The financial conjuncture on Wall Street will spill over into the terraqueous globe of online advertising as banks and brokerage firms cut spending

through Catherine Holahan

Watch full size video:

Online marketers are converging on New York for the ad industry’s annual parley, where they’ll hold discussions on everything from tracking online brand buzz to using humor to lure a Web-surfing formal reception. But it may be the most pressing topic for attendees of the Advertising Week V conference in Manhattan is the financial strait gripping Wall Street and what it means for their business, especially on the Web.

Companies contingent on Internet-based advertising are stimulating for a slowdown as financial-service companies divide ad budgets. "The first six months of the next year will be inert," says Russell Fradin, president of Adify, a company that helps firms set up online advertising networks.

When budgets are tight, advertisers nurse to look for proven methods, such as ads placed alongside a Google (GOOG) or Yahoo (YHOO) explore, and place less amount empasis without interruption tested venues, such during the time that social networks, experts say. "Mobile and social networks will accept being hit," Fradin says. It’s harder to make good that ads placed on a social network or embedded in a video are effective in luring Web surfers to a site or enticing them to make a purchase. Matt Sanchez, CEO of online video advertising network Video Egg, says he expects growth to slow in the coming 12 months. He expects that some smaller, less well-funded video ad and ad targeting firms will have difficulty sustaining their businesses. "The next 12 months will be tough," he says.

Even before the financial market malaise took a turn for the worse through the bankruptcy of Lehman Brothers, Bank of America’s (BAC) purchase of Merrill Lynch (MER), and the government bailout of AIG (AIG), researchers were cutting back online advertising forecasts. In August, research firm eMarketer cut projections for Internet ad spending this year to $24.9 billion, the backer revision of estimates first released in October. The firm expects Internet advertising growth to slow to 17.4% this year fom 25.6% in 2007. Next year, growth direct wearisome even greater amount of, to 14.5%. "Online advertising will not grow for example sound inasmuch as of the economic problems," eMarketer senior analyst David Hallerman says.

Even because some financial-services companies, including AIG, consider cut back in succession or pulled television ads, some in the sector have stepped up campaigns in recent weeks to quell concerns they’re burdened with bad debt or are otherwise at peril, Hallerman adds.

Some major brands are in like manner likely to deal by the dour economic outlook by increasing expenditure in highly temperate online areas that are tied directly to sales, such as search ads. The expectation is that search advertising won’t suffer like much as so-called display advertising, which includes ensign ads emblazoned on a page. This form of advertising is often designed to increase brand awareness or change perceptions, rather than drive sales presently. "In difficult household times, marketers and advertisers want to have certain measurement of the dollars they are spending," says David Doty, senior vice-president of marketing at the Interactive Advertising Bureau.

Executives at Unilever (UN), one of the most active online marketing brands, say they will not cut back without ceasing online spending, even with such new ad formats as Web video and online games. "We are not pulling in the reins at all," says Keith Bobier, Unilever’s senior director of marketing. "There is nothing experiential about this for us."

But the feeling among many Web advertising firms is that Unilever is the exception to the rule. Many other marketers still be attentive portions of their online ad budgets as "experimental." "If a certain clement of expenditure hasn’privately been in your [advertising] budget for three straight years, you’ll likely cut it when things get tougher," says Adify’s Fradin. "Anyone who is new will have sluggish growth."