Advertising pays for a lot of things .... what happens when the ad budget dries up in a recession?

Doing some research on the effects of the Great Depression in the 1930s, I started wondering what happened to advertising during that period.

Although I haven't turned up any detailed studies, I tool a look at the various archives of advertising that allow internet access to their exhibits, and noted the general move to less expensive, more localised advertising, and fewer adverts for more expensive goods.

It made me wonder what will happen to online advertising if the current credit crunch starts to drive a worldwide recession. If the budgets starrt to get reduced, and the emphasis switches to retaining brand loyalty instead of actively seeking out new markets, are the marketing brains going to decide to return to traditional advertising in restricted local marketing campaigns where the results are more easily measurable?

If that happens, a whole lot of companies fueling the current expansion of demand for bandwidth are going to find that their business model doesn't add up. Many of the companies distributing video via the net rely heavily on on-page advertising to fund their existence, and without ad-funding will simply dry up and blow away in am internet version of the Dust Bowl of the US Mid-West in the 1930s.

With this speculative disappearance of ad-funding and the loss of the current advertising funded business model so many of the boom companies rely on, what is going to happen to infrastructure demand and what is going to replace this business model to underpin the 'new' internet.

As far as the demand on the infrastructure is concerned, I have a feeling that the current increase in backbone spending (Financial Times: Internet-led demand puts cable-laying at top of list) is premature. As businesses and individuals tighten their belts, internet providers and their suppliers are going to see a reduction in demand, and its not going to come on slowly.

Its a feature of the 1930s depression that countries and individuals became more and more localised in their habits and mentalities, concentrating on survival rather than expanding their horizons. When its a choice between making that mortgage payment or funding the kids broadband access so they can keep up their Facebook contacts, I know which is going to suffer first.

As the users flood out of the system, and the advertising budgets shrink, and the video websites and music websites wither and die, so microeconomics are going to increasingly come into play. users are going to be willing to pay only for what they actually use or do, so services charging a few pennies or cents to deliver an email are going to find a demand. Need a Google search? OK but it'll cost you a few cents from your PayPal account.

We're going to become a subscriber culture, with low costs pay-per-use applications scrabbling around for brand loyalty. And I for one would welcome that, because only those organisations that supply and efficient cost effective and guaranteed service are likely to survive.

Hopefully that means that when I visit NewGoogleSubscriber, I'll just see the results of my search. Not ads targeted at the person my carefully calculated profile says I am.