Equanimity

Despite all its heralded success and popularity, there have always been questions surrounding Twitter and its ability to generate profits since it burst onto the scene in 2009. Twitter has been criticized for its lack of a profitable business model, despite strong venture capitalist backings and funding of $160 million.

With all the hype surrounding Social Media in the past year, especially as a business/marketing tool, it’s an important question to consider – when/how does the hype and popularity translate into monetary value?

Earlier this year, Twitter launched its advertising platform known as “promoted tweets”. Basically, companies can send out a tweet from their company accounts, and pay Twitter for the tweet to be at the top of search results in which the tweet appears. Sometimes, promoted tweets/hashtags also appear in the trending topics list.

That’s how I came across the hashtag #GroundRules, a promoted tweet from @JetBlue. For some reason it caught my eye, and clicking the tweet lead to this video:

I found this advertisement quite interesting because, rather than pushing the product, it is emphasizing a purpose: customer empowerment. This made me think back to class 1, when we discussed Ryanair and its many cost-cutting tactics. For being in an industry in which rising fuel costs and regulations are forcing airlines to charge for meals, pillows, blankets, and maybe even to use the toilet, JetBlue has chosen an interesting point of differentiation.

Currently, the jury is still out on whether Twitter’s promoted tweets are proving profitable for Twitter and the promoted companies. However, if Twitter and companies continue to work in tandem to create innovative and interesting content like above, I think there will be a time in the future when we finally stop asking, “is Twitter profitable?”.

As a precursor to today’s class – I came into Sauder as one of those, “Nooo numbers, keep them away from me” which leads into “Pfffft, of course I’m not going into Finance or Accounting!” people, so I wasn’t looking super forward to a class on Finance.

Luckily, Murray Carlson was a pretty good speaker. He kept us engaged throughout his presentation, and definitely incorporated non-embarrassing individual interaction. I think part of the problem was that before today, I honestly had no idea what “Finance” entailed, despite working as an assistant to a Financial Consultant at Investors Group for the past four summers (go figure). When we learned about the different parts of Finance (stocks, investing, loans, etc.), I still wasn’t overly thrilled. However, there was one portion that jumped out at me – microloans/microcredit.

Yunus receiving the Nobel Peace Prize in 2006

In 2005, the “founder” of microcredit, Muhammad Yunus, won the Nobel Peace Prize for his microloans project, the Grameen Bank. The Nobel Prize Committee had this to say about Grameen Bank’s far-reaching effects:

Lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty.

The Committee mentioned peace when talking about a Finance-rooted endeavor. We tend to think of businessmen as big, bad, money-hungry demons, but microloans have done a whole lot of good for millions of people. I hope that one day, I will find myself as a part of a similar organization that harnesses the power of business to create such immense social good.

On July 19, 2010, the NJ Devils announced the re-signing of Ilya Kovalchuk to a monstrous $102 million, 17-year deal, and thus the Kovalchuk Saga began.

Now, I am no expert on the collective bargaining agreement (CBA) and only quickly educated myself about cap circumvention for the purposes of this post.

Ilya Kovalchuk

During my TOK course in the IB program in high school, we defined ethical issues as basically violating a legal or established set of rules. In this case, the ethical issue was the length of the contract, but more importantly, how the length affected the average cap hit of Kovalchuk. The contract was “front-loaded” with the first few years paying Kovie $11.5m, $10.5m, $8.5m and so on, and only $505,000 in the last 5 years of the contract, for an average cap hit of $6m over the 17 years (which would put him at age 44). Obviously Kovie would not play to that age, so many (including the league) saw the final 5 years as “tacked on” solely to lower the average cap hit, which is known as cap circumvention (the main ethical issue).

As we know, the league rejected the contract and renegotiated a new one with the NHLPA/NJ, and a new “Kovalchuk Amendment” was added that stated players’ cap hits must be $1m from ages 36-40 if their average hit is $5.75m+ (like Kovalchuk). The NJ Devils were also fined $3m and 2 draft picks for the attempted circumvention. In this day where lifetime contracts are seemingly becoming the norm, I think it was good of the league to actually set precedent and enforce their CBA with the initial rejection, but the fine seems a bit overboard.

I’m just glad they didn’t reassess Luongo’s contract in the end – I don’t think we could handle another 1.5-month long saga.