SpectatorBytes

Much is being written today about the imminent downturn in the economy and how it has started to impact overall business activity (see here). This has gotten me thinking about what are the potential implications for the digital media community over the next 18-24 months.

Realities:
– Consumers’ online usage will continue to increase at a significant rate. The Internet is positioned to become the most pervasive medium in people’s lives (surpassing TV); As consumers decide to reduce their spending, they will likely seek greater amounts of “free” entertainment on the Web.
– Video consumption will continue to grow as traditional content providers continue to move their content online; they need to stay relevant in world where they only account for an increasingly smaller sliver of content
– Direct response advertising spending will given online’s cost efficiency and measurability; However, overall DR spending may slowdown a bit given slower consumer demand (i.e., less users may be interested in signing up for online courses)
– Online publishing will continue to flourish as talent from newspapers and magazines, whose advertising is likely to be impacted by the economic slowdown and thus continue to reduce organizations, begin to migrate online and start taking advantage of the existing tools such blog platforms, niche networks, etc.

Potential Benefits:
– Innovation will focus on “mainstreaming” existing technologies and products rather than on complex, cutting edge technologies; this will lead to larger audiences and better outlets for advertisers
– M&A activity will continue as traditional media players will face increased pressure in their core businesses (which are likely to be affected by advertising) and will need to reconstitute their portfolio of assets. Also, traditional media and large Web networks are still flushed with cash.
– Valuations will likely increase for startups that have achieved success – e.g., aggregated large audiences, and build scale in revenues.
- Poor performing startups will join the deadpool quicker. As pointed by Jeremy Liew a few months back, this is not a bad thing. Talent would be redeploy to new ventures.
– Startups will also become more focused and discipline – thus, increasing their likelihood of reaching success.

All in all, the downturn may slow down a bit of the transformation of the media business but not to the levels seen during the 2001-2003.

Consumers are voting with their clicks and eyeballs. Opportunities to create value will not subside.