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PODCAST: Strong jobs report undercut by shrinking labor force

Fri, 2014-05-02 05:23

The April 2014 jobs report from the Department of Labor shows much stronger employment growth than economists expected, and a significantly lower unemployment rate. The unemployment rate fell 0.4 percent to 6.3 percent in April.

Nevada, New Mexico, Texas, or Arizona? There can be only one home for the Gigafactory. Or possibly two... if two are built. The Gigafactory is a massive battery plant, built by the electric car maker Tesla, that will take up to 1,000 acres and will include its own on-site wind and solar energy plants. Tesla has narrowed down its choice of location to four states, but rather than pick one now, it will prepare to build in two or three (or potentially all four), CEO Elon Musk announced on Wednesday.

Technically, Cinco de Mayo falls on a Monday this year. But beer companies want people to get an early start, celebrating over the weekend. But celebrating what, exactly? What does Cinco de Mayo mean for marketers and consumers?

Time to mourn the minibar

Fri, 2014-05-02 02:58

Good-bye, midnight Snickers bar. Adios, Pringles cylinder. Sayonara, bourbon nightcap.

They may never go away completely, but the hotel minibar can certainly be considered a rare and endangered species.

Why are minibars vanishing?

"In Las Vegas, a little bottle of vodka can cost you more than $14. And in Washington D.C., if you want a bag of peanuts, be prepared to pay over $7," says Kevin Carter with the travel planning website TripAdvisor.

A recent TripAdvisor survey found just 7 percent of U.S. travelers even remotely care about a minibar in the room. Not surprisingly, PKF Hospitality found that between 2007–2012 minibar revenue fell by nearly 30 percent.

Disappearing minibars is just one of several changes in modern-day U.S. hotel rooms. Woodworth says what hotels lose in certain antiquated amenities, companies hope to make up in room rates.

"If I can get you to pay an extra dollar for your room tonight, about 90 cents of that is pure profit," says Woodworth. "The energies and management focus has been really optimizing room revenues."

TripAdvisor found travelers want a lot of stuff that starts with the word "free": Free wifi. Free breakfast. Free parking.

Oh, and we want outlets – lots and lots of electrical outlets.     

5 more "amenities" disappearing from your hotel room

PKF Hospitality President Mark Woodworth says hotels are recalculating what makes them money. Here are five services on the chopping block: 

1. Dry cleaning.

There will still be ironing boards, but you'll have to push them yourself.

Hulton Archive/Getty Images

2. Telephone services. 

Perhaps wake up calls will be rerouted to cell phones.

Keystone/Hulton Archive/Getty Images

3. Renting movies on hotel TVs. 

Enough guests prefer their own screens. 

Jimmy Sime/Hulton Archive/Getty Images

4. Room size.

The smaller the room, the bigger the hotel's profit. And the closer you are to your cell phone, which is what you care about anyway. 

Hulton Archive/Getty Images

5. Coffee makers.

For now, the coffee makers are still there -- but you have to pay for anything you brew

Hulton Archive/Getty Images

Elon Musk, Tesla plan 'Gigafactory' site

Fri, 2014-05-02 02:48

Nevada, New Mexico, Texas, or Arizona? There can be only one home for the Gigafactory

Or possibly two... if two are built.

The Gigafactory is a massive battery plant, built by the electric car maker Tesla, that will take up to 1,000 acres and will include its own on-site wind and solar energy plants. Tesla has narrowed down its choice of location to four states, but rather than pick one now, it will prepare to build in two or three (or potentially all four), CEO Elon Musk announced on Wednesday.

Replicating engineering work, design work, site selection, connection to power and utilities, and permitting is a costly strategy, says Ben Kallo, senior equity analyst with Robert W. Baird.

"You can talk about millions and even tens of millions [of dollars] to do this" for just one extra site, according to Kallo.

But the cost of not doing it could be much greater. Tesla plans to have 500,000 electric cars on the road by 2020. This would include more of its Model S sedans, a new SUV, and a more affordable car (at $35,000, it might be described as 'less unaffordable'). Tesla also plans to expand into electricity storage to the wind and solar industries, says Kallo. And the gigafactory is the foundation of that plan. A delay could damage Tesla's competitive advantage as a first mover, and could damage investor confidence. Aside from its own share holders, Tesla needs investors to finance the $5 billion behemoth project.

Jakki Mohr teaches marketing at the University of Montana and has followed Tesla closely. She says having multiple possibilities to site the gigafactory is a savvy negotiating move.

"States give huge incentives to get this kind of business in their regions," says Mohr, and this is a way of "playing one state against another to receive better incentives to locate there."

There's also one critical but underappreciated concession Tesla wants, according to Charles Hill, professor of management at the University of Washington's Foster School of Business. Tesla wants to sell cars itself, not through dealerships.

"It may be that Tesla picks a state that's initially hostile to that – Texas would be an example – as a way of getting leverage for them to change that policy as well," says Hill.

"The political issue around whether Tesla should have a direct sales model as opposed to selling through dealers is almost as big of an issue as the battery plant, and I don't think the two are totally separable."

The more back up plans you have, the more arms you can twist.

Despite strong jobs report, wages still flat

Fri, 2014-05-02 02:19

[UPDATED: FRIDAY, MAY 2, 2014, 9:58am ET]: The April 2014 jobs report from the Department of Labor shows much stronger employment growth than economists expected, and a significantly lower unemployment rate. The unemployment rate fell 0.4 percent to 6.3 percent in April.

Nonfarm private- and public-sector payroll jobs rose by 288,000 in April. The consensus expectation was 215,000. Job gains came across the board, in white- and blue-collar jobs: Professional and business services (+75,000), temporary employment (+24,000), retail trade (+35,000) with car dealerships particularly strong. Bars and restaurants added 33,000 jobs and construction added 32,000 jobs, a welcome recovery for a housing sector that has seemed weak in recent months. Health care and mining also rose strongly. Manufacturing and government jobs were both essentially unchanged.

The unemployment rate decline appears very favorable on its face -- 6.3 percent is the lowest unemployment rate since September 2008, as the financial crisis was raging. It hit a peak of 10 percent in October 2009, before beginning its painstakingly slow, steady decline to April 2014’s level.

One force driving the unemployment rate down is a decline in the labor force participation rate -- to 62.8 percent in April. The number of people in the civilian labor force -- those either working, or unemployed and actively looking for work -- declined by 806,000, after increasing by 503,000 in March. Data from the household survey -- the source of labor force measures -- is considered more volatile than the job-creation numbers derived from the Establishment Survey, and it might be a few months before these trends settle out more clearly.

Job gains turn out to have been better than previously reported during the winter, when the economy slowed dramatically amid severe weather events. February’s figure was revised up from +197,000 to +222,000, and March was revised from +192,000 to +203,000. That puts the three-month average at 238,000. That could signal a moderate, but significant, acceleration of job-creation in the economy. At some point, faster wage growth could even follow.

Finally, April was a 'pretty good' month for jobs

Fri, 2014-05-02 02:19

[UPDATED: FRIDAY, MAY 2, 2014, 8:35am ET]: The U.S. Bureau of Labor Statistics reported domestic employers added 288,000 to non-farm payrolls in the month of April, bringing the current unemployment rate down to 6.3 percent. 

Chances are, today's Employment Situation Summary for April from the Labor Department will be a pretty good report.

Job growth is expected to have improved compared to mid-winter's labor-market polar vortex. The consensus among economists (Bloomberg) is 215,000 new jobs created in April, and unemployment falling 0.1 percent to 6.6 percent. Job growth has come in around 175,000 non-farm payroll jobs per month since February (3-month average).

For the past six months, economists have had a hard time determining underlying labor-market strength. Nearly every monthly report has been skewed by anomalous or seasonal effects: the partial government shutdown in the fall; expiration of long-term federal unemployment benefits after the New Year (maybe people stopped looking, and getting counted?); severe winter weather in the Northeast and Midwest and Southeast and Northwest that suppressed consumer spending, travel, and hiring nationwide.

In recent weeks, economic signals have been mixed: a strong April private-sector jobs report from payroll processing firm ADP; higher first-time claims for state unemployment benefits (rising to a nine-week high in May 1 report); consumer spending up 0.9 percent in March to a four-year high. Meanwhile, GDP barely cleared the flatline in the first quarter (+0.1 percent preliminary, compared to 2.6 percent in Q4/2013). Home sales and building construction have all but stalled.

Mark Hamrich, who tracks the economy for personal finance website Bankrate.com, says the labor market hasn't changed very much in the past two years. Job creation has averaged , just below 200,000 every month and the unemployment rate has fallen gradually to below 7 percent. That represents slow, steady improvement—without, however, much acceleration in job creation.

"I call it a 'more, please' job market," says Hamrich. He says that's stressful for middle-income Americans--suffering from the lingering effects of the financial crisis, and the precipitous fall in assets such as retirement savings and home values.

Hamrick says income has largely stagnated. "Even for those who have been employed," he says, "many have had to put up with sub-standard wage gains on an annual basis. That leaves people feeling like they aren't making much progress."

Finally, April was probably a 'pretty good' month for jobs

Fri, 2014-05-02 02:19

Chances are, today's Employment Situation Summary for April from the Labor Department will be a pretty good report.

Job growth is expected to have improved compared to mid-winter's labor-market polar vortex. The consensus among economists (Bloomberg) is 215,000 new jobs created in April, and unemployment falling 0.1 percent to 6.6 percent. Job growth has come in around 175,000 non-farm payroll jobs per month since February (3-month average).

For the past six months, economists have had a hard time determining underlying labor-market strength. Nearly every monthly report has been skewed by anomalous or seasonal effects: the partial government shutdown in the fall; expiration of long-term federal unemployment benefits after the New Year (maybe people stopped looking, and getting counted?); severe winter weather in the Northeast and Midwest and Southeast and Northwest that suppressed consumer spending, travel, and hiring nationwide.

In recent weeks, economic signals have been mixed: a strong April private-sector jobs report from payroll processing firm ADP; higher first-time claims for state unemployment benefits (rising to a nine-week high in May 1 report); consumer spending up 0.9 percent in March to a four-year high. Meanwhile, GDP barely cleared the flatline in the first quarter (+0.1 percent preliminary, compared to 2.6 percent in Q4/2013). Home sales and building construction have all but stalled.

Mark Hamrich, who tracks the economy for personal finance website Bankrate.com, says the labor market hasn't changed very much in the past two years. Job creation has averaged , just below 200,000 every month and the unemployment rate has fallen gradually to below 7 percent. That represents slow, steady improvement—without, however, much acceleration in job creation.

"I call it a 'more, please' job market," says Hamrich. He says that's stressful for middle-income Americans--suffering from the lingering effects of the financial crisis, and the precipitous fall in assets such as retirement savings and home values.

Hamrick says income has largely stagnated. "Even for those who have been employed," he says, "many have had to put up with sub-standard wage gains on an annual basis. That leaves people feeling like they aren't making much progress."

The history of the marketing of Cinco de Mayo

Fri, 2014-05-02 01:05

Technically, Cinco de Mayo falls on a Monday this year. But beer companies want people to get an early start, celebrating over the weekend.

But celebrating what, exactly? What does Cinco de Mayo mean for marketers and consumers?

Many in Los Angeles celebrated Cinco de Mayo last weekend. Tens of thousands of Latinos attended a street fair that big corporations saw as a marketing opportunity, even if their message was a little fuzzy.

At the Ford booth, I spoke with Marie, a 'brand ambassador.' I asked her to make the connection between the car company and Cinco de Mayo.

"Ford, to me, is about the people. And people need to drive to get around this city and Ford is a great way to do that," said Marie.

She struggled to make the connection. But, to be fair, it is sort of a hazy holiday.

After all, May 5 commemorates an obscure battle where the Mexican underdogs defeated the French.

"In Mexico, we don't really do Cinco de Mayo," said Marie. "It's more of an American-ized holiday."

In this case, 'American-ized' meant commercialized. Festival goers moved from line to line, waiting for free samples and gift bags. A fiesta of freebies from McDonald's and Palmolive and Colgate.

"The consumer products companies have been the early-adopters of understanding that this is the market that is going to move the needle, and they've really fought hard to create brand recognition," said Xavier Gutierrez with Meruelo Group, one of the event's sponsors.

While some companies try to connect with Latinos, beer companies try to get everyone to party.

According to Nielsen, the market research company, Americans bought more than $600 million worth of beer last year for Cinco de Mayo. That's more beer than was sold for the Super Bowl or St. Patrick's Day.

"Beer companies have been largely responsible for the commodification of Cinco de Mayo. I mean, they spend millions and millions of dollar in Spanish-language advertising," said Jose Alamillo, a professor of Chicano studies at California State University Channel Islands.

Alamillo said the beer industry ignores alcohol related health issues that affect the Latino community.

He'd like to see Cinco de Mayo promoted as a history lesson, instead of -- as critics allege -- an excuse to sell booze.

Boxers, briefs or radiation underwear? Silicon Tally!

Fri, 2014-05-02 01:00

It's time for Silicon Tally. How well have you kept up with the week in tech news?

This week we're joined by Kara Miller, host of WGBH’s Innovation Hub. var _polldaddy = [] || _polldaddy; _polldaddy.push( { type: "iframe", auto: "1", domain: "marketplaceapm.polldaddy.com/s/", id: "silicon-tally-may-2", placeholder: "pd_1398982571" } ); (function(d,c,j){if(!document.getElementById(j)){var pd=d.createElement(c),s;pd.id=j;pd.src=('https:'==document.location.protocol)?'https://polldaddy.com/survey.js':'http://i0.poll.fm/survey.js';s=document.getElementsByTagName(c)[0];s.parentNode.insertBefore(pd,s);}}(document,'script','pd-embed'));

Family finance lessons: Demetria Lucas listens to her mother ... eventually

Thu, 2014-05-01 18:45
Thursday, May 1, 2014 - 19:40

The most important lessons we learn about money don’t come from our accountants or our radios. They come from our family.

Each week, we invite someone to tell us about the money tips they inherited from the people they grew up with.

Our guest this week is Demetria Lucas. She's the author of A Belle In Brooklyn and owns a blog of the same name. You might also recognize her from the Bravo reality series Blood, Sweat and Heels.

Demetria grew up in in a middle-class town near Washington D.C. that she says had lot of African-American professionals. 

"Sort of like a 'Leave It To Beaver' black version," says Lucas. 

Discussions about money happened early in Lucas' household. 

"My mother always taught me to put 10 percent away," says Lucas. "My dad would always talk about my grandmother. She was from Mississippi and she lived on a farm. When she passed away she had saved some ungodly sum of money and no one knew where it came from."

But when Lucas reached adulthood it took some time for her mother's lessons to take hold.

"[After] my very first paycheck, she reminded me of that 10 percent lesson. You know, I heard her and it went in one ear and out the other," says Lucas.

After about a year, though, Lucas got wise. She started cooking more, turning down invitations for nights out, and started setting aside as much as 20 or 30 percent of some paychecks.

Over time, she saved up enough to make a big jump.

"I decided I needed to leave my job to really pursue my blog and my [second] book to the best of my ability, and because I had a nice savings I was able to do that," says Lucas.

Though, she admits, the money from her first book helped a little bit, too.

Marketplace Money for Friday, May 02, 2014Family Money A Belle in Brooklyn: The Go-to Girl for Advice on Living Your Best Single Life Author: Demetria L Lucas Publisher: Atria Books () Binding: Hardcover, pages by Nick WhitePodcast Title Family finance lessons: Demetria Lucas listens to her mother ... eventually Story Type InterviewSyndication SlackerSoundcloudStitcherSwellPMPApp Respond No

Family finance lessons: Demetria Lucas listens to her mother ... eventually

Thu, 2014-05-01 16:40

The most important lessons we learn about money don’t come from our accountants or our radios. They come from our family.

Each week, we invite someone to tell us about the money tips they inherited from the people they grew up with.

Our guest this week is Demetria Lucas. She's the author of A Belle In Brooklyn and owns a blog of the same name. You might also recognize her from the Bravo reality series Blood, Sweat and Heels.

Demetria grew up in in a middle-class town near Washington D.C. that she says had lot of African-American professionals. 

"Sort of like a 'Leave It To Beaver' black version," says Lucas. 

Discussions about money happened early in Lucas' household. 

"My mother always taught me to put 10 percent away," says Lucas. "My dad would always talk about my grandmother. She was from Mississippi and she lived on a farm. When she passed away she had saved some ungodly sum of money and no one knew where it came from."

But when Lucas reached adulthood it took some time for her mother's lessons to take hold.

"[After] my very first paycheck, she reminded me of that 10 percent lesson. You know, I heard her and it went in one ear and out the other," says Lucas.

After about a year, though, Lucas got wise. She started cooking more, turning down invitations for nights out, and started setting aside as much as 20 or 30 percent of some paychecks.

Over time, she saved up enough to make a big jump.

"I decided I needed to leave my job to really pursue my blog and my [second] book to the best of my ability, and because I had a nice savings I was able to do that," says Lucas.

Though, she admits, the money from her first book helped a little bit, too.

The IMF gave Ukraine $17 billion. Now what?

Thu, 2014-05-01 13:49

Ukraine is getting a $17 billion International Monetary Fund loan package. Ukraine’s leadership now faces an unusual challenge: deciding how to spend the money when an important chunk of the country is under pro-Russian control.

“However they spend this money, they’re going to try to make sure they do it in a way that’s not going to entice or instigate Russian aggression,” says University of Mississippi political scientist Jeff Carter.

Some of the money will help Ukraine settle a multi-billion dollar gas bill with Russia, among other creditors. Deciding where the money goes will have political consequences that could determine the future borders of the country.

“If it doesn’t have the Eastern part of the country, the industrialized part, it loses a lot of the economic clout and wealth of the country. It also leaves itself open to further destabilization by the Russian government,” says Nicholas Burns, a former U.S. Ambassador to NATO, now a professor at Harvard University’s Kennedy School of Government. “It’s a fateful moment if we want to see an integrated Ukraine survive.”

Android Silver: Forcing manufacturers to toe Google's line

Thu, 2014-05-01 13:41

At the moment you buy an Android phone, like a Samsung Galaxy S5, Google doesn’t make a penny. The Android operating system is free to other companies. Google just wants you to use Gmail, and its search engine and look at ads.

“They get paid by those brand advertisers," says Brian Blau, research director in consumer technologies at Gartner. "That’s really how they make money from Android.”

Giving it away got Android on lots and lots of devices—it now dominates the smartphone market. But lately some of those phone manufacturers haven’t been playing along with Google’s plan. 

“Samsung has a lot of apps that would compete directly with some of the apps from Google itself,” Blau says. 

Companies like HTC and Samsung give Android extreme makeovers: their own look, feel, even services that take a bite out of Google revenue. Amazon’s Android-based devices, like the Kindle Fire, cut Google out completely. 

This, obviously, is bad for Google. 

“Without being able to monetize it, it makes it slightly pointless,” says Nick Spencer, senior practice director at ABI Research. He says Google has lost control of Android. Fourth quarter last year, he says, 50 million Android devices shipped that have no benefit to Google.  

This is why reports say Google is working on a program called Android Silver: new phones that meet its standards for design and interface, and services. They would get priority for new features and, Google hopes, put an end to all the fragmentation. 

Spencer says this could force many manufacturers to toe the Google line.  

“Certainly, the weaker brands, through competitive pressure, will have to adopt Android Silver,” he says. 

One day, though, this could drive powerful manufacturers like Samsung to adopt their own operating systems that they can control.

Boxers, briefs or radiation underwear? Silicon Tally!

Thu, 2014-05-01 13:35
Friday, May 2, 2014 - 04:00 David Ramos/Getty Images for CR7

Cristiano Ronaldo poses in front of a 19m high billboard during the global launch of the CR7 by Cristiano Ronaldo Underwear line

It's time for Silicon Tally. How well have you kept up with the week in tech news?

This week we're joined by Kara Miller, host of WGBH’s Innovation Hub. var _polldaddy = [] || _polldaddy; _polldaddy.push( { type: "iframe", auto: "1", domain: "marketplaceapm.polldaddy.com/s/", id: "silicon-tally-may-2", placeholder: "pd_1398982571" } ); (function(d,c,j){if(!document.getElementById(j)){var pd=d.createElement(c),s;pd.id=j;pd.src=('https:'==document.location.protocol)?'https://polldaddy.com/survey.js':'http://i0.poll.fm/survey.js';s=document.getElementsByTagName(c)[0];s.parentNode.insertBefore(pd,s);}}(document,'script','pd-embed')); Marketplace Tech for Friday, May 2, 2014 by Ben JohnsonPodcast Title Boxers, briefs or radiation underwear? Silicon Tally!Story Type InterviewSyndication SlackerSoundcloudStitcherSwellPMPApp Respond No

Long road for short-haul truckers

Thu, 2014-05-01 13:01

Short-haul truckers move freight around town, often to and from a port. Some complain that they have been misclassified as independent contractors, even though they are treated like employees.

“They classify us as an independent contractor, basically, to get out of paying certain taxes. They put a lot of the expense on the drivers,” says Carol Cauley, a short-haul trucker in Savannah, Georgia.

As an independent contractor, Cauley says she’s forced to pay unreasonable expenses, like the cost for tires that belong to the shipping company.

But a representative for short-haul trucking companies says truckers don’t have to work as independent contractors.

“If a driver prefers to be an employee, there is certainly companies that he or she can go work for. In fact, there is a drastic shortage of company drivers,” says Alex Cherin, executive director of the Harbor Trucking Association.

Employee truckers earn less money he says, but they have more steady work.

Cherin says his organization will assist state regulators in weeding out companies that intentionally misclassify their truckers as independent contractors.

Why Domino's is replacing pizza crust with chicken

Thu, 2014-05-01 11:56

Not too long ago, we mentioned that chicken was becoming a hot commodity because of rising beef and pork prices--so hot, in fact, that some restaurants are beginning to use them in just about anything they can think of.

"You can do a lot with it and flavor it in a lot of different ways," says Roxanne Swamba, pizza chef for Domino's Pizza. "So it's becoming more popular than it has been."

Thus, Domino's "Specialty Chicken" was born. Not the fried chicken-crust that some had initially thought, the dish consists of 12 bite-sized pieces of chicken, served with a blend of sauces and pizza toppings.

"You can top pizza however you like, but sometimes you don't want pizza," Swamba said. "This happened to be an idea that we tossed around and we started making for lunch a lot, and I came up with a variety of flavors."

Despite the high demand for chicken, Swamba says there haven't been any problems with obtaining the necessary ingredients.

"We work very closely with our supply chain center and find out what the availability is going to be for the year when we plan on launching it," she says. "We knew we could do it."

Looking for venture capital? Be careful what you wish for

Thu, 2014-05-01 11:08

The amount of venture capital money being pumped into start-ups is at its highest level since 2001, but it’s still nowhere near what it was like at the heyday of the tech bubble era. Raising money is hard to begin with, and it’s the lifeblood of a new business. On the other hand, you also have to be careful what you wish for. If you are one of the lucky companies who makes it to the level where big investors want a piece of you, then...you have a whole new problem to think about.

Wendy Nguyen and a couple of friends founded HealthyOut, an online and mobile app to help people find healthy restaurant food. As Nguyen puts it: “We want to get people healthy restaurant food in two clicks, to make that choice really convenient and easy to do every day."

Two years ago, Nguyen went from investor to investor trying to get money to make her dream happen. 

“Everyone says ‘maybe’ and ‘comeback later’ ... which is actually a 'no'.”

Eventually, Nguyen and her friends boot strapped, a.k.a. they used their savings and built the app themselves. It did well – very well, in fact – and investors started to notice. HealthyOut ended up raising $1.2 million.

While this was the break Nguyen desperately needed, for many businesses, it’s a moment that is fraught with tough decisions. 

“Venture capitalists exist ultimately for one reason – to make money for their limited partners,” explains Josh Lerner, professor at Harvard Business School. “The only way to make money is to exit their investments.” 

That translates to selling their stake and/or the company as a whole. So that could mean a startup company goes public one day. It could also mean the company gets packaged up and sold to Google or Yahoo, who may or may not actually do anything with it. It could mean changing a company’s target market or even fundamental things about what the company does. If the startup and the major investor aren’t on the same page with all of this, it’s not good. 

“The greatest fear is you pick wrong. And that venture firm, because they now have a large say in your company, directs your company in a direction you don’t think is right,” says Matthew Amsden, who helped start Proof Pilot, an online tool to launch and manage clinical trials and longitudinal research studies. 

Amsden is quick to add that any startup should be so lucky as to have the luxury of choice. 

All the same, getting money means giving up control, so when Amsden talks with investors, he tells them, “It’s dating, frankly. Getting investment is like dating. You’re looking for compatibility.”

Which means finding an investor with expertise in your field, whom you can trust as a mentor.

“It’s not only about the check,” says Amsden. “What else can that particular investor bring to the table?”

 And, just like in romantic dating, matches don't always go well.  Helena Plater-Zyberk is the CEO of SimpleTherapy, a company that designs online exercise therapy for people who can’t get to a clinic. She recalls instances where “I’ve been asked within the first two minutes of meeting someone what my endgame is.” In other instances she’s been “very pointedly told that the conversation doesn’t need to continue unless I have an exit strategy up front -- before they even understand what it is we’re trying to achieve and who we’re trying to help.”

Of course, sometimes the company founder really does need to rethink things. Like in relationships, they often have to ask, “am I the crazy one?”

Katie Rae, a veteran entrepreneur and chair of TechStars Boston as well as manager of a small venture seed fund called Project 11, says founders who haven’t gained a certain amount of perspective are likely to end up facing challenges getting the right funder. “Lots of teams hold back what they’re working on for a long time before showing people,” she says. “In my experience, the best founders don’t share with the public, but they do share with knowledgeable people their point of view, how they’re thinking, show them the product, and get active feedback.” 

“If you don’t talk to smart people, that’s a very tough mistake – it slows you down, you don’t learn as much, you don’t get as much feedback from smart people who would send you in a slightly different and better direction. They sometimes get funded by the wrong people with a very strong point of view opposite from your point of view.” 

In other cases, a startup’s founder may not have the background for approaching investors. That was the case for Helena Plater-Zyberk’s company, Simple Thearapy. She’s serves as the CEO, but she wasn’t the original CEO.

“Our service wasn’t conceived as a money making endeavor,” she says. “Our team of doctors created these therapeutic exercises as a result of patient need.” 

In other words, the doctors were thinking about patients, not how to grow the business. Which is why Plater-Zyberk was brought in as the new CEO. “We want to be able to balance that type of value system with the needs of an investor who is looking for a return in a set time frame; It’s a difficult conversation to have," she says.

It’s a conversation that Wendy Nguyen, with the Healthy Out App, had to have as well. Before landing the big the $1.2 million investment, she had to answer big questions for investors with big expectations. “Are you guys going to be a $50 million company in five years? Because that’s the type of return that a venture capitalist is looking for,” says Nguyen. If you’re not prepared to go big, then go home. Or at least to a smaller investor than a venture capitalist.

Nguyen thought about it, and considered the fact that the money would cost her a degree of control over her company. She trusted her funders, “and so we said...let’s do this!”

Nguyen and colleagues in New York with former Mayor Michael Bloomberg.

Courtesy of Wendy Nguyen

HealthyOut is expanding its model, branching out to help people design personal detox diets now, and is trying to bring its ordering service beyond New York City.

 As with all startups, it’s not just about the idea, and it’s never just about the money – it’s about where you get the money, and what you do with it.

Time to mourn the minibar

Thu, 2014-05-01 11:00
Friday, May 2, 2014 - 05:58 Wikimedia Commons

Good-bye, midnight Snickers bar. Adios, Pringles cylinder. Sayonara, bourbon nightcap.

They may never go away completely, but the hotel minibar can certainly be considered a rare and endangered species.

Why are minibars vanishing?

"In Las Vegas, a little bottle of vodka can cost you more than $14. And in Washington D.C., if you want a bag of peanuts, be prepared to pay over $7," says Kevin Carter with the travel planning website TripAdvisor.

A recent TripAdvisor survey found just 7 percent of U.S. travelers even remotely care about a minibar in the room. Not surprisingly, PKF Hospitality found that between 2007–2012 minibar revenue fell by nearly 30 percent.

Disappearing minibars is just one of several changes in modern-day U.S. hotel rooms. Woodworth says what hotels lose in certain antiquated amenities, companies hope to make up in room rates.

"If I can get you to pay an extra dollar for your room tonight, about 90 cents of that is pure profit," says Woodworth. "The energies and management focus has been really optimizing room revenues."

TripAdvisor found travelers want a lot of stuff that starts with the word "free": Free wifi. Free breakfast. Free parking.

Oh, and we want outlets – lots and lots of electrical outlets.     

5 more "amenities" disappearing from your hotel room

PKF Hospitality President Mark Woodworth says hotels are recalculating what makes them money. Here are five services on the chopping block: 

1. Dry cleaning.

There will still be ironing boards, but you'll have to push them yourself.

Hulton Archive/Getty Images

2. Telephone services. 

Perhaps wake up calls will be rerouted to cell phones.

Keystone/Hulton Archive/Getty Images

3. Renting movies on hotel TVs. 

Enough guests prefer their own screens. 

Jimmy Sime/Hulton Archive/Getty Images

4. Room size.

The smaller the room, the bigger the hotel's profit. And the closer you are to your cell phone, which is what you care about anyway. 

Hulton Archive/Getty Images

5. Coffee makers.

For now, the coffee makers are still there -- but you have to pay for anything you brew

Hulton Archive/Getty Images Marketplace Morning Report for Friday May 2, 2014Why do luxury hotels charge for Wi-Fi, but cheap hotels don't?Hotels seek added revenue in service feesHow does a $25 room service burger not make money?by Dan GorensteinPodcast Title Time to mourn the minibarStory Type News StorySyndication SlackerSoundcloudStitcherSwellPMPApp Respond No

Elon Musk, Tesla plan 'Gigafactory' site

Thu, 2014-05-01 10:54
Friday, May 2, 2014 - 05:48 Guus Schoonewille/AFP/Getty Images

A view of a fully electric Tesla car on an assembly line at the new Tesla Motors car factory in the Netherlands during the opening and launch of the new factory, on August 22, 2013.

 

Nevada, New Mexico, Texas, or Arizona? There can be only one home for the Gigafactory

Or possibly two... if two are built.

The Gigafactory is a massive battery plant, built by the electric car maker Tesla, that will take up to 1,000 acres and will include its own on-site wind and solar energy plants. Tesla has narrowed down its choice of location to four states, but rather than pick one now, it will prepare to build in two or three (or potentially all four), CEO Elon Musk announced on Wednesday.

Replicating engineering work, design work, site selection, connection to power and utilities, and permitting is a costly strategy, says Ben Kallo, senior equity analyst with Robert W. Baird.

"You can talk about millions and even tens of millions [of dollars] to do this" for just one extra site, according to Kallo.

But the cost of not doing it could be much greater. Tesla plans to have 500,000 electric cars on the road by 2020. This would include more of its Model S sedans, a new SUV, and a more affordable car (at $35,000, it might be described as 'less unaffordable'). Tesla also plans to expand into electricity storage to the wind and solar industries, says Kallo. And the gigafactory is the foundation of that plan. A delay could damage Tesla's competitive advantage as a first mover, and could damage investor confidence. Aside from its own share holders, Tesla needs investors to finance the $5 billion behemoth project.

Jakki Mohr teaches marketing at the University of Montana and has followed Tesla closely. She says having multiple possibilities to site the gigafactory is a savvy negotiating move.

"States give huge incentives to get this kind of business in their regions," says Mohr, and this is a way of "playing one state against another to receive better incentives to locate there."

There's also one critical but underappreciated concession Tesla wants, according to Charles Hill, professor of management at the University of Washington's Foster School of Business. Tesla wants to sell cars itself, not through dealerships.

"It may be that Tesla picks a state that's initially hostile to that – Texas would be an example – as a way of getting leverage for them to change that policy as well," says Hill.

"The political issue around whether Tesla should have a direct sales model as opposed to selling through dealers is almost as big of an issue as the battery plant, and I don't think the two are totally separable."

The more back up plans you have, the more arms you can twist.

Marketplace Morning Report for Friday May 2, 2014Marketplace Tech for Friday, May 2, 2014by Sabri Ben-AchourPodcast Title Elon Musk, Tesla plan 'Gigafactory' siteStory Type News StorySyndication SlackerSoundcloudStitcherSwellPMPApp Respond No

Funding an album in a jazz-improv kind of way

Thu, 2014-05-01 09:07

Over the years on Marketplace we've tried to cajole artists to talk business. It's not easy -- many are more comfortable talking about inspiration and passion than getting their hands dirty with money.

But if you want to bring a creative project to fruition, there are money choices to be made. For instance, jazz musician Lauren Kinhan decided to go online to crowdsource the money for her newly released solo album called "Circle in a Square."

Some people might use a spreadsheet to set their fundraising goal when crowdsourcing cash. Lauren Kinhan tells Marketplace Morning Report host David Brancaccio that she did it in a more jazz-improv kind of a way. 

The changing face of the money transfer business

Thu, 2014-05-01 09:00

Western Union, by far the biggest player in the money transfer business, has new competition from Walmart, which recently added a store-to-store money transfer service in the U.S. Both companies know that to grow in this industry, you have to keep adding new customers – which means the face of the money transfer business is changing a bit.

To understand how the sector is trying to attract customers one by one, meet two guys who recently sent money through Western Union. Customer No. 1 is Carlos Galvez.

“Well, I just sent $370 right now,” says Galvez, coming out of a small Western Union retail location in Washington.

You could call Galvez a traditional Western Union customer. He’s an immigrant who makes enough selling tamales to send money to cousins in El Salvador.

“We can’t send money every time,” says his son, Armando Menjivar, “but at least once a month, or when it comes to a big emergency.”

Now, meet Customer No. 2, who is not traditional.

Will Tjernlund, a self-described “third-generation Minnesotan. The 23-year-old buys and sells things on Amazon and eBay, and he used Western Union to send money to China.

But what’s actually different about Tjernlund’s story is where he sent the money from.

I googled Western Union to find the nearest location to me,” he says. “And the nearest location was inside a U.S. Bank.”

Over the last five years, the number of bank branches offering Western Union services has almost quadrupled, to more than 10,000 in the U.S. and Canada, according to the company. U.S. Bancorp, SunTrust Banks Inc., and Regions Financial Corp. are among its biggest partners.  

Analysts say banks used to resist this kind of partnership. Some didn’t want to advertise a branded service that wasn’t their own.

Plus: “Western Union traditionally served the underbanked and the underserved,” says analyst Wayne Johnson with Raymond James, which has investments in this sector.

But the majority of Western Union senders today are banked, according to Frank Lockridge, the vice president of strategic accounts for Western Union in the U.S. That means those customers have bank accounts, even if their relatives back home don’t.

“Some of our bank partners have realized that they’ve seen their customers getting the money out of the bank ATMs, getting the cash out of the branch, and walking next door to conduct that money transfer,” says Lockridge.

So now banks are trying both to retain their customers’ business, and draw new underserved clients into mainstream financial services.

Western Union won’t say how well the strategy of partnering with banks is paying off. But it does say people who transfer money from banks tend to send more than people in retail locations.

The bulk of the money Western Union sends is to and from foreign countries. But it does have a new domestic competitor: a service called Walmart-2-Walmart.

“It’s available at all 4,200 of Walmart branded locations,” says Daniel Eckert, Walmart U.S.’s senior vice president of services.

Eckert says simplified, inexpensive money transfer services are especially useful to people displaced from their families, like military personnel and shale oil workers.

“Even just in the first few days of Walmart-2-Walmart being up and running, our primary transaction stores were Williston, North Dakota, which is right out by the oil fields, and Killeen, Texas, which is just outside of an active duty army base,” he says.

And that’s how it goes in the money transfer business – adding customers bit by bit.

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