Product Development and Internet Marketing

If you write a blog, presumably you have something to say. And if you have something to say on the web, you really ought to organize it into an easy-to-parse list. And if you have a list of things to say, you probably should tie it to a logical timeframe.

Therefore, I am compelled to provide my top ten predictions for 2007.

1. AdSense for Video, plus Competitors

This one doesn't make me a rocket scientist, but it's pretty important anyway. Google, BrightCove, and all the others are building publishing solutions integrated with advertising networks. This model is very different from the web, where the ad networks plug-and-play with any content management system. Imagine if you needed Google to host your website in order to run AdSense.

In the video world, the value chain of hosting, developing a player environment, content management, and ad insertion is not standardized and can be complex and costly. Moving forward, either these technical problems will be solved (see below) or the video ecosystem will move to a small number of vertically-integrated players, obviously led by Google.

2. Open Source Video Platforms will Emerge

The video platform war is over, Adobe won. But the Flash platform is not a player environment, it is up to each programmer to develop their own player, playlist, and business rules.

Although many companies are offering products in the presentation layer (see prediction above), there are just too many smart people trying to solve what is really a very straight-forward technical problem for the situation to remain as is. I expect a high quality open-source Flash project to emerge and to be quickly adopted by long-tail and non ad-supported publishers.

3. Apollo is a Big Deal

When developers can easily develop powerful desktop applications leveraging the graphical sophistication of Flash and a huge installed base, that's a big deal.

If it lives up to its promises (and few 1.0s from Adobe usually do), the Apollo project will become the platform for small applications, web-enabled widgets, and potentially powerful apps which take the best aspects of browser-based AJAX and combine them with the speed of local storage and memory.

By the end of the year, Apollo will be on par with Yahoo widgets and Firefox extensions as a platform of choice for extending media presence.

4. AOL/MSN/Yahoo will be in Play

Another not-so-bold prediction. There's a simple truth to industry: As a segment matures, the "Rule of 2 or 3" applies. No more than 2 or 3 large competitors will generally emerge in an oligopoly. Ford, GM, Chrysler. McD's, BK, Hardee's. Coke, Pepsi. Why does this happen? I can't remember, I read it in a Harvard Business School case study years ago.

Anyway, while Google runs away with the search business, the three remaining players are fighting over display advertising. But like Detroit when the Japanese started stealing share, the Big 3 are under attack from Google, Fox, Viacom, and others. To maintain their position, and the disproportionate share of revenue they enjoy, consolidation is the obvious next step.

I'm not going to go out on a limb and predict which combinations will happen.

5. Lots of 2.0 Sites will Enter the DeadPool

I'm really not pushing the envelope now...

There's just no need for 10 different video sharing sites. The benefit to the user of one or two unique features is totally overwhelmed by the network effect of the YouTube audience and community.

Any site which relies on a social aspect needs to consider whether users really want to hang out in a second- or third-tier community (whether this community is bookmarking, chating, photo sharing, or whatever). Where you hang out online matters as much as where you hang out offline.

6. Social Media Moves to Core, Powering Niches

While there will be many losers in the 2.0 social media explosion, the core of what it means to tag, communicate, blog, etc will be incorporated into every meaningful online community, making those sites and media properties significantly more valuable.

Expect the second and third tier of media properties to grow in revenue and market presence and for the M&A activity among this group to continue.

7. Emergence of Online Media Agents

Perez Hilton showed us that all it takes is good writing and a catchy subject to create a new media star. The traditional route to monetization of traffic has been to outsource the ad sales to a company like Federated Media, or Blue Lithium. While this is effective at selling standard ad units, it generally does not cover sponsorship opportunities or non-traditional ad units, and it lacks the liquidity necessary to optimize yield.

I expect a new breed of intermediary to emerge, the online agent. Just as Hollywood stars trust a business representative to maximize their career trajectory and revenue potential, smart, tech-savvy businesses will emerge to weigh and optimize the earnings from one-person media phenomena.

8. Media Roll-Ups Won't Work

While several groups are currently raising money to roll-up smaller Internet media companies, they won't end up much better than Zap.com back in the day.

Problems with Internet roll-ups:

  • There aren't that many targets in the sweet spot with real revenue potential but prior to hitting it big or a buy out.

  • Competition for these properties is fierce, driving up prices and reducing return.

  • Many independents don't want to be bought out.

  • Media synergies don't generally exist other than ad sales, which are easily outsourced.

  • Arbitrage opportunities close as soon as they are recognized. If I'm writing about the opportunity, consider it recognized.

9. 3D Environments Won't Hit Mainstream

Second Life is the PointCast of the second bubble. When it implodes (so obvious as to not merit a prediction) everyone will assume that 3D environments do not have a future outside of gaming. 2007 will be a retrenchment year for mainstream 3D environments, with innovation taking a break for a while.

10. Mobile Applications as Advertising Vehicles

While Verizon putting ads on WAP pages makes headlines, the really exciting advertising opportunities will be based on downloadable mobile applications. WAP pages seem like the obvious place for ads (hey, its like HTML!), but the lack of context, small size images, small Flash penetration, and slow speed will limit the ultimate advertising value to media companies for the foreseable future.

Applications, on the other hand, allow caching of larger creative, inclusion of video advertising, interstitial style ads, and other creative formats. That said, there are huge barriers to getting those applications on the phone limiting reach.

January 1, 2007 11:57 AM
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