• by Diane Mermigas , October 24, 2008

The schism between Apple's reassurances and Amazon's warnings this week may have caused some confusion about consumer strength. But the flood of arresting forecasts for a steep decline in consumer spending and corporate earnings leaves no doubt--there will only be coal for Christmas.

Apple CEO Steve Jobs created the impression that there might just be an iPod, an iPhone or a Mac in everyone's stocking by reassuring "We'll be fine" during a third-quarter analyst call. iPhone sales soaring 500% from a year earlier and $25 billion in cash and marketable securities are two reasons why. Just a week ago, government data pointed to the first decline in consumer spending since 1980 that will only get worse.

Apple, the consummate device-maker, and Amazon, the consummate e-seller, are arguably unique barometers for the battered U.S. economy, consumer discretionary spending and all advertising and consumer-supported media. As Apple and Amazon go, so goes much of the rest of the connected world.

Jobs described October as "foggy" and offered low fourth-quarter guidance. Still, ever-hopeful investors immediately drove up Apple stock by 13%, believing that consumers will part with food before they part with their high-tech entertainment. Amazon executives, describing a "relatively challenging" environment, offered (among other things) a possible low-end fourth-quarter guidance of a 46% earnings decline from a year earlier. That triggered a selloff in which its stock fell 14% in after-hours trading, although analysts like CitiGroup's Mark Mahaney predicts that in the case of a severe recession (overall U.S. retail down -3% and online retail growth just 5%), Amazon could still grow revenues by as much as 15%.

All companies are braced for dismal forecasts, but Apple and Amazon are not like everyone else. Their universal brands are second nature for many consumers in the U.S. and beyond. While not completely recession-resistant, they are not hugely reliant on marketing and advertising.

Yes, even Apple's and Amazon's growth rates will be squeezed, but they will endure better than most because of the halo around their branded goods and services. They are golden, even in a weak and scary economy. If and when consumers buy in this environment, there generally is a flight to quality--the halo of relevance and value.

So where does that leave other marketers?

Historically, companies that reduced ad spending along with other corporate expenses in economic downturns generally paid the price on the upside in lost market share. In prior recessions, there were mostly mass-market outlets, like television, newspapers and billboards--making costly pitches to anxious consumers who were loath to part with their cash.

Advertisers now have unprecedented hyper-targeting, social networking and e-commerce options, which they must use to their advantage to make their best case to recession-spooked consumers still driving the digital revolution. Careful planning can result in less costly, more efficient qualified connections with target consumers, a golden interactive loop between companies and affinity buyers that can be monetized in good times and bad. Digital interactive media is one way to secure the cachet that surely will give Apple and Amazon a leg up during the economic crunch.

It's something that companies of all sizes should be mindful of as they confront their financial vulnerabilities.

Sony this week halved its fiscal-year profit forecast on slower global sales and a stronger Japanese yen. With consumer electronics sales down 13% in September, Sony and its peers fear their big-screen plasma TVs and other high-end product inventory will not fare much better than other retailer goods this holiday season. Just in case, there are signs that Christmas sales may be extended well into the first half of next year.

Research in Motion will launch a BlackBerry application storefront in March challenging Apple's iPhone and Google's new Gphone. AT&T is still numb over its $1 billion subsidy to Apple just in the third quarter for the exclusive iPhone service rights, resulting in a negative impact on overall earnings. At the same time, its wire line business continues to deteriorate at a rate of about 12% annually--another reason that Ma Bell has become Apple's significant other.

Ultimately, the widening gap between what consumers want and what they can rationalize spending during these tough times will determine just how bad business gets for ad-dependent companies. With consumer confidence bottoming out according to most polls, it's not surprising that retailers are expecting flat-to-negative spending this holiday. Even online sales growth will slow to 12%, Forrester Research said Thursday.

While the Web still gets high marks for convenience and value, nearly half the consumers Forrester surveyed said they will spend less than in years past. eMarketer estimates that online holiday sales will not rise more than 10%. Some analysts say a worst-case scenario for 2009 could be 5% online retail growth.

It's difficult to imagine that consumers choking on credit-card debt, losing their houses or jobs, and agonizing over massive declines in their retirement accounts will indulge in discretionary spending. All the advertising in the world isn't going to make them feel better. But in troubled times, Apple and Amazon are reminders that relevance and value trump all.