PRESS DIGEST - Financial Times - June 25 - Reuters PRESS DIGEST - Financial Times - June 25 - Reuters

Sunday, June 24, 2012

PRESS DIGEST - Financial Times - June 25 - Reuters

PRESS DIGEST - Financial Times - June 25 - Reuters

LONDON, June 25 | Sun Jun 24, 2012 9:44pm EDT

LONDON, June 25 (Reuters) - Financial Times


The Bank of England needs to pump at least another 50 billion pounds ($77.80 billion) into Britain's "stalled" economy, says David Miles of its interest rate-setting committee, warning that only a "substantial" third round of emergency bond-buying will kick-start recovery.


BT has been rebuffed for the third time, this time by the UK's Competition Commission, in its efforts to compel its competitors to share in the costs of lowering its 3 billion pounds ($4.67 billion) pension scheme deficit through higher charges for their use of its phone lines.


The EU financial services industry is on track to spend 33.3 billion euros ($41.74 billion) over the next three years simply to comply with new regulatory demands, a study by the JWG regulatory think-tank has found.


The new chief executive of Airbus says he is ready to "bet" that the European aircraft maker's planned new A350 widebody passenger jet will not suffer the same three-year delay that Boeing had with its 787 Dreamliner.


A string of earnings warnings from U.S. companies that are a barometer of the broader economy is casting a shadow over the outlook for equities.


Vale is preparing to build the world's largest single processing plant for palm oil by 2015 in an effort to cut its vast fuel costs and help develop the struggling Amazon region, the Brazilian mining company told the Financial Times.


Top U.S. and European bankers, including JPMorgan Chase's Jamie Dimon and Citigroup's Vikram Pandit, have enjoyed double-digit annual pay rises averaging almost 12 percent, despite widespread falls in profits and share prices, Financial Times research shows.

Don’t Count Out Facebook’s Business Model Just Yet - Bloomberg

Facebook Inc. (FB)’s disastrous initial public offering has led to an increasing consensus that the social networking site was overpriced and that its business model is flawed.

Some attribute the debacle to issues raised in the company’s prospectus, such as the difficulty of monetizing mobile technology. Others have pointed to the slow growth in advertising revenue or questioned Facebook’s strategy of collecting vast quantities of data from its networked users to enable customized ads.

Yet the pillars of Facebook’s business model -- monetizing customer data and social media -- are here to stay, and the company is among the best positioned to take advantage of both.

Facebook’s strength relies on network effects, economies of scope, discrimination, customization and market power. Most people understand the business to work like this: Users derive the benefits of social sharing. The price they pay is to hand over personal data that is sold to advertisers. The two major threats to this model are that users will increasingly become concerned about privacy and turned off by advertising, which will slow the growth of both the data and ad revenue.

This misrepresents the nature of the exchange. Although there are people who oppose data sharing and advertising of any kind, most consumers benefit from good advertising.

Wasted Effort

The retailer John Wanamaker is often credited as saying, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” He was optimistic. It is doubtful that traditional media advertising is even that effective, and the online variety doesn’t necessarily work any better. Advertising isn’t made more efficient by moving into cyberspace but by using data to identify the appropriate audience.

Every transaction, whether social or commercial, involves search costs. The monetary price of a good usually isn’t a measure of how much a customer has spent on it, nor does it accurately reflect what the producer received. The customer pays the monetary cost plus search costs, which can take the form of consumer research, product assessment and social validation. Sometimes these costs are monetary, but more often they involve time, effort and anxiety.

Similarly, you could say that the seller receives the price minus search costs. He must expend resources to ensure that there is an adequate supply of goods in the right place, educate the customer about the product, and market and advertise it.

Whoever makes this matching process easier is in a position to charge for it. And whoever does it best is in a position to charge the most. This is where economies of scope kick in for Facebook. Most of the companies that have performed this matching process, whether they are brick-and-mortar or online retailers, have done so within a single domain. These companies vertically integrate the advertising platform with the selling platform. For instance, Inc. (AMZN) can use customer- purchase data to design customized advertising of other products. It still doesn’t have access to data on purchases on other sites or offline, and tries to drive all book purchases through its site.

This benefits not just Amazon, but also the purchaser, who is often willing to pay a premium to reduce search costs and increase the likelihood of a better match between preferences and the item purchased.

Limited Matching

Yet this form of matching is limited. Suppose purchasers of a particular book would like to know about a film? Or film lovers might be inclined to visit a new restaurant? Even if advertising contracts can be designed across domains, the matching is suboptimal without data sharing. These limitations on the matching process that result from fragmented data are pushing companies toward greater scope, which explains the wider range of products offered through platforms such as Amazon and Apple Inc. (AAPL) Still, they have trouble knowing what you do in your brick-and-mortar life.

Unlike the companies that integrate the selling and advertising functions, Google Inc. (GOOG) has been extremely successful at streamlining the matching process purely as an advertising platform. It does so by knowing specifically what people are looking for, but also by funneling as much as possible of the online activity through its own platform.

Facebook, like Google, aims to collect data on every aspect of its users’ behavior across numerous domains and not just online. These companies want to know what people purchase, what they like, what they read, where they’ve been and who their friends are. They have created applications that make it increasingly easy to aggregate personal data in a single location. They do so by ensuring that users are generating data even if they aren’t logged on to their sites. Ultimately, the more data that exists in one place, the better the matching process can work.

Facebook and Google now offer their services free and generate all their revenue from advertising. There are questions about the sustainability of this approach. After all, how many hugely valuable companies can rely entirely on advertising? Is there enough advertising to go around? And if advertising becomes more effective through targeting and customization, won’t advertisers be able to reduce their overall spending? Probably not.

By making every advertising dollar more effective, the marginal benefit of each dollar spent increases. When allocating resources, more will be spent on advertising relative to other inputs such as labor or materials. The more efficient the matching process becomes, the more resources will be devoted to matching. Products will derive more of their value from advertising, which will account for an increasingly large percentage of gross national product.

Using Data

Facebook is only beginning to figure out how to use the customer data it collects. If it succeeds, it will be able to weed through information, media and user-generated content, and advertising, and then deliver only the items individual consumers are likely to enjoy or find useful. Most people would be willing to pay to view advertising if they knew the ads were tailored to their needs and desires.

Some have criticized Facebook for moving too slowly to monetize its data, but to keep its customers, it must continue to show that it has their interests at heart. The danger in going public too soon is that Facebook is trying to boost its numbers too quickly, before it has figured out the analytics.

Finally, much of the concern about user-data privacy is irrational in ways that economists would recognize. For instance, there is widespread worry that the availability of medical histories or driving-style information would increase insurance rates, even though rates would go down for at least half the population. As consumers become aware of these benefits -- and learn when and what to share -- they will be increasingly less concerned about privacy.

(Gregory La Blanc is a lecturer at the Haas School of Business and Boalt Hall School of Law at the University of California, Berkeley. He is a contributor to Business Class. The opinions expressed are his own.)

Read more opinion online from Bloomberg View. Subscribe to receive a daily e-mail highlighting new View editorials, columns and op-ed articles.

Today’s highlights: the editors on the Moody’s bank downgrades and on government power over toxic chemicals; William D. Cohan on Wall Street’s job creation; Albert R. Hunt on U.S. business’s embrace of Mitt Romney; Simon Johnson on why U.S. banks aren’t ready for a European crisis; Sharon Bowles on how the EU manages shared debt.

To contact the writer of this article: Gregory La Blanc at

To contact the editor responsible for this article: Max Berley at

Financial firm heads disparate on H2 economic outlook - China Post

Some financial company heads have formed the consensus that the European debt crisis will continue to be a crucial yet uncertain factor, even though the vote in Greece has mitigated concerns that the eurozone may crumble.

According to Tsai Hung-tu, chairman of Cathay Financial Holding, the European debt crisis will not be resolved in the short-term and may last for the whole of 2013. While a recovery in the continent may be possible next year, its strength will be weak. Against this backdrop, Taiwan's export-oriented economy looks murky right now and will be dictated by financial situations around the world, he said.

Tsai Ming-chung, chairman of Fubon Financial Holding, said the local economy will face adversity due to negative developments from Taiwan and abroad. Locally, the stock capital gains tax controversy is expected to drag on, while internationally things look dire with the European debt crisis, tepid recovery of the U.S. economy and a slowdown in China, he said.

“The government should put a stop to all controversial issues so that we all work together on the economy,” he said.

Tsai Yiu-tsai, chairman of Mega Financial, said the economy for the second half is “unpredictable” at best. While the global economy may hit the bottom in the third quarter, how long it will stay at the bottom remains to be seen, he said.

“The global financial crisis a few years back didn't seriously hurt the real economy, resulting in a quick recovery. Yet the debt crisis this time has done huge damage to the real economy, and how long it will take the financial industry to get out from the bottom is hard to say,” he stated.

While most bankers took a conservative, even pessimistic, view on the economy, some offered a glimpse of hope. For example, Wu Tung-liang, chairman of Taishin Financial, said that Taiwan's economy should pick up in the third and fourth quarters.

He said the European crisis has been temporarily alleviated with the Greek vote. That, coupled with China's various stimulus measures, is expected to contribute to a bottoming-out in the second half, he said.

Yang Wen-chun, president of China Development Financial Holding, offered a similar view, saying the U.S.' decision to refrain from a third round of quantitative easing measures indicates its economy is recovering slowly. “This bodes well for information technology operators,” he said.

Small Business: Ben Ridler - gamificiation in the USA - New Zealand Herald's journey in the US: With offices in Canada and LA, the NZ consultants advise USA and Canada based business how to implement their business strategies.

Ben Ridler, CEO

Like many Kiwi-founded companies operating in the global market over the past few years, the business execution specialists at have been prompted to take a look at our own model by the inherent challenge of being the market leader in a small market. Our company is responding by taking its own medicine - we teach businesses how to develop and execute strategy to future-proof their companies and implement a radical new strategy that will transform the company and lay the groundwork for the next 20 years.

The tagline is: Business Execution Software made simple. As a company, we are currently focused on becoming the world's leading provider of business execution software to the small and medium sized business market. In New Zealand we have developed a reputation as a leading management, consulting and strategic planning company.

We have transitioned to the cloud (Software as a Service) as part of our adaption for the US market and now deliver cloud based software and consulting to clients around the world from New Zealand.

Our plan involves maintaining a business execution focus, but replacing a labour-intensive consultation model with a bundled execution software-licensing system and virtual consulting model that puts the power in the hands of business owners.

Gamification and how is using it.

Gamification uses both game mechanics (as used in video and online gaming) in business applications. In short, we use gamification to reward and promote people to perform in the businesses. Gamification is currently one of the biggest trends in enterprise and it is slowly making its way into small business.

At its simplest level it may be a badge for achieving a goal or seeing through a particular process. As businesses evolve, gamification can be used to recognise high performance and behaviours that align with a company's core values.

How small companies can use Gamification.

Any company can use this concept. Currently, the most enthusiastic customers of our business execution software are not tech companies but those that love being able to engage their team with the growth of their business. This simple product can be used to highlight achievements and encourage everyone to pull in the same direction.

New Zealand companies using include pharmacies, radiator repairers and a forklift company. The software is definitely not just for tech companies, but are for anyone who has an iPhone or a computer.

Doing business in North America

North America is geographically large and socially diverse; due to this, a lot more is done online. People meet online, purchase online and deliver services online a lot more than in New Zealand.

As the approach to sales and marketing is a lot more avert and aggressive, there is a need to do more to stand out. It has been a huge learning curve for and one we are really enjoying.

Our new business strategy has come from having to create a business model that can stand up to scale in the US market. We are now applying what we have learnt in New Zealand - this approach is allowing us to reach more of the market at a much more affordable price. is a $10 million business, and that's not a bad place to be. We're focused on moving from a $10 million to a $100 million one, in principle aiming a smaller cut of the larger pie, rather than a big share of a relatively small market. North America and Canada will be important drivers of this growth. We see a lot of New Zealand companies have matured to a point where they can start to do the same.

Ben Ridler's GSummit Blog Post (June 19-21, San Francisco)

I do travel overseas frequently both for the business and Entrepreneurs Organisation. Some would say I've seen it all. Well not this week. I feel like a kid in a candy store and the boxer in me is raring to come out of his corner and defend businesses right to have fun while working.

The complete contrast of speakers from the head scientist from Salesforce, to rapper, Chamillionnaire really help to break us out of our own "industry" paradigm of thinking.

Arriving at the GSummit it was interesting to first be told to download the app, then once you've logged on with twitter you check in to the speakers, rate them, tweet to share and earn rewards for doing it all.

A great way to showcase why we are here and get people engaged.

The differences to other conferences don't end there, speakers talk for 18 minutes and then do 5 minutes Q&A. Lunch is food trucks, and there are video games, Wii's etc all around the venue.

Gamification is expected to be a $2.8 billion industry by 2016, and is one of the hottest new spaces in software. In short it is about using game mechanics (the secret formula the $60 billion gaming industry uses) to increase adoption, engagement and retention in non-gaming applications.

It can also manifest in a company giving rewards for acting sustainably, points for recycling, catching the bus etc. One company is trying to increase engagement of their Government targeted finance software, and another rewards customers for tweeting them, referring, liking on Facebook etc.

The whole industry is very new so the speakers are very varied, from the airline loyalty programs, to Professor Richard Bartle, teaching how to Segment players by different types that are Achiever, Explorer, Socialiser and Killer. It's all about what you find fun, but also how to commercialise fun.

For, we know that the key to companies achieving better results is engaging their employees to execute their strategy, for years we had promoted quarterly themes, recognition programs etc. Gamification is taking that to a new level. Making it fun to work with others, achieve goals, share successes and be recognised visually as well as rewarded with money or prizes.

New Zealand SME's will absolutely get this and we are already experimenting with this in our "Water Cooler" function in the execution software. While Kiwi business owners are practical people, we also know that if we can improve productivity through engagement then this should be a major goal of business owners.

Having spent ten years working on improving business performance, this new set of tools is incredibly exciting and will improve engagement, retention and ultimately results, and make it fun to do it. I can't think of a better way to spend my time.

Why I think it will really work for Kiwis is it moves away from a punitive management system to a rewards based one, Kiwis prefer to have an inclusive relaxed culture in their work place, letting the software create the engagement and visibility takes a huge amount of pressure off business owners and managers.

For further information see here:

Next week health experts will be giving tips to small business owners about how to avoid burnout when battling away in their companies.

Everyone knows that SME owners work long hours, skip meals, don't exercise enough, work late into the evenings and have patchy sleep patterns.

Tell us about your lifestyles since starting your own businesses.
Where do you need help and advice?
Email me, Gill South here, or at the 'email Gill' link below:

By Gill South | Email Gill

Business lending plan fails to cut rates - The Independent

Financial transaction tax on City would help rebalance Britain's economy - The Guardian

George Osborne is adopting a crafty approach to European plans for a new tax on financial transactions. The big four eurozone countries – Germany, France, Italy and Spain – are now all in favour of a levy and the chancellor's response is to let them get on with it.

Britain could have cut up rough about a so-called Tobin tax, but Osborne has decided that the aggro is not worth it. His assumption is that a financial transaction tax (FTT) will raise costs in Frankfurt, Paris, Milan and Madrid, and so drive business to the City.

The chancellor is also dubious about claims that the money will be spent on "good causes" such as development aid or helping poor countries adapt to climate change. In the event that an FTT does prove to be a cash cow, Osborne thinks hard-up European governments will use it to reduce their budget deficits.

From a narrow political perspective, the chancellor's stance makes sense. If the City prospers as a result of being a cheaper place to do business than rival financial centres in Europe, then London and the south-east will benefit. This will make it harder for Labour to win the swing seats in the home counties that it needs to form a government.

Critics of the FTT say that Osborne's approach is good economics as well as good politics. The Robin Hood tax is nothing of the sort, they say. Banks will pass the levy on to their customers and it will make it more expensive for exporters to hedge against currency movements and for homebuyers to get a mortgage.

The notion that the Robin Hood tax is actually a Sheriff of Nottingham tax cuts little ice with those European governments now planning to press on with the idea. They acknowledge that there will be what economists call behavioural effects from an FTT – some transactions will no longer happen as a result of the levy – but they are confident that the overall tax take will increase as a result. Revenue has to be raised from somewhere, so better that it come from the reviled financial sector than, say, raising income tax or VAT. The principle goes back to the 18th century French finance minister Jean-Baptiste Colbert, who said the "art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the smallest possible amount of hissing".

At the very least, an interesting experiment is now in prospect. If FTT supporters in Europe are right, the UK government will soon be looking enviously across the English Channel at all the lovely, easy wonga being raised in Germany and France. If there is an exodus of finance and financiers to Canary Wharf and Mayfair, Osborne will be able to say: "I told you so."

In one respect, however, the chancellor will be a loser whatever happens. One of the avowed aims of the government is to rebalance the economy, both from finance to manufacturing and from south to north. This is an entirely laudable and sensible objective, but desperately hard to achieve and not at all consistent with policies designed to reinforce the City's already considerable competitive edge.

A recent paper entitled Spatially Unbalanced Growth in the British Economy, by the Cambridge academics Ben Gardiner, Ron Martin and Peter Tyler, details how the north-south divide has widened as a result of two factors: the hollowing out of manufacturing and the rise of the post-big bang City. "Whilst financial services have grown in every region over the past four decades, the south has witnessed by far the most rapid increase, more than quadrupling real output from this part of the economy."

The study notes that in 1971 the south accounted for 56% of national output in financial and business services. By 2008 this had risen to 67%. So, while there are regional centres of strength in financial services, such as Leeds and Edinburgh, London's dominance has increased.

One strand of economic theory holds that market forces will even out these imbalances. Rising output and employment in the south will lead to pressure on resources and higher costs in financial services. Businesses will then move to the north and set up businesses in sectors such as manufacturing where costs are lower.

It is hard, however, to square this theory with the facts. Stronger growth in London and the south-east has acted like a magnet, attracting investment and sucking talent out of the northern regions of the UK. Britain has a comparative advantage in financial services, and there has been a cluster effect. The Cambridge paper estimates that the northern regions would be £43bn richer had they grown at the same rate as the national economy between 1972 and 2010.

If anything, the financial crisis of the past five years has made the imbalances worse. It was manufacturing rather than finance that suffered most from the recession, and the north is more dependent on manufacturing than London and the south-east. The north suffered most in the economy's initial deep slump, gained least during the short-lived recovery and was first to feel the pain of a double-dip recession. Austerity is hitting the region hardest, because almost all the employment growth in recent years has been in the public sector.

If the Treasury is right in its realpolitik calculation that the City stands to gain from an FTT in large chunks of the eurozone, this will make the imbalances in the economy worse rather than better. It could be argued that encouraging trading in complex derivatives will increase the size of the financial sector, generating higher tax receipts which can be recycled into higher public spending in the poorer regions. This, though, was, precisely what happened in the years before the crisis. As a model it proved unsustainable.

Vince Cable made the case last week for an interventionist approach to house building, noting correctly that one of the big factors that helped Britain out of the slump in the 1930s was a private-sector construction boom. The business secretary proposed using the public sector balance sheet to leverage in private capital to the housing sector. This makes sense, especially at a time when interest rates on government borrowing are so low, but any expansion of housing supply would inevitably be skewed to London and the Home Counties, where demand is strongest.

The Cambridge paper argues that there is an urgent need for a clearly identified industrial policy in tandem with a regional policy to address the north-south divide. But the ideas floated – a national investment bank, a much-expanded regional growth fund, impact investment funds to promote advanced manufacturing – will all cost money at a time when Osborne is counting the pennies.

One argument that could be deployed by FTT supporters is that it would help make the financial sector less prone to speculative bubbles while generating a steady flow of income to be used to finance economic rebalancing. At least one half of the coalition might find such a prospect enticing.

RIM might sell its handset business to Facebook or Amazon -

Troubled BlackBerry-maker Research in Motion could sell off its handset business to “potential buyers” Facebook and Amazon and focus on messaging services, according to a report from The Sunday Times.

Still relatively new RIM CEO Thorsten Heins (pictured) previously admitted that the company was in need of “substantial change”, and about a month ago, the company hired the Royal Bank of Canada and J.P. Morgan to give the company a “strategic review.” In that review, one of the options on the table is apparently splitting the BlackBerry handset business and its messaging/enterprise business into two entities.

The Sunday Times, which does not name any sources in its report, says that Facebook and Amazon are potential buyers for the handset business. Facebook makes more sense than Amazon because the company already has its sights set on building a “Facebook phone.” RIM already has the infrastructure set up to build large quantities of phones, so it could be a smart investment. If the company can’t find a buyer or is dead-set against splitting the company, the Times reports, it could also sell part of its stake to another tech giant like Microsoft.

If it does indeed sell off the handset business, RIM would shift all of its focus onto services and messaging. The company’s BlackBerry Messenger (BBM) and BlackBerry Internet Service (BIS), in this case, would be further developed and licensed out to other companies.

RIM’s plan will reportedly be revealed before the end of the summer. However, with the its stock price sinking quickly, it may want to hurry up and make an announcement sooner rather than later.

Thorsten Heins photo: RIM

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