Looking for Bright Spots
While the gloom and doom has been the prevalent sentiment so far (see Part I), a few folks dared to share more optimistic views (see this post on Webmonkey, for instance). We also decided to chip in our two cents and look for some bright spots in the sudden darkness descending on the web industry. Here are a few ideas:
The most cheerful news, perhaps, came two weeks ago from Google. Following up on its long-time promise that on-line advertising fairs better in tough times than traditional ads, Google announced a healthy 31% revenue growth in the fourth quarter. This surely is a welcome sign for the web industry at large as online ads remain the monetization vehicle of choice for many if not most of its outfits. Pundits, however, were quick to point out that Google is different from the rest of the industry in that it extracts the bulk of its revenue from search advertising. The latter, of course, remains the most attractive and fastest growing segment of the online ads market. Regardless, we agree with the underlying logic that as corporate advertising budgets tighten up more money will be shifted to the Web, which in many cases provides a more effective and cost efficient way to reach the customer.
Another bright spot was a sharp increase in user activity recorded by professional social networks, such as LinkedIn and Xing. The rational here is simple – as people become less secure about employment, they take steps to improve their chances of finding a new job in case they need one. Hence, users spend more time updating their profiles and working their personal connections on LinkedIn, Xing, etc. In addition, new members from hard-hit industries join the networks in hordes. New memberships from the financial industry, for instance, have doubled on LinkedIn recently. Ideally, the networks will be able to ride the momentum, expand their value proposition to members, and create new revenue sources. This seems to be the idea behind the latest move by LinkedIn to offer a set of business applications to its users.
On the Enterprise 2.0 front, Forrester just two weeks ago reiterated its forecast that financial services firms will increase their reliance on social media and interactive marketing to attract new customers. To succeed, the firms will need to offer an improved Web experience that builds upon the Web 2.0 philosophy. Whether this trend will translate into bigger spending on Web 2.0 apps remains an open question. In another report issued on October 9, Forrester suggested that while the overall interest in the enterprise Web 2.0 solutions continues to grow, vendors should expect an erosion of profit margins due to commoditization, bundling, and the entry of traditional software players.
A somewhat related idea that has been bounced around within the distressed Wall Street IT community bets on the repeat of the SarbOx effect. As stricter regulations make their way into the financial industry (which at this point is dead certain to happen), they will fuel demand for new software compliance tools. Many of these tools are likely to be web-based, thus creating new opportunities for the vendors.
To wrap up, there is no doubt in our mind that the pendulum once again has swung for the web industry. Belts will be tightened, pragmatism will return, and a few high-profile firms may well go under. What hasn’t changed, however, is the excitement and almost unlimited possibilities that the web brings about transforming the ways people live, play, and work. So, by the time optimism returns and new ideas once again start to get traction among users and investors alike, we hope that someone out there comes up with a better name for the new wave of web-enabled innovations rather than Web 3.0.
