What’s Coming in Internet Advertising: 12 Predictions for 2012

I did my annual predictions first on my Forbes blog, The New Persuaders, since they’re focused largely on the Internet media and advertising I cover there. On that blog, they’re done as separate posts, but I wanted to gather them up in one place here, as I’ve done in previous years. So here’s what I think will happen (or in some cases, not happen) this year in my corner of the technology and startup world:

Facebook goes public, but won’t start an IPO landslide: Facebook will make the signature stock offering of the decade, one that reportedly will value the social network at up to $100 billion. But it won’t launch a thousand IPOs as a gazillion venture capitalists and angel investors hope.

Of course, the first part of that prediction is a gimme. But I can’t go without mentioning it because the Facebook IPO will be one of the biggest stories of 2012. Assuming Goldman Sachs or Morgan Stanley don’t stumble in pricing and selling the offering, Facebook’s IPO will be every bit as important as Google’s in 2004. It will be a sign that Facebook is a real, sustainable company (if there was any doubt left by now), but also a sign that social networking is getting woven into the fabric of our entire online experience.

The second part of the prediction depends less on how the Facebook IPO goes than on how (or whether) the economy recovers. If the recover remains slow to nonexistent and the stock market reflects that, IPOs will be sparse. If we get the slow but growing economic improvement we seem to be seeing now, more companies will go public but not a gusher. But the point is that Facebook is such a singular success that it’s not going to set the tone for lesser (often far lesser) Internet companies.

Facebook’s ad business booms–but not at Google’s expense: Facebook’s social advertising looks promising, but won’t come close to challenging Google’s huge success in search ads this year–maybe ever.

Obviously, Facebook is having no problem raking in the bucks from advertisers eager to reach its 800 million-plus audience–or more specifically, the millions of people in whatever target markets they choose. EMarketer reckons the company will gross nearly $6 billion in ad revenues this year, up from $4 billion in 2011. And that’s before we know anything about Facebook’s likely plans for mobile ads or an ad network a la Google’s AdSense that would spread its ads around the Web.

From reading a lot of articlesyou’d think Facebook is stealing all that money directly from Google. That’s not mainly the case, given Google’s own considerable growth in display advertising, though Facebook’s success may well blunt that growth in the future. Instead, Facebook currently is eating Yahoo’s and AOL’s lunches, and those of many ad networks that, until Facebook ramped up its ad business, were the main alternative for advertisers looking to target sizable audiences.

What would make Facebook a huge Google-scale company is the theft of an entirely different meal: television advertising. After all, Facebook shows much more promise as a brand advertising medium than a direct-marketing medium like Google. It needs only to draw a small fraction of the $60 billion or so spent on television advertising, the biggest brand medium, to be enormously successful. But even then, it’s not mainly a Facebook vs. Google contest.

Facebook still needs to answer a big question, however. That’s whether its “social ads,” which incorporate people’s friends in ads in a 21st century version of word-of-mouth marketing, will have nearly the effectiveness in driving attention and ultimately sales as search ads, which appear in direct response to related queries, often involving products people are looking to buy. The potential is intriguing, and there are some nice examples of how well social advertising can work.

But despite Facebook’s considerable work in providing new kinds of metrics on marketing and advertising impact on its users, marketers and agencies aren’t yet universally convinced they need to spend a lot of money on Facebook ads. After all, they can get a lot of mileage out of their free Facebook Pages and Like buttons around the Web. (Not to mention, it remains to be seen whether these ultra-personal ads will cross what blogger Robert Scoble calls the Facebook freaky line.)

Bottom line: If Facebook is to be the Google of the this decade, its advertising has to at least approach the engagement of search ads, especially as Google itself moves to become more of a brand advertising platform with YouTube and continues its push into display ads. While Facebook is building what seems likely to become a great business on anew vision of advertising that could change many decades of tradition,2012 won’t be the year it closes that deal.

Image ads finally find a home on the Web: In 2012, marketers will start to find ways to do on the Web the kind of image and brand advertising that works so well on television. Not in the same way, at all, but brand advertising nonetheless.

Even as Facebook woos brand advertising dollars from television, the bigger near-term shift in brand spending will be from fading portalsYahoo, MSN, and AOL to emerging brand-safe venues such as Facebook, YouTube, Zynga, and perhaps networks of prime Web sites run by Glam Media, Federated Media Publishing, and others. One big reason for this: a concerted push by advertisers and at least some publishers such as Facebook, along with industrywide initiatives such as Making Measurement Make Sense, to use well-known metrics like television’sGross Rating Points with online ads so that marketers can measure impact more or less equally across media.

YouTube, with 800 million users (Facebook-sized!), could be especially interesting, and not just because of the brand appeal of video. With a redesigned site focused on brand-safe “channels,” including a content identification system that helps segment material safe for kids, teens, and adults, YouTube is making a big push for brand advertisers this year. And it’s not aiming simply to repurpose 30-second TV ads, says Lucas Watson, a former Procter & Gamble executive who joined YouTube last May as vice president of sales and marketing. He hopes YouTube will be able to offer personalized ads, measured not just by whether they appeared onscreen but whether they were actually viewed.

Glam Media, which is expected to go public later this year, offers an example of how brands such as Nike and Limited can find audiences they want on thousands of sites without necessarily buying placements on portals or a bunch of individual sites. Portals such as Yahoo and sites such as NYTimes.com have defined so-called the premium advertising space that commands higher ad rates than run-of-the-mill sites. But Glam may be showing the way to buy premium audiences across the Web. And it seems likely that these newer Web natives like Glam will find better ways than just traditional display ads to get the attention of those audiences.

Data-driven advertising accelerates: Data-driven advertising will continue to grow rapidly thanks to ad exchanges such as Google’s and Yahoo’s that offer real-time bidding for audiences across thousands of Web sites as an alternative to buying space on individual sites presumed to serve the target audience.

For a long time, there has been a divide–a deep chasm, actually–between ad scientists and myriad ad tech companies in and around Silicon Valley and the “creatives” at Madison Avenue agencies. The former believe only measurability, mainly by clicks, can produce meaningful results in online advertising, while the latter quite reasonably still believe in the power of compelling ads to change brand affinity and buying intentions, often months down the road.

What’s changing, and what will accelerate this year, is that both sides are starting to understand that they aren’t actually on opposite sides. They each need each other. So while there’s still plenty of argument over the impact of various kinds of ads, even the creative types realize they can help their clients by using the power of Internet ad technologies to conduct more targeted or more personalized pitches to large audiences in real time. And at least some of the ad tech folks are finding ways to quantify brand affinity and purchase intention in more precise ways.

But it’s uncertain how many of the hundreds or even thousands of little ad tech companies with arcane acronyms like DSP, DMP, and the like will benefit. Most of these companies offer features that advertisers would like to see rolled up into more cohesive ad offerings by established players like Google, Yahoo, or ad agencies. Many of them will get bought by the big guys, but many more will likely fade away, unable to articulate to marketers what the heck they actually do. That, however, probably will happen later, given the money still flowing into ad tech this year.

Web-native ad formats will remain MIA: The search will continue for the Holy Grail of online advertising, but it won’t be found in 2012: a Web-native ad format that is as effective for brand marketers as search ads are for direct marketers such as retailers.

While display ads can work, even for branding, they don’t work really well because they’re made to hijack attention in a medium where, unlike TV, people are actively doing other things and don’t want to be distracted. By all accounts, a relatively small number of people account for a large portion of the clicks on ads, and it’s common knowledge that these clickers are less desirable audiences (meaning they like to click much more than they like to buy).

Video ads hold more appeal, because they’re a format proven on television, even if the Web isn’t really much like television. They’ll do fine online, but they don’t exploit the Internet’s unique qualities.

So what’s next? Potentially, social ads like Facebook’s, which cut through the noise with references to what people’s friends like or have bought. But among many uncertainties about social ads are how well they will scale up to audiences of millions, how well they will work for image advertising, or whether they’re useful to any publisher except a giant social network–meaning, for now, only Facebook. Or maybe Twitter’s ad experiments will blossom.

What else? Who knows? I haven’t yet heard the answer from the marketers and agencies who do all the ad spending. The nagging worry of Web publishers–at least it should be a worry–is that whatever new form of advertising or marketing that emerges is so efficient at gathering demand that it doesn’t cost as much and thus doesn’t produce the kind of revenues traditional ads do.

In any case, given how slowly marketers and agencies have gotten with the digital program, it seems unlikely whatever new ad format does appear will take off this year.

Twitter (almost) becomes a real business: Twitter has become the 21st century news service, reaching 100 million active users a month, and that nearly guarantees it will generate a significant ad business.

But to date,Twitter has done little more than experiment with a few advertising formats, such as Promoted Tweets. While some of the results are promising, 2012 will remain a year of development, especially as brands take time to try out its redesign. Twitter’s automated ad system, which is what would prove the company can serve ads at massive scale, is still in beta test mode.

What remains to be seen is what kind of advertising entity Twitter will become. Author and Searchblog writer and Federated Media Publishing Chairman John Battelle is betting it becomes the free radical of the Web, the one player like Google used to be that creates value for the entire ecosystem and thus is the one player every other ad player must deal with. He’s probably right, but I don’t yet grok what business form that identity will take.

Mobile ads finally get moving: Each of the last several years was supposed to be the Year of Mobile Ads. So far, that hasn’t happened. But it may well finally come true in 2012. That’s because smartphones have gone mainstream. In the U.S., 65% of mobile subscribers have them, while 35% have old-style feature phones that can’t easily surf the Web.

As a result, IDC predicts that mobile ad revenues will nearly double, to $4.1 billion, this year–finally enough to be noticeable. The big winner here may be Google, since IDC expects that marketers will use search ads the most on mobile devices. But even if Apple doesn’t manage to turn around its troubled iAd mobile ad program, its voice-driven assistant Siriholds the potential to change the game in mobile search unless Google scrambles to improve its own voice search.

Amazon.com becomes a major online advertising player: Amazon’s ad business will start to become significant this year, catching people by surprise.

As Amazon itself has noted, more and more display ads are showing up on the site, including individual product pages. Macquarie Equitiesrecently predicted that Amazon will start to build up its display ad business not only on its own site but on others as well. The potential is intriguing, since in addition to purchasing data for its millions of customers, Amazon uniquely among advertising venues also offers a direct and easy path to purchase.

Then there’s the new Kindle Fire and ad-supported Kindles. According to one report, the Kindle Fire is already is sparking a surge in mobile advertising.

I don’t yet know whether Amazon plans to make advertising a third horse to ride along with its retail and cloud computing businesses. But I’m betting we’ll find out this year.

App overload sets in: Apps will continue to be the rage, but this year will mark the beginning of the end.

OK, I’m going out on a rickety limb here, since my prediction last year that apps would start losing ground to an HTML5-powered Web was dead wrong. Not least, that’s because Apple’s App Store (and Google’s Android Market to some degree) give software and app developers a way to make money. And money has a way of making even an annoying situation continue.

One problem is that apps need to be continually updated. If you have several dozen on your iPhone or Android device (or several hundred!), you’re going to be updating all the time. Even if that happens in the background, the process can gum up the works.

There’s also a philosophical divide that’s widening. Apps are silos, as Dave Winer recently pointed out, and that’s antithetical to the openness of the Web:

It might feel very large on the inside, but nothing goes in or out that isn’t well-controlled by the people who created the app. That sucks! … The great thing about the web is linking. I don’t care how ugly it looks and how pretty your app is, if I can’t link in and out of your world, it’s not even close to a replacement for the web. It would be as silly as saying that you don’t need oceans because you have a bathtub. How nice your bathtub is. Try building a continent around it if you want to get my point.

It still seems to me that HTML5 eventually will combine the interactivity of apps with the linking of the Web, thus making apps unnecessary from a technical point of view. I concede that there will continue to be advantages in discrete apps from an economic and even a technical point of view (such as this example), so I’m not going binary with this prediction. But I think the problems of apps will start to dim their appeal as a sure route to riches for startups and media companies alike.

Tabzines debut: As tablets such as Apple’s iPad and Amazon.com’s Kindle Fire become mainstream devices, as they surely will in 2012, it seems inevitable that native forms of content will emerge for them.

I may be missing one that already exists, though I don’t think any have broken out into the mainstream, or even the nerdstream. (I’m not counting curators like Flipboard, but they suggest ways to do tabzines well.) UPDATE: Well, I did miss Nomad Editions, a new collection of iPad-only magazines. (Aside to Nomad and Flipboard: Not everybody can afford an iPad. How about Android tablet editions?)

In any case, I can’t imagine that a device tailor-made for consuming media of all kinds won’t inspire some smart people to create what the Interactive Advertising Bureau’s CEO and wordsmith Randall Rothenbergcalls a tabzine:

Following the lead of Punch founder David Bennahum and Nomad Editions impresario Mark Edmiston, East Coast content entrepreneurs launch dozens of high-profile, original “tabzines,” pushing the borders of content creativity the way print aficionados Clay Felker and Harold Hayes did with magazines in the 1960s and 1970s. … The buzz around these “tabz” – and the demonstrable success of a few among readers and advertisers – divides the ad agency marketplace. Clients, once smitten with the promise of cheap scale offered by the media agencies and the acronym soup of SSPs, DSPs, RTB, ATDs, and DMPs, realize anew that nothing – not targeting, not data, not algorithms – is more valuable than a group of human beings totally engaged in an experience.

Well, it sure sounds good to this longtime magazine writer, anyway.

UPDATE 2: Well, ahem, I forgot about Fox’s The Daily, launched early last year. But it seems that many readers forgot about it too.

This revolution will be televised: Don’t call it cord-cutting, but television is ripe for disruption this year.

For one, Apple will likely launch a TV–perhapsSteve Jobs’ last legacy to the company he founded and restored into one of the world’s greatest. I know that’s almost a gimme, given all the coverage of Apple’s evident plans. But I think the company will move relatively slowly, because the TV set business isn’t exactly a very profitable one, and Apple’s entrance won’t automatically make it profitable even if some consumers go for the Apple premium. If Apple can bring some sense of organization to the clash of Web and television, or even persuade cable companies to offer a la carte channels, as some speculate, though, that will be a revolution worth buying into.

At the same time, Google’s efforts to reinvent TV will finally start to work. Yes, Google TV’s first effort was something of a bust, but rest assured that Google isn’t giving up on what is still, after all, the largest advertising venue by far. And it’s one ripe for Web-style reinvention as Internet Protocol brings trackability and measurability to the living-room screen. Think about the pieces Google is putting together: YouTube, Motorola, Google TV. Add them up, and yes, cable TV does indeed have something to worry about.

Update: Well, maybe you need to call it cord-cutting after all.

The Web startup bubble will start to deflate: Between app overload, a lot of features masquerading as products, a lot more features nobody really wants, and VCsand angels and superangels who no longer can keep track of all their little investments, many Web startups will start to find the going tougher this year.

Many will be acquired, or at least acqhired, so this won’t be a total loss. Nor will regular investors notice much because the companies never went public. So 2012 won’t see carnage of the sort we saw in the dot-com crash a decade or so ago.

But if only because talent, funding and advertising dollars aren’t unlimited, this could be the year when starting a Web company or launching an app no longer is a relatively sure route to success.

One Response

  1. […] more here: What's Coming in Internet Advertising: 12 Predictions for 2012 « Rob … Be Sociable, Share! This entry was posted in Aggregated by admin. Bookmark the […]

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