Tuesday, October 7, 2008

Tech getting the jitters from the economic hammering

Last week I touched on the impact of the US financial issues on tech stocks.

http://mimelbourne.blogspot.com/2008/09/no-vote-on-700b-bailout-impacts-tech.html

Now there is finally talk on how this will impact the advertising market ... with some sentiment that digital will probably benefit from any economic turmoil as it offers a perception of more accountability than other media.

Some have stated Google will benefit - which is interesting. I'm not so sure it should - Google is about demand fulfillment, not demand creation. In times like this brands need to create more demand - not look at making fulfillment more efficient. I sometimes feel most misunderstand the role of SEM in a marketing mix and the variables that impact what search can do for a company. For almost all categories, search relies on 'ATL' media (for want of a better term) to drive demand for brand and category terms ... by taking money out of brand building activity, it will impact the amount of traffic you can funnel using search. If advertising is a mix of art and science (magic and logic or whatever other analogy ppl use), then I am not sure it makes much sense to lean more towards straight science in leaner times.

Locally it will be interesting to see what happens. The first half of 08 was very flat ... however the environment has rallied in the second half and we should see approx. 20% YOY growth in the online advertising sector.

However, it's not clear yet what will happen in Q1 and Q2 of 2009 - which I think would be making the local players nervous given how soft the same period was in 08 without such powerful economic factors at play. In the US the past few months have seen layoffs at a lot of key players, the same situation is entirely possible here - I wouldn't be surprised to see layoffs in product/editorial areas over the next 2-3 months in AU. Either that or we will see publishers trim the fat off their offerings - ie, get rid of the elements of their portfolio which on their own are not viable. It's not the time to be carrying excess baggage.

So lets check in with 6 key stocks I looked at last week and see how they faired over the past 7 days.

Yahoo! - market cap down 2.18b in past 7 days
Google - market cap down 5.87b in past 7 days
Microsoft - market cap down 1.56b in past 7 days
Research In Motion - market cap down 1.84b in past 7 days
Apple - market cap down 6.86b in past 7 days
Time Warner - market cap down 6.07b in past 7 days

1 comment:

Wembley said...

Well yes that question is wide-spread.

An economist would say online as its more efficient and total campaign costs are lower.

Problem is that media and marketing is highly emotional and often irrational.

Not sure the folks at google will get a spike but very unlikely to see significant cuts.

Marketing is going to get cuts. It always does in a recession. Online will get cut too, just be harder to spot with such strong growth and limited predictability over time.

It is not however a good time to be in the portal generalist area unless you are number one/two or have a bunch of specialist/niche content.