Conventional thinking is that in a market downturn marketing and advertising are some of the first expenses to be cut. However, the current mortgage market may be defying this general wisdom.

Arguably, many of the big mortgage lead buying operations like American Home Mortgage, Ameriquest, and New Century may be gone and thereby reducing short-term aggregate spending. However, remaining market participants–Bank of America, Countrywide, Ditech, National Association of Realtors, and Wachovia continue strong advertising spending in multiple media channels, including sizable investments online.

Reaction Wheel’s Jerry Neumann highlights the distinction between brand advertisers and transactional advertisers:

Brand advertisers (consumer packaged goods, car manufacturers, etc.) can cut back their advertising spend in the short-term and not suffer too much from it. Brand advertising is an investment in the future: brand advertising today has a long tail, so a cutback today doesn’t mean that sales suffer tomorrow. But transactional advertisers (mortgages, car dealers) advertise today for a sale tomorrow. There is no long view. So if a transactional advertiser stops advertising, sales stop. (Of course, everybody is a bit brand advertiser and a bit transactional advertiser, it’s not black and white, but most are more one than the other.)

and predicts that transactional advertisers like mortgage Internet originators will continue through the downturn:

My prediction: transactional advertisers will continue to advertise through a downturn. Brand advertisers will slow. The internet is primarily transactional advertising, so should weather a downturn better than other media. Network television is primarily branded advertising, so should suffer more.

Quicken Loans’ announcement of a new consumer direct personal finance and mortgage destination site, Quizzle.com signals another trend–mortgage companies becoming more creative, more capable, and more direct at acquiring Internet consumers. This may herald a day when you see a Quicken Loans, Bank of America, or Ditech.com competing at LendingTree and LowerMyBills levels of media spends.

What is my prediction?

• Fewer large high volume mortgage lead buyers
• More medium to small mortgage lead buyers
• Increased demand for focused regional and niche loan program campaigns

Causing:

• Larger lead generation companies like LendingTree and LowerMyBills will continue to struggle to “right-size” without large buyers
• Increased difficulty in placing lead generated from large, untargeted national media buys
• Medium size, quality Internet lead providers like Adchemy, Bills.com, ConsumerTrack, QuinStreet, and ZipSearch will thrive on new and medium-size lead buyers
• Strong demand for the leads generated by more nimble and agile players that are able to adjust campaigns to target short-term emerging trends in the market, like reverse mortgages, FHASecure, HOPE initiative, conforming loan limit increases

In the end, these trends seem to support Jerry Neumann’s hypothesis that transactional advertising will sustain its aggregate level through downturning markets. What is the consensus out in the market?