All Things Digital’s Kara Swisher makes clear in two postings, Dear Web2.0: It’s Still the Economy, Stupid! and Layoffs Hit Silicon Valley: HP Today, Who Tomorrow?, that neither Web 2.0 start-ups or more established digital businesses will be immune from the credit crunch.
She argues that other established digital companies will follow Hewlett Packard’s lead to use the bad economic news to cut back on staff. Venture capitalists, meanwhile, will expect Web 2.0 start-ups produce profits or simply withdraw their funding.
She needed to say it because many digital companies appear to live in a non-parallel world where what happens on Wall Street has no impact on themselves.
Last week, one of the things that struck me about the coverage of the two main tech conferences devoted to start-ups, DEMOfall and TechCrunch50, was the almost complete lack of discussion–or, more appropriately, worry–about the troubled economy.
This, even though the subprime mortgage crisis remains in full swing, along with the continuing turmoil around the stability of Wall Street financial firms, as well as Fannie Mae and Freddie Mac. Also, let’s not forget those sky-high gas prices.
I am glad she said it. But dare I suggest, to one of the leading lights of the blogosphere, that there is one type of digital revenue that will remain a more positive subject to discuss despite the present calamity in the markets – digital revenues within traditional media companies. Let me try and explain.
However swiftly and dramatically total advertising spend might go down over the next year to 18 months, digital revenues will certainly not go down as swiftly. Indeed few companies will want to come out of the coming recession with their digital businesses anything but enhanced.
While they might cut back on their traditional advertising spend, they will not cut back, if at all, on their digital spend. We can already see this happening, hastening structural changes. The result? Digital revenues appear to be robust in an environment of declining revenues. And that position will become even more pronounced as time progresses.
Just as established digital businesses are different from Web 2.0 start-ups, so digital revenue within traditional media businesses needs to be analysed and discussed in a different breath!