Pay-Per-Click Gets Harder, One Company Encourages Employees to Marry (Each Other), and the Trade War Intensifies

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TRADE

Over the weekend, the trade war intensified: “American tariffs on foreign goods had already climbed higher than any time since the 1960s before Sunday, when the United States imposed a new 15 percent tariff. The levies on food, clothing, lawn mowers and thousands of other ‘Made in China’ products come as the president prepares to tax nearly everything China ships to America. The move will bring average tariffs on Chinese imports to 21.2 percent, up from only 3.1 percent when Mr. Trump came into office, according to data from the Peterson Institute for International Economics. China has responded by raising barriers to American companies and their products, while easing them for other nations. Trade between the world’s two largest economies has slumped, and China, which had long been America’s biggest trading partner, dropped to third place in the first half of the year, behind Mexico and Canada.”

Xero, a Colorado shoe manufacturer, struggles to cope with the tariffs: “‘When you are growing fast, it’s hair on fire a lot of the time,’ [CFO Lena Phoenix]  said. ‘These tariffs are putting an enormous amount of pressure on us.’ … Over the last four years, Xero’s sales have grown at an average annual pace of 84 percent, she said, reaching $8.8 million in 2018. The company employs 34 people. It sells 90 percent of its footwear in the United States while shipping the rest to markets around the planet—to Japan, Singapore, Britain and the Czech Republic.

“Growth had been poised to accelerate even more rapidly this year, as Xero wrapped up a test with REI, the outdoor clothing and equipment retailer, bringing an order worth $830,000 for the 2020 season. ‘It’s by far our biggest order ever,’ Ms. Phoenix said. But the tariffs that hit Sunday could alter the economics of that deal. Xero could presumably try to renegotiate a higher price with REI that would cover the tariff, but Ms. Phoenix has been reluctant to pursue that route given the importance of the relationship. Instead, she has waited and hoped that a deal between Washington and Beijing would end the threat.”

President Trump says it’s not the tariffs; it’s the businesses. “On Friday, the president [argued] that struggling companies have only themselves to blame and are rationalizing their own mistakes by pointing to, just to name an example, Mr. Trump’s multibillion-dollar tariffs and America’s biggest trade war in generations. ‘Badly run and weak companies are smartly blaming these small Tariffs instead of themselves for bad management…and who can really blame them for doing that?’ Mr. Trump wrote on Twitter. ‘Excuses!’ He repeated his point later with reporters. ‘A lot of badly run companies are trying to blame tariffs,’ he said. ‘In other words, if they’re running badly and they’re having a bad quarter or if they’re just unlucky in some way, they’re trying to blame the tariffs. It’s not the tariffs. It’s called bad management.”

The tariffs are also affecting small business confidence, a survey shows: “Economic confidence among small firms fell in August to the lowest level since November 2012, according to a monthly survey of more than 670 small companies conducted for The Wall Street Journal. The portion of respondents that expect the economy to worsen over the next 12 months rose to 40 percent, compared with 29 percent in July and 23 percent a year ago. … ‘It’s overwhelming. It’s exhausting. It’s demoralizing,’ said Susan White Morrissey, founder of White + Warren Inc., a cashmere brand in New York. ‘My employees just want to know what to do. This is probably the first time in my career that I can’t give them the answers.’”

MARKETING

Google is providing more information with its search results, which makes pay-per-click advertising harder for retailers: “With more people stopping their search journeys at Google itself, retail marketers are forced to rethink organic search strategy. This is especially pertinent for direct-to-consumer companies, which rely on selling their own products on their own sites; organic search click trending downward could easily mean less traffic to their sites. ‘Click-less is a challenging situation,’ said Chris Apostle, the chief media officer at the digital agency iCrossing. This shift has caused him to think more holistically about client strategy. ‘You can have campaigns that don’t necessarily have some form of a click that leads to a purchase,’ he said. For example, if you type in ‘how do I buy a mattress?’ in Google, it populates a few top organic results, paid search ads at the side and an aggregated list pulled from Consumer Reports explaining the best way to buy a mattress in the middle.

“The reasons why Google would do this is clear: It wants people to stay on its owned and operated sites; it sees no reason to have people surf elsewhere if it can provide the information more efficiently. One clear target is product recommendations; if you type in ‘best blender,’ Google lists the top results from a New York Magazine article. Below that is a box containing Google Shopping links for the top-rated blenders along with reviews and the sites they’re highly rated in—allowing users to bypass reading the recommendation posts and never learning about other products that Google’s aggregation algorithm failed to hoover up.”

Beyond Meat and Impossible Foods are probably overstating the climate-change benefits of their products: “They’ve also turned the environmental benefits of abstaining from meat into a key marketing tool for their products—drawing some skepticism from environmental researchers who say plant diets are healthier and less carbon emitting than producing processed plant-based products.

“Animal agriculture is responsible for 14.5 percent of global greenhouse emissions, according to the United Nations’ Food and Agriculture Organization, with 65 percent of those emissions coming from beef and dairy cattle. Scientists warn that climate change will trigger an international food crisis unless humans change the way they produce meat and use land. While companies producing imitation meat boast of the environmental benefits, some researchers point out that for people wanting to substantially lower their carbon footprint, having unprocessed plant-based diets instead of eating imitation products is healthier and better for the planet.”

STARTUPS

Preclusio, out of Y Combinator, automates how companies comply with tech privacy laws: “Preclusio’s competitive advantage, [CEO and co-founder Heather Wade] said, is its automated tools for determining a company’s data inventory and mapping that information. Their approach can cut six months out of the compliance process, she said. … Preclusio has finished the first version of its product and is running pilots. They’ve initially focused on Amazon’s AWS users, and are building support for customers of Microsoft Azure and Google Cloud. Their price varies according to the size and complexity of a business’s data infrastructure, starting at $25,000 for a year-long service for a startup.”

The fall of Theranos isn’t deterring San Francisco-based Microdrop from making an at-home blood testing kit: “Microdrop’s at-home blood testing kit is called imaware. The company is working with doctors in California to develop new tests to help clients get ahead of a potential disease. 

‘That first visit to the doctor is actually very time consuming, tactical, paper oriented, just to order a test,’ said [co-founder Jani] Tuomi. ‘So what we’re saying is, let’s not necessarily waste time on that first visit, and let’s have you go armed with a little more information.’ … Microdrop says it is dedicated to accuracy and transparency in how its tests work. The vials are sent to certified partner labs around the country. No lab order is required, the process takes less than five minutes and, after mailing back the vial, results are available within five days. Currently, imaware only screens for Celiac disease and rheumatoid arthritis but it plans to expand its range in the coming months to include tests for heart disease and other auto-immune conditions.”

Startups are targeting the breakfast cereal market: “Magic Spoon is part of a small cadre of startups that have emerged in the past year with plans to bring cereal back to a market that has abandoned it due to dietary restrictions, as well as convert some breakfast-aisle loyalists who might be looking for less sugary options for themselves or their kids. The brands each offer a variation on low-carb, high-protein cereal, sell direct-to-consumer (at least for now), and promise consumers a third option in between ‘inevitable sugar coma’ and ‘sad brown health flakes.’

“Magic Spoon co-founders Greg Sewitz and Gabi Lewis, who launched their cereal in April, wanted to tap into the familiarity that almost every American has with the category. ‘As we were thinking through the world of food products, there really aren’t many that people who have a true emotional connection to and history with in the way that they do with cereal,’ says Sewitz. ‘You talk to somebody about their favorite cereal and their eyes just light up immediately, and they think back to the pantry they had when they were a kid.’ …

“‘Ten years ago, cereal was the most popular breakfast in this country,’ says Lewis. ‘That’s going to be true 10 years from now, it’s going to be true 20 years from now. The only reason it’s declining slightly is because even though people love cereal, none of those products are talking to modern consumers today.’”

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AGRICULTURE 

More farmers in California are turning to mechanization to make up for the labor shortage: “More than 40 percent of farmers in the past five years have been unable to obtain all the workers they needed for the production of their main crop, according to the survey, released Tuesday. Of the total reporting shortages, it found about 70 percent or more indicating they have experienced more trouble hiring in 2017 and 2018. According to the farm bureau, about 56 percent of the farmers surveyed have started using mechanization in the past five years, and of the total, more than half said it was because of labor shortages. ‘The most frequently used labor-saving technology was some sort of mechanical harvester,’ said Dave Kranz, a spokesman for the farm bureau in Sacramento.”

SUSTAINABILITY

Beermakers are ditching the six-pack plastic rings for more environmentally friendly materials: “The Delray Beach, Fla., craft brewer [SaltWater Brewery]—co-founded by beach lovers and offering oceanic-themed beers such as the Salty Flamingo and the Sea Cow—was an early adopter of the technology. SaltWater Brewery has been working with E6PR to make the first eco-friendly six-pack ring made from by-product waste and other compostable materials. It took about 18 months for the sustainable packaging to be fully adopted throughout all of SaltWater’s distribution network. The rings developed by E6PR are now used by 35 brewers across the globe, including in Africa, Europe, and Australia. The ultimate goal is to ensure that the rings can break down in nature within a matter of months rather than the years it would take for plastic.”

INTELLECTUAL PROPERTY
Here’s how Robert Kearns invented what is now known as the standard windshield wiper, an idea stolen by Ford: “[On] his wedding night, Kearns had popped open a bottle of champagne in his face and permanently blinded his left eye. His impaired vision caused many hardships, one of which was operating windshield wipers in the rain. In the early 1960s, wipers only had two settings (one for light rain and one for heavy rain) and were controlled by a vacuum-powered system that ran continuously and didn’t allow for any variance in frequency. For Kearns, this didn’t suffice—and driving in the rain one day, he figured that a windshield wiper ought to function as a human eye, allowing the driver to control the pauses between, and speed of, the swipes. …

“The inventor made a series of presentations to Ford’s engineers and executives—and this time they offered him a contract. But it came with one condition: Ford claimed that, because wipers were a ‘safety item,’ all of Kearns’ engineering had to be disclosed before the contract was signed. … Sensing that he was close to fulfilling his dream, Kearns showed Ford exactly how his device worked and was welcomed aboard the team. But the celebration didn’t last long: five months later, he was dismissed. Ford, he was told, had come up with its own intermittent wiper totally on its own and no longer needed his services. … In 1969, Ford debuted a fancy, first-of-its-kind intermittent windshield wiper on its line of Mercury cars.”

OXFORD STRATEGIC ADVISORY DEAL OF THE DAY  

Maple Leaf Financial, a provider of banking services, was acquired by Farmers National Bank for $39.6 million.

VENTURE CAPITAL

Playful, an operator of an independent action game studio, raised $23 million in venture funding from undisclosed investors.

Baton Systems, a developer of a payments technology provider, raised $12 million in a Series A round.

MANAGEMENT

At Seraphic Group, which develops products that improve the health of people, animals, and the environment, 20 percent of the company’s employees are married to other employees: “The trend starts with the leadership team. The chief strategy officer is married to the vice president of information. The chief operations officer is married to the creative director. [CEO Zach] Bush himself is married to one of the company’s consultants. Another consultant proposed to his girlfriend at Bush’s wedding reception. When that pair married, at an event packed with Seraphic staff, Bush’s wife performed the ceremony and the company’s resident PhD in atomic physics played the bridal march on the piano. …

“Abundant couple-dom provides several advantages. For employees, there’s the pleasure of seeing one’s partner often during the day. Stress is reduced by the ability to quickly coordinate when, for example, a child gets sick at school. Bush says it creates greater camaraderie: Since everyone has the same friends, they all hang out together. … Seraphic, meanwhile, benefits from work conversations that extend outside its walls. Even at home, Gamble and his wife, Jana, bounce ideas off each other. That cross-functional perspective companies so desire gets an assist when people in different departments tell each other everything. And employees are more alert to developments outside their own functions when those things may affect a spouse. Couples also tend to be more loyal to the business, Gamble says. ‘They have more at stake. All their eggs are in one basket.’”

And that’s what’s ahead.

Please send comments and suggestions to mattg@oxfordcenter.com and lfeldman@oxfordcenter.com.

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