A blog about business and economics.

July 15 2014 6:38 PM

Yahoo’s Sisyphean Struggle Against Plunging Ad Prices

Ever wonder why all of your favorite websites are suddenly serving up more video? Look no further than Yahoo’s latest quarterly earnings for an answer. The company announced that its profits and revenues had both dropped year over year, thanks in large part to the deteriorating value of display advertising, which makes up 38 percent of its business.

See this graph? It comes from the Yahoo's earnings presentation, and depicts the Sisyphean struggle it's locked into at the moment. The company is selling more ads, yes, but for ever cheaper rates. This quarter, sales jumped 24 percent, but prices fell by an equal amount. Add it up, and total display revenue was down 7 percent. It’s one step forward, 1.07 steps back.

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There are a couple of reasons why display ad prices are sliding at Yahoo (and plenty of other companies that are in the masochistic business of selling advertising next to journalism). First, there’s simply more competition from social networks, with their vast troves of user data. Beyond that, media buyers have technology on their side thanks to ad exchanges, which let them look at inventory across the entire media market and pick the best value. Yahoo is trying to fight back by investing in higher-end online magazines so it can offer more native advertising, which marketers treat as less of a commodity. Of course, they're just playing catchup to sites like Buzzfeed in that space. And in the end, it’s hard for anyone to command much for their advertising space with such a massive throng of websites competing and driving prices down.

Which brings us back to the topic of moving pictures. While the market is swimming in text, advertising executives will tell you that clients are desperate to run commercials on glossy, high-production online video, in part because audiences can't skip them. Yahoo has responded by buying the rights to original television shows, including a new season of Community, to complement a news operation fronted by Katie Couric. It's a big-budget version of a strategy that much of online media is already chasing—which isn't a great place to be if you're supposedly a tech company first.

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July 15 2014 5:37 PM

Former Twitter Employee Sues the Company for Age Discrimination

When Mark Zuckerberg was 22, he said five words that might haunt him forever. "Younger people are just smarter," the Facebook wunderkind told his audience at a Y Combinator event at Stanford University in 2007. If the merits of youth were celebrated in Silicon Valley at the time, they have become even more enshrined since. Twentysomething CEOs like Evan Spiegel and Aaron Levie are standard at tech companies that command billion-dollar valuations. The elite Thiel Fellowship for college students-turned-entrepreneurs is nicknamed "20 under 20." Forbes publishes a now-annual list of the best and brightest "30 under 30."

So it comes as little surprise that the tech community often runs into accusations of age discrimination. The latest allegations come from Peter H. Taylor, Twitter's former manager of data center deployment. In a lawsuit filed with the Superior Court of California last week, Taylor, 57, claims he was wrongfully terminated by Twitter last September based on his age and a physical disability.

"Plaintiff's supervisor made at least one critical remark about plaintiff's age," the suit alleges. "The persons defendants employ in positions similar to plaintiff's position are all substantially younger than plaintiff. Defendants replaced plaintiff with several employees in their 20's and 30's." The suit also accuses Twitter of increasing Taylor's workload to an unmanageable level after he fell ill and was treated repeatedly for kidney stones, then firing him when he failed to complete the work.

A spokesperson for Twitter said in a statement that the suit is "without merit" and that "we will vigorously defend ourselves against it."

In 2011, Google reached a multimillion-dollar settlement in a similar suit with computer scientist Brian Reid, who was fired from the company in 2004 at age 54. Reid claimed that Google employees made derogatory comments about his age, telling him he was "obsolete," "sluggish," and an "old fuddy-duddy" whose ideas were "too old to matter." Other companies—including Apple, Facebook, and Yahoo—have gotten themselves in hot water by posting job listings with "new grad" in the description. In 2013, Facebook settled a case with California's Fair Employment and Housing Department over a job listing for an attorney that noted "Class of 2007 or 2008 preferred."

Whether Taylor or Twitter is in the right, the lawsuit is a reminder that age is right up there with gender and race when it comes to employment problems in tech. Older tech employees and executives have admitted to seeking plastic surgery and trading button-downs for T-shirts to fit in with the Valley's fresh-out-of-college culture. The pressure to look young now afflicts even the still-very-young, with twentysomethings in tech seeking out cosmetic touch-ups from surgeons, as Noam Scheiber reported in the New Republic in March. Age discrimination tends to be difficult to prove in court, but as a cultural problem in Silicon Valley, it's all but case closed.

July 15 2014 11:36 AM

How a T-Shirt Company Scored on LeBron’s Return to Cleveland

This story originally appeared in Inc.

Four years ago, LeBron James upset the city of Cleveland when he joined the Miami Heat. But all seemed forgiven last Friday, when he announced he was coming home.

Fresh Brewed Tees, a small apparel company in James' hometown, was ready. Not only had the company printed several custom tees, it had a Plan B when its website crashed within minutes of James' announcement. The company set up meeting points around Cleveland where people could buy their shirts. How did customers know where to go? Twitter. 

With 20,000 plus followers, reaching customers wasn't a problem. And Fresh Brewed Tees' grasp of the medium was uncanny: photos of empty boxes made the tees seem like a hot commodity, while selfies of happy customers modeling their "For6iven" shirts were the ultimate endorsement.  

Fresh Brewed Tees owner Tony Madalone told Fox Sports he began prepping a week ago. He came up with the "For6iven" design that switches the G with the number 6, LeBron's jersey number with the Heat, then teased the shirts last Wednesday on Twitter. "If it happens, y'all. Coming soon, #FOR6IVEN RETWEET" The tweet was shared hundreds of times. 

Within five minutes of James' announcement, "we sold all of our inventory—over 2,000 shirts in just a couple of hours," Madalone told Fox via text message. "We're printing 2,500 through the night to keep up."  

It just goes to show, while Instagram might be all the rage for small businesses, it can't hurt to try Twitter too. Just get your timing right.

July 15 2014 11:13 AM

Listen as a Desperate Comcast Rep Refuses to Cancel a Customer’s Service

This weekend, tech journalist Ryan Block attempted to cancel his Comcast subscription over the phone. Instead of a quick hello and goodbye, the conversation turned into a harrowing, 18-minute customer service odyssey, with the company rep refusing again and again to disconnect Block's service without an explanation. The guy sounds like a soon-to-be ex desperately trying to fend off a breakup. Sample dialogue:

Rep: I’m just trying to figure out what it is about Comcast service that you don’t want to keep.
Block: This phone call is actually a really amazing representative example of why I don’t want to stay with Comcast.
Rep: OK, but I’m trying to help you.
Block: The way you can help me is by disconnecting my service.
Rep: But how is that helping you! How is that helping you! Explain to me how that is helping you!

This is not normal behavior. Like John Herrman over at The Awl, I can hardly imagine what horrible, punitive incentive structure Comcast has put in place for its employees that might inspire this sort of interaction. There's something almost heartbreaking in the moment the rep finally gives up. The recording below starts about 10 minutes into the conversation.

July 14 2014 6:13 PM

Why Uber and Lyft Are Not Interchangeable Services in New York

Lyft, the purveyor of pink-mustachioed cars, markets itself as a "friendly, affordable ride" for city-dwellers everywhere. But New York officials aren't buying it. On Friday evening, the New York State Supreme Court in Manhattan forced Lyft to delay its planned launch in Brooklyn and Queens in response to complaints filed by the attorney general's office. New York is also seeking to halt the company's operations in Buffalo and Rochester and has accused Lyft of heedlessly disregarding the law.

"As it has done in every other city in which it operates, defendant has simply waltzed into New York and set up shop while defying every law passed whose very purpose is to protect the People of the State of New York," the attorney general's office wrote in a court filing. "Despite being warned and told to cease and desist by three separate regulatory and enforcement agencies, defendant has thumbed its nose at the law and continued with its plan to launch in what could become its largest market."

While Lyft is facing court action, similarly app-based ride service Uber has continued to operate in New York without a problem, making clear that the two platforms are not as interchangeable as they might seem. Why can Uber deliver rides legally in New York while Lyft cannot? In this case, it's because Uber has tweaked its service to follow New York law while Lyft has so far ignored it.

Uber New York is unique compared with other cities because it operates as a purely commercial service. Elsewhere, Uber Black and Uber SUV are commercial services (their drivers are commercially licensed and their cars commercially insured), while the cheaper UberX is a simple ride-sharing service facilitated by regular people with regular driver's licenses. But in New York, even UberX drivers are commercially licensed and their vehicles registered with the Taxi and Limousine Commission.

Where Uber ceded to state and city regulations, Lyft has not. In its filing, the attorney general's office accuses Lyft of violating eight different state and local laws and regulations. These include employing drivers without the proper licensing and insurance and using vehicles that aren't registered with the Taxi and Limousine Commission. "Lyft is flagrantly flouting state and local laws designed to protect the public health and safety" and "putting the entire public at risk," the complaint alleges.

Lyft's legal team was back in court this afternoon attempting to convince a judge to let it move forward with its plans for New York City. While the attorney general's office issued a statement on Friday claiming the court had hit Lyft with a temporary restraining order, the company contended in a post on its own blog that it agreed to delay the launch and that no such injunction was granted. No word yet on which side succeeded. At any rate, Uber should sit back and enjoy this rare moment: For once it's another ride service that's getting the most grief from a major city.

July 14 2014 3:39 PM

The Unending Horror of the Humanities Job Market, in One Chart

The weak job prospects facing humanities Ph.D.s are sort of a dog-bites-man story by now, and most budding classics scholars probably don’t need another reminder that they may have trouble ever getting a mortgage. But while working on my piece about surprisingly mediocre employment trends among young scientists, I gathered some data that I think uniquely spells out the consistent horror of the humanities market over the past 20 years.

The numbers come from the National Science Foundation’s Survey of Earned Doctorates, which asks Ph.D.s during their graduation year whether they:

  • Have a definite job commitment from an employer, whether in industry or in academia;
  • Have a definite commitment for a postdoctoral research appointment;
  • Are negotiating with at least one organization;
  • Are still job hunting (meaning unemployed); or
  • Have other plans, such as pursuing yet another degree.

Meanwhile, the NSF uses the label "humanities" broadly, covering foreign languages, literature, philosophy, history, performing arts, and other specialties.

Now on to numbers. The most important line is that purple squiggle, which tracks joblessness. In 2012, the last year available in the data, about 35 percent of graduating humanities Ph.D.s were still seeking work and weren't negotiating with any potential employers. In happier economic times, the rate was just under 30 percent—certainly better, but still high.  

Even in scientific fields where jobs are scarce, unemployment rates at graduation simply don't rise that high. Take the life sciences and chemistry. In 2012, fewer than a quarter of new Ph.D.'s in those fields reported that they were employed. Yet outright unemployment among these students was also under 25 percent, because they could still find postdoctorate positions—temporary research posts that let them train under a tenured professor and possibly burnish their resume. They don't pay especially well, but they offer opportunities for those who can't find better.

In the humanities, postdocs are far rarer, for the simple reason that literature and foreign language professors usually aren't running large research labs requiring many pairs of hands. In the end, most grads either find a job, or they find nothing.

Then again, job is a tricky word here. When the NSF asks students whether they have a definite commitment from an employer, it doesn't differentiate between short-term or part-time jobs and stable, permanent work. In other words, it tosses together adjuncts and teaching fellows along with graduates who end up in the tenure track—meaning the real market might be even a bit worse than this graph lets on. 

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Jordan Weissmann

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July 14 2014 12:14 PM

Watch John Oliver Explain Income Inequality With a Ridiculous Powerball Lottery

In his latest monologue on Last Week Tonight, John Oliver takes on income inequality. By at least one measure, U.S. income inequality is at its worst since 1928. Yet barely half of Americans think this disparity is a serious concern. Oliver thinks this last point might be explained by Americans tricking themselves into believing they can still work hard and become a modern day Horatio Alger. Some might call that optimism. Oliver considers it a deluded gambling problem.

"America now has a system where wealth is essentially dispersed as a lottery of birth," he says. "And maybe the reason we seem to accept that is that even though we know the odds are stacked against us, we all think we're going to win the lottery." To illustrate his point, Oliver plays a quick game of what he dubs "America Ball." It's a lottery that consists of two separate drawings: one for people with inherited wealth, and one for people born poor. We won't spoil the ending. And check out the full clip below:

July 14 2014 12:10 PM

Investors Say “Meh” as Citigroup Announces $7 Billion Mortgage Settlement

Citigroup will pony up $7 billion to settle government allegations that it misled investors about the rotten quality of loans it packaged and sold to them as supposedly safe mortgage-backed securities. The tab includes a cool $4 billion cash fine it will pay to the Justice Department—“the largest payment of its kind,” according to the New York Times—as well as money for the FDIC and several states and $2.5 billion in consumer relief, such as mortgage principal reductions and financing for affordable housing. It’s a pretty hefty sum, especially compared with the token payment Citi seemed to think it would be able to get away with when it opened negotiations in May by offering a mere $363 million to settle the DOJ’s charges.

And yet, as tends to be the case with bank settlements, there’s something a little sour about this agreement. Yet another financial institution is paying for the behavior that capsized the global economy by handing over a few billion dollars, then moving on. Notably, Citi's stock is still up slightly for the morning on otherwise strong earnings. Temporarily, this fine takes money out of investors’ pockets, but it’s not as if it will impair Citi’s long-term ability to do business. Contrast today's placid reaction with when the bank failed a Federal Reserve stress test in March. Regulators were worried about the bank’s ability to project losses in the future and rejected its request for a higher dividend and stock buyback. Shares promptly fell the most in a year because it signaled the sort of problem that could dog Citi indefinitely.

Citi is now the second American megabank to strike a deal with the DOJ over its mortgage-related misbehavior, following JPMorgan, which sealed its own multibillion-dollar settlement earlier this year. The government is already warning that more mortgage settlements are coming, most likely with Bank of America, which has been negotiating its own terms, next in line. If today’s deal is any sign, the eventual pact might deliver yet another gaudy sum, but not necessarily a whole lot of satisfaction, or lasting incentive for banks to behave themselves in the future.

July 11 2014 4:13 PM

Tourists Are Driving Colorado’s Marijuana Boom (and That’s Bad for Legal Weed)

Marijuana, I am sure you will be surprised to learn, appears to be pretty popular with tourists. Colorado’s Department of Revenue is out with an interesting new report that estimates statewide demand for legalized cannabis, which concludes that out-of-towners will consume 8.9 metric tons of the drug in 2014. That’s but a dime bag compared to the 121.4 metric tons locals will purchase. However, those state natives are still mostly buying medical pot. When it comes to the retail sales that have grabbed the country’s attention, visitors are driving much more demand. From the report (emphasis added):

Using a combination of sales tax receipt information, point-of-sale statistics, and data from county tourist offices, it is possible to impute visitor demand. For example, we estimate that purchases by out-of-state visitors currently represent about 44 percent of metro area retail sales and about 90 percent of retail sales in heavily visited mountain communities. Visitor demand is most prevalent in the state’s mountain counties, where combined medical and retail marijuana sales more than doubled after retail sales were legalized in January, 2014. In comparison, Front Range metropolitan combined sales only increased between 15 and 19 percent over the same period.

To repeat, tourists may be responsible for 90 percent of retail marijuana sales in resort towns, and nearly half in major metro areas.

For legalization advocates in Colorado, those interlopers may be a godsend. As Walt Hickey has written at FiveThirtyEight, part of the sales pitch for legalizing marijuana was that it would be a whole new source of tax revenue. Indeed, the state collected about $4.8 million worth of marijuana sales taxes in June, largely thanks to retail pot, which is taxed at a higher rate than medical sales.

However, this raises an interesting question. If so much of the demand is coming from tourists, you have to wonder: What will happen if other states follow Colorado’s lead and legalize? Presumably, it would mean fewer visitors generating fewer sales taxes. Inadvertently, then, Colorado may be demonstrating the limits of retail weed as a tax source, at least when locals can still get a medical card with relative ease.

July 11 2014 3:05 PM

France Banned Free Shipping. So Amazon Made It Cost One Cent.

This past October, French lawmakers decided it was time to show Amazon who's boss. Frustrated by Amazon's fast and cheap book-selling model, which poses a threat to France's healthy ecosystem of indie bookstores, politicians banded together to approve a bill that prohibited Jeff Bezos' company and other online retailers from shipping discounted books for free. The measure is designed to protect traditional booksellers who have complained that Amazon is hurting their businesses.

France's fun didn't last long. With the law officially in effect, Amazon announced that it is indeed complying with the terms and charging for shipping—a full one cent. "We are unfortunately not allowed to offer you free shipping for ordering books," Amazon writes in the FAQ section of its website. "We have therefore set delivery fees at one euro-cent for each order that contains books and that is sent by Amazon in order to systematically guarantee you the lowest price for your book orders."

Where Amazon can't shirk the law so easily is in its second provision: that online retailers can no longer legally discount the price of books. France used to allow retailers to sell books for up to 5 percent off the price set by the publisher but has now limited this privilege to traditional brick-and-mortar stores. Even with one-cent shipping, that promises to give physical bookstores a big edge—but then again, Amazon could appeal the decision to European courts for being anti-competitive.

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