WebProNews

Less to spend means advertisers will spend smarter

An economy that has been buffeted by soaring energy prices and inflated costs of goods may have the side effect of bolstering digital advertising.

When filling up even a modest four-door sedan consumes a noticeable chunk of one's take-home pay, people look for better deals elsewhere to compensate. A similar phenomenon could be happening with online ads.

As budget-makers plan where to spend money, they may opt for more measurable, and cost-effective, online ads. Silicon Alley Insider said discussions at the McGraw-Hill Media Summit hit some optimistic tones amid the current economic gloom:

"A recession is great; it's going to force people into digital and accelerate the pay-per transaction model," said Marc Ruxin, SVP for digital at McCann Worldwide.

Also in that camp: Dean Carignan, director of ad business strategy at Microsoft (MSFT), who says a recession will hit brand advertisers, which account for 30% of Web spending, but not direct-response advertising, which accounts for 70%.

Not everyone cheered for a recession. Analyst Scott Kessler of Standard & Poors sees 2008 having slower growth than predicted, likely 19 percent rather than an estimated 21 percent due to impact from the economy.

We're inclined to think the combination of the current economy and ongoing worries about the pay per click model will push more advertisers to opt for cost-per-action models where they pay for specific conversions. That may not bode well for companies earning big from pay-per-click, but the time seems ripe for a shift.