marți, 28 ianuarie 2014

Top Strategies, Salaries and Tools Revealed: Industry Survey Results 2014

Top Strategies, Salaries and Tools Revealed: Industry Survey Results 2014


Top Strategies, Salaries and Tools Revealed: Industry Survey Results 2014

Posted: 27 Jan 2014 03:12 PM PST

Posted by Cyrus-Shepard

Late last year we set out to discover the top tools, tactics, and trends of the online marketing world. With the help of our partners, over 3700 participated in this year's Industry Survey.

Today, Moz is proud to present the results.

Read the Industry Survey 2014 Results

Shifting demographics and salaries

This year's data was analyzed by Dr. Pete Meyers, Moz's Resident Marketing Scientist.

One area we've tracked for several years is the demographic makeup of professionals working in the online marketing industry. Among the shifts the survey has revealed is a rise in the number of women working in the field.

This year's respondents were 28.3% female, up from 20.7% in 2010, although theses numbers indicate we still have a long way to go.

The survey also examines salaries, as indicated by the graphic below showing the median salary by role of respondents around the world. The full data set (see below) contains even more granular information.

Median Salary by Role

Tools and strategies in 2014

In the age of (not provided), Google's Hummingbird update and changing practices in the world of link building and content marketing, the survey tracts both shifting tactics and tools inbound marketers most use to perform their jobs.

This year, we particularly wanted to know how marketers dealt with (not provided) keywords, as we've seen it's prevalence expand to over 75% worldwide.

How do marketers deal with (not provided)?

This represents only a small sampling of the data analyzed by Dr. Pete. Check out the complete results for more insight.

Bonus: Build your own content with the full data download

Moz is making all the data collected public under a Creative Commons license. This means you are free to use it for research, creating visual assets, or even producing your own content from the raw data, as long as you follow the requirements of the Creative Commons license.

We only published a portion of the data for this year's Industry Survey results, so the possibilities of what you can do with the remaining full data set are endless.

Get the full data download here.

Thanks to our partners and contributors

We firmly believe in collecting this data for the benefit of the entire industry, and this effort wouldn't be possible without the help of our partners. A few of the companies that deserve special recognition:

Also a big thanks to Moz team members Dr. Pete, Derric Wise and Devin Ellis who produced the content, and finally Jackie Immel who worked tirelessly for months to bring the whole project together.

Read the Industry Survey 2014 Results


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Tonight

 

 

Tonight, Barack will deliver his fifth State of the Union address.

You might think that this speech was born out of a pile of papers or a long series of meetings. But actually, the real motivations -- and the real substance -- behind tonight's speech come from those quiet moments late at night, when Barack is at his desk reading your letters.

He reads at least 10 a day, from folks all across the country. You write him to say thank you, or to weigh in on a policy issue. You tell him about your families, and what's going on in your lives. And he listens.

These letters turn into real action. I've seen it happen: He'll write in the margins "This is who we're fighting for," and then he'll pass them on to his senior staff.

Take a look at this video -- you'll see what I mean. Then make sure to let him know you'll be watching tonight.

Barack is always up late before big speeches like this one.

And all day today, I know that he'll be making changes to the speech right up until the last hour.

It's not only because he wants to get that final draft just right. It's because he cares deeply about your stories and your hopes and dreams. That's what keeps him going every single day.

We hope you'll be watching:

http://www.whitehouse.gov/sotu

Thanks,

First Lady Michelle Obama

P.S. -- I'm honored to be watching tonight's speech with some incredible Americans from across the country. Meet them here, and make sure you tune in at 9 p.m. ET.


Visit WhiteHouse.gov/SOTU

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Highlights from the Biddable World Conference

Highlights from the Biddable World Conference

Link to White Noise

Highlights from the Biddable World Conference

Posted: 28 Jan 2014 02:47 AM PST

So, Tuesday 21st January was the first Biddable World conference and it was just as successful as anticipated!

In this blog post, we (Holly and Tamsin) are going to give you our highlights and the tips that we will certainly be taking advantage of in 2014. We will also give you our Key Takeaway Message (KTM) from every talk! Like Jon Myers said – "it's all about the 3 letter acronyms, PPC, DSP… KTM"

Biddable World

Here are the highlights from the morning’s talks – come back tomorrow for the afternoon’s!

1. Jon Myers – Navigating the Biddable Landscape

Jon Myers took to the stage first and provided us with an excellent introduction to some present and future paid search trends:

  • Clicks and impressions are on the decrease, CTR is on the increase, and cost is remaining constant.
  • UK smart phone penetration is predicted to reach 75% in 2014.
  • Take advantage of PLAs – their market share is increasing and they have a positive effect on CTR.
  • Facebook Exchange ads are working well and allow us to target audiences at an extremely granular level. Facebook's strength is saturated in the platform of mobile and brings high CTRs and low CPCs.
  • The world of display is becoming more auction-based and Real Time Bidding (RTB) is predicted to be at 50% by 2017.
  • Audiences should be our new keywords! We can now determine our audience's journey, which allows us to generate personas and our keywords should reflect this! Build your data into these personas.
  • Jon predicts that the world of advertising is also going to become more biddable and suggests that TV & Radio will join the auction and become biddable too!

KTM: The biddable world of media is growing, and at a very fast rate, which means more opportunities for us. Therefore, we need to identify these opportunities and exploit them sooner rather than later!

2. Heather Robinson – Tentative Steps into Twitter Advertising

Heather Robinson dove deep into the Twitter advertising platform:

  • She highlighted the three types of Twitter ads:
    • Promoted tweets, which focus on increasing reach, awareness and engagement
    • Promoted accounts, which increase followers
    • Promoted trends, which focus on maximising exposure.
  • Twitter's reach is currently very modest at 232 million, compared to Facebook's 1.15 billion. It is similarly modest in terms of a market share, with 1.85% compared with Facebook's 15.8%. However, its response is looking extremely promising. It has an engagement rate of 1-3%. (Facebook's CTR is 0.12%, but this is a different metric so cannot be directly compared.)
  • If you identify the goals that you are trying to achieve and select the appropriate type of Twitter advert for you, target by device, geographical location, gender, user intent and interest and use the correct tactics, then Twitter advertising will work for you.
  • Note that Twitter doesn’t actually know users’ genders – it guesses from their activity.

Some key tactics:

  • Tweets that ask questions reap more replies.
  • Images in tweets gain more engagement.
  • Top tip tweets generate more favourites and retweets.
  • Lead generation cards e.g offers, downloads and competitions are captivating.

KTM: Track your conversion in GA. Using the tweet activity report, identify the key performing tweets and implement them into a promoted campaign. Then, continue to run new techniques, report, improve and repeat. And remember, if you are reporting an engagement rate of less than 1% something is wrong! Address this and make changes to optimise!

3. Ben Harper – How & Why To Become a Facebook Power Editor Power User

Ben Harper highlighted his thoughts on Power Editor – Facebook's Bulk Editing tool – and told us how there are no excuses not to optimise properly using this platform….

  • The Power Editor lets you copy, paste and amend very quickly so you can test variants of ads with different audiences and optimise.
  • There are audiences accessible in the Power Editor and not the normal interface:
    • Custom audiences, made of your own list of emails
    • Lookalike audiences, letting you target people similar to your current followers
    • In the USA you can use Partner Categories, which use offline purchasing data. For example you can target people who buy lots of children's cereal, or who have test driven a hybrid car.
  • You also have more control over where your ad appears – your ad can appear just on Android devices, or just in mobile newsfeeds.
  • You can also use Power Editor to get data – put in your competitor's name as an interest and vary the age range to see what their audience is like.

KTM: Use the Power Editor! Visit https://www.facebook.com/ads/manage/powereditor in Chrome

4. Nick Christian – Black Hat PPC

Nick Christian, a self-confessed PPC black hat had a really great point to make, and that was that PPC is different to other marketing channels because we aren't trying to manipulate people who have no interest in our product/service – the people we target in PPC are already showing an interest and are qualified to see our ads. This allows us to be super proactive and reactive!

  • By 'black hat' he doesn't mean dodgy tactics like URL cloaking and arbitrage, but focusing on doing what actually works rather than 'best practise' – thinking less like a search geek and more like a maverick.
  • He argued that there is no such thing as irrelevant traffic: traffic lies in a broad spectrum, where some traffic is more valuable than other traffic, but it's all of relevance! Everything has a conversion rate, even if it is really small and there's nothing you can't afford if the price is low enough.
  • This led Nick to shift his focus towards keyword expansion, language expansion and device targeting expansion. He moved from a risk-adverse strategy towards a more risk-seeking strategy.
  • This bold move saw Nick's CPCs drop, traffic increase and evenly split sales across all categories, all for the same cost.

KTM: Negative keywords shouldn't be neglected but adding new terms should be the focus. A risk-seeking strategy will be the one that gets you those exceptional results.

5. Richard Fergie – Is eBay Wrong About Paid Search?

Last March eBay released a report on their own test on their PPC's worth. Richard Fergie has been trying to recreate a similar test.

  • There is a curve of profit versus spend – the two parts of PPC are changing the shape of the curve and positioning yourself on it.Since Rishard hasn't put up his slides, here's a recreation courtesy of MS Paint.
  • The 'right' position is going to be different for different businesses – but wherever you want to be, you need to know where you are now.
  • You could get some data from Google's paid & organic report, but this shows data for searches where ads were not shown without saying why ads weren't shown – it may be biased to less commercial queries.
  • One way to see the worth of PPC is the 'nuclear option' – turn it all off. But seasonality means you can't easily compare before and after.
  • Instead go for the 'MIRV option' – nuke many small bits of your account. Then the rest of your account serves as a 'control' for comparison.
  • You can't pause particular keywords – the remaining keywords may pick up the paused keywords' searches, unless you're very switched on with negatives.
  • You could use Time Slicing – turn ads off for short periods. For example have ads running 1pm to 2pm, no ads 2pm to 3pm, ads 3pm to 4pm, etc. But this is tricky if you have a long buying cycle, unless you don't run the ads for a longer period.
  • eBay used geographic slicing – they ran in some Nielson areas and switched the ads off in others.
  • In the UK we don't have Nielson areas, so you have to come up with your own geographical groups:
    • Ignore London – it's weird.
    • Look at traffic at town/city level
    • Normalise for population size
    • Discard towns too small to see any change
  • Make groups of towns/cities you'd expect to behave similarly. Control the risk to business by deciding how much traffic you're going to turn off – this depends on the size of the groups.
  • Then the real test: turn off one of the groups and see how the drop in sales compares to the amount of sales usually attributed to PPC.

KTM: It's important to control risk, but it's also important to be correct when valuing PPC. This is also a way of seeing how good your attribution model is.

6. Tara West – Inside AdWords Quality Score: Different Types of Quality Score & How To Optimise For Them

Tara gave us a deep valuation of the factors involved in quality score and I think an important point to keep in mind when thinking about your quality score is the fundamental difference between CTR and relevance. CTR is an indication of people voting with their mouse, whereas relevance is an indication of what Google considers relevant.  Tara evaluated what quality score is and how it is optimised at different levels of the account:

  • At keyword level, quality score is calculated on exact match search queries only and is based on historic CTR. You should use Broad Match Modifier (BMM) to boost initial impressions and add easy keywords followed by keywords that may not perform as well.
    • If your keyword is new and doesn't have enough impressions, Google will use an industry average CTR for its quality score rather than its actual historic CTR.
  • To get good ad level quality score, you should use extensions that are highly relevant, split test as soon as possible to identify ads with superior CTRs, use DKI in the headline and in the display URLs, and use variations of the keyword terms in the body of the ad.
  • The account level quality score is an index of the overall historical performance of all of the keywords and ads in the account. So don't optimise some campaigns and ad groups and neglect others, as your account quality score is an overall measure. Also, optimise for location as much as possible as this contributes to your quality score and keep creating new campaigns, adding new keywords, and testing new ads with new, fresh content.
  • Your landing page is a factor in quality score; it does not directly affect position but it does affect eligibility. It is all about relevance and user experience rather than CTR, and data such as bounce rates and time on site will assist in optimising this. What's pivotally important is matching the user's expectation and being transparent, so linking to a privacy policy and including contact information is favourable in the eyes of Google. It is important to remember that it is reviewed by humans as well as an algorithm, so it might be useful to ask an outsider to review the page and provide external feedback.
  • At device level, the same factors are used to calculate quality score but a different calculation is used. Location is even more important for mobile relevancy so you can take advantage of that with mobile extensions that incorporate directions, a phone number and a contact page – all information that a mobile user is going to find more relevant.
  • When measuring quality score you should multiply each keyword quality score by the number of impressions it has accrued, as this will provide you with a weighted impression share quality score.
  • Use AdWords Scripts to keep track of quality score – they're quick and easy to implement. This one calculates at campaign, account and ad group levels, and this one is at keyword level.

KTM: Quality score builds its reputation from the first day a campaign runs live, so get your account structured well from the start. Be clever and set brand exact match keywords live first and let them build your quality score up for you, i.e. start by putting all of your eggs in the basket that you know is going perform really well. These terms can then support additional terms that may not immediately generate a high quality score.

7. Sarah Conway – Biddable Media & Online Shopping – Are You Being Left on the Shelf?

Sarah illustrated the growing market share that PLAs are taking up in Google's paid search. She also touched upon Bing products ads and the potential that they are showing. She further provided us with some tips on understanding your shopper's habits and how to optimise PLA campaigns:

  • Increase your budget.
  • Use labels.
  • Break out your feed by best sellers, margins or seasons.
  • Make use of the accelerated delivery feature, if only for a four hour time period, to gain a real indication of performance trends and opportunities for growth.

KTM: PLA's share on Google search is increasing and pushing organic search further down the results page. So, take advantage of this movement and begin or optimise your PLA strategies now.

The post Highlights from the Biddable World Conference appeared first on White Noise.

Seth's Blog : Who would be surprised?

 

Who would be surprised?

When was the last time you surprised or delighted a customer, colleague or boss?

If you did, would it help?

Apple developed a tradition of secrecy largely because Steve saw the extraordinary value in surprising the audience. It creates a rare wave of excitement--remarkable is a byproduct of surprise. Today, they continue to work at the secrecy, as if that's the only element necessary to create surprise.

But of course, it's not.

Surprise comes from defying expectations. Sometimes, we have the negative surprises that come from missing those expectations, but in fact, those negative surprises are part of the process of exceeding them... if you're not prepared to live with a disappointment, you can't be in the business of seeking delight.

Effort matters, sure, but mostly surprise comes from caring enough about your audience that you're willing to fail in your effort to redefine what they expect from you. The vulnerability and intimacy that come from that leap are at the heart of what people talk about.

       

 

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luni, 27 ianuarie 2014

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


China's Fake Export Numbers Under Close Scrutiny

Posted: 27 Jan 2014 10:59 PM PST

China's export numbers are so unbelievable that even mainstream media doesn't believe them. Bloomberg has the story correct, but its title could use a bit more punch.

Please consider China Trade Puzzle Revived as Hong Kong Data Diverge
China's trade numbers, distorted by fake exports last year, are set to come under renewed scrutiny after a discrepancy between Hong Kong and Chinese figures for bilateral trade widened to the largest in eight months.

Hong Kong's December imports from China fell 1.9 percent from a year earlier to HK$176 billion ($22.7 billion), the city's statistics department said yesterday. That compares with $38.5 billion in exports to Hong Kong reported earlier this month by China's customs administration, up 2.3 percent, based on data compiled by Bloomberg.

Economists split on how to interpret the latest numbers, which follow reports earlier last year that invoices for fake exports were used to disguise capital inflows, inflating China's trade data before regulators in May cracked down on the practice. Exaggerated overseas shipments would mean that global demand is weaker than China's statistics indicate.

"From the last few months' data, we have seen hints that some Chinese exports are fake and in fact that reflects hot money inflows," said Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong.

China's exports to Hong Kong in December exceeded the city's reported imports from the mainland by about 70 percent, the biggest difference since April.

Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong, said the gap between China's reported increase in exports to Hong Kong and the city's reported decline in imports isn't big enough to raise any red flags when compared to the difference earlier in 2013.

That's because China records exports when goods leave, while Hong Kong waits 14 days after items arrive in port to record them as imports, Shen said.

Round Tripping

Another possible explanation for the discrepancy is "round tripping" of goods that are exported from China to Hong Kong and then back to the mainland, Australia & New Zealand Banking Group Ltd. said in a report yesterday.

"The round-tripping trade has become an avenue to fuel China's capital inflows," as the current account may have been "improperly used as an alternative way of liquidity injection," economists Liu Li-Gang and Raymond Yeung wrote. The gap in interest rates fuels the practice and policy makers in China and Hong Kong "need to closely watch the potential risks such activities present to the financial system."
Place your bets. But I suggest no data from China is likely to be very reliable, especially export and GDP numbers.

Moreover, if export numbers are inflated, then GDP numbers are inflated by definition.

Of course, GDP is already overinflated for two other reasons:

  1. GDP is not adjusted for various shadow banking schemes and other malinvestments that will eventually be written off.
  2. GDP is not adjusted for massive amounts of air and water pollution that will at some point have to be cleaned up. 

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com 

Europe Dumps Global Warming Efforts; Good Idea?

Posted: 27 Jan 2014 06:33 PM PST

Regarding the religious debate over global warming, I am pleased to report Green Fade-Out: Europe to Ditch Climate Protection Goals.
The EU's reputation as a model of environmental responsibility may soon be history. The European Commission wants to forgo ambitious climate protection goals and pave the way for fracking -- jeopardizing Germany's touted energy revolution in the process.

The climate between Brussels and Berlin is polluted, something European Commission officials attribute, among other things, to the "reckless" way German Chancellor Angela Merkel blocked stricter exhaust emissions during her re-election campaign to placate domestic automotive manufacturers like Daimler and BMW. This kind of blatant self-interest, officials complained at the time, is poisoning the climate.

At the request of Commission President José Manuel Barroso, EU member states are no longer to receive specific guidelines for the development of renewable energy. The stated aim of increasing the share of green energy across the EU to up to 27 percent will hold. But how seriously countries tackle this project will no longer be regulated within the plan. As of 2020 at the latest -- when the current commitment to further increase the share of green energy expires -- climate protection in the EU will apparently be pursued on a voluntary basis.
Global Warming Hysteria

I am certainly not against improving the quality of the air we breathe.

Without a doubt, China needs a massive breath of fresh air and a flood of unpolluted water as well. So do emerging market countries in general.

Rather, I am against carbon trading schemes, taxpayer funding of green energy, and other silliness based on global warming hysteria.


Does any of that matter? Realistically, not one bit. More importantly, it does not matter one bit if the earth has been warming for the previous 100 years.

The simple facts of the matter are as follows:

  1. The earth has gone through periods of cooling and warming that have lasted tens of thousands of years.
  2. Random fluctuations in nature, lasting decades or longer happen all the time.
  3. It is preposterous to make any kind of realistic assessment regarding the last 100 years or even the last 1000 years.
  4. Even if it was possible to make a realistic assessment as to what is happening and why, carbon trading schemes and taxpayer subsidies are a ridiculous way to solve the problem.

Gratefully, Europe appears to be abandoning the mass hysteria. It's probably the only smart thing European Commission president José Manuel Barroso has ever done while in that role.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

France Unemployment Hits New Record High; Hollande's November Pledge Reviewed

Posted: 27 Jan 2014 02:40 PM PST

In November, French president Francois Hollande announced he had met his electoral pledge to halt the rise in joblessness by the end of 2013.

No one with any economic sense believed it.

Today in the face of a new record high unemployment rate, Hollande says unemployment has "stabilised".

No one with any economic sense believes his statements today either.

Please consider France Unemployment Hits New Record High.
France revealed on Monday tha the number of registered jobless rose to a record 3.3 million in December, belying President Francois Hollande's pledge to reverse the trend by the end of last year.

The number of job-seekers rose by 10,200, the labour ministry said. If those holding part-time employment were taken into account the number of unemployed rose to 4.89 million, another record.

Hollande, a Socialist who is under fierce pressure to tackle unemployment and with polls showing his approval ratings the lowest of any president in modern French history, claimed in November he had met his electoral pledge to halt the rise in joblessness by the end of 2013.

Despite the bleak figures, Hollande - who is currently in Turkey - said that unemployment had "stabilised" but added that "this is not enough."
Stabilization?

  • December unemployment rose 0.3 percentage points compared to November
  • In the past year, unemployment rose 5.7 percentage points
  • By what obscure definition does that performance constitute stabilization?

The average monthly rise in unemployment is .475 percentage points. Thus, it's a relative success for unemployment to rise only 0.3 percentage points. But relative success and stabilization are not the same thing, except of course in political fantasyland.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

50th Anniversary of War on Poverty Coming Up; Success or Failure?

Posted: 27 Jan 2014 11:26 AM PST

Before you can assess the success or failure of a program you must first understand the mission. Then, with the objectives of the mission in mind, one can measure success or failure.

If you set the bar low enough or modify the mission, then anything can look like a success. Conversely, everything fails if standards are sufficiently high.

Thomas Sowell discusses those ideas, in relation to the war on poverty, in Fact-Free Liberals.
Since this year will mark the 50th anniversary of the "war on poverty," we can expect many comments and commemorations of this landmark legislation in the development of the American welfare state.

The actual signing of the "war on poverty" legislation took place in August 1964, so the 50th anniversary is some months away. But there have already been statements in the media and in politics proclaiming that this vast and costly array of anti-poverty programs "worked."

The real question is: What did the "war on poverty" set out to do -- and how well did it do it, if at all?

Both President John F. Kennedy, who launched the proposal for a "war on poverty" and his successor, Lyndon B. Johnson, who guided the legislation through Congress and then signed it into law, were very explicit as to what the "war on poverty" was intended to accomplish.

President Kennedy said, "We must find ways of returning far more of our dependent people to independence."

The same theme was repeated endlessly by President Johnson. The purpose of the "war on poverty," he said, was to make "taxpayers out of taxeaters." Its slogan was "Give a hand up, not a handout." When Lyndon Johnson signed the landmark legislation into law, he declared: "The days of the dole in our country are numbered."

Now, 50 years and trillions of dollars later, it is painfully clear that there is more dependency than ever.

Ironically, dependency on government to raise people above the poverty line had been going down for years before the "war on poverty" began. The hard facts showed that the number of people who lived below the official poverty line had been declining since 1960, and was only half of what it had been in 1950.

On the more fundamental question of dependency, the facts were even clearer. The proportion of people whose earnings put them below the poverty level -- without counting government benefits -- declined by about one-third from 1950 to 1965.

All this was happening before the "war on poverty" went into effect -- and all these trends reversed after it went into effect.
By any reasonable measurement of war on poverty mission statements made by presidents Kennedy and Johnson, the war on poverty was a miserable failure.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Deflation Will Return: Europe First, Then US; Global Supply Arbitrage

Posted: 27 Jan 2014 03:09 AM PST

In an email update last week, Saxo Bank chief economist Steen Jakobsen commented "Europe has a more than 50:50 chance of deflation, while the US is 25:75 against."

Steen is talking about a general decline in prices of goods and services, which is also how central bankers use the term deflation. For now, let's use that definition. I will tie things back to money and credit (my preferred way of discussing inflation and deflation) a bit later.

In contrast to Steen, I believe deflation is near-certain in Europe, and strongly odds on in the U.S.

Global Supply Arbitrage

A simple statement by economist Andy Xie is what got me thinking about the prospects of deflation once again: Demand is local, supply is global.

Here is the complete context as noted in Keynes Is Dead, Abenomics Fizzles, US Fails to Reach Escape Velocity, Stimulus Fatigue
Keynes Is Dead

I have argued for many years that this round of globalization has fundamentally changed how an economy works, even for a large one like the United States. While demand is and always has been local, the supply side has become genuinely global. Both manufacturing blue-collar jobs and most white-collar jobs have become global. Today's information technology allows a multinational company to position research, marketing, finance and managerial jobs to anywhere. Hence, when a country stimulates demand, it's met by supply from anywhere.
Supply From Anywhere

With supply arbitrage in mind, please consider Invasion of Spanish Builders Angers France Struggling to Compete.
The earth movers digging out a sandy pit in the beach town of Biarritz could be any construction site in France. Except the builder of the 300 homes and its workers are Spanish. In the neighboring town of Anglet, a Spanish company built the concert hall inaugurated this month. A kilometer up the road, in Bayonne, a Spanish company is building a 15-lodging apartment block.

And that's just in a small corner of southwestern France.

The losing French bidders are crying foul, saying the Spanish pay lower wages and cut corners on regulations. The Spanish, fleeing a construction slump and an unemployment rate of 26 percent at home, say they're just using European Union rules allowing free movement of businesses and workers.

"We thought for a long time we were in an industry that couldn't be shifted offshore," said Didier Ridoret, president of the French Constructors' Federation, or FFB. "Instead, the reverse happened: the offshore came to us." 
    
With the best French bid in Anglet priced 40 percent higher than the winning offer, reversing the trend won't be easy.

French builders say a majority of homes in border regions are now being built by Spaniards, Portuguese and Italians.

"These contracts are often awarded solely on the basis of price," said Patrick La Carrere, head of the builders' federation in southwest France. "The Spanish have much lower charges so they can always undercut us."

For companies hiring Spanish builders, the choice is clear. The 2 million-euro contract for the Anglet concert hall was awarded to Altuna y Uria SA, based in the Basque town of Azpeitia, after its bid was 800,000 euros less than the best French offer, said Jerome Poties, head of culture for the town.

According to accounting firm KPMG, Spanish companies pay 30 percent of a worker's salary in social security contributions, and the employee pays 6.35 percent. In France, companies can pay as much as 45 percent and labor another 22 percent.

It's not just lower charges that help Spanish firms, said Maxime Alimi, an economist at Axa Investment Managers in Paris.

"There have been reforms in Spain that have made labor more flexible," Alimi said. "In France, salaries are extremely rigid. It's a tendency that's not likely to change."
"The Offshore Came To Us"

The offshore came to France. And the implications are enormous.

In Europe, with free movement of citizens, supply of labor could theoretically come from anywhere. In practice it didn't, at least on a large scale. But that is starting to change, and the repercussions will be huge.

Worst Ahead for France

Spain is still in the state of economic depression, but the worst is arguably behind. For France and Italy, the worst suffering is clearly ahead. Both countries are in huge need of work rule reforms and pension reforms. Public sector spending must decline. Wages and prices are going to have to decline for France to be competitive.

One way or another, it's going to happen. Even in Germany, the harmonized CPI is barely positive, with the most recent reading at 1.219%.



What happens if President Hollande lives up to his promises to make France more competitive and to reduce the size of the public sector?

Not many believe he will do that, but it really won't matter. The offshore came to France.

Currency Crisis

A second deflationary factor in Europe is the emerging market currency crisis. Foreign bank exposure to Turkey is $350 billion, and Greece is particularly exposed. For details, please see Start of a Global Currency Crisis?

Stress Tests

A third deflationary factor in Europe is the pending stress tests. Although the ECB Watered Down 2014 Stress Tests Second Time, some banks are still likely to have capital shortfalls.

Increased lending? Forget about it.

Recession in Germany and France

In December, France's statistics body, the INSEE, said France would avoid recession. I did not believe it then, and I sure don't now given Eurozone PMI Strengthens, Except France.

It's going to be very difficult for Germany to avoid recession when France slides back into one.

Europe First, Then U.S.

In the U.S., the Fed and others way overestimate the robustness of the jobs market. The discrepancy between the household survey and the establishment survey is 65,000 jobs a month.

For details, please see Employment vs. Jobs Discrepancy based on December 2013 Data, released in January.

Retail Sales Cost-Cutting, Competition, and Cannibalization

Numerous retailers are cutting employees. Wal-Mart, J.C. Penney, Macy's, Target, Aéropostale, and numerous other retailers have announced cutbacks as noted in Tsunami of Retail Store Closings and Downsizings Coming; Expect Layoffs and Shorter Hours.

Notably, Sam's Club CEO Rosalind Brewer announced a 2% Reduction in Sam's Club Employees to thin middle-manager ranks. Where are those managers going to get another job?

In "Retail Sales Cannibalization" I noted
"Brewer aims to better compete with brick-and-mortar rival Costco as well as to take on online membership clubs like Amazon Prime service. She seeks to double revenue and turn it into a $100 billion business, roughly the size of Costco."
Is doubling revenue remotely possible? If so how?

The only way it is possible is via reducing prices and costs to the bare bone and taking customers away from Amazon, Macy's, J.C. Penny and its own parent company, Wal-Mart.

The deflationary repercussions are enormous.

The China Factor

China is slowing. This puts pressure on commodities which in turn puts pressure on producer prices, then final prices.

A 3 billion-yuan ($496 million) Chinese trust product is on the verge of collapse. $496 million is a tiny amount, but it's also a sliver of the problem.

Bloomberg reports China Trust Products Gone Awry Evoke Soros Crisis Echoes
China's $4.8 trillion in shadow-banking debt, arranged by trusts and fund managers with less transparency than commercial-bank loans, was equivalent to as much as 55 percent of the nation's 2012 economic output at the end of that year, according to Moody's latest estimate.

Goldman estimates the 2 trillion yuan in lending by trusts last year accounted for 10 percent of financing in the economy and a removal of credit flows from trusts would knock 0.8 of a percentage point off the nation's growth rate. Gross domestic product will expand 7.45 percent this year, the slowest since 1990, a Bloomberg survey of economists signals. 

The first default of a trust product in at least a decade would shake investors' faith in their implicit guarantees and spur outflows that may trigger a "credit crunch," according to David Cui, China strategist at Bank of America Merrill Lynch in Hong Kong. The government and state banks may bail out a significant portion of bad debt "to prevent a financial crisis," he said. Guangdong International Trust & Investment Corp. failed to pay Yankee notes in 1998, the nation's first default since the People's Republic of China's founding in 1949.

A credit crunch in China will not be good for global growth, and that is on top of China's efforts to ease slowly.
For further discussion, please consider ZeroHedge's report China's First Default Is Coming: Here's What To Expect.

Equity and Bond Bubbles

The Fed (central bankers in general), once again spawned enormous asset bubbles in equities, corporate bonds, and housing.

For discussion, please see Bubblicious Questions: What Causes Economic Bubbles? When Do Bubbles Burst? Can the Fed Prevent Bubbles?

The popping of bubbles is inherently deflationary.

Housing Bubble Returns

Even though household formation by millennials is at a record low percentage, home sales are at modest levels thanks to investor demand in the form of all-cash buying:  All-Cash Home Sales Hit Record 42% of Sales.

CNBC reports All-cash offers crushing first-time homebuyers
Insatiable demand from hedge funds, private equity investors and foreign buyers, all armed with ready cash, are elbowing first-time buyers out of the housing market.

First-time buyers tend to purchase lower-priced homes, but all-cash investors have cornered the market on those, leaving little behind. All-cash purchases accounted for 42.1 percent of all U.S. residential sales in December, up from 38.1 percent in November, and up from 18.0 percent in December 2012, according to a new report from RealtyTrac.
The equity, corporate bond, and home bubbles are poised to burst. When they do, demand for goods and services of all kinds will decline. In turn, prices will drop.

Subprime Car Loans

Automakers have been relatively happy lately. Unfortunately, Subprime Car Loans are the driving force.
As the fifth anniversary of the Federal Reserve's policy of keeping interest rates near zero approaches, the market for subprime borrowing is again becoming frothy, this time in the car business instead of housing. U.S. auto sales, on pace for the best year since 2007, are increasingly being fueled by borrowers with spotty credit. They accounted for more than 27 percent of loans for new vehicles in the first half of the year, the highest proportion since Experian Automotive began tracking the data in 2007. That compares with 25 percent last year and 18 percent in 2009, as lenders pulled back during the recession. "Perhaps more than any other factor, easing credit has been the key to the U.S. auto recovery," Adam Jonas, an analyst with Morgan Stanley, wrote in an October note to investors.

The money for subprime loans comes from yield-starved investors who buy bonds backed by them. Issuance of such bonds, which pay higher rates than U.S. government debt, soared to $17.2 billion this year, more than double the amount sold during the same period in 2010, but still below the peak of about $20 billion in 2005, according to Harris Trifon, an analyst at Deutsche Bank.
Technology, Education, Medical Expenses

Competition in electronics, computers, and even computer storage is intense. Falling prices are the norm.

Two days ago Microsoft announced "new worldwide prices" to match Amazon Web Services prices. "Effective March 13, customers will see lower prices for Block Blobs Storage and Disks/Page Blobs Storage matching AWS' prices. We're also making the new prices effective worldwide which means that Azure storage will be less expensive than AWS in many regions."

In general, price deflation reigns in areas where that has been little government interference in the free market.

Two areas of highest price inflation have been healthcare and education. However, online eduction offerings are starting to eat away at what used to be a rising-cost, brick-and-mortar college experience.

The number and quality of accredited online schools and colleges is growing, and costs have come down. On September 3, I wrote Future of Education is At Hand: Online, Accredited, Affordable, Useful

Healthcare Costs Slow

At long last, healthcare costs have started to slow. NPR reports Health Care Costs Grew More Slowly Than The Economy In 2012

Obamacare had nothing to do with the trend even though the Whitehouse tried to take credit, and even though we are talking about 2012, before the exchanges were operable.

Moreover, actuaries suggest the Affordable Care Act likely produced a small overall increase in spending.

Some cite lingering effects of the recession for slowing costs. I suggest it's nothing more than "what can't go on, won't".

Deflation in Terms of Credit

Above I talked about reasons why prices are likely to decline. But what about credit?

Subprime loans are likely to blow up once again. Demand for business loans will plunge. Writeoffs of all kinds will increase. Asset prices including stocks, corporate bonds, and houses will all take a hit.

These are all symptoms of deflation in a practical sense.

What about money supply?

I have little doubt the Fed (central bankers in general) will step on the money supply spigot in response to another slowdown. But credit dwarfs money supply.

Once again, those who view inflation and deflation in the myopic eyes of money supply alone will come to the wrong conclusions about prices of goods, services and assets, just as they did in 2008 when they thought hyperinflation was just around the corner.

Those who understand credit and credit market to market will get the picture right. I repeat my claim that I made in 2007. The US will go in and out of deflation over the course of a number of years.

Deflation is once again nearly at hand, but Europe will be first.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com