Web Sites, All Their Eggs, and One Shaky Basket Called Advertising

Kevin Maney writes: Nice to wake up to news of global market crashes, eBay laying off 1,000, and AMD spinning off its plants to an Abu Dhabi investment company to stay alive. (Cue Sarah Palin: Time to blame Obama for "American dependence on foreign chips!")

Over in Web land, one majorly depressing thought is seeping into executives' brains: "Does this mean Internet advertising will shrivel?" Because if it does, there is going to be carnage.

If I had a dime for every Web company that was founded since 2000 based on an advertising revenue model, I wouldn't care if the markets melted down. I'd have a building the size of a Sam's Club full of dimes. Just about everything any of us uses on the Web exists because of advertising: Facebook, Yahoo, news sites, calendars, e-mail, TripAdvisor, WebMD, Huffington Post, Hulu, you name it. And of course, the big kahuna of the all, Google. Web companies, certain that consumers won't pay for anything on the Web, have single-mindedly pursued advertising as the way to make money.

So far, that's worked out well. Advertisers find that targeted Web ads get better response than a lot of mainstream media advertising, and they have been moving ad dollars away from mainstream media and into Web media.That trend is likely to continue no matter what the economy does, which will be a saving grace for Web companies.

But then the whole advertising expenditure pie is likely to shrink -- the ad dollars flowing to the Web along with it. Right now, nobody has a clue how dramatically it will shrink, or if it will shrink enough to whack whole Web companies off the face of the earth. Gawker already laid off a couple dozen workers, saying it was "preparing for the worst."

Way too early to tell. Numbers released September 24 by TNS Intelligence show that U.S. advertising is down 1.6% overall, but Web advertising is up 8% -- but that's for the first six months of 2008. Over in the UK -- if that's any kind of indicator -- Web ad spending rose 21% the first half of 2008.

The second six months will no doubt look a lot different.

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