What the CEOs Need to Hear


BOSTON (TheStreet) -- As a holiday gift for the C-suite executives struggling with corporate decisions, we offer, unsolicited (and perhaps unwanted) advice for how they might turn things around and reclaim past relevance and success.

Once upon a time, for instance, America Online was how most of the country took their baby steps onto the Internet. Its "You've got mail" prompt was such a part of the culture that, heck, they even made a Meg Ryan/Tom Hanks movie about it.

AOL has fallen mightily. But it is too soon to write if off. To start with, it still has millions of users, a top-notch instant messaging program and what remains one of the best email platforms ever devised.

In recent months, the company has adopted a "content is king" philosophy that means a massive amount of partner-provided and even in-house content. Its Patch network of sites is hiring reporters across the nation to offer "hyperlocal" community news. Gluing it all together is better integration with social networking sites.

We've come around to thinking AOL's strategy might just be what the doctor ordered. We have a few suggestions of our own to kick in:

AOL should consider a fresh marketing campaign to draw attention to its new personality. Many still associate the company with the squeak and squelch of phone modems and the way those "free trial" CD-ROMS cluttered every store's doorway.

When CEO Tim Armstrong said AOL's goal was to be "a low-cost producer of high-quality content at scale" we hope the emphasis is more on the "high" part than the "low." Content is not nearly as quick, cheap and easy to produce as many think. Already, there is buzz that Patch writers feel overworked and underpaid. Pay for quality just like your TMZ celebrity gossip site pays for paparazzi pics, Tim.

Finally, let's speak bluntly: AOL's own software shouldn't suck. While the company is pushing people to the Web, those using its old-fashioned, all-in-one desktop interface get navigation that's slow and confusing -- even the simplest of tasks are frustrating, bringing in third-party apps even to create an online profile. Improve it or kill it.

Borders and Barnes & Noble
Change isn't always good, says Michael Norris, offering his take on the sluggish revenues at Borders and Barnes & Noble, the nation's top bricks-and-mortar booksellers. "I don't think they should go for a Books, Bath and Beyond kind of strategy," says Norris, a senior analyst for publishing industry-focused Simba Information who sees too much junk in the stores. "I think they need to sure offer additional nonbook products where it makes sense, but when people walk by a bookstore they should be able to see a lot of different books with well-designed covers that will potentially have one cover visible that brings one person in."

A key example: Buzz about e-readers shouldn't come at the expense of print products, which are still doing fine. But at "every Borders I've been to recently, I can't see the books when I walk through the door," Norris complains. "You just see the big display of the Kobo reader."

He applauds Borders offering $20 membership discount cards in addition to its free Borders Rewards Card. Barnes & Nobel has long had a similar program. Those who pay tend to become more frequent, loyal customers, he said. To get their full money's worth they shop and spend more.

The chains should forget about a merger, which is occasionally rumored. He sees no benefit, aside from the boost it will give Amazon, Apple and Google "since two huge booksellers will be basically out of commission while figuring out how to design new business cards" and losing market share by shuttering stores.

Autumn brought good news for shareholders in Zale, owner of the Zales chain of jewelry stores. Its stock was up nearly 100% in three months.

Too bad last fiscal year there was an operating loss of nearly $85 million. Even worse from a customer perspective were the late 2009 liquidity problems, when the company had trouble paying vendors and had to cancel millions in holiday orders.

"The small, mid- to low-priced jewelry store located in a mall is a business model that has a poor future. There are literally thousands of such stores all over the country," says analyst and author George Whalin, of Retail Management Consultants.

That's a problem because Zales and similar stores -- Signet's Kay Jewelers, for instance -- depend on department stores and malls for traffic that has decreased year after year since the recession began, but also because Zales doesn't stand out. "Among the jewelers doing well these days are those that specialize," he says.

Zales needs to set itself apart, whether it's in "the types of merchandise they offer, the price points, financing plans, store design, sales strategy and how they communicate with consumers," including through social media such as Facebook or Twitter.

Whichever way Zales goes, one thing is certain: While having many locations can be important to suppliers, "with their long-standing problems they should consider closing those stores that are not profitable or have little prospect of achieving profitability in the future."

Supermarket analyst David Livingston, of DLJ Research, says A&P has long lacked financial discipline, something made clear by its overpriced purchase of longtime rival Pathmark.

"For reasons that I could only speculate, A&P overpaid for everything. Rent, transportation, goods and products sold in their stores, acquisitions of other stores and wages," he says.

Post-bankruptcy, the company -- once the dominant supermarket chain -- is in desperate need of a management overhaul. "Get out of the grocery business, because you are not very good at it," Livingston says to the top brass. "When I talk with other industry insiders they are just amazed at the total mismanagement of A&P. The punch line to all the industry jokes was 'Thank God for A&P,' meaning having them as an ineffectual competitor made life a lot easier."

Hundreds of stores should be closed or sold, and most likely will be, Livingston says. "Most of the competitors completed their wish list a year ago of stores they would like to acquire," he says. "They couldn't reach a deal with A&P, but perhaps after bankruptcy, they can. Maybe the company can be more efficiently operated with Executive Chairman Christian Haub out of the way, renegotiated leases at market rates and supply agreements that are more fair."

"If you can't beat them, join them" might be the best advice for MySpace, and a strategy it seems to be following.

Once upon a time, MySpace was neck-and-neck with Facebook in the social media footrace. It lost. An unlikely savior emerged when News Corp. bought the company, part of Rupert Murdoch's Web technique of plunging into a pitch-black room, slamming the door shut and stumbling around hoping there's a lamp somewhere. A strategy has finally emerged: With a rebranding announced in October, MySpace is becoming less a social network than a content aggregator pushing media. A "personalized stream" determines what to feature based on a user's preferences, habits and online connections. More than 20,000 entertainment-focused pages will be organized around topics using content from news sites and blogs including MTV, Access Hollywood, Los Angeles Times, New York Times and Village Voice.

You can even now use Facebook log-in info to access MySpace accounts, and there will soon be "like buttons" sharing info between sites.

"I was fully prepared to rail against the new strategy as trying to keep a dead brand afloat by addressing a need that wasn't real," Zak Kirchner, senior research Analyst at Interpret LLC, wrote last month. "MySpace actually has a decent chance at pulling off one of the biggest rebranding efforts the social media space has seen yet."


Blockbuster was once the go-to chain for movie rentals. Now, saddled with debt and forced into Chapter 11 bankruptcy, it struggles to stay solvent and relevant.

Retail Management Consultants' George Whalin agrees with analysts who say Blockbuster's "store-based business model is no longer viable."

Netflix, which mails DVDs and streams online, Coinstar's Redbox kiosks in grocery stores and the on-demand services available from cable and satellite providers all plunged daggers into the company's back. Adding Apple TV, Roku and the long-awaited Google TV to the mix spells even more trouble.

"To survive, Blockbuster must find another way to do business," Whalin says.

Blockbuster does offer streaming and has Redbox-like rental kiosks, but you might have better luck filming Bigfoot that finding one. Plans were to expand the number of Blockbuster Express DVD rental kiosks from 1,000 to 10,000 this year, but only 7,500 look likely compared with Redbox' 25,000-plus -- a number growing rapidly thanks to an agreement with CVS and with convenience stores and gas stations nationwide.

Even given Redbox's significant head start, an expansion of the kiosk business would be a boon to Blockbuster -- if it in fact owned them. The Blockbuster Express DVD rental kiosks are actually owned by NCR, which licenses the Blockbuster brand.

Salvation might come from a focus on online services and a move to ditch all the real estate.

The company needs to keep bragging about its rights to rent DVDs at the same time they go on sale, while Netflix and Redbox have to wait 28 days, but also to make more distributor deals and partner up: Blockbuster announced strategic alliances last year with TiVo, Samsung and Motorola. Its movie download service is embedded in the HTC HD2 smartphone, and an iPhone app has been a success.

There hasn't been much to yodel about lately for a company that was once king of the Internet, dominating search traffic and pioneering webmail.


A few years back, an internal memo by a Yahoo executive was dubbed "The Peanut Butter Manifesto" for its key criticism that there was "a thin layer of investment spread across everything we do and thus we focus on nothing in particular." "I hate peanut butter," the exec wrote. "We all should."

But Yahoo still struggles with an identity crisis. "It gets to the question that everyone asks but no one hears a good, concise answer to," says Jeremy Zawodny, a former evangelist for Yahoo, now an engineer for Craigslist. "What is Yahoo? We had this debate internally a lot. Are we a technology company, or a media company? When I first started there, in 1999-2000, it was 'We are a technology company,' that was clear. At some point in the next three to four years, it shifted and it was pretty clear we were a media company. There was this focus on eyeballs and content deals and we were bringing in TV and print people. OK, what changed and why did we change?"

Yahoo users have been up in arms this week after a leaked slide from an internal product meeting seemed to reveal a list of services that will be jettisoned or merged. On the list: AltaVista, Yahoo Picks, Yahoo Bookmarks, Yahoo Buzz, Del.icio.us, MyBlogLog, Alltheweb, MyM, FoxyTunes, Yahoo Events, Yahoo People Search, Sideline, FireEagle and Upcoming.

The variety of services on the endangered list -- some you may have never heard of -- illustrates the problem, Zawodney says. Often there seems to be little strategy behind the products under its umbrella, and a duplication of services.

"One of the battles going on internally around the time Del.icio.us was acquired there was already a similar service, Yahoo Bookmarks, that had existed for quite a while ," he says. "They were also building the replacement for it, My Web. Those three services ran in parallel for some time. People sort of looked at it and said, 'What's going on here? What's the plan to integrate them or replace one with the other?'"

Yahoo needs to find growth areas, be more innovative -- creating products, not scrambling to clone them -- or "just radically cut back and focus on a core set of things they think they can truly do well, a 'hunker down and let's get through this' philosophy," Zawodney says. "But I don't see them doing either one."

Innovating would mean cutting through the bureaucracy that bogs down innovation and a possible end of the strategy that every service needs to be fully integrated, and branded, with the mother ship. Yahoo might also take a page from AOL's playbook.

"I feel like AOL has taken the approach of, 'We may not be where people start on the Internet, but people are going to land here sooner or later because we are going to have content people want to see,'" he says. "I think they have a better radar for figuring out what those hot things might be and trying to buy them before they get too expensive. Yahoo hasn't been so good at that recently."

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