There is a 50/50 chance of an economic recession and the advertising industry has already factored in the softness for their 08 revenue forecast. One bright spot would be the Internet sector. This time around the budget cut will go to print and TV, the “engagement” and “measureable” nature of the digital marketing will make the industry resilient even if there is a recession.
Take a look at the valuations of many Internet companies and they do look like some value buy, with 2008 EBITDA mean and median multiples of 15x and 12x,respectively. I think we are still looking at 20-25% overall online ad growth this year versus 2-3% for all advertising (this is the US, Asia will grow at 6-8% with China at 18-20%). The explosive growth of social media will gradually be monetized as media owners harness both behavioral and contextual ad technologies to trigger a step-change in the profitability of consumer-generated content. This is the next phase of a much deeper commercialization of social media. It is interesting seeing how search is holding its own, dominating all other formats and becoming a US media channel in its own right. It is almost a sub-industry within the whole internet space and is dominated by one company. Search will not be slowing down at all and will take dollars from traditional customer acquisition mkt budget.
Consolidation will continue on mid-scale particularly on social networks and I don’t expect any mega-mergers such as Microsoft or eBay buying Yahoo etc. May be 2009.
