Wednesday, January 28, 2009

Capital scarcity - good for online marketing?

Recently, we have been swamped by articles and comments on how the growth in online marketing decreasing, CPM prices falling and ads network's inventory exploding. What can be good about it?

Well, think about it this way. We had an enormous amount of capital flowing in the system. Corporate America had unlimited marketing budgets, VCs threw capital on non-viable start ups who in turn paid high for non-sustainable online marketing efforts to drive traffic. Everybody participated in the online marketing party. Who suffered? Viable, potentially successful, startups and companies that saw their marketing efforts flooded with so much spam. The ventures that could actually create value for the long run had to first win in the "spam war", which consumed many resources.

Online marketing resembled securitization in many aspects. It became too complicated, nobody could follow its results and traditional metrics like ROI were completely forgotten in the WEB 2.0 rush. Luckily, it was not leveraged (at least that)...

Like everywhere else in the business eco-system, the current dislocation (relocation?) of resources is a vital process that will eventually differentiate the winners from the losers, the dogs from the stars. Capital and cash are not kings any more - good ideas and real value creation are.

And by the way -- talking about good ideas and value creation. To my opinion, YouTube is by far the next thing in online marketing. They are doing absolutely amazing staff and I do believe that Google made a good investment (in the long run). Watch how YouTube is falling a part right in front of you here.

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