Posted on 13 November 2010 by Marketing Spot
Posted on 13 November 2010 by Marketing Spot
The US corporate income tax rate is 35%. Yet this year, Google, which made $5.5 billion in revenues, only paid an effective tax rate of 2.4%. Indeed, it’s not unusual for a corporation to pay only 6-7% in effective taxes.
Such numbers put you and me and most small businesses to shame. What gives?
It turns out that tax credits aren’t the only trick corporations use to evade taxes. From Intel to Bath & Body Works, most big American corporations have a subsidiary and income shifting scheme that radically skews the amounts they end up paying the IRS. Here are five of the main components that help corporations write pint-sized IRS checks.
Why make profits in your home state when you can move them somewhere with lower income taxes? Such is the rationale of many American companies headquartered in high-tax states. Strategies like the so-called Las Vegas Loophole let companies move profits to subsidiaries located in states like Nevada, which has no corporate income tax.
Chain retailers are among the corporations that love to set up subsidiaries. Wal-Mart, for example, set up an out-of-state subsidiary that “collects ‘rent’ from Wal-Mart stores, enabling the chain to disguise (an estimated $7.3 billion in profits over four years) as expenses,” according to this article. By paying itself rent via a real estate investment trust (REIT), Wal-Mart avoids additional taxes while keeping money inside the corporation.
Another trick is to create a trademark holding company in a state that doesn’t tax intangible assets like trademarks. Home Depot has a paper subsidiary in trademark-tax-free Delaware. This subsidiary collects large trademark use fees from Home Depot stores in other states, writes NewRules. Home Depot deducts those fees as a business expense, and voila, its taxes dive.
About half of the 50 US states have adopted combined reporting rules to clog the subsidiary loopholes mentioned above. Combined reporting requires companies to list all of their sources of profit, regardless of state, before figuring out their state tax burden.
For many companies, however, national combined reporting requirements aren’t an issue—they just create subsidiaries in international tax shelters like Ireland and the Cayman Islands. A tool called transfer pricing lets companies make profits in tax havens while allocating expenses to higher-tax countries, writes the OECD Observer.
A company can apply transfer pricing to a variety of financial categories, including interest rates, service charges, share sales, and depreciation. This fickleness makes transfer pricing a continued point of intense scrutiny for governments around the world.
Google’s “Double Irish” strategy is one popular transfer pricing scheme. Google created two companies in Ireland to execute this maneuver. One pays royalties to use intellectual property (expenses that reduce income tax in Ireland). A second, located in Bermuda, collects those royalties. The meat in Google’s sandwich is the Netherlands, where profits go on their way from Ireland to Bermuda.
“Irish tax law exempts certain royalties to companies in other EU- member nations,” according to the excellent Bloomberg article that describes Google’s acrobatics. “A brief detour to the Netherlands avoids…Irish withholding tax.”
If you think the federal government would want to sink its teeth into those profits by implementing an international combined reporting requirement, think again. The feds would rather get what they can without changing the law: Google and the IRS negotiated for three years before coming to “an arrangement” that let the company execute its transfer pricing strategy, according to Bloomberg.
States can only tax corporations with physical facilities, or a “nexus,” within the boundaries of the state. Otherwise, federal law doesn’t let states tax corporations, according to NewRules. Just selling goods or services in a state without having a factory or other facilities there translates to no state taxes.
Corporations have leveraged this rule to the point of having “nowhere income” that is not taxable in any state. NewRules illustrates with an example: “…if Nails Inc. has all of its property and payroll in two states, but just 10% of its sales in those states, then it will pay state income taxes on only 70% of its profits: (100 + 100 + 10)/3. The other 30% will go untaxed.” Taxes are even easier to avoid in states where sales are more heavily weighted than, say, payroll or property, according to NewRules.
Nowhere income becomes more elaborate if you can pull it off internationally. Intel did just this in the early 2000s, according to CTJ.org. The company declared “millions of dollars in profits from selling US-made computer chips as Japanese income for US tax purposes.” This exempted it from US taxes. Meanwhile, a US-Japan tax treaty required Japan to “treat the profits as American.” That meant Intel didn’t have to pay Japanese tax, either.
No transfer pricing-subsidiary scheme is complete without income shifting. This happens when a company transfers or licenses its intellectual property to a subsidiary in a tax shelter. Any foreign profits based on that technology are taxed according to the subsidiary country’s tax law.
According to US tax rules, such subsidiaries must pay an “arm’s length” amount for those rights, the same mutually-agreed-upon amount any unaffiliated company would pay for them. So parent companies set that amount low to avoid tax burden, writes CTJ.org.
The nature of the loophole means that the feds can’t get lost taxes back, either. Bloomberg writes that “…multinationals that shift profits overseas are deferring U.S. income taxes, not avoiding them permanently. The deferral lasts until companies decide to bring the earnings back to the U.S. In practice, they rarely repatriate significant portions, thus avoiding the taxes indefinitely.”
Some tourist havens, notably Bermuda and Ireland, also happen to be stellar tax havens. “58% of offshore profits are now recorded in tax havens,” according to this FinFacts Ireland article. US operations, for example, have recorded more than $25 billion in profits in tiny Bermuda, which doesn’t charge any taxes, writes FinFacts.
It doesn’t matter that most of those multinationals’ sales happened in higher-tax countries like Germany, the US and the UK. Wherever tax rates
are low, multinational profits rise, sometimes exponentially. That translates to tens of billions of dollars the US Treasury doesn’t get its hands on. US corporations, meanwhile, enjoy enviable tax rates, while the tax havens that house them benefit from the injection of foreign capital.
Posted on 13 November 2010 by Marketing Spot
I really like this Article, for me urban sprawl a disease fueled by ignorance. But I understand it will be centuries before common society realizes this. We have unlimited space to go up yet because of money we only have short building spread out covering the nature that is so needed to have a healthy life. Nothing is perfect so to make a bad situation a little better business is now finding a way to utilize space upwards a little more. Sorry to complain so much but I also really do not like the roof standard for housing. Roofs can easily be flat and used for more space like farming or just more living space. We have the ability now to have flat roofs. It is not the 1800′s building materials have advanced enough to funnel water out and for the roof to be strong enough to hold heavy objects. Yet we still make ugly coned roofs just because it’s what where used to. O.K. here is the article on a roof made farm that can feed hundreds of people.
-Commercial Rooftop Farm Nears Completion
Most people would not consider January an ideal time to plant crops, especially January in Montreal. But for Mohamed Hage, Kurt D. Lynn and Howard Resh, timing is one of the proof points of their project — a commercial-scale rooftop greenhouse that’s designed to yield produce year-round for an urban community.
Entrepreneurs Hage and Lynn and horticulture and hydroponics expert Resh are the brains behind Lufa Farms, which unveiled details last week about its 31,000-square-foot greenhouse being constructed atop a two-story office building in Montreal’s Marché Central neighborhood.
Construction of the specially designed greenhouse began in July and is expected to be complete before year’s end. Planting is scheduled to begin in January. On that timetable, the first crops would be harvested six weeks later.
“We’re right on the threshold of completing the first commercial-scale rooftop greenhouse,” said Lynn, Lufa Farms’ co-founder and vice president, in an interview before taking the wraps off the project. “If it works in Montreal, it will work anywhere.”
GreenerBuildings.com and GreenBiz.com have featured several articles on urban agriculture: farms called VertiCrops that mostly have been planted on the ground and were recognized by NASA for fostering water sustainability, the prospects for soaring high rise farms of the future, and another rooftop greenhouse business called Sky Vegetables, which was the subject of a piece last fall by GreenBiz Executive Editor Joel Makower.
While the idea of urban farming isn’t new — small-scale rooftop farms and herb gardens are key draws for green restaurants such as Uncommon Grounds in Chicago — Lufa Farms lays claim to being the furthest along with a large-scale operation.
According to Lynn, he and his colleagues started batting the idea around about three-and-a-half years ago.
“The economics of food today forces us into compromises,” Lynn said. “If I’m shipping things 2,000 miles, all along the way I’m increasing the handling of the food, affecting its taste, its freshness. It’s a long food chain. My children don’t know what a true tomato tastes like.
“Our goal simply is to be a neighborhood food source and raise the bar on the issue of traceability. We think it’s important that people know where their food comes from, that they can say, ‘Yes, I can see where my food is grown. It’s grown right over there.’ ”
Lufa Farms, whose next project goal is a rooftop greenhouse of about 150,000 square feet, aims to be the produce source for about 2,000 households within a three- to four-mile radius of the nearly three-quarter-acre greenhouse. People will be able to purchase produce via a subscription system.
The crops will include more than 20 varieties of tomatoes, cucumbers, peppers, eggplant, bok choy, herbs, assorted greens and other vegetables, according to Lynn and his colleagues. The produce will be grown without pesticides or herbicides and be irrigated with harvested rainwater and recirculated water.
The greenhouse, which was designed to be lightweight but durable enough to withstand the rain, snow and temperatures of winter in Canada, will also be fitted out with irrigation equipment, heating, insulation, curtains, supplemental lighting and advanced computerized controllers. All are intended to maximize crop growth and minimize the resources used in the process.
Lynn said a Lufa Farm can yield 10 times the output of a traditional farm in an area of identical size. The business set up a 5,000-square-foot test farm at McGill University, and its bounty was shared among just about everyone associated with the project as well as a women’s shelter and a food bank, he said.
“We had 200 heads of lettuce every other day,” said Lynn. “We were overwhelmed with vegetables.”
In addition to producing crops, the greenhouse in Montreal also is expected to provide benefits to the building that serves as its host. The greenhouse further insulates the building beneath it and by reducing the need for heating and cooling, helps the property owner save on utility bills. In terms of supply chain and distribution, the greenhouse crops won’t require the refrigeration or the fuel expenditures typically associated with bringing produce to market.
“This is the ultimate green roof,” Lynn said.
Project partners include Fonds de Placement Immobilier BTB, which owns and manages the office building where the greenhouse is being built, Westbrook Greenhouse Systems, the GKC architectural firm and FDA Constructions.
Posted on 06 November 2010 by Marketing Spot
The starting point in a strong internet marketing campaign is to get your website linked to from common and popular places on the internet. These Directories, Bookmarking, Business Review, Article Submission, and Pinging sites are essential for a well executed free internet marketing campaign.
Submit your blog:
Ping Sites (some sites may require you to register first):
Submitting to business review sites:
Posted on 06 November 2010 by Marketing Spot
Decide on one product or service to sell.
Before you can go into business for yourself, you must have a product or service to sell. The people who have tried to make money on the Internet and failed have made at least one critical mistake – they started spending money on web sites, web hosts, software, etc. BEFORE they had a real product or service to sell.
The temptation of the Internet is that there is so much to choose from that you get confused and try too many things at once. I know because I went into business on the Internet with only a general idea of what I wanted to sell. I did not do my homework before investing any money; in about six weeks I had spent over $4,000 and thought I would be “raking in the cash”. Boy was I wrong! What happened? I did not make a wise decision of what to sell.
So, how do you decide what is the best product or service for you to sell? (Notice I said “for you to sell”?) Not every person can do well selling any product they choose. If you want to get off to a good start, you need to apply the following rules.
Rule #1 – Choose a product or service that you already have some knowledge of. You don’t have to be an expert, but if you know something about your product or service, you can save yourself a lot of trouble. If you are knowledgeable about a product or service, you’re off to a good start because it enables you to make informed decisions about what software you need, methods of payment you should accept, how to design your web site, who is your target market, etc.
Rule #2 – Don’t choose your product or service because someone else tells you how great it is. Some people will tell you anything to get your money. I’m still waiting on a $49 refund for the book I ordered in April of 1998. Do your homework – check out the company. Do they give references? Do they have a guarantee? Do they really sell an actual product or service, or do they sell the idea of selling? Save your money by choosing a product based on your research, not a stranger’s claim.
Rule #3 – Choose your product because people want or need it, not because you like it. If you sell something that meets a need or solves a problem for people, you are well on your way to making money and realizing your dream! Marketing is a whole lot easier when people want what you have to sell. There are a lot of free and “low cost” opportunities out there, but very few of them meet a need or solve a problem. Always fit a product to a market; do not try to make a market for a product.
Rule #4 – Do the money math. You should have a markup of 3 to 5 times the actual cost of the product. You’ll have expenses to cover –such as web hosting, Internet access fees, credit card processing fees, phone bills, and more– so you need to know if your sales will earn you enough to pay your bills and make a profit. Also included in the math is figuring your “break even” point. That is how many sales you need to make just to pay your expenses. If your monthly expenses are $300 and you make $30 profit per sale, then you need to make ten sales in a month just to pay your expenses or “break even”. Every sale after that is money for you. (Here’s a tip – do not waste your time trying to make money selling a product for $5 – $10. You would have to make 15 to 20 sales A DAY just to make a living. That means you would have to have around 30,000 visitors a month to your web site!)
If you apply those four rules when choosing your product or service, you will be well on your way to being successful on the Internet.
Determine your target market.
After choosing a product or service to offer, the next step is to determine your target market. Your target market is made up of those people who want or need your product or service.Why is it important to know who your target market is? Because not everyone on the planet wants or needs what you are selling. It would be great if they all would buy just one of what you are selling; you’d be set for life! But, that isn’t going happen. So we have to make some plans so that the people who want or need what we’ve got can buy it from us.
Remember Rule #3 of Choosing Your Product of Service? It doesn’t matter how well you market it if no one wants or needs it. You need to ask yourself a few questions to get started in determining your target market.
First, who needs what you’re selling? Is it for men, women, or both? What age group will it appeal to most? What is their income level? Does their marital status matter?
Second, why do they need what you’re selling? Will it make them feel better physically or emotionally? Can your product or service improve their life in some way?
There are many more questions you can ask yourself to help determine your target market. You can also do your own survey by asking 12 – 15 of your friends or family to give you reasons why they would or would not buy what you have chosen to sell.
Another way to determine your target market is to look at similar products and services. Where are they advertising? What magazines, TV and radio stations or web sites do they advertise on? Are they all forms of media that are seen or heard by a certain age group or income level?
There is one more way to determine your target market if you are already making sales – take a survey of your customers. If you already have a customer base, you can design a short survey to give them. There is a bonus for you in this method because you can offer them a discount on their next purchase if they answer your survey. You get the information you need and make some extra sales while your customer gets your product or service at a discount! (Keep this idea in mind for use any time you need to fine tune your marketing or generate some extra income)
Set up your web site. ( We recomend www.dwhs.net for web hosting )
Now that you have chosen a product or service that is needed and you know who needs or wants what you are selling it’s time to design your web site.
If you only learn one thing from this section, I hope it’s this: Design your whole web site with the sales process in mind! (Did you get that? I’ll say it again.) Design your whole web site with the sales process in mind. Internet marketing is highly competitive. You have got to grab hold of that visitor and lead them through the buying process before they “click away”.
How can you do this? Use the old advertising formula of AIDA+C.
I know it may sound too simple, but one way to spend too much money on your Internet business is by getting too fancy. You don’t need a 200 page web site with animations, video and sound to sell on the Internet. A very successful Internet marketing web site, The SUCCESS Arsenal!ä , has a simple design; what makes it so successful is that it follows the AIDA+C formula. (I encourage you to check it out to see what I mean).
Let me explain the AIDA+C formula and how to use it to your benefit.
Attention. You MUST get your visitor’s attention. You only have about 10 seconds to grab their attention. When someone visits your site, you don’t know where he or she came from or why. They may have found your site in a search engine, they could have clicked on a link from some other site, maybe it was a classified ad you placed or an e-mail you sent. You don’t know exactly what caused them to visit your site, but you should know this: they have at least a tiny bit of interest in what your site is about or they wouldn’t have clicked to go there. The point is that you only have a few seconds to get their attention before they “click away” and may never return. So get their attention.
Interest. Once you’ve got them to stick around a few seconds longer, you need to build interest. Tell them about the common problem you can solve or the need they have that your web site can meet; but don’t offer the solution yet. You want to let them know that you understand their problem or need and that you’ve been there too. Identify with their feelings and emotions. You want them to know that you care about these things because you experience them as well. That builds interest because they say to themselves, “This person really knows where I’m at and they care. Maybe they can help me”.
Desire. Now that you have them staying for a while to look at your site, you want to turn their interest into desire. They know they have a need or a want, a problem to be solved. It’s up to you to create in them the desire for your product or service that meets their need or solves their problem. You do that by showing them the benefits of what you offer. Don’t tell them about all the features of your product or service; tell them how those features enhance their life. For example, most cars have anti-lock brakes as a feature. So why would you buy a car just because their ad tells you the car has anti-lock brakes? Instead, the ad tells you about how safe your family will be while traveling in the car because it has anti-lock brakes. They sell the benefit, not the feature, of anti-lock brakes. (Do you see how important this part of the process is?) Sell the benefits not the features of your product or service.
Action. It is decision time in the sales process. You have grabbed their attention, built interest and then created desire for your product or service. Now its time for them to take action. You need them to take an action for this whole process to work; otherwise, you’ve just wasted your time and money. If you have followed the first three parts of the AIDA+C formula and applied them correctly, your visitor is ready to become a customer. You must tell them what to do. Don’t ever take it for granted that they know what to do next; tell them. Make it easy by providing a link that says, “Click here to order” or a button with directions on it. Be sure to make it “fool-proof” so you don’t miss any sales because of confusion. It is important that you take your visitor by the hand and lead them through the sales process in an easy to understand way so they know what to do when the time comes to make the purchase.
Close. The close is where you take away all the objections they have so they buy your product. A great way to do this is by offering a guarantee. Take away all the risk for them to buy. People think they can’t give a guarantee, especially a money-back guarantee, because they will lose money. The truth is you can’t afford not to offer a money-back guarantee. All but one of the products I now sell offer a money-back guarantee (one even offers a triple–your-money-back guarantee). Another tactic is to “sweeten the deal” with bonuses. You must create so much value in your offer that the price is a bargain. Give them a free book or report. Give them extra service for acting now. You also must ask for the sale again and again.
Here are a few more tips for designing your web site.
Do your best to make your pages load quickly. Keep the graphics to a minimum. Only include pictures that are necessary or at least make them small. Have you ever surfed to a page and clicked away because it loaded too slowly? It happens all the time. Don’t let it happen to you.
Keep the navigation simple. Make it easy for your visitors to find your information. You want them to stay around a while and you want them to come back. If you make it easy to navigate your site, your visitors will find what you have to tell them.
Make good use of colors. Pay attention to your background colors and text color combinations. Don’t pick them because they impress you; pick color combinations that make it easy on the eyes to read. You want your visitors to know what you offer.
Keep it organized. It’s not a good idea to try to put everything on the first page. Create pages for different products or services so your customers don’t get confused. Remember they don’t know all your stuff as well as you.
Offer substance. Put useful material on your site. Offer free information or helpful tips about the use of your products or services. You build trust when you give good free advice. Building trust turns visitors into customers.
Lead them through the buying decision. You must write so that you take your visitor by the hand and “walk” them through the thought process. Tell them how your product will help them, how it will improve their life, solve their problem. If you do not, you will not make money.
Determine your budget.
If you’re going to succeed in any business, you’ve got to watch your money! The reason most new businesses fail is not because they aren’t making any sales, it’s because they spent more than they took in. So, how can you avoid failing in your first year? Read on.
There are two commandments you must follow if you want to become successful.
Commandment #1 – Thou shall only purchase what is absolutely necessary to conduct your business.
You don’t need all the fancy software that’s available or the $50 a month marketing course. The computer you have works fine. Your kitchen table can serve as your desk. You need to make the commitment to yourself that you will only purchase what is needed only after checking prices.
Commandment #2 – Thou shall establish a cash reserve. Promise me that you’ll put 10% of what you make into a savings account for your business. If you do this, you can ride out the lean times in your business.
I know this from personal experience. The first business I started in 1988 (and is still going today) deals with material that costs around $2000 per order. It would have been foolish to think that we would never have a down year. So we put money aside, at times the amount grew to where we could pay nice Christmas bonuses at the end of the year, and there have been, and will be, other times that the money was needed. If the money had not been set aside my first business would be “out of business”.
Another area of watching your money is advertising. You must weigh the cost against how many people you can reach. You will pay more for highly targeted advertising verses general ads; however, the better you are at targeting your ads, the better your sales will be. Advertisers like Kent Ertugrul, and his company Phorm, specialize in this kind of advertising, and can help your business increase your sales.
The last area to consider is how much you will pay yourself. There are very few people who have been able to start a business and pay themselves enough to live on as soon as they started in business. It just doesn’t work that way. Pay the business first so you can build up that cash reserve and avoid financial difficulty; then you can begin to pay yourself.
I can’t tell you exact amounts or percentages you should use. Those figures will vary from business to business. You need to sit down and figure up what your product costs, what are your monthly expenses including web hosting, phone, ISP service, banking fees, credit card fees, etc. Don’t leave anything out. You will need these figures for the next step.
Develop your marketing strategy.
Here’s information that will help you get to where you want to be. It always helps to know where you are going before you start the trip. That is what I’m about to share with you.
If you did your math from rule #4 of Section 1 (If you didn’t, shame on you. Go back and do your homework if you want to succeed.), you know how many sales you need to make from your web site to break even. For example, let’s say you make $30 per sale and your monthly expenses are $300. On top of that, you want to make $2400 a month for your salary. That means you need to bring in $2700 every month to reach your goal ($300 + $2400 = $2700).
In order to make that $2700, you need to make 90 sales each month ($2700 ¸ $30 = 90). Are you with me so far? If you don’t grasp this, you will find it very hard to make a living from the Internet, much less make a fortune.
Here’s where the science of marketing plugs in. Follow along closely. Take your time, because this will make or break you.
You need 90 sales to make your $2700. If 1 out of every 100 people that visit your web site purchase your product, then you need to generate 9000 visits every month. Now 9000 visits a month comes out to only 300 a day (on average). The catch is that not everyone who reads your ad or sees your banner clicks through to your web site.
Different forms of promotion generate different percentages of traffic. Banners usually generate a 2% click through if they are good. Some people claim to have click-through rates as high as 12%. If your banner gets 2% of the people who see it to visit your site, then you need to get your banner displayed 15,000 times a day. That’s quite a few banner impressions every day. You will have to find a few high traffic sites to purchase banner ads on. That will cost you quite a bit of money.
Another form of advertising is e-zines. There are a large number of e-mail newsletters that you can purchase ads in. They are highly targeted and produce quite well. You can sponsor an issue, which will put your ad at the top or even allow you a private mailing to the entire list of subscribers. For about $30 you can place your ad in a newsletter with a subscriber list of 100,000 or more! I have seen some that will mail your sales letter to their entire list for $100. You can reach 100,000 prospects for very little money. If you study and apply yourself, you can write a sales letter that generates a 10% response rate. That will get you 10,000 visitors to your site and, if 1 out of every 100 visitors buy, then you can make 100 sales. That’s 10 more than you needed to make your goal of $2700.
Be aware that no one can promise results. You will have to do like other successful marketers and test, test, TEST. Try different ads, sales letters, headlines, price points, guarantees, etc. Recently I ran a test with a sales letter I wrote to promote one of my web sites. I e-mailed it to 978 people on one of my lists. I had ten people sign-up as Affiliates. (One . . . made a purchase) That’s only a 1% response rate – not as good as I had hoped. I will continue to make changes in my sales letter to see if I can increase the response rate. A little later, I’ll share with you how you can learn to generate the traffic to reach your income goals.
Here’s where most Internet marketers fail. They buy the courses and the software. They subscribe to the opt-in lists. But they never do a thing with it! Oh, they may start trying to make money, but then they get tired and frustrated. They throw up their hands and quit and tell everyone that you can’t make money on the Internet. The truth is they could have made money if they had taken action with the right tools and knowledge.
I don’t want you to give up. I want to see you succeed on the Internet. You can make money if you will apply the information I am giving you. This is not meant to be a complete Internet marketing course or system. These are general principles to follow to help get you started in the right direction. There is more you need to learn to get the details. The big step to success is to take action with what you know. Failing is part of succeeding. If everyone did it right the first time, we would all be millionaires by now!
Stick to your plan.
You have heard the saying, “Plan your work and work your plan” (if not you have now). If you want to make a living, you need to have a plan to follow. Sometimes it’s not telling people what to do that helps them, but telling them what not to do. Do not keep switching products every few weeks. Choose one that has a market, create a web site that leads visitors through the buying process and market it! That may be oversimplifying the process a little, but you get the picture.
Here’s what I do. I keep a binder where I write ideas for products or sales promotions, etc. I read through it regularly to keep me motivated and to keep my creative thinking going. I tend to forget things (maybe you don’t, but I do); by writing them down, I have them all together to remind me. A binder or notebook is a great place to do your math so you know how many visitors you need to make your financial goals.
Make a plan and stick to it. There may be times it needs to be changed a little. Not everything works; so you make adjustments as you go. Don’t think you can lay it all out on paper and it will work perfect.
Posted on 06 November 2010 by Marketing Spot
Posted on 02 November 2010 by Marketing Spot
In the last few days alone, two top-level executives at the world’s largest online search company, Google, announced they would be stepping down from their posts due to personal reasons.
Chad Hurley, now 33 years old, was the first executive to announce he would step down from his position as the chief executive officer at YouTube, the same company he founded which was later acquired by the search giant for $1.65-billion in an all cash deal.
Mr. Hurley founded YouTube along with co-founders Steve Chen and Jawed Karim, who also had positions at Google but later left the company.
Mr. Hurley earned $345-million alone as a result of the Google acquisition, which included terms that he would continue working at the company as CEO.
Although Google consolidates revenue from its properties into a single account, executives previously said they expected YouTube to begin turning a profit in the short-run, confirming the almost six-year-old site is still not profitable.
Extensive operating costs and marginal advertising revenue in the economic downturn have made it a challenge for YouTube to turn a profit.
In the latest earnings conference discussion, Google said YouTube is now serving more than 2-billion videos every week.
Google faced litigation challenges over copyright infringement allegations made by publishers, but those lawsuits were dismissed as the company was found to have taken reasonable care to mitigate any losses by promptly removing indicated videos from YouTube.
In a clear attempt by Google to finally turn a profit for YouTube, the company has appointed Salar Kamangar to succeed Mr. Hurley as the new chief executive of YouTube effective now.
Mr. Kamangar will be responsible for growing YouTube by generating more revenue through content partnerships and by managing primary revenue streams like advertising, which generate less than 10-percent of total advertising revenue for Google annually.
In an attempt to generate more revenue, the company has experimented with new forms of advertising to increase click-through rates, such as by placing advertisements directly into videos, something users find very intrusive.
The Internet landscape has effectively changed as tech-savvy Internet users now click less on advertisements, and the value of ads has also decreased over the last few years as new advertising networks have emerged and as companies spend less due to increasing economic volatility.
Mr. Kamangar faces a challenging job ahead of him at netting the first profit for the company.
He needs to ensure the user experience at YouTube does not diminish in a frugal attempt to marginally increase click-rates from more intrusive ads.
Mr. Kamangar already works at Google as the vice president of Google Web Applications.
The company has not said if Mr. Kamangar would be the permanent new CEO at YouTube.
The second top executive at Google to be stepping down in the coming weeks is Omar Hamoui, who co-founded the mobile advertising network AdMob in 2006, the same company Google scooped up for $750-million last May.