Apr 15 2010

The Recession and the Web Design Industry

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By Andy Warpole

In the autumn of 2008, at least for a few weeks, it looked as if the very walls of capitalism were going to fall on to the heads of its participants. The once mighty Lehman Brothers, an American corporate monolith since the 19th century, imploded overnight on September 15 and declared itself bankrupt; and then in the following month $10 trillion in market capitalisation was lost from global markets.

There was panic on Wall Street, in the City of London, Berlin, Paris and most major financial centres as stocks crashed and the politicians spent billions of taxpayers money to prop up the banks.

The credit that corporations and individuals in the West had become dependent on evaporated overnight and forecasters were warning of an impending Great Depression.

As the vocal billionaire commentator George Soros stated:

“This is a crisis unlike any other. It’s a total collapse of the financial system with tremendous implications for everyday life.”

18 months later and the dark prophesies of a repeat of the 1930s have not materialised. Although the economies of Europe and North America have suffered greatly, those of Australia, China and India have remained relatively buoyant.

Within the Western economies different sectors have faired better than others. Manufacturing has been pulverised, but new media and the digital economy have continued to expand – albeit at a slower pace than previously expected. Consequently, the web design industry has faired reasonably well in these difficult times.

Photo
Image by albertlaw

The dot com crash

For those that have been involved in the industry since its inception then this is the second time they have experienced a recession – the first being 10 years ago.

In the late 90s both investors and the technology sector rubbed off each other in an orgasm of expectation. Viewing the web – correctly, as it happens – as a new era in commerce, money was showered recklessly across digital businesses.

There were plenty of interesting ideas being flung around, but the technology was still relatively primitive and was not able to meet user expectations – in particular, internet connection speeds were very slow.

Speculators rushed in and the stocks of newly floated internet-based companies soared, but as it become apparent that they were investing in a dot com castle made of sand the NASDAQ collapsed as quickly as it had grown.

Tristan Louis found himself at the centre of the digital storm after being employed as a Senior Technical Advisor to the CEO of Boo.com – one of the more infamous failures from that era.

Boo.com was set up to sell fashion clothing across North America and Europe. It was a vast undertaking which, at the time, was like building a retail Roman Empire on the web.

And the management were completely out of their depth.

“Most days, to be honest, were days when we realized that there were substantial issues,” remembers Tristan today, “However, we felt that we could fix most of them before anyone noticed.

“The realization that Boo.com was in trouble, to me, was after the first week of sales. I realized that the amount of money we were bringing in was nowhere near the amount we needed to bring in to justify our valuation”.

Incredible as it may sound today but Boo.com went through $188 million of VC money in six months and all without a development plan. When Tristan started working there in the summer of 1999 the launch was already delayed and although he tried to implement a structured plan it was too little too late.

When the eCommerce company entered the fledgling commercial market six months after it’s original launch date it was severely panned for its poor user experience. The frontend of the site was heavily reliant on JavaScript and Flash and all at time when the vast majority of internet users were connected via dial-up.

Boo.com is still remembered today as a notable failure of that era but there were many others in the whirlwind of madness that people like Tristan Louis were sucked up in to:

“I felt that things couldn’t go on forever but, at the same time, that feeling kept getting challenged. I thought the market would crash in 1998. Then in 1999. Then in 2000.

“The issues now faced by economies around the world are much larger than any of the issues we faced. However, just as the dotcom world faced itself on the edge of destruction – remember that a majority of dotcoms didn’t survive the dotcom crash – we are now faced with an economy that has been on the brink”.

Internet failure boo.com
Dot com internet failure boo.com

The current recession and the web design industry

Fast forward several years to another economic crisis but one where the players are more mature than the last time.

Paul Lindsell is the co-founder of Capsule01, a digital agency in Hoxton – an area of London synonymous with creatives and web designers.


Capsule01 logo

Although Capulse01 have survived the recession they have only done so through restructuring and staff redundancies:

“The year before last, Christmas 2008, we shut up shop just before the holidays and we had a good solid forecast and things were looking good, then we came back after Christmas and three of them had pulled out due to their own financial difficulties. That wasn’t the best start to the year. We said, ‘Look we have money but we don’t have a steady enough work flow’. It was more financially viable to use freelancers as and when required.

“It’s probably affected all companies. There have been quite a few agencies going bust in Hoxton and a lot of the large one’s have cut staff. The one two floors above us in this building went last year. There was 12 or 13 people there and they just went overnight. Some of the bigger names in the industry have gone”.

Rachel Andrew founded edgeofmyseat.com nearly ten years ago in the debris of the dot com collapse, but this recession has had little or no effect on her business:

“I think generally,” Rachel states, “as with last time around in the dot com crash, then the people who are good at their jobs are working and still really busy. As a company we are still doing really well. I think that a lot of the design agencies that we work for are doing quite well. The web is a very cheap way to advertise in comparison to traditional offline campaigns. So we find that most of the people we work with are actually doing okay.

“It’s the same with the dot com crash. Where people suffer is where they don’t have the skills they need and are not prepared to look around and broaden their business and do slightly different things. If you are very reliant on one sector then you’ll be in trouble. We are fortunate in that we do all kinds of work. So whereas when something might slow down then something else might pick up”.


edgeofmyseat.com logo

Decline in the West, growth in the East

Away from Europe, the US and India have their own stories to tell.

Flag of USA

Kathy Marks is a Web Site Specialist at Arizona State University (ASU). Founded in 1885, it is one of America’s most prestigious research institutions.

The ASU, like the rest of further education in Arizona, has been the subject of savage cuts from regional government.

“It’s affected my department and every aspect of the university,” Kathy explains,”We haven’t had to lay off very many people but we all have to tighten our belts. Things that we planned to do at the university aren’t going to get done. We’re in survival mode at the moment and keeping the university afloat and keeping things functioning. It’s affecting innovation and progress.

“We have one of the largest universities in the country. Our domain is huge and there are hundreds of websites on it. We”ll do some of the work and move forward a little bit more but at this point we don’t have the resources to do a lot of the stuff we wanted to do”.

The predicament of the Arizona State University is a foretaste of what will come to the public services of much of the Western world. Massive amounts of revenue have been lost by sovereign states in the global downturn, both through spending to prop up the financial sector and lost tax income. Consequently, most governments in Europe and North America have enormous deficits that need to be re-balanced. Some countries, like Greece, are already introducing swingeing cuts in the face of an impending emergency, while other nations, like the UK, are holding off from spending cuts for now so as not to harm a very fragile recovery.

Web designers employed directly by government or indirectly through outsourcing could soon feel the squeeze like those at ASU.

Flag of India

Expansion though continues in India and their small but vibrant digital economy continues to advance.

Jagrit Gupta is the boss of EyeBridge Soft Solutions, a web development and marketing company based in India’s capital, New Delhi. Employing 30 people, EyeBridge has faired well over the last couple of years and has an expanding portfolio both at home and abroad.

“The recession has affected the economy in some ways such as in the banking sector, but not like countries such as the US or the UK which have been hard hit”, explains Jagrit, “but if you talk about the web industry and digital agencies like ours then we have not been that affected – our client base has grown overall”.

Based mostly in New Delhi and Mumbai, the IT and web-based sector is thriving but while it mostly trumps on price it often lets itself down in quality. Much of the appeal of outsourcing from the West to India is cost-saving and the quality deficit is something recognised by entrepreneurs like Jagrit who aim to provide a service on par with their counterparts in London or New York.

The cost of employing qualified labour is growing with that of the economy in general, and as prices reach an equilibrium with the West in the coming years then companies like EyeBridge recognise that the Indian web design industry needs to mature and offer a consistently first class professional service.

Redundancy, unemployment and finding work again

It’s always an unpleasant shock to be laid off and 2009 was witness to a lot of web design companies trimming their staff numbers.

As an employer, Paul Lindsell noticed a steady stream of people contacting Capsule01:

“Last year we were bombarded with designers and developers asking for work, sometimes to around five or ten a day. So there was a fear that there was a shortage of jobs but the people we let go were snapped up in a week or two.”

One of those was 23 year old developer Mat Carey:

“I had been busy everyday working on clients projects so it came as a bit of a shock when I was laid off. It was only a small company and so they were brilliant about helping with my CV and references”.

He instantly lost no time in signing up with recruitment sites like Monster.com, although he was initially worried that his commercial experience wasn’t enough to secure him the right type of job which was working with his main speciality, PHP.

Head-hunted by First Clarity his confidence in his own skills temporarily wavered and he considered not attending the interview:

“I had been at Capsule01 for five months before I was laid off, “he recollects now, ”Before that I had been freelancing as a web designer and working as a youth worker trying to figure out what I wanted to do after college. The jobs listed on Monster seemed like employers needed very skilled workers with more experience that I had.

“As it happens I took their technical test and passed it easily and after they looked at my online portfolio they offered me the job and I started work on the following Monday”.

One year on and Mat is now a lead developer assessing new recruits like he himself had been 12 months previous.

Alex Wybraniec is a PHP developer too and was made redundant in 2008.

“The company I was working for were building a large social network for a magazine publishers on an absolutely ridiculously small budget. The project was meant to last just a few months but at the end of 18 months it killed the company.

“The atmosphere was difficult because it was part of a merger and we got aggressively taken over at the same time. Everybody was worn out and everybody was working as hard as they can trying to salvage the project.”

Alex has the opinion that much of the web design industry is badly run and consequently, recession or not, is inherently unstable. After being let go for a third time he vowed never to work for an agency again and has set up his own company, Alex+Alex, with friend Alex Torrance.


Alex Wybraniec, Alex+Alex

Building a client base in the middle of a vicious recession hasn’t been easy but they are in the position now of taking on their first employee:

“I think everybody in the industry has struggled, “ he declares, ”Nobody has had much fun over the last couple of years but everybody of our size is doing well.

“We’ve gained clients through word of mouth and they were the kind of clients that wouldn’t deal with busy agencies because they were too expensive. Being a small partnership we were cheaper and a better option for doing this kind of thing.”

Recent clients of Alex+Alex include Hospital Records, DebutArt and Think Espionage.

Tips to help you find employment

It seems like the recession has peaked and matters are gradually improving but employment levels are still falling with youth unemployment at 17.8% in the US and 19.8% in the EU states.

Those about to leave college are going to find it more difficult to find work within the industry than those in a similar position a few years ago. It can be daunting to find an opening in such a competitive sector so it is useful to take on board the opinions of those responsible for hiring labour.

Rachel Andrew, at edgeofmyseat.com, is hesitant about using the services of inexperienced designers and developers:

“They need to have real experience. It’s not a case of saying at college we did this and that. They’ve got to have real experience far over and above what they had to do at college just to get their degree or to pass that course.”

Paul Lindsell, on the other hand, is enthusiastic about employing those with limited skills:

“We tend to take junior guys on, “ he states, “When I left college the general consensus in the industry was, ‘Well if you haven’t got two years experience we don’t want to know’. We believe graduates have a lot to offer and are very passionate. I’m a firm believer in employing people with lots and lots of passion.

“For example, we took on a guy as a developer. He had no agency experience what so ever but he was very, very enthusiastic. I said to him, ‘Look we are a small agency and having a multitude of skills would be an advantage have you done any video work or any AJAX programming?’ He said I haven’t but I’m pretty sure I can do it. Two days later I got a DVD on my desk with video editing done extremely well and several pages built in AJAX to prove that he could do it.

“To me that is somebody going about their business with a bit of passion and determination”.

When it comes to sending a portfolio to a prospective employer, Paul’s advice is clear: do your homework about the company first and make a point of emphasising that in your correspondence.

“We get a lot of people who start their letters, ‘Dear sir or madam we have studied your website in depth’. Well clearly you haven’t because my name is all over our website so that goes in the bin.

“Some of the students now are using their initiative they are trying to find us on Facebook, they are trying to track us on Linkedin, or they are using Twitter to see what we are up to. Those guys get a more positive response”.

Alex Wybraniec is now currently recruiting for Alex+Alex and his advice is similar to that of Paul’s: eagerness can trump technical skills.

“When you start up,” explains Alex, “don’t focus too much on one thing as you’re more useful if you can do lots of different stuff. Have a broad range of skills to start off with and then specialise. Don’t go in and just be a PHP coder or just a front-end designer – do everything to be employable.

“I got my first job at a record label. I wrote to a band and said, ‘You don’t have a website can I make it for you’. I think having that kind of front to do that that that puts you in a positive light”.

The value of a decent online portfolio can’t be underestimated. It’s not necessary to display a large body of work, but what there is needs to demonstrate quality to those inspecting it and that means attention to detail in all aspects of presentation: no spelling and grammar mistakes, no broken links, no missing images.

Further tips on how to approach potential employers in the industry can be found in other Smashing articles What Makes A Great Cover Letter, According To Companies? and Expert Advice For Students and Young Web Designers.

The rising WWW sun

As has been made clear, this isn’t the first recession that web design and development has faced – and it won’t be the last. Fortunately, a rapidly expanding communication medium such as the internet has provided a cushion that sunset industries, such as printing and publishing, have not had.

The worst, most probably, is over but there will be a nasty, lingering economic malaise in the West that will continue for years. For those who want to survive in this industry than a depth and diversity of skills will be essential.

About the author

Andy Walpole is a freelance web designer and developer in London. You can read his blog here: http://www.suburban-glory.com/blog

About the Author

Comments and Discussions
  • HD Guy, 15 April 2010

    Great article, well written and documented.

  • shimu, 15 April 2010

    “Decline in the West, growth in the East”

    In china, the web design industry is still young and jumbled. The designers have a low income generally.

  • Sam Wilson, 15 April 2010

    Thanks, in one place the author’s name is “Warpole” and in another “Walpole”

  • CJM Design, 15 April 2010

    Very interesting stuff. Many things of which I was unaware of. Thanks!

  • bala s, 15 April 2010

    yes i agree with the point “Indian web design industry needs to mature and offer a consistently first class professional service”

  • Arun, 15 April 2010

    Bala you are correct.!!

  • Jordan Walker, 15 April 2010

    I guess now is the time to become innovative.

  • Jordan Wiedbusch, 15 April 2010

    Great write up, thanks for a very good morning coffee read.

  • Pablo Lara H, 15 April 2010

    Gooooooooooooood¡¡¡¡

  • Aaron, 15 April 2010

    “18 months later and the dark prophesies of a repeat of the 1930s have not materialised.”

    Eighteen months after the Crash of 1929, most people thought that recession had peaked too. There’s a great website called “News from 1930″ (now up to 1931) that chronicles stories from the Wall Street Journal of that time that sound like they could have been taken from today’s: lots of attention paid to good news from certain industries, ignoring the bad overall employment and debt numbers, and talking about how “this time it’s different.” It wasn’t, and it probably isn’t.

    But to the main point: I don’t expect web-based businesses to suffer in this depression as much as others, because we don’t tend to have the same vulnerabilities that many manufacturing and service industries have today: high debt levels and a dependence on cheap labor. You don’t have to borrow a lot of money to start most web businesses, which means you can survive a lean month a lot better than the guy whose factory belongs to the bank. You also can’t hire the cheapest workers you can get and compete on price alone; quality has to be the primary focus.

    Which isn’t to say we’ll be unaffected, but I think we’ll do better than most as long as we do good work. The biggest difference I’ve seen in my clients who own websites is the advertising money they’re getting. Advertisers used to throw hundreds of dollars at them just based on the fact that the site looked good. Now they’re asking for stats and calculating their conversion rates and figuring out whether each ad is pulling its weight. That’s changed considerably in the last couple years, and I think site owners and the developers they hire will have to pay close attention to that and make sure the advertising they sell is worth the price.

    Alex is right that a lot of the web design (and development, programming, etc.) business is badly run. I wouldn’t hire most of the web designers in my town to mow my lawn (and if I did, they’d fail to show up or mow off the flowers or something). I suppose that’s the downside to a totally unregulated industry: there’s no barrier to entry for anyone with the talent and drive to do the work, but there’s no barrier to anyone else either. But if you do good work and provide good service, people will find you — often after getting burned by someone who had more advertising budget than know-how.

  • Brian Rhinehart, 15 April 2010

    Having lived and worked in the the SF Bay and Silicon Valley during the Dot Com Bubble and its subsequent burst, I can say that there is one significant and important difference from the current downturn.

    After the the Dot Com crash, it wasn’t just investors that didn’t want to touch tech or the internet, but businesses as well. Back then, it wasn’t perceived as a proven viable business model as it is now. In the current financial atmosphere, businesses are more careful with their spending, but fortunately for the industry they’re not completely gun shy.

  • natasha, 15 April 2010

    wow….superb stuff…..

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