Entries RSS · Is the internet recession-proof?
Premise: A while ago, Fred Wilson, a (possibly biased) tech-investor, wrote that he was bullish on the tech-industry. Recently, the New York Times reports that e-commerce is up because people want to travel less (fuel costs). And previous stories reported on the migration of advertising revenues from traditional media to online media.
A note: I don’t know that there will be a recession. I know that the real-estate bust in the US is a pretty big deal, and that banks from Europe and Asia have been pretty heavily invested in that supposed goldmine. And any fall-out in the US, i.e. banks shutting down or otherwise, will likely have global repercussions on the banking-sector, and affect other industries also.
With that out of the way, three problems/phenomena I associate with these times are:
- A lack of accountability in investments (e.g. currently real estate and previously startups & Enron), also accompanied by emotions like fear & greed.
- Rising input-costs (the market should normally adjust for that, but the explosive growth in demand from emerging countries + the lack of an alternative for, in this case, fuel, make this a pretty big uncertainty)
- Changing paradigms, such as the rise of webware, the (expected) fall of hardware-prices, the possible fall of software-sales, the continuing displacement of brick & mortar business models, businesses being forced to go & think green, and much, much more.
So, there’s probably a few more symptoms (throw them out in the comments!), but it seems to me that the internet is pretty well placed to deal with some of these problems.
Let’s start with accountability. The strength of the web is that everything on it is digital and, in theory, nearly (*) everything can be measured (*: I am quite sceptical about the measurability of video & audio, though arguable the serious data is still in text). Added to this, there are technology-shifts, like digital television, mobile computing, and E-Ink, which make it easier to have a wider reach as a data-gatherer, not to mention that business are increasingly placing their data online, again facilitating data-exchange in partnerships. This should make it easier for businesses to base their expense on actual data, the same for investors and advertisers. Together with the consequences of the last internet-bust, I think that everyone is pretty careful to base their decisions on information, not hopes and dreams (well, I’m still sceptical about Twitter).
Next, rising input prices. Having blogged on the topic of food and retail for about a year, I’ve obviously had to follow this trend/reality quite a bit. The NYTimes heading I linked to above summarises my feelings quite well, customers are looking at the opportunity cost of fuel (as well as the cost of being green) and alternatives like e-commerce may seem much more attractive. In the long-term, people like James Howard Kunstler are calling for more and more “locality,” i.e. that people will be willing to migrate less for work and, I guess, shopping, which opens up opportunities for e-commerce and ways of working across a distance.
Finally (?), changing paradigms. Well, whatever the new world looks like, a pretty warm place is reserved for the web. Web-apps and -services are maturing, offering more and better features, and providing individuals and businesses with a comfortable ecosystem to operate in. The OLPC, the Asus EEE, and other cheaper systems (when Dell comes in, it will be mass), may be less powerful, but they will be optimised to use the web most of all. Societally, it may eventually become the logical choice for the mainstream to spend less than $500 for a laptop, in which case hardware-makers and, possibly, software-makers will suffer. But the web won’t. Similarly, while I don’t yet see brick & mortar disappearing, it is clear that eventually 99% of B&M businesses will have to have an online presence. About the world going green, I can’t sell everything, perhaps someone else can give the answer to that.
Is the internet recession-proof? My guess is as good as the next guy. But, more efficient use of computing, datamining, search, advertising, e-commerce, and logistics are all technologies I am extremely bullish on these coming years.
What do you think?
Vincent
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Tags: advertising, banking, datamining, Dell, e-commerce, economy, green, logistics, OLPC, recession, search
Business intelligence, Business strategy, Consumer electronics, Economics, Finance, Future, Globalization, Internet, Networks, Public policy, S+S, Software, Technology, Telecommunications, Twitter, USA, Venture Capital, innovation, retail, web2.0, web3.0
My initial reaction to your question- “Is the Internet Recession Proof?” is a hearty YES. The more I think about it though, issues like Net-Neutrality, clogs in the pipes, diminishing returns for end users, and mass “unplugging” are issues that concern me. What if… the net is reduced down to just a few access points? It is conceivable that someday just a few companies will be providing access points to the majority of corporate and individual user. This closed loop would make the net experience so unusable that we are forced to find new information sources like mini-networks that only include our neighbors thus bypassing the driving economical motivations of innovations on a large scale.
Have you ever tried searching for a specific pizza place near your home? After drilling down all the Yelps, ads and other noise, you simply pick up the phone and dial 411- this is a FAIL that will spread if we aren’t careful.
Does the general consumer believe that the trade off of instant info access is worth complete profiling by large entities? We seem to be enamored with Google because we believe that are the “good guys” but what if all of the info is controlled and tracked by just a few? I believe this is what Philip K. Dick was so scared of.
I love technology, I am not afraid of Singularity and I’m bullish on our future because the net empowers connection, ideas and access. The only way to mess this up is to let too few control the conversation. Isn’t the “net” just the latest communication medium? Broadcast Radio sure found a way to take the idea of original expression and boil it down to eight formats. Look at the dwindling numbers for commercial radio, network television- are we next? Nah… there are enough of us that will find a way to build ham networks and connect to BBS, invest away my friend! We have only begun seeing what the net can do, I can’t wait to be a part of the next curve on this road of technological exploration.
Wow, Micheal (Nice Fish Films from FriendFeed)! Loved your comment and, from your anecdotes, I guess you’re as much as science fiction fan as me.
As far as net-neutrality goes, I was never in the camp that thought that this was ever going to happen. The most bandwidth-costing services are so popular that it would be extremely bad for business to suddenly cut their “tubes.”
About the pizza-search problem, it is indeed a very big issue, but one which I am hopeful can be solved. And the more problems there are like this, the more I’m thinking that smart entrepreneurs are just around the corner waiting to solve it, which makes me optimistic.
Regarding the controlling of data. I was planning to write something about this, but I forgot. Essentially, it is an economic prerogative that companies try to control their data. Without some kind of artificial monopoly there is no way to reap a profit, not matter what net-hippies like Scoble write. At the same time, there is the case for opening up, maybe not for free but against a price. The rewards of total transparency are just large enough to merit that, I would think.
Are we the next generation to be displaced? That’s a good question. For that to happen there would have to be a better alternative than the net. Is there one?
In my opinion the Web more and more becomes part of any business sector as much as part of private life aspects (think of the rising mobile web only!). Therefor it cannot be neutral to recessions. But: Coming recessions won’t affect the Web entirely but only on those parts, that rely to a given recession.
So if there was a recession in the media sector, advertising on web media sites would clearly be affected. In the same time other parts of world economy could prosper and with them all related online services, too.
If it wasn’t for stockmarket to be such an emotional cesspool & an empty wallet being an empty wallet, I would agree with you. But I think a recession hitting banks & real-estate (a commodity against which many other projects are funded) will affect a great many people and businesses, but perhaps (I hope) not those that have learned from previous mistakes and are doing things in a accountable and non-displaceable way.