Originally posted by Steve_S
It's going to get worse before it gets better.
I couldn't agree more.
Before Steve edited his opening post to clarify that "correction" in this context suggests a move in the positive direction, I had voted for Q2 2002 as a negative correction to offset the mini-booms experienced by a few of the more promising net stocks.
IMHO, we're going to see a W-shaped recovery, and are in the middle presently. Stocks such as Amazon (which was buoyed significantly by a tiny profit induced in part by favorable - read: lucky - currency exchanges and largely by the Christmas shopping fest), INT Media and Snowball (boosted out of penny-stock status for operating the largest independent Xbox site on the net), will be hit hard after releasing their 1st calendar quarter results, and former direct-marketing darlings such as the PPCSEs are already being devalued as investors realise that although they have sustainable business models and solid growth prospects, marketers will allocate increasingly large chunks of their online budgets to interstitials, mini-sites, banners, contests, coupon promotions and other branding-centric techniques as the real recovery draws imminent.
New accounting laws regarding the immediate writing down of bad investments will hit the big media companies and acquisition-hungry players such as AOL and Yahoo where it hurts, while Enron's collapse will take sizeable chunks out of the balance sheets of many of the big banks, fund managers and commodity traders - and it could still hurt the Bush team once trials heat up, even with possible witness J Clifford Baxter now out of the picture
. The scrutiny surrounding Enron will also force other companies who keep lossy operations under the annex of off-balance sheet companies to rethink the longevity of that strategy, and may thus bring losses back into the spotlight.
Not to mention that US stocks in general are still overvalued by world standards in terms of PE ratios, suggesting that if the growth expectations already factored into the market don't come to bare quickly, the major US indices will likely register big losses. This, added to the successful roll-out of the Euro and promising growth prospects in downtrodded Japan and SE Asia for 2003+ could see investors and fund managers move their focus to the foreign markets until things normalize Stateside.
Online, free hosts (and many ultra-budget hosts) will largely dry up, with a few stayers hanging around to pick up the pieces, and ad networks will continue to increase their competition for branded properties while leaving smaller indies on their own. This will additionally pressure indies to quit and publish newsletters, further their education or find traditional employment instead.
Email marketing will be squeezed as spam increases. Already, I receive about 300-400 spam messages a day, and it will be only a matter of years until the average AOL newbie is also subjected to this type of onnslaught, which will put email marketers such as NetCreations, YesMail and DoubleClick in an unenviable position of trying to cut through the clutter with technology and legislation lobbying.
Basically, I expect the consolidation to continue amongst the big players, and for smaller entities to either develop non-media interests or leave the net scene entirely. There will always remain hobbyists, but the gap seperating them from the big boys will increase.
Anyway, I know this has been a little pessimistic, but there are few indicators to suggest otherwise. Throughout the entire process, though, opportunities will exist, and as many Geek/Talkers have demonstrated during the past year, small and dynamic outfits will be able to profit from the emerging trends if they can handle the competition.
2 cents (and just a guess). Disclaimer: IANAL + IANAAFAOLSD - I am not an accountant, financial advisor or licensed securities dealer.