The latest blow to an already-weak financial outlook (soon to be exacerbated by third-quarter earnings reports) comes from a newly consolidated team of Barclay's-Lehman analysts. They leave no doubt that online e-commerce, whose 8% growth will be half of 2007, will barely neutralize lower holiday spending by debt-burdened consumers. Online retail is feeling the recessionary pinch, although it is still expected to generate about $150 billion in non-travel spending in 2008, which is 3% of overall domestic retail sales and should double by 2012.

The roadblock to Internet growth is de-leveraging consumers, who now have twice as much debt as disposable income and have shifted to a needs-based spending psychology. Even high-end consumers are paying off less of their outstanding credit-card debt, which is being pushed to limits that are being reduced by banks. Credit cards are being used more for nondiscretionary expenses, such as rising gasoline, food and home heating expenses.

Even less certain is the extent to which these downward trends will impact online advertising, and ad spending overall. The theory of convenience and improved ROI on target marketing and e-transactions is about to be rigorously tested. The weakest-ever holiday season in online retail will prompt heavy discount and promotions, such as free shipping, and will remain anchored in consumer electronic, video games and computers.

Lehman estimates that U.S. online advertising will grow to $26 billion or 9% of total U.S. advertising of $296 billion in 2008, buoyed by measurable metrics and connections to target consumers. The continuing shift of ad dollars to digital interactive platforms will not offset the forecast decline in overall advertising budgets expected well into 2009. By 2012, online advertising should top $45 billion, or 14% of total domestic ad spending. Despite all the brouhaha, video advertising will just top $1 billion this year and will continue to ramp slowly.

The ongoing financial turmoil provides the first opportunity to examine the correlation between e-commerce, general retail and advertising trends. Smart advertisers will use this time to study the sentiments and trends of online shoppers to make more of their online ad dollars and see them through to electronic transactions and ongoing rapport with key consumers.

Earlier this year, Forrester analyst Sucharita Mulpuru recommended customer-enhancing initiatives, such as multichannel integration, rich Internet applications for ease of use, made-to-order merchandising and other customization functionality. If mainstream retailer-advertisers don't embrace these catalysts, others will. One example in this recession year is Zazzle.com migrating from customized T-shirts to merchandising licensed items directly to fans on their MySpace pages when products are ordered.

Seasonal online shopping that fails to encourage browsing is among the drawbacks to online retail sales. Other obstacles include IT and organizational issues and a better understanding of consumer use of Web sites. But in a strained economy, even a modest e-commerce strategy can yield gains. For some marketers, mixed, costly conventional advertising options and a brutal retail sales market will be enough of an incentive to attempt a more enterprising e-commerce approach.

Broadcast, cable and print media should be as eager as Google and Yahoo to accommodate e-commerce experimentation. Retailers are receptive to collaborative product development and seeking advice, says eMarketer analyst Jeffrey Grau. They are increasingly seeking a reality check on social shopping sites like Kaboodle, Stylehive, StyleFeeder and ThisNext for information about the hottest trends, stores, and products. "Social networks and blogs are the new hub for online shopping...and for sharing information about customer care experiences with a brand," especially with Generation Y consumers, Grau says.

One of the more intriguing new attempts to integrate e-commerce, online advertising, social networking and online entertainment is NextNewNetworks' TMI Weekly, a seductively chatty blend of "Sex and the City" and "The View." It is as simple as three pretty girls and their miniature lap dogs sitting around a table discussing "sex, gadgets, style and all sort of fun stuff" for several minutes each day. The site addresses for the products discussed are flashed on the screen--and it works. Its social networking bear hug is about to include Twitter, MySpace, Facebook, Hulu and iTunes.

Retailers that are not ready to jump into that level of content production have other options. A recent eMarketer analysis of various online retail users surveys boiled it down to consumers seeking retail Web sites with powerful search and navigation tools, quality product information, a simple checkout process and cross-channel shopping options. Online retailers' to-do list should include better online behavior tracking, expanded video capabilities (such as reviews and product demonstrations) and virtual tours and interchanges (involving avatars).

If broadcasters and publishers comfortably ensconced in their branded sites don't think they have a stake in e-commerce, think again. Lehman analysts point out that online advertising has already been growing at 30%--or double the growth rate of cable advertising in its infancy. That could place Internet advertising revenues at $9.6 billion or beyond, where broadcast and cable revenues now reside by year 10 of its rollout--which means that smart marketers and media have a shelter from this economic storm after all.

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