You Have Carbonite Sickness, But Your Sight Will Return Shortly – or, why Limbaugh didn’t really kill Carbonite, and the Left hasn’t really killed Limbaugh

Over at Not a Potted Plant, Will has been commenting one of the newer internet political memes: Carbonite. Carbonite is a publicly traded stock company that asked it’s advertising agency to pull ads from the Rush Limbaugh show after the Slut-gate. (Hey! I just coined a “-gate!” I am finally a real blogger.) The story that Carbonite is being brought down for daring to cross Limbaugh Nation has been widely discussed over the past week by Righty pundits. In the meanwhile, Lefty-pundits have been hailing how advertisers, taking their dollars elsewhere, are about to hammer the death nail in Limbaugh’s storied radio career. Both of these memes have one thing in common, which is a common truth they each shed light on:

Those those that focus on political punditry don’t really understand the business of business that they often find themselves having to comment on.

 Let’s start with the Carbonite meme. (By the way, I want to take care to note that in Will’s post he was discussing the ethics of boycotting in general, and was in no way making any claims about the veracity of this meme.) According to the right wing, the story goes like this:

Carbonite is a financially strong file-backup service company, going along it’s merry way. Then, after the Fluke hubbub, Carbnonite’s founder and CEO reveals his company to be a socialist Trojan Horse and pulls advertising from the Limbaugh show for purely political reasons. The People, however, are wise and see right through this parlor trick, and because of this – to quote Pajamas Media – “Carbonite’s stock price has reportedly fallen to a near 52 week low.” If this meme is true, then the right’s claim that the vast population of the country really are with them, fighting against a small elitist minority, might have some merit. Criticizing conservatives will not just be an act that can coast you your RNC chair, it can bring down entire blue chip corporations. So how true is this meme? Let’s take a look.

It is true that Carbonite’s CEO has given money to predominately democratic candidates, according to public records. This may be because he is liberal; but it may also be because Carbonite is based in Boston, MA, a notoriously Democrat stronghold. Most companies that are located in an entrenched party stronghold usually give money to the party in perpetual charge. You might well have given a $50 check to Rick Santorum because you were excited about what he had to say on FOX News; corporations and those that run then give money to candidates for entirely different reasons. However, since we can’t know what really goes on in the head of Carbonite’s executive staff, lets’ assume for the sake of argument that the Right is correct; this was a political move pure and simple. If so, this surely shows that the collapsing stock price is an indicator that the country is behind conservatives and right wing radio, yes?

Well, no.

PJ Media was actually being truthful in reporting that Carbonite’s stock is at a year-long low. However, either out of a profound ignorance of the most rudimentary rules of how a publicly traded stock works, a purposeful slight of hand, or a complete lack of access to Google, PJM’s connecting the stock fall to the Limbaugh issue is misleading – if not an outright lie. Here’s a look at what Carbonite’s stock has done over this 52 week period, as of today:

You Have Carbonite Sickness, But Your Sight Will Return Shortly - or, why Limbaugh didn't really kill Carbonite, and the Left hasn't really killed Limbaugh

So, was the decision to pull advertising on Limbaugh a good idea for Carbonite? As much as bloggers will hate the answer, the truth is we’ll never really know.

Ignoring the point that the stock has not even been available for a year… If you look at the history of the price since August, when it was made available, you will see that the stock opened at $10 a share, immediately skyrocketed to twice that the day after, and has been in constant free fall ever since. This “herding toward” and subsequent “buyer remorse” right after initial offering is actually not uncommon in tech stocks, where the assumption is that you have to invest in hundreds of failed ventures to get on the ground floor on the next Amazon or Google. What the stock price shows is business as usual for new tech stocks. However, even if you didn’t know that the quickest glance at the stock history will tell you that the Fluke controversy that took place over the past few weeks is not the cause of it’s “52-week low.” In fact, the irony is that despite the fact that the stock is quite anemic and below it’s initial offering price, it has actually increased in value slightly over the past week. (And no, left-wing bloggers, this increase will have nothing to do with the Limbaugh boycott either.)

So, was the decision to pull advertising on Limbaugh a good idea for Carbonite? As much as bloggers will hate the answer, the truth is we’ll never really know. We don’t know what the demo- or psyco-graphics of Carbonite’s customer base was, or if they are attempting to rebuild them into something new. And because advertising is not an exact science, and neither is the exchange, Carbonite might not ever really know either. What we do know is that this idea that the ditto heads have killed a publicly traded company is a bloggy wet dream, based more on what some pundits wished their influence on Wall Street might be instead of the reality that Wall Street could give a crap.

The corresponding left wing meme, that through its efforts it has finally brought about the beginning of the end to right wing talk radio, is equally a fantasy. Many advertisers have indeed pulled their dollars – temporarily. But they’ll be back. Rush Limbaugh is many things, but chief among them is a very shrewd businessman. His comments about Fluke were the odd crossing of a moment in time when he was being overly offensive, and a moment in time when everyone was paying attention. Those moments coincide far more rarely in talk radio than you might think.

In a few months time, Arbitron will come out with 2012’s first quarter ratings. It is possible Limbaugh’s numbers will be down somewhat. If so, Limbaugh will look to assure buyers that he knows how to right his ship and get the ratings back to where they need to be, and until then he will charge less for his time. More likely, because of this hubbub (not to mention the crazy-ass GOP primary) the ratings will be up over this time last year, and one by one – now out of the spotlight – most or all of his advertisers will return, and new ones will join them.

People who talk a lot about politics assume that political-themed media is run with the same decision making mindset as political campaigns, but they are wrong. Given the right number of ears of the right kinds of demographics, McDonalds, Ford and even Carbonite will pay for access to your listeners. It’s not an endorsement – hell, they’ll be more than happy to buy time on Rachel Maddow or Ed Schultz during the exact same hours if they can provide value as well.

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34 thoughts on “You Have Carbonite Sickness, But Your Sight Will Return Shortly – or, why Limbaugh didn’t really kill Carbonite, and the Left hasn’t really killed Limbaugh

  1. I think you were reading into something in that PJ Media article that you linked that just isn’t there.  That article didn’t try to make the case that the stock price was a result, either directly or indirectly of the decision to drop Limbaugh.  Nor do I think there is an actual right meme about Carbonite being crushed under ditto-head boot heels.

    What the conservative blogosphere has been on fire about is using their own right to boycott companies that they view as hostile to them.  Carbonite is only one of those companies.  HBO is another.

    Carbonite is a company that has spread it’s advertising dollars pretty evenly among left and right talk radio.  For whatever reason, they seem to view talk radio audiences as a natural for their services.  But regardless of the ideological leanings of the company’s CEO, their decision to drop Limbaugh was a panicked reaction to the bad publicity Limbaugh generated, not (at least in my view) an ideological coupe de grace.  Otherwise they wouldn’t have been advertising on Limbaugh in the first place.

    I think both Limbaugh and Carbonite will ride out of this just fine.  Although they have had a mutually profitable relationship over the years, they do have alternatives for the other.

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  2. Yep definitly overreading on both sides of the aisle. That said this event does represent an unusual blow to the normally undeflatable Limbaugh so I wouldn’t begrudge the left their enjoyment of this unusual event.

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    • If/when Carbonite crashes & burns, Don’t Muck with Rush will be a viable meme.  It’s premature to dismiss the thesis as premature:  It could be that Rush was helping keep the doomed company afloat.   Rush was closely involved with Carbonite, giving it his personal due-diligenced recommendation.  He read the ads [Paul Harvey-style] and put his name on the line endorsing it.

      It wasn’t merely Carbonite buying time on the Limbaugh show for their self-produced ads like most ad arrangements.  It wasn’t just pulling or suspending ads like that.

      It was the lefty CEO, David Friend, after personally roping Limbaugh in,

      http://mixergy.com/david-friend-carbonite-interview/

      personally denouncing him.

      Perhaps David Friend will enlist more sympathetic lefties than he loses righties outraged at his perfidy, but I doubt it.    I was considering Carbonite meself, but that little weasel isn’t getting a dime from me.  And as we all know from Jonathan Haidt’s upcoming book, lefties don’t value loyalty very highly anyway, so I would expect any added support from the left to be a dead-cat bounce at best.

      If I were a Carbonite shareholder, I’d want David Friend’s scalp immediately.  I don’t dispute that Carbonite’s stock price was likely in a death spiral anyway as Mr. Kelly’s graph suggests, but it appears far more likely now to become worth nothing.  Zero, nada, crash and burn, use the stock certificates for toilet paper.

      Rightie tax prof blogger William Jacobson has been all over this one—there are far more elements than the newly-minted center-left Conventional Wisdom is keeping track of.

      http://legalinsurrection.com/2012/03/carbonite-and-howard-stern/

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        • It’s been Haidt’s schtick for a while now. Leftists value care and fairness, conservatives value loyalty, purity, and authority. Relatively, anyway. The paper I saw showed a difference between extreme leftists and extreme conservatives of no more than one point on a six-point scale for the perceived value of any of the five foundations.

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          • That said, the questionnaire Haidt used in his research appears to introduce bias by asking questions about issues that appeal only to left-wing or conservative sensibilities. For example, two of the six questions regarding loyalty were about loyalty to one’s country, with no corresponding questions aimed at left-wing loyalties (e.g., crossing a picket line). One of the care/harm questions was about how bad it is to harm a defenseless animal, but there was no question about how bad it is to harm a defenseless fetus.

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          • I respect Haidt because he’s been somewhat of a pioneer in moral psychology, even if his own research hasn’t carried it very far. His work in political psychology, however, is pretty much as bad as most of the other research in political psychology. The only people who you see using it to draw the sorts of conclusions it was used to draw in this thread are the people for whom the research itself does not matter, only the fact that it conforms to their preexisting prejudices.

            By the way, a difference of 1 point on a Likert scale is every social psychologists dream.

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      • Rush was closely involved with Carbonite, giving it his personal due-diligenced recommendation.  He read the ads [Paul Harvey-style] and put his name on the line endorsing it.

        Carbonite used to advertise on Slate podcasts – that’s how they did it too, the people on the podcast read some stuff about the product the company offered (I forgot what it’s about, I wasn’t really paying attention). I doubt it’s a “personal due-diligenced recommendation”, maybe it’s just how this particul;ar company does its ads, no separate advertisement done by the company played during the program,  just whoever running the program reading some stuff.

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        • A lot of talk radio iuses this approach. Some guys are pretty convincing with it, making it seem like a personal plea and less of an advertisement… Until you hear the exact same wording from a different personality. It is what it is… Advertising. Nothing more, nothing less.

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          • Yup, the Slate podcasters do this too, after reading what they had to read, they’d talk about personally using the product, how awesome it was bla bla bla. But come on, everyody knows it’s just business and not really a personal recommendation.

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            • Carbonite’s CEO said that they showed Limbaugh how to use it to back stuff up.  I have no reason to doubt him (except that he’s a hypocritical backstabbing commie leftist , of course.)

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              • Mike-
                They might have indeed used it, found it worked, and chose to advertise it as a result. That doesn’t change the fac tha they clearly used canned statements, which is made clear by rhe use of repeated sayings and phrases by different on-air personalities on different shows. This latter fact mkes the former hypothesis harder to accept. But, yea, sure… It’s possible.

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  3. When I read the quote from Pajamas Media about Carbonite’s stock price, I immediately stopped reading and looked it up myself. It took about two minutes. It seemed like the obvious thing to do. It wouldn’t have occurred to me not to.

    It doesn’t say good things about our media corps that I have been conditioned to do this.

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  4. “Carbonite is a financially strong file-backup service company, going along it’s merry way …

    WRONG!

    Here are some SEC statistics about Carbonite, and some grim conclusions.

    –> In a nutshell, Carbonite was doomed long before it left Limbaugh.

    THE CARBONITE ‘TITANIC’

    This dot-com disaster was doomed well before Rush Limbaugh’s dust-up with Sandra (pay-for-my-birth-control) Fluke.

    Carbonite’s first public Annual Report (2011) reveals a seven-year-old company steaming ahead into insolvency.

    NASDAQ:CARB reports that it is $100 million in the hole, burning $2 million per month, and that there is no end in sight to its losses!

    “We experienced net losses of $19.2 million for 2009, $25.8 million for 2010, and $23.5 million for 2011, respectively, and have an accumulated deficit of $100.4 million as of December 31, 2011.”

    “We have not generally achieved positive cash flow from our operations or reported net income, and we do not expect to be profitable for the foreseeable future.”

    http://www.sec.gov/Archives/edgar/data/1340127/000119312512101462/d277280d10k.htm

    ‘HAIL MARY’ IPO

    Between 2005 and mid-2011, Carbonite vaporized $88 million of venture capital.

    Having only six months to live ($11 million cash in the bank), Carbonite announced a ‘Hail Mary’ IPO for a staggering $122 million – an amount that would have both covered its losses and stuffed 18 months’ worth of spending money into its near-empty piggy bank.

    http://www.sec.gov/Archives/edgar/data/1340127/000095012311049041/b86123sv1.htm

    But nobody wanted to invest, and so Carbonite wound up pocketing only $55 million of folding green stuff … and nearly half of that came ‘under the table’ from existing venture capital investors!

    The WSJ reports that there were serious insider disclosure delay issues associated with the IPO:

    “To get the deal done, online storage company Carbonite not only cut the offer price significantly, but it also sold nearly half of the new shares to existing investors.”

    “But these investors didn’t fully disclose their larger ownership stakes for weeks, meaning the level of genuine, external interest in Carbonite’s shares wasn’t nearly as high as some may have thought.”

    http://online.wsj.com/article/SB10001424052970204485304576643433842326332.html

    ‘VISIONARY’ FOUNDER DAVID FRIEND

    In Apr 2011, Carbonite’s founding CEO told an interviewer that he had personally solicited Rush Limbaugh as an advertiser!

    “How Carbonite Got Over 1 Million Paying Backup Customers – with David Friend”  http://mixergy.com/david-friend-carbonite-interview/  (29 Apr 2011)

    Friend described Rush’s due diligence and excitement about Carbonite:

    • “Rush Limbaugh will not advertise any product.”
    • “He’s spent a good deal of time trying Carbonite, thinking about it, because his reputation is on the line.”
    • “I can remember sitting with Rush, showing him how he could access all of his files on his iPhone. • “He was like, ‘Holy mackerel, that’s what I’ve always wanted.’”
    • “And then when he goes on the air … he’s genuinely excited about this product and it come throughs in the delivery.”

    Friend also described his dot-com ‘first-mover’ business plan: Carbonite as a perpetual motion “money machine!”

    • “I’m sure that Carbonite will have a big payoff.”
    • “Right now we’re, kind of, number one in the market so it’s ours to lose.”
    • “It’s not like we’re catching up and there’s some big huge company out there that’s going to step on us.”
    • “It was pretty clear that we could spend a dollar on marketing and get three or four dollars of customer value back.”
    • “So I said, ‘Holy Mackerel, we have a machine here where you can put a buck in the top turn the crack and three or four dollars comes out — I want to start shoveling money into the top of this machine as fast as I can.’”
    • “I’ve always been a good pitchman, and I love getting people on board with whatever it is that we’re doing.”
    • “I talk about things that are in the future as if they’ve already happened today.”
    • “[Entrepreneurs] don’t see the future as possible; they see the future as probable or already happened in some cases.”
    • “If you’re completely convinced that what you’re doing is going to happen then it’s very easy. You can just speak from your heart [saying]: ‘This is what’s going to happen. So let me explain to you why I see this as so inevitable.’”

    CARBONITE’S GRIM FUTURE

    Carbonite is an unlikely target for acquisition because of its $100 million “accumulated deficit” and $2 million monthly losses.

    Carbonite’s subscribers are free to migrate elsewhere without penalty – about 1,000,000 of them will have the opportunity to leave in the next 12 months. Because of the Limbaugh flap, Carbonite will almost certainly be 2012’s Biggest Loser in the online backup industry.

    When its piggy bank is empty, Carbonite must either go bankrupt or be liquidated in a fire-sale auction of its tangible assets.

    By withdrawing its ads from his talk-radio show, Carbonite has spared Rush Limbaugh the embarrassment of being associated with the collapse of a yet another grandiose “spectacular dot-com flameout.”

     

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