Why should the Mets owners the Wilpon’s have known about Madoff?

Posted on January 31, 2011 by markkolier

It’s no secret that New York Mets owner Fred Wilpon and his son Jeff have had ‘Madoff’ problems since the scandal broke a year and a half ago. Longtime friends and associates of disgraced financier Bernie Madoff, the Wilpons had been investing with Madoff’s firm for many years.

When news of the Ponzi scheme orchestrated by Bernie Madoff first broke, one of the first names mentioned as being investors were the Wilpons. Consequently Met fans (of which I am a card-carrying member) heard that one of the reasons the Mets did not bid on many free agents (Cliff Lee for instance), was that they had a major ‘Madoff problem’. That problem apparently was that the Wilpon’s were ‘winners’ in investing with Bernie Madoff’s firm.

Just this weekend http://nyti.ms/f7IxjW news came out that the Wilpon’s were considering selling a portion of their interest in the New York Mets due to ‘uncertainties’ as Fred Wilpon put it. As the NY Times reported “The lawsuit against the owners of the Mets alleges that as longtime and successful investors with Madoff, they knew or should have known that he was operating a fraud, according to two lawyers involved in the case.”

Pardon me for saying so but – I don’t get it. The insinuation here is that the Wilpons being savvy investors, and smart, and rich should have realized that their rate of return on the investments with Madoff was inconsistent with general market performance. Would anybody in a similar position that invests question why their winners were doing so well? What the lawyers are saying is that if your investments outperform the market you should go back to your adviser, (if you use one) and question his/her methods to be sure they are not doing anything illicit. Exactly what is the threshold then? 15% over the general market performance? 20%? And what happens when your investment loses value? The little I know about investing tells me that if I am given a recommendation by a broker/advisor and it really tanks, I have no ‘right’ to go back and check on the advisors methods. And yet in the case of the Madoff scandal that’s exactly what is happening.

Do not mistake my puzzlement at chasing the Wilpons to recoup money, (or any other investor that somehow came out on the positive side of the Madoff scheme) for any lack of compassion for the many people who had their life’s savings destroyed by low-life Bernie Madoff and his accomplices. The people that were responsible for the fraud should be brought to justice and made to pay for their crimes. I am just questioning this path of taking down (one by one apparently), successful Madoff investors under the auspice of ‘they should have known’ is event legal if not just plain wrong.

It’s not a whole lot of fun being a Met fan these days. The Phillies are locked and loaded for bear with their offseason acquisitions. The Yankees will again be a formidable team. Another long summer is in the offing for we Met fans. Whether the Wilpons sell part or all of their interest in the team is immaterial to the notion that somehow they should have ‘known’ about Bernie Madoff’s Ponzi scheme.

If you have any good investments I suggest checking them out to make sure that if they are doing too well that performance is not due to nefarious circumstances. Good luck. For me I’ve got to find a winning investment that could perform that well first.

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A LinkedIn IPO – this one could be a big winner

Posted on January 28, 2011 by markkolier

Yesterday in Kara Swisher’s allthingsd.com blog http://bit.ly/e5QFen it came out the LinkedIn.com will likely file an S-1 for an IPO. This was confirmed late Thursday – http://nyti.ms/hZTvLp . Some interesting stats from the article were that LinkedIn has more than 90 million members in over 200 countries and territories. It has 1,000 full time employees. Also Sequoia Capital is involved and they are not often associated with IPO rumors.

The idea that LinkedIn could be worth more than $ 2 billion actually was surprising to me as I thought it would be higher. After all Facebook was valued at more than $ 50 billion (25 times more than LinkedIn) but LinkedIn has fewer than 7 times as many members. Part of the reason is that LinkedIn members are not nearly as consumer-ish and buying oriented as those on Facebook.

I’m a big proponent of LinkedIn as I have noted on my blog in the past in two separate posts, http://bit.ly/f1v1HU and http://bit.ly/grhp8R . Since more and more people are using LinkedIn it gains value for its subscribers every day. While I use the paid version that offers more access, the free version is useful all the same even though the folks at LinkedIn will surely find a way to gain more paid subscribers for obvious reasons.

I have a Plaxo.com account as well, although I almost never use it. Occasionally Plaxo will send me an email with updates but I pretty much ignore them entirely. Why would I need two accounts that have similar missions when LinkedIn is much more utilized and simply better? I suspect Plaxo will be toast before long.
LinkedIn does sell advertising and the model is a sound one. You can advertise to specific groups by purchasing display ads. The advertising CPM’s are surprisingly expensive but that market has been created on demand so I am certain that if they did not perform for advertisers the rates would or will drop.
From Computerworld.com and Sharon Gaudin January 6, “LinkedIn would be the first social networking company to go public and it will be a good test of how valuable these companies might be,” said Dan Olds, an analyst with The Gabriel Consulting Group. “While LinkedIn isn’t Facebook or Twitter, they do have something like 85 million users and a business plan that is at least as developed, or hazy, depending on your perspective, as those at Facebook and Twitter.”

So LinkedIn being the first social network to go public would be something of a coup particularly in view of all the noise made by Facebook’s on again off again IPO news. I hope it will not end up being a Jeopardy answer years from now – ‘The first social network to go public’.

If you are in business you should be on LinkedIn and use it all the time. If you are not on LinkedIn I’d love to know why (because I have a hard time understanding that).

This one will be a winner I think. What do you think?

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MySpace – is it going no place?

Posted on January 26, 2011 by markkolier

One report had MySpace with 66 million users as of June 2010. Another had MySpace with 110 million people that are monthly active users on MySpace.com including 1 in 4 Americans. While those numbers pale in comparison to Facebook’s nearly 600 million overall members, 110 million is still a huge audience. Two weeks ago more layoffs hit MySpace. Reports are that NewsCorp (think Rupert Murdoch) which owns MySpace is looking to divest itself of the sagging social network – http://on.mash.to/fbxUk1

I don’t have a MySpace profile. In fact the few times I have gone to the MySpace.com home page I have never even gotten anywhere beyond that initial page. Interestingly on the home page there is a prominent banner – ‘Connect with Facebook’. Is it ok if I remark that I don’t quite get that?

In June of 2006 MySpace.com was the most popular social networking site in the United States. By April of 2008 it had fallen to second place behind Facebook based on monthly unique visitors. According to Wikipedia, Quantcast estimates MySpace’s monthly U.S. unique visitors at 43.2 million. It seems to me that a lot of MySpace’s 67 million ‘members’ are not visiting MySpace each month.

One area that seems to be a particular strength for MySpace is music profiles for musicians. Artists can upload their entire discography as MP3’s. There is also a Pandora.com-type function that offers 30 second samples and suggestions on other songs you might listen to, making it a type of music discovery tool.
So where is MySpace headed? We’ve all heard the reports of Facebook’s U.S. $ 50 billion valuation. It’s not news to say that MySpace is even in the same universe. There is an advertising based revenue model which I can tell from ads on the home page (since I go no further), but I cannot tell if it is growing or contracting. I don’t have a very positive perception of MySpace either – for some reason I think of it as a place where young kids are at times preyed upon by low-life dirt bags. But that’s my perception and I am irrelevant to the MySpace folks anyway.

Do you even know anyone who is on MySpace? Or know anyone’s kids that are on MySpace? What do people find cool about it? Why should it survive?

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Why are people still flocking to movie theaters?

Posted on January 24, 2011 by markkolier

If you’re like me you have well over 100 television channels available to watch at home whether you are a cable or satellite TV customer. Yet I find it remarkable that more often than not it’s difficult to find something I actually want to watch. I think some of that has to do with not knowing what’s available. While I don’t feel any nostalgia desire to read TV Guide, our cable system program guide for finding individual TV shows or movies is cumbersome to say the least.

Recently we purchased a Roku player which facilitates movie and television downloads from Netflix into a queue that we can then watch ‘Instantly’. It was kind of cool at first but it did not take long to realize that watchable inventory is lacking – particularly for recent movies. You can have Netflix mail you a DVD for titles you might actually want to watch but that does not help you when you are sitting home on a Tuesday night wanting to watch ‘The Last Emperor’ which was released in 1987.

Lately my wife and I have been going to the movies. And we’ve really been enjoying it. When our children were young it was nearly impossible to get out to a movie as the opportunity to hire a babysitter and have a dinner out for some adult conversation far outweighed a trip to the movies. Today even with home theaters, more and more entertainment available to stream online, and interactive gaming, people are increasingly going out to the movies. Weren’t the movies going to be killed by the home video revolution?

In the United States there are more than a billion and a half tickets sold to watch in theater movies each year. There could be a number of reasons that people love going to the movies. Even at $ 13.00 per ticket or more. Several years ago when we were in Tokyo we went to the movies and saw Jack Black in “King Kong”. The tickets were roughly U.S. $ 20.00 apiece and we were given assigned seats. The theater was packed. It seems that people (in addition to liking the big screen and surround sound that is difficult to reproduce anywhere else), like the shared experience of going to see something with other people. I don’t know if people are even conscious of that idea.

If you had told someone 40 years ago that people in 2011 would pay $ 15.00 for a movie ticket and it was not a double feature (Remember double features? They went the way of baseball doubleheaders), it would not be believed. More people still go to the movies today than rent DVD’s. It’s evident that people look to the movies to escape their daily lives. You don’t really get that in your home theater.

With the NFL season winding down to the Super Bowl, Americans are entering the sports viewing black hole at least until March Madness. Traditionally movie theater business picks up during this period. Is it any wonder why?

How about you – do you go the movies more or less than you did five years ago? If not why?

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Jack Ma and Alibaba.com are forces to be reckoned with in China

Posted on January 21, 2011 by markkolier

With Chinese President Hu Jintao in the United States this week there was much talk about the state of Sino-U.S. relations. My interest in developing our company’s Chinese business has me keeping a watchful eye for business and marketing news in China. I thought it was interesting that during a week of heightened awareness of the U.S.-China relationship, that Alibaba.com and its Chairman Jack Ma would announce they are expanding their supply network in China. http://on.wsj.com/gIPr16. Full disclosure – we’ve had a couple of meetings with Alibaba.com here in the U.S. and I find the Alibaba.com story to be remarkable http://bit.ly/2vZW75.

It’s no trifling investment either. $ 4.6 billion U.S. is a staggering amount of money. The primary benefit is said to be the ability to expand Taobao.com which is Alibaba.com’s Amazon.com-like online shopping mall. I find it interesting that Alibaba.com CEO David Wei W considers Taobao.com to be more like EBay http://bit.ly/SjMep but that is not what most people think today. What also caught my attention was what Mr. Ma was quoted as saying – “In 10 years, we hope that anywhere in China you can buy a product online, and, at the slowest, it will get to your home in eight hours” This is to be somewhat limited to areas in the north like Beijing, and Tianjin, as well as major population centers in the south (Shanghai and Nanjing for instance). The western part of China is not nearly as developed and would be more difficult to cover with an 8 hour delivery promise.

The idea that you could order something online and have it delivered in as little as 8 hours is amazing to me. Back in the mid-1990’s Amazon.com’s CEO Jeff Bezos made a decision to invest in building distribution centers around the United States. This was at the time when Amazon.com primarily sold books and compact discs. Many people questioned the idea outright and many also thought that move would lead to the downfall of Amazon.com. It turned out to be one of the smartest things Mr. Bezos has done. But Amazon has never even tried to offer something like delivering an order in 8 hours.

I think the same thing will happen with Jack Ma’s decision to have Alibaba.com follow a similar path. Yahoo.com continues to own 40% of Alibaba.com (which was founded in 1999) and I have noted before that this might be the reason Yahoo.com CEO Carol Bartz still has her job. Mr. Ma would like to buy back the interest from Yahoo but Ms. Bartz has not acceded.

For the record Alibaba.com has something close to 18,000 employees in 60 cities and regions, including China, Hong Kong, India, Japan, Korea, Taiwan, the United Kingdom, and the United States. And the company is still growing and is headquartered in beautiful Hangzhou in a Silicon Valley like campus.

You will be hearing a lot more from this rising force in the near future. My question to you is have you heard of them before and what is your opinion and impression of the company?

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Cold Stone Creamery does not get it any better than Crumbs or Krispy Kreme

Posted on January 19, 2011 by markkolier

Last week I posted on what I felt was a strange and less than good move by Crumbs Bakery to go the route of an IPO. Indulgence based products and services seem to me to be a difficult area to sustain a consistent demand.

In this week’s Advertising Age it was reported that Cold Stone Creamery had embarked on a venture to compete in the self-serve, you weigh it and pay frozen yogurt category. http://bit.ly/fjmmXR . You remember Cold Stone Creamery don’t you? They were a darling for a few years and then not so much. In 2009 Cold Stone Creamery did U.S. $ 429 million in sales, but those sales were flat year over year.

My wife and I live in a town in Connecticut that has a small ice cream store with a couple of small sit down tables. Back in 2000 we thought about opening a Cold Stone Creamery which at the time was a relative newcomer (we remember Steve’s Ice Cream from Massachusetts and then New York from the 1980’s with the concept of mix-ins). We ended up passing on the idea because we were concerned about how the store would perform in the dead of winter. Cold Stone Creamery is a one trick pony.

A recent story on franchising on CNBC http://www.cnbc.com/id/39911155 outlined how Cold Stone Creamery franchisees (who have to purchase EVERYTHING from a company set up by – Cold Stone Creamery, were having difficulty making money – even those that were near the top in gross sales. Cold Stone denied much of the story. But the move to enter the Frozen Yogurt bar area suggests that the management of Cold Stone Creamery is uncertain as to what to do next.

Cold Stone Creamery has a brand – a pretty good identity at that. Rich tasting, indulgent and expensive ice cream treats/confections. If you remember the young people that did the mixing would sing while they worked – supposedly for tips. Now they are moving away from that concept entirely yet under the same brand umbrella.

I for one do not get it. Also noted in the Ad Age story is that Cold Stone Creamery spends $ 3 million on average in measured media. And now they are offering a completely different concept so there is a need to inform the consumer that what the perception of Cold Stone Creamery has been has changed. The management of Cold Stone Creamery acknowledges that Americans have moved to serve-yourself yogurt bars. So they are reacting by joining in the newest rage.

To me Cold Stone Creamery does not have any idea what to do next and is reaching for a solution and will come up empty. The next thing you might see them do is float out an IPO.

It’s too bad. I thought they had something that could have been built upon.

How about you? Have you gone to Cold Stone Creamery recently? Ever? What do you think?

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Commuting in the United States by train – why does it have to be like 1961?

Posted on January 17, 2011 by markkolier

Having opened an office in lower Manhattan in November I have joined the ranks of commuters from the New York City suburbs even it if is only two or three days per week. Because I have not commuted to New York City much in my business career I actually looked at it as an opportunity to do some work as well as some pleasure reading while traveling on commuter rails for the roughly 60 minute trip from Grand Central Station. The 60 minute time does not take into consideration the subway ride to Grand Central which is a little less than a half hour door to train seat.

When watching AMC’s ‘Mad Men’ there are scenes where Don Draper commuted to New York City from the Westchester suburbs. Aside from men wearing fedoras, it’s difficult to discern any differences in the train service from 1961 – fifty years ago to today.

I have a few thoughts after commuting for a little over two months.

1) Trains look much the way they have looked (to me) for the past forty plus years I have been riding them even when not a commuter. If there are improvements in rider comfort I must be missing them.

2) Conductors are pleasant for the most part but the only technology they have is the ability to look up an on board fare on the giant strap on device they carry and then print out a receipt. This past week during one of the snowstorms the train was so crowded that the conductor could not possibly make it through the cars to check or collect tickets. As a result non-monthly passengers (like me) were given a ‘free’ ride. It’s difficult for me to believe that this situation is not completely unusual and the lost revenue is one contributing reason why the commuter railroads area always in the red. There has got to be a better way.

3) Middle seats stink on trains nearly as much as they do on planes. You just aren’t there quite as long.

4) When I ride trains in other countries people roll carts through the aisles selling food and drinks sometimes. On our train we have a bar car for the ‘evening rush’ home somewhere near the front or back or middle of the train – you never really know where. If you are hungry or thirsty on the train in the morning you are out of luck. I wonder how much incremental revenue the railroads could bring in if they rolled a cart through offering even just a few things like coffee, soda, water and a roll or bagel in the morning? Or beers, soft drinks and snacks for the evening rush?

5) There is no internet service available on any commuter railroads. After all nobody would use it right?

6) On the trains and platforms you can hear and even understand announcements – some of the time. But when there are delays there are rarely any notifications or reasons for them. Very much airline like in many ways.

I have found that for the most part people are courteous and respectful of each other and I am happy for that. But we really have no choice. After all we are all in the same boat. I’m just afraid that it is a sinking ship. We all pay a fair amount to ride the rails so don’t tell me that to receive the kind of service I’d like simply jack up prices by 25%.

Do you think we deserve better?

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Online couponing sites are working – but for whom?

Posted on January 14, 2011 by markkolier

Andrew Mason of Groupon www.Groupon.com has received admiring and quizzical looks from people when he turned down Google’s offer of $ 6 billion for Groupon last month. It was a bold move in the style of Facebook CEO Mark Zuckerberg’s rebuff toward Microsoft for $ 15 billion in 2007. I bet Steve Ballmer now wishes Microsoft had offered three times as much.

Just this morning http://nyti.ms/ghA4dQ it was reported that Groupon is pushing ahead with an IPO perhaps valued by as much as $ 15 billion. Another fast growing online couponing site Living Social www.livingsocial.com , is also considering an IPO. Living social is said to be earning $ 500 million annually already. Living Social CEO Tim O’Shaughnessy has taken a $ 175 million investment from Amazon.com http://bit.ly/gyI73v . Clearly going local is going loco.

The concept of online couponing is simple. A business offers say $ 30 off on a $ 60 purchase of goods or services (or in the case of a restaurant food and beverage). Customers print out the coupon and present it when they purchase.

Have you tried using either Groupon or Living Social? The deals come into your email daily and there is a reserve on how many people have to take the deal in order for it to become a reality. I don’t have figures on how many deals are not consummated due to lack of interest but I am aware that once the deals reach the amount needed to become reality as many as 20-30% of purchased coupons go unused.

Online couponing works for Groupon and Living Social. And it works for some but not all companies. There have been complaints from local businesses like restaurants and nail salons that the online coupon deals are not generating much new business. How they are measuring is uncertain, however it must be obvious to these store owners that new customers are not storming their doors.

One important thing about couponing, the customer experience still has to be a good one. Otherwise, like any customer experience (discounted or not), they will not return because receiving a discount on something that’s not all that good is of little value to just about everyone.

Our agency team is experimenting in using online couponing for our clients. We look at it as a way to reach people who have no familiarity or experience with the brand so while we expect some transactional volume, the opportunity to buy some rather inexpensive branding is seemingly worthwhile. I will report back on results as we gather them in a future post.

How about you – do you get the daily emails from either Groupon or Living Social? Have you redeemed any coupons and found a new place? Or revisited an old one?

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5 Things Americans don’t know about business in China

Posted on January 12, 2011 by markkolier

U.S. Treasury Secretary Tim Geithner is speaking this morning regarding China’s currency and the idea that it needs to strengthen. As many of my blog readers know, on behalf of CGSM, I have made a concerted effort to open business relationships with Chinese companies both in the U.S. and in China.

Along with two members of my team I came back last Saturday from a meeting with a prospective Chinese client’s U.S. team in California. We are working out an agreement with them to help them gain awareness and engagement with American entrepreneurs. The people we have met are really smart and have a good understanding of the American market.

Back to Mr. Geithner whose comments centered on the Renminbi (RNB) or Yuan. The first thing I have come to learn in studying the Chinese people, economy and language is:

1) The Chinese do not respond well to ultimatums. Yes the Chinese government is well aware that its policy of not allowing its currency to float offers their growing economy a chance to blossom faster than if it did not. Chinese President Hu Jintao is scheduled to come to the U.S. this week to meet with President Obama for the last time as Mr. Hu is near the end of his term. The new Chinese stealth fighter plane test this week had U.S. Defense Secretary Robert Gates meeting with President Hu – http://nyti.ms/hfcudT . It was a clever strategy for Mr. Gates to visit China since Mr. Hu would have to see him in advance of his visit to the U.S. since a snub would not be good. This is a better tactic than ultimatums.

2) The Chinese government is socialist, the people are not. The expanding Chinese economy is not completely attributable to Chinese protectionism. Chinese people are all about business and making money and they are willing to work extremely hard for less (at least for now) than other first world nations.

3) There are a large number of huge Chinese companies that Americans have never heard of. Alibaba.com actually may ring a bell to some but my guess is less than 1% of Americans have any idea of what this U.S. $ 10 billion company does. Alibaba.com Taobao site is gaining market share quickly and Alibaba.com has visions of being the Wal-mart of China to some. Ever heard of Sinopec? China Mobile Ltd.?, How about Baidu, Huawei or BYD? If you haven’t, believe me, you will soon.

4) Learning Mandarin is a good idea but most Chinese business people under 35 speak English. They have been studying it for years and some companies (Alibaba.com for example) conduct meetings in China (their HQ is in Huangzhou) in English. I have been learning Mandarin Chinese for nearly 4 months and am fascinated by the language (very different) but also by learning about their culture.

5) China will struggle with social programs as it expands its economy. One of my Chinese associates told me that while she is not exactly in love with her job as a COO of a Chinese social media company, she has to work because there is no support system for her parents or family such as social security or unemployment. They rely on her and she feels responsible to continue to help them. This will become a much bigger issue for China, its people and its government in both the near and far future.

I get the feeling that Americans have a certain fear of China. And let’s face it China has more than 1.3 billion people and that in and of itself is intimidating. But keep in mind that they put their pants on one leg at a time just as everyone else does. China has problems and issues to go along with its successes, and both go hand in hand with China’s emergence as a world power – or dare I say “the” world power in the 21st century.

And that might be the thing that bothers Americans most. The notion that the 21st century is not the American Century. That was the 20th century. We now hold the position of not being the leader in the world economy. It is understandably not easy to get used to that notion.

At least it is not easy for me.

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Nothing left but the Crumbs?

Posted on January 10, 2011 by markkolier

The NY Times article this morning mentioned a possible new IPO – no not the much ballyhooed one for Facebook or even LinkedIn but for Crumbs Bake Shop http://nyti.ms/ibEzdz. A $ 66 million merger with an unnamed investment company would make Crumbs Bake Shop the first publicly traded cupcake brand (take that Hostess!). First opened in 2003, the largest cupcake chain in the United States (yes there really are others), Crumbs posted $ 31 million in revenue in 2010 – the cupcakes retail for $ 3.75 so one could surmise that they sold more than 8 million cupcakes. The plans are for Crumbs to expand to 200 retail locations by 2014.

By IPO standards this is a small deal. And I share the viewpoint that this public offering may represent a cupcake bubble. The first thing I thought was how quickly people have forgotten the story of Krispy Kreme. I look at Crumbs as an indulgence as was Krispy Kreme back in the early 2000’s. You remember don’t you? It seemed everywhere you looked a Krispy Kreme was opening or partnering with a local retail outlet. Krispy Kreme had its own IPO in April of 2000 but over expansion and fierce competition from Dunkin’ Donuts conspired to crush its share price which today is under $ 7.00 – it went public at $ 21.00 per share.

If you’ve never had a Crumbs cupcake you have missed an indulgence for sure. But how often could you really enjoy an indulgence before it became a non-indulgence and thus less interesting? I don’t understand they need for an IPO to grow to 200 units by 2014. What’s the overall plan?

I have no ill will toward Crumbs and wish them nothing but luck even if I completely do not understand what
they are up to. Do you?

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