Monthly Archives: March 2009

Increased Savings Hinders Economic Recovery

New research from the McKinsey Global Institute shows that the economic impact of further US consumer deleveraging will depend on income growth. Without it, each percentage point increase in the savings rate would reduce spending by more than $100 billion—a serious drag on any recovery. Relatively healthy income growth, on the other hand, would help households reduce their debt burden without trimming consumption as much.

The significance of any fall in consumption could be profound. US consumers have accounted for more than three-quarters of US GDP growth since 2000 and for more than one-third of global growth in private consumption since 1990. These trends were fueled by a surge in household debt, particularly after 2000, and a decline in the personal savings rate—to a low of –0.7 percent, in 2005. From 2000 to 2007, US household debt grew as much, relative to income, as it had during the previous 25 years.

Appreciating household assets—the “wealth effect”—enabled consumers to spend and borrow more even as they saved less. The value of US household assets rose by some $27 trillion from 2000 through 2007. Rising home values, as well as stocks and other financial assets, accounted for more than two-thirds of this gain.

This dynamic sputtered to a halt when the housing bubble burst and the financial and economic crisis ensued. Falling values for homes, stocks, and other assets have battered US households: from mid-2007 through the end of 2008, their net worth fell by roughly $13 trillion. These recent losses erased all the gains in net worth, relative to disposable income, since the early 1990s (It’s not surprising that US consumer spending fell at a 4.3 percent annual rate in the fourth quarter of 2008—a major reason for the broader economic contraction.

The flip side of falling consumption is a rising personal savings rate, which reached 3.2 percent in the fourth quarter of 2008. Net new borrowing by households also has fallen sharply from its 2006 peak. In the fourth quarter of 2008, it turned negative for the first time since World War II several forces underlie these shifts. Some households are responding to worries about possible unemployment or underwater mortgages by paying down debt or avoiding new debt. Others have found their credit lines shut down or can’t get new credit, because banks have tightened their lending standards.

How far these trends will go is a critical economic uncertainty in the months ahead. The economic impact of today’s deleveraging will depend on how it unfolds—through income growth, higher savings, or some combination of the two.

If incomes stagnated, for example, households could deleverage only by saving more. Every percentage point reduction in the debt-to-income ratio would require nearly a one percentage point increase in the savings rate. The US personal savings rate reached 5 percent in January, 2009. If this level prevailed and incomes didn’t grow, this would reduce the household debt-to-income ratio by five percentage points—which still wouldn’t be enough to restore the levels of indebtedness prevailing in 2000, before borrowing started to accelerate.

But if incomes rose, households could both reduce their debt burden significantly over time and continue to consume. If US incomes grew by 2 percent a year, for instance, households could reduce their debt-to-income ratio by as much as they would in the scenario above—but with a personal savings rate of only 2.3 percent.

These different scenarios have serious implications for the US and global economies because, holding incomes constant, each percentage point increase in the savings rate translates into roughly $100 billion less in consumer spending. A 5 percent savings rate would mean $530 billion less in spending each year if US incomes fail to rise; if they rose by 2 percent a year, a 2.3 percent savings rate would mean $250 billion less spending, all else being equal.

In short, the importance of income growth is difficult to overstate. With it, households can simultaneously reduce their debt burden, rebuild savings, and boost consumption. But without significant income gains, deleveraging could undermine consumption and the global economy for years to come. One implication: policy choices that favor productivity and employment growth—critical determinants of income growth—will make deleveraging less painful. Efficiency breakthroughs in sectors, such as health care and government, that employ large numbers of people—but that have not enjoyed productivity revolutions similar to those experienced in industries like retailing and wholesaling—would make a dramatic difference.

Why the Recession Won’t Kill Digital Media

digital-retailer-logoThe Wikipedia founder says branding through user-generated content is the future of online media, so go for it while it’s still cheap.  

Jimmy Wales, the self-made guru of mass content and co-founder and chair of Wikia, Inc., is many things: A founding father of the open-source movement, a visionary internet entrepreneur, a tech pundit, and a media darling. The founder of Wikipedia has managed to — for the most part — stay above the backbiting that characterized the online encyclopedia as it mushroomed into the unstoppable arbiter of truth, usurping the mantle of the Encyclopedia Britannica.

Save the date! Hear more from Jimmy Wales during his keynote presentation at ad:tech San Francisco. April 21-23. Register today for ad:tech San Francisco.

With a bundle earned through options trading, Wales became a very early dot-com player, co-founding Bomis, an internet portal, in 1996. Bomis found its niche in erotica and adult content, making enough revenue from ads and paid subscriptions for premium X-rated content to support a few more intellectual sites.

One of those Bomis-funded projects was Nupedia, a stab at an online encyclopedia that Wales founded in 2000 with a single employee, Larry Sanger. At first, Nupedia followed the principles of academic journals, with an author submitting work that was then passed around for peer review, a process that seemed glacial in the dot-com boomtime. Things took off in 2001, when they launched Wikipedia, an experimental version using the wiki platform, which lets multiple people write and edit a page at the same time. 

Jimmy Wales is co-founder and chair of Wikia, Inc.

In fact, Wikipedia was an early example of what has become the dominant model for internet content: Provide free tools for user-generated content, let the public have at it, and automatically place ads everywhere. However, Wikipedia, known for its snooty approach to contributions, has remained pure, forgoing advertising revenue and relying on donations. In 2003, Wales set up the Wikimedia foundation, a not-for-profit organization, and gave the foundation full and sole interest in Wikipedia.

Next, Wales co-founded Wikia, a venture-funded, for-profit company that’s a more wild and wooly version of Wikipedia. If Wikipedia was a controlled experiment in user-generated content, with Wikia, Wales now aims to enable personal publishing on a similarly grand but less rigid scale.

On Wikia, individuals or groups can own their own wikis — and ads appear all over the place. Wikia has more than 1 million pages of content in 70 languages, created by 350,000 or so registered users.
In 2008, the company launched WikiaSearch, a user-edited search platform. In February 2009, it got serious about ad sales, hiring Bob Huseby for the new position of senior vice president and publisher. He’s tasked with creating sponsorship packages for consumer brands to integrate their messaging into the various Wikia communities.

Much-recognized for his contributions to internet culture and the information economy, Wales remains chief spokesman for Wikia, as he helps guide the future direction of the information economy. He’s a fellow of the Berkman Center for Internet & Society, and a member of the board of directors of Creative Commons.

To read the full article, go to

Twitter Is a Total Waste of Time. Twitter Is Great. Both Are True.

I found this fascinating article today from Kiplinger:

When you sign up for Twitter, no one is initially “following” you — that is, you can send out a message but no one will read it because no one is subscribing to your ‘tweet stream.” Chances are you have friends using Twitter and you can easily locate them with Twitter’s search capability. If you follow them, likely they will follow you back. That enables you to see any tweets they post to their account, and they can see any tweets you post to your Twitter acccount.

You can read the whole article HERE.

Twoubled By Twitter?

A Twitter How-To Guide
Though the initial, pressing Twitter question a while back wasn’t “what are you doing?” but “what’s the point?” people are finding lots of uses for the new social media tool. In this installment of the ongoing what-good-is Twitter segment, we’ll focus on how people are tweeting their way out of some intereeting things and into others. Ready?

How to Tweet Your Way Out of Jury Duty
Twitter Bird
Just as a federal judge in Florida had to declare a high profile drug case a mistrial because the jurors were using their smart phones to do research about the defendant, court officials across the country are discovering jurors are tweeting from the courthouse, discussing the case they’re hearing and giving updates. One Philadelphia juror went all citizen journalist by telling his Facebook friends to stay tuned for a big announcement on Monday. In another case, a lawsuit, one juror tweeted about giving away $12 million of somebody else’s money.

So, no need to pretend to be a crazy Star Wars fanatic to get out of jury duty. Just be busily texting the entire selection process. Be sure to text the prosecutor you think tattoos are hot.

How to Tweet Your Way Out of a Job

Ok, I totally stole the title from the I’m Not Actually a Geek blog, where Hutch Carpenter details a couple of observed tweets. Somebody from Cisco was apparently listening when a job applicant tweeted about weighing a “fatty paycheck” against a daily commute and “hating the work.” Though the person deleted the tweet, apparently tweets are in Twitter cache forever.


Meanwhile, one might be surprised George Stephanopoulos still has a job at ABC after conducting an interview with Sen. John McCain via Twitter. After some painful repetition and some digital geezer what-was-that-sons, Stephanopoulos proved it’s probably better to get a politician to say nothing on TV instead. 

How to Tweet Your Way Into a Job

Be Nick Douglas. The former Valleywag writer has been chronicling the interesting things people tweet and, according to his former employer, landed a $50,000 advance from HarperCollins to put that tweet collection into book form. His biggest I’m-not-a-sellout challenge is to include only premium tweets of sufficient hilarity.
Well, it’ll be a good book for those with short attention spans anyway. If HarperCollins doesn’t put out a toilet paper roll version, they’re missing a golden opportunity. If you have a “twitticism” you’d like to contribute or if you just want to make Nick’s editing life hell, you can submit your best tweet to

How to Tweet Your Way Into Filling Up Alotted Presentation Time
To demonstrate Twitter’s real-timey feedback awesomeness,’s Chris Winfield conducted a survey in front of a PubCon audience, asking followers about ways Twitter has helped them professionally and how to use Twitter to increase traffic. Over the course of an hour, Winfield displayed 165 tweeted responses, most of them serious.
 Have you had success with Twitter? Tell us your story.

How To Tweet Your Way Into People Not Liking You Anymore
Guy Kawasaki, former Apple evangelist, and entrepreneurial web marketing all star has introduced TwitterHawk, an app that follows the Twitter conversation listening for mentions of things like coffee or shoes and then throws a promotional message at them. TwitterHawk charges five cents per message.

It would seem Kawasaki and company don’t consider this spam because of the great big Report Spam function where TwitterHawk promises to “follow up” with the offender. Is it spam? You be judge.

How to Tweet Your Way Into the Stock Market
StockTwits calls itself a “Bloomberg for the little guy and gal” and promises “not to spam you,” so they got that going for them. This service works like a realtime search engine for stock market information, allowing users to eavesdrop on stock-related tweets. They have a list of recommend Twitters to follow as well. 
Know of any really useful Twitter apps? We’d like to hear about it
Speaking of useful Twitter apps, have you tried WebProNews’ Twellow yet? Twellow is a directory of Twitter users, like the yellow pages. Users can search for specific people on Twitter, or search for people in specific categories, or browse by industry. Registered users can claim their profile and add a bio. It’s a great way to find people who share your interests.

Brought to you by WEB PRO NEWS.

Do You “Peddle” or “Sell”?

bigstockphoto_peddle_or_sell_3363219Plenty of B2B sales pros peddle when they should be selling. Want to know whether you’re peddling or selling?  CLICK HERE to take the following quiz.

Marketing After This Recession

marketing1It’s likely that the brands, tactics, and strategies you took into the recession are not going to be what you need to bring back customers as we recover.

Too much has happened. People have lost faith not only in Wall Street brands, but all corporate brands to an extent. They’ve also learned the value of savings, the high cost of credit, the sudden uncertainty of financial markets, their vulnerability to job loss. All these shifts affect buying behavior.

What also has changed, most likely, are your priorities as a manager or owner.  Cash is king again. Inventory is death. True partnerships are golden. The price has to be right. Experimentation is necessary — but too many bad bets are draining. Flexibility trumps consistency.

So how does all this change how you reach your customers when the bear turns into a bull again?

Harvard Business School marketing professor John Quelch offers seven recommendations for marketers to plan ahead. His advice, writing on Harvard Business Publishing includes the following:

  1. Focus on high-potential customers.
  2. Don’t assume a return to normal.
  3. Assess your target customers’ trust in your brand.
  4. Stay focused on costs.
  5. Know your lead indicators.
  6. Develop scenarios.
  7. Don’t wait for permission.

Razorfish: Digital Outlook Report 2009

2009-bIt’s here again, Razorfish has released Digital Outlook Report 09; their 5th annual report reveals the key digital trends, strategies and what to look out for throughout 2009. It’s an inspiring read, below are just a few key items from the report:

• Razorfish CEO Clark Kokich on “From Breaking Campaigns to Building Client Businesses”
Shiv Singh on “Trends In Social Influence Marketing”
• Paul Gelb on “Ten Mobile Applications To Watch”
• Terri Walter on “The Digitalization of  TV”

You can get the full report here (Razorfish digital outlook 2009) or take a look at Guy Kawasaki‘s favorite parts of the digital outlook report. Enjoy the read!