Monday, August 9, 2010

New economy grows, even as the old economy grinds down

At Intermarkets, we constantly monitor economic conditions in the US, to make sure that our clients and publishers are well served by our pricing and service offerings. For some time now, we have expressed concern about general economic conditions in the US for the second half of 2010, and the Federal Reserve Board has just recently issued a report consistent with our outlook and forecasts.

Here is a link to the story about the Federal Reserve report: Fed set to downgrade outlook for US.

So much of the economy is still dependent on old, and disproven, methodologies and industries, and political intervention in the markets has predictably distorted economic development even further.

Online media, however, continues to grow, as shown by increasing prices driven by higher demand, increased reliance by users on online content and recreation, bottlenecks in the online media supply chain, growing hiring plans by online firms, increasing financial transactions in online companies, and more.

As the rest of the economy continues to grind down, online media continues to thrive. The clear and obvious benefits to marketers of online advertising provides sound reasoning for more budgets to be directed to online media, and in some cases away from other types of media.

For our economic outlook, we continue to expect the general economy to slide back into recession, possibly severe, or at least experience monthly or quarterly economic shrinkage, during and through 2011. This is due to substantial tax increases in the US set for January 1, 2011, continued minimal private sector hiring or further net job losses in the private sector, weakness in most if not all asset classes, and continued uncertainty in the future of the US economy.

We are not able to find comparable scenarios in recent history that provide guidance for this period, because the current conditions and current policies have not been combined in OECD economies before; conventional economic theories and policies call for reduced taxation during economic downturns. The only somewhat similar situation is the conversion of the Venezuelan economy, under Hugo Chavez, several years ago, but with that economy's benefit of having net oil exports, there are material differences in potential outcomes for the US.

For the online media sector, we believe that there will be continued growth in spending and further development of new advertising methodologies and technologies. Greater rich media creatives, more testing of mobile media, and refinement of how to advertise on social media will also provide added growth opportunities.

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