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Survivors in the Not-So-New Economy

  |  October 25, 2001   |  Comments

With the economy on the decline for nearly 18 months, patterns are emerging as to where the Web-marketing world is heading and what it takes to survive slower economic periods. What distinguishes survivors from those barely hanging on?

Most traditional business principles apply to most new industries. Once the initial hype is over, this rings even more true. Key factors contribute to sustainability in any economy. The business model is at the forefront. If a company's product cannot create demand on a repeat basis, it has little viability. Be it software, Internet publishing, or coal mining -- if the market devalues a service, it cannot be sustained.

That's not to say that ideas need to be original. Part of the problem with the Internet's rapid growth and faster decline was that venture capital flowed toward companies with great concepts rather than those with strong infrastructure. Being the next big thing is not as important as an ability to compete for market share. There's plenty of success among competitors who offer comparable services; brokerage, travel, and gaming are a few examples. In any industry there is only room for so many players before a supply surplus is created. A large part of the dot-com fallout hinges on these factors.

Cash and cash flow are perennially in vogue. Having the resources to weather a bad economic period can be a standalone savior. The Internet will not disappear due to a rough economic period. Companies that ride out the storm will be stronger than ever. The amalgamation process is helping to strengthen big players' positions. Early entrants had the advantage in this industry, but not necessarily because of innovation or service offerings. It was due to their ability to attract big cash early on.

Internal staff, leaders, and vision can never be overlooked. We're starting to see many of the more substantial Internet companies pursuing older, more experienced executives in place of the less-experienced entrepreneur.

A good example of a company that seems to be weathering the storm is newly named Overture (formerly GoTo.com). It built its success around a strong business model: identifying the high demand for search services and the lucrative returns they can provide to advertisers. The company's strength during hard times also follows suit with many content sites' need for either paid subscriptions or paid content. It's hit a pressing need and built a strong business model around that need. Barring major changes in the search industry, it appears to have built a solid business that works well for all parties involved.

I recently spoke with a marketing spokesperson at Overture about the rebranding of the company. According to him, the new name better describes the service, with "overture" indicating "an introduction," among other relevant definitions. The new name is also a partial effort to differentiate the company from other Web companies that share the name "go," such as old rival Go.com (whose search function is now powered by Overture). This is what the company does -- provide paid introductions from advertisers to potential customers.

Overture's model, cash, and business leadership have produced nine consecutive quarters of substantial revenue growth and have attracted an active advertiser base of 45,000. The company predicts profitability this quarter (been a while since we've heard that term). A combination of business model, cash flow, and sound thinking contributed to that success. The new Overture will likely remain a leader in its space and stand as an excellent model of a strong business achieving sustainability in our not-so-new economy.

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ABOUT THE AUTHOR

Adam Posman

Adam Posman is a strategic planner with BAM Strategy, a leading digital agency with offices in Montreal and Toronto. BAM's core services include strategic planning, media buying, creative production, online contests, email marketing, and customized marketing technologies.

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