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Stream >> From Global Economic Crisis to... Online Crisis?


From Global Economic Crisis to... Online Crisis?

Published: August 17, 2012

Edited: December 25, 2013

Are we nearing another e-business environment crash like the "dotcom bubble"? It happened before, it could happen again.
We're living in a global economic crisis. Could an online crisis happen?

But will the next "dotcom bubble" rather be an online recession-like phenomenon? It's imaginable that because of the current global economic crisis, the 4th sector could be affected indirectly.

If this happens, it will be the first time in history when the online business environment will take a powerful hit from the phyisical environment.

For now, online businesses have been thriving, despite recession hitting so many countries in the World.

In fact, e-commerce, for instance, has evolved further, just like the online travel industry. More and more e-content-delivering sites have appeared, profits were on the increase even during these hard times.

But will it continue like this?

Eventually the bubble will burst. There are opportunities online, just as there are opportunities in the real, physical World. And, after a while they run out as they get over-exploited.

Causes are multiple and if we take the time to think about them, then we'll understand that the risk of an online recession is rather high... There could be 3 main reasons for such an event.

The Effects of the New Google Algorithms

Google has been punishing sites with its new algorithms for quite some time. Entire business areas have been negatively affected. The advertising industry is among the most severely-affected fields.

Nevertheless, the new algortihms have substantially affected the profits, the direction and the intensity of money's flow in the online environment.

The results of these algorithmic changes: lower profits to certain advertising agencies (particularily the ones promoting traditional SEO), once powerful agents went bankrupt, weaker small sites found that breaking in today will be much harder for small businesses etc.

The online advertising sector has been most affected. Because SEO is a more delicate issue today, companies have a more reserved attitude towards buying ads on websites, turning to 3rd parties to keyword-optimize their pages.

All of these will affect the incomes of the online marketing environment, potentially reducing cashflow. But this is extremely difficult to measure. We only have figures from some of the biggest players in the World, although the small firms have seen the worst times.

But another scenario (the better case) would be if all these funds would be spent on other services (such as Facebook advertising, video marketing, social media network building etc.).

Either way, the online marketing industry is bleeding and this will leave its mark on e-business.

The Indirect Effects of the Global Economic Crisis

Seems like certain sectors of the economy are also suffering in the online environment. Travel agencies and car sellers are among those most powerfully affected, because during crisis, very few people buy "unnecessary services and products". People travel less, they spend less on entertainment, but they save less.

The 4th economy overall seems to be doing well, as ecommerce sales are rising both in Europe, Asia and the USA., eBay and online marketing firms are also reporting increase of revenue.

However, the affected branches of the economies could indirectly influence the online environment and this could propagate into other areas of e-business, including the advertising services.

The purchase power is slowly weakening in peripheral Europe, but in the USA as well. And, because people are saving more, there will come a time when they will think twice before they buy anything online.

Online Market Saturation

In 2012 the internet is almost saturated today. But few are putting themselves this question.

Search engines show an incomprehensible huge number of competitors in their results and, getting into the top 100 in Google is already a hard struggle (some still have the old habit of "trying to get into the top 10", many still dream about becoming the 1st in the results).

Free search engine traffic is harder to grab, as there are far more sites competing, algorithms and filters are more stringent than ever, but the number of places, spaces, positions in search engine results is still the same!

Small firms will pull the short straw in this, as Google's Panda, Penguin and even the Page Rank system favors the big players.

The online market can also become saturated. Then the dotcom bubble will burst again. There will be far more sites, services, products and intermediaries (online marketing firms, for instance) than the market could feed with revenue. Just like in the real economy, this will lead to an online crisis.

The online environment is also full of speculative intangible activities. Let's just think about the advertising field: featured ads, PPC advertising, content optimization etc. Many of us are actually buying ads to feed our ad-displaying systems, hoping for a higher CTR, thus higher income.

It's basically ads for ads. Similar to the "credit for credit" situation in the real economy. Eventually a peak will be reached and the bubble will burst. It's just a question of time.



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