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QUEST MEANS BUSINESS

New Bonus Rules for European Banks Spark Fears Execs Will Leave; Chinese Dissident Wins Nobel Peace Prize

Aired December 10, 2010 - 14:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


MAX FOSTER, CNN INT'L. ANCHOR, QUEST MEANS BUSINESS: New bonus rules for Europe's banks sparks fears that top execs will take flight.

The Nobel no shows. China shows just how far its economic power has spread now.

And invincible Amazon: Why the hacktivists may be called out by cloud.

I'm Max Foster in for Richard Quest. This is QUEST MEANS BUSINESS.

Hello.

Nearly two years ago a public vitriol over bank bonuses was at its peak. In many people's eyes it was exactly this practice of big rewards for big risks that helped nearly bring down the global financial system. Now Europe is doing something about it and suddenly we're not quite so sure about these things. And on tonight's program we break down whether this really is the way to curb risky practices, or if Europe, and in particular the Euro Zone, simply has bigger things to worry about.

Well, the lines over European banking bonuses have been drawn and the aim is to cut the high risk that practices that are blamed for kicking off this financial crisis we have been caught up in. Now the Committee of the European Banking Supervisors has dictated that all bonuses must split between cash and shares. At least half of each of those must then be deferred for at least three years. That means bankers might only see a quarter, would you believe, of their bonuses as cash up front. Bonuses can also be taken back if a senior manager's risky practices are deemed to have caused a loss.

Now the new bonus rules may sound tough, but Bob Parker, senior advisor at Credit Suisse Asset Management, told me that some banks are already playing by them.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Some of it is the fact that you'll have enough servers, enough bandwidth, network bandwidth to those servers. There is also mitigation methods you can take. Obviously, very technical things-

(END VIDEO CLIP)

FOSTER: Bringing you the wrong interview there. We're going to try and line up Bob Parker there for you. He has some interesting things to say about that. But in the meantime, he's not too concerned about the effect of that new bonus rules, Bob Parker, as you will be hearing in just a moment. But we asked people in London's financial district what they think about all of this.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: The real problem here will be, as I said, to have a level playing field for everybody. You seem to be imposing something on a European bank operating in a foreign country, which that foreign country's own bank wouldn't necessarily have to abide by the same rules. So, it's not a level playing field. That can therefore mean that we will be disadvantaged.

UNIDENTIFIED FEMALE: I think we need a bit more encouragement. To do right by the country not by people's pockets so I personally think it is a good thing.

UNIDENTIFIED MALE: Well, the thing is that if they get less bonus they'll get bigger salaries. So how do they earn the bigger salaries? It is a Catch-22 situation really, because you pay bonuses as a reward for excellence if you like.

(END VIDEO CLIP)

FOSTER: OK, that is the bonus story, a big topic of conversation here in the European business community over the last 24-hours. But over the last week it has been all about the euro and the Euro Zone, in particular. Now the leaders of France and Germany are calling for deeper political cooperation across the EU. Angela Merkel and Nicolas Sarkozy met in Freiberg, in Germany, today, ahead of a European debt crisis summit next week.

From Berlin CNN's Frederik Pleitgen told me about their key points.

(BEGIN VIDEOTAPE)

FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT (On camera): Really the most strong statement that we heard today, Max, out of that meeting between Angela Merkel and Nicolas Sarkozy was that Nicolas Sarkozy saying that we are not going to let the euro drop. We are going to do everything that the euro is going to stick around. That of course, is a very strong, and quite an important statement in these very difficult times for the common European currency, Max.

FOSTER: The question is how are they going to do that because as I understand it Angela Merkel doesn't want to put more money into this bailout fund. But they do want to create some sort of mechanism to show that they won't let it fail. So what actually, in practical terms, are they talking about?

PLEITGEN: No, exactly. And that is certainly something where there has been a lot of dissent so far in the European Union. I mean one of the things that is certainly not going to happen it looks like, is a common European bond, which is of course some that was proposed by Jean-Claude Juncker, the prime minister of Luxembourg, who would like to have that happen. That is not going to happen. That is something that both Sarkozy and Merkel said today.

The Germans were very, very much against that, because they, of course, felt it would mean they would have to pay more money to lend-or to borrow on international markets. One of the things that the Germans want to see is more fiscal discipline, especially by the Southern European countries and there is going to be probably more methods of sanctions to do that in the future. And you are absolutely right. The Germans and the French today said that they agreed that that fund for the European countries, for the bailouts, is not going to get any larger than it is right now. But of course that expires in 2013 anyway, Max.

FOSTER: So am I right in assuming, Fred, that nothing changed today? It is just two of the key leaders in Europe saying, we won't allow the euro to fail so don't worry about devaluing it anymore, investors. Actually it is going to be fine.

PLEITGEN: Well, yeah, I mean that is quite and important thing. I mean, you are absolutely right. Nothing really changed today, but also one of the things we have to see is that nothing really got worse today. And if you look to the past, especially with some of the statements that Angela Merkel has been given in the past. They have lead to certain uncertainty, especially for countries like Greece, for countries like Ireland, but also for countries like Spain and Portugal, where it really seemed like they didn't know whether or not she was truly committed and whether or not Germany was truly committed to the euro.

So one of the interesting things that happened today and probably one of the important things and especially leading into that important summit next week on the 16th and 17th is that both countries say they are committed. They are going to find some way to make this work and that they are on the same page. Because quite frankly, and everybody knows this, nothing is going to happen in Europe without the Germans and the French being on board, Max.

(END VIDEOTAPE)

FOSTER: Well, despite the crisis in the Euro Zone, France hasn't taken its eye off the issue of banking bonuses. And just over a week ago Richard caught up with the French Finance Minister Christine Lagarde in Paris. And he asked her how she would react to another season of big bonuses in this age of austerity.

(BEGIN VIDEO CLIP)

CHRISTINE LAGARDE, FINANCE MINISTER, FRANCE: I think the bankers better be careful when they attribute bonuses comes January.

RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS: Is that a threat?

LAGARDE: It's not a threat. It is just a call for a sense of public interest, which I know some banks share. And you know, there are rules that have been put in place and they need to be respected.

(END VIDEO CLIP)

FOSTER: Well, the new bonus rules may sound tough but Bob Parker, senior advisor at Credit Suisse Asset Management told me some banks are already playing by them.

(BEGIN VIDEOTAPE)

BOB PARKER, SENIOR ADVISOR, CREDIT SUISSE ASSET MANAGEMENT: I think if you look at most banks over the last few years, really over the last three to four years, the whole bonus regime has changed. The norm now is that bonuses are paid out over a much longer period, typically three to five years.

Secondly a large component of the bonuses are actually paid out in the form of equity, or something which is similar to equity, that is to say, not cash. And also, typically, many bonus schemes, now, have a claw back arrangement. Whereby if you get paid a bonus today, it pays out over three to five years, but if the business deteriorates then you can actually get a debit to that bonus, let's say in three year's time.

Now these proposals that have come out today or this agreement from the European Union actually is consistent with those three proposals-

FOSTER: So no great change under these new rules.

PARKER: I would argue that it confirms what is already going on. And let's not forget that actually, particularly the investment banking industry, has actually had poorer results this year, relative to last year.

FOSTER: So bonuses will be less anyway?

PARKER: So, as a result it is coming out at a time when actually bonuses probably, for the industry as a whole, is going to be lower this year than last year.

FOSTER: Do the changes that you have been talking about, which have already taken place, predate the financial crisis?

PARKER: For many the answer is you can't generalize. For many organizations they were operating schemes like this going back, 10, 20 years. But you wouldn't say that for all organizations. I think now you've got a situation where all financial services organizations will be implementing the scheme.

FOSTER: OK, but it wouldn't have made a huge amount of difference to the financial crisis if the scheme had been in place before.

PARKER: Well, I think let's not forget-

FOSTER: Is that what you're suggesting?

PARKER: That is definitely what I'm suggesting, let's not forget that one of the casualties of the financial crisis, Lehman Brothers, their people actually operated exactly this scheme.

FOSTER: OK, the other big talking point, of course, within your business, is what is going on in Europe right now. We have the French and the German leaders out again today, throwing their support behind the euro. How do you think this is going to play out now, going into next year? Because it feels as though those politicians are treading feet with the euro, but it is the markets, as we have seen, that are defining the issue really?

PARKER: They won't let the euro fail. And I think they are actually determined that the euro project remains on track. But if you have countries like Greece, which cannot address its budget problem and it has got 300 billion euro of external debt, then you are going to face a situation where you won't have a Greek default, legally, but there will be a restructuring of Greek debt, which will involve a write down to investors. And therefore, the assumption in the capital markets is that for those weaker countries, if they don't address their problems, there will be investor write downs.

FOSTER: And they will be out the euro, that's probably the way of it, isn't it?

PARKER: I think you are going to see bond market write downs, but it is very difficult for any country to leave the euro. If you leave the euro, you have a major problem serving your debt, which is in euro. You have a major administrative problem introducing a new currency. And I think that it is easier to join the euro. I think it is nigh on impossible to leave the euro.

(END VIDEOTAPE)

FOSTER: Bob Parker speaking to me, eventually, there. Apologies for the problems we had there.

Well, banks were among the poorer performers on European stock markets today, but all things considered it was a fairly sedate session. Not much direction across those markets but all four indices closed up from where they finished last week. Santander and Standard Charter were both down by more than 2 percent. Carmakers Volkswagen and BMW were the top performers on the German DAX.

Now, the allegations keep coming. Now the leaks of diplomatic cables put bug pharma under the spotlight. We'll talk about the latest Wiki revelations, in just a moment. Stay with CNN.

(COMMERCIAL BREAK)

FOSTER: More companies are feeling the heat from the accusations released by Wikileaks. This time Pfizer's alleged activities in Nigeria have been put to-put under the spotlight. Leaked U.S. diplomatic cables published in the British newspaper, "The Guardian", claim the pharmaceutical company hired private investigators to dig up dirt on a state attorney general back in 2009. Supposedly, Pfizer was hoping the state would drop a lawsuit against the company regarding its antibiotics. Now, Pfizer says the allegations are preposterous.

And in another leaked cable, earlier this week, Shell was accused of having infiltrated the Nigerian government. The company spokesman says the claims were absolutely untrue, false, and misleading. Let's go to Nigeria for more on this Pfizer allegation in particular. Christian Purefoy is live for us tonight in Lagos.

Christian, it is very complicated this. But what do you make of it?

CHRISTIAN PUREFOY, CNN INTERNATIONAL CORRESPONDENT: Well, two big international companies, Max, under very uneasy spotlight with these Wikileaks. Particularly Pfizer today, digging up dirt, if you like, on a former attorney general to try and force him to drop a case that was controversial in the first place.

The case, Max, briefly, was about Provan, an antibiotic, distributed to children in the north of Nigeria. The federal government, the state government said that the company didn't have parents approval to do that and it lead to children's deaths and deformities. But the case was settled in 2009. And as we have said, Pfizer says that this was settled properly and that these allegations are preposterous.

And as to Shell, you know, another big international company working in Nigeria, saying that they have seconded people to all the relevant ministries and that they have access to everything that is going on in those ministries. Really quite, as I said, uneasy questions to be answered there, Max.

FOSTER: Yes, and we need to remember, of course, these documents aren't policy. They are just diplomatic cables. But what are people making of it here. Is it making the headlines? Are people talking about it? Are they shocked by it?

PUREFOY: People aren't really necessarily shocked by it. If anything this is confirming if you like, what people already believe in Nigeria. As you said, whether they are true or not, these are just diplomatic cables and both Pfizer and Shell have said that this is, you know, not true.

But Nigeria is a difficult place to work for-work in, for any international company. I mean, the man we are talking about with Pfizer, the former attorney general, in another cable, Max, he was described as charging $20 million to sign a contract; $2 million on the day, $18 million afterwards. We have been trying to reach him and he's on medical treatment in India.

The other one, Shell, they are operating one of the most violent dangerous situations in the Niger Delta, with kidnappings, attacks on all the pipelines. And since the new Sub-Saharan Africa manager has come in there has been three oil ministers. And a fourth one probably in January and very controversial elections coming up, Max. So it is not easy to operate in, but does that make this right, if it is happening? I'm not the one to say, Max.

FOSTER: Christian in Lagos. Thank you very much indeed for that.

Now, the winner of the Nobel Peace Prize was not there to receive it. And after objections by China, neither were more than 15 countries. The latest example of Beijing wielding its political and economic power? Join us after the break when we investigate.

(COMMERCIAL BREAK)

FOSTER: Now more than 15 countries failed to show up at today's Nobel Peace Prize ceremony in Oslo. A prize won by the Chinese dissident Liu Xiaobo. Now Liu is a professor of literature and he was represented at the ceremony by an empty chair. He is currently serving an 11-year prison sentence for what Beijing calls inciting subversion of state power. China objected to Liu receiving the prize. Claiming the award was a Western plot. And there is a strong suspicion that it actively encouraged other countries not to attend.

So, is this a case of China flexing its political muscle as well its economic power? Well, that is a question I put to CNN's Stan Grant, who is in Beijing.

(BEGIN VIDEO CLIP)

STAN GRANT, CNN SENIOR INTERNATIONAL CORRESPONDENT: Certainly China has been warning, Max, of consequences for any country that supports the awarding of the Nobel Peace Prize to Liu Xiaobo. And it has actually backed up those words with actions when it comes to Norway canceling free trade talks that were meant to go ahead. So, yes, it has not been beyond using its economic muscle of persuasion to try to get countries to not go, but look at the countries that didn't attend, or said they weren't going to send representatives.

The likes of Russia, Sudan, Iran, Vietnam, these countries all had significant ties to China. And significant trade relations with China, but then again, so does most of the world these days. We know China emerging as such a powerful agent of growth, particularly during the economic downturn that was largely due to China's continuing ability to grow around 10 percent. And the stimulus money that was coming from China that stopped the world sliding into an even worse recession, but when you talk about China's influence, it's political heft, you really can't separate it from the economic might that China now wields as the world's second largest economy, Max.

FOSTER: And the Nobel chairman not being shy to face this head on, suggesting that perhaps China's political reform needs to keep up with its economic reform?

GRANT: Indeed, he was quite effusive. He congratulated China on its achievements, but he says those achievements come with great responsibility saying that in fact the fate of the world largely rests on China's shoulders and if China's political and social reform doesn't keep pace with the economic reform then the consequences could be quite great. Not just for China, but for all of us. He also said that China needs to become a lot more willing to face criticism.

You know, China has been prepared to open up economically. We've seen the China economic miracle over the last 20 years. This continued ability in the face of a world downturn to be able to grow and grow strongly. It's ability to export widely. It's lifting up hundreds of millions of people out of poverty.

But at the same time China has not been as willing to extend to its people the same political and social freedoms. Now why, well you can control an economy. You can't really control what people think. And that is what this is about with Mr. Xiaobo, that his ideas are dangerous. And that is what is causing concern for China. And that is what the Nobel Prize committee and U.S. President Barack Obama, by the way, who is also weighed in on this. That is what they are saying. China needs to show that it is maturing. Not just economically, but politically and socially, and this award is part of that process, Max.

(END VIDEOTAPE)

FOSTER: Well, trade with China has never been more important. It is, of course, the world largest exporter. But figures out today reveal the China's trade surplus, the difference between exports and imports, is falling. China, however, still exports far more than it brings in. Let's take a look at the figures. The surplus came in at $22.9 billion in November; 16 percent lower than the October figure. Exports soared 35 percent, but imports jumped almost 38 percent, a sign that efforts to promote more domestic consumption are taking hold now.

Taken together exports and imports totaled $284 billion, which is a record. Let's compare that to the United States and the trade balance there narrowed to 13 percent to $38.7 billion. That is a nine-month low. Exports rose 2.3 percent to $159 billion. That is the highest since August 2008. Now imports fell 0.5 percent to $197 billion, so a comparison there of U.S. and China for you.

We are going to focus on the U.S. right now. In particular today, we are going to Wall Street where it looks like stocks will end the week little changed. Carter Evans is at the New York Stock Exchange with the very latest for us-Carter.

CARTER EVANS, CNN FINANCIAL CORRESPONDENT: Hey, Max.

Stocks are actually picking up a little bit of speed right now. The Dow up about 27 percent, the Nasdaq up about 21. That is an almost 1 percent gain. So we are seeing some positive numbers and some positive economic news is helping out a bit.

You mentioned the U.S. trade deficit narrowing, we also got a much better than expected report on consumer sentiment, but China's latest move to cool its red hot economy is putting a lid on some of these gains and so is uncertainty about that tax cut deal in Washington. It is still not clear if Thursday's no vote, from the House of Representatives, will derail the compromise. And investors want this to be a done deal. It is definitely adding a lot of uncertainty to the markets, Max.

FOSTER: Carter, it has been a strange week, quite a quiet week. But the financial sector seems to be doing particularly well. Has that been a theme of the week?

EVANS: Yes, it has kind of been a theme of the week, and a little known theme, unless you have been following it closely. They are getting stronger these banks, as the economy is showing sings of improvement. Check out the gains this week. I think we have graphic for you, that I can show you here. For JP Morgan Chase, Bank of America, and Citigroup, this is a similar story with the regional banks, the smaller ones as well.

So what is behind the run up? Well, we spoke with some banking analysts. And basically-here is the general feeling about this. First the sector is under invested right now. And with the end of the year approaching there is portfolio rebalancing going on and with some upside potential. A lot of people saw that with Citibank on Monday.

Second, interest rates are moving modestly higher. So banks can originate loans at better yields for them. Finally, you know, it is no secret that a lot of these companies are flush with cash right now and a lot of analysts say, hey, don't be surprised to see some mergers and acquisitions a bit down the road, Max.

FOSTER: OK, Carter. Thank you very much indeed.

And whilst we are talking about the U.S., we should mention that the U.S. Treasury Secretary Tim Geithner is undergoing minor surgery today. A Treasury spokesman said that Geithner had been admitted to hospital for the removal of a kidney stone. He should be back at work on Monday, though.

When it comes to Internet security it is a jungle out there. But Amazon looks like it is riding out the cyber attack storm. We'll tell you how it managed it, after the break.

(COMMERCIAL BREAK)

FOSTER: Welcome back. I'm Max Foster. More QUEST MEANS BUSINESS in just a moment, but first a check of the headlines for you.

(NEWSBREAK)

FOSTER: The attacks came after a day of massive student protests against a proposed measure to almost triple the cap on university fees. Charles and Camilla, the Duchess of Cornwall, weren't hurt.

Lauren Gbagbo has indicated he's ready to start talks to end the West African nation's political stalemate. The U.N. has pressured Mr. Gbagbo to acknowledge the results of November's runoff election and cede power to his opponent. Both men have sworn themselves in as president.

New twists and turns in the cyber struggle over WikiLeaks. Pay site, Moneybookers, was the latest to be targeted. Its Web site was down early today after being hit by cyber attacks. In October, Julian Assange told "The Guardian" newspaper that Moneybookers faced an I thought backlash after it closed a WikiLeaks account. Anonymous -- Anonymous has led the cyber offensive, but this week, today, it went on a charm offensive, though. A new statement from them insisted they weren't hackers and that the planned attack on Amazon was only called off so people didn't feel threatened.

But these attacks are no longer in the hands of any one group. Thousands of people have downloaded DIY software that can be used to take down Web sites. Anonymous, the group, offered links on their own Web page and nearly 40,000 people have downloaded the software this week alone.

Now, despite the calls to attack Amazon on Thursday, the site never buckled. The attempt ended up being called off, in fact. And Jim can help us understand why Amazon managed to stay online. It's clever stuff.

JIM BOULDEN, CNN CORRESPONDENT: It is clever, Max.

Well, let's remember that some of the attacks have gone to corporate Web sites. That's MasterCard.com. That's Visa.com, not their payment channels. And, of course, they're not solely Web sites. Amazon, of course, and PayPal are only Web sites. So that's where they spend all their money, all their efforts. They have multiple servers. They have redundancies, so-called elasticity. They can move between these so-called clouds. They have extra server space and they can always move around to all these extra servers.

And that's because -- and they also, of course, spend all their time and money and effort to keep people from attacking these sites, these servers.

So you certainly could slow things down, but not necessarily bring down those Web sites.

Also, we have to remember that these denial of services are simply sending a lot of e-mail traffic, a lot of service traffic to a Web site. It's not actually hacking. There is a big difference. These aren't experts who are trying to go in and steal credit card numbers. They're not trying to go in there and break something. They just send a whole load of traffic and ask thousands of people to send all that traffic so you have a denial of service.

Think of this. It's like a whole bunch of people standing in front of a store. The store may be there, the door is locked, the customers can't get in because there are so many other people blocking that door. That's how one analyst put it to me.

Now, Anonymous said, of course, that they did not, in the end, go after Amazon because they said it would be in bad taste. The reason for that, they said, of course, it's Christmas and Christmas shopping. And they actually said in a -- in a press release they did not want to stop people from buying things at Christmas. What they were looking for was to have some huge amount of publicity about WikiLeaks. And, of course, they certainly got that.

But remember that Amazon is prepared for attacks at Christmas. I mean they're prepared for a huge number of people going to that Web site to buy things. And that, of course, is a big reason why Amazon was able to stop anything happening to its Web site.

FOSTER: They really were prepared.

Thank you very much, Jim.

Now, earlier today, I spoke to Kevin Haley, director of Symantec, one of the world's largest makers of security software.

And I began by asking him what firms can do when faced with a multiple attack.

(BEGIN VIDEOTAPE)

KEVIN HALEY, DIRECTOR, SYMANTEC SECURITY: Some of it is -- is the fact that you'll have enough servers, bandwidth, network bandwidth to those servers. There's also mitigation methods that you can take. You know, they're obviously very technical things. But if you've worked out a plan beforehand, then you're ready to go if -- if you have this sort of incident and you can put those things in place.

FOSTER: But what we're talking about here has been dubbed hacktivism, hasn't it?

It's much harder to plan for, though, isn't it, because there isn't a profit motivation, which makes your job of it easier, because it -- you can work out more easily what they're after. This is a more -- a general idea. You don't know quite what they're going to try to do, so it's harder to defend yourself against?

HALEY: Yes, exactly. You know, likely the -- the group behind this is -- is thinking about their next step and what do they do. And so they're on the offense and you really don't know what could happen next.

FOSTER: Yes, because they just want an impact, don't they?

HALEY: That's right. They wanted to get people's attention. And I think they've succeeded in doing that.

FOSTER: How can companies prepare against this, then, because companies, we've learned, who don't expect attacks have been attacked and they have been attacked in a -- in a quite a strange way.

So how do they defend against something for which they can't possibly predict?

HALEY: Well, as I said, you always need to have a plan in place. For smaller companies that may not have the resources, they need to talk to their Web site provider. They'll undoubtedly have ideas and together they can put together a plan for -- for mitigating this if it happens.

FOSTER: The truth is, if they come under multiple attacks or multiple request attacks, they can't really defend, can they?

They have to close the site down.

HALEY: Well, it's all how big is the attack, how many systems are involved. So far, there really haven't been a -- that many systems involved in these attacks. That would be probably the thing to be nervous about in terms of any kind of escalation. If -- if a significant number of machines, more machines got involved, then the -- the job of trying to protect from it becomes that much harder.

But so far, this has been -- it's not been a lot of machines. It's not been a particularly sophisticated attack. So if you're ready to defend against it, you -- you can do it.

FOSTER: Is there software out there that you can just sort of upload onto your servers to protect you against this sort of stuff?

HALEY: Well, there's not really commercial applications. It's really things like, again, being able to expand the bandwidth, things you could do with adding additional servers, moving your servers or -- or the Web sites to other servers, that sort of thing.

(END VIDEO TAPE)

FOSTER: Billions upon billions of shares made on Google this past year. One of the most popular, one of the big names that everyone wanted in -- wanted to Google in 2010 and why hot searches are hot business, coming up.

(COMMERCIAL BREAK)

FOSTER: Now, it's that time of year again, when we are bombarded by year end lists. Even Internet giant Google can't resist this time around. It has just unveiled its top searches of the -- of the year in its so- called Google Zeitgeist poll. Three of the names topping the list, ChatRoulette, a controversial site that randomly puts you in touch with other Internet users around the world; singing sensation, Justin Bieber and the iPad. The top searches of the year makes for great water cooler talk, of course, but they also make for an interesting business story in their own right.

Felicia Taylor is in New York with that story.

What's going on -- Felicia?

FELICIA TAYLOR, CNN CORRESPONDENT: Well, Max, of course, it all comes down to money. So take it -- take this as an example. Remember in the game of Monopoly, where Boardwalk and Park Place was always more popular and naturally more expensive, than, say, like Pennsylvania Avenue.

This is kind of a high tech version of the board game -- Justin Bieber, ChatRoulette and the iPad are not only hot search topics, they're also money makers for Google. Google can charge advertisers a lot of money for ads that include these hot search words in them.

Companies will watch out for these key words. They know their ads will get more attention with these hot button words. And that, of course, translates into higher sales.

So if you want your ad about, for instance, an iPad related product, featured prominently on Google, you could be willing to pay more for the key word, than, say, an ad that has the word "Palm Pilot" in it. I mean Palm Pilot doesn't even exist anymore.

You can also try to artfully kind of weave Justin Bieber's name into your ad and that will get people to click on your product.

We asked CNNMoney.com tech guru, David Goldman, how Google transforms hot search words into money.

(BEGIN VIDEO CLIP)

DAVID GOLDMAN, CNNMONEY.COM: So what they do is they pay Google a -- a fee to associate their ads with that word. And Google doesn't reveal how much these fees are, although we can easily assume that the better key words cost more. For Justin Bieber, you see that Toys"R"Us is selling Justin Bieber dolls and station kiss108.com has a -- has a Justin Bieber video. They bought that, too, as well as YouTube, which is a Google product, are all buying the key word -- key words like Justin Bieber in order to sell their ads, as well, and get you to click on -- on -- on those sites, too.

(END VIDEO CLIP)

TAYLOR: So it's basically all about how to monetize things on advertising sites. And Google works very closely with their advertising partners to help them craft ads with those key words that actually get people to click on and notice them.

And as CNNMoney.com's David Goldman does say, if you had like ChatRoulette, Justin Bieber or the iPad as a key word, then, naturally, you've done pretty well, because those are on the top of the list.

And by the way, some of the other top search names are Katy Perry, Twitter, Facebook and, naturally, the hit U.S. TV show, "Glee" -- Max.

FOSTER: You need to include all of them, don't you, somehow, in a really short ad. You have to be a clever writer to do that.

TAYLOR: Actually, that would be really crafty.

FOSTER: This is all about monetizing the Internet, which is what everyone is looking to do.

TAYLOR: Yes.

FOSTER: So I guess it is a business that's going to get bigger and bigger and bigger.

TAYLOR: Oh, yes. And -- and there's no question, all of this is going to get a lot more personalized. Just last Thursday, Google announced the concept of what they're calling the searchless search, where Google will know your browsing history, what you do and don't like and it will automatically start displaying Web pages without you having to input anything.

And as one blogger said, to actually make this work, you're going to pretty much have to surrender your whole life to Google, because they're going to pretty much know everything they need to know about you. So be careful what you click on.

FOSTER: Absolutely.

OK, Felicia, thank you very much, indeed, for that.

Now, we're -- while we're on the subject of technology, new details of the iPad 2 are emerging, so there's going to be a search done, I'm sure, from now. Leaks make it look like it might have two cameras, front and rear, as many had suspected and predicted. It will be slimmer, lighter and have a better resolution display. And you can check out all of the details on our Facebook page. Do go and have a look. It's pretty fascinating stuff, Facebook.com/cnnquest.

Now, Western Europe is seeing a sign of warming, thankfully, and at long last, while the East remains frosty. So bad news for them.

Well, Pedram is at the Weather Center with more on those focuses -- Pedram.

PEDRAM JAVAHERI, CNN METEOROLOGIST: Yes, Max, warming just a little bit, not too much, but just enough to make it feel just all right outside. And you take a look at Western Europe, this is the forecast for you on Saturday. And Madrid goes up to 16; Paris not bad after the snowfall they saw on Wednesday into Thursday morning. And -- and London, as well, warming up to about six or so degrees.

But look at the displaced air mass here to the east, very cold temperatures from Vienna, south, all the way to Istanbul.

How can you see that?

The high temperature comparable, to say, London, or even Glasgow, with that air mass moving to the east and a really good depiction here of the temperature trends across Western Europe from Portugal to Spain to Western France. You can see all the temperatures, again, the color contours and the yellow stretching all the way out toward the areas of eastern portions, of, say the U.K., and then eventually you run into the very cold air mass. And that's pretty much the pattern. The Arctic air mass, that's going to shift to the south. Notice some of those rain showers working their way toward portions of Turkey, where we're seeing them right now and across areas within, say, Germany. Some great video coming out of there.

We'll show you how the folks, say, around portions of Berlin and Munich, they're dealing with the conditions outside. Well, you can't get on the road with a vehicle. That's unsafe.

How about bicycles?

I think that's a little unsafe, too. But at least you can manage to get around some of the roads that have been closed because of the heavy snowfall.

And now some of the photographs coming out of areas within, say, Munich, this one right here, take a look. This shows you -- this is actually out of Hamburg, showing you some of the airplanes that are being de-iced out there because ice, of course, very dangerous if it stays on the plane when it tries to take off. That could come off and eventually run into the engine and cause a lot of problems.

But big airplanes, if you're traveling, this is what you're looking at. There are some moderate delays in your forecast -- Brussels, Dublin look OK right now for your Saturday, yes. Frankfurt, Munich, eastward out there toward, say, Copenhagen and into Zurich, going to run into some problems, perhaps, in the evening hours. But overall, the weather pattern is going to improve a little bit as that activity shifts to the east.

And this is what it looks right now over Istanbul -- some heavy rainfall in the forecast. So even the Middle East getting some rainfall, too.

So at least the storms leave Europe, Max, and work their way toward a place that needs the moisture being out there, in the Middle East.

FOSTER: OK, good stuff.

Pedram, thank you very much, indeed.

That is QUEST MEANS BUSINESS for you today.

I'm Max Foster in London.

"MARKETPLACE AFRICA" is next for you.

Thanks for watching.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ROBYN CURNOW, HOST, MARKETPLACE AFRICA: Hello and welcome to MARKETPLACE AFRICA.

We're in Kenya this week.

I'm Robyn Curnow and this is Kibera slum in Nairobi. More than a million people live here. They are, essentially, the poorest of the poor. But collectively, they have buying clout, which is why companies are looking at innovative ways to try and sell their products to Africa's low end consumers.

So In Focus this week, the scramble for Africa's mass market.

(BEGIN VIDEOTAPE)

CURNOW (voice-over): In the makeshift shops across Kenya, they're doing big business, selling small items that can be used once or twice and which cost between five and 10 schillings each. That's not even one cent. But it's how his customers like to shop, says this kiosk owner.

SAMUEL NGATH, KIOSK OWNER: Yes, I can show you. Here I've got (INAUDIBLE). You can see it here. I've got the soaps, fragracia (ph) under there and they are all arranged in medium size and small size, so you can see. I've got almost all sizes, small and big.

CURNOW: In Kenya, people shop a lot -- four or five times a day, buying mini soaps, tiny packets or butter or single packets of tea when they have the money.

NGATH: And most of the people, they don't have money. They like to buy whatever they are using that time. Then tomorrow, they will buy another one. That we have, too.

CURNOW: Kenya's poor, though, know that buying smaller products isn't necessarily cheaper.

UNIDENTIFIED MALE: So when you buy in small quantities, it's not -- it is expensive, because you are buying just a single one. But when you are buying in a bulk, it's less expensive. But because of lack of money, they can just buy like that one. UNIDENTIFIED FEMALE: Small quantities, it is expensive. A bigger quantity is cheaper.

CURNOW: Many Kenyans are forced to buy day to day because many low income earners get paid on a daily basis -- intermittent cash that comes from odd jobs or self-employment.

(on camera): Africans will be familiar with this kind of roadside stall. It's a rickety table where you can buy a loose cigarette, hand packed chips or a single sweet. Essentially, this is the business model that the big global consumer companies are copying.

(voice-over): At the Unilever headquarters in Kenya, these trucks are loaded with standard sized butter and are destined for Ugandan supermarket shelves. In Africa, the Kenyan market, along with Egypt and Nigeria, prefers smaller products or low unit packs, says Martin Kariuki, who works for Unilever.

MARTIN KARIUKI, UNILEVER: In terms of even activity (INAUDIBLE) -- from our marketing and sales we've been, yes, a lot of effort is driven toward driving our low unit packs, because these are considered almost trial packs. People will try your brand by -- by -- by investing in a small unit pack. So that the risk is less. So, yes, for us, as a business, any time we launch a product through the portfolio, we ask, we have an offering for the lower end of the -- of -- of the market. And as I said, a big percentage of the Kenyan population is at the lower end.

CURNOW: He calculates that more than 20 million Kenyans are low income earners, many living on less than $2 a day. Just too many people to ignore, it seems.

KARIUKI: It does in terms of the volume we push. But in terms of per unit production, it's -- it's more expensive to produce a small unit than a bigger unit. But because we sell so much volume, we compensate -- we compensate for -- for that expensive production process of the small unit packs, yes.

CURNOW: It's estimated that more than half of Kenya's consumer goods and services, like cell phone air time, are sold in smaller units. Analyst Havi Murungi says more and more products are now marketed to consumers who buy in small quantities.

HAVI MURUNGI, CONSUMER INSIGHT: Twenty years ago, you found 100 gram and 500 gram and a kilogram of -- of (INAUDIBLE) up on the shelves. Now you are finding 10 grams or 20 grams. And just seeing that that's -- we -- it is actually a realization that it is making it possible that we would consume the products that the group of companies are producing. Having it in smaller packages makes it possible, because if they have one schilling, they're going to spend it moderately. But if you -- if -- if the (INAUDIBLE). So it's a realization that if you're going to make these people possi -- if you're going to make it possible for them to consume, then it has to be done in small bits and pieces.

CURNOW: Loose change that is sustaining the retail industry in Kenya.

(END VIDEO TAPE)

CURNOW: It's fascinating, isn't it?

Let's take a look at some more numbers.

Now, the people who live on less than $2,000 a year make up the largest consumer group in the world. That's about four billion people. And together, they have a spending power of about $5 trillion U.S.

Now, coming up after the break, we speak to the man who made his fortune by selling goods to Kenya's middle class, the managing director of Nakumatt Stores, after the break.

(BEGIN VIDEO CLIP)

DAVID MCKENZIE, CNN CORRESPONDENT: Does it keep you up at night thinking that Walmart is coming into the market?

(END VIDEO CLIP)

(COMMERCIAL BREAK)

CURNOW: Welcome back to MARKETPLACE AFRICA.

Now, here in Kenya, as across the rest of the continent, people have traditionally bought their -- their vegetables from that stall over there. They can buy one egg over there. And if they want to get their batteries recharged, for example, they go over there.

Now our guest on Face Time this week, Atul Shah, started off the Nakumatt supermarkets. He basically put all of those products under one roof.

Now, David McKenzie sat down and had a chat with him.

(BEGIN VIDEOTAPE)

MCKENZIE: You say retail is the future.

Why do you think retail is the future for Africa in business terms?

ATUL SHAH, MANAGING DIRECTOR, NAKUMATT: I mean retail -- well the word retail is always the leading sector where you can judge a lot of things for how the economy is going. I mean look at what retail was many years ago. Some parts of East Africa are still informal. We -- retail brings a lot of formalization of trade, a lot of formalization of things that you would create. Changing lifestyles is what we are known for. And we have changed the lifestyles of many by bringing products from all over the world and giving them an experience which is new.

So they say why can't we do what they're doing in developed worlds?

MCKENZIE: Why did you think that a -- a supermarket idea or like a -- a mega market, as it were, would work in East Africa?

SHAH: I mean Kenya, whenever we looked at it, there was a lot of opportunities around. A lot of Kenyans would travel abroad and bring their meats from either Dubai or London or wherever they would be traveling. And a lot of them had not the opportunity to travel.

So we said there is a market. There is the money around. There is the knowledge of people here that a lot of products are available out -- outside there and they want the products here.

MCKENZIE: And there -- there's a lot of talk of Walmart buying all or parts of -- of Massmart in Southern Africa.

Do you think this will bring in -- do you think a big U.S. company coming in will bring in more competition for you in East Africa?

SHAH: Definitely. I mean a U.S. giant player like Walmart, the world's number one player, coming into Africa, means competition. But it also means that there is a lot of confidence for the market out there in Africa, that there is a market in Africa. They would otherwise not be interested in coming here.

So it leaves us a lot of food for thought for us to start expanding very fast. And there is that market and take care of that market, let the other players come in, but still try to do what you can best.

MCKENZIE: Does it keep you up at night, thinking that Walmart is coming into the market?

SHAH: It actually encourages me to say we are in a store -- in -- in Africa, where Walmart also is thinking of coming. So from day one here, we have the right choice of being where we want.

MCKENZIE: What -- what benefit can Walmart bring in?

You know, they -- they are so well known as sourcing cheap products, particularly from Asia.

I mean, do you think that will, in general, be a struggle for, you know, Nakumatt, Shop-Rite (ph), these -- these companies -- to -- to compete with that sort of business model?

SHAH: Definitely. Their buying volumes do -- would make a difference. But would we still look at that kind of product or what would be the Walmart approach?

Would it be that they want to get it for the mass market at very cheap products?

Or would it be that they want to look at the middle plus class?

So I think I still -- we would still have an upper edge.

MCKENZIE: So when you go to Rwanda or Uganda and you see -- you visit your stores, I mean what do you feel like?

What sort of emotion do you have given where you -- you know where your company has come from in this relatively short period.

I mean for me, it's always the question, what's next?

What can I introduce as the next product to make it more exciting and more interesting?

Every time I visit a store, which I try to do at least to visit every Nakumatt store at least once a month, out of the country, and once a week inside the country, most probably, and try to do something new, something exciting, something different.

So there's always the challenge of keeping up with excitement. So whatever we have done so far, you will see we are steps ahead than many of the stores, if you compare us with Walmart stores layout and us, maybe I would be proud to even say with a little step higher than them.

(END VIDEO TAPE)

CURNOW: Kenyan businessman Atul Shah there, looking to expand his Nakumatt supermarket.

Now, here's what's trending this week.

(BEGIN VIDEOTAPE)

CURNOW (voice-over): The government here in Kenya will impose price controls on fuel beginning December the 15th. The pump prices hit at all time high last month, at $1.25 per liter. Kenya's energy minister says controls will be placed on wholesale and retail prices and will be reevaluated every month. Oil marketers warn the price controls could lead to fuel shortages.

Car maker Daimler A.G. clearly happy with South Africa's performance. It's investing an additional $290 million in a Mercedes Benz plant in East London. The plant has exported 100,000 C Class models of the luxury vehicles and has been key in producing both right and left hand drive versions of the model. East London is one of the four locations in the world that will make the next generation of C Class.

(END VIDEO TAPE)

CURNOW: Well, that's it for this week's show.

I'm Robyn Curnow here in Kenya.

Now, if you want to follow me on Twitter or e-mail us, please do go to our Web site, which is CNN.com/marketplaceafrica.

But until next week, goodbye.

END