Advice about the potential impact of a recession on tech stocks:
- The tech sector may not be as severely impacted as other industries during a recession. The blog post notes that while the broader market was experiencing a “reset”, the tech sector was not yet seeing a bubble or recession.
- Many tech companies were using funding to build sustainable businesses and communities, rather than just cashing out. This suggests a more mature and resilient tech industry compared to the dot-com bubble.
- There are indications that certain tech sectors, like social media and online advertising, may even thrive during a recession as companies shift marketing budgets to more cost-effective digital channels.
- However, the blog post cautions that tech companies with high valuations but lacking profitability could still be vulnerable, as evidenced by the steep drop in Bear Stearns’ valuation.
- The key is to focus on tech companies with strong fundamentals, revenue generation, and sustainable business models that can weather an economic downturn.
Insights from the “This Time It’s Your Recession, Not Ours” commentary:
- The tech industry may feel more “insulated” from a broader economic recession, at least initially, compared to other sectors.
- The tech sector has learned from the lessons of the dot-com bust and is now more focused on building real businesses rather than chasing unsustainable valuations.
- Shifts in marketing and advertising budgets towards digital and social media channels could actually benefit certain tech companies during a recession.
- However, the blog post cautions against complacency, as high valuations without profitability could still make some tech companies vulnerable.
- Investors should carefully evaluate the fundamentals and business models of tech companies, rather than just chasing the latest hype or valuation numbers.
- The overall advice is to approach tech investments with a balanced and cautious mindset, focusing on companies with strong fundamentals that can weather economic downturns, rather than getting caught up in the hype and speculation that can often surround the tech sector.
Daniel R (Who am I?) 03.18.08 at 12:16 pm
No doubt the recession will hit all markets and hit globally.
For start-ups based on an advertising model, I think they can still succeed. If major companies cut their advertising budget’s there’s a good chance we’ll see a shift from Print/TV to online marketing.
The question is what Online Marketing? Paid Search is the most trusted form of online advertising because it is the easiest to track to ROI and has the most apparent impact.
Will the new start-ups be able to convince more conservative agencies of other forms of online advertising? Will demographic/behavioral targeting finally take-off and offer a viable alternative to Paid Search?
Rate this: 3.5
Sean (Who am I?) 03.18.08 at 1:19 pm
While I agree that the valley is more rational than during the dotcom boom, I think it’s hard to say that a $500 Million valuation for a company that is not profitable is reasonable.
I think the feeling of humility evaporated when YouTube (which was losing money hand over fist) was sold for over $1 Billion. Ever since then, things have been getting out of hand again.
Rate this: 3.4
Lorna Li (Who am I?) 03.25.08 at 12:20 pm
Hi Brian,
Even though Yahoo has been shedding jobs, having recently navigated a swift job transition, it seems to me that there are still loads of jobs out there in the tech industry for online marketers.
Recruiters have not “gone away” as they did after the Web 1.0 crash, in fact, I feel like I’m being hounded more than ever, and demand for search engine marketers is high.
For this reason, to me, it does feel like it is “their” recession more than ours.
I wonder when we are going to really start feeling the recession in the tech sector. The canaries will be the evaporation of marketing positions, and the silencing of the headhunters.
Cheers,
Lorna Li http://lornali.com