Mizzou researchers figure out how to rescue the newspaper industry

Murali-Mantrala

Professor Murali Mantrala showed how one newspaper could raise profits through data analysis. (Photo courtesy of the University of Missouri News Bureau)

If you’re wondering whether the newspaper industry can avoid colliding with irrelevance, there may be a way to change course, according to two University of Missouri researchers.

Murali Mantrala, the Sam M. Walton Distinguished Professor of Marketing and chair of the Department of Marketing at MU, and Vamsi Kanuri, a former doctoral student at MU’s Trulaske College of Business, surveyed more than 1,000 readers of a West Coast daily paper to determine not what they news they read, but how they got the paper in the first place. The researchers presented the survey participants with a range of purchase options much wider than what the newspaper already offered.

These options ranged from print-only subscriptions to combinations of print, online and mobile subscriptions. The options also varied in price based on the mix of channels, the frequency of distribution, and whether or not they were advertisement-free.

Mantrala and Kanuri combined that information with data on advertiser spending across the variety of channels to create an algorithm that determines what precise menu of subscription options a newspaper should offer to maximize total revenues from subscriptions and advertising.

Given the customizable options for readers and advertisers, the potential benefit of a subscription menu to the West Coast newspaper equaled a 17 percent increase in the publication’s profits.

“Newspapers are in a quandary; they need to find ways to increase revenues without raising prices or creating barriers that will cause them to lose readers,” Kanuri said in an MU news release. “In developing this algorithm, it was important to determine readers’ preferences for how they wanted to receive their news, as well as to determine readers’ willingness to pay for different types of subscription plans. Once we gathered that data, we were able to streamline a process for making decisions about which subscription and advertising plans to offer in order to maximize profits without losing readers.”

And readers will buy news as long as they know the content they receive is unique, convenient, and relevant to their needs. For proof, look at the way members of the Millennial Generation – ages 18 to 34 – consume content. As a group, almost 90 percent of them purchase music, movies, television, and video games. Other research has determined that people willing to pay for entertainment are also willing to pay for news.

Mantrala and Kanuri said their model works for any newspaper or subscription service, including Hulu, Pandora, or Spotify. Publishers and broadcasters must first conduct audience and advertiser surveys, then organize the collected data by audience segment to determine the optimal subscription menu algorithm.

“Any subscription-based service can use this model if they do the requisite research to determine subscriber interest and willingness to pay for various tiers of service,” Mantrala said. “Using this model, as opposed to years of costly trial and error, can help newspapers and other online businesses greatly improve their profits.”

The study by Mantrala and Kanuri is titled, “Optimizing a Menu of Multi-format Subscription Plans for Ad-Supported Media Platforms,” and is scheduled for publication in the Journal of Marketing.

Kanuri is now an assistant professor at the University of Miami. Esther Thorson, a former professor at the MU School of Journalism now at Michigan State University, also coauthored the study.

6 indicators worth watching in quarterly earnings reports

Earnings Reports Icon

Four times a year, a downpour of quarterly earnings reports drops from the executive boards and financial offices of public companies around the country.

So, grab an umbrella, because the latest storm has started.

Earnings reports announce the revenue, income, and profit or losses of publicly held companies. The companies are obligated to issue them quarterly to current and potential investors and as a 10-Q filing with the Securities and Exchange Commission, the federal agency responsible for enforcing federal securities laws. Second-quarter summaries for the three-month period ending June 30 are going out from tens of thousands of companies right now.

Most of those will contain good news as the Dow, Nasdaq, and S&P have reported consistent gains over the past month, fears of a big Brexit backlash are subsiding, and prospects for the next business quarter are guardedly optimistic – November’s general election outcome notwithstanding.

But finding the important information in a quarterly report amid line after line of corporate vernacular can be dizzying. Having tackled these reports from two sides – first as a newspaper journalist, then at the corporate level – I can tell you that some of the mystery can be difficult for even experienced eyes to unravel. In some instances, only the reports’ authors have the clearest sense of what’s written. That’s because these people must put polish on what could be a dull or dreary three months, while still meeting an obligation to set the record straight.

You can strain your patience and eyesight pouring through these documents. So, skip past the disorienting argot to focus on these key performance indicators:

Cash flow – As in “free cash flow,” or the cash generated from operations minus capital expenditures and dividend payments. This is distinct from EBITDA – earnings before interest, taxes, depreciation, and amortization – which often appears in the bottom third of the report. From a company’s standpoint, EBITDA is fascinating reading, but the real news lies in the cash flow. If it’s positive, that’s a good sign the company can cover its debts and operating expenses.

Earnings per share, net income, and revenue – Combined, these reflect the overall financial health of a company. The EPS reflects how much of a company’s profit is allocated to each outstanding share of stock, net income reflects total earnings, and revenue refers to total earnings from normal business activities. Of course, positive numbers are preferred, but it’s telling whether these numbers fluctuate widely between quarters. The gap between these numbers attests to variations in the …

Margins – These show how much out of every dollar a company keeps. In formula form, two of the most important ones look like this:

  • Gross profit margin = (Sales – Cost of goods sold) / Sales
  • Operating profit margin = Earnings before interest and taxes (EBIT) / Sales

Size matters for both. If the gross margin is high, a company has extra cash to spend on product development and building the business. Rapid decreases from one quarter to the next, caused by such things as higher labor or material costs, may indicate trouble, which the company can mitigate by raising its prices. As for operating profits, a decrease here suggests the company is struggling to control costs.

Earnings per share vs. expectations – Earnings reports reveal not just how a company performed the previous business quarter. Corporate leadership also devotes space to prospects for the next quarter and punctuates them with a quote or comment usually from the chief executive officer or top financial officer. These prospects shape market and media expectations. If the expectations fall short, the company needs to explain why. A deal closing late or a missed order delivery rarely warrant concern. But revenues that buckle under the weight of changing trends, technology, lawsuits, market turmoil, or new technology can prompt investors to scamper away.

Angry St. Louis Rams fans should become Packers fans

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I never became a Rams fan despite the opportunities presented to me.

When I was in grade school, the Rams were the closest NFL team to my hometown. On the first weekday of each pro football season, most boys came to class wearing blue and white – the team’s colors back then – to signal their fandom, or to blend with the “in” crowd.

Years later in St. Louis, I bought a home within walking distance of the Rams’ stadium and was at Ground Zero for the huge showing of civic pride as the team won its only Super Bowl.

Around the same time, I became a sports editor at the St. Louis Post-Dispatch and had a hand in gathering the information that thrilled the Rams’ fan base. I worked closely with the reporters and columnists who sifted team minutiae for tidbits about Rams players and plays. I learned how to spell Oshiomogho Atogwe before Rams fans did.

A few years after that, I joined a company that had a professional and public partnership with the Rams. On occasion, I worked beside Rams staff, players, and cheerleaders at community-outreach events.

All those chances to emboss the curly horn on my psyche – and still, nothing. The Rams remained as distant to me as New England, or for that matter, Newfoundland.

Why?

Well, for one thing, the qualities of pro sports that most fascinate me, going back to my youth, are best described by dollar amounts, not player numbers. I prefer watching what goes on behind the scenes – the business deals, the machinations, the politics. Perhaps because I am not a player-sized person and lack player-sized athletic talent, my attention gravitated toward the average-sized guys working off-field to make a winner, or struggling to maintain one.

For another thing, I never believe that any team on any field, court, or rink plays for “me.” Pro sports in America started without spectators; the crowds came later because the games were diversionary – entertaining distractions from the workaday routine much like movies and circuses were. Soon enough, the players and team organizers realized they could charge for attendance, and a revenue stream was born to justify continuing the games for reasons other than sport.

Today, pro sports – football, in particular – rely on TV revenue to build wealth. The same basic principle of recreational diversion applies, only now an NFL team can profit without a single fan showing up in person at the stadium (although, if that were to happen, the team would lose out on huge income from sales of concessions).

Team owners understand and relish this stark reality, and that is why every pro football city outside of Green Bay, Wis., is at risk of suffering the same way as St. Louis. If an owner can be persuaded to think that better TV revenue exists in another city, that same owner can be persuaded just as easily to relocate his team to that city.

Green Bay will never suffer that indignity. The smallest city in the NFL, at just over 104,000 residents, also has the sweetest ownership agreement. Its Packers franchise is publicly owned by more than 300,000 stockholders, none of whom are allowed to possess more than 4 percent of outstanding shares. The Packers are also a registered nonprofit corporation – the only one in U.S. professional sports.

This happened because back in the 1920s, before the NFL as we know it was born, the team’s owners elected to hold a stock sale as a means of escape from beneath crushing debt. Since then, the Packers have had four other stock sales, the most recent in 2011-2012 to upgrade its home stadium, Lambeau Field.

No other NFL team can attempt that business model now. The league outlawed it three decades ago but grandfathered in the Packers’ arrangement.

I should disclose here that I am among those 300,000-plus Packers shareholders. Given my pro-sports proclivities, the notion of owning a couple shares of stock appealed to me more than owning a Brett Favre jersey.

This means I am in league, figuratively and literally, with Rams owner Stan Kroenke, except nobody will ever ask me for input on how to pay for three levels of depth at inside linebacker, let alone try to sell me on moving the Packers to a new stadium in suburban Los Angeles.

Another key difference between us is that I feel the pain St. Louisans suffer now from their wounded pride. I see that pain in many of the faces I pass in downtown St. Louis, and I read it in social media comments. This city embraces its pro sports profile much the way Green Bay does; its love for baseball’s Cardinals and hockey’s Blues verges on passion, and that is why St. Louis routinely ranks high on lists of best sports cities in America.

A thoughtful, committed NFL team owner would have paid to produce a franchise worthy of comparable passion. But as St. Louis learns for the second time, pro sports run on money, not love. Kroenke took his team to where he thought the TV money was better and the love was negotiable. If Kroenke truly thinks that is central to producing a successful team, however, Los Angeles will suffer a worse indignity than St. Louis by losing the same pro franchise twice.

Despondent Rams supporters should switch their allegiance to the Packers. The fans own the team, not the other way around. And because of that, the Packers aren’t packing to leave Green Bay anytime soon.

Resolve in 2016 to stop texting while driving

Distracted Driving

I drive 18 miles of interstate each weekday before sunrise. Ahead of me, lines of fast-moving tail lights stretch into the dark toward the horizon, toward my destination, like glowing breadcrumbs aligned along a well-worn trail.

As I draw near to a set of those tail lights, I glimpse something else: the soft white glow from phone screens as people text or read while they drive. I see even more of them after dusk on the commute home, because traffic is heavier and slower at that time.

The least distracted among these drivers announce their divided attention by veering into other lanes and almost into other cars, or they drive 10-15 mph below the limit amid high-speed traffic with two wheels in another lane the whole time. Those drivers who fail to correct often wind up in a wreck surrounded by emergency vehicles on the roadside.

I see an average of one wreck per day along my short stretch of Interstate 64 in eastern Missouri. Usually, more than one vehicle is involved.

According to the National Safety Council, more than one-quarter of all car crashes result from smartphone use. But that percentage represents confirmed numbers. By my count, 60 percent to 70 percent of the people I can see in the other cars along my 36-mile round-trip commute have their faces angled down at their phones instead of up at the road, so I believe the NSC’s estimate is soft.

What happens when drivers stop looking at the road, even for what they think is only a moment? A study by the Virginia Tech Transportation Institute found that sending or receiving a text requires an average of 5 seconds – the time it takes to drive the length of a football field at 55 mph.

The overall distance is longer when you consider that few of us on the interstates keep the speedometer at 55.

I admit to being one of those distracted drivers until a few years ago when, along the same stretch of I-64 on a cloudless day, an SUV bounced off the concrete divider and careered across all four lanes into my driver’s side door, totaling my car. (My phone was in my pocket at the time.)

Neither I nor the other driver were hurt, but he resisted giving me his name, address, driver license number, or insurance information for my own insurance records, saying the crash was not his fault. This sounded odd considering the road was dry, the weather was perfect, and witnesses at the scene said nobody was near his vehicle when he lost control.

So, I said, “Fine.” Then I turned to the police officer who was interviewing us for the accident report and said, “Either you obtain his cell phone records for your investigation, or I’ll find an attorney who will.”

The driver’s insurance company cut a check for all damages within 72 hours.

Few things in life are certain except these: death, taxes, and the risk associated with distracted driving. Dozens of studies going back more than a decade confirm this danger, underline it, and yet so many drivers still ignore it. This is why I drive Interstate 64 with a grip on my steering wheel that could strangle a garden hose, and I watch not just the other cars but other drivers as well.

I know, the pressure to look at our phones while driving is great. Driving is monotonous, boring, so we use smartphones as a cure. On top of that, each of us perceives ourselves to be superhuman in some way – like thinking we handle driving distractions better than everyone else.

But nine people die every day in the United States from distracted driving, according to the Centers for Disease Control and Prevention, and the chief cause is smartphone use. Resolve to not inflate that statistic in 2016, and repeat that resolution – and stick to it – every New Year’s thereafter.

Avoid holiday phishing attacks by taking these 3 precautions

3 ways to avoid phishingThe season for giving is also the season for taking. Lurking among the people exchanging gifts and glad tidings are shady characters whose only goal is to pluck opportunity from the well of goodwill filled each year during the holidays. For them, a Merry Christmas involves sending malicious messages via email.

Security researchers say these kinds of messages, while not unusual, flourish around Christmastime as family, friends, and workplace colleagues exchange kind thoughts in the spirit of the season. The main vehicle conveying most of these thoughts has been the e-card, which grows in popularity as we widen our circles of digital friends.

Cyber criminals relish this growth because it improves the likelihood they will reel in a sucker when they go “phishing” in this stream of e-correspondence. Recent reports on data breaches say an estimated one in 10 email users wind up getting hooked by a phishing lure.

“It’s easy for busy, distracted consumers to become victims of these schemes,” said Craig Young, a researcher at Portland, Ore.-based Tripwire, a cyber security provider. “But armed with a few basic security practices, they can drastically reduce their chances of being victimized.”

Among the practices that Young and others advocate:

  • Avoiding email from unknown addresses, or email with undisclosed recipients, and not opening the attachments in these emails. That includes e-greeting cards. If possible, confirm who sent the greeting before opening it.
  • Watching for bad spelling and poor grammar in email subject lines. Cyber criminals focus on results, not quality, because they send thousands of messages at once hoping for just a few responses. A subject line containing errors is strong proof that opening the email would be an even bigger mistake.
  • Running anti-virus software and keeping it up to date. The protections within these programs may be enough to ward off threats in emails that are opened by accident.

Businesses are particularly vulnerable due to multiple users in corporate accounts – and multiple approaches to answering email among those users. That is why employees must be made part of the solution, instead of being left to become part of the problem.

“Enterprises … need to place more reliance on employees to help them defend their organizations,” said Rohyt Belani, CEO and co-founder of PhishMe, a threat management company based in Leesburg, Va. “Consistent training turns employees into informants that can spot attacks before they turn into catastrophes.”

Dive into the Deep Web (but watch where you swim)

Deep Web Image

If you ever watched the rain fill a hole in the ground, then you can understand where the term Deep Web comes from.

For the past 10,000 days – the approximate age of the World Wide Web – we’ve poured gallon after gallon of content into that vast networking structure known as the Internet and watched as that content seeped into every crevasse of our lives. And the number of sources is as vast as the structure itself; none of us truly knows where all that content originates.

Now, imagine that, instead of overflowing, the hole gets deeper and deeper to contain the content pouring into it. You can see across the surface and maybe a little below it. But other content submerges to where you need special tools for access.

Search engines such as Google and Yahoo! and web browsers such as Firefox merely skim this surface, collecting indexed information from its source. These kinds of tools probe only about 5 percent to 10 percent of the Web’s content.

Deep-Web diving, on the other hand, reveals the immense amount of information not indexed by standard search engines. Much of it is exchanged through peer-to-peer networks and resides on databases, unregistered websites, query-sensitive dynamic pages, limited sites, non-HTML sites, broken or hidden web links and backlinks, scripted content, and web archives, among other sources.

The list of useful deep-diving tools is long, but among the most common tools are Freenet, IceRocket, I2P, SurfWax, the WWW Virtual Library, a series of search applications provided by Deep Web Technologies, and the Tails operating system. There are also customized tools targeting specific caverns nestled in the Deep Web.

A word of warning, however: The deeper you go, the darker the Web gets. This is why in recent years the terms “deep” and “dark” have become conflated regarding the Web. At Deep Web’s bottom layer, there be dragons who dabble in questionable or outright illegal behavior. Using Tor, a free browser designed to protect the user’s anonymity, deep divers can peer into portions of this darker area.

Granted, not everyone at this depth wears a black hat. Good guys dwell down there, too, such as journalists, law enforcement, the military, and whistleblowers. But like anywhere else, trouble can be found if you go looking for it. So, exercise the same caution swimming in the Deep Web as you would in deep water. Keep a lifeline handy like this one (accessible through Tor) and enjoy the voyage.

Taco Bell’s certified-vegetarian menu could win me back

Taco Bell logoSurely, you’ve heard the jokes – or made up your own.

Q: Why did the chicken cross the road?
A: Because there was a Taco Bell on the other side.

Q: What do you do after placing an order at Taco Bell?
A: Look the cashier in the eyes and say, “We never had this conversation.”

Or maybe when you heard Taco Bell’s former slogan “Run for the border,” you snickered and said “Run for the bathroom.”

Now, the company once famous for its talking Chihuahua mascot has taken a decidedly serious move. On Thursday, it announced a certified vegetarian menu, thus laying a claim as the first quick-serve restaurant to do so.

Among Taco Bell’s announced veggie items are the Cantina Power Veggie Bowl and the 7-Layer Burrito. The 35 ingredients that constitute the 13 all-veggie items also are certified by the American Vegetarian Association, and some of those ingredients can be swapped out to make the meals vegan.

All items are available now at each of Taco Bell’s 6,000 restaurants nationwide.

This matters to me because Taco Bell once was my fast-food place of choice. Their bean burritos and tostadas were better than typical fast fare, were less expensive, and they fit nicely into my family’s veggie-only lifestyle.

“We get it – being a vegetarian can be tough when you go out to eat,” Taco Bell CEO Brian Niccol said in Thursday’s news release.

But not long after the chain trotted out Gidget, the Chihuahua star of its “Yo quiero Taco Bell” promotion in the late 1990s, Taco Bell’s image went to the dogs.

In 2000, Taco Bell, a subsidiary of Yum! Brands Inc., was swept up in a Kraft Foods recall of taco shells made from genetically altered corn. In 2006 and 2007, it was accused of having unsafe sanitation practices after customers were sickened by E.coli contamination traced to lettuce and spinach in some meals.

And in 2011, the chain battled accusations that its seasoned beef was less than 40 percent real beef. (Not that I had a beef with their beef, but the controversy planted doubts in many consumers’ minds about the authenticity of other ingredients.)

By catering to a veggie crowd – and with an AVA-certified menu at that – Taco Bell may be taking additional steps toward putting all that bad news behind it, and maybe win me back as well.

If the Chihuahua trots back out, however, watch me trot away and never return.