Where does the prospect of a stock-market crash leave you? Enjoying
a touch of schadenfreude at the thought of all those dotcom millionaires
taking a bath? Or worrying about your ISA?
Relax and cast your mind back to 1987 and 1989. On both occasions
everybody thought the world was coming to an end and there was much
wailing and gnashing of teeth. In fact the markets experienced
short-term reverses, albeit quite large, before proceeding merrily
The trick is to get some perspective - a quality that seems distinctly
lacking whenever there is a wobble. Back in 1987, when I was a financial
hack, I had to put together a reaction article based on analysts’
long-term forecasts. One rang me in a state of panic. ’I want to change
my forecast,’ he said. ’But you only gave it to me this morning,’ I
’Yeah,’ he snapped, ’that was this morning’s long-term forecast and now
I’m giving you this afternoon’s.’
It was at this point that I realised the sheer fatuousness of it
Most financial markets operate on such short-term horizons that they
rarely look beyond their noses. Plus, since the media loves nothing more
than a headline with the words ’bloodbath’ and ’Armageddon’, they
happily collude in this over-exaggerated view of market gyrations.
So does last week’s wobble make a difference? Does it matter if there is
a serious reaction against internet stocks? There are two answers.
In the greater scheme of things, ’no’. If you’re in advertising,
First, the ’no’ bit. In the wider view, a stock-market correction,
especially in the internet and technology stocks that have fuelled the
boom, isn’t going to alter the fundamental impact that the internet will
have on our lives. Sure, some companies will get wiped out, but that’s
the Darwinian process that is capitalism. Just as the Industrial
Revolution was irreversible, so too is the internet revolution.
It does, however, matter to the advertising industry, at least in the
short term. For one thing, the mini boom that media owners and agencies
are enjoying from dotcom mania won’t last. The vast amounts of money
spent by the dotcoms - one estimate is that about half their operating
costs are spent on advertising and marketing - is inextricably linked to
the stock-market. That’s because the spend is predicated on securing a
stock-market listing some time in the future. In other words, dotcoms
are willing to spend money they haven’t got on the basis that they’ll
get it back when they float.
Moreover, higher spend means higher awareness means a higher
stock-market rating. Sadly, that business model may now be null and
void. Budgets will be slashed and agencies and media owners who have
taken a punt (ie done work or given away space for nothing in return for
equity) should consider chalking their ’investments’ up to
It’s an ill wind that blows nobody any good though. The beneficiaries
will be the old-economy companies, providing they can transfer their
name recognition and brand values to their dotcom offerings.