Surviving the Economic Forest Fire

October 14, 2008

As the sub-prime mortgage market continues to drive down housing prices, so goes consumer spending. As most of you may know consumer spending is a key catalyst helping to propel the booming online advertising industry. As consumer companies are forced to reassess budget allocations, one of the first casualties in corporate budgets is usually advertising. So what will this mean for the booming black web industry? Well as the money dries up so will the booming black tech segment that we have reported on in the past few months. Entrepreneurs currently bootstrapping there businesses will be forced to reassess their startup’s worth, while ad-driven enterprises are preparing to reduce spending and cut employees to maintain profitability. Other entrepreneurs interested in entering the space are now postponing launches to better gauge the extent of the economic problems while those seeking the tightly clinched purse straps of VCs are now searching for alternative funding sources. But as an eternal optimistic can’t help but think that through it all this will make our industry stronger.

The past positive economic climate helped spark some innovation in the black web segment, but another result of this boom was the influx of bad websites and not so innovative duplications. This change in climate will help to get rid of some of these bad sites leaving space for real innovation. I equate this downturn to a forest fire. A forest fire burns trees, starting with the driest and weakest trees. Stronger trees, may suffer some damage, but if rooted deep enough, most damage will be superficial. After the fire subsides, the ashes left behind from the old trees will act as a fertilizer, leaving room for the seeds of innovation, which has long lain dormant, to sprout up in the new sunlight.

Having the opportunity to see firsthand the creation of some of these sites, I have a pretty good idea which will be the first to go, but instead of using this article to wager on the fate of these companies, I will in turn make some very simple suggestions to companies interested in surviving. The companies that will survive will be apparent by how well they heed these suggestions.

Consider Partnerships: We all know the old mantra; if you can’t beat them join them. Well this holds true in the web space too. Consider teaming up with rivals, so that you can combine efforts and resources while lowering expenses. There’s power in numbers.
Be the Best in your Space: I know this may be a no brainer for most of you, but it still needs to be said. The black niche audience is not large enough for companies to thrive on being 2^nd place. Make sure that you’re company is the best in the space, and if you’re the only one in the space, make sure that your company strikes fear in the hearts of any impending.
Be innovative: If your idea is just a duplication of someone else’s, then don’t waste your time. If you’re interested in entering a segment, make sure that you bring something innovative and most importantly necessary to that space.
Be focused: Anything that takes your time away from enhancing your core business model may need to wait until better economic times. Now is the time to trim the fat! Anything that is not going to help take your business to the next level must go. Consider postponing redesigns, and technology upgrades, unless it fixes as current flaw or is key for innovation. If you’re just doing it for the “cool factor” then it’s probably unnecessary.
Engage and Listen to your Users/Audience: To survive in this industry, you must be able to adapt quickly to needs of the ever changing technology marketplace, and no one knows the market place better than your audience. Use this down market to engage your audience for ideas and suggestions. Be prepared to respond to their needs as quickly and most importantly as inexpensively as possible.
Stretch your dollar: One thing black folks have always been experts on is making do with what we have. This should carry over into our business thinking too. Make sure every dollar you receive from your business has a purpose. If you don’t then stack it!

If you have any additional tips or suggestions, please feel free to add it to the comments section.

Category: News, web 2.0 | Tags: Business, economy, startup, Technology, web startups

Rich S.

I had the same idea as far as these hard economic times getting rid of some of the web apps and design companies that are producing sub-par products and services. Even though hard times are upon us and will continue into the foreseeable future, the industry I think will be better in the end if the weaker links fall off and difficult times encourages true quality and innovation in services and product.

Lynne d Johnson

A recession is the best time for a startup. Lots of great companies came about during recessions: "Method, RF Micro Devices, and Clif Bar are the most recent crop," but "GE started during the panic of 1873, HP began during the Great Depression, Disney’s start was during the recession of 1923-24, and Bill Gates and Paul Allen founded Microsoft during the recession of 1975."

Most important in terms of what you covered here: CCI, with BlackPlanet as its leading brand survived the dot-com bust, while many other urban and black web properties and services couldn't hold on. So there's definitely a lesson in there somewhere.

It's not as much a time for panic as people think. All of these survivors served a real need, and that's what these new companies have to think about, whether they really serve a need.

I really enjoyed reading this post. In fact, I think you could have even called this it, "6 Tips for Startups During the Recession," or something of that vein. I loved your setup, but loved your tips even more. Especially the one about listening to the user/audience/community. Why? Because without them, they'll be no product. So more than ever, this is the time to listen. Meet their needs, but stay true to your vision. You'll be better off for it.

Unfortunately though, I'm sure some companies will have to make some cuts. But they should make them wisely. They also have to focus on their core missions. If they have plans to be a swiss army knife, perhaps they need to take things slower and focus on one idea or feature set, or what have you at a time. It's kind of hard to be a "be all" at this time, but being a must have should take priority.

That's my two cents.