Bronte Media

There is a great meme going around at the moment that distills down into: Is online advertising fucked in 2008?

The two people who have the most thoughtful arguments are Henry Blodget and Jerry Neumann err Jerry, since I don’t know his last name.

The online ad market endured a shakeout in the last economical downturn because the advertising was hugely leveraged toward ad deals between portals and fledgling online firms, whose existence was dependent on continued financing rather than operating profits.

So with newspaper advertising falling off a cliff and TV now showing weakness, online is also screwed, right?

Not so fast. If you look at the TV ad industry they rely hugely on Automotive and CPG companies. Those two categories have basically seen online as a ‘testing’ ground and are running ‘experiments’ even ten years on. In fact, the only time they mention online advertising is in the TV upfront season where they say Television is fucked and this year they’ll shift a huge amount of their budget online. And then they don’t.

Rinse and repeat at the next upfront.

The heart of newspaper profits - classifieds - is bleeding out at an accelerated rate. The story is hardly rosy online - Monster is dysfunctional at the moment, real estate is an industry into itself and Craigslist is a very credible competitor at the $0 price. The only shining brightspot really is Autotrader.

So what does Online rely on? Principally online retail and financial services. And maybe travel as well. Those three account for the majority of dollars.

Will people stop buying online? Probably not, but the growth is maturing. Financial services? Yes, less people are getting mortgages, companies are restructuring and so unless the lead price grows to compensate the decline in volume, then that pillar will be hit. And travel? The industry seems to be doing its best to piss of customers but demand is growing fast.

So I think that gravity does apply and the online advertising industry will flatten or decline because of the mortgage market. But there has to be compensation from two basic shifts: 1) dollars shifting to direct response (direct mail is still growing at a fast rate) and 2) dollars shifting to where the consumer is (i.e. the Internet).

Industries like Automotive and Real Estate which are yanking dollars from print and TV are not likely to have as big effect online: principally because they don’t spend that much online at the moment anyway.

But I do buy the Mortgage downturn means online ad downturn meme more and more each day. Just that I don’t know if we mix it all in together (consumer usage, direct response nature, category makeup) that ends with tears dropping into spilt milk.