Last Friday was Black Friday – the day after Thanksgiving – which is traditionally a big shopping day in the US as most people take the day off and many go shopping in preparation for Xmas. The following Monday, which is today, has recently become known as Cyber-Monday as it has become the biggest day of the year for online sales, driven by a combination of discounts and offers, and (once again) the imminent arrival of Xmas.
The good news is that In a period of widespread macro-economic gloom (the Euro crisis persists, warning signs in the US are mounting, and on Wednesday this week up to 2m public sector workers will be on strike) there are sub-sectors that are continuing to grow fast. Data from IBM Coremetrics shows that:
- US online sales last Friday were up 24.3% on Black Friday 2010
- mobile market share rose rapidly – largely driven by the iPad sales rose from 3.8% of the total in 2010 to 9.2% this year, and browsing share grew from 5.6% to 14.3%
- social media discussion volume increased 110% over 2010 – topics included out-of-stock concerns, waiting times, and parking
There is some significant growth in these statistics and it follows that there is good money to be made in the companies that are driving the sales directly – i.e. etailers, and also in the companies that provide them with technology and marketing/advertising services.
The existence of large pockets of growth like this are what has kept interest and valuations in the tech sector on a different trajectory to the rest of the economy. Moreover, with the pace of innovation continuing to increase I think we will see more exciting new pockets of growth over time. Given that the overall economy is not growing the quid pro quo is, of course, that other markets are being destroyed just as quickly.
The existence of pockets of growth like this is enough to build great businesses with strong profits. It doesn’t necessarily follow that these businesses will command high valuations in the way that they have for most of this year. On the subject of valuations I stand by my comments of the last couple of weeks – i.e. that the key driver will be public market sentiment towards technology, and that will be guided by the performance of recent tech IPOs, including Groupon (see While the exits keep coming the party will keep rolling and Groupon’s bull run is over).