The Declining US Dollar: Winners And Losers

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burning.jpgMany within the United States might not have noticed the trend yet, but the rest of the world has: the US dollar is in serious decline. Americans have long made fun of their friends North of the border, but today the Canadian dollar buys $1.02 US dollars making it worth more than the Greenback. It wasn’t that long ago that the US Dollar was at parity with the Euro (December 02), but today it buys 70 Euro cents.Even the Australian Dollar is nearing parity, buying 90cents USD vs 55c in December 2002.

It’s not all doom and gloom however, and there are winners along with losers as the dollar declines.

Winners

Google
(and to a lesser extent Yahoo and Microsoft)

Google is a big winner from the declining US dollar, with its 2nd Quarter financial results indicating that 48% of Google’s income now comes from outside of the United States (3rd qtr results are due this week). Google operates in US dollars so 48% of its income (even if growth was completely static) is now worth more today than it was at the end of the second quarter. Of course it would be a surprising result if Google didn’t grow its overseas business in the 3rd quarter so expect that foreign income will tip over 50% of Google’s earnings for the 3rd quarter.

The flip side of course is that the declining US dollar is actually representative of issues within the US market itself so Google does face the real risk that either now or in the immediate future of seeing ad revenue decline if there is a broader downturn in the US economy. Its international exposure though should outweigh any such decline, and the market knows this, in part its why Google hit $600 a share.

Yahoo and Microsoft will benefit in terms of foreign revenue as well, although neither has the online presence (or marketshare) that Google does.

Non-US Startups

The cost of doing business in the United States continues to slide, helping break down the cost barrier that makes it difficult for non-US startups to compete with the Valley. Everything from travel, branch offices, and even more favorable lending markets helps level the playing field.

There are also ample opportunities for non-US affiliate style programs to strive ahead; a decent program that competes with Google Adsense but pays in Euros would certainly have a much broader appeal than it once would have.

Losers

US Startups

Although many are focused on the US market alone, smart startups know that there are markets beyond the US-Canadian border that provide growth opportunities that may not be available domestically in the highly competitive US market. The cost of opening foreign offices is becoming expensive as the dollar dives, and even basic stuff like outsourcing coding (which many startups do to India) is now becoming more expensive.

Anyone with a US Dollar exposure

Affiliates, bloggers and even coders are seeing income reduced as the value of the US Dollar drops. Much (or most) of the content and coding marketplace is run in US Dollars, which exposes bloggers who rely on programs such as Adsense, through to people writing for blog networks and similar writing positions.

with thanks to Paul Montgomery for the post idea.

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