How will Internet companies be affected by the Recession?

The recession of 2000-2001 really impacted the Internet sector; it came right at the beginning of the Internet boom when many companies were working on branding efforts by getting sites online. Dot coms that wanted to make enough noise to justify a public offering, or big companies that were trying to show they “got it.” However, by 2001, the economy took a downward turn and the Internet campaigns were shut down (or paid little attention to)

Will the current recession cause the same problems for the Online community? It looks like no; while they may not be totally immune to hard times- the recession is not impacting the Internet world as much as the physical one. Google, the biggest advertising company online (and offline) had a strong first quarter and said that it does not see much impact from the economy now on its business. According to the article in the NY Times BITS, "Online Advertising Is a Lagging Indicator of a Recession", there was an optimistic view of the situation at last weeks AdTech, the big advertising convention in San Francisco.

So why is it that the Internet companies seem to be a little "Safer"? There are two main reasons for this, one is unique to this time period, and another perhaps structural. First, Internet marketing has proven (in the last 8 years) to be successful and business are shifting their marketing efforts online. Online marketers are catching customers that they could not catch before, and online marketing is actually driving sales. Second, much of Internet advertising is tied closely to what people are actually still buying, rather than the hopes of marketers that they will buy more.

If someone is in the market for new TV or other item, they are most likely going to be browsing the Internet- therefore, marketers do not want to cut back on their banner ads and search keywords. While they may save dollars by cutting TV or print ads, which do not target those specifically in the market for the TV. However, people have to still be online and clicking through on the websites that post the display ads. What if people decide browsing Netflix is a luxury item they just can afford these days? Only time will tell.

Of course, now a large number of Internet ad revenue is tied to how often users click, and thus they are wired directly to the spending interest, or lack of interest, of consumers. If too many people decide that Netflix or Match.com is a luxury they can’t afford, clicks will fall. The ad networks, and the publishers they serve, will suffer.

In a time of a recession, everyone is impacted- "Even if online is growing, it is growing more slowly than it would if the home builders were still erecting a McMansion every five minutes"

Full article-http://bits.blogs.nytimes.com/2008/04/21/online-advertising-is-a-lagging-indicator-of-a-recession/index.html?ref=technology