Web 2.0, Start-Ups, and Social Media in a Recession

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Brokers on Wall Street weren’t the only individuals cringing over the crisis last week, nor was this the first verification that the U.S. economy is in a recession.  The ramifications of large drops in the stock market, coupled with the mortgage crisis, have affected everyone from blue-collar factory workers to hundred-year-old investment banks, and not even those of us trying to earn a buck doing online work are immune.

Flying MoneyThe Deal, a provider business and financial news to corporate and financial dealmakers, advisers and institutional investors, interviewed a number of gurus and entrepreneurs at the Web 2.0 Expo in New York City last week regarding the current state of Internet business in the growing recession and their reactions to such.

While venture capitalists see a bleaker future for start-ups seeking funding, CEO Miles Beckett of Eqal, the company behind Internet phenomena lonelygirl15 and KateModern, believes that sound money-management is key to surviving in a bad economy.  “The good thing is, entertainment does well in a recession,” he said, laughing.  “We’ve always been very, very cost-conscious as a company … we try not to overhire, try not to reach too far, too fast.”  Eqal’s chief operating officer, Greg Goodfried, notes that strategic partnerships are key to generating revenue in the short-term, but to maintain internal ideas and projects for long-term growth.

Companies that sell sales and marketing tools are in a very healthy place as well.  Umberto Milletti is CEO of InsideView, a company that proclaims to “take advantage of the convergence of social media and enterprise applications – what [they] call ‘socialprise’ – and bring the insights gained from subscription-based and user-generated sources to the enterprise.”

Milletti says, “Historically, sales and marketing applications like ours are helped by a tough economy,” citing Salesforce.com’s success in the early part of this decade.  “Frankly, I think [a poor economy] is sometimes the best opportunity because the weak companies get weeded out, and the strong ones make it.  For a healthy market, you do need these times where the good companies break away from the not-as-compelling companies.”

Mary Kathleen Flynn, Senior Editor at The Deal, also speaks with Fred Wilson of Union Square Ventures, Lane Becker of GetSatisfaction, and Tim O’Reilly of O’Reilly Media, and you can view the entire interview at BlipTV.

The economy’s rough, and it will probably get worse before it gets better, and to survive in a poor economy you should always consider the following:

  1. Be cost-conscious.  Don’t overspend, don’t overhire.  You don’t need that corporate jet just yet.
  2. Have integrity.  Your potential customers are likely to be very concerned about budgets right now, so ensure that you don’t tell them one thing and deliver another.
  3. Don’t lay your big ideas to rest, but put them aside for now in favor of immediate revenue-generating projects.  Remember that this too shall pass.  The U.S. been through a number of recessions, and that is likely the same for other countries, but economies do bounce back in the end.

And if in fact you provide a service that thrives in a poor or unstable economy, enjoy it now!  Those offering cost-friendly alternatives to pricier products should use this time to their advantage, and focus on the soft spots within companies that are struggling now with the high costs of their current solutions.  Providing a more efficient solution to companies that need it, while earning some revenue for your own company, is just great business.


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