The financial crisis could bring with it great opportunities in hi-tech.
By AMIR ORNIasia markets 224.88(photo credit: AP)
Credit crunch, credit crunch, credit crunch. We keep on hearing those two words time and time again. But what does it mean when it comes to the hi-tech industry in general and the Internet in particular?
One of the biggest enemies of any economic growth is uncertainty. When it's as high as it is today, many business and economic processes come to a grinding halt, even if they are in their final stages of development.
The current crisis is so dramatic, it spills over way beyond the financial industry. Many businesses around the world, large and small, are reducing their advertising budgets to a minimum, freezing strategic development processes and are avoiding taking significant decisions for their businesses until a ray of light penetrates the dark sky again.
I personally know of two startup companies in their early stages which almost sealed their first funding, but at the very last moment the deal was frozen. In my humble opinion by the way, at least one of these startups had a good chance of making it.
I don't think there is anyone out there who knows exactly what he or she is supposed to do to cope with the situation, as no one really wants to take the risk and bet on where the economy is headed. However, in many industries, and in startups in particular, layoffs are being considered, salary cuts are pondered and the cash-burning pace is slowing down.
As the world heads into an economic downturn, one of the first to be affected are the hi-tech and venture capital industries. The level of uncertainty has significantly upped the risk for investors, so I can very much understand angels and venture capital funds that decided to take the foot off the gas and await the passing of the storm. According to a recent report by the American Venture Capital Association, a 7% decrease has been recorded in hi-tech investments over the third quarter, while Internet startup companies have seen a massive 36% drop.
And still, in every problem exists an opportunity. Some argue that now is the time for the Internet industry to prove that it is the most effective and cost-worthy media, and that it continues to generate a growth in advertising revenue at the expense of more traditional media. There is no doubt that advertising budgets will be slashed. The only question is which media advertisers will choose to place their money. Marketing executives are now being forced to be more meticulous than ever and put together clear and proven ROI (return on investment) models.
A CEO of a major company once said that half of his advertising budget was ineffective, but that wasn't his main problem. His main problem was that he did not know which half… Well, if there's a problem the Internet can solve, this is it. The Internet is the only media that is absolutely quantifiable. I can tell you, from experience, advertisers are well aware of this and carefully analyze the reports they get. One thing's for sure, Web sites are entering a high-stress period as advertisers examine results every hour of every day.
Web sites always had to find creative ideas for advertising that go way beyond traditional banner ad campaigns. This is true now more than ever. The segmented and precise advertising pie will continue to grow, as the rise in profit in Google's 3rd quarter results prove.
Speaking of Web sites, it is no surprise that in days when financial news make headlines all over the world, financial sites are enjoying a significant rise in traffic. Comscore, a company that specializes in measuring Web traffic, reported that Yahoo! Finance's traffic has risen nearly 30% in the last month to reach almost 20 million unique visitors.
So all you entrepreneurs who wish to jump on the startup wagon, as you can see, not everything is colored grey and the current crisis, big as it is, could bring with it tremendous opportunities. Like any other thing in life, it's a matter of perspective. Good luck!
The writer is the CEO of JPost.com
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