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Archives: February 2008
Stupid comScore and stupidder journalists
ComScore released an estimate yesterday suggesting that the number of clicks on Google ads has fallen. Even as Google's traffic is growing 40%, comScore asserted that clicks were down 7% in January versus December and flat year on year.
The press uniformly covered the story as though comScore's numbers are fact and not an estimate. "Google hit by economic slump." "Google growth isn't clicking."
Even the SJ Mercury News, which should know its way around a story like this or at least be able to pick up a phone and call some people who know something offered this lame and incomplete gloss: " Google's paid "clicks" on search ads fell 7 percent between December and January and have not grown from the previous year, according to comScore, which measures Internet audiences."
Missing words: "estimated" or "projected."
Kinda like reporting a pre-election poll as the outcome of the election. And journalists would never do that, right? (Hmm.)
Google's value fell 7% at one point early in the day.
Compounding the silliness: a little checking would show that comScore's numbers are notoriously flawed, manufactured from a series of estimates of estimates, interpolations from tiny samples. A stroll over to the desk of the resident newspaper web teams would yield a stream of colorful comments about how clueless comScore is when it comes to guestimating web audiences and activity.
My money says comScore and the hundreds of journalists who reported its projections as reality will end up looking like idiots on this one.
Update: other folks familiar with search and comScore seem to agree. See David Rodnitzky for example. By day's end, even comScore was backpeddling vigorously.
Meanwhile, Brian Morrissey at Adweek reports: "SearchIgnite, a search management technology company employed by agencies and marketers, reports that in the first month-and-a-half of this year, paid clicks on Google are up 45.7 percent compared to the year-ago period. Advertiser spending climbed 40 percent. What's more, ad impressions rose 60 percent."
More comScore crow-munching. .
I think the dudes at Google are gonna have a major laugh when they publish Q1 results.
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Conspiracy of dunces
Conspiring in broad daylight, the banks, insurance companies and regulators are scrambling to use bank money ($3 billion) to backstop the companies that insure the bonds ($2 trillion) that the banks own so the bonds be downgraded and drop in value. The WSJ reports:
"It became clear to all the different stakeholders...that if you had the right people talking, there was an intersection of interests that could be discovered," a senior Treasury Department official said. "Our goal was to have people focus on the potential of that intersection."Take a look at the numbers, and you'll see the whole thing is a shell game conducted in slow motion with drunken, arthritic hands. It wouldn't fool a fifth grader, but then most fifth graders don't have enough money in the bank and have a wish stake in seeing the shell game succeed.
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Churnalism
Claiming that little journalism is original these days, UK investigative journalist Nick Davies
commissioned Cardiff University’s journalism department to do a study on the state of the industry.
The study looked at all domestic news stories over a two-week period from five British newspapers, including the quality papers--the Times of London, the Daily Telegraph, the Independent, the Guardian--and one mid-market paper, the Daily Mail.
The researchers looked at 2,207 stories.
They also had the Guardian news desk send along all of the material--such as press releases and wire stories--that the journalists had access to during that period.
The survey found that 80 percent of the stories in these papers--some of the most prestigious in the country--were wholly or mainly or partly based on information from pr departments or wire stories. The researchers weren’t sure on the origins of another 8 percent of the stories.
Only 12 percent were clearly original.
Further, the researchers found that when stories hinged on a specific fact, there was clear evidence that fact was checked in only 12 percent of stories.
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Tony and Kareem
The web is host to many miracles, small and large.
In chapter 153,479,934 of the web's weird, wired wonderfulness, my buddy Tony Pierce helps teach one Kareem Abdul-Jabbar how to blog.
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Subhed of the week
"Gore and Pelosi See Role as Honest Brokers in Tight Contest."
The Onion?
No, front page, right column of the New York Times.
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Ruffini vs Ron Paul
Patrick Ruffini, one of the tiny handful of GOP strategists who get online and social media, is gleefully pushing for Ron Paul's primary defeat.
Here’s what Ron Paul says about TX-14: “If I were to lose the primary for my congressional seat, all our opponents would react with glee.” Give what you can. Ron Paul is running scared — using his Presidential campaign’s donors’ money to subsidize a desperate last-minute attempt to save his Congressional seat.Ron Paul is, of course, the GOP presidential candidate who did not write the anti-Semitic, racists, paranoid bile that appeared in his eponymous newsletters for several decades.
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Austro Hungary in three sentences
Christopher Hitchens in the March Atlantic:
In his essay on Malinowski, Ernest Gellner wrote of how the borderline and marginal peoples of Austria-Hungary needed three things from their benign, whiskered old monarch. The required insurance against mutual fratricide, protection of local and eccentric cultures and guarantees against the ambitions of Germany and Russia. By giving way first to micro and then to macro anti-Semitism, not only did this fair approximation of a civilization lose its best minds; it lost its collective min, and thus managed to invite the two worst possible fates by beckoning on first a German and then a Russian imperium."
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Happy Valentines day
Oceana, one of the first causes to buy blogads way back in 2003, dreamed up this clever and, ultimately, sad spot...
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More on too-late-is-worse-than-never bond insurer band-aids
Bill Gross, biggest bond fund manager in the world, is skeptical of bond insurer bailouts too:
That the monolines could shoulder this modern-day burden like a classical Greek Atlas was dubious from the start. How could Ambac, through the magic of its triple-A rating, with equity capital of less than $5bn (£2.5bn), insure the debt of the state of California, the world's sixth-largest economy? How could an investor in California's municipal bonds be comforted by a company that during a potential liquidity crisis might find the capital markets closed to it, versus the nation's largest state with its obvious ongoing taxing authority? Apply the same logic to the gargantuan size of the asset-backed market it has insured in recent years - subprimes and CDOs in the trillions of dollars - and you must come to the same logical conclusion: this is absurd. It is as if Barney Fife, television's Sheriff of Mayberry in The Andy Griffith Show , promised to bring law and order to the entire country.Meanwhile, the chief of Germany's biggest bank is sounding the alarm also, talking to Bloomberg TV.
... the sense of stability imparted to an oligopolistic industry with visible flaws is not likely to last, nor may the hope for a return to economic growth of recent years. The modern US financed-based economy has a striking resemblance to Barney Fife, guaranteeing global prosperity without the productive industrial-based firepower to back it up. Neither ultra-low interest rates or tax rebates, nor investor-led and authority-based monoline bailouts are likely to change that significantly during the next few years.
Deutsche Bank AG Chief Executive Officer Josef Ackermann said rating downgrades for bond insurers pose risks that could match the U.S. subprime market collapse.
"It could be a tsunami-like event comparable to subprime,'' Ackermann said in a Bloomberg Television interview in Frankfurt today. Deutsche Bank, Germany's biggest bank, is "well positioned'' on its risk from bond insurers, he said.
Bond investors stand to lose $200 billion should MBIA Inc., Ambac Financial Group Inc. and Financial Guaranty Insurance Co. forfeit their AAA grades because of declines in mortgage-backed securities they insure, according to data compiled by Bloomberg. Ratings on $2.4 trillion of debt that the industry guarantees would be thrown into doubt.
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Hillary loans campaign $5 million?
"Hillary Rodham Clinton lent her campaign $5 million late last month as Barack Obama outraised and outspent her in the Democratic presidential race," says the AP.
Where did HRC accumulate this money amid all her years of public service? I'm not suggesting the money is ill-gotten, but that some of it might come from a joint bank account with her husband. She did get an
$8 million book advance in 2000, but after taxes that number drops to roughly $4 million. Maybe that money was shrewdly invested in post-bubble Internet stocks that were in HRC's name only.
If not, headlines might read "Hillary and Bill" loan campaign $5 million. I assume all this will be covered in disclosure documents. I realize that when Romney gives his campaign tens of millions from a bank accounts held jointly with his spouse, the headlines don't read "Mitt and Ann invest in campaign," but Bill Clinton makes the story more complex. And the headlines for Romney should be corrected too.
I liked Hillary a lot when I saw her speak at YearlyKos in Chicago last August, but I think she'd do better, now and in the Whitehouse, if she wasn't shadowed (or overshadowed) by big Bill.
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As Walmart goes, so goes GDP?
Walmart's January same-store sales were just +1% year-over-year. That equals -3% in real terms. And that means down 10% relative to WM's historic growth.
Imagine GDP down 10%.
?!$%
This is the kind of quite Thursday when more people throw in the towel and trickle of sellers becomes a gusher as the day passes.
Gee, what if these rate cuts don't pull us out of the spin. Why did commercial paper rates for XYZ Corp just jump 75 bp?
Cognitive dissonance starts to slip, the pixels re-arrange themselves and the pretty lady becomes a hag.
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Spy versus spy
In a fascinating first, one advocacy group sees its opponent advertising on blogs, gets aroused and asks Senators to help it advertise too. Yes, the tale is kinda tangled, but it's DC.
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We are Jerome Kerviel
It turns out that one newly unemployed guy wasn't doing so bad earlier in the month. Jerome Kerviel had €1.4 billion in profits on his book earlier in January 2008. (WSJ.)
I keep wanting to sketch out how Kerviel --speculating wildly, way beyond his limits, hiding his speculation from everyone with a series of offsetting paper trades -- is a near perfect metaphor for our entire economy. Everyone is in on it and nobody wants to look too closely at how rotten the whole scheme is.
Consider that US banks are getting ready, with the collusion of bank regulators, to try to bail out the bond insurance agencies who are supposed to cover bond defaults. Why? Because if the bond agencies get downgraded from their current AAA rating, then all the bonds they've insured are worth less. And if those bonds are worth less, then the banks' portfolios will have to go through another round of brutal markdowns.
Does nobody notice that this circle of risk-washing is fictitious -- the banks are basically just stepping in as guarantors of the bonds already on their own books? You could call it fraud, except regulators are right there at the table too.
You have to read the NYT article to see how perverse the scheme is (bolds are mine):
Eight major banks are in talks to bolster the Ambac Financial Group, the troubled bond insurance company, as part of an industrywide rescue being orchestrated by state regulators, people briefed on the negotiations said Friday."Speed is crucial." That's the give-away that this is a flimflam, a shell game. If we don't hyperfast stuff this dreadful panther back in the bag of denial, we'll have to admit how wildly unstable our banking system really is... and then it's gonna shred of us.
The banks, which include Citigroup and UBS, are considering injecting capital into Ambac and assuming some of the risks associated with guarantees written by the company, these people said.
The plan is still in flux, and it is unclear how much money the banks might commit to the effort, either by extending credit to Ambac or by buying a stake in it. It is also uncertain if such moves would be enough to restore confidence in the insurer and safeguard its triple-A credit ratings from Standard & Poor’s and Moody’s.
A spokesman for Ambac declined to comment, but people briefed on the talks said Ambac’s management is involved in the negotiations. The group is planning to reach a deal in “days, rather than months,” one person involved in the talks said. Once the parties have reached a deal they will present it to the ratings agencies to make sure the plan meets their requirements for a triple-A rating.
Regulators are hoping to arrange similar rescues for other guarantors like MBIA and the Financial Guaranty Insurance Company, which have been hit hard by declining values in mortgage securities they insured, but are moving one company at a time. Ambac is in more dire financial straits than its larger rival, MBIA, which has raised $1.5 billion in recent weeks.
The New York insurance superintendent, Eric Dinallo, has hired Perella Weinberg Partners, the investment bank, to advise him and bring the parties together. Mr. Dinallo is not attending the negotiations but is receiving frequent updates and is keeping Gov. Eliot Spitzer abreast of the developments.
Speed is crucial, according to people involved in the talks. On Friday, Moody’s warned that it might downgrade the bond guarantors by late February if the companies did not raise capital and pursue a “viable business plan.”
Investors fear a chain reaction of losses might rock the financial industry if even one big bond insurer were to lose its top credit rating. The concern is that Ambac and MBIA, which have guaranteed more than $1 trillion in municipal, corporate and mortgage debt, will not have the capital they will need to pay claims as defaults rise.
Many big banks and investors that hold mortgage securities guaranteed by the companies would have to write down the value of those investments if the insurers were to lose their top ratings. Those losses could total tens of billions of dollars for some banks.
The banks participating in the Ambac talks are said to be those that have the most direct exposure to that company, people briefed on the talks said. Likewise, other banks that have heavier involvements with MBIA and Financial Guaranty are working on plans to help those companies.
The whole banks-underwriting-insurers-of-bonds-in-bank's-portfolios scheme is just as fictitious as Jerome Kerviel's paper-trading to cover up his massive profits and losses. Banking is based on faith -- I give you money today based on my faith that you'll give it back to me tomorrow -- and bad faith banking is suicidal.
But we can't throw 10,000 upright Wall Street folks -- rating agency staff, bond insurance executives and bond-addicted-bankers -- in jail, can we? (Or can we?)
The real solution is morally rotten, but might keep the economy from cratering. We should skip the charade of having the bankers guarantee their own bonds with the collusion of ratings agencies and regulators; to avoid a banking cataclysm, the government will probably have to bail out the rotten bond insurance agencies, thus bailing out the rotten bankers. (Just as the 3% discount rate is padding their profit margins right now.) Then we'll all pretend the whole thing never happened. Except we'll have to live with the higher taxes and the inflation.
First, though, the government should expropriate 10 years worth of banker, bond insurer and ratings agency executive bonuses and the Porsches, Greenwich swimming pools and Winged Foot memberships they bought.
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Initial unemployment claims
Two of the leading (bleeding) edges of an economy are new hire and new fires. The latter shows up in initial unemployment claims, a number that is released weekly by the labor department. Here's a chart of seasonally adjusted claims over the last 40 years.
The latest reading was 375,000, up from the previous week's 306,000. We're still well below previous peaks were:
10/82: 695,000
3/91: 509,000
9/01:517,000
(Here's the DOL chart generator:
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Newspaper revs plummet
The recession is here folks.
In Q4 '07, USA Today's ad revenue was down 17% versus a year ago. NYTimes properties' ad sales were off 5.6%.
(It's worth noting that we've seen two consumer brands cancel all their online spending in recent days.)
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Google grappling with social advertising
Interesting to see that Google is having trouble monetizing social media:
“We have found that social networks are not monetising as well as we were expecting,” said George Reyes, chief financial officer, as Google reported its earnings for the final quarter of last year.
Since Google has guaranteed to make minimum payments to a number of social networks that carry its advertising, principally MySpace, the slow growth of the business had left the company out of pocket and contributed to falling profit margins in the quarter, he added.
Sergey Brin, co-founder, said a number of initiatives in the final months of last year to boost social networking advertising had failed, but that he remained confident that Google would find ways to build a successful business around the growing traffic on these sites.
Other Google executives said that the difficulties arose from creating an appropriate “look and feel” for adverts, so that they matched the content on social networks.
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Tempus Fugit
Febclub, the ultimate celebration of grey February, once propagated by tshirts and word of mouth and then killed by changing liquor laws, attempts a post-collegiate come-back powered by the interweb. It's weird history gets debated here.
The Doodle shutters.
Brad Westerfield, Plato to Bush and Cheney, died January 19.
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