Tag Archives: recession

Black Friday Shopping

I just read an initial report out of ComScore indicating this year’s Friday retail e-commerce numbers were up slightly over last year.  Online, nontravel e-tailer sales grew 1% for the day to $534MM from $531MM last year.  For the month of November, retail e-commerce sales were down 4% from last year’s numbers.  The National Retail Federation, on the other hand, is forecasting an increase of 2.2% for the full Thanksgiving weekend (with only Sunday being an estimate), on total spend of $41 billion and average customer spend up 7% from $372.57 to $347.55. 

All in all, I’d consider the data to be encouraging (relatively speaking).  It seems to me all retailers were very concerned about spend and pushed heavy discounts to the forefront to ensure the holiday season got off to a good start.  It may not bode well for retailer margins, or for the overall health of the industry for that matter, but at least a strategy of heavy discounting did create elasticity and spend with consumers.  It would have been far worse to heavily discount and feel like one was simply pushing on a rope.  People could have easily refused to put any money out this holiday season, and frankly I would have guessed we would see declines in spend.  I’m still not sure I believe the increase in average purchase size.

Walking around, things seemed to be pretty busy.  I put a couple of pictures from Macy’s and the Apple Store in NYC this weekend below.  They were jammed.

Apple Store NYC


The next step is to see whether people have “forward bought” and all retailers have done is rob from tomorrow to get paid today.  I noticed several retailers offering discounts for future period purchases.  For example, at Banana Republic, upon completing a purchase, they offered a card for 20% off any item between December 2 and 22nd.  The goal is clearly to get me back into the shop.  It will be interesting to hear the data come in over the next month.  If anyone has other good anecdotal data, would certainly love to hear it!

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Advertising in 2009

As many of you know, Ad-Tech is in NYC this week.  It’s a great conference that brings together some of the leading traditional and digital thinkers to explore the latest topics affecting the industry.  The timing of this Ad-Tech was particularly interesting given the broader market environment. 

I had the pleasure of being on a panel entitled “The Digital Economy” with David Moore of 24/7, Bob Raciti of GE, Imran Khan of JP Morgan Chase, and moderated by Henry Blodget.  Much of the discussion focused on the state of the online advertising market.  I thought I’d share some of my predictions:

·      2009 will mark a very, very tough year for overall advertising, and I would not be surprised if the total ad market (which exceeds $230 billion) declines by 10% or more.  Mary Meeker had put out an interesting analysis that showed the correlation between GDP and advertising spend at 81%.  Based on that analysis, at a 0% GDP growth rate, one would see a 4% decline in overall advertising.  With a 2% contraction in GDP, one would expect to see 8% decline in advertising.  I believe 10% is a real possibility.

·      There will be a continuing rotation of dollars from legacy advertising markets to online advertising.  The overall online advertising market (which is only $25 billion out of that $230 billion pie) will grow, though at much more muted levels than the 15%+ currently predicted by the market.  More likely is mid single digits overall.  History shows that advertising eventually follows the user, and given how woefully behind ad dollars are to the time spent online, growth should be expected.  This will be offset by declines in the unit pricing, both on a CPM and CPC/A basis.  Clicks or actions won’t matter if the consumer cannot ultimately convert because they don’t have the money.   

·      We will not see the 25% drop that we saw between 2001 -2003, for two reasons:  1) Overinflated tech startups are not buying from other overinflated startups.  Online is mainstream and touches nearly every industry in a meaningful way.  2)  The inventory being offered has evolved from display only many years back to display, search, SEO, email, lead generation, affiliate, etc. 

·      This contraction could put MAJOR pressure on the traditional media players.  In particular, I worry about the newspapers, who still generate over $38 billion in advertising, with content that is often readily available from hundreds of sources, including blogs of which many are viewed as more “authentic” to young readers.  I think we can see some major failures over the next few years.  Those who produce premium content, or content that has a high cost of production, controlled distribution, and long shelf life (eg the networks, film studios, etc) will have to work through their transitional issues and the current tough environment but will survive and thrive online.  

·      Within online advertising, consistent with prior recessions, we will see retrenchment to direct response/performance oriented spending.  Search will grow much faster than display, as people will release dollars only to the extent they are certain they will see them back very shortly. 

·      Other areas of robust growth will include online video and in gaming advertising, as people increase time on leisure entertainment.  Online video will get even more compelling as we get beyond the pre-roll only.  There is such a rich opportunity to make advertising within a video context so much more engaging and real-time.  You can engage the users with calls to action, can make real time “hot lead” phone connections, can offer incentives to induce immediate behavior.  We should watch for some exciting innovations.

We are still early in many aspects of the online revolution.  One of my companies, Conductor, just released a report that showed over 75% of the Fortune 500 have no presence for their keywords and brands in the natural search domain.  Consistency of measurement has continued to prove a challenge to unlocking more spend.  We have plenty of data, just no good idea how to agree on it.  Increasing fragmentation in the sources of online spend in a market where people had enough to do with just TV and newspapers will require much more robust technology for automation.   The whole concept of de-portalization and free flowing content will necessitate a re-writing of all of our Web 1.0 and 2.0 tools.  There is still a lot more innovation needed to move the rest of the $200 billion or so that is not yet online, and so while the short term market looks tough, the long term opportunities remain exciting.

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