Will Recession Hit Domains?

Will a recession hit domain values and underlying pay-per-click revenue?

When TechCrunch covered Oversee.net’s $150M investment (see Reglike story), the popular blog suggested that a recession could hurt the domain industry:

Buying domain portfolios and domain-related marketing businesses is becoming pretty capital intensive. As long as there is money to be made in online advertising, domainers like Oversee.net will continue to do well. But if a recession arrives and online advertising takes a hit, so will the domain-name sector.

Readers were quick to dismiss the notion that a recession would hit online advertising, and thus domains:

Disagree on the recession point. In a recession marketing dollars will move into measurable, transactional media buys, i.e. online advertising. The efficiency of ROI is the thing. Traditional media gets killed, online suffers from a lack of inventory.

This has been the domain industry’s view for a long time: a recession will drive advertisers to smarter and better converting ads, which fuel domains. But there’s another side to the story, as another reader pointed out:

you guys are forgetting that recession will drive down consumer demand which means search volumn for services/prodcucts will drop (mortgage search terms have dropped)

so even if marketers want to spend more money, they will not be able to. . . matter of supply and demand

That’s a reasonable and fair point. If people aren’t buying big ticket items, searches for “cars” and “camcorders” may drop, thus hurting domain owners.

Who’s right?