It’s been in the news more and more. Recession! Economic collapse! Depression! Even yesterday, Alan Greenspan said “The current financial crisis in the US is likely to be judged as the most wrenching since the end of the second world war.”

During most economic downturns, the first thing that companies do is pull marketing budgets. This cutback affects traditional media in a big way. I was the victim of this back when I was in television during the .COM burst. When companies are less willing to market it equates to less revenue from TV ads, which in turn meant that Ed was shown the door per a corporate cutback in the fall of 2001. But will new media be affected as much as traditional media in this current economic downfall?

An interesting position

New media, social media… whatever you want to call it, stands in a unique position. While you would expect ad revenue in new media as to follow the trends of traditional media, there is incredible potential for it to do the exact opposite. New media continues to gain the attention of companies as a viable marketing platform. Companies are already confident that marketing on the internet is nearly as important as traditional outlets. While marketing to the niche has always existed, the wealth of information available to marketers on the internet allows companies to market to an incredibly narrow set of people. This information didn’t exist in 2001 during the .COM collapse. If companies can easily reach a demographic much narrower than what traditional media offers, the risk vs. reward of marketing goes down. Less risk equals happy companies during difficult economic times. Also unlike 2001, the internet is not the focus of the economic downturn, so the trust level of the internet is much higher.

The Payout(in)

Because advertising and marketing initiatives in new media are still relatively new, the cost to run an effective campaign is fairly low. Advertising in new media can reap huge rewards for a fraction of the cost of traditional media campaigns, especially if it’s done correctly. Add the narrow focus and the price for such campaigns, it is wholly conceivable that those marketing cutbacks will involve a significant redirection of WHERE companies advertise, rather than across-the-board cuts.

The market is there. The benefits are there. It’s hungry for companies to dive in. Will new media suffer the same brutal fate as everyone else, or will it benefit from the fallout? Only time will tell…