Are social media agencies (like Kwiqq) doomed ?

Under the current financial crises (+ billion dollar rescue bill failing) many blogger like Mr Mark Hendrickson are asking startups and silicon valley to brace themselves for the nuclear winter. This triggered a thought, if startups stop investing in new websites guess there will be no orders for social media agencies like ourselves and we will all go bankrupt ?

The argument sounds very reasonable and there is no denying that there is lack of lending in the market but does it necessarily mean that we will go out of business ?

Things will without doubt slow down, there will be a time period during which the enquires will go down but the sales will continue to grow at the same rate. Doesn’t decrease in enquiry mean reduction is sales ?

Not necessarily. Enquiries are of 3 kinds:

1. Don’t want to buy just curious
2. Want to buy but still deciding
3. Want to buy and I suspect I’ll use you

I can be upfront and tell you that generally enquiry number 1 comes from opportunist entrepreneurs. Those who aren’t really in for making a difference in the web just involved because sites like YouTube was sold for $1.65 billion. For them lot, this nuclear winter would be really hard and will force them back to their day job. Whilst serial and passionate entrepreneurs will stay and keep fighting during this period. Remember sustainable enterprises like Google are product of pre-dotcom bubble and survived through out to go public in 2004.

Raising money will be difficult in the coming months, but not impossible. And companies which rely on raising a series A of $5 million as way to start will find it difficult. But that also implies that if a company has a genuine product/service they will see profits and success. Also companies then will see less competition and noise and from unworthy competition

So if startups don’t spend money how will social media agencies not go bankrupt ?

The simple fact is a good Social Media Agency is like a Venture Capital fund. A lot of elements developed for companies are bespoke and require us to put in lot of resources. The real profit we see is when one of our clients does ’superwell’. Just like VCs, they invest in 10 companies 8 of which might go bust. If one goes public it pays for all the others which went bust.

In short although the number of companies social media agencies work with will go down the chances of working with successful social sites will increase.

Lets wait and see !

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