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.

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Apple’s iPad Mini Cannibalizes Other iPad Sales While Google’s Android Tablets Steal Share

Apple Introduces iPad Mini... and some new com...

From my Forbes.com blog The New Persuaders:

Apple’s grip on the tablet market it single-handedly popularized is slipping.

The maker of the iPad line of tablets still leads the market with a 55% share, according to a new report from market research firm ABI Research. But that’s down 14 percentage points in one quarter alone, and the lowest since the first iPad launched in 2010.

The problem, according to ABI, is that Apple was late to come out with a seven- to eight-inch tablet, well after the point at which it was becoming obvious that people really like that size. And when Apple did finally debut the iPad Mini, it was at a substantially high price relative to rivals such as Google’s Nexus 7 and Amazon.com’s Kindle Fire. “With the introduction of a smaller, lower-cost iPad mini, Apple has acknowledged Android’s beachhead of 7-inch-class tablets, though at the same time, it has failed to deliver a knock-out punch through innovation, pricing, and availability during the most critical selling period of the year,” ABI senior practice director Jeff Orr said in the firm’s release.

Worse, ABI says, the iPad Mini didn’t take back share from tablets powered by Google’s Android mobile operating software. Instead, people simply ended up opting for lower-cost tablets. Android’s market share rose to 44%. Another recent report from Finvista Advisors predicts that Android tablet sales will overtake the iPad’s by mid-2013. Android also recently bested Apple in smartphone shipments, at least before the iPhone 5 launched.

It’s not clear from the ABI report which companies benefited the most from the market-share shift. But it wasn’t just Google. According to one report, Google is expected to sell about 4 million Nexus 7s by the end of this year, but that’s somewhat fewer than some analysts expected.

Amazon says Kindle sales are strong, but it’s not providing specific figures to prove it. A report from Pacific Crest Securities says it’s likely to pick up a bit of market share in the fourth quarter, but not much.

The big losers are clearly every other tablet, including those running Windows–though that, too, could change if Microsoft’s new Surface tablet takes off.

Now, Apple’s share decline may well reverse in the current quarter, the first full one for the iPad Mini and other new iPad models, squarely in the heart of the holiday shopping season. And of course, it’s far better for Apple to cannibalize its own products than let others do it.

Problem is, it’s too late, at least for the moment. Now, rivals are eating some of Apple’s lunch, too.

Will Google Dodge An FTC Antitrust Bullet?

Image representing Google as depicted in Crunc...

From my Forbes.com blog The New Persuaders:

The Federal Trade Commission‘s antitrust investigation of Google is about to come to a head, by most accounts. But it’s a complex case touching on several aspects of antitrust law and whether Google’s search and other activities violate any of them, and the implications for Google, its investors, and Internet users could be huge.

Two attorneys intimately aware of the case provided contrasting views at a webinar this morning conducted by the investment firm International Strategy & Investment and its senior managing director Bill WhymanGary Reback is an antitrust lawyer most famous for representing Netscape in its antitrust case against Microsoft in the 1990s. He now represents several vertical-search companies, such as NexTag, that have complained about Google practices. Geoffrey Manne is a lecturer in law at Lewis & Clark Law School and executive director of the International Center for Law & Economics,which receives financial support from Google and other companies. He has written extensively about his belief that there is no strong antitrust case against Google.

The main takeaway: Despite a Bloomberg story last week that said the FTC was wavering and unlikely to attack Google’s core search business–and another today that repeats that assertion–there’s no agreement by the two sides on what the FTC will end up doing. Reback seemed to acknowledge that Google might find a way to maneuver politically around the FTC to avoid a full-scale assault on the way it conducts its search business. But he also noted that the European Union is closely watching the outcome and may act on its own if the FTC does nothing more than a settlement on the more minor issues.

One key point on timing: Press reports say there’s a Dec. 3 meeting between FTC Chairman Jon Leibowitz & EU Competition Commissioner Joaquin Almunia. What’s more, Leibowitz is expected to leave for private practice around the end of the year, so that could affect the case one way or another. And if it means anything, Bloomberg says Google CEO Larry Page met with the FTC today. …

Read the complete post at The New Persuaders.

Marissa Speaks! CEO Mayer Lays Out Where Yahoo Needs To Go

Marissa Mayer

Yahoo CEO Marissa Mayer (Photo: Wikipedia)

From my Forbes.com blog The New Persuaders:

It’s a quarter that probably doesn’t matter much, but Yahoo eked out a small rise in profits on slightly higher sales in its third quarter.

It’s the first full quarter since CEO Marissa Mayer joined the company, and while investors are more concerned about the future, so far they like what they see in the last quarter. Shares are rising about 3% in after-hours trading following a decline of less than 1% today, to $15.77 a share.

Yahoo’s third-quarter revenues rose 2% to $1.09 billion, earning a 35-cent profit per share. Operating income came in at $150 million. Wall Street analysts were expecting net revenues of $1.08 billion, operating income of $180 million, and GAAP earnings per share of 26 cents. Including a onetime gain from the sale of shares of China’s Alibaba, Yahoo’s EPS was $2.64.

Those figures are minus the costs of acquiring traffic from website partners. Gross revenues fell 1% to $1.202 billion, a touch below analysts’ $1.206 billion estimate.

In particular, display ad revenue, Yahoo’s mainstay business, came in flat from a year ago at $452 million, but search ad revenues via its multi-year deal with Microsoft were better than expected, up 11% to $414 million.

And we’re underway on the analyst call with Mayer:

Mayer says she’s thrilled to be hear, naturally. She says she has been having a lot of fun. Why did I come to Yahoo? This job is tailor-made for me. Search, mobile, ads, home page, etc.–all things I built my career on.

She’ll talk about priorities and vision–great! First she addresses the people problem–that is, all the ones who have been leaving in droves for years. She says she has instituted new goals, metrics, etc. for people. True cultural change can’t be bought. The vast majority of what we’ve done hasn’t cost much, she says. …

Read the complete post at The New Persuaders.

Congrats, Facebook, You’ve Hit 1 Billion Users. Now What?

From my Forbes.com blog The New Persuaders:

So 1 billion people now visit Facebook at least once a month, according to CEO Mark Zuckerberg, who celebrated with that weird new ad. That’s an amazing milestone for a company only eight years old, fully justifying the glut of press coverage this morning. But is it getting too big for its own good?

I’m not just talking about the usual stuff a company faces as it grows very large–antitrust concerns, privacy worries, hiring quality, and the like. Google, Microsoft, IBM, and many others have faced and still face these issues. But such challenges haven’t taken any of them down. And even as they start (or continue) to be concerns for Facebook, they likely won’t sink it either.

The biggest concern I have is whether Facebook could–as a direct result of getting what seems likely to be just about everyone online to use it eventually–lose what’s special about it. After all, is it enough simply to be the biggest social network? Does being the biggest, as Zuckerberg and many others inside and outside the company implicitly assume, automatically make it the best?

I’m not so sure. And that’s without even falling back on the old look-what-happened-to-MySpace argument. The fact is that Facebook doesn’t do a lot of the social activities people participate in online as well as others. Twitter is way better in many ways for disseminating news. LinkedIn still does professional networking far better. No one has made video sharing easier than YouTube (yes, it’s a social service too). Pinterest, Reddit, and others are seeing massive growth thanks to a pretty clear focus on doing one thing well.

And Facebook? As well as it facilitates connections with friends, its overriding appeal is not any particular features. (OK, except for sharing photos–but even there, it felt the need to spend a billion bucks to buy Instagram.) Facebook’s key advantage now is largely that all your friends are on Facebook too.

Of course, that’s a huge technical and business feat for Facebook–nothing to be minimized, as evidenced by the fact that no one else accomplished it. But is that enough to catapult it to the next level?

Maybe. But as its growth slows, I wonder if essentially becoming a social utility that Zuckerberg long said Facebook should be is distinctive enough a mission to maintain its momentum. One random item that gave me pause today came in passing on a BusinessInsider post on Facebook’s recent move to allow advertisers to “retarget” its users with ads:

The most valuable inventory for re-targeting until now has been Yahoo Mail, because:

  • It has huge scale.
  • It’s engaging enough that you’d only want to click on an ad to leave if you really wanted to leave.
  • The people who use it tend to leave it open as a tab in their browser all day.

In all three ways, Facebook.com is very similar to Yahoo Mail.

Yikes. Facebook is now like a boring email service? Now, it’s probably unfair to extrapolate this comparison in a particular realm of advertising to Facebook overall. But it reflects the reality that Facebook’s ubiquity is inexorably steering it toward becoming something like the new television. Another mass medium, even if it’s a uniquely interactive mass medium.

I guess there’s nothing wrong with that, and in fact there’s a lot right with it, for Facebook’s business. I just can’t shake a nagging feeling that achieving this ubiquity–as Zuckerberg put it today, to “connect the rest of the world”–isn’t enough of a raison d’etre.

So the question now is what Facebook will do with that ubiquity. Maybe simply facilitating those connections is enough. But at this milestone moment the company itself chose to highlight, it’s worth posing some existential questions to go along with that existential ad:

Why is Facebook here?

Is sheer ubiquity sufficient for Facebook to achieve Zuckerberg’s lofty goals?

As Facebook becomes a service for everyone, does it become special to no one?

Google To Steal Facebook’s Display Ad Lead in 2012–A Year Early

From my Forbes.com blog The New Persuaders:

After seeing Facebook vault into the lead in U.S. display-ad revenues last year, Google will take the top spot this year, according to a new forecast from market researcher eMarketer.

The search giant’s display revenues in 2012 will jump almost 39%, to $2.31 billion, while Facebook’s will rise 24% to $1.73 billion and Yahoo’s revenues barely budge to hit $1.39 billion. Overall, display ad revenues will rise almost 22% this year, to about $15 billion, thanks to Google’s and Facebook’s growth, the continuing explosion in ad inventory thanks in part to mobile advertising, and more spending on video ads, especially on YouTube.

But that number is down a bit from eMarketer’s previous forecast because of lower display ad prices on ad networks and continuing wariness by big brands to up their display spend significantly. Google and Facebook combined will account for nearly 30% of display ad revenues this year, rising to 37% in 2014.

What’s more, according to eMarketer, Google will lengthen its lead in the next couple of years in these banner, video, and social ads that are the mainstay of most commercial websites, reaching $4.4 billion in 2014 to Facebook’s $3.2 billion and a moribund Yahoo’s $1.5 billion. Microsoft and AOL also will continue to see relatively flat revenues.

What’s going on here? For one, Google’s display-ad engine has begun to rev, thanks to its YouTube video site, its mobile ads, and its DoubleClick ad-buying and ad exchange business. At the same time, Facebook has seen its growth slow recently, raising questions in the minds of investors about the effectiveness of its social ads and its relative lack of mobile ads. Earlier this year, eMarketer had forecast that Google wouldn’t capture the display lead until next year. …

Read the complete post at The New Persuaders.

Report: Apple’s Mobile Ads Make More Money Than Google’s

From my Forbes.com blog The New Persuaders:

Despite the rapid rise of mobile devices based on Google’s Android operating system, marketers are still getting better results from their advertising on Apple’s iPhone and iPad.

Ads that run on Apple’s iPhone command significantly higher prices than Android, and way higher prices than any other mobile platform, according to a new report from mobile browser maker Opera Software, which also operates a mobile ad network. The iPad in particular, thanks to its large touchscreen and ease of use, gets the highest effective cost per 1,000 impressions (eCPM) of all devices–$3.96 to the iPhone’s $2.85 and Android’s $2.10. All the other platforms are far behind.

That gives Apple’s iOS platform an outsized lead in actual ad revenues compared relative to its market share in traffic: Together, the iPhone and iPad capture more than 61% of revenues to Android’s nearly 27%. Again, all the others bring up a distant rear.

Read the complete post at The New Persuaders.

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