Recession – the implications for online advertising?

During the SIME event there was an eyebrow-raising presentation from PriceWaterHouseCoopers. Well, it sure caught my attention with the bold statement that ONLINE ad spending will grow in all European markets next year, mainly because of the shift from old to new media. See this link.

This reminds me of some news I stumbled across recently – the story of how HomeAway, the largest online vacation rental marketplace, this month nailed down a good $250 million in venture capital, an extraordinarily large amount of money for an Internet company. As the New York Times reports, the new round, which is the biggest a tech company has raised since 2000, brings the four-year-old start-up’s total venture funding to $405 million!

So, against striking news items like this one, it seems difficult to work out the true state of the online advertising business in these nail-biting times. Lately, and fully understandably, Toading has spotted reams and reams of negative reporting with regards to what is likely to happen with online advertising during the recession we’re already in. We’re even seeing some of the more popular online media companies drop head count in the expectation that ad spending on the Internet will crash and burn in the short to mid term. While I certainly believe that companies will be forced to rein in their spending, especially in the sphere of advertising, it’s my prediction that more money will be coming to the Internet. This is why I feel that way:

1) Consumers turning to online shopping to save money – More and more people will be trying to save money in every way possible. This will include saving on petrol money by making more purchases online instead of driving around town looking for the best deals.

2) Smarter purchasing – As people start to take a hard, critical look at their purchasing decisions, they will be making more use of comparison shopping online and doing more research on the web before they make those purchases. This will also lead to more online purchases as they work out where the best deals are to be had.

3) More time at home – This could be classed under the people saving more money category. As people begin to watch their spending habits, it will mean less time and money splashed out on entertainment outside the home, like going out to eat, going to the movies, travelling abroad, and so on. These will give people more free time at home, which in turn will mean more time spent online.

4) Measurability - If that’s a real word! Anyway, my theory is that companies that are cutting back on ad spending will only put their money in what they absolutely know delivers results. This gives online advertising serious clout over pretty much any other variety of advertising, as it’s all trace-able down to the click or penny. You can fine tune and experiment constantly to identify what works best for you.

It seems sure that, in some sectors at least, spending will drastically decrease online. I would actually put luxury goods, travel, automotive, and some financial sectors in this bracket. Although I feel that advertisers will cut back on banner ads and other rich media, I think that more advertisers will be moving to affiliate type CPA stuff and CPC, as well as other Search Marketing efforts. So, that means online display advertising may slow down but overall I still believe the state of Search Advertising is looking good.

What do you think?