No one wants to see a double dip in the economy, but with the economic uncertainties that abound, there’s a chance that we will hit some rough patches.
As a video entrepreneur, I can’t help but realize that even though online video remains the fastest-growing segment in the rapidly growing online advertising industry, there will be repercussions which we must all plan and account for. What will those be? Read on.
1) Macro matters. Before the 2008 econocalypse, members of management in the print industry thought that they had lots of time before the floor fell out from under them. Then the economy went off the rails and the newspaper and magazine industries underwent a period of rapid deterioration. Unlike the 2000 Nasdaq implosion, this time around, media planners were comfortable and experienced with online media, so the econocalypse actually, in some ways, helped new media.
I think that any slowdown in the broader market will net-net help new-media as planners, who will take into account television’s fleeting audience and finally adjust their budgets. Let’s face it, while less and less people watch television, budgets are still largely disproportionally allocated to television.
Overall, marketers will turn to the Web’s targeting and tracking options and allocate more as a percentage of their total budgets, even if their total budgets are flat or fall slightly.
But therein lies the rub. In the short term, if the hit a slowdown, no one will be spared; why would I lie to you? So how will online and video in particular be hurt? Let’s proceed.
2) Where’s the ROI? Online advertising is attractive to marketers because of tracking and targeting — which also sets the expectations bar higher. While in boom times marketers spend heavily to chase consumers’ wallets, in a downturn consumers spend less money and advertisers clam up. If there is no ROI, or, if it’s simply harder to measure, advertisers will balk.
3) Branded content was about to take off, but it shall be grounded again. After a lot of hype, I am starting to see advertisers and media planners show a greater interest in branded content and custom programming, But let’s face it, those programs have less reach and more questionable ROI, so they will be some of the first efforts to get curtailed. It’s a shame, because the “reach” game has become a smoke-and-mirrors façade, but in a downturn branded content will be a “nice to have” and not a “need” whatsoever.
4) Flight to quality. There will be a flight to quality on all levels. For example, in Q4, marketers accept video pre-rolls to run in-banner and even sound-off because they want to hit their impression targets and spend their yearly budgets. But as demand softens, there will be enough inventory in true pre-roll, meaning that marketers won’t have to accept in-banner delivery. The impact to publishers is that their in-banner real estate will be less valuable and lucrative, and their revenues will erode.
5) Value. Marketers and publishers will squeeze their supplies and seek more value. This will have far-encompassing impact across all stakeholders. Quality and quantity will become secondary to value.
6) Need for content remains, but companies will license
Of course, as consumers face lesser discretionary income, they will stay at home and consume more content there. This is a net-net positive for new-media content owners, but iit only makes sense to create more content if their cost structure is sustainable.
Right now, some traditional media companies are dipping their own toes in original made-for-web programming, while new-media firms are getting more aggressive with their output.
The premise for this bullishness is that there’s not enough inventory and content to meet the ever-growing, insatiable demand for video ads. If the marketers scale back, there won’t be much incentive to churn out content.
7) VC-funded firms will die. The undertakers are already out, Video companies who have raised a lot of money in all spheres of the ecosystemm be it online video a) content, b) distribution, c) content management, d) content delivery, e) advertising or f) analytics, will come under pressure to exit, merge, and/or shut down.
Meanwhile, companies that are bootstrapped or lack deep resources will not be spared if their cost structures have gotten out of hand and relied on a booming, drunk market to finance their operations.
Of course, at the end of the tunnel there’s always a shining light. If you have a sound business and smart strategy driven by capable people, you will be fine. Just reflect back on how history shaped 2001-2003, and 2008-2009, and act accordingly.