13 Questions For 2013 In The World Of Online Advertising

questionsCross-posted at my Forbes.com blog The New Persuaders:

For the past few years, I’ve offered predictions here and on The New Persuaders for what’s likely to come in the next year. I viewed them more as an agenda for what to watch for in the next 12 months than as firm predictions.

But it was too easy sometimes to state the obvious so they’d end up right by year-end. So this year, I’m going to shake it up and throw out a few questions instead. I think I know the answers to some of them, but if many won’t be answered definitively by year-end, they remain top of mind for me and probably for many others in online media and advertising.

So in this, the first full week of the new year, here are some questions to which I hope to start finding answers (and if you’ve got ‘em, sound off in the comments below!):

* Will image advertising finally take off online? I have to believe that as people spend more and more time online instead of reading print publications and watching TV, brand marketers will want and need to reach them there with ads that are aimed at creating consideration for later purchases, not just eliciting an immediate sale like Google’s search ads and too many banner ads. We’re already starting to see signs of such advertising with the early success of Facebook’s Sponsored StoriesTwitter’s Promoted Tweets, and YouTube’s TrueView ads–not to mention the explosion of tablets, which provide a lean-back experience more compatible with image advertising. This won’t be a sudden change, since brand marketers and agencies don’t move quickly, but you can’t tell me there aren’t going to be increasingly compelling ways for brands to influence people online.

* Will native ads reach broad scale? Well, perhaps they will on platforms such as Facebook and–well, Facebook–that already reach hundreds of millions of people. Sponsored Stories clearly have gotten some traction, even on mobile devices. But marketers and agencies won’t create multiple versions of campaigns to serve every new ad format that publishers claim work better than banner ads. Which brings up a related question:

* Will any standards emerge around the social gestures that most of these native ads embody? That’s really the only thing that will ensure that marketers can reach scale across many sites. That wouldn’t be in the interest of big companies such as Facebook and Google, which benefit from proprietary ad formats that can reach their huge audiences. But standards, whether it’s banners of a particular size or ad networks, create a more liquid market that helps hundreds of publishers survive as they provide marketers scalable opportunities to reach big audiences. So are there atomic units of social gestures that could carry brand messages across multiple native ad formats without destroying the appeal of native formats? Maybe there’s a technological fix for this, but it’s clear that a lot more needs to be done.

* Will the long-predicted shakeout in ad tech companies finally happen? It didn’t really occur last year despite a few middling-big acquisitions by Oracle, Salesforce.com, and Google. This year, perhaps new Yahoo CEO Marissa Mayer will corral a few to try to recharge the company’s ad business. Google, Adobe, and IBM have built out “stacks” of ad tech, but no doubt they can each fill out their offerings. Then there’s Facebook, whose ad exchange is likely to need fleshing out. But even if they each write checks for a few three-letter acronym startups apiece, don’t call it a shakeout. Given the rapid evolution of advertising technologies, and the reality that using data to refine advertising is still in its infancy, it’s a good bet that more companies will still be created than disappear. That should keep the Lumascape as crowded as ever.

* Can advertisers and publishers make ads more personal without scaring people? That’s the $64 billion question, and it likely won’t get answered in full this year. It’s easy for headline-hungry politicians to make a big deal out of Facebook’s latest privacy gaffe or the Wall Street Journal’s or the New York Times’ latest scare story about an ad that followed somebody all over the Web. That’s especially so since Facebook really does push the privacy envelope too far at times, and too many advertisers idiotically chase one more sales conversion at the cost of scaring off hundreds of others or inviting onerous legislation. But making ads more useful to each individual person is not only crucial to online commerce, it’s potentially better for most consumers as well–seriously, I don’t need to see another ad for a fitness center or a new credit card, but that ad for Camper van Beethoven’s new CD had me in a split-second. The answer lies in these two words, everyone: transparency and choice.

* Will mobile advertising work? Well, some of it already does, to hear Google and Facebook tell it. And while those already devalued digital dimes so far turn to pennies when it comes to ads on smartphones and tablets, this still feels more like growing pains than a crisis in online advertising. Sure, the screens are small and people don’t like to be interrupted in their mobile cocoons. So a different kind of advertising is probably needed–clearly, banners don’t cut it on a four-inch screen. But the value to advertisers of knowing your location and maybe the apps you’re using, coupled with knowledge of what your friends like–all with permission, of course–is huge. That permission may be really tough to earn. But if advertisers can offer tangible value, perhaps in the form of useful services related to what you’re doing or looking for or shopping for–and isn’t that the ultimate native ad?–people may loosen their hold on that information.

* Can Larry Page keep Google relevant in the social media age? So far, the no-longer-new CEO has at least kept Google’s mainstream ad business humming. Page has outlasted a year or so of missteps, missed opportunities, antitrust investigations, and bum vocal chords, and arguably emerged with a company that’s leaner, more focused, and more potent than ever. Not only does the recent antitrust victory appear to leave it free to compete unimpeded, but Android is doing better than ever even vs. a very strong Apple ecosystem and Google is about to emerge as a powerhouse in the other half of online advertising: display ads, whether on the desktop or on mobile devices. Page’s big challenge looms as big as ever, though: Can Google play in the social Web vs. Facebook/Instagram, Twitter, Pinterest, and more? I don’t know, but this may be the year Page has to provide a more definitive answer.

* Will TV and Web video ads finally come together on Connected TVs, tablets, or other devices? Sure, at some point. Video is video no matter where it runs, and while personal computer users bristle at pre-roll video ads, I’m betting viewers are more amenable to various kinds of ads when they view video on Internet-connected TVs or tablets. And even on PCs, YouTube’s TrueView ads, which you can skip after a few seconds, have proven successful to the tune of several billion dollars last year. Traditional TV advertising will continue to thrive thanks to unassailable economics of the cable-content cabal. But given extensive work by Nielsen, comScore, and others to provide metrics that can extend across TV and the Web, the latter may finally get some serious coin from brand marketers–if not this year, pretty soon thereafter. Especially if Apple works its magic on the television.

* Will Facebook really tick us off with a new feature or privacy “improvement”? Is Mark Zuckerberg CEO of Facebook? Nonetheless, Facebook’s well-worn playbook of pushing beyond social comfort levels, then pulling back just a bit, means we’ll probably see privacy norms get stretched once again.

* Will Apple ever make a real splash in advertising? Don’t bet your iPad on it. I think even the post-Steve Jobs Apple still views ads the way a lot of Silicon Valley still does (mostly in error): ineffective, inelegant, and crass. Apple itself can make great ads, but selling them is an entirely different matter.

* Will Amazon make a real splash in advertising? Oh yeah. All the pieces are in place, from a huge shopping-focused audience to a nearly bulletproof technology infrastructure. Again, it won’t set the world on fire this year, but we’re likely to see the smoke.

* Will Marissa Mayer turn around Yahoo? Not this year. Still, I wouldn’t be surprised to see signs of a real turn for the first time in about five CEOs. But the real turnaround will take years–if Yahoo’s board has the patience. That’s still an iffy bet worth about as much as a share of Yahoo stock.

* Will I ever figure out the appeal of Reddit and BuzzFeed? Gosh, I hope so. I get that these guys attract massive traffic, but neither site does much for me. Reddit, in particular, seems so random that I guess it must be the channel-surfing of today’s generation, only with somewhat more worthwhile nuggets. But for pete’s sake, there’s so much noise for the signal you get, and even the most popular noise can be many hours, days, or even months old. Go ahead, call me a geezer who doesn’t get it. You wouldn’t be the first, and maybe you’re right. So I will continue to click over to them until I see the light, my brain explodes, or the next phenom looks more worth wasting my remaining years on.

I have a lot more questions, but I’ve got to stop before too much of 2013 is gone.

Venture Capitalists: We’re Doing Fine! Really!

4444 students from 25 schools in Gwalior

Image: AFP/Getty Images via @daylife

From my Forbes.com blog The New Persuaders:

With so much turmoil in the venture capital business, from the rise of competing super-angel investors to tepid fund returns for the past 10 years to some big IPO duds this year from the likes of Facebook, the future of this economic engine of innovation is pretty murky. But to hear VC investors on the opening panel of the Silicon Valley Venture Summit held annually in the coast-side community of Half Moon Bay by business media network AlwaysOn, there’s not much to worry about.

On the panel addressing the “VC & Investor Outlook for Global Silicon Valley” were host Packy Kelly, partner and co-head of KPMG’s U.S. Venture Capital Practice; Norm Fogelsong, general partner at later-stage VC Institutional Venture Partners; Neal Dempsey, managing general partner at early-stage VC Bay Partners, which has gone through its own travails in the past couple of years; and Gaurav Tewari, director of SAP Ventures. Here’s what they had to say about the state of the VC business:

Q: Where are we in terms of the VC cycles today?

Fogelsong: The industry’s healthy. Things got quite excessive in the bubble, and now we’re back up to $15 billion to $20 billion that’s healthy for the industry.

Dempsey: Companies are going to have major exits, and I’m convinced it’s going to be fine over time.

Tewari: The pace of innovation and entrepreneurship is just accelerating. It’s a very exciting time. The numbers are mixed. The number of folks in the industry has shrunk 30% in recent years.

Q: Is there still ample capital to invest?

Fogelsong: Yes. But we’re still burning off the excess of the bubble.

Q: How have things changed in terms of the choices entrepreneurs have now–angels, seed funds, accelerators?

Dempsey: It’s only better for the industry. The angels provide this huge infrastructure of small investments that we can’t make. We can see what trends or companies are working. When we get involved, [unlike angels who make dozens of investments a year], we’re hands-on.

Fogelsong: But if you’re thinking of getting angel financing, get an experienced angel. Some of the new ones don’t realize their investments are going to need follow-on financing. …

Read the complete post at The New Persuaders.

Can’t Get Enough of Gangnam Style? Check Out AdTech Style

From my Forbes.com blog The New Persuaders:

Geeks love to insert themselves into the zeitgeist as much as anyone, and tech-inflected parodies of popular songs have become a staple of Silicon Valley folks who–let’s face it–struggle to live normal lives while working around the clock.

No surprise that they’re particularly popular in the arcane world of advertising technology firms, which have the additional problem that nobody knows what the heck they do. So today, we have a parody video of–what else?–Gangnam Style.

This time, ad tech leader BlueKai did up a pretty good marketing ploy parody based on South Korean singer PSY’s runaway YouTube hit. Most of it still appears to be in Korean, so I can’t vouch for whether the PSY stand-in is mouthing the words that appear in English subtitles. But the signature opening line clearly subs in “Oppan ad tech style,” and from there you have to depend on the subtitles to get the very inside jokes.

Amid shots of people dancing in server farms and bland Silicon Valley offices, plus cameos by ad tech figures such as Luma Partners’ Terry Kawaja, the video pokes fun at the industry’s infamous acronym epidemic. “Activate… with the DMP! … Optimize, verify, and inform those buys! … HEEEEEY, Sexy data!”

Like I said, it’s inside stuff, so half of you might be amused and the other half won’t know what on Earth they’re talking about. But it’s ad tech, so what else is new? And who thinks Gangnam Style‘s popularity was based on humdrum things like words?

Actually, this isn’t even the first Gangnam Style parody from Silicon Valley. A couple of months ago, there was a startup-oriented one starring a bunch of Valley entrepreneurial luminaries. Watch that one, and you don’t need to watch any more of Bravo’s lamentable Start-Ups: Silicon Valley reality show.

Reid Hoffman: Social Networking Isn’t Over Yet–And Neither Is Facebook

Reid Hoffman

Photo: Wikipedia

From my Forbes.com blog The New Persuaders:

Reid Hoffman is one of the most prolific angel investors in tech startups from Facebook and Zynga to Airbnb and Zipcar. It’s a talent he transferred to more traditional venture capital in 2009 when he joined Greylock Partners. He’s also a cofounder and executive chairman of LinkedIn.

In a “fireside chat” at the TechCrunch Disrupt conference in San Francisco today with TechCrunch founder Mike Arrington, who has since joined the VC world as well with his own CrunchFund, Hoffman proffered comments on everything from Facebook’s struggles to Twitter’s battles with developers. Here, paraphrased at times, is what he had to say:

Q: You are exceptionally wealthy. What changes?

A: There is a bunch of weird things. I had had a long-term plan to be affiliated with universities, like teaching. Overnight all those changed to donor relationships. Also, I would never have imagined I would fly in a private plane by myself, and now I have. It has its advantages.

Q: You wrote a book [The Startup of You]. How’s it doing?

A: It’s sold 120,000. In the consumer Internet space, we’re used to much higher numbers. I don’t think we’ve created a movement yet.

Q: You were one of the very first investors in Facebook.

A: $37,500 at a $5 million valuation. [That means he made 3,000 times his investment, or $111 million.)

Q: So you did very well. What do you think of Facebook’s stock now?

A: I’m a big believer in Facebook’s long-term position. The real question is how it plays out over the next year or so. People’s hand-wringing about not making money on mobile is an innovation problem that is not that hard to solve.

Q: Did Facebook screw up its IPO or was it inevitable it played out that way?

A: In some ways, it was inevitable. You had unprecedented demand, and you couldn’t know NASDAQ servers would go down. We at LinkedIn were criticized for leaving too much money on the table. …

Read the complete post at The New Persuaders.

Uber-Entrepreneur Jack Dorsey To Startups: Don’t Just Disrupt, Start A Revolution

Image representing Jack Dorsey as depicted in ...

Image via CrunchBase

From my Forbes.com blog The New Persuaders:

Jack Dorsey is a latter-day legend among entrepreneurs, and no wonder. Not only did he help found Twitter, where he serves as executive chairman and head of product development, but he’s also founder and CEO of Square, which is trying to foment a revolution in payments by allowing people to use their mobile devices as wallets.

Revolution, in fact, not simply disruption of the existing way of doing things, was Dorsey’s main message in a keynote talk this morning at TechCrunch Disrupt, a startup tech conference in San Francisco. “We need to change the name of this conference,” he told thousands of attendees hanging on his every word. Here’s a sampling of what he had to say, mostly aimed at dashing precious beliefs of entrepreneurs:

I never wanted to be an entrepreneur. I never woke up one morning and thought I need to get a ticket to San Francisco. I actually wanted to be Bruce Lee.

Actually I wanted to be a sailor, to explore the world. I wanted to be a tailor, to build things myself that I could share with other. I wanted to be an artist, specificallly a surrealist.

Along the way, I realized life really happens at intersections. Literally for me. I was fascinated by cities.

I thought about founders–in particular the Founding Fathers of the United States. They realized they wouldn’t get everything right at the start. There would not be one founding moment but many. A lot of the ideas they had at the time were wrong (slavery, for example, or women’s suffrage).

So there’s a massive amount of energy spent on the founding moment. At Twitter, not so. Companies have multiple founding moments. I consider CEO Dick Costolo a founder. He’s really reconsidered everything and made the company better. Same at Square with its COO. Same at Starbucks with Howard Schultz, who was not a founder. Marissa Mayer, not a founder of Google or Yahoo, but with the drive and smarts to create another founding moment at Yahoo.

So a founder is not a job, it’s a role. An idea that can change the course of the company can come from anywhere.

Science fiction writer William Gibson said the future has already arrived, it’s just not evenly distributed yet. Our job is to distribute the future that is already here. We need to make sure it spreads all over the world, as quickly as possible, and with the right values.

We have the change the name of this conference. What we really want is not disruption, but revolution. It pushes people to do the right thing. It doesn’t always have to be loud or violent. It’s just as powerful in its stillness.

So the key is how we recognize disruption. We want to distribute the future more quickly. We don’t want to just disrupt things and move them around. We want purpose. …

Read the complete post at The New Persuaders.

Next-Generation Venture Capitalist Ben Horowitz On How To Build A Company Today

PandoMonthly - June 2012 - Sarah Lacy intervie...

Photo: thekenyeung

From my Forbes.com blog The New Persuaders:

Few venture capital firms have been more aggressive in recent years than Andreessen Horowitz, which has invested in dozens of the hottest companies from Facebook to Groupon to Pinterest. It has become one of the largest VC firms in just the three years since it was formed by onetime Netscape cofounder Marc Andreessen and his longtime partner Ben Horowitz, former CEO of Andreessen’s company’s LoudCloud, later sold as Opsware to Hewlett-Packard for $1.6 billion.

Today at the TechCrunch Disrupt conference in San Francisco, one of the year’s largest conferences for tech entrepreneurs (streaming live here), Horowitz was interviewed by legendary Silicon Valley VC and adviser Bill Campbell, known in these parts at “Coach.” Here, paraphrased at times, is what Horowitz had to say about how best to build a company today:

Q: What do you mean by “Software eats the world” as your basic investment thesis?

A: Weak form: Software is eating the technology industry. The stronger form of the hypothesis is that software will eat every industry eventually. Retail, movies, radio and music. We see software eating every industry from agriculture to finance.

Historically, the technology industry has been sized at a certain size. Only so much new technology could be absorbed. But as software eats other industries, technology will actually expand.

Q: Apple defies some part of that with software and hardware integration. How do they do that?

A: Increasingly, such as with Amazon, it’s software, hardware, and content.

Q: Why did you go over to the dark side–venture capital?

A: I’m considered a much better CEO now that I was when I was a CEO. Venture capital had become too abstract when it came to building a business–it was about business models. When you’re building a business, it’s about the struggle and the horror. I thought it would be good to have a firm that knew how to actually build a company. …

Read the complete post at The New Persuaders.

Why Do Programmers Hate Internet Advertising So Much?

Facebook ad question (Photo credit: renaissancechambara)

From my Forbes.com blog The New Persuaders:

Another week, another pontificating programmer slamming online advertising. What is it with these guys?

The latest example is a steaming heap of linkbait from software developer and entrepreneur Patrick Dobson entitled Facebook Should Fire Sheryl Sandberg. That would be the chief operating officer of Facebook, whose purported crime is that she steered Facebook toward being an ad-supported company.

In Dobson’s telling, while Facebook cofounder and CEO Mark Zuckerberg was off at an ashram in India, onetime Google ad exec Sandberg mandated that Facebook would henceforth be an advertising company. Proof of her folly? Facebook’s now worth half of what it was at its IPO three months ago as it “continues to flounder in advertising hell.”

This, despite the fact that Facebook will gross about $5 billion in ad revenues this year, despite the fact that its current market cap is still more than $40 billion less than eight years after the company’s founding in a Harvard dorm.

Thousands of Web developers would love to flounder this badly.

Dobson’s preferred alternative is that Facebook should gradually phase out advertising in favor of–and I have to get technical here, because the bigger picture he provides is fuzzy–selling access to its application programming interface. That way, developers can build businesses like Zynga did on top of the social network in the way personal computer software developers built applications atop Microsoft’s Windows. From his post:

… There is massive value in the social graph and the ability to build applications on top of it. I believe the value is greater than all of the advertising revenue generated on the web to date. … What is the best way to monetize the social graph? To sell access to the social graph! … Developers can then figure out if advertising, or micro transactions, or payed access is the best way to monetize the social graph.

I’m not really sure what “selling access to the social graph” would be, though it sounds like the result could make Facebook’s many privacy gaffes to date look tame.

But the bigger problem is the persistent implication by tech folks like Dobson that advertising is beneath them, and beneath any intelligent human being. Now, I’m no huge fan of most advertising, and all too often it is indeed lame. But there’s no doubt it can be useful at the right place and time, and even when it misses the mark, advertising is a small, remarkably frictionless price to pay for a whole lot of free Web services.

The notion that advertising is evil, to use a favorite term of Google critics, or at least useless is a longstanding meme in Silicon Valley. It goes at least as far back as Google’s founding, before it became–right–the biggest online ad company on the planet. Cofounders Larry Page and Sergey Brin famously wrote in their Stanford doctoral thesis describing Google that advertising could pollute search results.

Why this antipathy to advertising? A lot of tech folks seem to believe they’re immune to the influence of advertising. More than that, they assume that no one else is much influenced by it either (despite ample evidence over many decades that ads do influence people’s attitudes and behavior). Therefore, the reasoning goes, ads are nothing more than an annoyance, an inefficient allocation of capital. Dobson accuses Sandberg of a “rampant lack of business creativity” that has “no place in centers of innovation,” later saying she should start an ad agency in Miami. …

Read the complete post at The New Persuaders.

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