5 ms·

I’m still wondering how the stock market is assuming that tech cos that rely heavily on digital ad spend like Google and FB are effectively recession proof even

by xoxoy 6y ago

I’m still wondering how the stock market is assuming that tech cos that rely heavily on digital ad spend like Google and FB are effectively recession proof even though media outlets with the same business model are clearly not.

iateanapple 6y ago
How long can companies like Google and Facebook run at 50% revenue? A lot longer than any media outlet.
- xoxoy 6y ago
  Ok sure but these companies are trading near all time highs. I imagine digital ad spend is somewhat correlated with changes in consumer demand. If demand drops significantly, how does Google and FB stay at a valuation identical to a pre-Covid Economy?
  - iateanapple 6y ago
    Because the market thinks this is temporary. The market probably also thinks that a good chunk of the additional consumer use can be captured by google and fb post-covid. If you think the same for click bait media companies they would be a great buy. Actual reader demand is through the roof - they just aren’t readers who are willing to buy anything.
dmix 6y ago
I work in a business that's tied to our customer's online advertising for a very broad set of verticals and our business hasn't gone down at all. It actually kept growing since COVID hit... For every vertical that went down (ie, mortgages, local small business ads) there's plenty of others that go up (ie, health insurance, consumer ecommerce). I don't think media buys on newspapers are a significant amount of Google et al's ad business, adwords (ie, search based ads) is much bigger than adsense (display advertising). Search for any major keyword and you'll still find the SERP flooded with ad results. I'd imagine generally it's gone down for Google but I doubt it's by much total.
newacct583 6y ago
This is a big question for me too. I mean, the next quarterly results are going to be brutal, everyone knows that. The end of the pandemic is going to be a slow recovery like every other slow recovery, everyone knows that too. There's no magic way to make an economy "bounce" when doing that would entail getting a whole bunch of shuttered businesses back up and running. Yet the market just doesn't show it. And I've seen no good explanations. For myself, btw: I'm mostly in bond funds and cash accounts at this point. There just has to be another severe crash coming in the next few months.
- deleted 6y ago
  [deleted]
- birdyrooster 6y ago
  https://news.ycombinator.com/item?id=23133086 https://news.ycombinator.com/item?id=23133086 I have rotated half into Gold ETFs and the rest into cash for the next few months to do some bearish options trading.
  - newacct583 6y ago
    You do realize that gold crashed along with everything else in March, right?
    - birdyrooster 6y ago
      Gold took a tumble in March but it was nowhere near as bad as the DJIA and the charts bear this out. Also the monetary supply has significantly increased since then which and gold is not strongly dependent on retail consumer demand or other short cycles where uncertainty is injected. While Apple still has to operate and sell phones during the pandemic, Gold just sits there with all of its glorious potential.
paxys 6y ago
Reducing both business models to 'advertising' is a vast oversimplification. Google/Facebook provide platforms and services, and have zero content creation cost. They are also way more diversified. Conde Nast isn't investing in telecommunications infrastructure or self driving cars.
- xoxoy 6y ago
  How is Google diversified? Outside of Cloud they make money almost exclusively with ad revenue from Google and YT
Jagat 6y ago
The answer is Direct Response (aka performance) advertising where they only pay if there was a directly measurable action taken (e.g., app install, or online store purchase). During recessions, companies are going to move their ad spend from places with questionable ROI to those they can directly measure the impact on.

by xoxoy 6y ago

iateanapple 6y ago

How long can companies like Google and Facebook run at 50% revenue? A lot longer than any media outlet.

xoxoy 6y ago
Ok sure but these companies are trading near all time highs. I imagine digital ad spend is somewhat correlated with changes in consumer demand. If demand drops significantly, how does Google and FB stay at a valuation identical to a pre-Covid Economy?
- iateanapple 6y ago
  Because the market thinks this is temporary. The market probably also thinks that a good chunk of the additional consumer use can be captured by google and fb post-covid. If you think the same for click bait media companies they would be a great buy. Actual reader demand is through the roof - they just aren’t readers who are willing to buy anything.

dmix 6y ago

I work in a business that's tied to our customer's online advertising for a very broad set of verticals and our business hasn't gone down at all. It actually kept growing since COVID hit... For every vertical that went down (ie, mortgages, local small business ads) there's plenty of others that go up (ie, health insurance, consumer ecommerce). I don't think media buys on newspapers are a significant amount of Google et al's ad business, adwords (ie, search based ads) is much bigger than adsense (display advertising). Search for any major keyword and you'll still find the SERP flooded with ad results. I'd imagine generally it's gone down for Google but I doubt it's by much total.

newacct583 6y ago

This is a big question for me too. I mean, the next quarterly results are going to be brutal, everyone knows that. The end of the pandemic is going to be a slow recovery like every other slow recovery, everyone knows that too. There's no magic way to make an economy "bounce" when doing that would entail getting a whole bunch of shuttered businesses back up and running. Yet the market just doesn't show it. And I've seen no good explanations. For myself, btw: I'm mostly in bond funds and cash accounts at this point. There just has to be another severe crash coming in the next few months.

deleted 6y ago
[deleted]
birdyrooster 6y ago
https://news.ycombinator.com/item?id=23133086 https://news.ycombinator.com/item?id=23133086 I have rotated half into Gold ETFs and the rest into cash for the next few months to do some bearish options trading.
- newacct583 6y ago
  You do realize that gold crashed along with everything else in March, right?
  - birdyrooster 6y ago
    Gold took a tumble in March but it was nowhere near as bad as the DJIA and the charts bear this out. Also the monetary supply has significantly increased since then which and gold is not strongly dependent on retail consumer demand or other short cycles where uncertainty is injected. While Apple still has to operate and sell phones during the pandemic, Gold just sits there with all of its glorious potential.

paxys 6y ago

Reducing both business models to 'advertising' is a vast oversimplification. Google/Facebook provide platforms and services, and have zero content creation cost. They are also way more diversified. Conde Nast isn't investing in telecommunications infrastructure or self driving cars.

xoxoy 6y ago
How is Google diversified? Outside of Cloud they make money almost exclusively with ad revenue from Google and YT

Jagat 6y ago

The answer is Direct Response (aka performance) advertising where they only pay if there was a directly measurable action taken (e.g., app install, or online store purchase). During recessions, companies are going to move their ad spend from places with questionable ROI to those they can directly measure the impact on.