No recession in the technology sector

Technology buyers say they will continue to invest according to a story from The New York Times. Microsoft reported record earnings last week, and Chris Liddell, Microsoft CFO, gave stock analysts strong "guidance" for the coming year, saying “We have not seen any significant spillover for an economic slowdown in the U.S.”

The NYT article cites an IDC study and concludes; "There will surely be belt-tightening, and cuts may be sharp in some industries, especially the financial sector. Overall growth in technology spending may fall from 7 percent last year to 4 percent or less this year, according to estimates by IDC, a research firm."

Erick Schonfeld at TechCrunch predicts that a tight economy will actually benefit Web 2.0 companies and SaaS based software. Erick says

"While a belt-tightening might not be good for the IBMs, Dells, and Oracles of the world, Web 2.0 companies should do fine—even thrive. All of those Enterprise 2.0 startups out there, or even Amazon trying to sell Web-based computing infrastructure, are actually at an advantage. Customers are more likely to try cheap cloud computing when they can no longer afford the alternatives."

What about advertising? A few weeks ago I asked "Will Advertising Revenues Drop In A Recession?"  Marketing and advertising is usually the first thing to get cut when the economy sours. Display advertising will probably feel the pinch, but online Cost Per Click (CPC) ads will look more attractive to advertisers.

With CPC ads you pay nothing unless someone clicks on your advertisement. This is a huge advantage for advertisers who really want to increase sales but can't afford to gamble on a display ad. CPC ads are easily justifiable and trackable. In a recession, with declining sales, there is enormous pressure to do anything possible to get sales moving. CPC advertising, principally on search engines, will be very appealing to advertisers.

Google and Yahoo report earnings this week. Of course these earnings will cover the 4th quarter of last year. What analysts really want to hear is their outlook or "guidance" for the coming year.

Apple reported great earnings last week, but said the future looked soft. Apple stock was crushed by investors. Microsoft stock was up in a very down market. One thing about the stock market...every day is a new day. Last week doesn't matter. The stock market is always looking forward.

Subscribe - To get an automatic feed of all future posts subscribe here, or to receive them via email go here and enter your email address in the box in the right column.

Comments

[John Wall]

For better or worse I'm siding with the optimists this year. I think the economy can handle the spillover from junk mortgages and the securities built on them. Tech has a hype bubble yes, but not a corresponding run on the NASDAQ.

Then again, Economic predictions are about as good as the weather forecast three months out...

[Michelle Dunn]

There are many jobs that are recession proof, I have worked in the credit and debt collection industry for 20 years and that is a recession proof job. Some other jobs that may be recession proof are, like you mentioned, Technology, vices, such as tobacco and alcohol, security or alarm services, medical services, and some food and energy sectors.

[Jordan Mitchell]

The thing about CPC advertising is that the supply already isn't meeting the demand -- so rates are getting out of hand. New marketers may have a tough time justifying their ROI when their average rate per click climbs well above $1 (especially if they don't have the expertise in-house to do landing page optimization, etc.).

In the next 12-18 months I think we'll start to see a rebirth in display advertising. 83% of display ads in 2007 sold for less than $1, which means that marketers only need to see 1 click out of 1000 impressions (.10% CTR) to give equal consideration to $1 CPM (graphic) inventory. The ad networks will respond in 2008 with keyword targeting and self-service, putting banners, skyscrapers and other graphic ad on par with text ads. More musings at http://kickstand.typepad.com/metamuse/2008/01/cpm-rates-will.html.

[Billy 001]

This is the nice information. I also want to suggest one online advertising network to you - Hooqy.com.

It pays 10% of referred advertisers' expenditure and 5% of referred publishers' earnings. Publishers have full default campaign management to manage their unsold space. Monthly payments by check or Paypal with $50 payout.

http://publisher.hooqy.com/publishers_account.php?ref=3