Has it been a whole year? I posted my predictions for 2007 on Jan 1, 2007, and here it is, the first day of 2008, and here we go again. This year I am going to organize my predictions by companies (just the big ones) and trends. I’m focusing on advertising and search markets and the largest companies in that space, as that seems to be what’s on our collective minds these days, and it’s what I seem to have focused on in the past, as I read through my past prediction posts.
So what are the trends in 2008?
Well, everyone I speak to is very worried that we’re in for a major economic downturn, and we all know that a key lagging indicator of a recession is a serious downturn in the advertising markets. I’m going to buck all my colleagues fears, however, and predict that web-based advertising businesses will in fact enjoy significant gains in 2008. These gains, however, will not be evenly distributed. The markets will reward innovation and growth in new forms of advertising, and punish those who are seen as not having a strategy. (Recall that Google took off as an advertising business in the doldrums of 2002-2003).
This means it will not be an easy market for major public debuts. But we will see at least one, if not two new IPOs (for more see below).
2008 will also be seen as the year that proves Conversational Marketing as a new form of advertising (this is clearly a biased view), and by the end of the year, adding value to a customer’s life through marketing will be seen as a necessity as opposed to an experiment. This is the logical extension of the search marketing revolution to all forms of marketing, well beyond direct response and the fulfillment of declared intent.
2008 will be the year of integration indigestion for the majors, and as such, it will mean M&A will slow down for those companies. All those advertising-based acquisitions in 2006-7 will have to start to pay off, and the results will be uneven to say the least. For specifics, see below.
Another trend we’ll see is the continued erosion of the traditional mobile oligarchy. But despite the best efforts of Android, not much will get done this year. Don’t worry, though, by 2009, we’ll finally see a mobile web worthy of a serious development economy, one that looks a lot like Web 2 looked in 2005.
As for the Web 2 world, we’ll see a ton of venture funded companies go by the wayside. This is healthy and normal. It’s been a few years since the funding wallets opened, and it’s quite normal for companies that couldn’t get lift off by year two or three to close their doors. We’ll also see an uptick in acquisitions, as the boards of companies that that thought they were worth tens or hundreds of millions of dollars decide to settle for decent returns. This will be particularly true for media and advertising related businesses, who will find home at large media companies that are traditionally not eager to pay significant premiums.
Now, given these trends, on to the major advertising- and search-driven Web companies:
2008 will be the year Wall Street gets frustrated with Google. The company has incredible numbers, and will continue to impress, but analysts, tired of bidding up the stock, will start to question the company’s myriad ocean-boiling projects – after all, it’s merely trying to reinvent Health, Energy, Telecom, IT (both consumer apps and OSes), and a few other major portions of the GDP. Look for a few querulous analyst reports and even a few downgrades by the end of the year, as Wall Street finally comes out of its honeymoon stage with Google and demands that the company consolidate its control in marketes where profits are secure: Search and Adsense. Look for complaints about profits and integration (or lack thereof) with regard to Doubleclick, and at least one major product flop that gets analyst tongues wagging. Google will continue to struggle with its display advertising business, at least as it is traditionally understood, in part due to a culture conflict between its engineering-based roots and the thousands of media-saavy sales and marketing folks the company has hired in the past two years.
Yahoo, meanwhile, will spend most of 2008 trying to figure out what to do with what it bought in 2007, and attempting to articulate a strategy that is anything but “we have 500 million users, so we must be important.” By mid year, it will have succeeded, in part due to a clarification of its approach syndicated advertising (ie, how it will beat Google by delivering better than AdSense can to key partners). All the the big players in the advertising platform business – Yahoo, Google, AOL, Microsoft – are looking to monetize the magic middle of web traffic – high volume, but low CPM. Yahoo has access to a ton of this traffic, but in 2007 it couldn’t seem to figure out how to make it pay (more). Right Media, Blue Lithium, etc, are all plays to this (as are aQuantive and Doubleclick and Tacoda and Quigo and…) In 2008, Yahoo will figure out a promising start. This is critical, because Yahoo will finally admit to itself that in the battle between Microsoft and Google, it is an increasingly minority player, and will need to bulk up to compete. By year’s end, Yahoo will have combined in a major way with another third party, and it won’t be either of the two aforementioned companies.
In 2008, Microsoft will fail to gain much traction in anything that is Web related. This will frustrate Wall Street and Microsoft’s employees to the point of several key executive defections. Sound like last year? Yes, with one key difference. In 2008, Microsoft will finally figure out what do to with aQuantive, and by the end of the year, it will be clear what the company must do with it: Let it free. Yup, but this time, it will be as a public company that is majority owned by Microsoft, with fresh contracts to execute against MSN’s inventory, both owned and operated (O&O) and syndicated (Digg, Facebook, etc.). Yeah, I’m going out on a limb here, but what the hell.
Now, what about current media darling/punching bag Facebook? Ahhh, this is a tough one. First, the company will suffer from a serious identity crisis, as it realizes it must change its core DNA from tech- and founder-focused startup to media-focused Real Company with Lots of Employees. This is not a new story, Google went through it in 2003-2005. But not many companies make the transition without serious collateral damage. Second, the company will find itself stuck in the hell of pre IPO preparations, again, like Google in 2003-4. This will frustrate company leaders to the point of looking for a CEO whose job is, in essence, to talk to Wall Street. But until Facebook figures out a way to justify its lofty valuation, this hire will be stymied. In short, the most important short term focus for the company in 2008 will be solving for the Social Ads quandry. (By this I mean how to build the equivalent of a AdWords and AdSense for the “social graph.”) Though it will take promising steps, the company will fail to get it just right, at least by the end of the year and all by itself, but it will still find itself profitable and on the path toward an 2009 IPO. By mid 2008, there will be very serious rumors about an acquisition battle over the company between Google and Microsoft. But Facebook will play the middle, and most likely cut a deal with a third party, which despite the strong relationship with Microsoft, could well be Yahoo or a smaller but growing company that looks a lot like Facebook. Also, look for Facebook to make a run at NetVibes.
And AOL? As with aQuantive, Platform A will go public, if the markets allow (see trends). The rest of AOL will be sold or folded into Time Warner in ways that, regrettably, will finally signal the end of the original Case-ian dream.
Finally, what to make of Newscorp/FIM? Major problems will become apparent by early in the year, and those problems have to do with structure: Who is really in charge of “Fox Interactive”, and what does that mean? What about Dow Jones? There will be a battle for control over all of Newscorp’s interactive assets, one that will limit the company’s ability to execute any clear strategy. That said, MySpace will make a comeback of sorts, and look for it to cut a very important deal in 2008 with regard to its future. This could even be – yes I’ll say it – a spin out of the company as an independent public entity.
Well, that’s about it for now. I reserve the right to revise this a bit in the next week, as I’m still pondering this draft.
Oh, yes. I usually end with a prediction about my own work. Not FM, as I begged off that last year and will do the same this time. But as for my writing: I will be back at work on a book, at least a couple days a week, by mid year. This is simply too important for me to ignore, it’s literally a physical urge I feel now. 2008 will be the year it becomes real for me.
Again, to all of you out there keeping me honest and helping me think out loud, thank you. Here’s to a great 2008!