The guy did it again last February. No wonder why this current tornado…

So, fasten your seat belts, it’s going to shake up quite a bit for the next couple of years.

The time for Greenspan and his peers to find another economy sector to put their money – ooops, sorry, to take your money – in.

Marianne> I love community marketing

ManuPD> I agree with everything, but hey, I needed to write a blogpost, right?

I have little time to go very deep in my comment, but just a few remarks:

- Let’s not forget there are two sides of the crisis: one is the slowdown and progressive downturn of the US housing market (as a whole, but of course this is particularly visible for the subprime borrowers) that has been going on for 15 months already; the other one is the liquidity crisis that arose from the realization that sofisticated risk-sharing financial instruments backed on subprime mortgages were indeed impossible to price.

- I therefore disagree with the fact that there could be no impact on retail. Even more, I do believe there WILL be, and I’m not the only one thinking so. Why? Just as in every single housing market downturn, households spend less when their house price falls (even more so in the US, where mortgage equity withdrawals are particularly used).

- But besides this, this “crisis” is in no way a cyclical economic downturn, as growth prospects throughout the world are strong (with the exception of the US of course, which should grow at about 2% in 2007, ie below potential: but there is absolutely no recession in view), corporate profits should remain also strong -including in banks.

- Therefore I see little impact on the software industry, except for those companies with strong and/or sole exposure to the US consumer goods markets -and that’s quite a few companies of course, but IMHO let’s not dramatize the situation more than it needs to be.

A credit-crunch at the bank-level can have a direct effect, but also an indirect one, by making financial decision-making for private investors like business angels more difficult.

About online- vs. offline advertising, both are based on how well businesses are doing in the real world, and how much they have left for an advertising budget. Of course, it won’t be dead and I agree with your reasoning that businesses will aim at services that present the best and most measurable ROI, which includes online advertising on high-traffic sites. Again, low-traffic sites, i.e. start-ups, may suffer, and if the housing-crisis lasts, which is uncertain, I expect the total amount invested in online advertising to fall also.

About online advertising and why I believe it’s not going to suffer any economic downturn: 1) the digital advertising market grows 20% per annum. 2) when you spend 1 euro in offline commercials, it’s EXTREMELY HARD to track your ROI, ie know how much revenues an investment of 1 euro will generate. 0? 0.5 euro? 2 euros? 5 euros? You never know. 3) Digital advertising, although it has become expensive because only one player offers a truly pervasive platform (namely, Google – and they should be given credit for their vision of this market), allows such performance trackings. When you spend 1 euro, you know exactly how much it generated in termes of clicks / visits / sales (depending on the pricing you chose).

In a downturn, managers get pressurized by the necessity to track all investments and show results. Traditional commercials barely represent a valid option in this respect. Online advertising is a much more accountable solution that will help managers say: “hey, I generate 2 euros in revenues everytime I spend 1 euro whilst you couldn’t even track that number last year. How can you not increase my bonus?”

Feel free to disagree Vince, sorry for not being crystal clear in my post. Hope visitors will bump on these 2 comments.

I think that a housing-crisis is probably a most damaging problem to an economy of all. People and banks depend on using housing as collateral for loans. A natural consequence would be less consumer-loans and less loans for pre-VC / small start-ups as well.

It reminds me a little of the shift that happened in some European countries (e.g. Germany) in the 90s. Banks used to finance a large part of the purchase-price of housing, up to 85% in Germany in some cases. After this seized, it had a lot of consequences for the ability to buy housing of course, but also on the risk-mentality of the people, which often comes from ease that they can purchase credit.

I hope this does not happen in the US, but a lowering in entrepreneurial risk-taking may be an effect also… which, if it lasts, will also affect business angels, and eventually venture capitalists.

Can you explain how you foresee a shift to online advertising? I seem to remember hearing that general advertising-expenditure would probably fall, which would certainly have consequences on a lot of internet-sites’ business-models.