How Your Blog or e-Business Can Survive an Economic Downturn

Everybody is watching closely what’s currently happening in the world’s markets and wondering if we are approaching another 1930 great depression or a 2008/2009 financial crisis, or if we are already deep into crisis. Whatever the case may be, many may also wonder if we are expected to recover soon or if it is going to be harder this time.

“In a best case scenario, the U.S. economy is destined for a Japanese-style malaise”, according to Joseph Stiglitz, Columbia University Professor and two-time Nobel Prize winner (read more about Japan Lost Decade).

In my humble opinion, the problem hasn’t just begun today or yesterday, it has been there for some time now.  What makes the situation even worse is the government’s denial of the problem. We can only solve the problem if we recognize that there is a problem to begin with.  Unfortunately while the ruling party has always been in denial, the other major party has been crying out for help just to gain political ground with little regard to the problem itself; this happened during Bush’s administration and is happening now during Obama’s.

Regardless of how you believe things will turn out, I believe  that any economy in this world has its ups and downs.  The question is not whether the sky is really falling or not, the question is, do you have enough resilience in your business to sustain market hits? What have you done to get yourself prepared for a possible economic downturn?

Blogging to me is a small personal e-business, some are in it for the fame, some for the money and some are in it just for fun or the hobby. I personally know bloggers who make $20/month off their blogs and others who make 6 figures. If you are depending on your blog revenues as an essential part of your income, you should be paying close attention to market details and hedge yourself against possible risks.

Everything is connected!

At the first glance, you may think that you are detached from all market dynamics, yeah? Com’on, it is just a blog, you may think! It is not that simple unfortunately, everything in this world is connected. Where does your revenue stream come from? Direct product or service sales? Adsense and other ad revenues? Affiliate sales? Donations? Let’s take each case separately.

Products’ revenue is directly connected to consumer spending. Economy goes bad, income drops, consumer spending drops, people do not buy as they used to, you don’t sell as you used to, your revenue drops.

As for ads and affiliates revenue, although some business managers advocate an increased marketing activity in slow economy, most corporations consider marketing as a discretionary expense that is subject to some serious budget cuts. Marketing budget cuts mean lower ad revenues for your web pages. Affiliates won’t be willing to pay as much as they used to, demand drops, bidding on ad networks like AdSense and others drops, the market invisible hand and the basic rules of market supply & demand dictate, and eventually result in a lower Cost Per Thousand Impressions (CPM) and a lower Cost Per Click (CPC) for your web page(s).

Similarly, donations are considered discretionary expenses that significantly decrease in slow economy. Lower income of donors means lower donations for your web pages.

Diversify!

I wish I had that magic recipe for you, but I don’t. Having said that, I think I can point out some options that may help your blog or e-business.

You may want to consider expanding your product portfolio or service offering to include services or products that increase in demand as consumer income or real GDP declines. These types of products are called “inferior products“.  Just bear in mind that expanding your product portfolio comes with some risks, in my opinion however, in this type of economy, the benefits outweigh the risks (check our other post, Product Diversification, Risks and Rewards).

Some people mistakenly think of inferior products as lower quality products, that’s not necessarily true. As income decreases, some cheaper alternatives emerge; for example, as income declines, some people may prefer going to the coin laundry over buying a new washer and dryer, borrowing or reading in the public library over buying books, eating more rice, potatoes or bread over eating fish or meat, brewing their own coffee at home over buying it brewed from the coffee shop, using tap water over bottled water, using public transportation over driving their own car, and the list of inferior products can go on and on.

The point here is to understand that there will always be a way to make money regardless of the state of the economy. The real challenge is to pick the right product for your business that integrates well with your existing portfolio or your webpage contents. For example, a web page that sells educational services or software may need to consider offering training software or online classes over face-to-face classroom, offer Instant Immersion over Rosetta Stone, or a site that sells cosmetics to consider CoverGirl or L’Oreal over Chanel or La Mer. All are great products, the focus is however is on the product demand curve rather.

Unless you see a real need or constraint in offering a specific brand or a specific type of product on your web page, brand and/or product diversification would be your best bet in diversifying your revenue sources and forming a safety net in hedging against possible market downturn, and always “hold your dog in readiness before you start the hare“.