There's been a big discussion over Internet advertising and the impact a bad economy would have on it. up until recently, the answer to this wasn't clear, primarily because we haven't experienced a bad economy since the birth of the web.
On one hand, there were people who thought that when the economy is weak ad spending will go down across the board, hurting Internet properties along with traditional media.
On the other hand, there is a school of thought (present company included) that thinks that when the going gets tough, the advertisers go hard sell. In other words, when the economy is bad, advertisers will cut TV and billboards, which are primarily branding tools and stick to or even increase Internet ad spending - considered a hard sell vehicle.
I have worked in this field a few years back and my experience from the interactive agency racket is that Internet advertising is a different game than other forms of advertising:
The primary difference is that TV, newspaper and billboard campaigns are launched 2 or 3 times a year and involve a large one time spend. When companies are feeling pressure, canceling one or two of these campaigns is the easiest thing to do. Branding campaigns don't immediately translate to the bottom line and it's understandable why they would be postponed.
Internet campaigns are of the "rolling" kind - in other words budgets are allocated annually and spread evenly over time, with small enhancements to compliment traditional media campaigns. Unlike Branding tools, Internet campaigns show results, in hard sales, the day they are launched. If a company is selling a product on Google for a cost of $7, and makes $12 from the sale, they will increase their spend, if anything.
For this reason I was curious to see what Googles results in this quarter would be.
Googles profits spiked 26% for the quarter, in a period where the market mayhem was already evident to all advertisers.
To me this answers the question - Internet advertising is a different beast, not to be measured with traditional ad metrics!
With the company trading at $350, 50% less than it's peak, I'm seriously considering a long position in this company.
Happy trades everyone.
Guliamo's portfolio:
http://www.marketguru.com/guliamo
