Is Online Business Over?

The vibes are off, but not terminal.

Welcome to Brain Trust, your monthly coaching and advice column! Each month I answer questions from paid Think Piece readers on business, strategy, entrepreneurship, and more.

This week, we have a great question for the inaugural Brain Trust column.

Let’s dive in.

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🤔 Brain Trust

“Sometimes it seems like online business is over. You’ve talked a lot about how ads don't really work anymore, the algorithms seem like they're out to get us, and all of my friends are making less money than they used to. What do you think?”

Photo by Emil Kalibradov on Unsplash

The online business gold rush is largely over. And that's a good thing: what's left is the opportunity to do good work. The current feeling that online business is in decline is an issue of perception more than a change in reality.

Online business generally refers to digital-only or primarily digital products, like courses, content, software, and remote services. One could extend this to e-commerce, but I won’t address that model directly here since the selling of physical goods has different factors.

The concern that online business is in decline largely emerges from the dramatic increase in entrepreneurs working online now who got their first big break in 2020—or started focusing online in that year—and the outsized impact that has on perception of the industry.

2020 was a revenue outlier for every online business I know.¹ Lockdowns and work-from-home pushed people indoors and onto their phones. Most countries provided stimulus funds that boosted middle class disposable income even in an uncertain economic environment. People had little to do besides panic, and were willing to spend on courses, coaching, and experiences to stave off their misery. Severance and stimulus funds were also invested into starting online businesses, which increased B2B sales as well.

But every business has up and down cycles. It's normal to have years where you generate less revenue, or where your growth rate slows. What we're seeing is change, not decline. This is a post-pandemic marketing correction, and a needed one to avoid a bubble.

The fear emerges when we buy into the Friedmanite myth of perpetual growth, that businesses can and should continue to grow and that there are no real limitations to that growth. This is specifically true online, when the physical limits are largely hidden from view.² Behemoths like Meta, whose revenue fell slightly in 2022, are punished in the stock market for it.³ Many digital companies over-hired after the pandemic boom, which was one of the (though certainly not the only) causes of the hefty tech layoffs we've seen in the past year. There are also companies like digital-physical hybrid Peloton that made big bets based off of pandemic-era revenue, creating huge cashflow issues and tumbling stock prices. Smaller online businesses are not alone in having to adjust their plans and expectations as the market has corrected.