Sterling Falls: Good News for Publishers, Bad News for Advertisers

God save the Queen
Creative Commons License photo: BraNewbs

As a webmaster and publisher, what exactly does the credit crunch and the dramatic falls in the value of the pound mean for you? (This article is primarily targeted at a UK audience).

I feel that this is a seldom discussed issue as very few publishers are fully aware of exchange rates and the impact on their ability to make money. In this article, I will discuss the consequences for British publishers of the dramatic falls of the value of the pound and the possible business opportunities here.

What’s happened?

I’m sure we’re all sick about hearing about the credit crunch… the global financial crisis. I’ve found myself avoiding the news because quite frankly I’ve had enough of hearing about our financial woes. As the chancellor of the UK has just admitted, it looks like the UK will be entering a recession. Economists say a country is in recession if its total economic output (a proxy for quality of life) falls for two successive quarters. Because of the bad news about the UK economy, investors have been rapidly moving money out of the Sterling. This has caused the value of Sterling to plunge. According to Google Finance, Sterling was sitting very close to 2 dollars to 1 pound a couple of months ago. It today plunged as low as 1.53 dollars to 1 pound. And analysts are predicting a further drop down towards 1.4 dollars per pound.

What does that mean?

facing the ocean
Creative Commons License photo: numberstumper

The weaker pound is good news for exporters, and bad news for importers. Web advertising is somewhat unique in that almost all advertising networks trade in dollars. So publishers export advertising to the rest of the world (they sell advertising in dollars) whilst advertisers import it from the rest of the world (they buy advertising in dollars).  Let me clarify:

A website publisher earning $10,000 per month would have recieved about £5,000 per month. If the value of the Sterling falls to 1.4 dollars, that income increases to £7,140 per month. That equates to £25,000 of extra income every year.

However, it’s bad news for advertisers. An advertiser spending $10,000 per month would have to shell out £7,140 per month instead of £5,000 – a price increase of almost 50%.

As the audience of this blog tends to include a large number of web developers, especially from the UK, this is good news for you. In fact, if you haven’t thought about monetising your blog or website, it’s well worth doing now.

It’s not necessarily good news though…

Creative Commons License photo: pfala (injured)

The more eagle eyed readers will have noticed something. As it’s costing more for British advertisers to place adverts, they’ll place less of them and be willing to pay less money to advertise. So even if the exchange rate of the pound falls, the actual amount of income recieved might not actually go up as much as expected. Right? Kind of.

If your website caters for British audiences then it is likely the vast majority of your advertisers will be British companies. If you’re selling advertising to a British company, you’re not really exporting anything – only selling it to a domestic company, but using dollars.

If you cater for international audiences and companies, you’ll be a winner.

But what else about the financial crisis?

Well, regardless of exchange rates, companies are a lot less likely to advertise right now. Given we’re entering a recession, money is tight. Companies cannot be confident about how much money they really have available and whether consumers will respond to their advertising. Like for everybody else, the financial crisis is bad news for exporters too.

Whether the fall of Sterling is a long-term correction or just a short-term blip, I can’t say. But what’s important for us to all realise is that the game has totally changed. We need to rethink the way we all spend our money. But in the very short term, I believe there is a big opportunity in the market for British publishers.

Free Delivery on – Charges Scrapped

Creative Commons License photo: joiseyshowaa

In a move which should improve price transparency, Amazon has essentially scrapped the delivery charge on its website.

To qualify for free super saver delivery, you now only need to spend £5 rather than £15. Given very few things cost under £5, this isn’t a tough feat! For orders under £5, you’ll still have to pay a delivery charge which is likely to dwarf the cost of your purchase. One book costs £2.75+VAT to ship and an electronic item £5.88+VAT to ship. In most cases, you will find it cheaper to buy a really cheap item in order to get your order up to £5 to avoid paying delivery. Use the Filler Item Finder for this. For example take a pack of 8 Duracell AA batteries for £3, or get a cheap kids book for 60p which you can recycle or use as a stocking filler.

I hate hidden prices online so I think it’s a fantastic move. A few weeks back, a company tried to charge me P&P for a ticket. Fair enough you might say but I think it was £1 for an e-ticket (because it actually costs them £1 to send an email!) or £1.65 to pick it up from the box office in person (because they pay their box office staff about £1.65 per half minute). Ebay has a certain problem with really cheap items with extortionate shipping fees. In some ways, Amazon Marketplace has had the same issue in the past… I remember buying an SD card for about £1.50 and paying £4.50 for P&P. Anyway, great news.

Hello from London!

River Thames
Creative Commons License photo: wili_hybrid

Just a quick note to let you guys know I’m still alive! I’ve been in London for 2 weeks now, studying a degree course in Physics. London is a really great city and the pace of life here really has taken some getting used to!

Over the last two weekends, I’ve also taken the opportunity to see some of the wonderful places in the UK including the snowy mountains of Snowdonia in North Wales and the white Seven Sisters coastal cliff range.

As well as that, I’m really trying to get myself more involved in the application of science to real world issues and scientific journalism. Of course, this blog has been my primary platform for my writings in the past and I hope it will continue to be a lively weblog to interest you, the readers, and to provoke thought, debate and discussion. Watch this space!

Going to London

I’m moving to London tommorow morning 🙂 I’m leaving the countryside for the city so the pace of life will be totally different! And I’ve got a whole van load of stuff to move!

It’s especially exciting going to London with it being one of the most populous places in the world and with so much to do, and things to cater to every taste. London being the Olympic City is an extra bonus; I can’t wait for London 2012 and I’ve already applied to work or volunteer there for a bit!

Anyway, it might take me a while to get settled in so if things so quiet on this blog or you don’t hear back from me via e-mail – you know why!

September 2008

weekend inspiration
Creative Commons License photo: muha…

It’s been a very hectic month! The news was dominated by the global financial crisis and that’ll have knock on effects on everything in the next year or so. When companies are less confident about the future, they’re less willing to invest in developing new technologies. With more tax money going towards bailing out failing financial institutions, it could change the climate for spending on science and technology. It remains to be seen what the effects on our industry will be.

We started off September with the launch of Google’s new Chrome Browser. It recieved some lukewarm reviews but many of us were surprised to see Google promoting the browser to the masses amongst the big security and privacy issues.

We also had some interesting research relating to social networking sites such as Facebook. Sociologists have described “ambient awareness” from Facebook and microblogging taking society back in the direction of intimiate village networks. Research by O2 found that due to modern communications, the six degrees of freedom are now just three.

Highway Insomnia
Creative Commons License photo: Nrbelex

We had the official opening of the Large Hadron Collider at CERN which caused a ridiculous panic about the world ending. Unfortunately, there are a few issues at CERN at the moment which have caused it to be delayed for a few months so I hope all goes well and they’ll be able to get the LHC fully operational soon.

In the UK, we also had the launch of the iPhone on Pay As You Go. I asked what the alternatives to the iPhone were.

Elsewhere on the blog, I discussed how we could solve the issues of climate change and environmental degredation by using simple economic schemes. I also asked, “What is the most efficient language?“. I was very surprised at the number of speakers of the Esperanto language there are on this blog and they’ve contributed some really interesting thoughts which are worth reading!