Things of Internet: Is a Great Correction coming?

Things of Internet
Things of Internet: Is a Great Correction coming?
By Deepak / Chuck • Issue #97 • View online
Hello! I know I mentioned there might be no issue this week, but ah, I can’t stay away from my keyboard for too long. We had a terrific diving vacation - details of that, later.
For now, something I’ve been thinking about for a while, a reflection of things happening around us. It’s not necessarily technology or internet specific, but I believe it’s important enough to be spoken about here. I’m calling it The Great Correction.

The signs are around us
Prices are rising. Stocks are falling. Layoffs (especially in unicorns) are happening. Inflation is soaring. Ubers are harder to come by. CRED’s being stingy with cashbacks. Analysts wonder if the tech boom is over. Everyone’s crypto portfolio has crashed (to be fair, that was bound to happen). 99% of value of both a stablecoin and Paytm Mall have eroded.
Even those eternal founts of optimism and upward-pointing graphs, venture capital firms, are bearish. In the East, Softbank started a recent presentation with the Japanese symbol for protection (before talking about record losses). Sequoia is closing an India-based fund. And in the West…
David Sacks
Investor sentiment in Silicon Valley is the most negative since the dot-com crash.
What gives? We can point to many reasons ranging from Covid to the war to supply chain issues to rising inequality to the US labour movement… But I’m going to say it’s more a regression to the mean, a ‘correction’ in the truest and most positive sense of the word.
The last few years have felt a bit surreal. I’m no expert, but there seems no reason why, during a devastating pandemic that has killed millions and upended everything, the stock market should have moved like this.
Certainly doesn't seem like the 'crisis of our lifetime'
Certainly doesn't seem like the 'crisis of our lifetime'
People much smarter about these things than me were puzzled at this growth too, most rationalising that it was due to future growth promise. This reflected in other markets too - global equities, record VC investments, and of course, crypto. Millions new to investing got used to daily upper ceilings, some even became TikTok / Reels finance influencers. Good for them. Startups seeped in losses were going for IPOs. Record-breaking amounts of private equity was pouring in. Companies were offering sports bikes for anyone who’d show up to work. Peak Bengaluru had weirder stories everyday.
It all seemed like a party… And let’s face it, unsustainable. Every whirlwind Shahid Afridi innings eventually comes to an end. Elon Musk (arguably, Twitter’s Afridi) is looking for all kinds of reasons to scuttle his own proposed Twitter deal.
And I just think that’s what might be happening right now. I am not an economist so I can’t tell if this is a depression, recession, stagflation or whatever new fancy term sells books. It just seems to me that the world is just sitting down after two breathless years and letting entropy do its thing. And that might be painful to many only used to seeing bourses ending in the green and getting used to moving to a new job with 30% hikes every few months.
From crypto companies dominating an IPL, to ASCI telling influencers to ‘introspect’ before endorsing them. In the matter of one year. Phew. So. How might some of these corrections play out?
What can we expect?
  • Employers holding more cards: On the podcast Pivot, Scott Galloway predicted that companies are going to start holding leverage over (some) employees again, the tip of the iceberg being return-to-work-or-else mandates, a far cry from the “work from anywhere as long as you please work” of the last year. It’s going to be very interesting to see how the resurgent labour movement in the US (unionization, walkouts, etc) is going to go head-to-head with this - especially since that will trickle down to other economies. One point Galloway makes is that frontline staff are still going to be in demand - think riders and drivers, while “unicorn white collar workers” are going to be culled in droves.
  • A return to pre-2016 life: Discounted cab rides, cheap/free deliveries, everything coming to the doorstep, content for virtually free… I’m not saying these will end, but will likely pause. Case in point: Netflix, which doesn’t seem as invincible as it did a few months ago. As prices increase, we’ll subscribe to fewer services, or just go back to how things were pre-2016. Damn good thing the BMC is building the Mumbai Metro fast and RBI is slamming some brakes. For many of us, this is how The Great Correction might impact the most.
  • Companies with scale have an advantage: If you’ve been desperately sifting through analyses trying to figure out what to do with investments, you’ll see many saying: Invest in safe companies, with lots of assets of their own, and healthy promises of steady future growth. Many of these incumbents also have upskilled themselves nicely during the pandemic - picking up digital know-how, or just acquiring their way into D2C-dom. A great analysis on this is Stratechery’s Cable’s last laugh, showing how the death of cable companies (or those who own the internet wires anyway) is greatly exaggerated. The frothy middle, wherever you look, is likely to be cleaned out over the next few years. (This is not investment advice). Big companies with lots of money in the bank - even if they’re not sexy or screaming innovation - will continue their onward march. As we’ve seen with Reliance acquiring anything that walks within 200m of its Ghansoli campus and Tata on a buying spree too. Expect companies with cash coffers getting into all sorts of businesses - adjacent or not.
  • Strong brands have an advantage: This is not just because customers will default to safety in times of uncertainty - the changing economics of online marketing mean that targeted performance-based ads are just getting more unviable. A start-up founder I interviewed recently (will be out soon!) surprised me by saying he is not focusing on directing traffic to his own site (which used to be de facto D2C practice), mostly because customer acquisition costs now on social platforms are through the roof. It seems like the best hedge against rising CACs is building a strong brand. All the wisdom that brand building making sales in the long run easier, will ring more true than ever before. One case in point: Last year, Airbnb said that it’s going to turn off all its sales ads and focus on just brand-building communication - significant, given the travel industry is notorious for plastering the web with BUY NOW communication. Second case in point: The IPL. Despite slowing viewership, media rights (and hence, ad rates) are estimated to be higher than ever before. Nothing in marketing beats a good brand.
We'll get through this
I know it’s a bit of a tense time.
I’m no oracle, but I do think things will turn out fine. I graduated from an expensive Bschool bang in the middle of the last recession. The past two batches were taking increasing average salaries, and ours was told that if we had any offer over ₹35,000 per month, we needed to take it - no exception. One-third of my starting salary went towards a loan. It was a trying time.
The reason I say this here is that things like this have happened before and will happen again. Maintain perspective, don’t do anything silly, acquire skills and good experience that matters… And things will be fine. (Recessions / downturns have proven to be good times to start businesses - perhaps not one based on cashbacks, though).
Hopefully all this will not last too long. Even then, I feel some of the things I said above will play out in the long run. As many analysts said, Covid acted more as an accelerant than a change agent. A recession / correction could very well be the same - crunching into one year what we might have experienced over ten.
If it helps, I wrote an article on exactly this during the last time we were staring in the economic pits - September 2019 - long before corona was anything more than a premium beer. It was my first article for Arre.
I do hope The Great Correction leaves us with some positives. Unviable businesses deserve to not be in business. People who can afford to need to pay what products and services are actually worth. Anything propped up by artificiality will eventually collapse. I hope people come out with interesting ideas for products and services that will be of benefit to humankind and the planet, instead of whatever the heck web3 is.
Brand tweet of the year so far
Is any brand more self-aware than RyanAir? Original tweet.
The crypto bro here is Simon Leviev aka the ‘Tinder Swindler’
The crypto bro here is Simon Leviev aka the ‘Tinder Swindler’
Binge on the Webbies!
The ultimate compilation of all things digital (arguably, with a Western lens - but enough trends there that we can draw from). What will you find? Several examples of campaigns, websites, apps. But also - new content formats, artists, podcasters, and more. The Webbies can honestly be considered a digital crash course. This will take you at least 2 full days to go through and parse!
Right, then, off we go: https://winners.webbyawards.com/
BY THE WAY. If there’s anything you found particularly awesome, do let me know. I’d love to link out to what you found interesting, later.
The updates section
  • A new TikTok ad product will split revenues with creators. I feel gutted the platform is not in India. I feel it’s the zeitgeist of today’s content, home to some of the best creators and product features. Ah well, we’ll have to be happy with Instagram trying to figure out how to cram 30 kinds of video formats into one shitty app, then.
  • Behind Nike’s 50th year ad.
Nike 50th Anniversary | Seen It All
Nike 50th Anniversary | Seen It All
The reads section
A highlight from my vacation
Out of the 29 dives we did and thousands of underwater animals we saw, this one will remain very special. After 2 dives, and hours of transit, our group spotted a whale shark at the very last moment during a dive. The world’s largest fish. It was spectacular.
Maldives Scuba Diving: Whale Shark at Lux Beyru
Maldives Scuba Diving: Whale Shark at Lux Beyru
And for something completely different, a grey tip shark being utterly cute for 90 seconds.
Maldives Scuba Diving: A grey tip shark being adorable for 90 seconds
Maldives Scuba Diving: A grey tip shark being adorable for 90 seconds
See you next week!
What do you think? Is a Great Correction coming? Am I being needlessly alarmist? Do you want to see less long writing and more cute baby shark videos? Either way, hit me up.
Chuck
Did you enjoy this issue?
Deepak / Chuck
By Deepak / Chuck

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