The Delicate Nature of Trust and Brands

If you look at what is going on in our global financial markets and many large business sectors (airlines and auto manufacturers in particular) the disease they are suffering from is a lack of trust among consumers.

The financial markets have witnessed wholesale capitulation by retail investors who understand that the market is functioning not on the basis of fundamental business strength and weakness, but at the mercy of large fund traders who are capable of moving any large stock 10% up or down on any given day irrespective of what the circumstances surrounding that business are. The retail investor sees these bear raids and bull runs are for what they are, insider dominated trading.

Volatility increases as the number of participants in a market decreases. Retail investors are sitting this out and the SEC and Congress are not helping, on one side is the SEC which has done little to create level playing fields in markets and Congress has distorted the markets with trillions of dollars of your money being committed to companies and industries that should not be getting free money. Insiders have polluted and corrupted every one of the bills that deal with economic stabilization, the latest outrage being provisions inserted into the auto failout bill that would provide a pay raise to federal judges and a provision that would let transit agencies off the hook for illegal SILO tax shelter tansactions.

On the business side, industries like American auto manufactures and airlines have done everything within their reach to tarnish their brands over the last 20 years and irrespective of whatever financial propping up they receive from Congress, the fact remains that their biggest obstacle to success over the long run are not credit markets or labor costs, it’s a lack of trust among consumers.

American cars and trucks are without a doubt competitive on quality benchmarks, every customer satisfaction and quality survey reveals this fact. Having had a wide range of these vehicles myself, I have no complaints about GM and Ford quality, in fact the GMC Denali that we owned at one point did not have a single issue that required service, beyond regular maintenance, and it was one of the best equipped and most comfortable vehicles we have ever owned.

If you look at the model lineup GM and Ford in particular you will see a strong portfolio of high mileage vehicles. Chevrolet offers 88 models (yeah that’s somewhat of a problem in itself) with an average fuel economy across the entire portfolio of 23mpg, while Toyota’s 55 models comes in at 21mpg. GM’s efforts on Flex-fuel (E85) have led the industry, 6% of their volume is now Flex-fuel vehicles (hybrids are 2% of Toyota’s shipments). GM alone has invested $750 million in development of the Volt, advancing state of the art not only in powertrain technology but also in battery technology.

What are the two biggest complaints that critics throw up on GM and Ford? They make crappy cars and the have not invested in fuel efficient cars and low emissions technology.

Even if GM survives (Ford is not in as bad a crisis and Chrysler simply won’t survive) the bigger challenge they face is that consumers don’t value their brand anymore. The same applies to the big airlines, while Southwest and JetBlue were cultivating their respective brands, UAL and Delta were doing just the opposite. Running new advertising, remaking the corporate logo, and self-flagellation among executives won’t change any of this.

Congress is in no better condition either, the public not only gives this Congress historically low approval ratings, they also have little confidence that Congress will be a constructive player in our current economic downturn.

Advertising in Applications

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Few things elicit the visceral reaction that advertising inserted in applications does. Just the mere mention of the word brings out a stream of critics who decry the intrusion that ads impose on usability and express dismay at the treasonous behavior of the developers and companies in question.

Yesterday Nick Bradbury released a beta version of FeedDemon that includes a small display ad served by The Deck. As Nick states, his goal was to include the ads in a tasteful manner while also including highly contextual ads that reflect the predominately tech oriented community that uses desktop feed readers, hence the selection of The Deck.

I’ve watched the comments that first appeared on his post and then as the day went on. The comments reflected a good balance of 1) no big deal, 2) disappointed but understand why, 3) want to pay for an ad-free version, and 4) going to look at other products.

NewsGator has to support these apps not only from an operational standpoint but also from a continuing development perspective and the costs of running a datacenter that supports sync, 4+ million feeds, search services, and then the development of a complete portfolio of client products are daunting. We made client apps free a year ago and at that time made no commitment about advertising other than to say we were not doing it at that time. Nick has continued to develop FeedDemon, this is the 3rd release of the app since Jan. Even when we charged for the product, not all upgrades were free therefore it’s still a good tradeoff, IMO.

I looked at what we were doing with our client applications and rightly concluded that if we could generate some revenue that would offset the cost of supporting those apps, then that would be the responsible thing to do. As Nick (and Brent Simmons and Nick Harris) will support, what we talked about was the right approach to doing this. We didn’t want Viagra or University of Phoenix ads showing up in the apps and we didn’t want ads in feeds and we didn’t want interstitials. It was also important to not impact performance negatively so compact asynchronous ad streams were important.

What we wanted were ads that reflected the community of users who rely on these products and placement in an unobtrusive manner that, if we selected the right network partner, would prove to be actually useful to the community. Nick was the most skeptical but as he writes in his post, even he has been clicking on the ads because they are relevant to him.

The FeedDemon v2.8 release is a beta, it’s something we are trying and while we welcome the feedback it’s also important to recognize that adding ads to an app that is being made available for free is not unreasonable. It may turn out that this doesn’t work as well as we would like, hence the reason for calling this a beta, and we reserve the right to change our mind but from where I sit this is a good compromise that satisfies our financial requirements while also presenting ad content that is not distasteful or overwhelming to the user experience.

The reality about desktop applications is that very few outside of large packaged software apps can generate a large enough community of users who are willing to pay for them, at least not enough to pay at a level that supports those applications on a fully loaded basis. This is even more true when you are competing against some very good products that are free. A reasonable person might consider that the alternative of having the app go end-of-life is a less appealing alternative to running ads to offset the operational costs of supporting them. We’ve just gone through a period of time where you could reasonably make the argument for free as a business model but given the economic realities of right now and what 2009 is looking like, you simply have to rethink everything.

Lastly, for the part of the community that remains unsatisfied by this decision and wants to voice their criticism, don’t direct it at Nick, direct it at me.

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