I wasn’t really planning on talking about the impact of the credit crisis on online advertising anymore, but I just read Blodget’s take on the news that online financial advertising was up 10% in the third quarter (compared to the third quarter of last year) while online advertising in general was only up 1.3%.
The beauty of blogging versus other forms of writing is that I can flog my personal beliefs no matter what the evidence. So can Henry. Personally, I try to let my beliefs change when confronted with evidence to the contrary. Henry prefers “anecdotes” that support his conclusions.
Things can always change, but it remains my contention that advertisers will respond to difficulty in finding new customers by increasing ad spend in accountable media. Like online.
The mortgage crisis is the result of mortgage lenders seeking customers who were bad risks. Fees for servicing these subprime mortgages are high and the borrowers are eager to borrow so easy to find. The non-risk-adjusted ROI on subprime borrowers is astronomical. Risk-adjusted: not so good.
The appropriate response by mortgage lenders is to tighten credit standards and give money to a smaller segment of borrowers, those more likely to pay. To find these borrowers, the lenders still have to advertise to the same pool of people because the amount of money spent targeting potential subprime borrowers specifically was a small piece of the ad pie. The ROI may decline, but the dollar spending doesn’t.
Some financial firms will stop advertising, sure, because the impact of their prior mismanagement will leave them unable to invest in the future. The ones who do this should be put high up on the list of likely bankruptcies.