A blog about business and economics.

Nov. 12 2014 11:26 AM

Why the Internet Didn’t Have Ads This Morning

If you were browsing around the Internet between 9:45 and 10:30 this morning, you might have noticed that your favorite websites seemed curiously ad free. For that you can thank Google. The company's DoubleClick ad servers went down, leaving sites including Slate, the Wall Street Journal, Forbes, the New Yorker, the BBC, and others stripped of their advertising. Some simply failed to load as they tried and failed to pull up their banner ads. As Napier Lopez succinctly put it on the blog of TNW during the outage, "It’s likely affecting millions of advertisements across the Web and could cause advertisers to lose a whole lot of money collectively."

Aside from the fact that publishers just suffered a collective coronary, this little incident is interesting because it's a very visual reminder of how Google underpins so much of the Internet's essential infrastructure. In the words of the Awl founder Choire Sicha:

The company controls slightly less than a third of all digital advertising dollars but is probably even more dominant when it comes to serving display ads for online publishers (I haven't been able to track down specific market-share data on that front). This isn't necessarily a bad thing. Having an absolutely giant marketplace where websites and advertisers can buy and sell ad space makes the business more efficient. But if something goes wrong with Google's hardware, the company apparently turns into the world's most powerful ad blocker.

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Nov. 11 2014 4:34 PM

Alibaba Blows Away Singles Day Record With $9 Billion in Sales

Yesterday, for Moneybox, we wrote about Singles Day, the biggest day in online shopping you've probably never heard of. Singles Day, to briefly recap, was started in the 1990s by university students as a kind of anti–Valentine's Day and rebranded as a huge commercial event by Chinese e-commerce giant Alibaba in 2009. Last year, Alibaba did $5.8 billion worth of transactions on Singles Day. This year, it was projected to top $8 billion.

Singles Day is still ongoing in the U.S., but in China—where it's the rough equivalent of Cyber Monday—the day has already wrapped up. And based on the numbers we have so far, Alibaba crushed it. In just 24 hours, Alibaba's various shopping sites did more than $9.3 billion in sales—an increase of about 60 percent from last year. Nearly $2 billion of that amount clocked in during the first hour of Singles Day alone. When the final tallies come in from sales on Alibaba's AliExpress site (for buyers outside China), that total could climb far higher.

Alibaba's Singles Day sales have been growing at a somewhat terrifying clip since 2009. Here's a nice chart from Forbes showing that:

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Despite blowing away its Singles Day sales record—or perhaps because of it—Alibaba is having one of its worst days on the stock market since its Sept. 19 debut. Shares on Tuesday fell 3.87 percent to $114.54, and continued to trend down after the bell. One theory for the weakness was that Alibaba Chairman Jack Ma rattled investors with an interview he gave to CNBC. "Today when people have high expectations on you, I start to worry," Ma said. "We are not that good yet. We are a company only 15 years old. ... It's a young company, young industry, and it's not easy." As per usual, the dip can also be chalked up to profit taking.

Ma also said Tuesday on China's state TV that he thinks Alipay, the financial services arm of Alibaba, will definitely go public on its own. Asked about his plans by CNBC, Ma said he hoped to take Alipay public not for money but for transparency. "I want this company to last long. I want this company to be audited by everyone involved," he said. "If we can be public, more people know about us more people look at us, that will be good. I can sleep well."

With $9 billion-and-counting in sales under Alibaba's belt for this year's Singles Day, he should probably sleep well tonight regardless.

Nov. 11 2014 3:25 PM

Yes, the Middle Class Really Is Sinking

Most Americans sense that the middle class is in decline. And why wouldn’t they? Wages are stagnant. The income of the typical family is lower today than at the turn of the century. We just lived through a recession that crushed middle-class wealth into drywall dust. By most obvious measures, there doesn’t seem to be much cause for optimism.

Richard Reeves, a researcher at the Brookings Institution, begs to differ. “Certainly the golden years of income growth enjoyed after World War II are behind us,” he writes at the Atlantic this week. “But it is simply false to imagine that the American middle class is sinking.” Before taxes, the median household makes less money today than it did at the end of the dot-com boom. But after taxes, Reeves points out, middle-class incomes actually grew between 2000 and 2010, at least if you count employer benefits like health insurance and government transfers. Between tax cuts and the welfare state, he argues, the government is pulling up regular families faster than the economy is pulling them down.

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In the end, Reeves is making a political point. He thinks liberals are too lugubrious for their own good—that they tend to exaggerate the problems in the economy in order to justify new safety-net programs but just end up convincing voters that government doesn’t work instead. He thinks the left would be better off trumpeting Washington’s successes and asking: “What’s the next problem we can help solve?”

Progressives probably could do a better job explaining how the government already improves the lives of most Americans. But it also doesn’t serve anybody’s interest to deny that the middle class is in trouble. It is, and we need to reckon with it.

First, about those rising incomes. Part of that growth, as Reeves writes, has been delivered in the form of health insurance paid for by the government and employers. The problem is that health insurance isn’t the same as cash. You can’t save it for a down payment on a house or put it away in your retirement fund. You can’t use it for groceries or gas. Meanwhile, employers and the feds are spending more on health coverage not because Americans are getting better and better care, but because the same care is getting more and more expensive. That’s not a sign of improving living standards. It’s just inflation.

How badly is health care eating into paychecks? According to Reeves’ Brookings colleague Gary Burtless, health insurance and noncash benefits from the government made up 17 percent of after-tax income for the middle fifth of American households in 2010. In 1980, it was just 6 percent.

Then there’s the housing crash. Income is important, but savings are what actually provide some semblance of financial stability for families. And on that score, the middle class is still recovering from crises. Thanks to the collapse of home prices that led to the recession, the median household’s net worth is now lower than in 1984, according to the Russell Sage Foundation.

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You can argue that this is just a temporary setback, that eventually home values will recover and restore vast swaths of the country to financial health. But families spent two decades counting on perpetually rising home values to support their lifestyles, taking out second mortgages when they wanted to make big purchases, and hoping that their real estate would provide a nest egg in old age. That’s all done. And with cash incomes relatively stagnant, it’s worth worrying about how Americans are going to save for the future, especially at a time when traditional middle-class occupations in industries like manufacturing are in decline and being replaced by low-wage service work.

The cost of health care is weighing down middle-class incomes. The recession made mince meat of middle-class savings. The government has been a buoy. But it hasn't actually stopped families from sinking completely.  

Nov. 11 2014 12:19 PM

There’s Even a Data Breach at the Post Office Now

Hackers might actually be running out of useful places to hack. FBI Director James Comey himself said last month that the Chinese had hacked every big company in the U.S. And their latest target? The U.S. Postal Service.

The USPS said Monday that the names, dates of birth, addresses, social security numbers, and other personal information of its 800,000 employees may have been compromised in a recent breach of its computer systems. While the FBI is still investigating the incident, the Washington Post reports that the hack was discovered in mid-September and is suspected to have come from the Chinese government.

So far, the damage to customers seems relatively minor. The USPS said in a statement that there is "no evidence that any customer credit card information from retail or online purchases ... was compromised." On the other hand, customers who reached out to the USPS by phone or email between Jan. 1 and Aug. 16 may have had their names, addresses, and contact information compromised.

The Postal Service is the latest in a long string of organizations that have been targeted in cyberattacks lately. Target, Neiman Marcus, Michaels, Home Depot, and JPMorgan Chase have all disclosed data breaches this year. At the same time as the hacks have started occurring more frequently, America's interest in them has seemed to wane. Data breaches, like auto recalls, are on their way to becoming something people know they should care about, but mostly tune out.

Of course, this is all getting away from the main point: Hackers hacked the post office. Experts told the Washington Post that the breach needs to be viewed as "part of a continuous series of efforts to target the government" and that the Chinese might assume the U.S. Postal Service has more information on citizens (like their own) than it actually does. Even so: Who would have thought that the USPS had enough digital data to make it worth breaching?

Nov. 11 2014 7:34 AM

Pizza Hut Rebrands With Spinach, Sriracha, and Plenty of Puns

The cover photo on Pizza Hut's Facebook page shows a pepperoni pizza oozing bacon and cheese from its crust—which is only appropriate, coming from the same chain that birthed the 2,880-calorie cheeseburger pizza. (Update, Nov. 11, 2014: Since this post was written Monday night, Pizza Hut has updated the cover photo on its Facebook page with … spinach and what appears to be sriracha! Let the rebranding begin!) Despite this strong attachment to grease and salt, however, Pizza Hut has decided to pursue a new flavor path: healthy and eclectic.

Pizza Hut, the Yum Brands unit and Italian-ish sibling of KFC and Taco Bell, announced Monday that it is seriously rebranding its U.S. business. Starting Nov. 19, Pizza Hut is rolling out 10 new crust flavors (among them, toasted Asiago and honey sriracha), six sauce choices (buffalo, more honey sriracha), five "premium toppings" (banana peppers, spinach), and five "drizzles" (balsamic, more buffalo, and even more honey sriracha). The menu is also getting a line of "Skinny Slice" pizzas with about 250 calories a slice, and the pizza itself a new logo and box.

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"Skinny Beach."

Courtesy of Pizza Hut

According to USA Today, the overhaul is the biggest in Pizza Hut's 56-year history. In addition to more than doubling the ingredients at each of Pizza Hut's 6,300 restaurants nationwide, the rebranding is also introducing a number of puns to the menu, such as "Curried Away" and "Cock-a-Doodle Bacon."

The ambitious rebrand is aimed at giving a much-needed boost to Pizza Hut's business. In the latest quarter, same-stores sales in the U.S. declined 2 percent and operating profit fell as well. While those numbers weren't great, Yum Brands CEO David Novak said on the quarterly earnings call that Pizza Hut "should have a strong 2015 led by an expected U.S. turnaround." That plan, he added, would include ads designed to "better connect with millennials" that would also "reinforce Pizza Hut's leadership, quality, innovation and superior value."

Pizza Hut is joining a series of fast-food chains that are desperately trying to escape their fast-food images. McDonald's, the standard-bearer for this movement, has gone so far as to hire Grant Imahara of MythBusters and ready a new slogan—"Lovin' Beats Hatin' "—to fend off consumer skepticism. McDonald's could certainly use some loving after its profit plunged 30 percent in the latest quarter and its same-store sales slipped 3.3 percent. Pizza Hut could as well. The question in both cases is how much rebranding and spinach and sriracha it will take for customers to buy in.

Nov. 10 2014 6:21 PM

Republicans Might Hate Obamacare Enough to Boycott It, Even if They’re Uninsured

How much do conservatives hate Obamacare? Enough that some of them might be boycotting its insurance exchanges this year, even if they’re uninsured. That’s according to a new study by researchers at the University of Washington, who polled thousands of the state’s residents to see whether endless partisan struggle over the health care law had affected Americans’ willingness to buy coverage through its online markets.

To figure out how participants leaned politically, the survey asked them whether they blamed President Obama and the Democrats or the Republicans for last year's government shutdown, and whether they agreed with the Supreme Court's decision upholding the Affordable Care Act. Overall, just 7 percent of participants said they would definitely use the exchanges this year, while another 20 percent were unsure. Even after adjusting for factors like age, finances, and personal health, uninsured individuals were much more likely to say they planned to buy coverage on an exchange if they blamed the GOP for the shutdown than if they blamed the Democrats.

Meanwhile, the "unsure" group showed signs of feeling politically conflicted. When it came to their financial concerns and health needs, they were similar to the group that planned to use the exchanges. However, when it came to their feelings about the shutdown, they were more similar to the group that did not plan to use the exchanges.

The authors conclude that "the current political rancor in our federal government" may make it "difficult to enroll certain segments of the eligible population through the Exchange." As a fix, they suggest more "bipartisan outreach."

Jason Millman at the Washington Post might have a more realistic takeaway: Democrat-led states with large conservative populations may be best off following in Kentucky's footsteps. The government there did its best to obscure the connection between Obamacare and its state exchange, which it branded as Kynect. This has led to a strange political situation in which many Kentuckians claim to love their health care marketplace, yet to dislike the reform law. But that contradiction is preferable to letting people pass up affordable health coverage.

Nov. 10 2014 4:51 PM

Bad News for Bankers: Bonuses Might Disappoint This Year

Wall Street's bonuses—aka the ultimate measure of all that is important and worthy in finance—might be shrinking for many a banker this year. That's the dismal news from Johnson Associates, a compensation consulting firm, which released its annual survey on the matter on Monday.

Before the bad news, the good: Investment bankers are doing just fine. After a year of heightened merger-and-acquisition activity, their end-of-year bonuses are expected to rise 5 percent to 15 percent. Bankers in private equity and asset management can expect to see their payouts climb by a similar range. But for everyone else, the trend is down. According to the Johnson Associates report, bankers and traders in stocks and bonds could see their bonuses fall by up to 10 percent. In retail and commercial banking, the sums will likely stay flat. Even hedge funds might be paying 10 percent less in bonuses this year.

While Johnson Associates doesn't release specific figures with its report, a spokesman said that, generally, a managing director in investment banking with 10 or more years of experience could expect a bonus package of $500,000 to $1 million this year. For a vice president of investment banking, the total bonus could fall between $200,000 and $400,000.

Over at DealBook, Nathaniel Popper notes that the trends in bonuses could mean regulators are getting what they want. More sedate sectors of finance—asset management and private equity—are hauling in the big bonuses, while the higher-risk ones are not.

The changing fortunes on Wall Street are largely consistent with what regulators hoped to see in the wake of the financial crisis. New rules have discouraged banks from doing the sort of risky trading that used to result in big profits.
The regulations have instead encouraged banks to emphasize businesses that serve clients, such as wealth management and deal-making. These more staid business units do not require the banks to put any of their own money at risk.

The decline in bonuses also isn't too surprising considering the other tepid tidings from Wall Street this year. While banks implemented "protected weekends" for junior bankers and salaries inched up for those employees, many big banks have laid off workers this year. Goldman Sachs said in its third-quarter earnings that it had decided to set aside less money for employee compensation. And just last week, JPMorgan announced that it would cut thousands more jobs in both mortgage and retail banking than it had previously expected. All in all, not a great year.

Nov. 10 2014 3:07 PM

The Obama Administration Just Set Some Very Low Expectations for This Year’s Health Care Sign-Ups

With open enrollment set to start Saturday, the Obama administration is predicting that far fewer Americans will sign up for health insurance through Obamacare's online exchanges this year than others have forecast. The Department of Health and Human Services estimates that between 9 million and 9.9 million individuals will purchase coverage through the exchanges. That includes both new enrollees and people who bought plans last year. The Congressional Budget Office previously projected that the figure would be 13 million, but HHS believes it will take more time for the program to "ramp up," in part because it expects that Americans will move from their employer-sponsored plans onto the exchanges more slowly than the CBO anticipates.

The CBO also believes that the exchanges will hit a "steady state" of 25 million enrollments by 2017.*  HHS officials said today that they weren't sure how long it would take to meet that mark, but that it would "take longer than three years."

Regardless of whether the lower estimate is correct, the announcement is probably a wise move politically. Whether the issue was the effect of stimulus spending or the pace of Affordable Care Act sign-ups, the Obama administration has never exactly benefited from setting high expectations. During last year's open-enrollment period, it had to deal with the endless media speculation over whether it would hit the CBO's projection of 7 million sign-ups. It's better to keep the bar low and clear it than trip over a nice-sounding but maybe overly ambitious target.

*Correction, Nov. 10, 2014: Due to a typo, this story originially misstated that the CBO expected the exchanges to reach 25 million enrollments by 2107.

Nov. 10 2014 12:52 PM

The World’s Biggest Online-Shopping Holiday Is Underway, and You’ve Probably Never Heard of It

Over in China it's already Tuesday, which means that the biggest online-shopping holiday in the world has started. It's called Singles Day—as in, the opposite of Valentine's Day—and it generates more e-commerce sales than the post-Thanksgiving Black Friday and Cyber Monday combined.

Singles Day was started in the early 1990s by students at Nanjing University who wanted to celebrate their single status. The date, Nov. 11, was christened "bachelors' day" for the four "singles" (i.e., 11/11) it contains. It remained something of a niche holiday until e-commerce giant Alibaba took note in 2009 and rebranded Singles Day as a huge online sales event with steep discounts. Since then, Alibaba's business on Singles Day has grown by leaps and bounds. In 2013, Alibaba did $5.8 billion worth of transactions on Singles Day; this year, it's expected to top $8 billion. Cyber Monday, by comparison, accounted for just $1.7 billion in sales last year.

The craziest thing about Singles Day is that its huge sales so far have been almost entirely driven by Chinese shoppers. What Alibaba is looking to do now is grow Singles Day from a Chinese phenomenon to a global one—an expansion that's all the more important after Alibaba debuted on the New York Stock Exchange in mid-September. That IPO rang in as the biggest ever in the U.S. and investors across the world are watching closely to see if Alibaba can maintain its breakneck pace of sales growth.

For this year's event, Alibaba has invited Tmall Global and AliExpress merchants—two platforms that work with businesses and users outside of China—to get in on the promotions. A banner atop the AliExpress homepage features a countdown to the "11.11 Shopping Festival." For those who aren't familiar with AliExpress, it's a gigantic, bizarre, and scam-ridden marketplace that sells everything from $40 mattresses to fruit-themed flash drives.

Companies including Tesla Motors and Zara are also taking part for the first time, according to Businessweek, but where's the fun in that? The hourlong "flash deals" for Singles Day on AliExpress include a casual men's hoodie for $0.11 (discount: 99 percent; quantity available: 100), a vintage quartz watch with leather strap for $0.17 (discount: 99 percent; quantity available: 50), and a high carbon steel fishing hook set for $4.60 (discount: 92 percent; quantity available: unclear). Who can say what other discounted wonders lurk on AliExpress? Happy Singles Day hunting!

Nov. 10 2014 11:37 AM

So, That Kim Kardashian Video Game Made Some Money

It's Kim Kardashian's world; We're all just living—and spending gaudy amounts of money—in it.The Daily Dot reports that Kim Kardashian: Hollywood, her surprisingly addictive mobile game/dissertation on the existential emptiness of postmodern celebrity, raked in $43 million during the third quarter of this year. The game itself is free, but players spent big on in-app purchases of things like clothing and "charm" for your character.

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The $43 million figure is, weirdly, a little bit of a disappointment. Early on, game-maker Glu Mobile said that the app was on track make $200 million by the end of 2014, but it's fallen behind that pace. On the other hand, the game is clearly a hit. It has been installed more than 22.8 million times. Players have spent more than 95 million hours standing around in it.

Are there lessons to gleaned here, other than the fact that Ms. Kardashian still has a Janet Yellen–esque license to print money? I'd argue that it's another reminder that, despite the entertainment industry's traditionally monomaniacal focus on young men, there's plenty of money to be made catering to other half of the population. On the other hand, plenty of men seem to have been playing Kim Kardashian: Hollywood, too. As Time put it, "Everyone wants to be Kim K."

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