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With the New Year right around the corner and this being my last post for the year, I figured it was time to go on record with my predictions for 2009.

The last half of 2008 has been interesting and changed the dynamic in the internet economy as financial markets collapsed and the global economy faltered. This will set the tone for 2009.

Prediction #1: It Gets Worse

In December 2007, I stated "I’m not bullish on the United States economy" and predicted that in 2008 "The U.S. Economy Won’t Help Startups."

The global economy will get much worse in 2009. The United States, Europe and emerging nations will face tough business environments.

Don't let the recent rise in the US stock markets fool you - the chances that the recent rally has been a bear market rally are much greater than the chances that we've hit 'bottom'.

The underlying problems in the global financial system still exist and in my opinion haven't been substantively addressed. And there's far more on the horizon that could make what we've been through look like a walk in the park.

But even if government intervention in the financial markets manages to stave off Depression 2.0, internet businesses (and startups) will have a tough environment to contend with. Capital will be harder to find, customers and advertisers will be cutting budgets and taking longer to make decisions and M&A and IPO activity will continue to be very muted.

I don't expect anything to noticeably improve in these areas until late 2009 at the very earliest assuming the most optimistic recovery scenarios. More likely is the possibility that we're in a multi-year
downturn that will force many businesses (including startups) to scale back or close up shop next year. This separation of the wheat from the chaff, which is already starting, will be a good thing in my opinion.

Prediction #2: VC Layoffs

There are too many venture capital firms in existence today and they've raised far too much money. They've been able to do that thanks to the same capital glut that fueled the subprime mortgage mess that kicked off (but by no means was the sole cause of) the global financial crisis.

While there's no question that top-tier firms will still continue to be able to raise new funds, I think you'll see that most of it will be put to use in later-stage deals and in more capital-intensive investments like cleantech (which themselves are questionable).

I expect second and third-tier firms will run into trouble. Liquidity events are increasingly hard to find and because many of their limited partners are feeling pain from the capital crunch, some firms likely not be able to access capital that had been committed.

This means we're likely to see firms cutting staff in 2009. Some firms may even go out of business - especially those that invested heavily in cheap consumer internet startups.

Prediction #3: Businesses Get Back to Basics

Obviously, today's economic environment creates an imperative for businesses to get back to the basics. Revenue, cash flow and profit will trump reach, clicks and pageviews. In 2009, it's all about the bottom line.

'Getting back to basics' has a broad impact. For many online businesses, a focus on the bottom line means working to improve SEO, managing CPC campaigns more closely and focusing on ways to maximize the conversions realized from traffic already acquired.

In this sense, I believe 2009 will be an important year for digital marketers who have focused less on experimental marketing and more on the solid (but less sexy) arts that include SEO, A/B testing, etc.

To be sure, 2009 will be tough for everyone but I do think that those with expertise in these areas will find 2009 to be a year in which they can become even more invaluable to their clients and thrive, relatively-speaking.

Prediction #4: Save Money, Make Money

In tough economic times, the saying 'A penny saved is a penny earned' is never truer. Thus, if you're running an established business or thinking about starting a new business, some of the best opportunities
will be created when you establish the most simple of pitches - 'This will save you money.'

While it should go without saying, if you're selling products and services that don't offer an immediate ROI, you're likely to face anuphill battle getting prospective customers and clients to write
checks. Therefore, companies and entrepreneurs offering solutions that can demonstrably save their customers will survive and thrive more than their less utilitarian cousins.If you're an entrepreneur, creating products and services that can help businesses save money is a good place to look for opportunity.

Prediction #5: 2009 is Not the Year of the Mobile Internet

The mobile internet has been coming into focus and it will continue to progress in 2009 thanks to the growing number of smartphones in the hands of consumers. But 2009 is not going to be the year that the mobile internet becomes a bonafide mainstream money-making opportunity. This doesn't mean that you should ignore the mobile internet or not try to take advantage of it as part of a broader strategy but for the vast majority of companies and entrepreneurs, investing in dedicated mobile internet efforts in 2009 will prove a waste in my opinion.

Prediction #6: Facebook Starts to Falter

Most of my predictions thus far are admittedly based on common sense observations (although common sense isn't so common these days).

Since I have to go out on a limb with at least one prediction, I'll predict that Facebook will hit a very clear rough patch in 2009. Already all but one co-founder (Mark Zuckerberg) has left, it has reportedly missed its 2008 revenue targets, estimates for spending on social networks in 2009 has been cut, questions about the company's ability to monetize are only increasing, its focus on international growth creates a poor revenue-to-cost equation, valuation is an issue, without liquidity attracting and retaining good employees is difficult and the company is reportedly shopping for hundreds of millions of dollars more in funding.

These are all red flags and barring a dramatic reversal of fortunes, I think there's a decent chance that Facebook will cement itself as the Bear Stearns of Web 2.0 in 2009, especially if the global economy gets as bad as I think it is likely to.

Conclusion

Will my 2009 predictions prove as accurate as my 2008 predictions? Time will tell.

To be sure, 2009 is going to be a challenging year and there's a lot of uncertainty. How governments around the world react to the situation will play a major role in determining how long and deep the downturn lasts (and whether or not another bubble will quickly form). Regardless of this, the situation going into 2009 shouldn't be looked upon as entirely negative - challenging business environments do offer their own unique opportunities and I think many businesses and entrepreneurs will ironically find 2009 to be more rewarding than 2008 - if even if the rewards are harder to obtain.

Enjoy the holidays and may your 2009 be filled with positive cash flow.

Drama 2.0

Published 17 December, 2008 by Drama 2.0

237 more posts from this author

Comments (1)

Stuart Greenfield

Stuart Greenfield, Director at Greenfield Strategic Marketing Consultants

There are going to be a lot of these 2009 predictions over the next two weeks so well done to Drama 2 for starting the ball rolling. I have a few more predictions to add ..

1. Corporate Social Networking will become the norm across all major companies websites. These portals will be great for recruitment, keeping hold of retired talent and, of course, creating more of a conversation with suppliers and customers. For most 40+ people FaceBook and Myspace are just too wide and the focus of a corporate networking space will work for many. Linkedin will also grow and benefit from the downturn when managing closer relationships will be key.

2. Bandwidth and Security
I predict that there will be some major scams and security breaches in all the major browsers and many of the older web1 sites will be under threat. Edge Caching will become 'subjective' and Google will offer some 'Silver' services for those who want to pay.

3.Banner advertising and affliliate marketing will suffer a major slow down and many of the major networks will suffer financially

4. The number of digital and conventional  agencies will drastically reduce with a hundreds of bankrupt businesses and big mergers at the top end.

5.Microsoft will buy Yahoo

6.Twitter will be purchased by Microsoft

7. Podcasting will be the fastest growing online comms addon for businesses

almost 8 years ago

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