Recession: Perception Is Reality

As the stock markets around the globe engage in panic selling, the reality of recession follows the perception: people become fearful and more conservative and spend less. Because the US economy is largely based on consumer spending, Bush & Co. want to “put money into people’s hands” so that they continue to spend. But the “damage” will have been done before people can get whatever modest payment the government provides.

The rate cuts don’t help that much right now because they seem to be fueling a lack of confidence. In addition, lenders have stopped lending. All this probably means we’ll be feeling the effects of recession before too long. I hope not but there’s a feeling of inevitability about it now. (Insert anti-Bush rant here.)

Questions:

  1. What will happen to advertising in traditional media and online?
  2. Will online suffer equally or not as much?
  3. Will advertisers fall back on traditional media because of familiarity and more proven history or will the greater flexibility and generally cheaper pricing drive faster adoption (for SMBs and nationals)?
  4. Will newspapers suffer more than other traditional media sectors?
  5. Will investors keep funding Internet companies or shift their money elsewhere?
  6. Will the M&A climate continue or will it constrict amid broader conservatism?
  7. Will some of the various competitors in local, verticals, search wither and die leaving some clear winners?
  8. Will business models matter again for startups?
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8 Responses to “Recession: Perception Is Reality”

  1. Jay Small Says:

    If rate cuts trickle to the mortgage sector, and if refinance and new mortgage opportunities for consumers loosen as a result, and if markets that really popped the bubble on home prices (think Florida and California) stabilize … well, that’s a lotta “and ifs” but anything that smooths or even brightens prospects in the real estate market would mitigate a recession for newspapers.

  2. Greg Sterling Says:

    Hope you’re correct Jay

  3. Webomatica Says:

    Also add in that with each rate cut, the dollar gets weaker and inflation goes higher.

    If people have less discretionary income to spend, advertising will be less effective. It may take a while but if advertisers begin to realize all the money spent on ads is making no difference if there are no consumers to buy things, then they cut their budgets.

    The companies that survive will surely be the ones with piles of cash to fall back on.

  4. David Says:

    Spending on ads will always be there either online of offline. With the recession the advertisers or ad buyers will just be more selective in terms where they would get the most bang for their bucks.

  5. Greg Sterling Says:

    There will be much more emphasis on “accountability” accordingly. But brands will also still want reach.

  6. Perry Says:

    Two (opposing) thoughts:

    1. In the reasonable recession scenario of tightened ad budgets of local businesses, the appeal of performance-based models is high. I can therefore see this to be a trigger to trial. Post recession, will the print ad business really be the beneficiary of the rebound, or could this just become the catalyst for trying, then scaling interactive media spend?

    2. In a recession, the need to secure your existing base of business may cause businesses to retreat to “safe havens”. Tried and true ad products are fortified against offers to just “take a little of your budget and try this”. When small businesses have “a lot more to worry about”, change is often slow.

    There, the answer is obvious, right?

  7. Greg Sterling Says:

    2. is psychologically probable but 1 is more “rational.”

  8. evans ink » Blog Archive » recession & local online ad spending Says:

    […] Sterling triggered an exchange on his blog last week – the dialog centered on “what would the impact of a US recession be on local online […]

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