Financial Crisis Drives Back to Basics Thinking

Financial Crisis Drives Back to Basics Thinking

Charlie Buchwalter

The recent cataclysmic events in financial markets have jolted many of us into a “back to basics” mentality. Basics such as “what goes up must come down.” Basics such as “live within your means.”

Over the weekend, my colleague Dave Martin and I reviewed a 100 year trend of price/earnings ratios for the S&P 500. For the last 18 years or so, the average has driven far north of the long term average of 15, and a “back to basics” mentality would have indicated that sooner or later it would come back down to the average, and probably overshoot it on the way down. Lo and behold: an article in last Thursday’s Wall Street Journal reported that the P/E ratio went below 11.

It’s interesting to note that the P/E ratio “bubble” over the last 15 years pretty much coincides with the introduction, growth and mainstreaming of the Internet and interactive media. And the dramatic correction in financial markets has made me wonder: what kind of correction is due for online media and market researchers? I suggest this should happen because, as with the financial markets, many have gotten carried away with an exhilaration regarding all things interactive, and this exhilaration has caused many to overlook tried and true research approaches that have withstood the test of time. After all, how often have we heard something like this: “The Internet is different…the research that has worked historically for other media isn’t relevant to the Internet”?

The Media Rating Council (MRC) has looked closely at this, and here is what they have to say: “Overall we’re ready to consider some compromises in strict probability sampling in the name of larger Internet samples for currency measurement. But we will not let certain narrow technical issues to allow us to throw out the quality ‘baby’ with the probability ‘bathwater.'” Here are six essential research anchors according to the MRC:

  1. Knowledge of the universe
  2. Coverage of that universe (e.g. minimizing totally excluded populations)
  3. Efforts to minimize non-response bias in general (e.g. optimizing cooperation)
  4. Understanding and minimizing differential cooperation (to achieve proportional samples)
  5. Consistency of procedures over time (so that results are replicable)
  6. Sample sizes

So with this in mind, let’s ask: “Which financial institutions are positioned to survive the current meltdown?” The answer: those that clung to portfolio quality and didn’t let go. The great financial sages foretold that when turning away from quality, one pays for it sooner or later. Time will tell, but I’ll bet the same lesson will hold true in the online media and market research world. What do you think?