The last couple of weeks, amid the dynamics of the mortgage market, there has been interesting commentary on recession and online ad spending. The contagion effect of the mortgage meltdown is alive and well and creating havoc in the lead generation market.

I thought, since I have had multiple inquiries into my opinion on potential investments and financial positions in companies in this market, would make my perspective more generally available, link to commentary from people far smarter than me, and potentially get comments from folks on the front lines.

Analyzing investments in advertising or lead generation is a very complex tasks. You are challenged not only with understanding the advertising market, but also the underlying market that the advertiser supports. This even more critical in lead generation where this concentration tends to be even greater than general marketing and advertising firms.

In our analysis let’s begin with the potential effectors in the mortgage market (in roughly the order of occurrence):

1. consumer shock (payment, rate, employment, income)
2. investor volatility (credit crunch)
3. lender and broker volatility (mortgage implosion)
4. rate volatility (everyone to be the helping hand)
5. loan program volatility (lenders and wall street trying to stop the bleeding, but still retain some earnings)
6. confusing, asynchronous, randomly oscillating iterations of 1-5

Now into the interesting stuff. What is the potential impact to advertising and lead generation companies? Unfortunately, since this is relatively new media we lack historical precedence, but let’s try our shot at a couple of theories:

Online advertising is a leading indicator of economic and business trends

I like this one a lot. It is a bit counter-intuitive, but that is often the way markets and statistics play out. It hinges on the assumption that processes you measure are observed and reacted to in a more acute way. True, in my opinion and experience.

Proof: Accounts receivable does not make marketing decisions. They pay invoices as efficiently as possible. Therefore, traditional (often unmeasured) marketing channels such as print advertising submit monthly invoices and get efficiently paid. Once in motion will probably stay in motion, too long.

Transactional advertisers versus brand advertisers is the cut-line

I like this one too. Coming from the mortgage business I can contend that despite all of our attempts it is not a customer loyalty business. It is very much a one-time transactional business. Sure, there are some great mortgage professionals that have beat the odds, but 99% of the business does not. Therefore, leads are a tactical necessity, not a strategic plan.

Proof: This one is hard to prove out since many of the big mortgage brand advertisers were transactional advertisers too. And their demise and spending were grand implosions. Not a lot to analyze in this pile.

Search advertising versus display advertising is the cut-line

This one straddles the discussion. Although I think the argument is sound in premise I am not sure it can be applied well to analyzing lead generation platforms. Display advertising is generally a long-term strategic media spend versus the more tactical and volatile search spend. Again, this argument may reflect back to the first theory: That which gets more closely measured, gets cut first–for better, or worse.

Certainly, things are moving and changing. Is it positive or negative for the lead generation business? Who will be the winner and who will be the losers?

Audience Participation

Time to throw the question back to the audience. What do you think the effects and results of a recession is or will be on the advertising and lead generation business?