As we edge closer to the end of another calendar year, it's time to reflect upon the past 12 months and think about what's to come. 2010 has been yet another year of intense innovation in our young online marketing industry, and 2011 seems likely continue this light-speed trend -- after all, the difference between this year and next is literally just one second at midnight on Dec. 31, right?
Predicting the future might sound hard, but luckily I was in attendance at the iMedia Breakthrough Summit in March when renowned futurist Ray Kurzweil let us know that it's actually not that hard: "Exponential growth is remarkably predictable, belying the common wisdom that you cannot predict the future. The price-performance of computing, for example, has been growing at a smooth exponential pace going back to the 1890 American census. Exponential growth is also very explosive. Taking 30 steps exponentially (2, 4, 8, 16...) gets us to a billion, whereas 30 steps linearly (which reflects our intuition about the future) gets us to 30. That is why people's imagination about the future is often very limited compared to what happens.
Kurzweil also went on to say that by combining an understanding of the basic needs/desires of humans with the obvious direction that technology is going, the future is remarkably predictable. For example, he was on record for predicting the rise of cellphones decades before they hit critical mass: He intrinsically knew that humans would always want to be able to communicate instantly, as well as the fact that computer technology was innovating fast enough to make mobile phones a reality. So, with these two data points -- human need and desire and the technological innovation curve -- he was able to predict the point in time that mobile phones hit critical mass with significant accuracy.
Thus, according to Kurzweil's exponential growth theory, most of what's going to shape the online marketing industry has already been set into motion -- in some cases, decades ago. Here are five trends that will continue into 2011 as well as the companies helping to push the wave.
Direct purchasing of inventory via exchanges grows
Yahoo's Right Media Exchange, adap.tv, Brightroll Exchange, Mobclix
Demand-side platforms were virtually unknown in 2009, but they've gone on to dominate the blogosphere and industry conversations in 2010. Why? Because the human need for efficiency has driven both the buy side and sell side to innovate and bring billions of ad impressions literally to the doorstop of the decision makers. Just as Netflix beat Blockbuster and iTunes beat the music stores, users want to have direct access without the extra hoops to jump through. Exchanges bring advertisers and their agencies closer to the impression, eliminate unneeded middlemen, and finally take full advantage of some of the deep targeting options available online. Other experts agree: Mark Leonard, trading desk specialist for MediaMind, says, "I believe the exchange space will continue to grow rapidly throughout the rest of the year and well into 2011."
Google's DoubleClick Exchange and the Right Media Exchange (purchased by Yahoo in 2007 for $680 million) are the two major sources of inventory in the channel. However, unlike Google and the other handful of major exchanges, Right Media has yet to move its inventory over to the real-time bidding (RTB) model. By all accounts, that's going to change sometime in 2011. Best estimates are that Right Media provides around 35 to 30 percent of the total exchange inventory, so RTB exchange buying is going to see a huge boost once Yahoo makes this change.
Some other companies that are on the cutting edge of this "exchange revolution" are video ad exchanges adapt.tv and the Brightroll Exchange, as well as mobile ad exchange Mobclix. It isn't hard to imagine the near future where any ad inventory that can be purchased this way, will be purchased this way -- including TV, print, and outdoor. This doesn't mean that the current planning and buying methods will cease to exist, but certainly a large portion of the run-of-site, remnant inventory will make its way to this efficient, technologically enabled channel.
Paid search sees a surge as the second and third players merge
Yahoo and Bing search marketing
Search engine marketing, with its tiny, three-line text ads, was barely a blip on the radar 10 years ago. Now, the channel accounts for almost half of all online marketing revenue in the U.S. and has become one of the strongest return-on-investment media in the history of marketing. It's not a secret that the 800-pound gorilla in this space is Google, which has consistently grabbed a 60 to 70 percent market share over its top two competitors, Yahoo and Microsoft (each had about 16 percent of the U.S. search business). The kicker was that buying and managing advertising campaigns in each engine's platform took roughly the same amount of time and expertise. So, on occasion, search marketers opted to only work within Google's AdWords platform and bypass the other two options. But things are changing.
Months ago, Yahoo and Bing announced that they were combining their efforts, and at the end of 2010, their Search Alliance vision has been fulfilled. Moving forward, in 2011, search marketers will no longer have to work on two other platforms besides AdWords -- just one. This might not sound like a huge deal to non-search marketers, but ask any SEMer you know and they'll tell you that this move definitely drops the barrier for engaging with Yahoo and Bing. With a combined 33 percent of U.S. search volume on these engines, it almost becomes a no-brainer for SEMs to utilize this inventory.
"I expect that, post Search Alliance, more search engine marketers will invest in AdCenter/Yahoo," says Alex Cohen, senior marketing manager of search management platform, ClickEquations, "if it can deliver on the promise of sufficient scale and ROI. The key issue is that the value of the audiences on each engine could potentially vary, but you won't have the same level of control and reporting you once did. I think we'll see a lot of experimentation in the first and second quarter."
Fragmentation breeds innovation and success stories
Shopkick, Groupon, Quirky
One of my favorite buzz words this year to repeat is the Forrester-created Splinternet, employed to describe the constantly fragmenting space being created by the explosion of content and entertainment options in the digital realm. At one time, there were three television stations, the local paper, and the AM radio. Now, marketers are being literally assaulted by new channels on a monthly basis that they have to consider, plan for, and optimize: "Each new device has its own ad networks, format, and technology." Platform fatigue is setting in. I don't know about the rest of you, but for the first time in my digital career, I feel like I might be at full platform capacity.
But where there's crisis, there's opportunity. And the companies that adapt and evolve will find success like the following: Coupon star Groupon, one of the hottest startups in web history, said recently that it expects to end the year with more than 25 million subscribers and close to $500 million in sales. Wow. With more than 300 employees, it's currently on the hunt for another round of investment that would put its valuation somewhere around $2-3 billion -- not bad for a company that launched two years ago. Simply enough, Groupon is a daily coupon emailer, but its meteoric success is a huge indicator of the potential when social and retail combine.
Quirky markets itself as a "social product development company." It's an ingenious concept for a store where the products originate from ideas submitted and developed by the user community. Once a prototype is made, it doesn't go into production until a threshold of pre-sales are reached -- thus, the community leverages its own connections to come to the store and place pre-sell orders or the product won't even be made. Referring sales are tracked, and those influencers gain real commission dollars for driving conversions. It's self-perpetuating and truly leverages the social power online -- plus it has some really cool gadgets you should all check out for the tech geek in your lives.
Let's throw another buzz word into this mix: mobile. Shopkick's app gives users incentives to check in to physical retail locations, which then advertisers can push offers to these users standing in their stores -- how much more targeted can you get? If an app like Shopkick were able to get anywhere close to Groupon's subscriber level, it could be one of the most dominating players online for decades.
A shift in advertising dollars will make social even more important
I bet Ray Kurzweil saw the recent social revolution coming a million miles away. Face it, humans are social creatures and with the rise of the internet, it was inevitable that a Facebook would eventually arise. According to Nielsen, "social networking now occupies 22 percent of American's time online. That's more than any other activity, and a 43 percent increase from last year."
We all know that social's huge, but the trend here is that it's going to get even bigger because of the shift in ad dollars. I don't mean ad dollars spent on these social networks -- I mean dollars being spent driving users to these platforms. It's amazing, yes, but advertisers are feeding the social beast by switching the URLs in their ads to their Facebook page or Twitter streams instead of their home pages. Microsites, once the haven for landing pages, are declining in favor of branded social experiences.
From Ad Age: "Coca-Cola, with its 10.7 million Facebook fans, has three to four times the Facebook fan base as MyTown and Foursquare have registered users. That certainly trumps U.S. unique visitors to Coke's brand website, which fell by more than 40 percent to 242,000 in July compared to a year ago."
Why the shift? Social networks have a synergy that brands can tap into that is many times stronger than the combined efforts of even the largest of online advertisers. With Facebook's collection of games, groups, and millions of individual user networks, brands can engage their audience on their "owned" pages as well as utilize the marketing products and services that are continually evolving. Brands can focus on marketing while leaving the technology to the networks.
Physical devices will bridge gaps to extend digital's reach
Xbox, Google TV
The reason why the online marketing industry is a safe bet is the reality that the world is changing in ways that will break through walls and let us extend ourselves beyond the desktop or laptop. Smartphones, tablets, and e-readers are digitizing the world's content -- and where's there's an audience, there's advertising. Convergence is happening before our very eyes. In the last 10 years, we've witnessed users continuing to migrate toward digital media while the pull for marketing budgets grows. That trend will continue.
In retail, the innovating cycle is always a bit behind. First, there has to be a real need that exists before manufacturers will sink the millions into major production. Like a Catch-22, it's hard to generate real need until users get their hand on the products. The following companies are paving the roads for our industry through physical devices that will attract users to move toward all things digital.
Xbox Live is a juggernaut every online marketer should be aware of, as it's becoming its own major social network, complete with a tremendously loyal user base. Some relevant statistics regarding the online experience for Microsoft's gaming console, Xbox 360, might catch you by surprise:
- There are 42 million consoles now in 35 countries.
- 42 percent of Xbox LIVE Gold members in the U.S. are watching an average of an hour of television and movies on their Xbox every single day, or more than 30 hours of digitally distributed television and movies a month.
- The 25 million members of Xbox LIVE around the world are each spending more than 30 hours per month on the service -- that means cumulatively, Xbox LIVE members are now logging more than one billion hours a month on the service.
Right now, users can not only play their Xbox 360 games, but can also video chat with their friends, engage with Twitter and Facebook, rent and buy new release movies and albums, watch the new E3 ESPN digital channel, and stream Netflix, Last.fm, etc. It can also integrate with your home network and stream movies, music, and pictures from your own computer.
Sales from Android-powered smartphones overtook the iconic iPhone this year, and Google hopes to follow suit in television. From the minds of our industry's most prolific innovator comes Google TV, the "proprietary smart-TV platform for set-top boxes and HDTVs based on the Android operating system, using IPTV, and co-developed by Google, Intel, Sony and Logitech." Sure, so-called web-enabled televisions have been around for years, but the open developer, app-driven success of the mobile industry has opened the door for a revolution in television. With the onslaught of Google TV, and other major competitors soon to follow, I dare say we have entered into the next evolution of the most powerful media tool that every major brand has come to rely on for the last 50 years. When we look back on 2011 in 10 years, Google TV might have been the catalyst for the next great shift in digital.