- September 15, 2009

A Recession is a Terrible Thing to Waste

As occurred at the Davos World Economic Forum conference earlier this year, the global economic crisis was a pervasive subject at last week’s “Summer Davos” meeting in Dalian, China. I was asked to share my thoughts on what companies like Comscore can do to continue growing in rocky economic times.

I’ve always believed that every cloud has a silver lining, and so it is with a recession. Or, to paraphrase Paul Romer, the noted Stanford economist: “ A crisis is a terrible thing to waste”.

As a company, the majority of Comscore’s revenues come from North America and Western Europe, where the Internet Media and e-commerce markets have been hit pretty hard and their growth has slowed significantly. Needless to say, in this environment some of our customers are hurting. Many young Internet companies are having funding difficulties. Established companies are reducing their marketing budgets. Some financial services clients such as hedge funds are in a state of crisis. It all makes for a challenging marketplace. However, in the midst of these economic challenges there are some attractive opportunities. For example, the Internet’s lower cost offers marketers the opportunity to obtain the same advertising reach, frequency and sales impact as traditional media -- but at a lower cost. The economic headwinds are causing many companies to revaluate their investment in digital marketing -- and Comscore is the right partner that can provide them with the proof of performance that’s needed to justify the movement of their ad dollars to the Internet. In fact, the Internet offers such economic advantages in both advertising and e-commerce that we are seeing the Internet’s share of total media and retail spend increasing at a rapid clip.

One adjustment strategy that is paying us dividends is increasing our focus on international growth in markets such as Brazil, China, and other Asian countries that are growing faster than the rest of the world. These geographies represent a new growth opportunity for Comscore. Consider that, today, 85% of all Internet users reside outside of the United States but only 15% of Comscore’s revenue comes from outside the U.S. This is clearly a very attractive long term opportunity for us, but one that also acts as a short term counter to the domestic and European challenges.

Jack Welch once said: ‘Buy your competition or bury them’. I think that is excellent advice. Acquiring competitors can often be helpful when you can get it done. Acquisitions can open up adjacent markets, help accelerate international growth, or provide strong distribution synergies. When the economic crisis began, we found it was often a challenge to acquire private companies because their valuation expectations had not been reset commensurate with the lowered valuation of public companies. That is now changing and it’s clear that acquisition opportunities can be pursued at attractive valuations and leveraged to stimulate growth.

Finally. the abundance of talent that has been freed up in this labor market offers companies the opportunity to hire top notch people in key technical, operating or management positions, not to mention junior positions. The quality of available talent today is the highest it has been in a generation and no one should miss the chance to upgrade human capital, and raise overall corporate IQ and capabilities.

Bottom line, there is a genuine silver lining to this recession. The strategies I have outlined, coupled with rigorous cost reductions to maintain margins and fund necessary investments, will certainly help in the short term. More importantly, they offer the best recipe for generating far stronger growth when the clouds clear and the general economy begins growing again.

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