Wasted online advertising spend

Here’s a classic example of what not to do. Repco, a parts supplier, has started advertising online. Good.

They purchased this (flash) banner. OK I supose.

Repco Banner

But the banner links  to an ugly catalogue designed for print – the same catalogue no doubt that is in everybody’s mailbox.

And yes – there is no way to buy anything on the site.

End result – well not much I expect – so expect Repco to be unimpressed with internet advertising for a while longer.

Why online ad spend is low in New Zealand #2

So NZ has low broadband penetration, which means kiwi’s spend less time online, and have less desire to click on random advertising links.

But that is not the full story for the paucity of media spend here.

3: The lack of eCommerce players

Aside from Trade Me, the airlines and banks, New Zealand has had no eCommerce to speak of. Dating sites are owned by players with large traffic (NZ City and Trade Me) so they did not need to advertise. There is no Amazon nor Buy.com nor Best Buy here, and Trade Me doesn’t advertise its Auctions, Motors, Property or Jobs sites – all big categories of eCommerce. (eBay does in Australia- and to excess, and Seek does in both countries). The airlines and banks arrived late to the party, despite increasing amounts of their business being sourced online.

That lack of eCommerce meant less online ad spend from online players, a situation which has not changed that much even today.

4: The professionalism gap

In Australia the media companies invested early in dot coms. PBL owns a chunk of Seek, runs nineMSN, and had previous involvement with eBay Australia. Fairfax has some interesting properties – such as drive, RSVP, and the Sydney Morning Herald amongst others. These big media companies realised early that online advertising was going big, and allocated resources, including quality staff, accordingly.

Meanwhile in New Zealand the flagship xtraMSN site was run by hapless Telecom NZ, and the newspaper sites were stuck with archaic designs, were horribly understaffed in sales and ignored by their bosses. For a long time there were no big league media players selling or promoting online advertising in NZ. Telecom didn’t know how, Stuff and NZHerald didn’t care. Snow/Surf (MM Group), NZ Girl and Trade Me amongst others entered the market, with Trade Me in particular earning good money from their traffic dominance.

The NZ advertising agencies really didn’t understand the media, but it was not their fault – there were not enough evangelists selling the space.

The difference between xtraMSN and NineMSN is a great case study. Several months ago, when I last looked, the advertisements on xtraMSN were almost all internal Telecom ones. Things are better now, but not as good as nineMSN, where they have been successfully selling ads for some time.

The real difference can be seen in their ratecards. XtraMSN’s rate card charges $30,000 per week for a floating ad on the MSN homepage, while nineMSN charges AU$100,000 per day.

An MSN Messenger text link ad costs $15,000 per week in NZ, and $15,000 per month in Australia. That Australian text ad is for 5% of the rotation though, and it appears the NZ one is full time – I could be wrong.

That’s the past – but recently things are looking much better for the online advertising industry in NZ….

Why online ad spend is low in New Zealand #1

So Australia has a per population online media spend of 3 times New Zealand. That’s a huge difference for 2 economies where the GDP/Capita differs by only 30%.

Let’s look at some likely reasons for that difference:

1: Internet penetration

Actually New Zealand is doing just fine – with 76% of the population online versus 70.7% for Australia.

2: Broadband penetration

In June 2006 Australia had 17.4 broadband subscribers per 100 people, while NZ was a bit further back at 11.7. That’s a 49% difference.

It was worse in 2005, when Australia had 70% greater broadband penetration than New Zealand.

NZ was doing about as well/badly as Australia until 2003/4, when Australian broadband penetration accelerated more sharply. It is all to easy to blame Telecom NZ for the difference, and so I will do so.

Broadband penetration NZ australia

Source OCED

..more to come

NZ online ads spend has world’s highest growth

According to the latest stats from WARC (and via my father Glen Wiggs), NZ had the highest year on year growth for online advertising expenditure last year.

NZ online ad spend rose by 184.8%, well in excess of number 2 Lithuania, at 69.4%.

Next was the UK, where online ad spend growth was a solid 61.1%, on a high base, while the US was 20th fastest at 26%.

The USA tops the spend per capita list with $42 per person, while the UK was right behind at $41.70 per person. That makes the UK growth all the more impressive and shows that there is plenty of growth left for all countries.

While the Scandinavian countries show up pretty high, it is interesting to see how well Australia is doing. More on that soon.

Country    Spend/Pop. 

1st: USA            $42.00

2:    UK              $41.70

3:    Norway      $31.56

4:    Sweden      $24.10

5:    Australia    $23.5

12:   NZ              $7.70

26:   Lithuania  $0.80

Getting good airline seats

British Airways has changed their policy for allocating seats – and I like it.

If you pay full fare, are Business or First class, or have gold or silver membership – then you can reserve your seat at the time of booking your ticket.

If you have kids with you then you can reserve your seats 3 days before flight.

Else, if, like most others, you have paid a discounted economy fare, then you can only reserve a seat when you check in, which you can do online from 24 prior to departure.

The clever thing about this is that BA is rewarding their most valuable customers. If I pay full fare then  it is fair that I get a better seat choice than someone that pays a third of what I paid. Right now the organized, those who arrive early at the airport (certainly never me) and the persuasive get the best seats.

BA is also ensuring a higher uptake of online check-in, which reduces costs and clutter at the airport, makes seat assignment and calculating how full to make the plane that much easier, and makes the traveller commit to their travel well ahead of departure.

This is a really good way to get a better price for the better seats – after all if everybody wants an exit row seat, then you may as well charge more for it.

Another way to do this could be to have a standard ‘exit row premium’ that is charged to customers that request and get those seats. If the airline is really good then they can auction off ‘exit row’ and ‘seats next to empty seats’ for long-haul flights – could be a nice little earner.

My Portfolio

An unpleasant drop in the US market yesterday, but for me the damage was minimal.

Since 2000 I’ve had a relatively neutral approach to the market, and seek alpha by going long on companies I like in sectors I like, and short on the reverse. (I have other money with Gareth Morgan who has a (recommended) diversified portfolio approach.)

Last year I was long TM (Toyota) and Short F (Ford). I made good percentage gains out of that one, and exited just as Ford started to climb back in late July 06.F vs TM

Now I’m long on EBAY and short EQR.

eBay has options over three potentially huge markets – auctions, payments and telecommunications.

eBay’s implementation of auctions isn’t as elegant as Trade Me, especially in developing markets where they struggle to compete with locals. Indeed Trade Me owns the New Zealand market because eBay arrogantly or ignorantly decided that servicing this market from the USA via Australia would be effective. There was barely a fight for dominance and $US500m of value was left on the table. We can see the same thing happening in China and other markets. However, eBay are smart enough to buy incumbents when the price is right, and hopefully smart enough to pass enough real control of the China operation to locals. eBay have dominance of most ‘local’ international auctions – the next question is whether they can extend that to cross-border trade.

Skype is the voip monster and has the telcos running scared (which is why my Skype does not work at the moment – thanks to the local telco). Skype isn’t merely a replacement for telephony, it is a better replacement for telephony. While there is a lot of revenue being lost by telcos, the question is whether eBay can become the dominant international telecommunications player and actually earn a significant portion of the disappearing revenues.

Paypal, like eBay, suffered from parochial US-centric policies for too long. This year has seen some opening up to international markets, but there is still a long way to go. Trust and Safety remains an issue, and only a handful of countries are trusted by online stores. When anyone in the world can get a Paypal account, and can buy from any store online, then we will have a system to rival the credit cards. Until then it is up to eBay to continue to expand the potential.

EQR is Equity Residential – a REIT that concentrates on multifamily property development and management. I’m short for two reasons. Firstly the residential real estate values are sky high, and it is unlikely that EQR will see much capital appreciation from sales. This is a hedge against housing prices falling. Secondly I’m uneasy about Sam Zell‘s involvement – that’s it.

I went into eBay harder as the price dropped from $39.50 to $22.85, and have an average cost of $27.81. With the current price at $32 that’s a 14.5% gain to today.

EQR acts as a good hedge – I am down marginally (0.8%) at the moment, but the price movement essentially mirrors eBay and reduces my beta risk substantially. eBay’s beta (volatility versus the market) is clearly much higher than EQR’s, but I am, sticking with equal long and short positions for now.
With EQR it is really a matter of waiting for the penny to drop – either a Sam Zell scandal, or a big real estate crash. eBay to me is a longer term hold – I’m waiting for the market to correctly price the full value of the three options, and waiting for eBay to actually execute on two or three of them.

ebay vs EQR

Tim Finn

Saw Tim Finn in concert on Monday night. It turns out that it was the first concert of his tour. The band wasn’t totally tight, but it was close, and the musicians were honest, Tim relaxed, the venue intimate and music sublime. I was pleasantly surprised at his range of hits, and the concert was the perfect mix (for me) of Enz, Crowded House, known Tim Finn and new Tim Finn songs.

When we walked in we felt we lowered the verage age. Substantially. Or perhaps we are really that old. Tim’s shout out to his MySpace friends was met with quizical looks, but his Split Enz songs were met with rapturous rattling of the jewelery.

Go see the show if you can… Te Awamutu should be a blast, and he is also headed to various places in Australia

NZ Scandal. why ‘whatever’ is great news

Scandal in NZ as a tell-all book is published about Don Brash, leader of the opposition.

It’s interesting to observe the reaction here versus similar tell-all books in the USA. I would classify this as a ‘whatever’ scandal in the USA.

Brash resigned. This seldom happens in the US unless pageboys or other Republican sex is involved. While horrific remarks supporting segregationist presidential candidate Strom Thurgood 2 years back cost Trent Lott his Senate Majority Speaker job, he remained in the Senate and was just elected by his peers to the number 2 Whip role.

The newspapers gave extensive and prominent coverage (I don’t watch TV news, but assume they did as well.) This rarely happens in the US unless the scandal is particularly juicy (i.e. sex is involved), and left wing.

The NZ scandals are not that bad really – some election shenanigans mainly, but we are an honest lot here – not for nothing we kept our traditional top three place in the least corrupt nations list this year. US-style pork barrel politics would result in jail terms for those involved, if it were to exist here.

Brash fell into the Al Gore and John Kerry trap – he actually listened to his election consultants, rather than speaking his own, rather more engaging and common sense mind. He isn’t a GW Bush with no appropriate background – Brash was our best ever Reserve Bank Governer, and a potential white knight. But he happens to be clueless about politics and listened to the wrong people. A shame. It seems that he didn’t believe the racist claptrap or right wing Brethren nonsense, which precluded me from voting for him.

Less Haka please

The All Blacks didn’t perform their haka in front of 70,000 fervent rugby fans in Wales. Welsh officials wanted the anthems after the haka, NZ team and officials demurred. So the haka was performed in private in the changing shed, and the Welsh ended up doubly embarrassed (the score was not flattering either)

This haka incident is troubling for several reasons.

Firstly – the haka has been over-performed in recent years as international rugby games (union and league) have increased in frequency,

Secondly although the haka is now a tightly choreographed event, and is practiced and performed with pride and respect, it is increasingly seen as just part of the entertainment whenever the All Blacks play.

Finally while the reason for the non-performance has been blamed on petty bureaucrats, whether from Wales or New Zealand, we must not forget that this is essentially about money. I’m not sure exactly how, but somehow business got in the way of spirit, and in Wales of all places.

Here’s a suggestion – why not bury the haka, hold it back for the games that really matter and really have meaning. France at the 100th anniversary of All-Blacks France matches. Lions tests. The Tri Nations decider, the second Bledisloe cup game against Australia, and the final of the World Cup.

That way the mana of the haka will be preserved, and petty officials around the world will scamper to encourage the All Blacks to perform the haka on any terms.

<update>

All the right things are being said by NZ team and management – they get it.