It would seem logical to think that as people are feeling the pressure from increased interest rates on their monthly outgoings, together with the ever soaring price of fuel, online businesses will suffer like many of the major high street retailers are in the current slow down resulting from the credit crunch.

The term credit crunch is pretty popular now with news readers and journalists referring to it daily.

What exactly does this mean?
The term actually refers to a rapid drop in the money supply effectively making it more expensive to borrow. This is the result of their being an increased risk in lending. The current credit crunch which is having a global knock on effect is the result of the collapse of the American housing market. Without wanting to go into too much detail, this housing market collapse was caused by lending mortgages to people who could only afford them whilst the interest rate was at its current low rate. As soon as the interest rate rose, people began to default on their payments.

How does this affect the average Joe?
If you have a mortgage, the increased interest rate will mean your monthly payments are greater, leaving you less of your income to spend elsewhere. For example you may opt to buy the super market’s own brand products instead of the well known brand in order to cut back.

How does this affect businesses?
Businesses often have loans, so they too will be feeling the pinch. Even more worrying for businesses is the fact we all have less income to spend on their goods and services. As a result they will be cutting down wherever possible in order to tighten up their business model and avoid narrowing their margins. One of the first budgets that is often cut is their advertising.

How does this affect online business?
It is early days but after the amazing growth of online advertising in 2007, it is expected that online ad spend will continue to grow rapidly in 2008. It is just starting to become a staple in all major companies advertising budget (as it should be!). The real attraction to online advertising will be the ability to reduce wasted ad spend by the much improved targeting available online compared to traditional channels (print/tv/radio).

With Pay Per Click (PPC) campaigns you are only paying for actual clicks who presumably are interested in what your selling. This is very attractive to anyone who is selling anything! In the case of Pay Per Action (PPA) campaigns you only pay when a pre specified action (such as a sale) occurs. This is pretty much the next best thing to not paying at all!

Consumers are not going to stop spending altogether but they are going to be a little more aware of their spending and the need to be a little more thrifty. Where will they turn to find a bargain? Online of course! Price comparison websites which take a commission have been popping up left right and centre in the last year in order to cash in on people’s desire to find a bargain. Many businesses are offering online only discounts in order to appeal to these bargain hunters.

You are still able to profit from a recession if you focus on selling the right products. People will be looking for the cheaper alternatives – if you sell these then you could profit!

With all this taken into account, it looks like online marketers are in for a bumper year again. What are your predictions for internet marketers in 2008? Will online businesses dominate the headlines by the end of the year?