Trends - Winners & Losers

Winners & Losers

by Editor

In the fashion world, things change in a relatively predictable cycle, with designers handing out their new style mandates that world of print and other trend noting mediums translate into the season's do's and dont's, the list of what is "in" and what is "out." The world of internet advertising doesn't quite follow such a pattern, but over time certain businesses, technologies, and/or strategies take hold, while others go from profitable to problematic. With so much taking place in the world around us, we thought we might take a mid-year look at what's "in," what's "out," and what's too close to call.

· International - The US market has long dominated the minds of most companies operating domestically. Most haven't focused internationally or tried to gain traction overseas. Those that have enjoy some healthy returns. It's not too late for the rest of us. Google et al are merely helping open up the markets.

· Serving the market - Take debt as an example of a dual opportunity, one for businesses and one for consumers. We saw in last week's article that this debt has hit companies hard as well. They too need cash, and a potentially lucrative, but perhaps difficult to realize, market exists for those who can help the financial institutions acquire new customers. (If we think tech stocks have taken a beating, just look at the difference between the yesterday's close of Morgan Stanley, Merrill Lynch, Lehman Brothers, and even the Google of the finance world Goldman Sachs.) The consumer debt load also hints at the next, large, segment of the online customer acquisition space - from social angles like Prosper.com, to vertically integrated consumer life-cycle companies like Bills.com, and certainly the more straight forward lead generation firms. Education and job related offers should continue to have a strong pull as well. In tough times, people have an incentive to increase their employability and maintain their competitiveness in a market with increased supply.

· ROI - Companies that can't quantitatively prove their value will have a harder time maintaining their share of the budgets. Economically challenged times have proven a boon to those in the performance marketing space who can prove their value. It's not dissimilar to advice given to employees; if you can prove what you help the company make, you have a stronger position, whether for a raise or keeping your job. The same holds true for one company serving another.

· Optimization - Those who can improve yield add value, and adding value should sit top of mind for businesses and employees within a business. It's really about doing more with less money and reducing the amount of waste. Companies like Advertising.com grew during the last downturn because of such a focus layered with an emphasis on results. Those in this field are like the robots helping out on the assembly line, and now is a great time for them to show that they can make companies more money without increasing their cost base.

· Diversification - It was too easy for many companies to grow using only one channel. The companies showing the best resilience have taken the effort to diversify and can survive even if one of their once strong areas shows weakness. They can afford to lose a certain advertiser or type of advertiser or conversely a publisher or traffic channel. Not that they want to of course.

Out

· High overhead - You don't have to be a business owner to know the burden of a high overhead. Sales people in particular know the stress that can occur once you've started to spend money like you will always have it, only to find out that you don't always have it. Too many people will make x but spend 2x counting on that increase to continue. Even if you can afford it, a higher overhead puts undue pressure on people and companies and results in sometimes suboptimal decisions.

· Slackers - Thinking of the situation in terms of hunting, in times of abundance, even the weaker link will catch food, but once scarcity takes place, the bottom percentiles will struggle to survive. We've lived in times of abundance where any concern of food shortage hasn't taken place. They may have before, but no one is going to look after you but you; if you don't pull your weight, you will stand out, and not in a way you want.

· Online political ad spending - The candidates spent $137 million dollars on television ad spending during the primary season, an astronomical amount of money, but those dollars translate little to online. It's truly broadcast spending, and even if they wanted to create a more action oriented approach, they just don't have the infrastructure. The general election dollars will trickle to online, but make do very little.

· Money losers - Now is not the time to simply think that you will make money one day. It will take a little longer for the lights to be turned off at some places, but I wouldn't want to be working at a place that wasn't moving closer to monetization. At some point in time even the coolest of sites will need to justify their constant time in the red, and even Google will probably slow down on buying, choosing to stockpile that cash instead.

Draw

· Ad Networks - Vertical ad networks like Adify have received strategic praise and a certain level of financial validation (i.e., an exit), but they don't make any real money. The more traditional ad networks still have the reach, and they did well the last time we experienced some economically challenging times, but the performance dollars that drove many of them have sat on the sidelines as of late. The brand dollars won't be increasing their budgets, and while the performance guys will be there, which product will carry them through remains unknown.

· Incentive Marketing - People now have more time than money. Incentive advertising might not come back in the same form, but when people have limited cash, they will gladly give their time. Companies in the social media space have shown some impressive monetization by tapping into users willingness to trade time for some reward, and chances are that outside of that space will show some opportunities as well. Everything is ripe for it to grow again, but will consumers and advertisers embrace it?

· Long-tail chasers - We've written before about Google and Yahoo's increasing trend towards taking away some of the access to the far reaches of their inventory. There is a business there both in search and in the content world, but it's no longer the path to definitive profits it once seemed.

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