After almost a decade of strong growth, the online sector faces its first major recesson. The experts are bracing for a tough year, but some products and services will still thrive. We outline the top 20 trends that every business owner needs to come to grips with.
The downturn is approximately six months old and set to savagely change business practices this year as companies seek to adapt. How will the online world fare given the internet is facing its first big recession?
SmartCompany went to the experts and entrepreneurs to check on the trends emerging, or expected to emerge, in this downturn – and to uncover the products and the services that will do well online.
Online is still on the fringe of business activity. But 2009 could well be the year that online establishes itself as core.
Why? “You can prove the return on investment – and it is very hard to get that level of data and results from other mediums,” says David Trewern, who runs full service web and digital marketing agency, DTDigital. “This takes the guesswork out of it in a bad economic environment, when people want to be sure of their investment.
“And you can also put in place strategies with a high degree of certainty that they will work. If you make a change to your site on Thursday you can know by Friday afternoon if you were wrong,” Trewern says.
The hard sell is dead, at least until the start of the next boom. It’s bad news for those desperate salespeople working hard to meet targets. But in a downturn, people are more likely to defer purchasing decisions – so they don’t want pressure.
“You have to allow people to buy in this market – you can’t push. Faced with a pushy salesperson, a person will put off the decision or tune out,” says Colin Benjamin, who developed the Roy Morgan value segments on consumer behavior. “There is enough pressure as it is.”
This means a rethink of the website. “Your online presence needs to be far more than a hard sell. It needs to move a potential purchaser through online filters,” he says. “This means the website now becomes the introduction, not a catalogue.”
Companies doing it right identify in advance the reasons not to buy and then move the purchaser through online filters, overcoming the reasons a person may not buy or might defer the decision.
Companies are looking at expanding their own websites to include more “information” filters or building micro-sites – three or four pages – on other high ranking sites that act as stepping stones to their own site. Online filters include “sticky” landing pages, which are pages full of tools, calculators, white papers, reviews, forums – anything to catch the purchaser and take them further on a journey to buy.
As people seek more hard-nosed information before they buy, companies will respond with a jump in free offers online – the try-before-you-buy. “Then after the trial, people will want to return to the opportunity to confirm the purchase,” Benjamin says. “There must be the opportunity to close online – so websites must provide much more information but in a very simple and easily digestible way, because if people are flooded with too much information that is hard to digest their answer will be ‘not now’.”
He adds that the downturn will mean that consumers will want to buy part of an offer – not all of it. And they will want to come back later to the “same situation”.
As companies develop more content, they want to expand their reach by becoming small publishing hubs. Optus has developed its own hub aimed at small and medium business called BizThinkTank. Large companies are also buying micro-sites on well-populated news or information sites that link to their own. Take a look at zdnet.com.
Some companies are still locked into proprietary systems where small IT changes to their websites take forever and cost a lot. But this year, as CEOs slash their IT costs, many will turn to open source to redevelop their websites. Web development companies will be forced to adapt, offering lower prices, better deals and quicker lead times to erect sites.
Web site traffic is expected to grow. In key niche sites such as finance, traffic has already increased, says online search marketing expert Fred Schebesta. “Online attracts the savvy, and someone who is more price conscious in a downturn will spend more time researching what they want to buy and looking for information.”
Traditionally a lot of information has come from magazines and newspapers. As more information can be sourced for free online, and from high quality sources, expect traffic to rise and subscriptions to magazines, newspapers and specialist publications to fall further.
Any downturn hits advertising hard. While the year did not end up disastrously, 2009 will be hard going. Monique Talbot, who runs media buying agency Tempest, says there is a wait-and-see attitude. “We didn’t see the forward planning that we liked at the end of last year,” she says. “And we haven’t seen a strong January, but it’s not disastrous.”
Talbot says companies are waiting to see how they are affected by the downturn, and agencies are waiting for direction from clients. “Fortunately online is not the first thing they cancel, because they see and can measure the benefits, but it’s bad news for other mediums.”
She also says the downturn could force those sectors that spend very little online to dive in. “There have been brand advertisers sitting on the sidelines instead of coming online, and with better tracking and proven results this could be the year they do. However I have been waiting 10 years for Proctor & Gamble to come online so, who knows.”
Mark Harbottle who runs online design company Sitepoint, says there is a slight downturn in ad budgets. “They are not saying they won’t spend. They are just saying budgets are frozen until the powers that be decide to spend.”
What is doing well however, are ebooks, downloadable PDFs and white papers as people look for more information before they buy, and they are seeking that information online. “People are skilling up again,” says Harbottle. “They are saying ‘my job could be in trouble so I had better learn that new technology or application’.”
With conferences being cancelled and attendance way down, people are turning to cheaper alternatives to get the information, including webinars and ebooks.
While companies are planning to cut back spending on marketing generally, it may not have the same impact on their online strategies. As people have another go at the websites and turn them into more than an online catalogue, they realise that the website still won’t work if they don’t have a proper marketing plan behind it.
“People expect more when they visit websites, especially as time is more important in a downturn,” says Craig Reardon, who runs independent web advice company ETeam. “They want queries dealt with online, and to complete the transaction online. So they have started to realise that online is a technical business driven by a good marketing plan, and to get it right, they need a very strong online marketing plan.”
Pundits have expected online search to grow in the downturn as people spend more on buying key words to push people to their information-rich sites.
David Burden, CEO of web development company Ansearch, says six months ago only 30% to 40% of people were buying search engine optimisation (SEO) packages when developing a new site. “Now that’s 70% to 80%,” he says. “They are quite attuned now to the fact that if people can’t see their website on the first page of Google, they are missing out.”
But even search is coming under closer scrutiny. Ben Shepherd, associate business director at agency Mindshare, says he has seen some companies question the value of buying brand-based terms when they are ranking in the top three positions of Google. Instead he expects that money will be directed into buying category-based terms. “They will say our brand is indexing quite well so let’s pull back on brand and put it into category, so when people search for a product, up they come.”
Many companies have outsourced their search engine marketing (SEM) to specialist firms and agencies. But SEM practitioners report that some of the agencies are losing business as companies take this function inhouse.
“Up and comers that have developed the skills in the last few years are telling large companies to hire them and they will do it far cheaper than the agency,” says Chris Thomas, general manager at online marketing business Reseo.
Other companies are sacking their agencies and asking their marketing assistants to do SEM and SEO in order to save money. “That means we will see more inexperienced people competing with high-end specialists,” Thomas says.
What will happen to web design? For a start, people are looking for cheaper alternatives to big name agencies. Mark Harbottle is also principal at 99Designs (a business owned by Sitepoint), and says his company has grown to $2 million in revenue in under a year as companies look for ways to save money on design.
On Harbottle’s site you can post a tender, and anyone in the world can answer it and negotiate a price. A Romanian designer, for example, could well offer a much lower price for the same job than an Australian.
As the recession hits, design will be more focused on profit, revenue and a return on investment, rather than on warm and fuzzy designs. However in a downturn, it is very important to get the right emotional response from a site. “People will make a mistake if they turn their back on creativity,” says Trewern.
Any forecaster worth their salt predicts that this year video will “really take off”. But will it?
One factor that could affect the growth in video this year is lack of advertiser demand, which means less will be made, says Ben Shepherd. He says a lot of video has been around user generated content. “That’s a minefield. There is a lack of professional high-end video. To get video right, people have to redefine what a 15 second brand message is.”
He also says that in a bad economic climate, clients are not going to re-edit video commercials coming from overseas because it will be too expensive, so they will probably dump the video.
It can be a great time to pick up some very cheap advertising online – or so media agencies think. There are rumours of media buyers going to desperate publishers and reporting their client’s budget has been slashed by half, but they still want everything on offer or they will walk. Shepherd says: “Agencies are going to be negotiating really hard. But you have got to pay a fair price or publishers, when they have control, will screw you back.”
At the same time as retailers tune out of any thoughts of developing retail and ecommerce, Gen-Zs are growing up fast. “If retailers think that 16 year olds who in the next few years will have credit cards and jobs won’t have different attitudes to people today, they are very shortsighted,” says Trewern.
Gen-Zs are loosely defined as being from the late-80s to 2000, and have also been called “digital natives”, having lifelong connections to the web and new media.
And as the Gen-Zs hit the CBDs, many of their purchases may well be made online. “Everyone forgets about the long tail, and compared DJs to Gerry Harvey when they talk about retail figures,” says Trewern. “But there are hundreds of places where you can buy online anywhere in the world, and that seepage is not measured. As the Gen-Zs come along, that seepage will grow. So will the way they use online.”
People will have to do the same with less as their staff or colleagues are retrenched. “We are seeing a rise in efficiency tools that enable SMEs to communicate with customers quickly and cost effectively,” says David Burden. “Those tools are out there now, but there will be a faster take up because of the downturn. There will also be a rise in the use of free applications as they get better.”
Companies looking for new markets or to lessen the risk of being reliant on just local markets are turning to online and making their websites more internationally focused. “We are seeing companies that want a wider footprint than just their local area invest more in their websites,” says Craig Reardon.
In a downturn, there is more room on the dance floor. Corny but true.
Trewern says he is seeing some companies seeing the downturn as a real chance to take a punt to invest in brand and come out with more market share. Some companies are investing in big campaigns that take out a lot of inventory on one site in an attempt to push their brand.
We will see more of that this year as strong companies take advantage of the weak to get market share.
The fun experimental part of the web is over. Already those providing services to people online are complaining that clients are choosing safe and staid options, whether it’s in search campaigns, advertising, strategy or design.
Trewern says: “There will be less viral campaigns – you can’t look people in the eye and tell them a viral campaign is going to work and be seen by millions.”
There will also be less companies urging agencies to take a small pot of money and trial something new. However the innovators who have been experimenting will make use of new areas online, and maintain their advantage.
Large companies such as Apple and Amazon will continue to innovate at an amazing rate. They are working on long-term projects, so there will still be innovation. There will be new ways of doing ecommerce and online shopping as these models continue to evolve.
People are exploring different models of ecommerce and online shopping like windowshop.com, and also how people interface with their computers such as using touch-on-screen to navigate.
However at the smaller end where budgets are much more tight, there will be far less innovation. And as Trewern points out, this is a major concern for the Australian retail sector, which is trailing badly behind global trends.
“When we come out of the downturn, if they have stopped developing their online strategy to save costs, they will be so far behind.”
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