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Forecast 2009: Digital

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As the digital media business enters 2009 amidst continued economic upheaval, no one is talking about the industry being recession-proof anymore. But unlike some other more fragile media sectors, no one thinks this is the end of the world either.

Industry bellwether eMarketer predicted Web spending will climb 9 percent to $25.7 billion in 2009. But that estimate is down from an August prediction of 15 percent growth.

Similarly, as the economy went from skidding to flat-out tanking in the past few months, analysts from Barclays Capital and Magna Global each dropped their forecasts from double to single-digit growth.

And there probably will be more downward predictions as economic events unfold. Yet in light of other media business’ struggles (newspapers stand out), things could certainly be worse. “When the business is supposed to be flat or close to up, that’s great in a situation where you know there are going to be drastic downturns,” observed Sarah Baehr, vp media, national media discipline lead, Razorfish. Therefore, the overall mood in the digital sector is one of sobriety, not panic. “The truth is, now that we are a $20 billion business, it’s large enough to cut back,” said Peter Naylor, senior vp digital media sales, NBC Universal. “Our strengths continue to be our strengths.”

Those strengths of course are trackability and efficiency. Plus, users continue to spend more time with digital media. So brands are unlikely to walk away during a recession (as many did in ’01). Some may even spend more.

“I think a lot of new marketers are going to get into digital in some form,” said Scott Schiller, executive vp, global marketing, Glam Media. “We’ve had a healthy amount of new brands come on lately that were very low or dormant online spenders in categories like food and beauty.”

That doesn’t mean that digital buyers will enjoy the spending windfalls they’ve seen in the recent past, during which experimentation was rampant, as were incremental dollars. Marketers’ restraint was already being seen in fourth quarter, said Baehr. “Those calls we used to get, ‘spend a million dollars by Christmas,’ that wasn’t happening.”

Thus, 2009 may not be the year when buyers step out on a limb and allocate spending to digital platforms with uncertain business models. “This year is an opportunity to step back and make smarter buying decisions,” said Baehr. “Really show your ROI.”

One segment that still needs to prove its ROI value is social networking. Sites like MySpace and Facebook are still grappling with how best monetize their massive amounts of inventory, and that struggle is likely to receive increased attention in 2009. What of still-emerging segments like mobile and video games?

An even more ROI-obsessed environment makes things tougher. But there are exceptions. “Just saying emerging media is all vulnerable is wrong,” said Baehr. “For example, if my target is men 18-25, then I’ve got to look at gaming.”

Because dollars will be tighter across the board, publishers, like buyers, will also have to be pickier. Maybe not every site launches an iPhone app, five new widgets and a Twitter program this year. “As a publisher, you’ve got to keep publishing,” said Naylor. “The survivors will be rewarded. But you have to make decisions about where you innovate.”

Where innovation may be needed most is in the display advertising marketplace—in many ways the medium’s core—which is facing increased scrutiny these days. Pam Horan, president of the Online Publishers Association predicted there “will be a lot of efforts put toward proving [the value of] display,” she said. “We’re all trying to be smarter about this model and the way we monetize inventory. You’ll see more business intelligence tools.”

Expect lots more debate over just what role ad networks should play in the display marketplace, and whether a traditional, brand-environment-matters-most philosophy wins out over the data-based targeting that nets preach.

Another area to watch next year— how does a new Democratic White House tackle Web regulation? Will President Obama go hard after privacy issues that impact online advertising? However, with wars and the economy stealing most of D.C.’s attention, don’t expect any changes on day one.

“He does have other things to worry about right now,” said Horan.