We've used Yahoo (YHOO) as somewhat of an example as to what the condition and direction of the online ad market is at and going. Part of the problem that Yahoo has is self-inflicted and will take some time for them to get a hold of. Does that mean that there is no concern about the overall online ad market?
While I do believe that the online ad market will grow for years to come, there are some things to keep in mind as we go along.
The problems in the auto and financial sectors are real. What happens if they continue on and the ad market drops a lot further? What can be done to prepare for that?
These are legitimate questions that need to be answered. The major companies that will be hurt by those that are the biggest advertisers will be those that aggregate information or portals. They are vulnerable because they rely upon a few huge customers to drive the majority of their ad revenue. That is always a risk to anyone overly reliant upon a few customers.
The other question we need to answer is this: If the auto and finance industries lower their spend in a large way, will that cause other sectors to shy away and slow down their spend as a result? In other words, will the whole advertising industry slow down across all sectors and platforms? We need to be aware that it's a possibility - although a slim one.
My thought is that those that are in niche markets will be the safest companies in the online ad model. Sure, there could be possible disasters in niches too that could cause advertising to plummet. That's why we don't put all of our eggs in one basket. Have at least several niche areas you do business online in to combat that possibility.
The bottom line is that even if things eventually slow down in this sector, it will still grow tremendously over the long haul.
Remember that to be in the ad business is to be in a business of cycles. Don't let some seasonal slow downs stop you from keeping the course. You'll be rewarded great if you do this right. Understand it and prepare for it and you won't be surprised when things happen. Yahoo shouldn't have been.
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