/Big Question/ Crunch time
22/07/2008 | Filed under Discover > Big Question
What effect will a recession have on the internet industry?
Internet playboy
Drew Curtis
Fark
Hopefully it’ll pop the bubble on some of these bullshit dotcom 2.0 companies.
Drew is the owner of Fark.com
B3ta guy
Rob Manuel
B3ta
Recession means conservatism in spending. Big companies will be less willing to take risk and there will be a downturn in advertising spend. So some weaker sites will go to the wall and there will be fewer new property launches from big companies. However, small companies for whom to even exist is a risk can and will thrive.
Rob is co-founder of the ‘best of the web’ site B3ta
Tech journalist
Scott Carney
Freelancer
Just to get our facts right, we aren’t actually in an official recession at the moment. At least the United States isn’t, though it’s mighty close. Technically a recession is two quarters of negative growth. First quarter growth was .9 %, which while meagre, is still growth.
My feeling, though, is that it will have no discernible effect on the internet industry other than a lot more general whining and malaise in the blogosphere.
Scott is a freelance technology journalist
PR guru
Janine Griffel
Lycos
Compared to other industries, the internet industry will not be as affected by the recession. The internet has become more readily accessible in recent years and is continuously gaining popularity and momentum despite the onset of recession. Because the internet has not been affected by the recession, it may well be that we see a shift in advertising revenue towards online marketing rather than expensive above-the-line campaigns.
Janine Griffel is Europe PR manager for Lycos
Hosting specialist
Neil Barton
Hostway, UK
In some respects, the effects of the recession online will mirror those in real life. People will spend less and be more careful with their money. Although a few ecommerce stores may notice a difference, it’s unlikely that any one online shop in particular will experience significant problems. People may well take this opportunity to look around and change their ISP in order to save a few pounds each month on ‘bundled’ deals for their TV, internet and phone. However, as the internet has become such an indispensable part of our lives today and in many cases is saving people money, it’s unlikely that an economic downturn would have a significant negative effect on the internet.
On the other hand, technology may also hold some of the keys to escaping the recession. There are a number of ‘efficient’ technologies that people may look at in order to save money in the long term. Skype may gain a few more subscribers as people try to cut down on phone bills. In the data centre, companies may switch to virtualisation to streamline how they use server resources. In the boardroom, people may use videoconferencing rather than flying out for meetings. These, and other technologies, will help both businesses and consumers to streamline their operations and cut costs until the storm passes.
Neil is the director of Hostway UK
Project manager
Ané-Mari Peter
on-IDLE
The internet industry is a subset of the media industry as a whole, but with some advantages. It’s more cost effective to sell product and advertise online and results can be measured precisely. The problem, however, is that spend from retail and travel is down industry-wide and there are large ‘gaps’ of advertising spend caused by the downfall of Rover, Northern Rock, Courts sofas, Allders department store or Coldseal windows.
The market is definitely slower, but still not at the levels of the early 80s, early 90s or 2000. Peripheral or discretional spend by both consumers and business will impact negatively on the internet industry over the coming months as everyone tightens belts in anticipation of a recession and higher fuel and food prices start to bite – as has been happening in newspaper, TV and radio as well as the high street since April this year.
The internet industry will, however, remain a strong force for business critical application development, online commerce, online advertising, online gaming and online marketing. The internet industry will not only ride out the downturn as online shopping and fulfilment improves (the new Ikea online store and ASDA clothing entering the market), but continue to grow as a result of cheaper and broader broadband penetration and as consumers use online to research and compare prices looking for bargains – cutting back on ‘big-ticket’ purchases, but spending smaller amounts more frequently on clothing and groceries.
Ané-Mari is the co-founder of on-IDLE and has a background in business management and technology
Content specialist
Siim Vips
Modera
A recession may have a cleaning effect for internet industry. Budgets would be more carefully followed and best price quality ratio will become more scrutinised. It’s certain that more businesses will invest in producing efficient processes and using internet technologies to streamline business processes, whether bricks or click-and-mortar related.
Long term, recession may be good for any industry, but especially for new industries like the internet and related sectors because innovative ideas are some of the best ones generated during hard times.
Siim is a content management specialist at Modera
Media & PR expert
Tim Gibbon
Elemental Communications
If the sudden influx of inflation-friendly ads by major supermarkets, the daily reports of the recession by mainstream media and survival tips by the trade media haven’t alerted to you the darker times that may be ahead, I don’t know what will.
We’re doing a fantastic job of talking ourselves into a recession, so it’s a case of hoping the ‘prevention before cure’ school of thought will be an effective way of being competitive in such challenging times.
The ease of use, access and flexibility of the internet grows for many, with the cost of it appearing to become more competitive. With healthy competition between broadcasters, content creators, publishers and technology owners developing exciting platforms for us to use we’ll perhaps see more wonderful innovation even in challenging times.
From the media reaction, we’ve already seen how businesses and consumers have reacted, and it’s no surprise. It’s a very human response, but the difference here is that we’re entering more challenging economic times in a very technology-driven environment. It will certainly be interesting to see how ‘all’ scale back and use recent and developing technologies to maximise the efficiency of our lives for which the internet and related technologies plays a crucial role.
It’s natural that budgets will be allocated to the most accountable mediums that deliver the best results, and the digital arena will be in its element here, but in some areas more than others. There are many arguments to the contrary, with many stating that as digital is still a largely unproven industry it will be the first budget to be cut. I respectfully disagree. Yes, there is still a large percentage of businesses that are yet to fully ‘get’ and embrace online marketing; however, this is shifting significantly with the growth of social media. Search engine marketing should remain somewhat more resistant to a continued credit crunch, as driving a consistent stream of traffic to a website is vital for increased brand awareness.
While many of the world’s largest brands may experience a different outcome during a recession (or an economic downturn as we are currently in), it’s important that everyone from SMEs upwards has the confidence to continue marketing their brand effectively so that they don’t suffer unnecessarily.
Tim is founder/director of Elemental Communications
Marketing guru
Claudia Giovannoni
Coull
We’re undoubtedly facing a very tight credit crunch, but we’re by no means in a recession. I think the first step is to educate ourselves on the state of our respective markets and on the economy as a whole so that we don’t panic when reading the media hype.
Don’t get me wrong: there is, of course, much cause for concern, and we should all be aiming to prepare ourselves and our teams about the hardships we currently face (and will continue to face) in a financially challenging environment, not just on a national or European level, but globally. However, those who have the proper measures in place and are therefore in a strong position should be able to ‘weather the storm’.
If they’re not already doing so, more brands should be looking to increase their visibility across digital. Not employing any marketing or advertising strategy because of budget restraints is not advisable, as this will decrease visibility with your target audience and subsequently decrease your bottom line.
Digital has the unique ability to provide more accurate campaign reporting and therefore you can make your money work harder for you by closely monitoring your return on investment (ROI). By extending reach to social media (including blogging and video) and looking to interactive campaigns, you create greater brand awareness and broader reach, which obviously gives you great potential to engage your target audience and have them purchase and/or follow a call to action. This will leave you in a much stronger position than your competitors who are not doing the same.
General Motors obviously agrees with me, as it has recently announced that they’re bringing half of their advertising budget online. Not all of us have GM’s pockets, but you get the drift.
Claudia is marketing director at Coull
Payment expert
Jon Prideaux
SecureTrading
The internet is the place people go to try to find bargains. When money is tight, canny consumers go online – 60 per cent according to a recent poll. The biggest challenge for the internet industry is the increasing cost of petrol, energy and food. Every pound spent on basic daily necessities is a pound not available to be spent online.
Jon Prideaux is deputy CEO of payment service provider SecureTrading
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Comments
Luke / 22/07/2008 / 19:49
Why on earth was Drew Curtis' input even published? What a useless and inane comment.
Daniel Foster / 22/07/2008 / 23:41 / http://www.dealfiesta.com/
I think the Internet will take a hit from the recession. Because fewer companies are advertising online, Google has announced a drop in earnings as of late Whether we like it or not, the real-world economy plays a huge factor in the web economy
mike / 03/08/2008 / 17:17 / http://www.bozboz.co.uk
Personally ive not noticed any slowdown yet, in fact things are getting busier. But it probably will depend what area of the market your in. People seem to be a bit more cautious, but maybe it will 'weed out the chaf' anyway.
