Economic Mysteries Explained!

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Treats ($3 to $10/hour)

• Movies cost $4 an hour.

• Cell-phone service—assuming an average customer bill of $60 for 700 minutes of use—works out to $5 an hour.

• Starbucks coffee costs $6 an hour. That's high enough so that a median-income family should always bring coffee from home. And if you have a cigarette and a doughnut with your coffee, it's verging on an extravagance.

Extravagances (greater than $10/hour)

• McDonald's, a $6 meal wolfed down in a half-hour, costs $12 on an hourly basis.

• A car—leased for $350 per month, plus insurance and gas, and driven 10,000 miles a year at an average speed of 30 mph (means you spend 300 hours in the car)—costs $18 an hour.

• Take a cruise, fly in a plane, or attend a Broadway show. Between $25 and $75 an hour.

• Inpatient surgery plus recovery, comes to $250 an hour. Unfortunately, if you don't have health insurance, even life-saving surgery is an "extravagance."

Try a few of these calculations on your own. The math is simple and the results are often illuminating.

How It All Adds Up

What does this mean for advertisers? Well, the Internet now matches radio, TV, and newspapers on a dollar-per-hour basis—which means it's truly a mass-media market with matching economics. Even in a downturn, when Madison Avenue retreats to the tried and true, expect the Internet to absorb its proportion of ad campaigns and to reach similar demographics.

As for sellers: What if you're pitching a product that costs more than a few dollars per hour? Well, don't continue pushing the idea that a $3 cup of coffee is an everyday event—the numbers simply don't work out. Every once in a while, consumers may confuse a treat with an affordable thrill, but, in down economic times, they won't (or simply can't) make that mistake for long. Starbucks (SBUX) is feeling the pain of lower-price coffee competitors. It needs to position Starbucks coffee as a "reward" for working hard, while blunting lower-price competitors through stronger discount and affinity programs.

And that $3-per-gallon tank of gas? Well, the good news is you can drive to work, wear a T-shirt, and read a newspaper, all without breaking the bank. But if you want to save for that annual vacation in June and avoid misery this holiday season, you might want to start packing a lunch from home today.

Greg Blonder is a partner at Morgenthaler Ventures, which has investments in a number of ad-supported companies, including IGA, imeem, NexTag, and Rhythm NewMedia.