This year in Italy, when I comment to locals that I've noticed no decrease in crowds even with the slow economy, they say: "Yes, but spending habits are much different." Many more tourists are blitzing in from cruise ships and cheap mainland hotels, meaning there are fewer overnights in hotels and fewer dinners sold.
This means that the cafés on St. Mark's Square may be pretty empty in the evenings, even with the allure of their orchestras, but crowds still fill the midday streets and blockbuster sights. Getting up to film for a 7:00 a.m. appointment at the Doge's Palace (what a treat to be in there all alone!), I was struck by how the square is an entirely different experience without the mobs. The simple moral: Get up early and stay out late, and you'll have Venice all to yourself...except for a few joggers.