NEW YORK While the economy sputters toward recession and is by most accounts headed for several rough quarters, there are mixed signs how much this will affect the online ad industry.
 
Google yesterday reported results that were below analyst expectations. The company is still seeing robust growth -- revenue grew 39 percent from the second quarter last year -- but executives said its growth took place in a "challenging economic environment."
 
The earnings came as the industry faced mixed signals of just how much an economic downturn will slow the shift of spending from traditional media to digital channels. On the plus side: A Millward Brown survey of 252 marketing executives undertaken by Publicis Groupe public relations shop Manning Selvage & Lee and PRWeek found most respondents looking to cut traditional marketing channels while increasing online spending. Another plus: a forecast by Jupiter Research this month also found online to grow at the expense of offline media during a time of economic uncertainty.
 
Yet other signs have been negative. Ad network Valueclick reported disappointing earnings yesterday, which executives pinned on "macroeconomic uncertainty." Earlier this month, Universal McCann revised its prediction of online display ad growth to 12 percent from the 16 percent bump it forecast last December.
 
Online is often thought more insulated from the pressures because it makes up a smaller portion of budgets and is often thought more measurable than other forms of media.
 
"I think that -- aside from obvious sectors like mortgage lead generation -- online is probably better insulated from these problems than other media, because so much of what happens online is direct response, and generates direct revenues for the advertisers," said Nate Elliott, a Jupiter Research analyst.
 
What's more, adds MS&L CEO Mark Hass, marketers have embraced digital marketing as a cornerstone of their plans.
 
"It's not a fad," he said. "It's become a tested method."


 
While 81 percent of respondents to the MS&L survey said they expect ad budgets to decline or stay the same, 75 percent said they forecast online budgets would grow. When it comes to budget cuts, advertising led the list, followed by point-of-sale marketing and public relations. Digital finished at the bottom, chosen by just 4 percent.

Jupiter predicted that the U.S. online ad market is on pace for 20 percent growth in 2008, a slightly higher forecast than it previously had. The researcher believes it will continue to draw dollars from print and TV budgets.
 
"As clients are held to greater scrutiny of the dollars on the balance sheet, by default they're going to turn to as many highly measurable means of communicating with customers as they can," said James Hering, the recently installed director of new business at Click Here, the digital unit of The Richards Group in Dallas. "I think digital is going to benefit from that."
 
The shift from traditional media to digital will continue at Lenovo, said David Churbuck, vp of global Web marketing, but the computer giant will concentrate more on doing a better job of converting the traffic it already attracts. "We're really now into optimization of the traffic we get," he said. "[The economy] makes you thrifty."
 
An area of pronounced interest is social media, according to MS&L. It found 28 percent of respondents identifying consumer-generated media as their top priority in the next 6-12 months, with high marks given to it for brand building. In contrast, only 12 percent in last year's survey judged CGM "very important."
 
"People were dismissing CGM as a valid technique," Hass said. "They were explaining it as it wasn't measurable. It was code for we don't really want to do it."