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October 2008

Microsoft Advertising vs. Apple

OK I can't hold back anymore.  Can someone with influence please let the people at Microsoft and their advertising agency know that they are doing nothing to improve PC brand equity with this campaign.

Here's my take on how this campaign was probably sold in.

Round 1: The Launch (picture account management lead presenting to Microsoft)

Well Microsoft, Apple is a number 2 brand, so they are doing what they need to do.  Direct comparison, younger cooler image.   So to respond we've come up with a great campaign for you.  We all know how popular Bill Gates is.  His charitable giving, high levels of recognition and the overall fondness American's have for him makes Bill the perfect spokesperson. 

But Bill alone might not come off as being warm enough.   Let's match him with Jerry Seinfeld, he did wonders for American Express when they were in a similar position.  The combination of Bill and Jerry, like Abbot  and Costello or better yet Rowan and Martin is a killer.  We'll put them in ordinary situations to show that Microsoft is in touch with ordinary people.  Plus we'll run parts of the story on the television and some on the web.  That we will look like we know what we are doing by integrating the internet and mass media. 

We'll shoot the commercials so they are quirky.  Everyone loves quirky.  It's in right now.  Just look at those reality shows.

Round 2: Focus on PC Users

So that didn't go quite as we planned.  Bill looked out of place as an ordinary guy and we didn't  make the point that Microsoft is as approachable as Apple.  We know we didn't move the brand meter at all, but hey we got press in thousands of publications and look at all of the blogesphere activity we generated.  For an initiative that was only scheduled for a few weeks it's a home run.

Now we suggest running advertising that PC users aren't as geeky as Apple makes them look.  No one is out supporting the PC even though it has a significantly larger market share.   We need to fight back by showing that cool people use our product too.  

Round 3: Change the Agency

I don't understand why Microsoft finds this so hard.  The company is filled with technological breakthroughs, great people, new ideas.  They just need to unlock it.  Appoint a customer evangelist with the power to control what goes to market.  Stop pretending to innovate without actually doing it.  Don't imitate Apple, you are bigger, stronger and more important than that.

Inspiring Websites

Fred Wilson listed some of the most inspiring web ideas this morning on his blog.  I thought it was worth listing them here with a brief description of each.
grameen - this site is for grameen bank, an institution that makes believe that small business loans made to the poor can help to fight poverty.

kiva,- it connects entrepreneurs around the world with peope that are willing to directly lend them money

donors choose - this site connects teachers and their classroom needs to donors.  For example the home page lists a physics teacher that needs calculators for the class in order to teach lessons.  Kids send you pictures of their work.

etsy - marketplace for handmade goods.

amee - Site that aggregates energy related data.

livemocha - Livemocha blends self-paced lessons, a vibrant community, and interactive tools to help you talk to the world

Make Money and Do What You Love - The Future of Work

Seth Godin makes the point today that you cannot always make money at what you love, yet many blindly pursue their passion and can't earn a living.  He describes a musician that found work in the PR department of a record label and how unfulfilling that job is to someone that wants to make music.  The better route in Seth's mind is to become a music teacher and offer music on-line for free.

I think the latter is right with one exception.  We should all pursue jobs that allow us to follow our passion while making money AND have entrepreneurial endeavors that are solely focused on the passion that also make money.  This duality serves many purposes not to mention protection on the downside should our primary source of income disappear and creates the opportunity to make money at an increasing rate over time as we get better at our passion.  Both feed each other.  You can improve work performance because of your extracurricular learning and bring some level of inspiration to both that comes from knowing that everyday you are moving a step forward.

Today everyone has the tools to create, educate, perform and offer something of value to the world.  We need to change our mindset of dependency on others to one of dependency on ourselves.

The Financial Crisis Explained

I don't know about you, but understanding exactly what happened to cause the great financial meltdown of 2008 is hard to understand.  I think I finally have a handle on it after seeing tonight's episode of 60 Minutes and an interview by Steve Croft with Jim Grant from Grant's interest rate observer. I thought I'd outline it here:

The mortgage crisis is based on turning the riskiest mortgages into financial investments. At the core of the problem money was lent to people that could not pay it back.

Wall Street investment houses bought mortgages from banks and mortgage lenders and divided them into hard to understand securities for sale to their customers.  The securities were based on mathematical models that combined the mortgages in ways that based on historical models would minimize risk.  The securities were incredibly complex and certified by the ratings firms such as Moody's and Standard and Poors as investment grade.

The securities were sold back to banks around the world and pension funds.

In addition to these securities, the investment banks also sold credit default swaps which acted as insurance on the mortgage backed securities identified above.  A credit default swap is a contract between two people that he will be paid if a financial instrument fails.  It is insurance without being called insurance because insurance would be regulated.  The problem was that since these were not called insurance, there was no government requirement that the seller maintain some capital reserves to pay if the insurance was called by the buyer.  AIG, Citi and others sold these credit default swaps.

The credit default swaps made it easier to sell the mortgage back securities.

When homeowners started to default on the mortgage loans the investment houses had to pay off the insurance they had written.  This is what caused Bear Sterns and Lehman to go out of business.  The banks and investment banks primarily got into trouble because of the insurance they wrote.  AIG was the largest insurer of credit default swaps.

The problem is that no one really knows how big the credit default swap market is although there is a rough estimate of 60 trillion dollars (4x the total US debt). 

So who are the guilty parties:

- Individual home owners that took out mortgages and home equity loans knowing that even a slight interest increase would cause them to default.

- Congress and Fannie Mae for encouraging mortgage lenders to lend to low income individuals without some reassurance that the individuals could pay back those mortgages.  This includes Barak Obama, John McCain and Joe Biden.  Last I looked they were in congress when all this was happening.

- Wall Street for creating complex instruments that securitized mortgages that are so complex that only mathematicians could understand the true risk.

- Wall Street for creating insurance instruments that were in effect insurance policies.  This is criminal and the government should go after the executives that allowed this to happen.  Wall Street executives were also guilty of taking on more risk than was being revealed to stockholders.

- The investment ratings agencies for rating complex financial instruments as being investment grade.  Investors should sue the ratings agencies.

- The SEC or whatever government agency agency is responsible for regulating Wall Street for not seeing the credit default swaps for what they are, insurance.

- The accounting firms for not properly accounting for the amount of risk being taking on by banks that were securitizing high risk mortgages and credit default swaps.

I can't say now that I understand it I feel any better.

Where's the Value - Marketing Through The Bad Financial Times

Outstanding post by Seth Godin today titled  "When you stand for something."  He makes the excellent point that consumer's need a company to stand for a set of benefits.  When these benefits are vague, the company is damaging the brand.

I've found that these choices are even more complex and challenging than the ones outlined by Seth.  There is always a temptation to be everything to everyone.   Retail offers the best examples of brands that thrive because they are well defined and those that do not.  In retail you are either Bergdorf Goodman or WalMart.  Everyone else is a shade of the two.  Not to say others aren't successful.  The problem is that they always live a life of protecting share from those that are cheaper or others that are higher on the premium goods scale. 

Another good example is Southwest Airlines that not only has a well defined brand, but is surprisingly the best performing stock on the New York Stock Exchange from 1972 through last year.

Choice becomes even more complex as you define your relationship to the consumer.  Are you a friend, mentor or secret adviser.  What are the three measurable points of distinction that differentiate you from the competition.

It's easy to believe that everyone will buy your core product.  The problem is that you quickly become Sears....A company that is  capable of satisfying many people in an average way.  The world is too competitive to be average.  Your value proposition sets the guideposts of distinction.  With the economy in turmoil, it's better to be well defined like Southwest instead of representing an unclear future like the competition.