Archive for May, 2008

Can InBev Pressure A-B into a Deal?

May 31, 2008

Brew Blog

Analysts see offer price exceeding $65/share.

A Reuters story today says InBev, reportedly interested in acquiring Anheuser-Busch, is trying to show A-B shareholders that “it sees a better future for North America’s biggest brewer than its family-led management.”

From the story:

Belgium’s InBev is putting pressure on Anheuser-Busch’s non-family shareholders to consider a $46 billion deal or risk being left out of a round of takeovers in the world brewing industry.

InBev, the world’s second-biggest brewer, is considering a $65 a share bid for the Budweiser maker, to show shareholders, including Warren Buffett, it sees a better future for North America’s biggest brewer than its family-led management.

“Clearly, InBev is looking to pressure Anheuser-Busch into a deal. The big problem a deal faces is the Busch family, so InBev is trying to influence the non-family shareholders,” said one banking source familiar with the situation.

Recall that August Busch III’s half-brother has stated that some members of the Busch family would be open to a sale.

The story notes that Warren Buffett, whose Berkshire Hathaway owns a roughly 5 percent stake in A-B, could prove a swing factor. From the story:

Analysts say Warren Buffett, with a 5 percent stake in Anheuser, could be key along with other non-family shareholders in determining whether InBev actually makes a friendly approach and even ultimately goes hostile. They say Buffett bought into Anheuser in early 2005 in the mid-$40/share.

The Reuters story notes that some analysts believe InBev might bid more than the $65 per share putative offer reported last week by the Financial Times’ Alphaville blog.

From the Reuters report:

Analysts see the $65 a share rumored bid as an opening shot and a higher bid of $70 or above is more likely to succeed.

Matthew Webb at Cazenove sees a take-out price of $71, being a 35 percent premium to the market price before last Friday’s reports, while Philip Morrisey at Citi sees a $70 price.

The Reuters story can be seen here.

 

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How Big Can Bud Light Get?

May 31, 2008

Brew Blog

Top A-B marketer sets ambitious goals.

Can the Bud Light “megabrand” — including offshoots such as Bud Light Lime and Bud Light Chelada — someday reach 25 share?

Dave Peacock, the vice president of marketing for Anheuser-Busch, says yes. Beer Marketer’s Insights Express had the story on Thursday (before news of InBev’s interest in A-B overshadowed everything else):

Bud Light “is its own megabrand” now, maintained Dave Peacock at Beverage Forum. And with offshoots like Bud Light Lime (almost 1 share again in 2d week) and Bud Light Chelada, Bud Light “has the opportunity to represent 1 in 4” US beers, he added. So there’s big “upside.” How big would that be? That’s 11.5 mil bbls ahead of where it is now.

Clearly this is an ambitious goal, given that Bud Light represented “only” 19.3 percent of the market in 2007, according to shipment figures from Beer Marketer’s Insights.

The only brand that held such a high market share was Budweiser. For instance, in 1989, Budweiser shipments stood at 50.0 million barrels (off its 1988 peak) and it held 25.9 percent market share. By 1991, its share had dropped to 24.1 percent.

But the world has changed a lot since then. The trends of premiumization (trading up) and fragmentation (people seeking brands that allow themselves to express their individuality more precisely) arguably work against a single brand enjoying such ubiquity again. That’s true for many other consumer categories as well.

BMI notes the challenges:

As industry grows, to get to 25 share, Bud Light megabrand would have to get even bigger. Bud Light growing just 1-2% for last 18 mos. So a lot depends on how big these offshoots can get and how much they cannibalize the Bud Light motherlode.

Indeed, cannibalization is an important consideration. Bud Light Lime — as expected — has enjoyed a rapid ascent. But there may be some cannibalization.

During the week ended May 17, Bud Light Lime hit 1.0 share in supermarkets, according to beer sales statistics from Nielsen. Bud Light, meanwhile, saw its share drop by 0.6 points.

Nearly 72 percent of markets recorded a share decline for Bud Light during the four weeks ended May 17, according to Nielsen’s beer market analysis. And 13 of Bud Light Lime’s top 20 markets have recorded Bud Light share losses.

It remains to be seen how big Bud Light can get. But if A-B seeks to fend off takeover attempts by InBev or another party, it will need to demonstrate that its vision of the future delivers greater shareholder value than a buyout. And clearly, its ability to build Bud Light would be a key part of that vision.

The Beer Marketer’s Insights home page can be seen here.

 

Welcome to the Weekend Web

May 31, 2008

Business Week

There’s only one Web. At least that’s been the standard response in many tech circles to the emergence of the wireless Web. The point? No matter how you get online, be it by PC or smartphone, you’ll still do the same things on the Web, using roughly the same sites and services. Really?

David Witkowski missed that memo. Witkowski, an executive at a Silicon Valley startup, behaves very differently when he uses the Web on a PC compared with when he’s surfing via cell phone. From the office computer, “I pretty much live on Google,” Witkowski says. But from his Research In Motion (RIMM) BlackBerry, the amateur radio enthusiast spends a lot of time searching for gadgets for sale on Craigslist, especially when he travels and on weekends. He also checks local weather forecasts and airline schedules.

Welcome to the weekend Web, where people are spending a bigger slice of time online via wireless devices—and using a different set of sites than during the workweek. “At Google, we see the majority of our desktop traffic [in the U.S.] during weekdays,” says Matt Waddell, chief of staff for Google (GOOG) Mobile. “On mobile, the situation is completely reversed.” Mobile browsing surged 89% in the past year, with mobile page views increasing by 127%, according to researcher M:Metrics. The increase reflects growing availability of all-you-can eat data plans and increasingly sophisticated handheld devices such as the Apple (AAPL) iPhone.

On Saturday, Classifieds Rule

Of course, most Web surfing still happens via PC, but M:Metrics’ research shows that when it occurs by way of mobile, much of it takes place on the weekend. The number of unique visitors to the mobile Web spikes on Saturdays, according to March figures compiled by M:Metrics. The number surged to 4.17 million on Saturdays, an 8% increase from Fridays and 4% more than on the next busiest day, Monday, according to the study, which tracked behavior by 1,861 U.S. smartphone owners.

And like Witkowski, lots of U.S. cell phone users flock to a different set of sites via handheld. Many swarm Craigslist, the local classified ad site. In March, users spent more time on Craigslist than on any other site. “Very few Web sites are inherently local; ours is the exception,” says Craigslist CEO Jim Buckmaster. When it comes to sites visited from a PC, Yahoo! (YHOO) properties hold the No. 1 spot, while Craigslist is way down in ninth place, according to researcher comScore Media Metrix.

Electronic commerce site eBay (EBAY) is No. 2 in time spent on mobile, while it’s only No. 8 on the PC Web, according to M:Metrics and comScore. The Weather Channel gets the fourth-highest number of unique visits on the mobile Web, according to Nielsen Mobile, but it’s way down the rankings at No. 26 on the PC Web, according to Amazon’s (AMZN) Alexa traffic monitoring service. Map provider MapQuest, owned by AOL, is the eighth-most visited mobile site, according to Neilsen, but ranks 35 on the PC Web, according to Alexa.

“Personal Concierge”

During the week, Americans run Google and Yahoo searches at work and compose blogs on MySpace and Facebook. The PC Web’s fastest-growing site categories include pharmacies, food, cosmetics, and job search, according to comScore. During weekends, we fire up our smartphones for fun. The fastest-growing mobile-Web categories relate to weather, entertainment, games, and music, according to comScore.

The weekend Web may grab more widespread use in the coming months. Nokia (NOK), Motorola (MOT), and RIM all are due to release new devices equipped with browsers this year, and Apple is expected to introduce an updated iPhone capable of faster download speeds later this year.

Carriers are also striking deals that give users access to specific sites more easily. A service from British carrier 3 lets users log on to eBay via smartphones for free, while other sites still come with related fees. “We are getting signs that more carriers are moving in this direction,” says Max Mancini, senior director of Platform & Disruptive Innovation at eBay.

To make mobile Web surfing more convenient, companies like Microsoft (MSFT) are integrating speech capabilities into everything from mobile search to calendaring. “It’s almost like having a personal concierge,” says Brian Arbogast, corporate vice-president for mobile services at Microsoft.

Capitalizing on Differences

In the future, mobile and PC Web use could diverge even more. EBay is experimenting with using a phone’s camera and location capabilities to introduce new ways of shopping. People may be able to take a photo of a product’s bar code in a brick-and-mortar store, and look up comparable prices on eBay from their phone. “I look at this as, ‘What can we do to extend mobile commerce and what we do currently on eBay?'” Mancini says. Mobile technology was originally viewed as a way to extend the PC Web, he says, but now “there’s an opportunity to do things that are unique.”

Marketers are already taking note of the differences between consumers’ behavior on the mobile Web vs. a PC. According to a recent report by Juniper Research, retailers will send as many as 3 billion mobile coupons to wireless phone users by 2011 (BusinessWeek.com, 5/6/08), resulting in $7 billion in discounts redeemed. Already, advertisers in some regions can use Global Positioning System technology to send coupons and other marketing messages tailored to a cell-phone user’s specific location. “We really believe the mobile consumer will make more purchasing [decisions] in the offline environment than on the mobile Web,” says Michael Bayle, treasurer for the Mobile Marketing Assn.

Google CEO Eric Schmidt seems to concur. In a recent interview published on F.A.Z. Electronic Media, Schmidt said that “mobile will be a larger business than the PC Web.” Google will get plenty of competition from other companies eager to generate sales from wider use of mobile Web access. “I think it’s possible for us to become the No. 1 site on mobile,” says Jed Stremel, director of mobile at social network Facebook.

Make search a branding vehicle

May 31, 2008

iMedia Connection

 

Search engines reward ads containing relevant calls to action over those that focus exclusively on branding. Steak Media’s VP of corporate strategy explains why this should change.

 

Every time search practitioners gather at a conference, there is always healthy debate about what the future holds for the seemingly all-powerful medium. At a recent event I attended, Gian Fulgoni, comScore’s chairman, focused attention on the value marketers currently are not getting from search and display advertising. He asserted that over-emphasis on the “last click” overlooks important latent online and offline effects. Overall, Fulgoni suggested, as little as 5 percent of paid search ads on Google result in a click, but by failing to monetize the latent value of the remaining 95 percent, Google and the other engines fail to capture as much as 84 percent of search’s value. Essentially, comScore’s findings imply that search should — and may — become more of a branding vehicle, while not necessarily sacrificing its primacy as a direct response mechanism.

In effect, what comScore has issued is a monetization and measurement challenge to both engines and marketers, since the engines are now so focused on performance that they reward ads containing relevant calls to action over those that focus exclusively on branding. Pouring resources into search engine optimization can help with branding efforts, but that’s not likely what Fulgoni had in mind. Nonetheless, emphasizing the branding value of search makes sense. Consider the consumers marketers are trying to reach. They don’t distinguish between branding or direct response ads — they see ads. All direct response ads also have a branding element to them while all branding ads, though they may not carry a call to action, will have a direct effect on consumers’ perception of a brand and their subsequent purchase activity. In short, both are opportunities to put a message in front of a prospective customer.

The challenge comes at a time when there is increasing emphasis on a) the value derived from integrating search and display; and b) the branding value of search. None of this should come as any surprise in an age in which industry consolidation and in-house innovation have united both media under one roof at all of the leading search players. In this context, trumpeting the synergistic benefits of search and display media buys makes dollars in addition to sense.
According to Fulgoni, only one-third of online ad spending goes to brand building (the reverse of traditional media), so remodeling search to facilitate branding may further fill the engines’ coffers. Yet, beyond attracting the brand dollars, which is where the big money is, focusing on the branding value of search may help elevate and solidify the medium’s presence at the top table. This would be a welcome advent for both in-house and agency practitioners, who continue to relentlessly trumpet search’s effectiveness in the face of the sexier media, both online and off.

In my previous column, I focused on the importance of using search strategy and tactics to manage a brand’s reputation online, especially in the age of universal or blended search. If the future of search is increasingly brand focused and we’re going to be putting a great value on latency in both search and display, the nexus of search and reputation management comes into sharper relief. Reputation management is all about building and protecting the brand. It contains both a defensive and a proactive component, but in most cases, it is not about direct response — it is all about the latent actions consumers take or don’t take as a result of what they discover through search. Making search more of a branding vehicle and further fusing it with display advertising would make managing online reputation a far more viable concern.

Unlocking value that currently goes unrealized is a laudable goal, but the key to reaching this proposed but still-nebulous future is maintaining relevance. That’s a goal in which everyone from marketers to the engines to the consumers who use search is invested. Search has become a universal activity. In the future, it will likely be a ubiquitous activity as well, one that transcends every possible device, but regardless of where, when and how the activity occurs, no one wants relevance to be sacrificed. That would be bad for search’s online reputation.

Bud brings out the dude in consumers

May 31, 2008

iMedia Connection

 

Anheuser-Busch recently added consumer-generated videos to its Bud Light “Dude” campaign. But was it a successful brew or did it merely water down the brand?

 

Dude? (Do you live in a cave?)
If you haven’t seen any of the ubiquitous Bud Light “Dude” commercials, you may not understand the following commentary: “Dude?” But imagine this monosyllabic line being delivered by a twenty-something, ex-frat guy-looking “dude” with equal measures of disbelief, disappointment and slacker cool, and you’ve got a better understanding of what it means. Now, envision this line — and only this line — repeated with multiple inflections and intonations as a reaction to a variety of daily circumstances in the dude’s life.

The word communicates anything and everything from, “You’re sitting too close to me on the couch” to “I can’t believe my flight has been cancelled” to “Check it out — it’s Fox announcer Joe Buck” to “I’m totally bummed that the stadium beer concession closed before I could order another Bud Light.”

Now, you’ve got a pretty good idea of what the whole “Dude” campaign is about. 

The campaign’s ads, like past Bud Light campaigns such as “Whassup?” and “I Love You, Man,” are humorous, topical and aimed primarily at young men of drinking age. But this time around, Anheuser-Busch decided to take things a step further by offering up its popular campaign to the general public. And the results were impressive — even by Bud Light standards.

Dude. (Submit an entry)
The offering took place in the form of a call for entries of consumer-generated “Dude” ads. Creators of the videos selected by Anheuser-Busch would be paid $5,000 each for their efforts. Along with the cash, they’d also get exposure in a highly visible online ad campaign. Bud Light would get fresh video content for a very reasonable price. Brokering the deal was XLNTads, a Philadelphia-based company that specializes in connecting brands with a network of over 5,000 video creators.

[Editor’s Note: In the interest of full disclosure, it should be pointed out that iMedia’s founder and CEO is also a founder of and investor in XLNTads.]

XLNTads posted the assignment, which included a creative brief, release forms and all the necessary assets, such as the Bud Light animated logo and the “Dude” music track on its website. Anyone interested in submitting an entry could download these materials after reading and agreeing to the assignment’s terms and conditions. Creators then had until March 31 to submit their masterpieces. The videos selected by Anheuser-Busch (a hockey-themed spot and an animated spot featuring ants) were posted on Bud Light’s March Madness website and can still be seen, along with the four agency-produced spots, on their Dude Madness site.  

Dude. (Extend your brand)
So why would an advertising behemoth like Anheuser-Busch want to offer up a slick, successful campaign from a heavy-hitting agency like DDB of Chicago to the general public? According to Bud Light Director Rick Leininger, the decision was all about extending the brand.

“The XLNTads initiative was a great way for us to extend our Bud Light Dude campaign while staying in tune with pop culture,” Leininger said. “Working with XLNTads, we were able to tap into their network of video contributors to generate a bigger take on the Bud Light Dude concept.”

Staying in tune with pop culture and actively seeking input from end users appears to be part of a concerted effort by brands to appease younger consumers, a lesson Dave Itzkoff of The New York Times claims advertisers are quickly learning. In his April 27 piece on the campaign, titled “Dude! Like Those Ads Live Forever,” Itzkoff writes, “For their creators and the brewery behind them, the spots have provided a different lesson: that young consumers are using the internet and other technologies to express the ways they want to receive (and even control) advertising, and it’s up to advertisers to hear this message.”

Dude. (It was, like, a perfect match)
If the “Dude” concept seemed to Anheuser-Busch like a good candidate for consumer-generated takes, it may be because the concept itself was developed in a less traditional manner. “Dude” originated not from an agency but from two outside writers, Clay Weiner and Kenny Herzog, who made a short film of the concept, mainly for their own amusement. Then, as Itzkoff explains in his Times article, through a contact at DDB Chicago, the primary advertising agency that handles Budweiser and Bud Light, Herzog and Weiner were able to get their film seen by executives at Anheuser-Busch.


 
The executives obviously liked what they saw. And so did the public. According to Itzkoff, the original “Dude” spot has been viewed over two million times on YouTube alone, and all four agency-produced “Dude” ads have been viewed a total of more than 13.5 million times on YouTube, MSN.com and other online sites featuring video. Throw in television viewership, and it’s a wonder the word “dude” has not yet supplanted “the” as the most used word in the English language.

 

Clearly the “Dude” ads possess something that appeals to people — a quality XLNTads’ Neil Perry equates to transcendence. “When you look at the Bud Light campaign, people are waiting for the next Bud Light commercial to come out because the population, in general, has been very much enamored with the fun-ness of this guy, the humor of the writing and the way it transcends all sorts of occasions and opportunities,” Perry said.

It’s the concept’s wide appeal, according to Bud Light’s Rick Leininger, that made consumer-generated takes such a natural next step. “The concept behind Bud Light’s ‘Dude’ has such universal appeal that extending the campaign with a user-generated initiative was a natural evolution,” he said. “We felt the XLNTads project provided an organic way to generate fresh takes and expand on the already successful ‘Dude’ message while tying it back to Bud Light.” 

Dude? (Any concerns?)
Fresh takes are great, but what about the possibility that consumer-generated content could go too far, or not adequately represent the brand, or even water it down? Having control over which ads would ultimately be seen by the public helped alleviate any trepidation Bud Light may have had.
 
“We provided the creative elements, including the music and logos for consistency, and ultimately, we had final approval on all submissions,” Leininger said.

As for any concerns Bud Light may have had regarding the quality of consumer-generated content, Perry explained that those concerns were quickly overcome as submissions rolled in.

“If you look at the current four Bud Light ‘Dude’ commercials that were produced by their agency, and compare them to our top 10 versions, I think you’ll be remarkably surprised at how competitive ours are from a professionalism, acting, editing and sound point of view,” Perry said.

Perry attributes the high quality of the “Dude” submissions to the fact that, unlike destination websites like YouTube, which are outlets for virtually any video produced, XLNTads.com is visited primarily by professional and semi-professional videographers actively seeking assignments. Which begs the question, are brands truly getting consumer-generated takes, or just more professionally produced content, albeit from smaller production houses?

“The assignments are open to anyone who wants to submit,” Perry said. “Typically, what happens is someone who happens to like beer, or thinks Bud Light commercials are really cool — they’re the ones who would choose to work on that program. So it’s very similar to consumer-generated content, which is to let the consumer do the ad. But we have a higher level of consumer, if you will. The quality of what we get is quite a bit different than what you’d see posted on YouTube.”

However, a lack of production value does not appear to be preventing YouTubers from creating and posting their own “Dude” takes. Entering “Bud Light” and “Dude” into YouTube’s search engine yields 172 results as of the writing of this article. Some of these are the agency-produced spots and XLNTads submissions, but there are also a lot of unofficial parodies, many with themes clearly not endorsed by Anheuser-Busch.

One of the racier videos — for a different kind of “bud”– features a cast of African-American males who substitute the word “dude” with the N-word. It ends with the message: “Smoke Responsibly.” Not exactly messaging approved by Anheuser-Busch, but consumer generated nonetheless. But for a parody to work, no matter how racy or off-message it is, there needs to be some brand awareness, so even these unofficial takes are, in theory, promoting the brand.   

Dude? (What’s next?)
So will Bud Light, based on its experience with “Dude,” look to use consumer-generated content on future campaigns?

“We’re certainly open to incorporating user-generated content when and where it fits the goals of a particular campaign,” Leininger said. “Though there are no concrete plans for the next user-generated initiative, we’re constantly exploring opportunities as our Bud Light consumers turn to the web for an increasing amount of news and entertainment.”

One place on the web Anheuser-Busch hopes its consumers turn for entertainment is BudTV, a destination site for beer drinkers. It features original comedy, sports, and web video entertainment, including, you guessed it, user-generated content. Currently, the only user-generated show on the website is called “Have Some Fun With It,” a series of short films in which snarky hosts Stan and Phil take a video camera, a Bud Light bottle, and unsuspecting strangers, “combining them with hilarious results.” The hilarity of the results may be up for debate, but the direction the series is taking seems to be the future of user-generated content, according to Perry.

“I think the next big thing is going to be short, entertaining video content,” Perry said. “Short pieces of film, say two to five minutes, that have interesting characters, crisp writing and fun story lines. And brands are going to sponsor it…. I think that’s where a lot of these video producers that we work with are going to evolve. They’re going to become almost short film makers.”

Considering all of the possibilities and future applications of consumer-generated video, one word comes to mind. (Hint: it starts with a D and rhymes with food.) Feel free to say it with the inflection that most appropriately summarizes the way you feel it will affect you. 

InBev’s Plan B?

May 31, 2008

Brew Blog

Merger of equals with SABMiller?

The Financial Times Alphaville blog today reports that SABMiller plc would formally consider an offer from InBev valued at $29.64 a share, or $44.7 billion.

According to the report, SABMiller (the parent of Miller Brewing Company) would want to create a merger of equals, under the British “top-co” structure. SABMiller had no comment in the story.

From the report:

InBev, on the other hand, according to sources with a close knowledge of its thinking, favours a straightforward takeover, retaining its Belgium-based status and keeping the complex structure of shareholder agreements between its Brazilian managers and aristocratic Belgian founding families in place.

Any transaction with SABMiller is being considered as a distinct “Plan B” to a preferred takeover of Anheuser Busch in the US. In any case, SAB has told InBev that it is unable to engage in meaningful discussions until it completes its US beer joint venture with Molson Coors in the US.

The story also notes “the potential synergies, put at around $800m annually, are significantly below the $1.4bn being privately forecast in an Anheuser takeover.”

A Dow Jones story, meanwhile, said the report was met with some skepticism.

A report by Credit Suisse analyst Carlos Laboy on Tuesday weighed in on a hypothetical combination between InBev and SABMiller:

Such a deal would be a nightmare for A-B. The prospect of getting permanently boxed into an inferior and disadvantaged global footprint by Inbev and SABMiller should cause AB board to think really hard about the cost of saying “no” to InBev as A-B could compound a decade of bad strategic decisions with the worst one yet. InBev may well be the final chance for A-B to get out of the strategic bind it has created for itself….

SABMiller would, on merit have to control the operations as InBev lacks both the human resource management capability and the proper balance of cost and brand management culture that SABMiller seems to master. Right now, such a deal could not happen without the approval of Altria and of the Santo Domingo family on the SABMiller side.

Here is the Alphaville report on InBev’s “Project Barium.”

Dow Jones reported on skepticism regarding the report here.

The Credit Suisse report can be seen here.

 

Some Busches Open to Selling A-B

May 31, 2008

Brew Blog

Different attitude at One Busch Place?

August Busch III and IV may be opposed to selling Anheuser-Busch. Other family members apparently don’t have the same compunctions.

That’s perhaps the most interesting revelation since last week’s report that InBev was interested in acquiring Anheuser-Busch. And it comes courtesy of a Wall Street Journal profile of August Busch IV in today’s Wall Street Journal.

From the story:

On Monday, one family member, Adolphus Busch IV, said he and some other family members are open to the idea of Anheuser and InBev sitting down to discuss a possible deal. Mr. Busch, 54 years old, is a half-brother of August A. Busch III, the legendary former CEO and father of Anheuser’s current CEO. Mr. Busch says he owns a “substantial” block of shares, though less than 1% of the total.

“There are members that absolutely want it to stay status quo,” said Adolphus Busch in an interview. “There are others that say they want to see some kind of chance to enhance shareholder value.”

The article points out: “An offer by InBev would put the 43-year-old August A. Busch IV in a tough spot. If Anheuser is sold to InBev, he could be remembered as the member of the founding Busch family who let the St. Louis icon slip into foreign hands.”

The Wall Street Journal story takes a close look at August IV’s leadership since taking the reins in December 2006. Based on the story, August IV has butted heads with his father, August III, more than a few times – which created challenges for A-B employees who had to deal with mixed messages.

“The younger Mr. Busch acknowledges there has been tension,” the story reports. “His transition to CEO, he says, has been ‘a very difficult, fluid situation.’ The elder Mr. Busch declined to be interviewed.”

For instance, August IV was interested in acquiring Hansen Natural, makers of Monster Energy drink; August III was opposed. (The A-B system now handles distribution for Hansen.)

August III also apparently was opposed to the A-B system importing InBev’s family of European brews. He feared it would create “complications” for A-B distributors.

From the story:

The younger Mr. Busch says he and his father also clashed over plans for his own management team, which he installed last year. “If I can’t have my team, how can you hold me accountable for performance?” Mr. Busch says.

Here’s the Wall Street Journal profile of August Busch IV.

In other A-B/InBev related news, reports suggest that InBev may decide whether to make an offer as early as today.

It’s worth noting that some media reports have suggested that InBev’s plan B could be a deal with SABMiller plc, parent of Miller Brewing Company.

 

Email Analytics Reveal Sweet Spots In Subject-Line Length

May 31, 2008

Media Post Publication

 

by David Goetzl, Tuesday, May 27, 2008 7:00 AM ET

 

CAPTIVA ISLAND, Fla. — Email marketing analytics have led Dela Quist, CEO of London shop Alchemy Worx, to discover a sweet spot for how long subject lines should be.  

He says open rates climb when the subject lines are in the 50-character range or 80-character range. But, perhaps counterintuitively, they fall in the middle when the length is 60 or 70.

The magnetic Quist gave the keynote address Saturday at MediaPost’s Email Insiders Summit conference: “Emailing People Not Lists: Using Customer Based Metrics to Drive Performance Improvement.”

Research culled from 250 million messages sent over the past two years, with 660 different subject lines, has led him to believe that a 50-character subject line touting a “powerful” offer is appealing (30% off Spring Getaway flights to Florida on Delta).

And a longer 80-character-plus line describing a newsletter in enticing fashion works (Find out Secrets to Spice up your Barbecue this weekend and all Summer Long and enter to win a New Weber Grill.)

Somehow, in the 60- to-70-character middle, he says, the subject line is either too long or not long enough.

Quist has various theories, but one is that the longer the subject line, the better chance a marketer has of presenting different concepts that may appeal to different consumers and boosting open rates. So in the above example, some may be interested in the ways to improve their grilling, while others would seek the new grill, leading to higher open rates.

Quist’s research–his clients include PayPal and Intercontinental Hotels in the U.S.–showing that “long subject lines work better” goes against conventional wisdom, he said.

“Our experience tended towards the belief that long subject lines work better,” he said. (The longer the better goes against conventional wisdom.) A more descriptive subject line can also build goodwill with consumers, since it can provide enough info to easily either turn them on or turn them off.

Gain the competitive edge with SEO

May 31, 2008

iMedia Connection

 

Leaving organic search results to chance can be costly for your brand. Here’s a strategic, scalable system for success.

 

How much is the word “cheap airfare” worth in the United States? The answer is about $8 million, according to comScore Marketer Search Data, December 2007. A word like “laptop” is worth about $35 to 40 million. “Car insurance” is estimated to be worth more than $50 million per year. And this is just the conversion value of the top organic listings.

Organic listings continue to account for the majority of the clicks, with between 75 and 85 percent of all clicks going to organic results depending on which study you read. Add in the PPC results, and these figures can be adjusted up by another 15 to 25 percent.

The value of search is rarely questioned nowadays. So as more and more consumers go to Google and Yahoo to research everything they do — from restaurants where they eat to the houses they buy — the option to invest heavily in search engine optimization (SEO) is no longer a choice; it is a necessity. Not focusing on building processes to dominate organic rankings is a very costly brand management error in every market. 

The challenge, particularly for larger brands, is how to build a scalable and predictable approach for managing organic rankings — how to raise awareness, how to leverage the opportunity, how to instill the key processes and how to execute the work.

The focus of this article is the best practices in building out scalable SEO processes. The information below is based on the experience of some of the largest global brand managers in the market. Also discussed below are results attained by these major brands and how what they learned can be used to predict future outcomes from SEO.

The complexity of building SEO for large brands
Excelling at SEO involves both good news and bad news for a large company with its many brands, websites and locations in multiple countries. The good news is that a large brand site, with its linking and content, has every right to be at the top of the organic listings based on the way the search engine algorithms work.

The bad news is that exposing that content to the engines usually requires close coordination between personnel in the organization’s IT and marketing departments as well as the agencies being used. With worldwide offices, this gets complicated.

Also, the engines are increasing the sophistication and complexity of what SEO means. SEO is no longer just based on text analysis. In the age of universal search, SEO-based brand promotion has to include the way images, videos and text are added to the site to ensure visibility and relevance to key search terms used by consumers.

In addition, there are ever increasing ways that the engines are returning relevant information to end users through specialized return results such as News, Travel and Maps. Each category has unique ways to determine which organic ads are shown and therefore command the lion’s share of the consumer’s attention. 

A common response from large organizations is to hire an SEO expert to act as an internal advocate and consultant to the brands on SEO-related issues. Given the size of these organizations, the number of parts of the organization that require communication and the complexity of the problem, this approach is rarely effective or efficient.

SEO requires a holistic approach — one no different from the management of traditional corporate processes like customer relationship management (CRM). It would be unthinkable in this day and age to “hire someone to do CRM” as organizations have a healthy respect for the fact that CRM is a process and a way of thinking. CRM is a way of life for large enterprises. SEO should be the same. 

Here’s a way to manage it.

Building a Center of Excellence
A successful approach is the concept of driving SEO-best practices around technical construction, content management and link strategy into the brand management function itself at both the product and geo-marketing levels in large companies. Essentially, this requires anyone who touches the site — marketing and web management — to be held accountable for SEO-related results. This is very similar to the “Center of Excellence” concept used to drive CRM best practices.

What is involved? Most Center of Excellence initiatives start with a preliminary 90- to 180-day project. With respect to SEO, the purpose of this is to:

  • Select a section of the website and execute the initial optimization of that site section.
  • Document the process from keyword research, keyword selection, site design, etc., and make the information on the implemented processes available to others in the organization through a knowledge-sharing system like a wiki.
  • Develop a certification program for those who go through the process that can be used to certify other knowledge workers for future projects.
  • Identify key metrics of success and document achievement toward those metrics for the initial project (basic improvements to “crawl-ability,” content, link strategy on the site, rank changes on the engines, increase in traffic, increase in conversions, etc.).
  • Pinpoint the technologies necessary to deploy the program at scale across the organization, and identify changes that need to be made to existing technologies (usually the web analytics systems) to track results from organic in the context of the program.

Once the initial project is completed, two important outcomes have to occur. First, the program has to be sanctified by the senior marketing leadership as a priority and as something other brands need to embrace. The metrics from the initial project (e.g., indicators of SEO-health for the site, rank analysis and conversion analysis) need to be benchmarked for other sites and goals for improvement set systematically. Brand and geo-marketing managers need to be held accountable for improvements once the initial benchmarking is completed and for getting their groups certified on best practices.  

Second, the work on the initial site needs to be expanded to continue improvements. Most organizations experience degradation in SEO performance after about 90 to 120 days. This is why SEO is most effective as an ongoing process. Degradation is usually the result of competitive action. Search marketing is a zero sum game: There is a finite amount of inventory available and being successful at SEO comes at the expense of a less able competitor. Competitors will notice improvements and respond. 

The Center of Excellence concept is designed to be scalable as it is viral. It builds the best practices into the daily processes of the employees working on the site and ensures they are educated, motivated and measured to excel at SEO. 

Let’s see how it works.

Studying the Center of Excellence approach
To determine the effectiveness of this approach, Covario conducted a study between March 1 and October 15, 2007 with approximately 300 global brands to measure how leveraging the Center of Excellence concept improves performance. More than 85 percent of the brands involved in the study belong to Fortune 500 companies with their websites operating in multiple languages and on many search engines.

The goal of the study was to assess whether the metrics that had been built to measure SEO health of the websites could be used to predict results in rank improvement on the major U.S. search engines (Google, Yahoo, and MSN). The study used changes in rank for the participating Fortune 500 brands as the metric of success. 

The results were impressive. To help educate the SEO knowledge workers in the brand and geo-marketing divisions, a proprietary technology titled Covario Organic Search Insight developed by my company, Covario, Inc., was used to identify what aspects of the sites were well optimized on 48 different criteria. 

Changes to these site factors were then statistically measured against changes to rank on the engines. During this study period, the average brand experienced an improvement in its average rank position for the keyword it was trying to optimize by 4.5 rankings.

To put this into context, on “cheap airfares,” moving from position five to position one on the engines means a difference of $2.5 million in commerce per year, based on analysis of data from comScore Marketer Search Data.

Most importantly, the relationship between the changes made to the websites during the test period had a very strong statistical relationship to changes in rank on the search engines. This means that the statistical links discovered by Covario can be used to predict improvements that other sites may experience given similar changes. This is key as ROI on SEO for these organizations can be reasonably estimated, helping to justify the expense of the programs. 

What is more, the reactions of the engines were very different. Google was 15 times as sensitive to technical issues as Yahoo, and twice as sensitive as compared to MSN. Specifically, Google was far more reactive to link improvement strategies than Yahoo or Microsoft — by eight to 10 times. Yahoo was much more reactive to changes in content than Google or MSN — up to 50 percent more reactive than Google.

The reactions are part of the complexity that many large advertisers find hard to corral. However, with the right processes in place, insights like these can be used to determine which aspects of the site will provide the best ROI for brands and geo’s by engine, by product, by site, etc. This is a great example of the development of the science of SEO, which presents large advertisers (and their vast, complicated web properties) a process-driven, data-based method to manage their brands’ presence on the organic side of search engine marketing, and do so in a scalable and efficient way.

So how do this information and the Center of Excellence for SEO concept get actualized in a large company? Let’s see.

Putting SEO into practice
SEO daunts many organizations because they get paralyzed by the number of things they could do, and do not know which two to three things they should do to drive the best results per engine. This is the big challenge organizations have — the prioritization of the work and building that prioritization into the web management process. 

The study above suggests a solution to this problem. With empirical evidence on what drives SEO ranking results and understanding the differentiation by engine from operational website changes, large companies can ensure that results can be driven in the short term while their long-term continued improvement is also scheduled and managed.

Take “cheap airfare” again. For a travel company or an airline looking to optimize on this word, here is what the study would suggest for prioritization.

Focus first on content issues, meaning the usage of the word in the text on the pages in the site. These can be changed most rapidly by the agency or content managers and have a very significant effect on rank improvements. The study suggested the following:

  • Adding the words “cheap airfare” to the URL of the page being ranked will have the most significant effect on driving Google ranking — i.e., something like: http://www.companyname.com/cheapairfare.html.
  • However, the study also showed that changes to the URL will have minimal effect on Yahoo ranking improvements. 
  • On the other hand, Yahoo reacted very strongly to the emphasis of words like “cheap airfare” in the content text on the site — i.e, when the word is displayed as cheap airfare, CHEAP AIRFARE or cheap airfare. This had a smaller effect on driving Google rankings.

Content issues are also relatively easy to syndicate across a large site, particularly when the issues are made available to content managers. A best practice can be given to always emphasize the usage of “cheap airfare” in text, and to design URLs with the most important keyword that will drive traffic conversions.

The second area of focus should be on the link strategy; however, this is less simple to execute en masse across a large site. It is the quality, not the quantity, of links that matters.

What is a “quality link?” It is a link from a site or page that has a Page Rank (a statistical measure of relevancy that is available from Google on various pages) greater than three. So the question becomes: How does an organization drive multiple web managers to build a small number of links from pages with Page Ranks greater than three and distribute this information efficiently? 

This is an area of intense study. There are very sophisticated ways to implement link building and a number of companies that specialize in this, both agencies and specialty consultants. For a large site, deploying these solutions can be cost prohibitive.

The above study suggests that building links from a series of authoritative sources such as .gov or .edu. for “cheap airfare” in order to get a link from the FAA would be highly valuable but very difficult. A link from .edu would be easier. Also, Technorati and del.icio.us sites are good places to start. In the study, Google reacted very significantly to sites with links from these sources, as did MSN, so this is a straightforward way to get sites started in an efficient way to build links. Again, one to two high quality links are better than 1,000 poor quality links, and Covario’s study results strongly support this assertion. 

The final step is to address the technical structure. This is listed last because technical issues usually deal with fundamental technical construction issues around site design. Changing these in large organizations is highly non-trivial and takes time and planning.

Technical issues can also be the most egregious as they may fundamentally prevent the mechanisms used by the engines to organize information from working. However, the above study provides guidelines on efforts that can be prioritized for the IT department or the web management team on how to deal with site issues and drive better rankings. There are essentially two major issues:

  • The first of these technical issues is URL structure. One of the components that the Center of Excellence must develop is a best practice on site URL structure. The Covario study showed that long URLs and URLs that use mechanisms to track visitors to the site (called dynamic parameters) confuse the engines and drive significant rank decreases on Google and MSN. Yahoo seems better able to deal with dynamic URLs.
  • The second of these issues is how the navigation is constructed, as the search engines use this to figure out how to find content on the site. Use of Java or Flash for the navigation prevents search engines from finding content. This was completely consistent across all engines in the study and is binary, so it’s either a catastrophic failure or it works. 

The technical issues are not term-specific. If there are technical issues, it will impact any keywords that an organization is trying to optimize, not just “cheap airfare.”

What is important for a large organization is making sure that the business case for determining whether or not making changes to site structure is worthwhile, and that the right process can be developed by the SEO Center of Excellence. This is a change and very valuable in getting the appropriate attention and results from, what are usually, overburdened IT teams.

Conclusion
The rewards of building these processes are vast as more consumers use search engines to find information about their brands and services. A brand that does not do this can be assured its competitors will, thereby influencing consumers on brand choice through one of the fastest growing, most effective advertising media available. Establishing competitive advantage through SEO is no longer a luxury — it has shifted from avant-garde to de rigueur.  

Will He Or Won’t He?

May 31, 2008

Brew Blog

Reported InBev offer puts heat on August Busch IV.

The long-rumored merger of InBev and Anheuser-Busch appears not to be in the cards.

Instead it appears an outright takeover of A-B could be in the works.

And the big question if InBev pulls the trigger on its bid is whether it will go — and whether fifth-generation brewer August Busch IV will be willing to sell the company that bears the family name.

A highly detailed report in the Financial Times — which laid out the terms of the putative offer ($65 per share) as well as names of banks and advisers involved — notes that InBev approached August Busch IV in October about a deal.

From the story:

Sources with a close knowledge of the putative deal said an approach to Anheuser by InBev was first made informally last October, but August Busch insisted he would protect Anheuser’s independence and wanted time to show his mettle at a job to which he had only recently been promoted.

But InBev’s advisers believe Mr Busch would now succumb to shareholder pressure to open merger talks and are banking on the fact that Anheuser’s board would feel duty bound to follow due process and formally consider a bid if they received a private offer pitched at a substantial premium.

Recall that August Busch IV — who has had to contend with rumors about a deal with InBev since taking the e top job more than a year ago — last month told distributors that A-B won’t be acquired on “my watch,” according to the Wall Street Journal.

But with InBev reportedly offering $65 a share for A-B, a nearly 24 percent premium over Thursday’s closing price of $52.58, August Busch IV will have to pay attention.

“If indeed a hostile bid is in the works, A-B management will have to convince its board and shareholders that it has the means for delivering higher value,” Credit Suisse analyst Carlos Laboy noted in a report today.

(Laboy thinks that if a hostile bid is in the works, the price could go higher. From his report: “This $65 bid is on target with our DCF fair value and sum-of-the-parts valuation for BUD published yesterday and consistent with our view that InBev wants and needs this deal but the timing is not perfect and a hostile bid would have to go at a higher price than this DCF fair value.”)

A Credit Suisse report released Thursday — the day before news broke about the putative deal — noted that a combination of InBev and A-B held great potential for culture clash. InBev is famous for cutting costs and driving efficiency whereas A-B is a brand-led company that invests heavily in brands and people.

From the report:

If most mergers fail because of culture clash, this might be the Clash of the Cultural Titans. It is our view that a hostile bid originating from InBev would create extraordinary difficulties for both parties which may ultimately threaten the reason for the deal. An unsolicited bid would put the management of A-B immediately in a defensive posture and this would be problematic along several lines.

Simple pride is obviously an issue, but ultimately we believe that for an A-B-InBev combination to work, top A-B management would need a role and feel invested in the success of the new entity. This is because we believe InBev would need the buy-in (and moral authority) of A-B top management to facilitate the implementation of InBev’s difficult but effective Zero-Based Budgeting (ZBB) philosophy.

If InBev pushes the button on the offer, August Busch IV will have a profoundly challenging decision to make, the report says:

“The King of Beers” is not meant ironically; A-B’s roots are deeply entrenched in a stable, multicentury family brewing tradition. For a proud and patriotic company like A-B, where the quality of life for employees is very high, we believe selling out to a foreign entity that focuses so hard on cost control as a way to create value would be extraordinarily difficult. If the Molson and Coors families were not excited (initially) about the prospect of selling to a European brewer, we strongly doubt the Busch family would be either.

The report can be seen here.

The Wall Street Journal covers today’s story here.