reads like a well-crafted novel.

The main characters – the “Lords” themselves – are Montague Norman of the Bank of England, Hjalmar Schacht of the Reischsbank in Germany, Benjamin Strong of  the N.Y. Federal Reserve Bank, and Emile Moreau of the Banque de France. all of whom were well intentioned but ultimately flawed men who were not immune from the kind of gross miscalculations and unwarranted fears that led to the financial disaster of the Great Depression.  While a great deal of information may be gleaned from their stories that is applicable to the present one must be cautious: 2010 is not 1929.

Some of the miscalculations early twentieth century central bankers made were over the conduct and financing of World War I.  No one in financial circles believed the war would outlast the various governments’ ability to pay for it. They were all on the Gold Standard, you see, and the financial resources of each country were tied to their reserves of gold.  It was hard to imagine Germany, France and Britain would be so foolish as to burden their countries with massive debt just to keep a war going.

These top-hatted and stiff-collared expert prognosticators, mired as they were in centuries-old financial traditions based on the availability of precious metals, completely overlooked the proclivity of wars (particularly wars between monarchies, empires and single-party republics) to be self-sustaining and self-fulfilling.  If wartime governments run out of money, they borrow it, mostly from foreign banks incurring massive debt.  If they don’t have enough currency, they print it, all to keep the war going toward ultimate victory, at which time all debts will be easily repaid.  Or so they thought.

The incipient catastrophes that resulted from financing the First World War in so unsustainable a fashion were exacerbated by the enmeshment of world financial interests.  In the introduction, Ahmed explains, “Because financial institutions were so interconnected, borrowing large amounts of money from one another even in the nineteenth century, difficulties in one area would transmit themselves throughout the entire system.”

Ahamed stops way short, however, of ascribing this financial entanglement to any conspiracy of central banking institutions.  In retrospect it may read like a Dan Brown novel, but conspiracies require agreement, and the central bankers in the 1920’s could agree on almost nothing.  Scrambling to force some post-war order on the economies of their respective countries, they formed alliances, made enemies, forced concessions, engaged in blackmail and all manner of intrigues eventually stumbling into Great Depression through incompetence, a too rigid loyalty to ideological principles, and misguided policy.

The biggest blunder on the road to the Great Depression was the New York Fed’s decision to lower interest rates.  It may have helped Germany’s cash-flow, but it caused massive speculation on Wall Street, as investors borrowed more and more money to purchase stocks, further inflating the bubble that burst on October 29, 1929 – “Black Tuesday.”

Ahamed writes, “Their goal is a strong economy and stable prices. This is, however, the very environment that breeds the sort of over-optimism and speculation that eventually ends up destabilizing the economy.  In the United States during the second half of the 1920s, the destabilizing force was to be the stock market.” (p.280)

We are put in mind of the economic situation in America before the current recession: Overspeculation, easy credit, artificially inflated prices, and a protracted military campaign resulting in massive “bad debt,”* much of which is held by foreign banks, principally China.

In the Depression, as well as today, the main conflict on the road to recovery was,

“Between those who believed that governments could be trusted with discretionary power to manage the economy and those who insisted that government was fallible and therefore had to be circumscribed with strict rules.” (p.230)

Traditionalists said Government should keep its hands off the economy and allow the “invisible hand” of the market to determine its course as proposed by eighteenth century economist Adam Smith.  Others, principally twentieth century economist Maynard Keynes, said the government must have control over the economy to keep market pressure from destabilizing it.

The real issue for the [Federal Reserve] governors was that many of the banks closing their doors…had sustained such large losses on their loans that they were … insolvent, [the governors] made it a principle to let them go under.  They failed to recognize that by doing so they were undermining public confidence in banks as a repository of savings and were causing the U.S. credit system to freeze up.” (p. 391)

What government aid did come was too late.  By that time, Ahamed writes, “Banks, shaken by the previous two years, instead of lending out the money, used the capital so injected to build up their own reserves.”

Ahamed seems to say that when a crisis looms, the injection of funds to shore up failing banks should come sooner rather than later and in sufficient quantity to capitalize the banks and allow them to begin lending.  When Adam Smith’s “invisible hand” goes arthritic, Maynard Keynes is there to take over the heavy lifting.

Amid the chorus of our own contemporary “know-nothings” who spout partisan absurdities about the government not getting involved in economic policy, or how deficit spending to get the economy out of crises is tantamount to cultural Armegeddon, Ahamed’s analysis is a voice of reason. “The Great Depression was caused by a failure of intellectual will, a lack of understanding about how the economy operated.  No one struggled harder … than Maynard Keynes.  He believed that … economists are the “trustees, not of civilization but of the possibility of civilization.” (p. 504)

That’s something even an artist like me can understand.

(*Bad debt is, according to Robert Kiyosaki, debt that does not put money in your pocket).

Jeremy Mcguire is an author/illustrator, humorist and social commentator. His weekly articles appear in a variety of publications, and are archived on the blog, Baloney & Blarney.

An article on last week’s CNN website both amused me and pissed me off. The amusement came from the fact that my assertion, made last month, about the name “iPad” being a little “feminine hygiene oriented” is now borne out, by – among other signs – the word “iTampon” trending as one of the most tweeted topics for the two weeks following the release of Apple’s newest gadget. Apple has experienced a failure (however temporary one might feel it to be) in branding. That failure may have been driven by some factors that were beyond the company’s control (naming rights, etc), but it was a failure nevertheless. I imagine it will be a short lived offset, as their evangelical fan base is capable of turning water in to wine, when it comes to product adoption.

Apple’s failure was a marketing failure, and while it’s unlikely to lead to a business failure (as they experienced with the Newton, original Mac Mini, and other such ventures), it is a failure in that it missed a major opportunity. The failure was not a failure to push the right name forth, or advertise convincingly enough. These would have been promotional failures, and I would agree with Mr. Ihnatko: in those cases, the failure of a promotional campaign can be inconsequential, when the offering sells itself. However, a product only sells itself when it FULLY MEETS A PREVIOUSLY UNTAPPED NEED.

Apple may end up selling a healthy number of iPads, but I am left wondering how many more they might have sold, had they LISTENED to the consumer more than they are used to doing. Like all great designers, the company created something they “knew” was the best thing, but they based their knowledge on personal aesthetic and creative sensibilities and preferences. If Jobs, Ive, Forstall, and Schiller like it…let’s get real…if JOBS likes it, the world must like it. Thanks to the fact that Jobs has undeniably cool taste and is indeed brilliant (combined with the unquestionably genius skills of Mr. Ive and his team), the result has historically been some pretty darn exciting products…for a relatively small niche of equally specific consumers – People whose personal aesthetic and creative sensibilities and preferences matched those of Messrs Jobs and Ive, in essence.

When you’re trying to create a solution that serves a wider market, however, this doesn’t work so well. Unless competitors such as Microsoft, HP, Blackberry et al fail to deliver market-ready versions of their own prototypes, I predict Apple’s market share for this type of device will be far less than it may otherwise have been.

Now to my irritation, which is not altogether unrelated.

Andy Ihnatko, a tech columnist at the Chicago Sun-Times, is quoted in the article I mention above as saying “with the right device, marketing doesn’t really matter.”  I’m not sure what else he said, because all I heard after that was a strange wailing, that I shortly realized was my own cry of frustration at yet another unwitting misinterpretation of the role and value of marketing, within 21st century business strategy and practice.

Having worked with and within a thrilling diversity of businesses and industries, I have learned a lot about, and practiced, an equally wide array of interpretations of the function known as “Marketing”. My experiences, perhaps more than anything else, have irrevocably confirmed for me that this function, when successfully leveraged and executed, is NOT an adjunct or additional engagement, to be activated “when the need arises”. One could argue (subjectively) that Public Relations, Advertising, and Promotions fall in that category, but Marketing is no longer, nor should it ever be, seen as an initiative designed to purely drive sales.

I am now picturing a bevy of Business Unit leaders and financial officers derisively snorting in shareholder-sensitive disdain and contempt at my apparent naïveté…but humor me for a moment longer, please.

For a long time, consumer products companies, consumer electronics companies, and even service and solution providers pursued the notion of “push marketing” with an exponential level of investment.  For a longtime, their methodologies delivered equally, or at least satisfactory, returns on those investments. Make enough noise, grab enough eyeballs, repeat the mantra enough times, and you’ll make the sale. This worked in many instances, but no longer.

The consumer of today belongs to a complex society of social networks. In some cases these networks are consciously inhabited, while in others the consumer participates subconsciously, simply by dint of their purchasing habits or behaviors exhibited, when in possession of, or proximity to, the value offerings in question. To clarify my point, permit me to borrow from the Forrester research ladder metaphor, created four years ago, when social networking was still very much in its mainstreaming infancy.

Since 2006, Facebook has grown its user base by over  5000% (from under 8 million to over 400 million active users). YouTube has experienced a more than 3000% increase in content uploads since 2006. UGC (User Generated Content) and CDP (Consumer  Driven Productization) are not fads. They are inescapable trends, and they are largely inured to the promotional efforts of “old school” advertising agencies and product marketing groups. Taking some of this data as a baseline, I can only *begin* to imagine how Forrester’s 2006 findings have changed in the intervening 4 year period…

In 2006, a full 48% of online consumers over the age of 21 were already actively involved in social networking activities. Consider the above growth curves of Facebook, YouTube et al, what can we imagine is the percentage of adults engaged in social networking today?..

Companies are still able to drive sales in to niche constituencies, simply by investing enough energy and money in the artificial creation of the “illusion of need”. This pseudo-holographic need is only experienced as long as the investment required to uphold that illusion is maintained. If brands truly want to CONNECT with larger market segments, and establish the type of brand recognition and long-term loyalty of which contemporary ad execs can only dream fondly, they need to grasp the concepts of social networking, crowd sourcing, and “Trust” or “Relationship” marketing.

I will delve into these at a later date. For now, however, I would like to offer up a taste of the power of crowd sourcing, and ask you to think how you might consider changing the way you develop and bring to market your next product/solution/service/self…


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1990 photo of Earth

Look again at that dot. That’s here. That’s home. That’s us. On it everyone you love, everyone you know, everyone you ever heard of, every human being who ever was, lived out their lives. The aggregate of our joy and suffering, thousands of confident religions, ideologies, and economic doctrines, every hunter and forager, every hero and coward, every creator and destroyer of civilization, every king and peasant, every young couple in love, every mother and father, hopeful child, inventor and explorer, every teacher of morals, every corrupt politician, every ‘superstar,’ every ‘supreme leader,’ every saint and sinner in the history of our species lived there — on a mote of dust suspended in a sunbeam.

Carl Sagan

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Web Marketing strategist Elyssa Pallai shares her “Top 4” projections here for web marketing in 2010:

The days of SEO as the primary traffic driver to your website are over. Don’t get us wrong, organic search engine optimization isn’t about to disappear as a key traffic driver. And thankfully, Google AdWords is still going strong. However, recent technology trends enable a brave new world of marketing. Ignore them at your peril.

Take real-time, for instance. The next generation of search, aggregation, notification and findability services are being developed using real-time technologies that enable users and machines to receive real-time updates. In a recent post, Robert Scoble said he would be better off curating news than actually attending the Apple launch! What? If you aren’t thinking about how real time, along with social networks, mobile and location-based services fits in your marketing plan, you’re missing an opportunity.

Google’s Great, But Facebook Rocks

In a recent post, ReadWriteWeb’s Marshall Kirkpatrick asked “Why is Google afraid of Facebook?” The answer is because social networking sites have become a key link in the search and information sharing value chain. You would have to be hiding out in a dark hole not to understand social media and the effect it has had on marketing the past couple of years – but surpass search? Oh, right, now I get it: These sites are an important information source for everyone. Importantly, friends’ recommendations are key.

Mobile is Better

Google’s VP of product development recently stated that, “with all the capabilities these phones that are coming out have – like GPS, cameras – we think there is the potential to actually make this mobile Web better than the PC Web.” That is a profound statement for marketing managers. A mobile phone experience better than the web? If you haven’t bought yourself a smart phone like iPhone or Android, we suggest you go out and grab one. Mobile applications are proliferating like rabbits. What would be better than to be first to market and offer your customers an exceptional product experience while on the go.

Perfect product placement

Location-based services mean the ability to market right outside your front door is happening now. Frederic Lardinois reported in June 2009 that 1 in 3 smart phone owners use location based services. Take this simple example. You’re in Vail, you just finished 8 hours on the mountain and now you’re looking for the perfect apres ski location. You’re walking down the Mall, you take your iPhone out of your pocket and ta-da! Buy one-get-one-free margaritas at Las Margaritas. You’re standing right outside. Perfect product placement. And now you can talk about the restaurant and broadcast it immediately to all your friends.

If you aren’t listening to the conversation, you better start. There are numerous listening applications available to get you started in your pursuit to join the conversation and get a handle on positive as well as negative feedback on your product or brand. A simple saved search in Twitter can go along way.

All these trends have a profound impact on how we market to our website guests at ReadWriteWeb. Not only do we have to understand search engine optimization, but the opportunities offered by social media marketing, the new capabilities and possibilities offered by mobile, geolocation, augmented reality and real-time notification and information sharing. One seems to becoming just as important as the next.

If you don’t understand these technology trends as a marketer, you better get out while the getting is good. Enabled by technology, 2010 is already a watershed year for new ways to reach your customers.

Elyssa Pallai is the Marketing and Experience Manager at ReadWriteWeb. Elyssa has been working on the web since 1997 in the USA, UK and New Zealand.

Once again, a volume of rainfall considered “manageably heavy” anywhere else in the world has paralyzed Greater Los Angeles. Today it rained 2.4 inches. That’s a lot of rain, but it’s not End-of-the-World-Where’s-The-Ark levels…unless you live here.

In the Los Angeles area, the wash systems (sewers and drains) are built to accomodate the volume of water generated by a wasteful idiot, too lazy to rake or broom sweep his driveway. You know, that chap who aims his hose at the concrete and stands there watering the sidewalk clean of all those awful leaves…

Anything more than that, or more than the amount of water needed to regularly wash one’s blinged-out SUV (with those great new spinning hub caps), overwhelms the system. Drains backup, and street sides flood. Less than an hour after it began raining today, I drove through a section of town where the cars parked on the side were actually submerged up above the TOP of the wheels!

In the Los Angeles area, there exist a system of dips at most intersections, ostensibly designed to slow vehicular traffic in the same way speed bumps do along residential streets. It works during the other 360 dry days of the year. It works too well when it rains. Giant lakes 12 inches (or more) deep form at these intersections, which sounds fun unless you’re the one diving…uh, I mean driving though it.

In the Los Angeles area, the idea of porous tarmac, white paving, and other sustainability practices simply has not taken hold. Perhaps, one day, someone with some influence might choose to repeat that suggestion about larger drain systems and porous tarmac…


The above footage was taken by a 15-year old boy in the Los Angeles area today. Granted, the issue extends beyond drainage, in to the realm of wildfire prevention and erosion control. The point remains, however, that this is not a new phenomenon!

The forecast calls for heavy rain every day, for the rest of the week.

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JD-About-Town Jonathan Handel shares here some very interesting insights into the NBC/Leno/O’Brien slap fight. For the international reader, Jay Leno and Conan O’Brien are two big talk show hosts here in the USA, ostensibly “trapped” in a web of intrigue (others may suggest a quagmire of confused corporate fumbling) surrounding their futures as talk show hosts on that particular network. NBC, one of the USA’s top television networks, brusquely replaced Mr. Leno, former host of the renowned “Tonight Show”, with Conan O’Brien, in an effort to appeal to the prized younger demographic. They secured the demographic, but lost overall viewership. Meanwhile, the consolation prize offered to Mr. Leno, in the form of a prime time talk show, also failed in the ratings (again, some may prefer “was not given enough of a chance”). The Network affiliates revolted, and NBC – just as brusquely – announced an odd reshuffle that led to the current (and apparently soon to be resolved) standoff. For more details, read on!:

That sweet walkaway payday for Conan O’Brien might not be as rich as it sounds. Media such as Variety are reporting that NBC is likely to pay Conan $30 to $40 million to settle out his contract, with a deal to be reached shortly. But what none of the media appear to be mentioning is the two magic words of employment contract settlements: mitigation and offset. Depending on how those terms are deployed, the hit to NBC could be much less than the numbers imply – particularly if Conan scores a deal with Fox for a new show to start in September, as many observers expect.

Here’s how it works. First, as background, the NBC payments are likely to be made over the period of time remaining in his contract – at least, that’s what customary. Conan’s attorneys, agents and manager would probably press for some acceleration though, unless the tax consequences of doing so would be adverse.

In any case, mitigation is the concept that the terminated employee, i.e., Conan, has an obligation to seek other employment. If he fails to do so, the payments from NBC could stop. To protect against this, Conan’s representatives will seek, and may get, a “no mitigation” clause. In that case, the payments would keep coming even if Conan decides to sit on the beach for the next 2-1/2 years (reportedly the remaining term of his contract), though he’s unlikely to want to damage his personal brand name by simply disappearing.

At the very least, though, Conan’s team will argue for no mitigation from now until a new Conan show could feasibly be launched, which is generally assumed to be September, i.e., the beginning of the fall TV season. They’d also probably seek a guarantee that there would be no mitigation if Conan is offered and refuses a show of lesser stature, or one at a lower salary than he was receiving at NBC, or one that reaches too small a percentage of households in the country. In other words, under such contract terms, Conan would be able to refuse a “demotion” without violating a duty to mitigate.

Now on to offset. This is the concept that whatever the employee earns at his or her new job, if any, would be offset against the settlement payments owed by the old employer. This would apply only for the remainder of the old contract. For instance, suppose the agreed NBC termination payment (“liquidated damages,” in legal terminology) is $40 million, and suppose Fox pays Conan $30 million over the next 2-1/2 years. In that case, the $30 million could be offset against the $40 million, and NBC would only have to pay $10 million.

Naturally, Conan’s representatives will seek a “no offset” clause. This would be a hard-fought point, however. NBC would argue that Conan would be getting a windfall and, even worse, that he’ll be cashing those checks while competing against NBC itself. That’s like biting the hand that feeds you, but knowing you’ll get fed regardless.

Here again, there’s a compromise available: Conan and NBC might agree that his salary from the new show would be only partially applicable (i.e., partially offsetable) against the NBC liquidated damages payments. For instance, if 50% of his Fox salary (if he does a Fox deal) were applicable, then $15 million (in the above example) would be applied against the $40 million, reducing NBC’s obligation to $25 million.

On a different note, it wouldn’t surprise me if NBC seeks a non-disparagement clause from Conan. Paying him liquidated damages while he’s getting paid by Fox to bash NBC in his monologue might be too much for the NBC suits to accept.

Of course, this is all speculation. No one’s seen the existing contract, let alone the settlement agreement, since there is no settlement yet (and it’s not clear to me whether NBC would be required to file a redacted copy with the SEC). But it’s easy to see how mitigation and offset amount to a win-win. Those provisions could allow Conan’s people to leak big impressive figures, yet reduce the bite for NBC.

Whether that would be enough to keep heads from rolling at NBC is another subject. If the Comcast deal goes through, under which the cable operator would acquire a majority stake in NBC Universal from corporate parent GE, then I’d expect some hasty departures. Someone might get the ax even if the deal isn’t consummated. (The antitrust division of the Justice Department recently announced they will be reviewing the deal.) Ironically, terminating the responsible executives would probably require NBC to make more contract settlement payments.

Moving Jay Leno to 10:00 p.m. was an understandable experiment. It seemingly kept both Leno and O’Brien in the family, and lower ratings were acceptable to the network, since production costs for five nights a week of a talk show are a lot less than for five nights of scripted dramas.

Unfortunately, it looks like the downside wasn’t evaluated as thoroughly: Leno’s lower ratings at 10:00 meant diminished ratings for 11:00 p.m. local station newscasts, an unacceptable price for network affiliates, for whom the newscasts are a cash cow. Moving Leno back to late night gave NBC one host too many: Leno, O’Brien, Jimmy Fallon and Carson Daly. That’s four hosts for three chairs, and when the music stopped, O’Brien was out. Now, for NBC, it appears time to pay the piper.

Jonathan Handel is Of Counsel at TroyGould and practices digital media, entertainment and technology law.  He is an adjunct professor at the UCLA School of Law, and his op-ed pieces have appeared in the Los Angeles Times, the Daily Journal, and the Los Angeles Business Journal. Visit his site at

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