Monday, February 06, 2006

"Binomial Marketing Experiment" and Other Euphemisms

Okay, let’s get it over with right up front: I couldn’t care less about the Super Bowl. World Series, yes; Super Bowl, no.

Which is why I didn’t quite believe it when one of my daughter’s friends called from the college dorm where they were watching the Super Bowl to tell me had run an ad during the Big Game.

Overstock?” I asked him.

“Yep,” he said. “The guys in your blog.”

“What kind of ad? The lady in white?

“Sexy lady. She was in bed.”

Sounded like Overstock, but I still didn’t quite believe that a web retailer with negative operating margins had bothered spending money on a Super Bowl ad.

That is so, as they say, 1990’s.

But sure enough, in my USA Today today is a “Super Bowl Ad Meter” ranking every single ad shown last night—and there it is, described thusly: “ O as part of life.” (Overstock's web site calls it "Red Objects.")

Unfortunately for Overstock, however, this description appears under the heading “5 least popular.” In fact, the USA Today Ad Meter ranks Overstock’s sexy bed-lady 56 out of all 58 ads.

(According to the paper, the “Ad Meter” comprised “207 adult volunteers in Phoenix and McLean, Va” whose reactions were “electronically charted” during the game.)

Their favorite ad came from Bud Light, and scored an 8.39. The top ten ads—six from Budweiser alone—averaged in the high 7’s. The least favorite, from Gillette, scored a 4.05. The second least favorite, from Slim-Fast, scored a 4.28.

Next was Overstock’s “O as part of life,” at 4.91.

All of this is eerily reminiscent of last year’s so-called “binomial marketing experiment,” which is how the Overstock CEO described a mysterious, not-quite-defined $2.6 million expenditure that added to the 2005 first quarter’s woes.

Long-time readers will recall that following the earnings report some of Wall Street’s Finest dutifully wrote “$2.6 million binomial marketing experiment” in their research reports, despite the fact that not one of them appeared to understand what that actually meant. But it sure sounded cool.

While I took plenty of math in school, my own memory of binomial coefficients and how they bear on marketing expenditures is a little shaky—unless, perhaps, “binomial” comes from the Greek roots “bi” meaning “buy” and “nome” meaning “very little.”

I am, of course, making that definition up. But I am not making up the cost of a Super Bowl ad, according to USA Today today:

“The evening didn’t come cheaply for the winners—or losers. Each 30-second time slot cost a record $2.5 million—or $83,333 per second.”

I don’t know what Overstock actually spent on last night’s ad. Nor can the opinions of 207 individuals be said to accurately reflect the 50 billion or however many people watched the Super Bowl. And I assume that more than a handful of individuals will, as a result of the sexy bed-lady, check out the site and pump up the numbers.

It will be interesting to hear the spin on tomorrow’s conference call...but beware "binomial marketing experiment" and other euphemisms.

Jeff Matthews
I Am Not Making This Up

© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations.


Its_strange said...

What was front and center on OSTK's website ? Free shipping ? Comforters ? Books by Phil Saunders ?

credibility said...

Overstock has always said that their Commercial and their website were targeted for WOMEN.
The Super Bowl is for men, most women were not watching the Super Bowl last night.
Waste of Money as usual.
Will they air commercials during the Olympics?
Will they air during Greco-Roman Wrestling or Women Figure Skating?

DaleW said...

An ad inside the first half two-minute warning has to be one of the priciest on the Super Bowl broadcast. Too bad it was uninformative, really unimaginative, and tired. That was a big waste, which is no big surprise for Overstock.

On another note, check out this very informative explanation of those big numbers on the wall at Best Buy:

Yaacov said...

In an older post of yours, you said GOOG put/call buyers wouldn't likely make much on the earnings due to high implied volatility. How about selling some spreads to caitalize on OSTK today?

An Investor said...

Reporter: "Hey, Overstock CEO, your Super Bowl ad bombed big time. What are you going to do?"

CEO: "I'm going to Disney World!"

Jeff Matthews said...

Jake Wolf: I am not in the stock recommendation business so I am not touching your question with a ten foot pole.

My comment on Google pre-earnings was this:

--Whatever the outcome tonight, I doubt there is much of a short-term “play” in Google stock, because short-term option volatility has soared to absurd levels and will almost certainly collapse the minute the press release hits the tape.

--I’d be willing only to bet that Google put buyers and Google call owners see little profit, unless Google management misses huge or beats very large.

That was a pretty bland comment, worthy of an economist, don't you think?

I make no recommendations here--never have, never will. While I do talk about companies, managements and analyst reports, I leave valuation to the market.

Valuation is, after all, entirely subjective: what looks ugly to a momentum player may be beautiful to a value investor, and vice versa.

If you want stock recommendations and trading calls, watch Mad Money!

Its_strange said...

watch today...If i recall correctly Patrick and / or pals were buying the day of past earnings releases and conference calls .

Its_strange said...

looks like OSTK's cash burn is forcing Patrick to change his plans for growth ...which was ostk's battle cry . ..

Its_strange said...

So what happens when they stop buying sales and they still are losing money ?

Its_strange said...

How did OSTK's diamond business do over the holidays ? He Patrick say ?

credibility said...

I remember a stock market movie about rogue brokers where the manager with the rolex watch stood up in front of a room with his Hugo Boss suit and touted to his high school dropout series seven licensed brokers how the firm's house stock is now totally accounted for and has been placed in very strong hands of family members and that it would be impossible for the stock not to triple as long as everyone held there shares and continued buying more. The fearless leader would also hype the boys by saying that major institutuinal buyers looking for 1 million shares where coming into the marketplace and they would drive the price skyward. The fundamentals didn't matter.
The movie ended with the FBI arresting everybody.

For some reason when I was listening to that conference call today and I heard mention of the buyers and family members and shares being unavailable and the stock being overshorted or naked shorted I could not help but recall that movie. I guess Patrick will have the last laugh. The stock looks like it is all tied up and has no where to go but up!
Good job Patrick.
I wonder if he will be teaching this technique at his seminar on Wednesday at the "Aggressive Trading Tactics: How Investors Engage in Aggressive Stock Trading and How Issuers Can Protect Themselves".
I guess if anyone knows how to do this its this ceo

credibility said...


Its_strange said...

Not for a second do i believe Patrick is up to doing the blocking and tackling required to run a internet retailor. Nope , thats not sexy enough for him.

the management said...

"binomial" = either it works or it doesn't, I think. Usually used in contexts where it hasn't.

credibility said...

"That's what happens when you own someone, they can't get you out of their head, and they don't often think, speak or act rationally. "---------Mark Cuban

I guess the BEARS own Dr.Pat

credibility said...

"We always like to compare ourselves to Amazon"
------Patrick Byrne on 2/7/06 CC

May I?

Words mentioned on each CC

OSTK CC mentions Amazon 8 times and Overstock 7 times
Amazons call mentions Amazon 30 times and doesn't mention Overstock

Amzn: 0

AMZN: 20 X


AMZN: 21 X

"Free Cash Flow"
AMZN: 20 X

AMZN: 15 X

"TO be honest"
OSTK: Patrick mentioned Twice
Amzn: everything was assumed to be honest

Amzn: 0

Amzn: 0

Amzn: 0

Other Things that I compared:
AMZN Free Cash flow: $569 million
OSTK: Negative Free Cash Flow

Money Made on Travel Business:
OSTK: P.B. quote "Ski West made a CHUNK of Money" (what is the chunk per share?) Is that like a chunk of shit?

Amzn: if you look at the results that we’ve had, our North America revenue grew 22% in 2005. That’s actually an acceleration up from 400 basis points, up 400 basis points from 2004. If you just look at the history, 2005 with 22% growth, 2004 was 18%, 2003 18%, 2002 12%, and 2001 3%

OSTK: P.B :"If they(auditors)don't change anything, our(ostk) margins actually passed them(amzn)....
We've(ostk) now essentially caught them(amzn) in margins"

The grammar that Patrick used on his call makes me wonder if he ever attended the university or was he like Thorton Melon and hired Kurt Vonnegut to write his term papers?

I wonder if the Switzerland guy and his friend, who are waiting for their delivery of the 1/2 million shares of ostk shares to be delivered, know anyone selling diamonds cheap?

P.B. quote: ".....30 million or more undelivered overstock shares in the system" (he said he had a fiduciary responsibility to say this!) Is it true? Is this a fact?
What are people suppose to do with this information?

Another great line was:
someone told him that "OSTK brand ....was the same as TARGET"

"this is a very large lawsuit, we think that this is a, we’re looking for 10 figure number to come out of this. There maybe some other deep-pockets associated with some folks we’ve been, we are assuming"
Should an investor use this information to speculate that OSTK might receive $1 billion Cash?

Jeff, I remembered you did a word search on a blog once and I thought I'd try to do one.

credibility said...

I had an executive VP at Microsoft on the line saying we’re sending you a team that only works with Fortune 100 accounts. It’s four guys in suits and a high school dropout with a ponytail. Don’t let that throw you, the ponytail is in charge. Well, that was Shawn Schwegman.

quote from Pat Byrne on OSTK 1Q 2004 CC