• by Cory Treffiletti , Featured Contributor, October 14, 2009

If you read the news, you can become very confused about the state of the economy. 

According to some sources, things are looking up (see the stock market) -- and according to just as many others, things don't look too good (see the impending wave of mortgage resets in real estate).  Whom do we trust?  Whose opinions do we value? 

If you ask me, you need to avoid the big picture and look at the smaller picture.  Though we do live in a global economy, I think the world is fast becoming an environment of micro-economies that may depend on one another.  That being said, we do also retain some independence  -- and what concerns me most is where advertising and marketing are headed.

For insight into the world of advertising and marketing, we can take two paths.  First we can examine the categories of spend, like TV, print and digital.  The second path is to look at the areas where these businesses have thrived in the past and where the growth is expected to come, namely New York and San Francisco. 

If you check in with the New York folks, things aren't looking too good (though that could be due to an innate pessimism that grips almost all New Yorkers like the blustery wind of winter as it whips around the East Side).  TV suffered a little in this year's upfronts, but the scatter market seems to be doing very well.  Magazines and newspapers continue to slide , with companies like Conde Nast announcing cuts (though they're in very little threat of going under as a medium and a retraction was always inevitable). 

The digital industry is continuing to grow, but not at the clip of previous years, which was also inevitable because the pace would have outpassed the potential audience.  What's also interesting is that if you speak to the marketers with budgets, they are unanimously spending more time looking at ways to reach consumers without relying on "traditional" digital paid placements like search and display.  They are looking into owned media and earned media; things like micro-sites and social media presence that extend the brand without a required payment to some third-party for targeted exposure.  These marketers seem to understand that while budgets may have been cut, the opportunity still exists to speak with your target - and if you can maintain that conversation, then your money will be spent even more efficiently on the paid side of the fence.

This deep dive into the micro-climate can be evidenced by the opinions and insights gained from speaking to people in San Francisco even more than any other city.  The San Francisco ad market collapsed when the bubble burst, and it never fully recovered.  For years agencies have been shutting down and losing clients to New York, Chicago and Los Angeles. The Bay Area has reverted back to a creative and technology-oriented community.  It's become a community that praises innovation and impact over big dollar budgets and mass marketing ideas.    VCs are indeed funding innovation and companies here tend to look for the brighter side (maybe it's the California sunshine or the proximity to all that year-round outdoor activity that increases oxygen levels and feeds intelligent optimism). 

The digital marketing business continues to innovate all the time, and with this innovation is coming a shift from being dependent on advertising as a monetization model.  This is a concept that Madison Avenue doesn't like to hear -- but if you look at challenger brands through history, you will see that they took an existing model and attempted to make it better.  The Web has always been about free content for the consumer, as well as a means of fostering interaction between people  -- and that seems to be the stake that many companies are driving deeper into the ground.  The idea is that advertising cannot fuel the growth any further and that we need to challenge the existing ways of thinking.  From the perspective of a traditional marketer, that challenge is being made by asking the simple question, "Is this working?"

So what does all this mean? Change is driven by innovation and the digital media business has continued to grow because of innovation.  Advertising and marketing in general are examples of a business that is stalling because it has either pushed back on or not embraced change.  The digital marketing business is a micro-climate underneath that overall umbrella that bucks the trend and has proven successful.  As a case study, I can see the value, can't you?

What will be a strong indicator of the future and what will drive the recovery is innovation and the willingness to accept new ways of thinking while we abandon the crutches of previous years (with crutch number one being the idea that all advertising revolves around TV).  Companies that make up the market need to focus on innovation. Real estate needs to find ways to innovate.  Innovation is what drives optimism: new ways to solve old challenges.

San Francisco has been a great example of this for many years, and hopefully the rest of the country can learn from this.  If so, then the general California optimism could infect the rest of the world, and success would be inevitable!