Crunch time, part 2
22/07/2008
What effect will a recession have on the internet industry?
Ecommerce specialist
Chris Barling
Actinic
The internet is big business and a major part of the economy, so it’s hard to dodge a recession. However, I believe that ecommerce will be an exception. The internet generally, and ecommerce in particular, is one of the few bright spots in the current business firmament. Ecommerce is still growing like crazy – up around 50 per cent from last year according to the IMRG – so it seems like there’s still plenty of gas left in the tank. It’s been good to be in this industry for the last few years, and it’s likely to be even better now, particularly as everything else stumbles.
Chris founded ecommerce company Actinic in 1996
Web video guru
Ifron Watkins
Coull
Times may be tough, but we’re not currently in a recession nor are we irrevocably facing one. However, in a declining economy (of which there can be no doubt), the internet industry as a whole will undoubtedly be affected – but not necessarily for the worst. Marketers are under increased pressure to deliver more effective campaigns at lower costs – and this is where digital comes in. Advertising across television, radio and billboards can have marginal ROI as reaching a specific target audience can be somewhat hit and miss. Digital offers brands the opportunity to more effectively target ads to the right audience, increase pick-up on a call to action and interact (and therefore engage) with their target audience. Brands will increasingly look to their marketing and creative teams to integrate and even drive activity through digital as the one of the primary mediums of a campaign (if not the only medium).
A digital campaign, whether that’s interactive video, banner advertising, social media marketing or classified ads, doesn’t necessary equate to ‘cheap’ or glossed over ‘cost effective’ – yet this is a common misconception. It does, however, mean creating a more interactive and ‘lean-forward’ consumer experience at (mostly) lower cost than a traditional television advertising campaign (a passive experience) does.
For many, tougher economic times will be the digital shot in the arm they need to switch them on to a medium that will present more meat for your pound at a time when every penny counts more.
Ifron Watkins is CEO of Coull, a provider of online video advertising products
Web filtering specialist
Eamonn Doyle
Bloxx
The internet can help business reduce costs, streamline operations, improve operational efficiencies and increase productivity. So it probably means that the underlying investment in the internet will continue but at a slightly reduced level for the next year or so. However, we’re likely to see some impact in the IT industry as a whole as companies reign back in other areas.
Eamonn Doyle is managing director of Bloxx
Search expert
François Bourdoncle
Exalead
The recession, if confirmed, may have a long-lasting effect on the economy as a whole. As for the tech industry, which seems to have resisted pretty well so far, you have to make a distinction between consumers and enterprise. Consumers appear to still be willing to spend money on tech products (iPods, cell phones, TVs, etc). For enterprises, the situation is different: software vendors that help their customers cut or contain costs, or improve sales, will thrive, while other vendors will have a very hard time. This is indeed a great opportunity for search engine vendors, such as Exalead, that help their customers build Decision Intelligence applications.
François is co-founder and CEO of Exalead
Applications guru
Roger Greene
Ipswitch
Recession will both hurt and help the internet industry, even within a particular company. Take Google, for example. On the one hand, we’re still fairly early in the transition from weakly targeted traditional media advertising to Google’s highly targeted model. That trend will continue strongly, and even be aided by recession, as advertisers pay more attention to getting maximum value for their purchases. On the other hand, Google is becoming part of the macro economy, and recession will have an impact on their existing customers who are already converts to the new model. Those advertisers that are hit by recession will cut back on their Google ad spend. On balance, the internet remains a disruptive force. Recession will have a dampening effect on growth, but growth will continue to be higher than in non-internet businesses.
Roger Greene is founder and CEO of Ipswitch, developers of innovative IT software
Marketing expert
Andreas Bernström
TradeDoubler
The internet is best placed not only to withstand recessionary times, but to escalate its growth at the expense of other marketing channels. Cost-conscious consumers are turning online to reinforce purchase decisions – researching prices, taking in peer reviews – and to buy direct deals. Meanwhile, as advertisers’ marketing budgets come under greater scrutiny to improve the bottom line, the internet will thrive on its performance-based attributes where every impression, click, lead and sale can be tracked, analysed, optimised and rewarded accordingly. Not a penny is wasted. Where storm clouds are gathering over the economy in general, the internet continues to enjoy fair weather and is set to get brighter.
Andreas Bernström is chief operating officer at TradeDoubler
Business guru
Catherine Ward-Brown
Fortune Cookie
While the economic downturn is forcing clients to evaluate investments more closely, I also believe this is a time of opportunity for web design agencies. Clients now put greater emphasis on producing business cases for investment where strong returns can be forecast. This is resulting in solid growth for the digital design industry, with clients investing in larger, more strategic web projects. Design agencies can thrive during a recession by positioning themselves as digital strategists who work ‘with’ rather than ‘for’ their clients. We can help clients to evaluate their options so they invest the right money in the right projects. Web projects can actually result in reduced business overheads. Websites can be very cost effective channels for sales, marketing, customer service and customer retention while employee-facing web apps, such as intranets, increase business productivity. These factors serve to simulate investment in the web as they show the channel is really efficient, especially during a recession.
Catherine Ward-Brown is director of new business at Fortune Cookie
Social media and comms expert
Rachel Hawkes
Elemental Communications
Businesses and consumers are intrinsically linked to the internet in so many ways. The most human reaction for both parties is to look for a way to save on costs and reduce spend, but we need to look deeper and beyond the obvious knee-jerk reaction. It sounds easier than it actually is, and no doubt hard to work toward. But forecasting, history and research does show us that spending through a recession, for businesses in particular, favours those that do so.
In the UK, web access seems to have users opting for bundles (combined television, telecoms and web). For many it could seem like the internet is very low cost or bizarrely even free. Certainly removing the internet from that equation would have a negligible outcome, especially as it’s one of the cost-effective mediums that opens the door to more ‘free’ and low-cost benefits for users, such as email, VOIP, surfing and social networking.
Perhaps life and business decisions should be approached from short and long-term standpoints, considering variables that can change the outcome on the direction/s we can take, endeavouring to remain strong until more stable global environments grace our paths again.
All concerned will be looking how to maximise the efficiency of things that we do, even more so for organisations scrutinising their operations throughout the whole business and how it works. It shouldn’t be a pending recession or recession in progress that affords this scrutiny, but for many it certainly may be a wake-up call for how they conduct their business affairs and how the web can bring new opportunities.
We may have challenging times ahead, but we’re unlikely to completely break the internet or see a decline in the sense that its future is uncertain, as history demonstrates; we’ve experienced recessions before with the web being around for decades (see http://en.wikipedia.org/wiki/J.C.R._Licklider). We may see blips, unfortunately some casualties, but I envisage greater innovation, creative output and usage from consumer and business quarters as we continue to share what we know and experience with a medium that never fails to surprise, entertain, innovate and serve us all.
Rachel Hawkes is an account director at Elemental
Content specialist
Stuart Dean
Cognifide
There is no doubt a recession spells challenging times ahead for businesses based both off and on the internet. However, there are things that we can do to help minimise the impact, and (if we’re clever) potentially even gain from the declining economy. A recession (which seems inevitable at this stage) can offer opportunities for smart entrepreneurs and also for more financially stable companies to buy-up smaller companies who may be struggling financially. There are cost-efficient changes that can be made to a website relatively painlessly, such as adding a press centre on the site and keeping it up to date with fresh content (including press releases, case studies and images).
Get your employees blogging if they aren’t already, have them talk about the industry, about new products and technologies coming to market and make sure you make the most of what’s available by adding social bookmarking links, hyperlinking and adding rich content such as images and video. A steady flow of traffic to your website can help you maintain visibility and a perception of solidity and strength in an uncertain market. For ecommerce-based businesses, look to introduce a more dynamic shopping experience for your users by embracing technologies that are relevant and useful and tap into audiences that were previously not catered for. Making your online store work harder for you, through up-selling and cross-selling, will help counteract any loss in sales faced by a tightening of consumer purse strings.
There’s no doubt that consumers are looking for better deals and they’re going to do that predominately online directly through search engines, comparison and review sites. Now is the time to make your business efficient above and below the surface – looking beyond the hard times that may come.
Stuart Dean is the chief executive at content management service Cognifide
Content specialist
Craig Hepburn
RedDot
In my experience a downturn in the economy usually breeds innovation, people tend to work smarter and ensure budgets go further under these circumstances. I would expect companies to embrace social media, communities and content aggregation services to help market themselves and generate attention. We’ll also see a major rise in the adoption of engagement metrics to measure the value and effect of bloggers and influencers on the internet. By leveraging existing technology, content and social communities, companies can ensure they’re maximising their opportunities online. Therefore I’d expect the recession to have a positive effect on the internet.
Craig is senior marketing manager for RedDot
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