There's Another Problem with Targeted Ads
A study finds online targeting tends to be used most often by inferior vendors and that consumers would be better off doing a quick web search.
Here are today’s highlights:
Congress created a small business advocacy office in 1974. It’s been vacant for six years.
Businesses looking for capital should know about the SBA’s SBIC program.
Almost half of all employees are now earning cash on the side.
Remember the Summit Series? It involved a group of idealistic entrepreneurs, a $40 million real estate deal, and the mantra “Make no small plans.” Can you guess what happened next?
The Morning Report will be closed Friday. It will return on Monday.
OPINION: Targeted ads aren’t just creepy and annoying: “Last year, researchers at Carnegie Mellon and Virginia Tech presented a study of the consumer welfare implications of targeted ads. The results were so surprising that they repeated it to make sure their findings were correct. The new study, published online this week, confirmed the results: The targeted ads shown to another set of nearly 500 participants were pitching more expensive products from lower-quality vendors than identical products that showed up in a simple Web search. The products shown in targeted ads were, on average, roughly 10 percent more expensive than what users could find by searching online. And the products were more than twice as likely to be sold by lower-quality vendors as measured by their ratings by the Better Business Bureau.”
“The authors posit that targeted ads may be a way for smaller vendors to reach consumers — and ‘a sizable portion of these vendors may in fact be undesirable to consumers because they are of lower quality.’”
“Quality seems to be an issue with Jeremy’s Razors, which spent the most on Facebook advertising during the 30-day period ending March 26, spending more than $800,000. When I checked Jeremy’s Facebook reviews, many customers said they liked the product’s political message more than the razor itself.”
“‘If you like razors that feel like someone is pulling your facial hair out with a tweezer one at a time, then Jeremy’s Razors are your razors,’ one wrote. The razor has a 2.7 star rating (out of 5) based on more than 280 reviews.” READ MORE
What happened to the small business advocate? “Over the last few years, small businesses have had to adapt and innovate to survive — navigating shutdowns, inflation, and workforce shortages. So why, in the face of these historic headwinds, has the federal government failed to permanently fill the role of the small business advocate? This position, officially called chief counsel for advocacy, was created by Congress in 1974. The chief counsel runs an independent office from within the Small Business Administration and is appointed by the president and confirmed by the Senate. However, there hasn’t been a permanent chief counsel in more than half a decade. It’s a significant job. These are significant times. So where’s the small business advocate?”
“As the CEO of a Utah-based manufacturing operation that survived the pandemic, I know firsthand the challenges of hiring. However, the six years this position has been without a permanent appointee are way too long. Furthermore, several other positions within the Office of Advocacy have also been left vacant.”
“The Office of Advocacy’s mission, according to its website, is to be the ‘independent voice for small business within the federal government,’ advancing ‘the views and concerns of small business before Congress, the White House, federal agencies, federal courts, and state policymakers.’”
“Many small businesses like mine face significant challenges in understanding and complying with ever-changing and confusing federal regulations. Filling this role would give us a voice when it comes to the impact of these regulations.” READ MORE
The SBA’s SBIC program invests in small businesses but often gets overlooked: “Small business owners looking for capital in an increasingly choppy lending environment might want to dig into the Small Business Investment Company program. The Small Business Administration program has been around for more than six decades, but experts say it often flies under the radar for many businesses despite the billions at stake.”
“Investment firms apply for and are accepted into the SBA’s SBIC program after an agency review, and are then eligible for low-interest loans to match their own private fundraising to invest in small businesses — ideally undeserved small businesses.”
“The SBA can invest up to $4 billion per year in these SBICs, with the money then being distributed to small businesses in the form of investment rounds and financing. Alan Roth, a partner at law firm Winston & Strawn, who specializes in SBIC licensing, said the program has, for relatively few dollars, boosted small businesses around the country and at no cost to taxpayers.”
“There are a number of rules SBICs must follow, including not being able to invest in companies that have a net worth of greater than $24 million or an after-tax income of $8 million, although those amounts can vary for some industries.”
“There is no mechanism for business owners to apply for this type of financing, Roth stressed. That's because the money is overseen by investment firms that make their own decisions on investments and use their own networks to identify potential businesses — more in the style of venture capital firms.” READ MORE
American companies added fewer jobs than expected in March: “Private payrolls rose 145,000 last month after an upwardly revised 261,000 increase in February, according to figures out Wednesday from ADP Research Institute in collaboration with Stanford Digital Economy Lab. The figure was below all estimates in a Bloomberg survey of economists.”
“Hiring increased the most in leisure and hospitality; trade, transportation, and utilities; and construction. Firms in manufacturing, financial activities, and professional and business services cut payrolls. The South was the only region to shed jobs, and some medium-sized businesses did as well.”
“The report suggests a year’s worth of interest-rate hikes by the Federal Reserve could be starting to weigh on the labor market. Meantime, layoffs that initially started at big technology companies are now beginning to spread to other sectors.”
“The recent turmoil in the banking sector could also impact hiring if tighter credit conditions lead businesses to halt expansion plans. Smaller firms are already having trouble competing for talent amid wage pressures and higher borrowing costs.” READ MORE
Signs of recession are flashing in the land of warehouses: “Southern California’s Inland Empire, the warehousing mecca that’s home to Amazon.com and Walmart facilities, is showing signs of trouble. Just last year, the region was hiring workers faster than California and the rest of the U.S. — emerging as a top beneficiary from the supply-chain turmoil that clogged warehouses and led to record imports through North America’s largest port complex near Los Angeles. Now, the gush of cargo that once flowed through the 27,000-square-mile area, stretching from east Los Angeles to the Nevada and Arizona borders, has dwindled to almost three-year lows and jobs are harder to come by.”
“The Inland Empire, an epicenter of California’s 2008 housing crisis, occupies a strategic location just east of the twin hubs of Los Angeles and Long Beach, which collectively handle about $500 billion in goods annually. With a population of almost 5 million, it delivered a remarkable increase in transportation and warehousing jobs during the pandemic, peaking at 215,000 last year and marking a 40 percent surge from February 2020.”
“It’s an ominous sign for California, already reeling from the tech collapse and a banking crisis, and a glimpse into what may lie ahead for the rest of the U.S. as it stares down a potential recession. California, the world’s fifth-biggest economy, projects that a mild recession is possible, giving way to concerns that the pain would hit the Inland Empire’s blue-collar workforce especially hard.”
“Over the longer term, the Inland Empire is poised for significant growth — and potential new strains on its infrastructure — with its population projected to increase at double the rate of the rest of California over the next 25 years. The region's warehouse-vacancy rates are nearing all-time lows at 1 percent, and major development projects, such as Amazon's largest fulfillment center in the world, are underway.” READ MORE
Almost half of U.S. employees are now earning cash on the side: “It’s not just low-income or cash-strapped households who are turning to additional income to help pay the bills. Those earning $100,000 annually are more likely to have a growing supplemental income, the survey found. Overall, consumers may be amassing more than $50 billion a month in cash through extra earnings — with a large portion of that money undeclared to tax authorities, according to the report.”
“‘A vast majority of consumers became used to working from home during the pandemic, and after returning to work, many kept flexible hours and turned to alternative income streams to expand their earning potential beyond a 9-to-5 job,’ Anuj Nayar, financial health officer at LendingClub, said in the report.”
“Tips and selling used items on online marketplaces like eBay are among the most common sources of extra cash cited in the survey. Other respondents — especially the more affluent — are taking informal jobs on mobile apps like TaskRabbit, or receiving passive incomes from investments or rents.”
“The proliferation of apps designed to help people find short-term work or to sell products has made it easier to find additional sources of income. More than 4 million people in the U.S. and Canada have signed up on Instawork looking for additional income, according to Daniel Altman, chief economist at the platform.” READ MORE
Gene Marks says there is a way to make unlimited PTO work: “An unlimited PTO plan is not as hard to implement as you may think. And for me, the benefits significantly outweigh the costs. So if you’re thinking about it, here are a few things that I’ve learned from some of my clients who are doing this the right way. The first thing to know is that your unlimited PTO plan doesn’t have to be your only PTO plan. Most of my clients with unlimited PTO plans have multiple plans. For example, there’s a PTO plan for hourly employees which may be the standard two-to-three weeks of vacation plus sick days and then another plan for salaried or senior managers that allows more time off and may include sick days.”
“This brings me to my next point. And that is that people should only be eligible for your unlimited PTO plan after fulfilling certain requirements. For my clients with these plans, they only consider employees who have been working for them for at least two years and sometimes as many as five. It’s a perk for loyalty and good work.”
“Other eligibility requirements may include the employee’s position in the company, compensation levels, or meeting certain performance milestones. So many of us are struggling not only to attract new talent but retain our best people, and an unlimited PTO plan can be the carrot on the stick for doing this, which brings me to my next point.”
“And that is that unlimited PTO plans are a great sell. Most workers love the sound of ‘unlimited’ when it comes to their vacation. The workplace has changed, and now, besides offering healthcare and retirement plans, good companies are also revisiting the concept of flexibility by offering more remote working and time off opportunities.” READ MORE
Could ChatGPT replace millions of professional jobs? “A handful of experiments point to the astonishing potential of generative AI to replace workers. With ChatGPT, professionals such as grant writers, data analysts, and human-resource professionals were able to produce news releases, short reports and emails in 37 percent less time, 10 minutes on average and with superior results, according to a study by Shakked Noy and Whitney Zhang, doctoral students at the Massachusetts Institute of Technology. In a separate experiment by Microsoft researcher Sida Peng and three co-authors, programmers using a tool based on a model developed, like ChatGPT, by the startup OpenAI cut the time required to program a web server by more than half. These are game-changing results.”
“Higher productivity means that some workers, or types of work, will no longer be needed. Automation has been displacing labor continuously for centuries, of course, but historically took its toll on routine, repetitive work. Generative AI by contrast hits well-paid college-educated professionals right in their human capital.”
“Open AI and University of Pennsylvania researchers asked a team of humans and a ChatGPT-like model to evaluate which occupations were most exposed to generative AI. Some jobs—such as dishwashers, motorcycle mechanics, and short-order cooks—were deemed to have no exposure.”
“The most vulnerable occupations included mathematicians, interpreters, and web designers. Some 19 percent of all workers could see at least half their tasks affected, the study concluded.” READ MORE
They bought a $40 million mountain in Utah to build Davos for hipsters: “Just four years after a group of idealistic entrepreneurs in their early twenties started Summit Series, it had grown into a phenomenon: an invite-only multi-day conference with an eye-popping guest list of CEOs, founders, wellness gurus, philanthropists, and celebrities who came for the intense workshops, heady talks, and legendary parties at stunning vacation destinations. At an annual Summit Series conference or a ‘Summit at Sea’ cruise, one might find oneself in a meditation session with Jeff Bezos, learning about indigenous peoples’ rights from Harrison Ford, or petting puppies with A$AP Rocky.”
“The founders had always seen the Summit Series mission as bigger than a string of epic gatherings, they explained. They were building a community of people who wanted to fix the world’s ills by creating businesses that gave back.”
“They were collecting people who accepted the Summit mantra ‘Make no small plans’ as a personal creed. They needed a year-round home, and this literal summit could be it. They just needed $40 million to buy the mountain.”
“The $40 million real estate deal would give the Summit group nearly 10,000 acres, land equal to roughly two-thirds of Manhattan, but they pledged to keep development eco-friendly: a four-acre village and 500 elegant but restrained single-family homes built into the mountainside, as well as modernist condos, workforce housing, co-working spaces, coffee shops, farm-to-table restaurants, and upscale hotels.”
“But a decade later, the investors and the county are still waiting for the promised utopia to materialize. Today the sparsely populated resort consists of a few dozen new homes and the Skylodge, a luxe yurtlike clubhouse. Some 90 percent of the promised 500 houses have yet to be built. Many lots remain empty or are in a state of unfinished construction.” READ MORE
THE 21 HATS PODCAST
This week, Paul Downs, Sarah Segal, and Laura Zander discuss how they think about the possibility of recession: Do they proceed with planned hires? Do they continue to spend on marketing? Do they look for unexpected opportunities? In addition, Sarah, having recently taken back ownership of her PR firm, asks Paul and Laura how they pay themselves, how much cash they keep on hand, and whether they think she should expand her offerings to include digital marketing. Plus: Laura, who’s acquired several businesses over the years, explains what she looks for, how she decides how much to pay, and why she’s come to see acquisitions as necessary for the survival of Jimmy Beans Wool. As usual, all three owners are remarkably generous about sharing their thinking and even their numbers.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren