Insomnia (insomnia) wrote,
Insomnia
insomnia

Webcrash 2.0?

This article by BusinessWeek points out a 10% drop in the growth of online advertising, and asks...

"Are companies tiring of ad agency blah blah about social networking being the only place to be?"

While this certainly could be a market correction driven by oversaturation and irrational exuberance (read: hype and greed), perhaps it has something to do with a general level of public resistance to banner ads. (i.e. They ignore them or actively go out of their way to remove them.)

"Are they questioning the metrics touted by online agencies as not much better than the metrics touted by print and TV?" 

Wha...?! Are you saying that companies like SixApart would hype their hip/cool marketing demographics, number of users, and site activity to make more money? Say it isn't so! 

</satire> 

"Are they seeing customers getting actively angry at their ads being thrown in their face online?"

Naah. Couldn't be. 

I mean, if that happened, you'd expect to see a string of failed, overhyped high profile online advertising campaigns that hit the online marketplace with a dull thud, and some of the biggest memes online would be about clueless attempts by marketers to astroturf online communities and pretend that "they're one of us".   

So... let's step back and look at the bigger economic picture. We've got this decrease in online advertising spending, combined with decreasing consumer confidence -- people buying less -- and increased concern regarding subprime loans, the housing market, etc. Which, in turn, is causing loans to go into default, making the stock market go down, driving up interest rates and making it harder and more costly for businesses to borrow money.

Now, maybe I'm no financial guru, but it seems to me that this would lead businesses to be very conservative. They'd want to cut back on discretionary spending right now... such as new business initiatives and advertising... and would want to reduce their advertising budget and refocus it towards "tried & true", better-established venues. If they did advertise online, they would probably want to focus on very targeted, established sources with more trusted, reliable marketing data -- such as Google.... while avoiding overhyped, overpriced segments of the online marketplace, such as, say, online communities.

Which, in turn... could drive down advertising prices and revenue sharply. 

So, assuming that you were a startup company that... 
- was completely overleveraged, with so much money spent on staffing and acquisitions, that actual profitability was years away. 
- was entirely dependant on pricing and demand fluctuations in the online advertising marketplace.
- faced reduced customer loyalty due to broken promises, failed commitments, and excessive, unwanted spam.
- found your future growth and revenue projections to be way out of whack.
- faced increasing skepticism from the business (and investor) community. 
- suddenly found it much harder to get that next round of investment capital, as interest rates climb and investors get spooked / find they can make a higher return on investment elsewhere.

Would you:
A> Immediately start making the tough staffing cuts needed to get somewhere remotely close to profitability within months, not years, while apologizing to your customers for your previous failings, try to win back their loyalty, and reduce your business' financial exposure to the highly unpredictable online advertising marketplace?

B> Hope that things change (or don't get worse...) despite obvious signs that the subprime crisis will last years, in the hope that your investors don't run away in droves.

C> Spam your custmers even more out of desperation, while doing your best to "flip" your unprofitable business off on some other company with more money than you.

D> Try both B and C until economic situations get even worse, you're forced to lay off 80% of your staff, and it becomes abundantly clear that nobody wants to pay "retail price" in a buyer's market for the next f*cked company.

Ah, irrational exuberance and bubbles-a-poppin'... this could be like the late '90s all over again!


  

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