Mortgage upheaval could ding online advertising

Mortgage upheaval could ding online advertising

Summary: The mortgage industry is in a shambles as the credit market unravels amid bad subprime mortgages. That's part of the reason why the stock market has been plunging of late.

TOPICS: Google, Microsoft

The mortgage industry is in a shambles as the credit market unravels amid bad subprime mortgages. That's part of the reason why the stock market has been plunging of late.

What does that development have to do with online advertising? Potentially a lot.

Nielsen/Netratings delivered its July traffic recap on Thursday and while the headline focused on social networking and other blogger buzzwords my eye went right to the advertiser rankings.


The top spender on advertising is a mortgage referral company Low Rate Source (woops). The third ranked company is credit rating firm Experian (may actually do better because if your credit rating isn't pristine you're not getting a mortgage). And the fourth ranked advertiser was Countrywide Financial, which just tapped its credit line because mortgage liquidity is drying up. Countrywide is a lock to cut spending and its online advertising budget. And you can't peruse Yahoo Finance or Google Finance without getting a mortgage pitch somewhere.

InterActive Corp. is the fifth ranked advertiser and it's a safe to bet that some of that advertising directs folks to LendingTree, which also refers folks to lenders.

And if this mortgage fiasco spreads to consumer spending perhaps comparison shopping service NexTag doesn't do as well. NexTag is the second largest advertiser. Add those sums up and you have a significant number.

The point: Online advertising isn't as insulated as we think. Meanwhile, there are a lot of keywords being bought by those aforementioned companies. Watch the language from Google, Microsoft or Yahoo to monitor the fallout.

Topics: Google, Microsoft

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  • This is news?

    Dude, current home mportgages ding everything in the economy.
  • Does this mean the end of mortgage spams?

    If there's no money for mortgage lending, then there's no need to advertise that (non-existant) money via spam... hoorah.
    Knorthern Knight
  • Broader reaching than that

    Yes, some of the top advertisers are mortgage-based lenders. But it's MUCH broader than that. Any time there's a broader economic slowdown that impacts the market as a whole (a period we now seem to be entering) advertising as a whole takes a pretty big hit. It's not just the mortgage-based advertisers. ALL companies start to pull back a little to reign in expenses and advertising is usually one of the first things on the chopping block.

    What will be interesting to track this time (assuming this downturn sticks around for more than just a few months) is how much it hurts online ad spending v/s traditional media spending. Working at an ad agency I've seen firsthand how much more cost-effective online advertising can be. If we were to pull budgets based on a medium's effectiveness, online advertising allocations would actually weather this very well - unlike during after the 'dot com' bust. But unfortunately that's not always how it's decided. Traditional media is still very ego-gratifying to corporate marketing executives who make the final call, so many are loathe to part with it in favor of new media.

    Of all formats, search advertising will probably weather any downturn very well. Content-targeted advertising and even the emerging (and more effective) behavioral-targeting models would be the areas to most likely take the biggest hits.
    • Let's the chips fall where they may

      Seems to me that all the advertising done for big corporations is nothing but fraud also makes sense that if the big companies COULDN'T afford to advertise snake-oil, it would GREATLY benefit the American people and maybe we could get some REAL news and truth from our media, if they weren't funded by blood-money. A benign form of terrorism, huh? Ripping off your customers and refusing to be accountable...
  • Subprime market - the ultimate con

    For those who don't understand how subprime loans work, here's a quick and dirty... The bank loans you money to buy a house, normally at a higher interest rate than they'd charge for a conventional loan. As the borrower, your payments are made up of only the amount of interest that loan generated each month. These are adjustable rate mortgages, so your monthly payment will be affected only by interest rates. Unless you make payments over and above these interest payments each month, the amount of money you owe the bank never goes down.

    A much simpler explanation is that people are now renting a home from their bank rather than from a landlord. They get none of the protections afforded a lessee renting a home or an apartment like someone else being responsible for fixing the roof when it leaks or replacing a water heater when it goes out. If the housing market in their neighborhood does well and they have to move in a few years, great...they might actually make a few bucks on the deal. If the housing market is stangnant or goes down, then they're really screwed. Sure, with a conventional loan they'd still be screwed but after a few years hopefully they'd have earned a few bucks of equity instead of earning equity.

    Now, this whole situation has been created because of the great idea of having an "ownership" society. They'll tell you that even though these people have no equity they are homeowners. Sad to say, not everyone in this country is capable of owning a home. They've been sold a dream, and now that dream is crashing down around them. The only potential positive that might come out of this is a spotlight focusing public attention on predatory lending. Business, and I mean all business, has shown over and over again that it simply can't self-regulate. When this happens, it's up to the people to make a difference. Only when the people can't unite to make a difference should government get involved. Hopefully this spotlight is enough to get people motivated and keep government hands out of it.
    • sometimes it's consumer irresponsibility

      "Now, this whole situation has been created because of the great idea of having an "ownership" society."

      First, let me say - I agree. Also consider the attitude that landlords = slumlords, and renters/tenants = deadbeats. This translates into the belief the rental properties and renters will therefore reduce real estate values in a given neighborhood or even municipality. There have been and always will be a need for rental properties, and there will always be people will need or choose to rent. The sooner municipalities (and people) get a grip on this, the better off we'll be. Cuz yeah, there are some people who just shouldn't own a house!

      While I concur that subprime loans are BAD, I would also place some of the responsibility for this mess on the consumers themselves. Too many people bought homes they simply couldn't afford because they wanted the status of bigger, better, more (kinda sounds like all those folks driving gas guzzling SUV's, yes?). Instead of buying reasonable homes, some folks took out subprime loans so they could have 3000-4000 sq ft., brand-new behemoths for themselves, their spouse, their ONE kid and their dog. Those folks I have a difficult time feeling sorry for.
      • Maybe

        People will wake up and get their priorities in order one of these days. And restrain their egos. Something to hope for, heh?
    • It's not quite that simple...

      "The bank loans (*LENDS*) you money to buy a house, normally at a higher interest rate than they'd charge for a conventional loan."
      Subprime loans are ALWAYS at a higher interest rate--otherwise they would be conventional loans.

      "As the borrower, your payments are made up of only the amount of interest that loan generated each month."
      Not all subprime loans are interest-only. In fact, most are not.

      "These are adjustable rate mortgages, so your monthly payment will be affected only by interest rates."
      Not all subprime loans are ARMs. Many are fixed-rate.

      Furthermore, not all ARMs are bad. IF you KNOW you are not going to be in the house long enough for the rate to adjust, AND IF you have the financial wherewithall to take the hit if the market drops, an ARM can be a way to save significant money. Remember that there is no reward without risk, you just have to be in a position to assume that risk.

      The same is true of interest-only loans. In a rising market, they give you the ability to control larger assets, and generate more appreciation, with less expenditure. Here again, you need to have the financial resources to assume the risk, and to weather a market downturn.

      What happened in the current mess is that a lot of stupid people who weren't financially prepared to assume risk, did it anyway. Now those people are suffering for thier stupidity, and some people want to represent them as being victims of "predatory lending", and some such drivel. The only thing these people are victims of is their own stupidity, and to quote Dave Ramsey, "stupid is not illegal".

      It saddens me that a whole bunch of people are losing their homes, money, and dreams, but it saddens me more that a whole bunch of other people in our society want to create a brand new "victim class", and bail out these stupid people with taxpayer money.
  • The bigger threat to IT

    If money becomes harder to borrow there will be a lot less funds to grow IT. A lot of upgrade projects and new development will be shelved. Not a good situation if you are a contractor. I hope this doesn't continue for that long, because if it does, I think the next set of fiscal budgets will be leaner.
  • Advertise when times are tough.

    When times are tough, you advertise more. If you don't, when the competition drops out of sight, there will be nothing to fill the void in the customer's mind.

    What we're seeing is the demise of print advertising, especially in newspapers. Magazine advertising, as pretty as it is, will also follow in the footsteps of the dinosaurs. Too expensive due to withering circulation. After all, who wants to pay nearly five bucks for a copy of 'Newsweek' that's square-inch coverage is over fifty percent advertising?

    Internet advertising, coupled with today's format of television advertising, is the present mainstay. Tomorrow, when television programming downloads off Internet broadband feeds, we'll then see a combining of Internet-Television dual purpose advertising. Of course, include in that combination WiFi streaming advertising via .mobi.

    The advertising media changes every ten or so years, so what we're now seeing is not unexpected. Therefore, the present pickle the stock market and financial lenders find themselves will only heighten opportunities for other industries and businesses to move in and fill the advertising vacuum created by money lender cutbacks. Advertising abhors a vacuum, and the Internet is the best way to presently fill a marketing and promotional vacuum. Why? Because it is the cheapest way to advertise to the entire world. As a medium, the Internet is the most pleasing and exciting to the majority of any product or service demographic. It's where the action is; and where the 'action is' so too should be advertising dollars. And, believe me, more and more ad bucks will flow into the Internet. An enterprise would be stupid not to invest heavily into Internet advertising right now.

    Smart enterprises will wisely rely on the services of the professional marketing and advertising agencies who specialize in virtual advertising; not-so-smart businesses will try and wing it on their own. In short order, the 'homemade bread' advertiser will fall by the wayside. It will be the companies who work with their Internet savvy advertising agencies who will not only survive in the Internet advertising venue, but will actually come to control and maneuver the marketplace; and do so at a rate of speed that was unimaginable in the halcyon days of print and direct mail advertising.

    For an old advertising man like me, these days of Internet promotion are worth the price of admission.
  • Great Time to Pick up some Traffic

    That whole industry has been untouchable. I hope to see a drop in average CPC and the small guys being able to compete again. I would love to see what happens to the Major search engines stock prices when they start loosing revenue. That will only further bring down the market.
  • Re: Mortgage upheaval could ding online advertising

    You sound like you are advocating the government owning property instead of the people. In the sub prime mess, the American public has bought into the dream of home owenership. The problem is that they do not understand basic finance. They also are not living within their means. i.e. what they make. The loan institutions have given them free access to credit that the public has not used wisely. The government, via a pseudo government agency (The Fed) has raised interest rates and made the problem for these people worse. So who is to blame? There is enough to go around. The Fed, government (those tax and spend guys who confiscate our money), and the people for not getting educated. Less government, not more, is part of the answer.
    • consumer education

      Are you equating consumer protection laws with "more government"? Because I tend to concur with the previous poster that corporations in the US have proven time and time again they can't regulate themselves.

      However, the most important part of your comment, which you seem to negate by the end, is that many Americans do not understand basic finance. This, in my opinion, is something that should be taught throughout school so that by the time a child is old enough to have a job, he or she will have the tools necessary to make educated choices about where their money goes.

      After all, someone may offer me heroin (and yes, I'm equating credit cards and otherwise with highly addictive drugs), but that I doesn't mean I have to take it. If I know the characteristics and dangers of heroin, I'm less likely to believe the dealer's hype.
      • Re: consumer education

        I am always suspect of government "coming in to help". If you want to call it consumer protection, then yes I am suspicious. We should be very cautious about thinking that the solver of our problems is "government".

        A better solution is along the lines of what you state in the second paragraph, and that is education of the American public. If you think about it in a "root cause analysis" mindset, if the people had the basic financial education and understood what they could and could not afford, then this sub prime mess would not be a mess. This can be extrapolated out to the "government" school system. I agree with you that by the end of high school all students should be able to handle money. However, basic finance is not being taught and has not been taught for decades.

        This is why your last paragraph makes sense. If you know the characteristics and dangers of money, you are less likely to abuse it (via poor credit management.)
  • Mortgage and Credit not the only causes

    While it is true that bad credit lending practices have contributed heavily to the unrest in the stock market, there is at least one other serious cause to make me believe that the worst is yet to come.

    The United States has a balance of trade deficit with China of more that ONE TRILLION dollars. Congress is currently debating whether or not to impose import restrictions against Chinese products. Should they do so and China decides to call in it's markers, we (all of us whether we are in the market or not) are going to be in a world of hurt. This situation may be hurting the market and scaring investors more than the credit situation caused by the predatory practices of banks and mortgage lenders.

    The two situations together serve as justification to investors to take their money and run while they still can. This doesn't address the oil situation, the social welfare state, support for a protracted war, and several other situations that are bleeding the United States dry.

    Someone needs to stand up and say enough and begin to look out for the welfare of the United States or we will slowly be crushed to death and become a bright but forgotten memory.
  • Waiting for "Malboro Friday"

    There's the ASSumption that ramming your brand in people's faces will automatioally translate into sales.

    If that is questioned, then the bottom could fall out of the whole "advertising pays for Internet free lunch" model.

    If you've had something rubbed in your face via banners etc. while trying to do other things, are you more likely to buy that brand, or more likely to avoid that brand out of resentment?

    How do you feel about pointless and irritating post-sale branding, such as "hooray for us" laptop wallpapers and screen savers, pushing ALLCAPS Start Menu entries, intrusive TM (c) (R) gibbering up language, etc.?

    And when you make a major financial decision like choosing a mortgage, do you so based on the last spam you received?

    There's a suspension of disbelief here...
  • It all started in 1913

    The first misconception that most people
    have is that the Federal Reserve Bank is a
    branch of the US government. IT IS NOT. THE
    Most people believe it is as American as the
    FORBIDS IT'S EXISTENCE. Article 1, Section 8
    of the Constitution states that Congress
    shall have the power to create money and
    regulate the value thereof, NOT A BUNCH OF
    controls and profits by printing WORTHLESS
    PAPER, called money, through the Treasury,
    regulating its value, AND THE BIGGEST
    with approximately 300 people or banks that
    became owners, stockholders purchasing stock
    at $100 per share - the stock is not
    publicly traded) in the Federal Reserve
    Banking System. They make up an
    international banking cartel of wealth
    beyond comparison. The FED banking system
    collects billions of dollars in interest
    annually and distributes the profits to its
    shareholders. The Congress illegally gave
    the FED the right to print money through the
    Treasury at no interest to the FED.

    What we have now is foreign bankers wielding
    this power of us:
    Under the Federal Reserve Act of 1913 and
    amendments over the years, the Federal
    Reserve System:
    Conducts America’s monetary policy.
    Supervises and regulates banks and protects
    consumers’ credit rights.
    Maintains the stability of America’s
    financial system
    Provides financial services to the U.S.
    Government, the public, financial
    institutions, and foreign financial
    The Federal Reserve makes loans to
    commercial banks and is authorized to issue
    the Federal Reserve notes that make up
    America’s entire supply of paper money.

    How do you like them apples?
    The sole remedy to our predicament would be
    a coup of our government, highly undesirable
    as it would cause the bloodiest most chaotic
    situation imaginable. Best to keep playing
    the real-life game of monopoly we now enjoy
    and "don't rock the boat" and "don't make
    any waves".
    Ole Man
    • Just as Federal...

      My wife has told me about a professor she had at Harvard (Graduate School of Business). She said one of his favorite sayings was that, "The Federal Reserve Bank is just as Federal as Federal Express, and is considerably less interested in your family's financial wellbeing".

      I have always wondered how that guy got a job at that school...