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Old 03-23-2001, 01:00 PM   #1
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The internet economy gave a freakishly positive performance, for a while, because everybody wanted to get in on the ground floor of the "next Microsoft". Fine. They didn't.

The ridiculous stock valuations evaporated, and everyone had a lot less cash to throw around. Thus the end of the high CPM banner ads and the high payouts by most search engines.

I believe that the internet economy will grow, and support a certain number of businesses. Unfortunately, there are people who believe that the economics of the internet over the past two or three years were normal or sustainable. They will be disappointed.

It will no longer be adequate to tack ".com" onto your name for people to start throwing money at you. People will succeed through hard work, rather than some pie-in-the-sky internet-land-grab economic trickery.

The easy money is gone. If you can't deal with that fact, then you'd better make other plans. Other people are hustling at this minute to generate real products and earn the real revenue that is possible using the internet.

Oh yes. I believe the correction will have to wipe out all of the ridiculous gains and then some, before things start to rebuild. I'd be looking for a Nasdaq composite at about 1100-1500, and a Dow at about 7-8000.
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[This message has been edited by musicinsight (edited 03-23-2001).]
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Old 03-23-2001, 01:26 PM   #2

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Of course, we all know the reasons explaining the tech stock boom and consequent crash in hindsight. That is, the desperate desire to establish 'first mover' advantage, to grow global market share regardless of cost, ignorance as to how business models would need to be adapted to suit the online environment, etc, etc. Once investors started doubting such principles, they sold out with almost the same level of exuberance with which they bought in the years before.

Investment dollars didn't come just in terms of VC funds, public market support and angel investment, but advertising. The heady ad rates of 98-99 were a direct reflection of the health of the tech/net sector in the market.

The burn caused by the busting bubble have forced web businesses to return to Business101. We've been forced to re-evaluate our business plans with goals more consistent with becoming profitable, rather than simply growing in terms of popularity.

Many companies have already declined to the point at which it will be incredibly difficult or impossible to break even, regardless of whether they make an effort to turn around presently. As such, we're likely to see a few more large dotcoms liquidating during the coming months.

On the other hand, those who are able to plug the holes in the overly-optimistic business plans they developed during one of the greatest bull markets of all time, should be able to reverse the trend. Web-based firms are now waking up to the fact that they cannot continue to survive on ad revenues alone (while 'giving away' products, services and original content). These will launch fee-based systems so as to offset their costs with funds from their users.

The flow-on effect from this (and the closure of many also-rans) will be a greater balance found in the supply:demand ratio. As more services become fee-based, more ad dollars will flow into those sites that remain dependent upon such revenues.

Many analysts expect ad revenues to drop throughout the better part of this year, and I have to agree. I'm a little more optimistic than Steve, though, and expect ad revenues to begin their skyward climb during the 3rd-4th calendar quarter of this year.

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Old 03-23-2001, 01:40 PM   #3
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Great post Steve ... i was thinking of posting the same topic http://geekvillage.com/ubb/smile.gif

in my opinion,

the end of the internet recession in either the end of 2001 or early 2002 ... and the economy will need a quater or 2 to settle down everything and rebuilt the confidence towards so call 'dotcom' companies ... due to the extrame low price of the shares by that time, investors will start investing in nasdaq and will slowly increase the confidence and thus the internet economy will slowly pick up ... i think the pick up point should be around mid 2002.

as the internet usage is increasing around the world and there is still a huge gap to grow ... internet marketing or advertising will not just vanish in the cyber space and after few years later people will forget the terms like CPC and CPM ... this is impossible and will not happen in the future ... the good old days of $20/cpm will not happen, as after the failure/experience the dotcomers will spend their money wisely ... so maybe we will get something like $2/cpm

well i think what all of us should do is tried our best to hold on and 'keep breathing'! ... but another important factor is that the overall economy around the world is slowing down and everywhere and everyone is trying to retrech workers ... so if US economy doesn't pick-up by the end of this year ... we might have to wait longer for things to get into shape ... http://geekvillage.com/ubb/frown.gif

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Old 03-23-2001, 02:03 PM   #4
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Ok, I'm going to take a much more optimistic SWAG at this than any of the previous posts.

I think the economic downturn has been largely caused by the burst of the dotcom bubble. The good news is that all those highflyers have either already gone bust or will in the first half of this year.

After that the recovery will accelerate. I think we will see improvements by September. We just have to hang in until then.
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Old 03-23-2001, 02:15 PM   #5
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I agree with all posts above but want to add just one thing:
Let's be more optimistic. It's getting harder and harder to get revenue from our sites but that is a good chance for internet market to become more strong and profitable.

As I see there are many webmasters who started their paid services or sites which depends on sales not just CPM or CPC.

If you can offer some really good service or product You don't have to wait till any quarter.

Just my 2 cents

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Old 03-23-2001, 02:23 PM   #6
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Personally I doubt that things will ever return to how they were, even when the market rebounds

The reasons I think are
(a) investors will be much more savvy (or skeptical depending on your point of view) about how their money is being used
(b) I doubt many new corps are going to be founded with the philosophy of "let's spend $100m on banner ads/building an audience/etc" and then figure out if we can make a profit.

This is not to say there will be no new ideas, or new ventures (IMHO the Internet has barely started yet compared to what it will eventually become), but I think they will be spending their money very differently than in the previous set of "new ventures".

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Old 03-23-2001, 02:27 PM   #7
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>I have in the capital markets as well as the Real Estate industry. My experience doesn’t make me the definitive word or even an expert.

In the real world, I am heavily involved in commercial and residential real estate, wholesale distribution, and financial management. Let's just say I've been around long enough to have worked selling computers for Burroughs -you know it as Unisys- in the early 70's. In the virtual world, since '95 I've developed and run a network of travel and relocation guides which dovetail with real estate interests. My crystal ball says:

Advertising and affiliate networks will never return to anything like their previous levels for anime, game, sports, freebie, celebrity, or community/board sites. I think these sites will be lucky to keep what's available now. Some of these will convert to a subscription model and/or product tie-ins and make it financially, but the vast majority are going to be struggling to pay bandwidth charges.

On the positive side, I see niche content sites and specialized search or directory sites doing well if they can achieve critical mass. I think the new ad sizes, sponsorships, some affiliate relationships, and even good old 468x60 banners will all cause a revenue rebound for them, and perhaps as early as 1st Quarter 2002. The "old" ways, banners and buttons, will not come back to the $20 CPM levels for most, but the $7 range is likely for sites that can display a proven demographic and at least some degree of targeting. The available selection of advertisers and affiliate merchants is going to continue to drop at nausea-inducing rates for at least the next six months, then start to climb back. The new advertisers are going to be recognized real-world brands doing CPA deals. CPM and CPC will be there, but doled out mostly to trusted, proven sites that have cultivated their relationships with the ad networks.

<edit: change date to 2002>

[This message has been edited by dbcooper (edited 03-23-2001).]
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Old 03-23-2001, 02:54 PM   #8
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Why should the vast majority of anime/gaming sites have to suffer bandwidth problems? I can understand how any site that is heavy on multimedia will have bandwidth problems. But alot of sites with mostly text based content should not suffer from this. I run two anime sites and none of them have bandwidth problems.

If my visitors increases 10x I still will not suffer bandwidth problems. Currently I have a very small overhead and I make 6 times more then I spend for one of my anime sites. That site has no media clips, image galleries, or anything of that sort. My main anime page is is a different story but my costs are not overwhelming. Our new design will also cut the page sizes in half.

I think my main reasons for not having such a huge bandwidth problem is that I never planned on making a whole lot. Earlier sites that were based on heavy multimedia files were expecting to make a certain amount of money. Because they made enough money they were able to afford the high bandwidth fees. Now as banner prices have lowered their business model (should we even call it one?) also went down the drain.

While I still think that if you cannot get atleast 1.00 CPM (using all your programs)their is something very wrong because my site(s) are in a very undesirable category (as far net advertising goes).

So far my future looks okay... My overhead is several miles below the revenues the sites pull in.
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Old 03-23-2001, 03:30 PM   #9
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Things will get worse before they get better, and I agree
that they'll probably never be as good as they were.

I'll still be here though http://geekvillage.com/ubb/smile.gif

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Old 03-23-2001, 04:40 PM   #10
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Internet Consumers have lost alot of confidence in Internet Busineses in general.

Besides the Fraud epidemic, other "reputable" companies simply didn't deliver what they promised. You can only spit in someone's face so many times before they turn and walk away.

eToys, and many others simply didn't respect buyers in delivering products on time as promised. Myself, I could never trust any of these companies to get something to me in time for a Holiday, or what have you.

They've made their quick money. They've burnt the forest, and now they move on.

We are still here working in this burnt forest, and must have the confidence that we can replant, and maybe things can be better than before one day.

We, the Webmasters, make this place we call the Internet. We helped these companies do what they did.

Many of us (like these companies) were greedy for the fast buck. We failed to care who we promoted, along as they were paying us top dollar.

GoTo disowns you, after you helped them rob advertisers? Well, they're through with ya cheaters! They've teamed up with reputable Disney. You know, the company that cares alot about Mickey Mouse's image, but as far as their Internet image...??? They deserve GoTo.

May they both GoTo--->Hell with the forest they helped to burn.

God help us all. Don't miss Confession.

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Old 03-23-2001, 05:15 PM   #11
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Good thread!

The current downturn is simply a function of economics, many markets in the past have experienced the same boom/bust nature, such as the tulip bubble in europe. Markets go up and down that is a fact all around the world. The most important thing to look at is long term trends in growth.

Looking long term I am very positive about the long term growth of the internet. I personally believe it will outperform most other sectors in coming decades. Since my speciality and expertise are in IT/economics I feel that any common sense investments I make in my own websites will give good long term returns.

But always remember diversity is key, do not put all your eggs in the internet basket. If you can keep your real job dot it and try to have other investments.

The other factor I see as important is that of unused capacity. The fact is that only a small percentage of the Earth's population has internet access. While growth is slowing in the developed nations the potential in economies such as India and China alone will provide much of the fuel the internet will run on. These two economies are developing rapidly and have increasingly well educated and IT savvy populations (China has over 1000 universities!). Watch out for these guys, the internet is the most level playing field that I know and as hardware gets cheaper and cheaper the developing nations of the world will be able to compete.

I have got much more to write but I am about to time out. I will come back later http://geekvillage.com/ubb/smile.gif

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Old 03-23-2001, 05:25 PM   #12
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About those Indian's how many of them are we importing daily? They are coming in flocks for various IT jobs. It shows that their are plenty of development going on in those countries. Something that the media doesn't really cover. Instead they show all the poverty stricken people on TV.

[This message has been edited by Kaiosama (edited 03-23-2001).]
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Old 03-23-2001, 05:37 PM   #13
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From my perspective, the banner advertising market will either be successful, or will fail (I'm really going out on a limb, huh?).

If it's successful, then we're all happy. We, as publishers, can live with the technology the way it is (but not the current payouts).

If it fails, then content publishers will only have limited options. Subscription-based, micropayments, or CPA-based revenue.

I've seen an article describing why micropayments won't work -- because the choice of paying for something you haven't seen yet is a choice that most people won't make.

Subscription-based won't work either. If cable-tv was only pay-per-view, would you subscribe to cable? That means that people won't pay their ISP $20/month if they have to subscribe to every piece of content on the internet. A couple of sites with subscription models are OK, but not the entire internet. That model just won't work because there is a finite amount of dollars out there for content, and few people pay for content directly in the real world.

We've already proven that for the most part, CPA does not work for content sites. It works for a few sites that are focused on pushing their CPA vendors, but pure content sites can't survive on those crumbs, not without compromising the content.

We also know that if advertising becomes more "in your face", people will block it, pure and simple. People don't want advertising in their face.

So if advertising fails and other revenue methods available to publishers fail, that means that online content, and the internet, will fail.

But I don't believe that will happen. The internet is just too good for that. Online content has far more benefits than traditional media -- which is why I can't picture it disappearing. Do I know what will save it? No. But I know something will, because it's too good for everyone to just collectively walk away from it.

Before the internet, could you see a picture of MIR falling the day it happened? Could you look up an actor in a movie that just debuted yesterday and find out what else you saw him in? Could you check to see what position you finished in for the marathon you just ran? Could you get the scores of the game that just ended to see if Mark McGwire hit another homer?

No. These are all things that are now possible because of the internet. The genie is out of the box, and people like those things. They just don't like to pay $10/month for each thing they like to do on the internet. They don't like to pay $0.01 to view a page which may or may not have the information they're looking for. And they don't want to fill out a credit card application when they're in the hunt.

When an activity occurs that takes up so much attention from so many people, and that activity is taking people away from watching TV, then eventually advertising will flow.

The problem is, no internet company can compete with the TV networks. TV viewership is down. Are ad rates down? No. They're up. Where's the logic there? Well, there are only a handful of TV networks, and they know the benefit of not cutting each other's throat.

On the internet, anyone can create an advertising network. So there is always someone to undercut you. That's a problem. The internet ad networks will need to get stronger. They will need to stop undercutting each other. They will need to take their networks and differentiate them from the small guys. Then they can enjoy the status and profits of a true network.

But I don't see many doing that. Most are just leading the stampede to their own graves. "$1 CPM is too high? How about $0.50? What, you're only getting 5% CTR? Let's make the banner bigger. Let's only run it on sites who get more than 10% CTR.". They're just following the money. The advertisers are having their way with them.

Solution? Get more exclusive. It's the only way. Stop taking sites for impressions. Take them for impressions + quality. Work with the sites. Help them turn into something that the advertisers will want to be associated with. Stop running ads on "spread-your-legs.com". Stop the fraud.

That's my view of what is to come.


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Old 03-23-2001, 05:40 PM   #14
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Q1 of 2002 definately seems to be the period markets are looking for the upswing.

I believe it also has to do with how the big internet companies are doing. Isn't amazon suppoused to pull in a profit by q4 2k1 or q1 2k2? If they miss it, and formerly profitable companies like Cnet keep struggling, the market might not rebound at all.

Imo, its all in the confidence, and if the big ones dont make it, the rebound not might even happen in 2k2.
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Old 03-23-2001, 06:23 PM   #15
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My thoughts regarding Making Money off of our Sites in the Future:

Advertising will never go back to where it was. Various forms of advertising will continue to replace the banner, but each will come down to ROI once it becomes old. The absolute largest, best brand name sites in the field will be the ones where companies do not look for just ROI (though, this will certainly be a concern). On all other sites which are not an industry leader, advertising will be at such a rate where the advertiser can achieve a ROI.

I strongly believe the new way sites without large brand names will make money is through better affiliate programs. Within 2-3 years, once merchants finally realize the benefit of affiliate marketing, there will be some really great affiliate programs out there which benefit both the merchant and the web site owner (right now, the vast majority of affiliate programs are weighted towards benefit of the merchant).

The alternate way would be with subscription or micropayments. Paying to see all of the content of a site will not work in my opinion. What I believe will work is building an incredibly strong community and offering certain advantages to those who sign up for a one year's subscription. These advantages could be anything from turning off all ads on the site or allowing certain cool features when communicating with the community.

If your site doesn't have a great brand name, can't produce money for someone else in some way, or cannot in some way have a subscription component, then you won't be able to make money from it. I feel this is how it should be.

That's how I saw it. Here's how I prepared for it:

- I stopped work on my largest content site because I doubted its ability to sell products in the future. The site was not well designed for this. The chance of it becoming an industry leader (if I continued working with it) is slim to none.
- I have moved most of my work to sites which promote affiliate programs. If the program is good, then I sell their products. This is where the majority of my income comes from these days.
- I am considering continuing to create some content sites in the field of my previous content site (gaming). However, any new content site I create will focus on getting the visitor's E-Mail address in the form of signing up for a newsletter. This makes it much easier for me to sell to that visitor.
- I am looking into creating my own products to sell.

I made these decisions in July of 2000 after being 100% sure the banner market as I knew it was going to die. At this point, it is definitely paying off. I feel much more secure in knowing I am actually selling a product for companies. I am certain the companies I affiliate with want me to continue with them because I know they are making money off of our partnership.

That's what I did. How is everyone else preparing?
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