Big Red Horseshoe - Vanderbilt Owen MBA Students on Business Strategy

Miscellaneous 'Shoe

-- Home Depot dropped by $2 billion the price -- to $8.5 billion -- of its commercial supply business. HD is desperate to sell. Could that be the haircut of the year? More on the failed commercial strategy at this prescient October 2006 post at the Motley Fool: "Nardelli did this at GE as well: Expand the definition of your market, and you can grow. But I have to wonder whether the returns are really going to be there. ... My fear is that Home Depot will start to experience the 'Red Queen Effect,' in which it has to run as fast as it can (i.e., spend capital to achieve limited growth) just to stay in the same place." Good call.

-- Taiwanese firm Acer bought cow-themed Gateway and is now the world's third-biggest computer company with sales of 20 million units per year. "The takeover will mean a big payday for founder Ted Waitt, who owns 20% of the shares. Gateway has struggled, however, to keep up with the industry's two multinational leaders. ... The tie-up is a blow to Lenovo, which is among a crop of Chinese industrial firms keen to break into the global league. It was in talks to buy Packard Bell for $800m but under an agreement negotiated last year, Gateway has first refusal to purchase the European firm." 

-- HBS's Working Knowledge examines how Mattel correctly recalled a toy. The three reasons: The CEO has taken personal charge of the situation, Mattel is effectively getting the word out about the recall, and Mattel's recall Web site is a model of excellence.

-- "To a United Pilot, The Friendly Skies Are a Point of Pride" at the Wall Street Journal. Customer service on an airplane? I haven't seen much of that for a while. "Capt. Denny Flanagan is a rare bird in today's frustration-filled air-travel world -- a pilot who goes out of his way to make flying fun for passengers. ... United, which ranked in the middle of the airline pack in on-time arrivals and mishandled baggage in the first half of this year and next-to-worst in consumer complaints, has supported Capt. Flanagan's efforts. The airline supplies the airplane trading-cards he hands out as passengers board, plus books, wine and discount coupons he has flight attendants give away. He goes through about 700 business cards a month, and the company reimburses him for the food he buys during prolonged delays."

-- Yahoo has added text messenging and instant messaging to its free email. Add a kitchen sink if you want, I'm sticking with Gmail.

-- Live and learn: Roger Ebert and family of the late Gene Siskel own the copyright to the up or down Thumbs™ used in his television show.

(Slightly) Healthier Donuts

Dunkin' Donuts is going to eliminate trans fats from its menu -- including donuts -- by October 15. Actually, the items will have 0.5 grams of trans fat, which can legally be rounded down to zero. New York City, which loves its Dunkin Donuts, passed a law in December 2006 that limits trans fats to 0.5 grams per serving for any menu item.
 

What effect(s) will this have? Improve the chain's image? Help protect it from consumer lawsuits (even though lawsuits aimed at McDonalds have failed)? I don't think this will improve Dunkin' Donuts' image much if at all. The move is part of a larger shift away from trans fats across the country, a change that would have come sooner or later. But for a chain like this -- let's face it, it's known for coffee and fried-and-sugary dough -- to voluntarily make the change could give it a short-lived competitive advantage. Since the change was going to come eventually, why not get what little first-mover advantage exists?

FYI, a Dunkin' Donuts jelly filled donut currently has four grams of trans fat, eight grams of total fat, 14 grams of sugar and 210 calories.

Miscellaneous 'Shoe

-- "Young Workers: U ND 2 Improve Ur Writing Skills" at the New York Times. "Nearly half the executives said that entry-level workers lacked writing skills, and 27 percent said that they were deficient in critical thinking. It seems that some young employees are now guilty of the technological equivalent of wearing flip-flops: they are writing company e-mail as if they were texting cellphone messages with their thumbs."

-- "The Agonies of Agflation" at The Economist. "Food prices around the world are rising so quickly that a new term has been coined to describe the ballooning price of breakfast staples and dinner-time favourites: agflation. ... Demand for grain is accelerating not to feed humans or livestock but to fill petrol tanks. Compared with 2000, three-times more corn is used to make ethanol in America; distilleries that produce biofuels hoover up a fifth of the country’s corn supplies. Demand for cleaner energy in turn keeps demand for corn growing. Farmers are having trouble keeping pace with the burgeoning biofuel industry. And to produce more corn farmers are switching production from wheat and soya, pushing up the prices of those crops too. On top of these pressures, rising prosperity in poorer countries, particularly India and China, is also lifting prices. ... As central banks try to control demand they tend not to react to price fluctuations caused by see-sawing supply. But in consumer-price indices, at least in some countries, food has a greater impact. In America food carries just 14% of the weight of the consumer-price index, but in China it accounts for 33% and in India 46%."

-- "Can Private Equity Get Out Of Buyouts?" at DealBook. "Private equity firms are being pushed to rethink deals by the banks that had committed to loan the money and are now expected to rack up billions in losses by selling the debt at a fraction of what they had planned. In Home Depot’s case, the banks that agreed to lend money to the private equity firms are pressing for better terms. At the same time, the consortium -- which includes Bain Capital, the Carlyle Group, and Clayton Dubilier & Rice -- has become nervous about falling sales at Home Depot’s wholesale unit. The combination of factors led the firms to seek a better deal, threatening to walk away otherwise."

-- "BP Says It Won't Increase Pollution" at the Chicago Tribune. "Responding to a month of unrelenting criticism from politicians and the public, BP pledged it will not invoke provisions of a new permit that allows the largest oil refinery in the Midwest to release significantly more ammonia and suspended solids into the lake. BP, which promotes itself as environmentally friendly, said it would abide by more stringent limits in its previous permit as the company moves forward with a $3.8 billion expansion of its Whiting, Ind., refinery, the nation's fourth largest."

Why Starbucks Succeeds With Music, Fails With Movies

What is it about Starbucks, and/or the company's marketing strategy, that allows it to be so successful with music and (thus far) such a failure with movies? Variety has an article on Starbucks' struggle in its movie partnerships but doesn't delve into the issue. (A proper look at the topic isn't going to come from trade publication like Variety. Maybe Malcolm Gladwell can pick up where Marc Graser left off.)

In case you didn't know, Starbucks has done very well with music. It sells select CDs in its stores, has its own channel on XM Satellite Radio, and it operates its own record label, Hear Music. In March of this year, Hear Music signed Paul McCartney after the singer was with Capitol Records for decades.

"Starbucks has long been considered a potential powerhouse for Hollywood, especially after helping launch music artists and assisting more familiar ones to sell CDs. But it hasn't fared as well on the film front."

Why is that? I think it's because music is an integral part of the Starbucks ambiance and consumer experience. Video and movies are not. There are certain types of music that pair well with comfortable decor and the smell of roasted coffee. Jazz. Laid back singer-songwriters. From Norah Jones to Madelaine Peyroux, Dave Matthews to Bryan Ferry.  What type of movie goes well with the Starbucks' ambiance?

"'With all of our entertainment options, we are careful to promote our products and projects in a tasteful manner and not to interfere with the coffeehouse experience,' said Ken Lombard, president of Starbucks Entertainment."

But how does a movie have anything to do with the coffeehouse experience? If a movie did have anything to do with the Starbucks' experience, it wouldn't be a childrens' movie. I'll admit that I don't drink coffee and have been in a Starbucks only a handful of times, but I walk by a Starbucks daily, and I've never seen a movie playing in one. I don't see movies, and I don't see children. I see a lot of adults who love coffee and music.

Music makes for good background entertainment. Movies not so much. They demand too much of your attention. I see people walking around with iPods. In supermarkets. On the subway. In the street. At the gym. How often are people watching movies on their iPods? Not very often. Video use on iPods is very low -- 2.2% of the time, according to a Nielsen study.

entertainment for eyeballs

As you fast forward your tivo past the ads of the latest episode of Everybody Loves Raymond, marketers are busy trying to get your eyeballs back. Where are they hunting for your eyes? Everywhere besides the traditional advertising avenues. No, Detroit is not giving up on the glossy ads of the latest tough guy truck ad in the latest issue of Maxim. The Superbowl will likely remain the Oscars of the TV commercial, and the right to use the internet seems to have been paid for by banner ads.

The difference today is that people have more choice in how and when they consume information. Technology has enabled us to avoid mass marketing. Marketers have realized the changing paradigm and they are scrambling to reach the eyeballs. It is a fascinating dynamic to watch play out.

One of the more interesting ploys is Smirnoff's Raw Tea campaign. In case you did not know, Raw Tea is a fruit-flavored malt beverage put out by the wine and spirits giant Diageo. The spoof rap video that came out on YouTube last summer could have been a Saturday Night Live skit, but it was a clever marketing campaign by Smirnoff's creative agency (JWT New York) that turned into a viral marketing hit. 

East Coast Tea Partay

The video was so popular that Smirnoff has commissioned a follow up. This is not the normal spawn of a popular commercial like the unforgettable bud-wei-ser frogs or the lovable Geiko gecko. This is a full-on pop culture East Coast, West Coast rap war. 2 Pac and Biggie may be gone, but the West Coast Boyz N The Hillz are dissing the East Coast rappers with their green tea lifestyle. You can follow all of the madness at Smirnoff's Tea Partay central. Not sure if they are selling any more booze, but it sure is entertaining...

One Has The Brains, One Has The Money, But Will Americans Buy Into It?

Over at Coolfer, my other blog, I posted a few times about the new joint venture between RealNetworks and Viacom's MTV. Rhapsody America will be a PC- and mobile-based music service that will use RealNetworks' Rhapsody subscription music service. The mobile part of the service will team with Verizon Wireless's V-Cast.

Rhapsody is the brains of the two. The subscription service is the best in its peer group and has succeeded while MTV's URGE has failed. But subscription services are a game of scale, and Rhapsody drastically needs to increase its numbers of subscribers. Enter MTV. The company has the money and the marketing muscle. MTV will provide a five-year, $230 million note to the joint venture. (In return, RealNetworks has agreed to buy $230 million of advertising on MTV cable channels over the next five years.)

Is America ready for a subscription service like Rhapsody America? It depends on a lot of things. Mainly it depends on Americans' willingness to rent music. Thus far the idea of renting music -- streaming it and/or downloading protected music files to compatible, non-iPod music players -- has not taken off. Subscription services are a niche in this country of downloaders. The word "rent" is fine for movies, but it's been a non-starter for music.

All the research I've seen recently has pointed to a slow adoption of subscription for both PC and mobile. Unless Rhapsody America raises the bar in user experience and technological superiority, I believe adoption will be slow to moderate. One problem has to do with platforms. Apple devices are not compatible with the protected file formats used in subscription services. That leaves a hoard of runner-up devices by Microsoft, Sansa, Creative and Samsung. Another problem is that Americans seem to be happy sideloading to their mobile devices. Over-the-air download sales are miniscule. While some feel we can look to Asia for the potential in the subscription market, I see Asia and think of how cultural differences can make one technology popular in one country and very unpopular in another country. Example: Cash cards are more popular in Asia than in the U.S. (outside of college students who get their parents to load up the card with money). We are happy with our debit and credit cards.

Six years ago, analysts thought subscriptions would soon overtake downloads. In this 2002 PC World article, said Jupiter Media Metrix expected subscription services to generate $1 billion in 2006 while downloads would account for only $600 million. What happened in 2006? According to RIAA figures, subscriptions accounted for $206 million (that would be PC-based subscriptions, not mobile-based) while digital downloads totaled $857 million.

What's the point? Predicting whether or not Americans will adopt new technologies and services is ultimately a guessing game. Some will subscribe to Rhapsody America, no doubt, but will the joint efforts of two major players figure out a way to move subscription services into mainstream America?

Success, if it comes, will take a few years. By 2010, we'll see if the subscription model can successfully be jammed down consumers' throats after a decade of failure. As much as I'd like it to succeed, and without seeing the product and details on pricing and plans, I will guess it will not break into the mainstream and properly tap into what many believe is a gold mine of a latent mobile music market.

It Depends On What Your Definition of 'Market' Is

I've been following the proposed XM-Sirius merger with much interest, and Friday's news about the Whole Foods-Wild Oats merger folds into that nicely. 

"Judge OKs Whole Foods-Wild Oats Merger"

And as a result...

"Whole Foods Decision Could Boost Other Deals"

"The decision is a 'modest positive' to two other planned combinations -- Sirius' takeover of XM Satellite; and Google's acquisition of digital advertising firm DoubleClick -- wrote Blair Levin, analyst at Stifel Nicolaus and former Federal Communications Commission official, in a research note published on Friday and obtained by Reuters.

It gives the companies 'new legal ammo to argue for defining their relevant markets broadly, which could reduce antitrust concerns about potential anti-competitive effects,' Levin wrote. 'At a minimum, it gives the reviewing agencies some food for thought,' he added in the note."

Or you may be of the opinion, like Douglas McIntyre of Blogging Stocks, of...

"The Fiction of Whole Foods Helping Other Mergers"

I don't agree with McIntyre because I believe he defines the market too narrowly. XM and Sirius are, as he points out, the only to satellite radio companies. But they operate in a very broad entertainment and recorded music industry. They compete with terrestrial radio and in the coming years will definitely come into greater competition from Internet radio as it becomes untethered from personal computers.

The Washington Post's Steven Pearlstein certainly defines markets as narrowly as possible. "Whole Foods Gets Its Monopoly" claims the title of his post yesterday. He will say there is evidence that traditional grocers do not compete for shoppers of high-end grocery stores, but that seems really flimsy to me. Can a market -- and therefore a monopoly -- be so narrowly defined as to include only a sliver, a niche of a larger market? What about the thousands of farmers' markets around the country? What about the organic food products carried by grocers large and small?

There are so many places to get healthy, organic food in Manhattan that I didn't come close to stepping inside a Whole Foods over the summer. Whole Foods may have a lock on the narrowly defined market of well known national chains that carry high-end organic food and give a share of its profits to non-profit organizations, but that's a very small part of the overall grocery market, and many people have enough high-end options never to shop at Whole Foods.

Miscellaneous 'Shoe

-- "When to Dump That Great Idea" at Forbes.com. Will Schroter of Go BIG Network outlines three instances in which entrepreneurs should dump that great idea: when paying customers never show up, when you can't sustain a competitive advantage and when you're not ready to quit your day job.

-- "For Buick, Good Names Go Bad" at the Wall Street Journal. Detroit automakers' tendency to change car names hurts their market share. Economist George Hoffer of Virginia Commonwealth University said, "For domestic lines a renaming results in a 22.22% decline in market share growth for that year. Nor does market share growth rebound in the model year after the renaming."

-- BarCamp Nashville is tomorrow at the Exit/In. The digital business conference/festival is free and runs from  noon all the way through the evening. The speaker schedule has a lot of very interesting topics: Social Media and Blogs in Corporate Marketing, Demystifying Web 2.0, Community Powered Media and Product Concept, Design & Development. I'll mosey over there early and will try to catch as much as possible throughout the day.

IHOP To Applebees' Rescue and Other Chain Restaurant Stories

For some odd reason, I've taken an interest to IHOP's acquisition of Applebees. I call it odd because I rarely eat at chain restaurants and would go out of my way not to eat at either IHOP or Applebees. When I look at Applebees, I see all sorts of lessons in business strategy. From a case study point of view, the restaurant chain is intriguing. Now that it has been acquired by IHOP, I'm watching with interest how Applebees will try to return to its former glory.

There was in interview with IHOP chairwoman and chief executive Julia A. Stewart in Saturday's New York Times. IHOP is riding high right now and believes Applebees is a strong brand and good strategic fit. Here's an excerpt:

"Q. You surprised a lot of people with your announced plans to buy Applebee’s International for $1.9 billion — in cash — plus the assumption of debt. How did the deal come together?

A. We announced in January 2006 that we would be looking at strategic alternatives, which included an acquisition.

It had to be a concept that did not compete with our base business. So it couldn’t be in the family dining category, because we didn’t want to jeopardize our terrific relationship with our franchisees. It had to be something in either casual or fast food or specialty.

Secondarily, it had to be something of significant size. It had to matter. And it had to be something that would really fit with our core competencies. It had to be a strategic fit.

Q. Morningstar aid the deal was an “outright steal” at that price.

A. At $25.50, it is certainly a 4 percent premium to the day before the announcement was made. But it is a significant premium, upward of 20 percent when they announced they were going to consider selling the company.

Q. This is a critical moment in your career — you are basking in the glory of 18 consecutive quarters of growth at IHOP and a strong stock price. What if you bet wrong on Applebee’s?

A. I don’t see it that way. I see it as we successfully turned IHOP into this fabulous successful brand, as measured by top-line sales and franchisee health and consumers — and we are now doing the same exact thing at Applebee’s, so to me, it’s just more of the same. I don’t see it as a turning point but a repeat."

What happened to Applebees? It didn't stay fresh. In a Motley Fool article from November 2005, Mike Cianciolo described the company's problems:

"Back in April, I pointed out a plethora of reasons supporting the likelihood that the restaurant chain would sustain its run of moderate growth. I also spoke of strong trends in its market and its ability to keep itself fresh.

Well, so much for that.

For its third quarter, Applebee's posted earnings of $22.1 million, or $0.28 per share, a 23% drop from last year. Minus charges, the company earned $0.31 per share, still missing its guidance of $0.32 to $0.35 per share. And while revenue climbed 8.6% to $305.3 million, it still came up short of expectations.

Although Applebee's did manage its 29th consecutive quarter of same-store sales growth, an increase of 0.9% is nothing to write home about. Company restaurants continue to falter, with comps falling 1.6%. Franchise locations, meanwhile, kept the streak alive, with a 1.8% gain."

Just six months earlier, Cianciolo praised Applebees for its "strong effort to distinguish itself." Its Curbside To Go and pairing with Weight Watchers were two of the little differences "that seem to allow Applebee's to remain fresh."

It's not just Applebees. The entire casual dining segment is having a tough go of it. Analysts downgraded a number of dining stocks earlier this year. Maybe it was Applebees' menu that was the main problem. Red Lobster has its Endless Shrimp and Olive Garden has its Never Ending Pasta Bowl. Applebees has...Weight Watchers. I don't know much about the casual dining chain restaurant experience, but I do know that Americans love a gluttonous bargain. Feed them and then overfeed them. If the portion/price ratio hits that magical number, Americans will keep coming back.

Chipotle is now where Applebees used to be, in a growth stage, growing like a weed and making a lot of money for investors. The Motley Fool posted about Chipotle a few days ago.

"Chipotle's stock lapped the $100 mark earlier this month. That nice round number says little in terms of valuation, yet the rarity of an eatery stock trading in the triple digits is leading investors and financial journalists to wonder whether Chipotle's shares have gotten too spicy for their own good. Just check out the following headline out of this weekend's Barron's, in Johanna Bennett's Weekday Trader column:

  Has Chipotle Gotten Too Hot? 

You can probably guess the answer. A high P/E multiple, negative trends in restaurant stocks, and a history of sizzling casual-dining IPOs that went on to fizzle out of favor are working against Chipotle, claims the article. 'Investors looking to spice up their portfolios may want to order something else from the menu,' Bennett concludes."

The Fool recapped the struggles of other restaurant chains like Baja Fresh and La Salsa ("both hit brick walls"), and Panera and P.F. Chang's ("had their brushes with mortality, but they've gone through expansion pains").

Miscellaneous 'Shoe

-- Freakonomics is now a blog at the New York Times.

-- Marginal Revolution recommends "How Credit Got So Easy and Why It's Tightening" at the Wall Street Journal. "The origins of the boom and this unfolding reversal predate last year's mistakes. They trace to changes in the banking system provoked by the collapse of the savings-and-loan industry in the 1980s, the reaction of governments to the Asian financial crisis of the late 1990s, and the Federal Reserve's response to the 2000-01 bursting of the tech-stock bubble."

-- Murdoch's Free WSJ Plan: "News Corp.'s Rupert Murdoch has said he might make the Wall Street Journal's Web site free, a shift that could compel Pearson to do the same with the online version of its Financial Times. Numis Securities analyst Lorna Tilbian said any move by Murdoch to make wsj.com free has to put pressure on Pearson, while Dresdner Kleinwort's Usman Ghazi estimates a potential hit of up to six percent on earnings per share."

-- "Product Packages Now Shout To Get Your Attention" at today's New York Times:

"Consumer goods companies, which once saw packages largely as containers for shipping their products, are now using them more as 3-D ads to grab shoppers’ attention.

The shift is mostly because of the rise of the Internet and hundreds of television channels, which mean marketers can no longer count on people seeing their commercials.

So they are using their bottles, cans, boxes and plastic packs to improve sales by attracting the eyes of consumers, who often make most of their shopping decisions at the last minute while standing in front of store shelves.

'The media is fragmented, and we can’t find people — we can’t get them to sit down and listen to our argument on a television spot,' said Jerry Kathman, chief executive of LPK, a brand agency based in Cincinnati. 'The package can convey that argument.'"

Virgin America Takes Flight

Judging from the amount of time I spent studying Southwest Airlines in various MBA courses last year, I believe it is my duty and responsibility to mention the launch of the newest low-fare airline, Virgin America. I feel like I know the airline industry intimately, and so this news is a great interest. (Can I get feedback from MBAs at other schools? Is your faculty as obsessed with Southwest as is ours?)

How will Virgin America succeed where Song, for example, failed? How will it grab market share, and eventually become profitable?

-- "Like JetBlue when it started seven years ago, Virgin America is packing its 10 new Airbus planes with all the gizmos, including seat-back televisions and massage chairs in first class." (Dow Jones)

-- "Some industry experts believe Virgin America will capitalize on unprecedented customer dissatisfaction and trigger a service war, rather than just a fare war." (Seattle Times)

-- "Virgin America passengers on inaugural flight beginning this week between New York and Los Angeles and San Francisco will be able to send text messages to each other and to create music playlists from an archive of 3,000 songs, the airline said." (InformationWeek)

How will Virgin keep its costs down? I couldn't find information on that. I imagine that high employee costs have been all but wrung out of most airlines by now. Unlike Skybus and Southwest, Virgin is concentrating on large airports and heavily trafficked routes.

There are not many routes yet. From New York and Washington DC, for example, Virgin flies direct only to Los Angeles and San Francisco (with a connection on to Las Vegas). Actually, those are the only five cities serviced right now.

Southwest is responding to its low-cost competition, says this informative article at the Dallas Morning News. It may change its long-standing seating policy. It's going to test wireless Internet on some planes. In two years, it will be able to feed passengers to other airlines (starting with code-sharing partner ATA Airlines).

Least Favorite Business Tactic of the Summer: Large Salad Containers

Midtown Manhattan is a mixed bag for lunch options. There are quite a few good Halal carts (I like to get a falafel sandwich every now and again) and one good Indian cart near my office. The other halfway cheap option is the tried-and-true salad bar. Outside of those two options, it's best to be with somebody who can put the meal on the corporate card.

What I've discovered is some delis have only one size container for their hot/cold salad bars. I prefer to get the small plastic container when I hit the salad bar. If the deli has only one option, it's always the larger of the two. Delis have certainly figured out that the size of the plastic container effects portion sizes just as larger bowls and plates encourage people to eat more. The standard container is about 6"x6"x4". The large container is probalby around 9"x9"x4". That's a lot more surface area to cover with food, and a lot more volume to fill.

The other day, after picking up my laptop from a repair shop in the area, I went into a deli and saw it had only large containers. Though frustrated, I was too hungry to go elsewhere. My plan was to load up the container with the same amount I would have purchased if I had the smaller container. As I put food in the container I was very careful to not take more than usual. As I feared, loading up a large salad container is like going to the supermarket while hungry: You buy more.

When it was all said and done, I loaded in much more food than I thought I would. The container was so big that my modest amount of food made the container look and feel empty. What I took for emptiness was just an illusion. When the container was weighed and I saw the price, I knew I had more food than I needed. But there's no going back in the world of salad bars. You dish it, you buy it.

The Internet is filled with articles on containers' effect on portion sizes and amounts of food consumed. Here's one on the size of popcorn buckets. "According to a new Cornell University study, when moviegoers were served stale popcorn in big buckets, they ate 34 percent more than those given the same stale popcorn in medium-sized containers." Here's an article on research done on portion sizes and soup. "Participants who were unknowingly eating from self-refilling bowls ate more soup ... than those eating from normal soup bowls. However, despite consuming 73% more, they did not believe they had consumed more, nor did they perceive themselves as more sated than those eating from normal bowls." After seeing it mentioned a few times, I'm interested in reading "Mindless Eating: Why We Eat More Than We Think."

Waiting For The Tech Crash

PC Mag's John Dvorak has an article similar to one I linked to the other day. From "Bubble 2.0 Coming Soon":

"Every single person working in the media today who experienced the dot-com bubble in 1999 to 2000 believes that we are going through the exact same process and can expect the exact same results—a bust. It's déjà vu all over again. And since this moment in time is only the beginning of the cycle, the best nuttiness has yet to emerge."

Dvorak outlines the top ideas in the current bubble: neo-social networking, video mania, user-generated content, mobile everything, ad-leveraged search and widgets & toolbars.

The difference here is the last tech crash involved more companies that raised funds through IPOs and fewer acquired companies. When the second-rate companies fade away, it will be the VCs who will take the hit. Some of the best companies have already been acquired (MySpace by News Corp, last.fm by CBS) and their success or failure will be integrated into the results of their parent companies. To Silicon Valley's job market, though, a bust is a bust. To entrepreneurs, a bust of any kind will mean capital will be scarce for a few years.

Here's a good section from that Independent article, written by KPMG's Tudor Aw, that ties in nicely with Dvorak's piece:

"The existence of a 'digital bubble' has yet to be proven. However, similar warning signs to those present in the rail and dot.com bust are already identifiable: investments based on speculation rather than economics; unproven business models; overheated prices; and capital in excess of available assets."

Murdoch's Wall Street Journal Strategy

Now that News Corp's quest for Dow Jones (publisher of the Wall Street Journal) is over, people are thinking about the post-acquisition strategy. What does Murdoch have in store? From Richard Siklos at the New York Times:

"His strategy will probably include aggressively undercutting advertising and investing heavily in editorial content — particularly in Washington and international news — absorbing losses at first to win the longer-term war.

At its most ambitious, Mr. Murdoch’s vision for Dow Jones would establish The Journal as the rival to The Times in setting the daily news agenda of the country.

The vision has a business corollary: by broadening The Journal’s influence beyond pure business readers, Mr. Murdoch wants to reposition it as not just the world’s leading financial newspaper, but the world’s leading business journalism source for consumers.

The paper has already tried this with softer service features and its Saturday edition. Reorienting the newspaper further for consumers would fit with two other aspirations Mr. Murdoch has. One is to build his nascent Fox Business Network, which begins in 30 million United States homes this October, into a viable contender with Bloomberg Television and CNBC, which have much larger subscriber bases both at home and abroad. ... Mr. Murdoch’s second and overarching vision is to resurrect the newspaper industry by integrating print and video online and building brands around the world."

And...

"A more immediate change might be felt on the Web side, where The Journal has stood out among newspapers by commanding more than 900,000 paid subscribers. Executives at the News Corporation are keen to explore whether more of that content ought to be offered free online to increase the audience and attract advertising, while keeping subscribers by offering more premium services. A more open WSJ.com would be able to attract more advertising, but also potentially distribute that advertising across the News Corporation’s online footprint."

The phrase that sent shivers down my spine was "the world’s leading business journalism source for consumers." Logic says that business journalist for consumers -- which I interpret to mean typical Joes and Janes rather than astute business readers -- will be a more dumbed down version of today's WSJ. That could -- not will, but could possibly -- impact its credibility (see next paragraph) in the financial world. That would open the door for a competitor to nip at the WSJ's heels...although it's hard to imagine right now since the #2 business newspaper is so far behind.

Side note in this WSJ article: Bancroft family member Leslie Hill opposed the New Corp acquisition and resigned from the board of directors yesterday. Hill worries about "the loss of an independent global news organization with unmatched credibility and integrity." Hard to argue with that. An independent Dow Jones may not be the best thing for the company's financial statements, but it may be the best thing for journalism.