OverMatter

The $850 Million Hire

"The story starts two years ago in January 15 2007. Bebo is riding a wave of growth and to control this and pitch the company in the right direction, founders Michael And Xochi Birch hire Joanna Shields, managing director of strategic partnerships for Google EMEA, as international President, based in London.

You have to cast your mind back to that era. Social networking was still a very new phenomenon, especially in the mainstream media. Facebook had only just opened up in the six months prior. Selling social networks as media platforms was a new field. What advertising agencies wanted was someone to explain to them, in simple terms, where the value lay. And that’s exactly what Shields did.

As one of my sources says: “Shields was extremely really good at getting the slightly dim media buying agencies to automatically tell their clients that they just had to be on Bebo.”

It would be fair to say that many advertising agencies then - and even to some extent even now - don’t have a clue about the Web.

A senior media planner at a major agency spoke to me on the condition of anonymity. She confirmed that Bebo’s 2007 offensive on the agencies was planned with military precision: “Among all the social networks that pitched to us at the time Bebo had the best packages and approach to sell to agencies. It was VERY easy to buy from them. Joanna’s approach was excellent. Her experience was evident. When they presented the packages it was presented as a one-stop shop.”

Media agencies found other social networks at the time far more complex to deal with. But “dealing with Bebo was very similar to traditional online buys. They got into agencies easily because of that. They just pitched exactly what you wanted to hear: audience, growth, traffic, costs, and branding/textlinks packages. Simple.”

By the time other social networks came calling at the agencies’ doors, Bebo had almost sown up the market.

But in particular, Bebo did very well targeting the completely Web-clueless TV planning agencies, largely responsible for buying TV shows, not running the ROI numbers on a PPC web campaign.

Bebo was pitched as a kind of new-era TV network. The creation of the Kate Modern series. The partnership with media companies. All of it was cleverly designed to pull fat, undiscriminating ad budgets out of TV agencies.

In fact, it’s almost arguable that hit Web shows like Kate Modern were created specifically to target these agencies and generate PR in the media, prior to the sale. As a media agency source tells me £100,000 is nothing in TV. “Communication planners have big budgets for this kind of TV-style buying - it’s easy to justify to clients.”

Bebo also found a way to spin off its shows to traditional TV. Bebo’s “Sofia’s Diary” drama, for instance, was acquired by Channel Five in April last year.

Thus, once the agencies had been coaxed into singing the praises of Bebo to clients, brands started to join in with the choir. The bandwagon started rolling. Bebo went on a media-savvy PR offensive the like of which has rarely been seen from a tech startup.

The rest as they say is history. Thinking Bebo was going to rank as “Facebook Mark 2″, AOL (the place where, as Jeff Jarvis famously put it, innovations go to die) Bebo was bought by AOL on March 13, 2008 for $850 million (£417m).

However, in 2009, in an advertising recession, all is not working so well. Digital agencies - not TV planners - have since found that Bebo has not been performing anywhere near the ROI level it was pitched at a year ago. Apparently the dwell time in particular is not as good as first thought, and the young demographic has not proved valuable.

Should Bebo be blamed? My agency contact thinks not. “I don’t blame Bebo as much as the agencies who don’t know how to engage with Bebo users, and made bad decisions. We are now moving away from a walled garden in social networks anyway. You don’t just have to be on one social network in the way we thought we did two years ago.”

They say: “Bebo was great at the time but now we are disappointed because socnets [social networks]are not about sending loads of traffic to a profile page. At the time it was fine, but people are now disappointed. You don’t get ‘friended’ much as a brand. It’s not just about being inside one socnet but about being everywhere.”

Furthermore, the fallout from the Bebo sale amongst the VCs who backed other social networks has also been tough to take. Although Balderton made $140m from the Bebo sale, I understand Index Ventures, which backed European social network Netlog to the tune of €5 million was not best pleased when Bebo was picked instead. Netlog has plenty of figures to match or even better Bebo, but it was Bebo that AOL picked, not Netlog. And my sources say it is largely because of the stellar performance Shields gave to the media agencies, and thus their brand clients."

Updated: A Year Later, AOL Is Contemplating A Bebo Sale.

Birth Of Internet News - 1981

You Need To See This Video (1981 TV Report On Birth Of Internet News)

David Cole (S.F. Examiner): "This is an experiment. We’re trying to figure out what it’s going to mean to us, as editors and reporters and what it means to the home user. And we’re not in it to make money, we’re probably not going to lose a lot but we aren’t going to make much either."

KRON reporter #1: "Of the estimated two to three thousand home computer owners in the Bay Area, the Chronicle reports over 500 have responded by sending back coupons."

KRON reporter #1: "This is only the first step in newspapers by computers. Engineers now predict the day will come when we get all our newspapers and magazines by home computer, but that’s a few years off."

KRON reporter #2: "It takes over two hours to receive the entire text of the newspaper over the phone, and with an hourly use charge of five dollars, the new tele-paper will not be much competition for the twenty cent street edition."

On second thought, never mind about that bailout

"WASHINGTON — A small but growing number of community banks are backing out of the government's bailout, which they see as fraught with hidden strings and government interference.

About 20 banks so far that applied for or had been approved to receive about $1 billion combined in taxpayer money have reversed course in the past month and refused to take the money. That's just a fraction of the hundreds of billions of dollars the government already has spent, but it shows that taxpayers aren't the only ones anxious about the financial bailout.

"The government's going to own a good portion of these banks," said David Heintzman, president of Stock Yards Bank & Trust in Louisville, Ky. The bank recently turned down $43 million in approved bailout money.

After Congress approved the $700 billion bailout in October, the government gave banks only a few weeks to decide whether they wanted to take part in the government investment program. Many applied to get a foot in the door, in case predictions of an economic collapse came true.

"We drank the Kool-Aid," said Michael Ross, president of Fidelity Bank in Dearborn, Mich., which applied for about $29 million in November.

But as details emerged, the deal didn't look so good. For Fidelity, taking the money would mean the government would have owned about 25 percent of the company's outstanding stock. Then Congress and the White House could start calling the shots, Ross said. He remembers the government's failure overseeing Freddie Mac and its sister company, Fannie Mae, the two housing companies so badly mismanaged they were taken over by the Bush administration.

"These are the guys who brought you Hurricane Katrina. These are the guys who were supposed to be watching Fannie and Freddie," Ross said. "I've not seen anything like this, where they really are talking about nationalizing banks."

Much of the criticism about the bailout has focused on the lack of oversight, which allowed banks to take money and refuse to say where it's going. Wall Street executives, who make millions of dollars and enjoy lavish perks like private jets, earned the ire of consumer watchdogs who said taxpayers were getting a raw deal.

But some community banks, which had little or nothing to do with the subprime mortgage crisis, say the deal didn't look great for them, either.

Congress wants banks to make loans, so businesses can expand and people can start buying houses again. But lawmakers also want them to make only trustworthy loans. But there are only so many good loans to make in a weak economy with high unemployment.

Explaining that to investors is easy. To politicians, it might looks like you're hoarding taxpayer money.

"Then what? Then they have a guy at our board meeting?" said William Campbell, president of Pamrapo Savings Bank, a Bayonne, N.J., bank that walked away from its $11 million bailout application.

The government also can force banks to cut dividends to shareholders, making a bank's stock less attractive to investors. President Barack Obama has said he wants to prohibit banks from buying other banks. And at any time, Congress can change the law and add new terms.

"Are you going to enter into a contract that will cost you millions of dollars if you can't live with the rules and you don't even know what the rules are?" said Steve Buster, CEO of Richmond, Calif.-based Mechanics Bank, which refused $60 million in bailout money. "I don't know of any other forum that parties can change the contract at will. This is not fair."

The banks that turned down the money said they were comfortable their own finances will allow them to weather the storm. For some, taking the money seemed riskier than turning it down.

"We finally said, 'Hey do we really want to go down this path?'" said Michael Blodnick, chief executive of Glacier Bancorp of Kalispell, Mont. "I understand a lot of banks do, and a lot of banks need to."

- Matt Apuzzo , Associated Press Writer

(Newsvine - On second thought, never mind about that bailout.)

Tyler Durden’s 8 Rules of Innovation

1) "No fear. No distractions. The ability to let that which does not matter truly slide."

2) "I say never be complete, I say stop being perfect, I say let’s evolve, let the chips fall where they may."

3) "It’s only after we’ve lost everything that we’re free to do anything."

4) "You’re not your job. You’re not how much money you have in the
bank. You’re not the car you drive. You’re not the contents of your
wallet. You’re not your fucking khakis."

5) "People do it everyday, they talk to themselves… they see
themselves as they’d like to be, they don’t have the courage you have,
to just run with it."

6) "Sticking feathers up your butt does not make you a chicken."

7) "This is your life, and it’s ending one minute at a time."

(LateralAction.com)

'Atlas Shrugged': From Fiction to Fact

"Some years ago when I worked at the libertarian Cato Institute, we used to label any new hire who had not yet read "Atlas Shrugged" a "virgin." Being conversant in Ayn Rand's classic novel about the economic carnage caused by big government run amok was practically a job requirement. If only "Atlas" were required reading for every member of Congress and political appointee in the Obama administration. I'm confident that we'd get out of the current financial mess a lot faster.

Many of us who know Rand's work have noticed that with each passing week, and with each successive bailout plan and economic-stimulus scheme out of Washington, our current politicians are committing the very acts of economic lunacy that "Atlas Shrugged" parodied in 1957, when this 1,000-page novel was first published and became an instant hit.

Rand, who had come to America from Soviet Russia with striking insights into totalitarianism and the destructiveness of socialism, was already a celebrity. The left, naturally, hated her. But as recently as 1991, a survey by the Library of Congress and the Book of the Month Club found that readers rated "Atlas" as the second-most influential book in their lives, behind only the Bible.

For the uninitiated, the moral of the story is simply this: Politicians invariably respond to crises -- that in most cases they themselves created -- by spawning new government programs, laws and regulations. These, in turn, generate more havoc and poverty, which inspires the politicians to create more programs . . . and the downward spiral repeats itself until the productive sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism.

In the book, these relentless wealth redistributionists and their programs are disparaged as "the looters and their laws." Every new act of government futility and stupidity carries with it a benevolent-sounding title. These include the "Anti-Greed Act" to redistribute income (sounds like Charlie Rangel's promises soak-the-rich tax bill) and the "Equalization of Opportunity Act" to prevent people from starting more than one business (to give other people a chance). My personal favorite, the "Anti Dog-Eat-Dog Act," aims to restrict cut-throat competition between firms and thus slow the wave of business bankruptcies. Why didn't Hank Paulson think of that?

These acts and edicts sound farcical, yes, but no more so than the actual events in Washington, circa 2008. We already have been served up the $700 billion "Emergency Economic Stabilization Act" and the "Auto Industry Financing and Restructuring Act." Now that Barack Obama is in town, he will soon sign into law with great urgency the "American Recovery and Reinvestment Plan." This latest Hail Mary pass will increase the federal budget (which has already expanded by $1.5 trillion in eight years under George Bush) by an additional $1 trillion -- in roughly his first 100 days in office.

The current economic strategy is right out of "Atlas Shrugged": The more incompetent you are in business, the more handouts the politicians will bestow on you. That's the justification for the $2 trillion of subsidies doled out already to keep afloat distressed insurance companies, banks, Wall Street investment houses, and auto companies -- while standing next in line for their share of the booty are real-estate developers, the steel industry, chemical companies, airlines, ethanol producers, construction firms and even catfish farmers. With each successive bailout to "calm the markets," another trillion of national wealth is subsequently lost. Yet, as "Atlas" grimly foretold, we now treat the incompetent who wreck their companies as victims, while those resourceful business owners who manage to make a profit are portrayed as recipients of illegitimate "windfalls."

When Rand was writing in the 1950s, one of the pillars of American industrial might was the railroads. In her novel the railroad owner, Dagny Taggart, an enterprising industrialist, has a FedEx-like vision for expansion and first-rate service by rail. But she is continuously badgered, cajoled, taxed, ruled and regulated -- always in the public interest -- into bankruptcy. Sound far-fetched? On the day I sat down to write this ode to "Atlas," a Wall Street Journal headline blared: "Rail Shippers Ask Congress to Regulate Freight Prices."

In one chapter of the book, an entrepreneur invents a new miracle metal -- stronger but lighter than steel. The government immediately appropriates the invention in "the public good." The politicians demand that the metal inventor come to Washington and sign over ownership of his invention or lose everything.

The scene is eerily similar to an event late last year when six bank presidents were summoned by Treasury Secretary Hank Paulson to Washington, and then shuttled into a conference room and told, in effect, that they could not leave until they collectively signed a document handing over percentages of their future profits to the government. The Treasury folks insisted that this shakedown, too, was all in "the public interest."

Ultimately, "Atlas Shrugged" is a celebration of the entrepreneur, the risk taker and the cultivator of wealth through human intellect. Critics dismissed the novel as simple-minded, and even some of Rand's political admirers complained that she lacked compassion. Yet one pertinent warning resounds throughout the book: When profits and wealth and creativity are denigrated in society, they start to disappear -- leaving everyone the poorer.

One memorable moment in "Atlas" occurs near the very end, when the economy has been rendered comatose by all the great economic minds in Washington. Finally, and out of desperation, the politicians come to the heroic businessman John Galt (who has resisted their assault on capitalism) and beg him to help them get the economy back on track. The discussion sounds much like what would happen today:

Galt: "You want me to be Economic Dictator?"

Mr. Thompson: "Yes!"

"And you'll obey any order I give?"

"Implicitly!"

"Then start by abolishing all income taxes."

"Oh no!" screamed Mr. Thompson, leaping to his feet. "We couldn't do that . . . How would we pay government employees?"

"Fire your government employees."

"Oh, no!"

Abolishing the income tax. Now that really would be a genuine economic stimulus. But Mr. Obama and the Democrats in Washington want to do the opposite: to raise the income tax "for purposes of fairness" as Barack Obama puts it.

David Kelley, the president of the Atlas Society, which is dedicated to promoting Rand's ideas, explains that "the older the book gets, the more timely its message." He tells me that there are plans to make "Atlas Shrugged" into a major motion picture -- it is the only classic novel of recent decades that was never made into a movie. "We don't need to make a movie out of the book," Mr. Kelley jokes. "We are living it right now.""

By Stephen Moore

Mr. Moore is senior economics writer for The Wall Street Journal editorial page.

Printed in The Wall Street Journal, page W11

('Atlas Shrugged': From Fiction to Fact in 52 Years - WSJ.com)

Beauty as a signaling strategy

"What's beauty? You know it when you see it, sure, but what is it? It turns out that beauty is an important evolutionary byproduct.

An organism needs to invest energy in being beautiful. You won't see healthy skin on a sick animal, because maintaining a healthy coat is too 'expensive'. A sick peacock isn't as spectacular as a healthy one. Or a genetically damaged chimp isn't going to have as symmetrical a face. As a result, most creatures evolved their definitions of beauty in a mate to match the displays of healthy creatures.

Human beings have adopted this signaling strategy with a vengeance. I know a woman who is going to spend more than $9,000 having her hair styled in 2009 (hey, that's less than $200 a week). Entire industries are based on human beings spending time and money in order to manufacture temporary physical beauty.

Businesses build lobbies that they rarely use, giant atriums with big windows and lots of empty space. It's a waste, it's expensive and it's beautiful. It's beautiful because it's expensive.

Stop for a minute and think about the relationship between expense and beauty.

Do you make something beautiful? It could be the way you write hand written letters or leave a little extra on the product, even if maybe it's not so efficient. Sometimes efficiency is beautiful, but only when it took a lot of extra effort to get there. Ordinary products are almost never beautiful. Austere products might be, but only when real effort is expended to make them that way.

Even the most hard-hearted people are suckers for beauty. We treat people and products differently when we think they're beautiful. The reason people and organizations have invested so much in beauty over the years is that beauty pays off.

A website that doesn't cram ads into every single nook and cranny is more beautiful... it's also more expensive to run in the short run. A salesperson who doesn't squeeze you for every penny is more confident, earning more of your trust--that's beautiful.

When everyone has it, it ceases to be beautiful. (Babies are beautiful because time takes their babyhood away so quickly... it's a guaranteed temporary effect). Beauty is a signal, not just a physical state."

(Seth Godin)

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