Vertical Risk
Today I spoke with a company doing CPA marketing in the credit space. Apparently Capital One has shut down all online applications. Every other major card issuer has dramatically tightened their acceptance criteria. That has brutally shrunk the credit card marketing space. Everyone in the space is hurting–from the issuers on down the value chain. Amazing, since it wasn’t too long ago that CreditCards.com was filing an S-1 that showed great growth and near 50% EBITDA margins. No more.
This has one obvious parallel–mortgage, which in ’07 also went through a brutal contraction. It’s not cyclical, either, since neither mortgage nor credit cards will return to the frothiness of the recent past in the next few decades, if ever.
Very few in the mortgage space saw it coming, and I don’t think many in the credit card space did, either.
What vertical could be next?
The other major financial vertical is insurance. I don’t see auto as vulnerable unless the government decides to make it voluntary, but that seems improbable. Health? Given the regulatory changes on the horizon, there could be risk. But I actually think health stands to benefit as Obama will likely create some sort of national program that will mandate a competitive market.
Education? It’s probably the sexiest vertical now, but the for-profit players are heavily regulated and therefore face regulatory risk. That said, it’s hard to imagine that any political official would lay a hand on the industry in today’s economy.
Then again, it was hard to imagine a few years ago that the mortgage and credit card verticals were about to get mauled.
