The WSJ reports today that P&G and Google are swapping employees to get a better understanding of each other. With P&G as one of the leading advertising companies in the world, this move has long reaching upside for Google and P&G.

I’ve noted that Yahoo and Google shouldn’t be focusing on each other, they should focus on growing the market and this move goes further than replicating the Madison Avenue model. If Google can show how it creates value to P&G, and P&G can explain how it builds brands, these two players will revolutionize how interactive marketing is done.

During downturns, companies are forced to find new ways to compete that are under-leveraged while creating real consumer value. What P&G begins testing out of this relationship will be worth watching. At a minimum, Google will better understand what big companies need and how to go after a bigger piece of the traditional marketing pie.

No doubt, these times are increasing the focus on value marketing. What is becoming more obvious is the need to increase the focus on ensuring that a company’s strategy has meaningful purpose beyond the financial statements.

What do I mean by purpose? Umair finally kicked me in the head on this one last week with his post on the 7 ways P.E. Obama has confirmed a real shift in strategy. If Google wants to organize the world’s information, then what is it that your company is going to do? Regardless of profit, Google can point to its successes in healthcare, government data and small business services and show an increase in user value. At a time when all businesses will shrink in some way or another next year, having non-growth measurements become critically important for morale.

Some non-growth strategic measurements: new product vitality, value creation v. substitutes, new product profits as a ratio of R&D, unaided brand awareness, customer service levels, and so many more.

If times are hard now, being motivated to do something great while hitting specific targets will at least mean feeling like we all have a worthwhile jobs to do. Honestly, the folks working in the mortgage and auto industries have to turn the corner here - they are not just salvaging shareholder profits, they are also restabilizing the financial base of our country and leaders in those companies need to offer reasons on why their people need to dig in and put in the extra effort.

Trust me, staring at all those red numbers in my 401K and IRA accounts isn’t getting anything productive done.

If you haven’t voted, go do it. If you have, good for you.

If election polling is directionally correct, we’re going to see a whole group of people feel inspired in a way they never thought they could. Good. We can use a change in tone and our collective view on the world. No one feels comfortable with a lame-duck president, or being in the middle of a recession. Let’s move forward and fix the messes.

A bit of optimism goes a long way in getting a new project off the ground. I guess folks that start businesses and new projects run at a 10 out of 10 on the optimism scale (which is hard in times like these).

The other part of writing up a plan is the need to see the world differently. While jargon doesn’t help anyone, complex problems need to be dialed down to short words/phrases to act as stand ins for larger concepts (e.g. freemium). BTW, that’s how we felt all along the development cycle with Invequity and PatentMonkey (now Patents.com).

Try following Umair’s presentation on consumers of digital media from a couple years back and you’ll see that the learning curve is steep, but once you’re up it you can see how he views the world. [Too bad Umair seems to want to write/consult more than do a start up or be a VC, cause he’d be great.]

Saving will be more attractive than consuming. Many of the trends we have seen in the past, like trading up, luxury etc. will be stopped or reversed for many consumers – so companies must not simply extrapolate the trend of the past 20 years.

The real key to these value marketing times will be to quickly re-tool and re-focus where products and services should be targeted in terms of price points and value props. Apple is leading the charge with its planned $800 laptop after down shifting its price to $199 on the iPhone.

The responsive players will fair better this holiday season.

Update: Apple missed out on entering the netbook arena at a time when consumers are going to seek cool and cheap instead of just cool.

The Pew Research Firm is helping define the middle class. A battle ground for politics is also so critical for marketers to understand.

Per the Pew summary, here’s a portrait:

12 Percentage of the middle class that say “being wealthy” is very important to them.

14 Percentage of middle class that lost their jobs in the past year — about half the proportion that fear they’ll lose their job in the year ahead.

29 The percentage increase in the inflation-adjusted median net worth of middle-income families from 1983 to 2004. During that same period, the net worth of upper-income families grew by 123%, or four times faster.

33 Percentage of Americans with family incomes of $150,000 or more who say they are middle class.

39 Percentage of the middle class who say they are “living comfortably.” About a quarter — 23% — say they are just able to meet expenses or fall short.

40 Percentage of middle-class homeowners who have paid off less than half of the money they owe on their homes.

41 Percentage of Americans who say they are better off now than they were five years ago, the smallest percentage in more than four decades.

41 Percentage of Americans with family incomes of less than $20,000 who say they are middle class.

53 Percentage of all Americans who identify themselves as middle class.

55 Percentage of Baby Boomers who say their income won’t keep up with the cost of living in the coming year, a view shared by significantly smaller proportions of younger (44%) or older (43%) adults.

67 Percentage of the middle class who say they are doing better than their parents. But only about half (49%) expect their children to do better than they’re doing, down from 61% in 2002.

68 Percentage of middle-class Americans who say “having enough time to do the things you want” is a very important priority in their lives. Other priorities in this survey scored lower: having children (62% rate this very important), having a successful career (59%), being married (55%), doing volunteer or charity work (52%), leading a religious life (53%), and being wealthy (12%)

79 Percentage of adults who say it is harder now than it was five years ago for the middle class to maintain its standard of living, up from 65% in 1986.

89 Percentage of employed middle-class Americans who are satisfied with their job, including 34% who are “completely satisfied.”

$52,285 The median family income of Americans who identify themselves as middle class.

$70,000 The median family income that Americans say is necessary for a family of four to live a middle-class lifestyle in their communities.

Stepping outside the norm on marketing, a couple thoughts on short selling and the furthering risks of being a public company.

Fred on shorting:

I’ve been uncomfortable with the “no shorting” rules that the gov’t put in place thursday night. I couldn’t really articulate my discomfort with them, but my buddies Howard and Roger have done it for me.A VC, Sep 2008

Even more, Fred today questioned why companies with cash reserves aren’t buying up their own stock.
While I am a fan of using securities to enhance transparency in the markets, I have to say I’m out of sorts on shorting.

I’ll be honest, from an economic POV, I’m trying to understand how shorts add value (beyond the shorter) to a share’s liquidity or accuracy in share price.  To be clear, the options market does a lot of good in terms of future expectations, but shorting has a direct impact on the stock in its market.

Due to borrowing the share and reselling it, the share’s count in the market gets increased with this derivative in a way that will inherently decrease price (the share is owned, borrowed and resold).  In theory, any shorted stock will see a price decline due to a breaking of the control of the supply of the stock which was traditionally held by a company.  The underlying potential of a stock has to not only meet growth expectations assuming the company’s plans for share dilution or buy backs, but now has to exceed expected growth + dilution created by this financial instrument.

When the short market moves strongly against a stock, then the base # of shares increases dramatically more than a company can move to respond to which would seem to create a death spiral.  In essence, excessive shorting can create a real problem in that this death spiral impairs a company’s ability to raise further capital and has taken the ability for it to control its share base out of its hands.

In terms of incentives, like the mortgage broker issue before it, the disintermediation of the brokerage market has created a problem noted by NPR recently that many brokerages make more money on the commissions from shorting than they do on trades.  If shorting is so lucrative, and no controls exist to bind together the supply of a company’s stock, then well capitalized players can pile onto one side of the table and do a lot of harm quite quickly.

Given a short’s incentive is to get the stock to zero, and with each added short position an added share is put into the market that was borrowed to do so, I’d be quite interested in seeing something quant on the impact of shorts in the market as they’ve bloomed to see where this derivative has added value to the market and not just to the shorter and brokerage house.

My hunch is that shorting is the new bubble. If so, we’re in for some major value destruction.

Some deals just don’t create the value promised. AOL and Time Warner ranks pretty high in that category and many, including me, wonder how a deal for so much money could have been so wrong.

Confession: I made a bet on AOL + Time Warner back in the day and lost when it went South. Truth be told, I thought that the combination of the leading distribution network for the web + a leading content provider would be able to find synergies. I was proven quite wrong. What’s worse, my sense is that after 7 years, the same vision could still be implemented with a lot of value creation for consumers and investors.

Here’s what I generally hoped had happened:
AOL moves from charging for access to premium content
AOL needed a new revenue model, but for some reason the company decided that going for advertising dollars was more important than potentially more collaborative efforts that tapped into its content division. Imagine Time magazine + a host of other subscriptions tied into your AOL account online - what was that worth? No idea, but it feels like a path to keep consumers buying v. going to an ad-only online solution. I don’t fault a strategy that has also been employed by the NYT’s, but would question why a harder look at the Wall Street Journal wasn’t considered. What AOL needed to do was create an arms race where access transitioned to add-in content with its service supported by a higher speed internet subscription option. The pieces were all in the company to be leveraged, but like Sony, there have been just too many GM’s to fight to make this vision work.

Time Warner’s premium content leads a new distribution model
Why is Amazon leading the content + hardware revolution? Time Warner had/has a perfect opportunity to leverage its AOL brand and traffic to bring forth the technology needed to deliver on that promise. Movies, magazines, books, music all in a distribution model that sells content via subscription. Isn’t that what Time Warner wants to grow?

In the end, AOL + Time Warner suffered from 2x the incumbent problem
Incumbents with revenues to be lost act differently than start ups with no revenues to lose. To that end, this was a deal that had a chance to be visionary, but was left without a catalyst manager to test some of these options out. Now AOL looks to be spun off at some point when the financials can support it. Too bad.

I would have loved to see something more dynamic, something more like what Jobs did for Apple in 2000 when he charted the plan for iPod + iTunes, but alas, that’s what makes him so special.