This morning I read of Yahoo!’s 64% profit decline and impending layoffs, which comes on top of recent news that Google is only trading at 15x cashflow, and rumours that UK online advertising in Q3 might be flat year on year.
We are seeing a rapid deterioration on all fronts; it was only two weeks ago that I blogged the 21% increase in UK online ad spend for H1 (also interesting is that the comments on that post pointed out that the normal time to see a decrease in ad budgets is after Xmas).
Whilst it is important not to throw the baby out with the bath water and stay focused on what you can do, this is a reminder that prudent budgets are the way forward – plan for the worst, hope for the best.
Growth rates in ad revenues can be expected to be slower (particularly display), and biz dev deals with the likes of Yahoo! and Google will be harder to come by and slower to close. Conditions in the M&A market will be an order of magnitude tougher. Current best guess is that we should plan for these conditions to persist for 12-24 months.