Yesterday Henry Blodget spelled out the doomsday scenario for online financial services advertising and for the larger online advertising market. He claimed that the “mortgage collapse” will threaten the revenue and stock market valuation of not just online mortgage marketers like Bankrate, but also the other major advertising-driven companies like Google, Yahoo, and AOL.

He’s wrong. Let’s walk through his analysis to see why.

“…the financial-services sector alone accounts for one-third of U.S. online advertising.”

No, it doesn’t. The number Henry uses is July’s Nielsen report that says that financial services advertisers buy 34% of all impressions. I’ll accept that. The problem is that share-of-impressions does not equal share-of-revenue. Not even close. CPMs online vary from the mid 4 digits per thousand (search & our ad network) to well under $0.01/thousand (yes, really). What’s interesting is that while financial services search CPCs are among the highest of any category, the same advertisers buy some of the lowest CPM ads available – run-of-network (RON) and remnant ads on the major portals.

The big financial services advertisers are direct marketers. They buy expensive search ads, because they work, and very cheap remnant inventory because at that price, it also works. It’s funny because just last week I spoke with one of the top mortgage impression buyers and we had a laugh about the disparity between what they spend and what people think they spend based on the truly absurd number of impressions they buy at rock-bottom CPMs. Compare that to say, car makers, who buy expensive impressions (>$1 CPM) on car sites and sites with good demographics to reach their target audience and you get a sense of just how far off the impression count is in estimating industry share of online advertising spend.

“A declining housing market, moreover, is putting pressure on REITs, real-estate agents, appraisal firms, contractors, home-supply companies, movers, and other industries, some of which will likely reduce online ad spending accordingly.”

OK, fine. But what % of online financial services ad spending, let alone all online spending, do these categories represent? I can’t imagine that it is even 1%. Yes, there are a lot of real-estate agents, but they don’t aggressively market themselves online and the CPCs for the category are very low. The rest of the financial services advertising spend is coming from products like Auto Insurance, where the CPCs are in the double-digits and the advertising budgets are massive. The sub-prime meltdown will do nothing to this market, except possibly spur demand as consumers look for another way to save money online (now that home equity lines are harder to come by).

Here is a company-by-company breakdown of the companies Henry mentioned.

Google
Google is the least affected of any of the companies mentioned. We’ve been told that financial services represents 20% of their revenue. Using 30% of that for mortgage, we are talking about 6% of their U.S. revenue that is even in play. But, the beauty of their model is that the auction system insolates them. As the sub-prime lenders (and many aggregators) drop down the list for top keywords, others with flexible budgets rise to the top. Yes, CPCs could drop a bit with less competition, but most of the spend will just move to stronger players. Online advertising is still far more effective than direct mail, which is the true competition for the ad budgets of the large banks.

Yahoo / AOL / Microsoft
I’ll lump these into the “display + search” group. For their search traffic, everything I said about Google above applies. For their display ads, this is where Henry has really missed the mark. For display, particularly run-of-network ROI-oriented display where all the impressions are, the big portals have become very good at optimizing across categories. It’s all becoming a giant auction. Not like it will be in a few years when the Right Media, Aquantive and other technologies are fully deployed, but it’s fairly efficient now. As some of the mortgage players drop out, others in different categories will take the inventory. The mortgage players would have been elbowed out for impressions by the holiday retail ads in about 2 months anyway.

Bankrate
Here’s where things get interesting. If anyone would be hurt by a downturn in the mortgage market, it would be the #1 mortgage website, right? Not exactly. First, Bankrate’s audience is really not the sub-prime market. Why? People with bad credit are not generally shopping rates; they’re looking for someone who’ll say “yes, we’ll give you a loan.” Second, as Bankrate CEO Tom Evans mentioned on the call with Jordan Rohan, there is growing demand for other products like CDs, given the current interest rate environment. And, a third issue is the growing consumer demand the whole crisis has created. Where do you think consumers will look when the rates on their ARMs go rocketing upwards? That wave is coming very soon and Bankrate will be among the prime beneficiaries.