Hits & Misses
(Business 2.0) – [HIT] Leggo my shelf space! Former Kellogg's CEO Carlos Gutierrez was a business legend by the time he left the company last year to join the Bush administration. That gave new CEO Jim Jenness a tough act to follow, but the former adman played to his strengths. Look no further than toaster waffles, one of the foodmaker's best-selling categories. Eggo products are set to reach $500 million in sales this year, thanks to a win-win proposition that the brand's managers extended to grocers:Feature only Eggo's and your cheaper, private-label store brands in the breakfast aisle and we'll both watch our sales soar. Kellogg's boosted Eggo TV advertising by 25 percent and filled the shelves with two dozen new varieties, including Star Wars tie-in flavors. Sure enough, sales of both Eggo and storebrand waffles rose about 11 percent over last year, according to Frozen Food Age.
[MISS] Oh so bittersweet. Wall Street is obsessed with "league tables" that show who's on top in various financial maneuvers. In a seemingly sweet victory, Goldman Sachs dethroned Morgan Stanley as the top underwriter of IPOs this year, thanks in part to its $885 million deal to take fellow investment bank Lazard public. But success came at a price: Lazard shares dropped after they began trading in May, forcing Goldman to buy shares back from its customers at the original price. The $15 million trading loss shaved 60 percent off the $25 million fee Goldman earned from the offering.
[HIT] Name that tune? Name your price. Economists are baffled by the willingness of cellphone customers to pay two bucks for the ringtone of a song they can download for a dollar. Here's another puzzler:How was Rocket Mobile able to persuade more than 1 million users to pay 99 cents each just to identify a song based on a short recording made by a cell phone? Rocket CEO Wayne Yurtin has an explanation for the success of his company's Song IDentity application, available on Verizon Wireless and Alltel: "We thought it was going to be a music utility, but it's becoming clear to us that it's an entertainment application. People like to play name that tune."
[HIT] A business plan with a magnetic personality. Kids love to stick things on the fridge, but why limit magnets to the kitchen? As the home-improvement trend expands to kids'bedrooms, parents are increasingly using magnetic paint to create wall-to-wall play areas. Joe and Sandra Deeds, who had been slugging away for years selling Magnamagic paint, were perfectly situated to capitalize on the opportunity. Sales limped along at about $15,000 a year until the couple bought search ads on Google for the term "magnetic paint." A producer from ABC's Extreme Makeover:Home Edition found the site and featured the paint on the show. That, in turn, led to a licensing deal with Rust-Oleum, which will begin shipping a paint based on the Deedses'formula to big-box retailers like Lowe's and Home Depot this summer. The mom-and-pop paint shop now expects revenue to hit $1 million by the end of the year.
[MISS] Must-sell TV. NBC has long commanded premium ad prices for its wealthy audience and high ratings. But with those ratings collapsing, the peacock network stayed a little too proud for too long. As of Memorial Day, by which time most "up-front"deals for the fall season are usually locked in, NBC had yet to sell a single ad, apparently as the result of its reluctance to discount prices to reflect its smaller audience. Rival ABC, meanwhile, had sold out its entire inventory, thanks to modest price increases despite last year's ratings surge.
[MISS] So that's what he meant by "crash into me." For years, nothing could drive away fans of the Dave Matthews Band's frat-rock sound. But some believe the college crowd reacted poorly to the buggy digital-rights management software the band's label, RCA, installed on its latest CD:Several buyers reported that the disc crashed their computers when they tried to play it. Stand Up debuted with first-week sales of 465,000, well below the performance of 2001's Everyday, and then saw sales drop by an unusually steep 66 percent in its second week.