How Advertisers and Ad Tech Can Survive the Tough Times Ahead
The Federal Reserve Board recently approved a fourth consecutive hike of its interest rate by three-quarters of a point, which signals that general consumer inflation is likely to be with us for a while, certainly deep into next year. Taken together with the intense pressures on energy markets from the Russian war in Ukraine, this means we all need to be prepared for some tough sledding ahead.
I’ve run technology businesses in the advertising industry for almost 28 years, so I feel like I have seen this movie before. I suspect that we’re going to face something along the lines of the impact from the dot-com bubble bursting in 2001 and the significant slowdown from 9/11 in 2001.
Advertising is very sensitive to inflation and dramatically slows down with recession. Money spent to acquire new customers tends to be the first money cut when things are tough, and the last added back when things get better.
In 2000 and 2001, I watched literally thousands of companies go out of business. I don’t necessarily expect the same to happen now, but everyone needs to understand that we’ve been living off a 14-year bull market run, with interest rates so low that the cost of capital to companies was almost zero.
That’s all over. Here's some unsolicited advice to companies for surviving the hard period to come:
Conserve cash. Cash is king. Get it. Keep it. Be super-careful in spending it. Time will only make cash harder to get.
Replan and rebudget. Assumptions made in 2021 and earlier in 2022 -- particularly about sales, pricing and revenue -- are now wrong for sure. Waste no time redoing and stress-testing those plans and assumptions like you never have before.
Strategize recession opportunities. With economic hardship can come opportunity. Find places to win when others are going to lose. Many companies can grow share in tough times. Make sure you’re one of those companies.
Focus on talent. The available talent pool is going to expand significantly. If you are growing, this is your chance to bring in new talent and raise the bar for your entire team. Tough economic times create uncertainty and anxiety for everyone. Make sure your stars know that they're stars.
Get started yesterday. I’ve seen enough of these moments to know this one hasn’t really started yet for most in the world of media or ad tech. Yes, I know we’re already seeing tough earnings reports, weak guidance, hiring freezes and muti-thousand layoffs among companies in our sector. It will get worse before it gets better. Don't dawdle.
This part of business is rarely fun, but it’s a time when you can make a real difference. Don’t waste a crisis.
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An earlier version of this blog was originally published by MediaPost.