WIRED:THESE DAYS I'm often asked how the financial calamities shaking Wall Street are affecting Silicon Valley. The best answer would be: slowly.

In its cloistered world, the techies here have little inkling how the deflating world outside might affect their industry. There will be changes in the next few months and years, but for now the code continues to be spooled out, the wild plans continue to be made.

That's not to say there isn't a sensitivity here to the stock market's gyrations. Employees with stock options or ordinary citizens with shares in their retirement plans are eyeing the yo-yoing of the Nasdaq with alarm. However, the long chain of credit that stretches from the financial markets to the pockets of entrepreneurs here works on a longer timescale.

Many of the better-financed start-ups have already pocketed several million from their investors and are set for the next year at least.

Going public - the usual way for venture capitalists to cash out - has been a slow slog since the last boom, so companies are expected to last longer and seek profitability sooner than they did 10 years ago.

The rash of Web 2.0 companies which never really had a chance will disappear just as quickly as they would have done without the finance jitters.

The strange niche social-networking sites, YouTube clones and other one-trick ponies which managed to snatch a few hundred thousand from investors, all assumed that they would get bought out by Google, Apple, Microsoft or another stable giant.

Those giants are hunkering down for the duration ("Financial issues are going to affect both business spending and consumer spending," Microsoft's Steve Ballmer said last week) and won't be splurging on small fry any time soon.

It's not the evaporation of venture capital money or the plummeting of shares though that will transform the internet sector this time - it will be the collapse of the online advertising billions.

Marketing is one of the first budgets to be cut by a company during a downturn and, for many net companies, advertising revenue is about the only income they have. Plenty of them do very well out of it too - there's a sizeable number of one-man blogging operations that make more than $5,000 a month.

As that market contracts, though, so will those feeding on the edges of profitability.

How will the giant in the middle of the online ad world, Google, fare?

Google's profits on advertising have so far leapt up by 30-40 per cent a year, with revenue in the second quarter of $5.47 billion. Even if the marketing budgets contract overall, Google may still eke some growth out of the shift online of advertising dollars and the decline of its smaller competitors.

Even if it doesn't, the company, like many valley giants, has billions of dollars in cash to live off during the lean years. It would make sense for Google to rein in its current wide net of projects to create a bigger internet and try to pull profitability out of its current ventures. No more million dollar prizes for moonshots or celebrity chefs for its employees.

Those companies that straddle the internet and the high street could also find their profits challenged.

In the last downturn, Amazon frequently found itself teetering on the edge of pundits' predictions of doom. It faces a challenge in this recession too.

Can it compete with ease of use when penny-pinchers will want to save on post and packaging? Can a luxury like the Kindle e-book reader survive when consumers are cutting back on magazines and reading material in general?

Even if the economic outlook is gloomy, that doesn't mean that Silicon Valley plans to fold in on itself. The last recession was the moment the techies here knuckled down and laid down the hard work that became the current boom.

A new world of deflation, bear markets and austerity could well bring new opportunities for those who react quickly enough.

The net isn't just about luxuries or big purchases: these days, it's seen as an essential utility, even by the cash-strapped. While we can expect to see the death of sites that depend on excess spending, bargain-hunting, collective discounts and sites serving those tightening their belts are going to see an explosion in growth.

It's not a coincidence that paranoia about the future has led to a leap in the price of gold - and that a million goldbug websites have sprung up around that obsession. In the last bust, the first site to do well was the bluntly-titled "f---kedcompany", which became a community of last resort for those about to lose their jobs in the real world.

The downturn has already inspired gigabytes of advice, entertainment and commiseration online.

The optimists always seem to make money in Silicon Valley - whether they are pitching their futures to the venture capitalists or selling hope to their companions in an uncertain world.