Eric Jackson - who led the campaign to bring change to Yahoo - is looking for the next target. He’s looking at notable blue chips that have taken a recent hit, namely: Citigroup, Apple, GE, and many others.
Check out the list and vote for the company you think he should open a can of whoop ass on.
Personally, I am starting to think we’re in a deflationary period (and I don’t seem to be alone) and most of these stocks can be cheaper in the next few quarters relative to where they are now.
This is especially true when you consider:
- the actual stock market performances: the DJIA fell below 8,000 to 7,500, then crept back up to over 9,000 at 9,030 but has now tumbled back down to below 8,000 to 7,950 on Inauguration Day,
- recent real estate trends: I have never seen so many “reduced prices” on home “For Sale” signs,
- softness in so-called safe havens and growth markets, you are seeing a flight to quality evidenced by the drop in low-quality online advertising CPM rates.
I don’t know, but I think a lot of the projected earnings that companies are still touting over the next 2-6 quarters will be reduced, and obvioulsy that means stock prices remain shaky at best.
The Grinch Who Stole Q1
Tech Crunch has been making the rounds and the projections for Q1 2009 online advertising are bleak:
Display advertising revenue is going to fall of a cliff in January according to a number of content sites I’ve spoken with who rely on advertising for revenue. “Sales through December were mostly strong as advertisers used up their marketing budgets,” said one sales exec. But, he added, “there are few buyers for this next fiscal quarter, and those few that are buying are looking for steep discounts.”
Just how bad will it be? I’ve heard estimates of 30%-80% revenue drops over the next three months from companies that serve a variety of content (games sites, tech news, celebrity news, political news, etc.). The median pessimism point is around 50%. The people I’ve spoken with work at large public companies and small one-person blog shops. Absolutely no one I spoke with said they expect an up quarter.
Negativity Begets Negativity
At some point (and we’ve passed that point, folks), the bad news becomes a multiplier effect for more bad news:
- a media buyer sees this kind of article, uses it to lowball a publisher,
- the publisher sees little bright news, so they give in,
- the rates fall downwards, the bookings become rarer and rarer,
- next thing you know, indeed, we’re in a down quarter.
D stands for Deflation…
The web economy and online advertising sectors represent tiny pieces of the bigger picture. The buzz word in 2009 will go from subprime to deflation… so if we operate in a climate (or think that we do) of falling prices, then I wonder why we’re shocked to realize that ad rates and overall ad revenue might fall. I think at the macro level (all marketing) this might - and will - happen. From AdAge, via MediaMemo:
… and Display Advertising!
But as we outlined in our 2009: The Year in Online Advertising, yes, display will be weak, but I think publishers are buying into the glass-is-half-empty outlook because of bearish reporting. The truth is, my gut says things will go down a bit differently:
- marketers will push for video ads (and rich media ads in general) in display advertising real estate,
- the definition for video advertising will move away from purely instream ads (pre-rolls or overlays, for example) to include in-banner video ads,
and by mid-year, the actual display advertising figures will be fine (when you include the video / rich media units).
I do agree that traditional display ads will be weak… mainly due to a horrible Q1.
Let’s be honest: CPA and CPC are for suckers
While many are using the downturn to suggest that performance-based advertising units will see a boom, I’d like to point out a truth that most publishers fear admitting: CPA and CPC ads don’t really work for publishers, so even in horrible CPM times, I don’t think you will see a boom in performance priced ads in a downturn. For more on the entire CPC, CPA and CPM and other online ad terms, click here.
CPA and CPC revenue does not pay the bills, and quality publishers generally reject giving up prime real estate to CPC and CPA inventory.
But don’t take this from me, just follow the market: why else do you think Doubleclick, Blue Lithium, aQuantive and Right Media all got bought out (they all pay out largely in CPM terms even if on the back end they arbitrage inventory on a performance basis) whereas Valueclick remains standing, with no one to partner up with. At its peak, Valueclick was worth $3B with talks that it could fetch more. Even before the market meltdown, it was trading at $1B. Today, in the post media meltdown market, it is trading at $562M in market cap, with an enterprise value of $460M. The point being: in my experience dealing with of all the ad networks, from the publisher’s perspective, Valueclick was the most exposed to CPC and CPA and thus, most expendable.
Now this is all just my gut, but my gut has been right before: here’s one example of CBS buying CNET.
All Things Are Relative: At Least We’re Not in Radio, TV or Print!
If online advertising sentiment is this bad, even if the outcome is half as bad, then imagine what the radio, TV or print outlook is right now. Can you really imagine a media buyer paying $1M - let alone $50M, as Dell balked at - to be in print? What about radio or TV, which represent a black box in advertising where you don’t get to even track or target anything?
Newspapers like NYT and Tribune are - or are at risk to - defaulting right and left. TV companies like CBS are seeing declines in revenues. Radio companies are not faring better.
The point I am making is: there is a bull market somewhere at all times - even these times - and that market is online. It’s time to balance the reporting, too. I find it appalling (alright, strong word) that a site like Tech Crunch inflated the bubble on the way up, and is now ringing the bells of doom in the downturn… but that is publishing… and Tech Crunch does it well.
Who does the doomsday scenario thing best? Henry Blodget. Reading his Alley Insider, you’d think he and his talented staff of writers were typing on a ledge somewhere, choosing between the Publish button and jumping out of the window. For a great piece on his comeback, read this Wired piece. Mind you, in all honesty, I am technically guilty of this as well, the title of this piece should be “Will Online Ads Fall by 50%”, and not “What Happens if Online Ad Revenue Falls by 50% in Q1?” - but when I started writing it, I was thinking more of the impact on print… but then I started to ask myself, can this even really happen?
Well, maybe. At the end of the day, we just saw a major evaporation of wealth throughout 2008 in the housing, financial and automotive sector, to think that online advertising will go on unscathed is foolish, but to alternatively expect a 50% decline in what is the only bright spot in all of marketing is equally foolish.
Caption reads: With this hand, I push my predecessor off the stage.
Subprime to Deflation: tag, you’re it. Subprime will go down as the “Word of 2008″ and trust me, “Deflation will be the word of 2009″. First some background:
Although the risk is still considered relatively small, concern about deflation is one reason stocks have been hammered this week, sending the broad Standard & Poor’s 500 to its lowest close since 1997 Thursday. The rapid slowdown in the economy, coupled with the collapse of housing and financial markets, has increased the threat of a broad, sustained drop in prices.
While deflation might sound welcome, in fact it can be devastating to borrowers, banks and businesses. The Great Depression in the 1930s was accompanied by deflation of 10 percent per year, reflecting the widespread lack of demand. Falling prices in the 1890s made it impossible for farmers to keep up with mortgage payments, as Fed Chairman Ben Bernanke noted in a 2002 speech on the topic.
As prices fall, consumers and businesses become less willing to spend and invest, worsening the economic downturn, as happened in Japan’s “lost decade” of the 1990s.
Yippie. No wonder President Elect Obama is set to announce his economic team on Monday… anything to get the douche bags running the show out of sight, out of mind, will be a Godsend. The problem is that we have a President in office who was absent for most of this tenure, and the one President won’t be sworn in for another 50 days:
President Bush has been noticeably absent from the machinations aimed at righting the nation’s financial course. Analysts and key players differ over whether President-elect Barack Obama should get his economic team in place and take charge, or sit back and await his turn at the helm.
“Somebody has to speak up soon,” said CNN senior political analyst David Gergen, explaining that he understands why Americans are growing anxious and yearning for direction and leadership.
“I think … sort of the bottom feels like it is falling out for many people,” said Gergen, who has advised four presidents. “They sense there’s a total lack of leadership in Washington, that the White House is silent, the treasury secretary has been battered, the Federal Reserve can’t speak up. These automakers come up to Capitol Hill and fail. And the president-elect is silent in Chicago.”
Read more. Wow, the Republicans just might get their wish: a socialist in the White House. Be careful what you wish for…
Between now and January 2009 though, we just might see Citigroup join AIG and Fannie/Freddie in the government’s hands. Alley Insider’s ClusterStock has some frightening reads:
- Citigroup F****d: Bear Stearns, Lehman Redux?
- Citigroup F****d: Merger with Goldman Sachs or Morgan Stanley?
- Citigroup F****d: Weekend Rescue
- Citigroup F****d: Why are you laughing, creditors? You’re f****d, too.
Hmm… deflation, heh? Maybe this is why Citigroup is falling… people know it will be cheaper tomorrow than it is today. Recall Citigroup was at $5, then $4… soon $3, maybe $1 soon?
You know the saying: “the bigger they are, the harder they fall”.
Citigroup was the world’s most valuable bank, this week it became the fifth, probably even lower right now.
In finance and banking, it has everything to do with confidence and right now, there seems to be absolutely no confidence in Citigroup. It does not help that American Management is corrupt, morally bankrupt and getting its due. Had America dared “share the spoils” there would be buyers out there, but a few have reaped the rewards at the cost of the many, and this is the result of all of that greed and excess. Said the poorman to the rich: “Payback is a bitch, bitches”.
Consumers are not buying homes, because they expect house prices to be lower one year out. Not surprising, when you consider that home prices have fallen in 80 cities.
It’s not just housing anymore: shoppers fear buying prepaid gift cards from retailers due to the threat that they might go broke. It’s more than a threat: Circuit City has filed for bankruptcy.
Automakers are trolling on Capitol Hill (and YouTube) asking for mercy and, oh yeah, $25B in bailout money from taxpayers. Consumers have already shunned Detroit’s cars, this is why they’re in this mess, but with the specter of bankruptcy, sales will fall even more.
Consumption has halted to a screech, no doubt, with a 1% growth in online commerce, which last year at this time was growing 17% year-over-year.
Add it all together (or subtract it all together) and you have a 2.8% decline in consumer prices.
PLAY
