Are Advertisers Slowing Down?

Writing by Social Marketing Journal on Saturday, January 26, 2008 Leave a comment

I agree with Sean at Mashable on this one.

Recessions are difficult to predict and harder to explain. They rely on fundamental aspects of economics that much of the Internet does have to abide by. Simply put, taxes are an issue off line, but online they are not so much so. If the price of paper rises or falls, people online aren’t bothered by it. On the other hand, if ISP prices move up or down then people online are much more concerned whereas people off line hardly notice, unless they’re an ISP customer (even then, you won’t see much of an economic ripple).

Off line advertising might slow down. It already has, in fact, been in decline for the past 3-5 years. I guess you could call that an advertising recession. Or could you? Probably not since online advertising has increased during the same time. Which is Sean’s point (the broader point at least).

Fuel prices, a new president, economic slow down in certain sectors, decline in value of the dollar, all of these could contribute to businesses cutting their advertising budgets. But would they stop advertising altogether or simply transfer their budget to online advertising instead? There is no historical information to give us a clue. As Sean so eloquently pointed out, any allusion to past data regarding this matter online is outdated and won’t shed any new light on the topic. There simply is no data to tell us how today’s online consumers and advertisers will respond to an off line economic downturn.

One thing I will take issue with Sean Aune on is that consumers will automatically embrace online commerce. His own words:

1) Consumers will be turning more to the Internet for all of their shopping needs. Where it has previously been a convenient part of Christmas shopping, they are becoming more comfortable with it, and the lure of no sales tax, the occasional offers of free shipping, and not having to gas up the car to drive somewhere, will send more of them to do their everyday buying online.

Consumers have already turned to the Internet for many of their shopping needs. They are more likely to search for real estate online and more likely to research their next purchase in clothing, computers, automobiles, and a huge bevy of other product lines on the Internet before actually making a purchase. However, they are still more likely to drive to a local merchant to make the purchase. That’s today. Could that change?

It could, but there would have to be a drastic event, I think, to make it change drastically. An off line downturn in the economy might be the drastic event. If gas prices go up and people prefer to do less driving, that could happen. People are becoming more at ease with doing business online, but will that translate into increased purchases online during a recession? That remains to be seen.

If consumers do end up spending more online then advertisers will definitely spend more money on advertising, regardless of what is happening off line. If consumers slow down purchasing altogether – online and off line – then advertisers will spend less. The undeclared and unknown variable is how consumers will act. Therein lies the mystery.

I will see this as a final caveat, if consumers spend more and advertisers spend more in response, Google will likely end up making more money and you could see their stock rise again. You’ll see more content network advertising and possibly places like Facebook and other social networking sites will increases in their stock values as well.

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