by Tom Lee

Filed Under:
blogs, online advertising

gawker media

Amid Fears of an Internet Downturn, Gawker Sells Properties

from the pop-goes-the-internet dept

Yesterday's news that Gawker Media will be selling three of its sites caught many by surprise. Particularly shocking was the revelation that Wonkette was among them — it was an early site in the network, and one famous enough to be featured in the newly-reopened Newseum.

But more interesting than the news was the reasoning behind it, which was explained by Gawker chief Nick Denton in an email to Fishbowl NY:

[S]ince the end of last year, we've been expecting a downturn. Scratch that: since the middle of 2006, when we sold off Screenhead, shuttered Sploid and declared we were "hunkering down", we've been waiting for the Internet bubble to burst. No, really, this time. And, even if not, better safe than sorry; and better too early than too late.

Everybody says that the internet is special; that advertising is still moving away from print and TV; and Gawker sites are still growing in traffic by about 90 percent a year, way faster than the web as a whole. But it would be naive to think that we can merely power through an advertising recession. We need to concentrate our energies... on the sites with the greatest potential for audience and advertising... [T]hen, once this recession is done with, and we come up from the bunker to survey the Internet wasteland around us, we can decide on what new territories we want to colonize.

Say what you will about Denton — and many people do — but he's proven himself to be a shrewd businessman. As he notes, it's easy to find wishful thinking when it comes to online advertising's capacity to withstand the recession that most experts say is coming or already occurring. But, as that second link notes, there's no denying that advertising expenditures declined during past economic downturns, or that online ads have fared even worse than other media. So while Denton is just one businessman, it's a safe bet that he's not the only one girding for lean times.

This isn't to say that the organizations buying these Gawker properties are making a mistake. Mike has written before about the need to marry content and promotion in a way that's compelling to an audience. Idolator and Gridskipper in particular seem well-positioned to do just that, as they join newly-consolidated ventures from Buzznet and Curbed, respectively (Wonkette, which exists in a media environment filled with publications that largely subsist on donor largesse, may have a harder time of it).

But whatever the fate of these particular sites, a recession-sparked advertising downturn would clearly be bad news for the web. With so much of the internet economy built on top of ad models — Google's foremost among them — vulnerable startups may do well to follow Denton's lead and hedge their bets now.

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  • identicon
    Ajax 4Hire, 15 Apr 2008 @ 4:56pm

    Sounds like Slartibartfast from Magrathea

    But when the great galactic stock market crash occurred, the Magratheans went into hibernation awaiting the recovery of the economy to the point where their services could once again be afforded. They were later awakened for the reconstruction of the Earth (the Earth, Mk. II).

    The Hitchhiker's Guide to the Galaxy.
    Douglas Adams

    reply to this | link to this | view in chronology ]

  • identicon
    Shohat, 15 Apr 2008 @ 11:17pm

    Microscopic markets are more vulnerable

    Online advertising is a very very small and young market My estimate is that 60% of the revenue in some way reaches Google, and since Google's revenue is even smaller than HP (for instance), the entire wolrd market is the size of one decent company.
    Coupled with the fact that it actually depends on other businesses to constantly publish advertisements, and provide a profitable convertion rate (which is constantly dropping), it is reasonable to see the Internet Advertising (!!not ecommerce sites !!) sites get hurt when the current bubble is over.

    reply to this | link to this | view in chronology ]

  • identicon
    arbulus, 16 Apr 2008 @ 7:29am

    There's a lot of talk these days about a Web 2.0 bubble on the verge of bursting. I really find it ridiculous.

    What happened in the Web 1.0 burst? Everyone and his mom decided he was going to try to do something to make money on the web and when people realized the web wasn't ready yet, people mostly gave up on the web. Then, when technology started advancing, the web started to re-emerge, and people learned the lesson about how to offer services on the web that could stand the test of time. But of course, as with everything, when one or two companies are successful, a whole slew of companies pop up trying to copy them and get in on the action, usually doing a poor job. That's what we have now. The web is solid, stable and there are many sites offering goods or services that are becoming more and more a part of our lives. That's not going away. In fact, it's only going to grow. The web is becoming more intertwined in our lives everyday and will only continue. It's here to stay. People aren't giving up on the web like they did with the Web 1.0 burst.

    Let me give an example: there are what seems like 20,000 MySpace and Facebook clones on the web. If 19,900 of those sites shut down, that's not a bubble burst (it was never a bubble to begin with), that's simply pruning the useless clones who only popped up to cash in on a fad and bring absolutely nothing to the table in terms of innovation. Call it digital natural selection. What will stand? The sites and services that actually offer sound products, innovate and have solid meaning to each user. That's not a bubble bursting, it's just pruning the garbage, or in capitalistic terms (as much as I hate this phrase) it's an example of the market sorting itself out.

    reply to this | link to this | view in chronology ]

  • identicon
    bob, 16 Apr 2008 @ 10:19am

    links gone too

    I noticed yesterday that they have removed the links from the bottom of all the affiliate sites. I used to use those links and had to add some sites to by bookmarks. :P

    reply to this | link to this | view in chronology ]

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