Recession Survival Guide
Depending on whom you ask, the United States economy has already entered a recession or sits on the precipice of one, with even the most bullish not willing to say no such recession will occur. Our stock portfolios, though, tell us a different story, especially for those who hold Google, Amazon, and Bidu to name a few. They have seen values fall upwards of 40% this year despite the fact that none of the companies has actually reported lower earnings than in previous year’s. In that sense, it almost boggles the mind to see healthy companies who will grow this year, despite a recession, chopped off at the knees, acting more like the value of homes than the cash creating, market leading businesses they are. They might have exposure to the US economy, but these companies aren’t mortgage banks or even a Bear Sterns that have come perilously close to, if not actually, going out of business. Nor, are these companies operating in a sector in jeopardy of disappearing. The bulls and the bears seem to agree that despite facing potential headwinds, Internet advertising will outperform the US economy as a whole by a long shot, and the same seems true from reports of analysts covering tech spending, often an early indicator for Internet companies. Add to that this time around, as compared to the recession less than a decade ago, the companies make real money, from a large diversified advertiser base, as opposed to the first time around where most of the high fliers really didn’t make much money at all, and that money they spent often exceeded what they made. In other words, it was an unsustainable cycle, or exactly the opposite of what we have today. Yet, here we are, entering a recession, home prices and tech stocks acting about the same. The former makes sense; the latter makes less sense and does seem to have a solid foundation to weather the storm even if the market price doesn’t reflect the revenue generated.
While we can’t control the price of homes or the price of stocks, we have a fair amount of control over ourselves during this recession. Those that have worked in the industry for more than three years, especially those that have survived the first Internet meltdown, know that now is the time to kick it up a notch. As mentioned just earlier, though, this recession won’t feel like the last one, even though it should last longer. Want a hint of why, just go to www.fuckedcompany.com. Each era seems to have its own personality that made its money by being the writer at the right place at the right time. In 2000 that guy was Philip "Pud" Kaplan, founder of F*Company, whose site caught fire in 2000 as it chronicled, in what now would call blog format, the demise of company after company impacted by the bursting of the tech bubble, often posting as-it happened information and copies of emails letting people know they’ve downsized. It was the anti-Techcrunch, whose fame and now fortunes came from highlighting newer technology companies not being the first to share of their misfortunes. ‘Crunch empire founder, Michael Arrington, who has all the same charm, or perhaps anti-charm, that his predecessor "Pud" did. Techcrunch also has its version of F*Company, which ironically enough has joined the ranks of those it once covered. That if anything, should give us hope, but for those who missed out, its closest equivalent, the Techcrunch property the Dead Pool, won’t provide the same experience.
Outside of the mortgage industry, whose insiders didn’t mobilize to share their doom online and in real time, the companies failing now never had the level of success and scale that those featured in FC did. Hearing about a company going under that had a clean looking interface but no chance at revenue, comes as no surprise, unlike the feeling of reading about a publicly traded company worth billions in the midst of chopping 1,000 people with those getting chopped posting in the comments about the experience. Imagine the Yahoo layoffs and reading the equivalent every day. It was perverse, almost like Internet advertising embedded journalism. Knowing, though, that this time around, i.e., this recession, this economic crunch, this period of low morale and no shortage of bad economic news, won’t follow the exact same path doesn’t mean that each of us has any greater level of security. Historically, when times get tough, marketing gets squeezed. Overall Internet marketing certainly did last time, but that again brings us to the conundrum which began this piece – the fact that most expect our sector to grow. Last time around, year over year looked like Bear Sterns’ stock. It dropped big, then dropped some more, taking several years to reach the spending levels seen in the late 1990’s. Those in this space less than four years won’t know this, because by the end of 2004, spending had reached its former highs and has set new ones every year since. That overall Internet marketing budgets won’t dry up and that spending won’t drop by almost a half, implies that we shouldn’t see nearly as many layoffs, outside of the Web 2.0 companies that failed to get acquired in time. We will see some, so who won’t go?
In a tie in to its upcoming show, Search Engine Watch ran a piece recently about search professionals operating in a potentially recession-proof job, the online equivalent of nursing, an industry that always seems to lack enough qualified candidates. Those performing search engine management get paid more like doctors actually; becoming good means having the touch of plastic surgeon but the responsibility of a cardiologist. With respect to SEM professionals, you can’t become one overnight, and finding a qualified replacement, is like finding a nanny – stressful with a high learning curve, which provides a layer of security to those already in the field. Additionally, and perhaps most importantly, search itself won’t go anywhere, the ever increasing complexity, frustrating fickleness of Google, and consequences that come from not conforming, make the person in control and most aware of a company’s search activities like the unexpected franchise athlete that fills the seats. Ironically, if search were more of a typical profession, those in it wouldn’t have the same level of security; yet, they aren’t immune, for like Elliot Spitzer, it takes one small move to find it come crashing down. Maybe they will be forgiven; maybe they will find someone else willing to take a chance on them. No one knows. An SEM’s biggest weakness comes from their being the wizard behind the curtain. However, we can use them to understand what those of us not in SEM need to do, and it comes down to a) controlling revenue and b) having a skill that makes you integral to a company’s operations. You want to be an insurance policy for the company, the person they don’t want to lose because it would mean a loss of business to them and potentially an increase in business to competitors. If you don’t control revenue – through some specialized knowledge of traffic acquisition, and you don’t control relationships, now is the time to think about how you could become stronger in either or preferably both. In our space, one of the best things you can do is view yourself from the eyes of your competitor. Do they want you? What do you lack in skill or relationships that would make you more attractive? Now, is not about you, but about them. The easiest way to prove value to your company is to be valuable to people outside of your company – whether a competitor or to the industry as a whole through thought leadership. As we see playing out in the billion dollar acquisition market, sometimes the best offense is a good defense.
