In 2001, the Nasdaq crashed and investors bailed, realizing that the net or intrinsic value of many of the companies in question was drastically lower than they previously believed. A series of events, including 9/11, led to a recession.

Today, sure, a lot of homes and dwellings have lost value, many people won’t be able to afford mortgages etc., banks have pretty large exposures, but last time I checked, in economics class, we made a big stinking deal about real assets: an asset that is intrinsically valuable because of its utility, such as real estate or physical equipment.

A nominal asset, which is what a stock is, holds its value largely from the confidence it instills. Not sure Pets.com raised much confidence in anyone come 2002… but a condo in Miami? Yeah, that’s valuable. Maybe not as valuable as the young broker trying to sell it you suggested, but valuable nonetheless.

In laymen’s terms, while there were no buyers for nominal assets that were wildly expensive, there will always be demand for real assets, especially ones you can live in, rent etc.

Anyway, now that this is out of the way, let’s answer the question:

If tomorrow you had to cut 10, 25, 50% of your ad budget, would you cut print, radio, tv, or web?

This ain’t 2000 when the bubble burst and the Nasdaq crashed, or 2001 when 9/11 happened; then, few F500 companies spent heavily or were experienced with web advertising, then it was a matter of “we don’t have the resources to experiment with the Web.” At the time, there were also less people online. It just did not offer you as much reach x frequency as the other medium.

In technical terms, online advertising’s beta (the ratio compared to the average) was much higher so in a downturn it suffered a deeper decline.

Today, the secret’s out of the bag: print advertising is pretty ineffective, TV is expensive and random, no one listens to radio etc., and online is where it’s at. If an externality - say the sub-prime credit situation turns sour - online advertising might be affected, but TV and other more expensive (and inefficient, effective etc.) formats will be hit harder, faster, and unlike the Web, they simply will not recover.

In other words, once advertising budgets recover, a much larger portion will be allocated to the Web, but if something does happen, the Web will be the least affected thanks to the 3 Ts:

- tracked
- targeted
- timely.