The Year That Will Be

Despite the rocky beginning and the ultra-competitiveness foreshadowing times to come, 2005 once again made Internet advertising history, not to mention making more than 1200 millionaires. We’ve already presented our take on Internet Advertising 2005, so it’s time to complete the picture with a predictive look at 2006. Some will sound more serious than others, but we still expect all to happen.

· Content will work the way we want it to. Restated – the Internet is a means to an end, not the end itself. This one sounds unrelated to Internet advertising, but it will ultimately impact how we operate. We live in a fragmented media world, but it’s starting to make sense, and by 2007, we will have the ability to view what we want where want on any device that we want. It will be led by one of the major “old media” companies acting on the first main point from 2005 – that content is key and content with traffic can work on any medium. Why limit yourself?

· Google will have a larger market cap than Microsoft. This one is a stretch as it would imply either a catastrophic meltdown at Microsoft or Google doing the unthinkable and their stock doubling again. It’s bound to happen; I just want to be the one that predicts it will happen this year. Google stands an equal chance of not beating MSFT but becoming the next MSFT, i.e. too confident, “Do Only Evil.”

· In a follow-up Google prediction, they will reshape the way we think of personal computing and it will be based on their don’t sort, search framework. Among the most fascinating concepts behind Gmail is the way it turns typical email on its head. No folders. Need something, search for it. This won’t work for everyone, but for the digerati and those that grew up with the net, no other method of retrieval makes more sense. And, for anyone that has installed either Google Desktop or Yahoo Desktop because Outlook search is one-dimensional and painfully slow, this day couldn’t come soon enough. The company knows that winning the consumer heart is the key to advertising gold and they will continue what they started with the website.

· Convergence of comparison shopping and lead generation. Comparison shopping might be vertical search, but at its essence it connects users with businesses. In 2006, someone will figure out the lead generation killer app and fragment the space so that it can serve more than four verticals.

· Social networking turns into social media. Social networking sites mobilized the troops, and the self-service platforms provided the infrastructure and housing for them all. In 2006, the buzz won’t be about connecting but producing, sharing, rating, and improving.

· Local search becomes useful for consumers and a clear leader emerges. It has taken perhaps too long to be able to find a hairstylist near your new apartment, but in 2006 that changes. Google will finally modify their maps so that users can enter multiple points of interest on one map rather than users having to get directions, or worse, make more than one map. Similarly, some consolidation among the local entrants, both established and startup, will take place and one site will become synonymous with local search.

· x10 of Asia will appear. The Chinese already have as many people online as the US and an economy on steroids. That doesn’t mean any performance marketer has figured out how to tap into that audience. In 2006, we’ll see the beginnings as someone with a US Internet background will be involved in kick-starting Asian media. It probably won’t be little cameras, but it will do just as well…and it won’t require a credit card.

· Make or break acquisition to occur. Experian Interactive will challenge and overtake Valueclick. Equifax on the other hand has no online presence. The difference was their strategy and acquisitions. And, we’ll see this repeated again as at least one major company sensing the consolidation and feeling the need to acquire in order to have a role to play will spend too much money on the wrong company. Companies like Experian Interactive, who have a clear vision, will continue building their arsenal. We’ll see more of News Corp., Experian, and eBay, but many others will (finally) join in the big spending too.

· One of the survivors will not last. Of Vendare, Adteractive, AzoogleAds, NetBlue TheUseful, NexTag, and Quinstreet, one of these dotbomb survivors will fall out of contention in 2006. At least one will go out well in the public markets, while another will get bought for a healthy amount, with two choosing to maintain their profitable course. This Internet version of little piggy will see one collapsing under the weight of its lack of real brands and reliance on one income stream.

· Revenue Science will be sold or go public. They’ve raised $70 million and are the clear leader in the non-desktop behavioral targeting space. This is the year that they take that momentum and exit big.

· Affiliate marketing will evolve radically. Either that or Google / Yahoo will buy an affiliate network and successfully make money from the advertisers and publishers. Affiliate pioneer Amazon.com will at the very least make a move that brings them back into the limelight.

· Incentive marketing will change. Users love free iPods, and the aggregate of remnant inventory will still be incredibly large, but the day of the email / zip offer will come to a close. It will be replaced by an alternate, more value-add oriented approach with a focus on repeat users and long-term value that doesn’t rely on ever-increasing ad buys.

Fact or fortune cookie? Predicting what will happen is always a little of both. One thing is true though; those in our space will continue to figure out new ways to make money, new ways to arbitrage. No one will create the next Judy’s Book or Frappr; they will instead be making the businesses that those with money only wish they could find.