As 2007 wraps up, many people are reading and writing their yearly assessments of who did what, and what shook the industry up as well as what’s going to shake the industry up in the year to come. So let’s do this.
2007 certainly didn’t lack for momentum. The global spend for online advertising increased by nearly 30%, and companies partied like it was 1999, buying anything and everything in a land rush for online advertising firms. Social networks and widgets rose from the shadows somewhat to make a big splash and many debate over their true value, and then there was the threat imposed by the recession; plus, does anyone know what has been happening at Yahoo? However you look at it, it was another landmark year for the industry, and somehow, most of us came out intact.
The major acquisition frenzy of ’07 started with an entirely different type of Spring Fever than most of us are familiar with. When Google beat out rival Microsoft in a bid for advertising serving company DoubleClick for $3.1 billion, the gloves came off and the trend of inflated acquisitions and investments took off like it hadn’t since the last time we saw a bubble like this. Flexing its muscles, Microsoft quickly acquired aQuantive for an astronomical $6 billion and then the third competitor in the very visible U.S. trifecta of media giants Yahoo, bought RightMedia for a comparatively modest $680 million. But let’s not forget to mention some of the others that joined the club like WPP Group acquiring 24/7 and AOL acquiring Tacoda. The irony is that out of all of these spending sprees, Google’s is the only one yet to be approved for completion. Left and right money was tossed at companies in the hopes that online ad revenue gold would be accumulated in a very short amount of time.
This mentality spilled over into the funding area as well, especially in social media. This was the year of the widget and the social network. With open applications launching Facebook into the spotlight, the three-year-old site gained speed this year and even received $240 million by Microsoft for a 1.6% share of the company which values the company at $15 billion. This is a lot of faith and it will take another year or two to see if this investment will pay off. And just like our favorite pop-tarts, once these sites gained a little more press, they started messing up. Facebook put in a faulty targeting strategy called Beacon, Orkut was being investigated for child pornography pages, and MySpace’s newest owner was publicly expressing doubts about the purchase due to slowing growth. The list goes on. Widgets on the other hand are making a recognizable impact on the industry. These small pieces of programming, which started the social media pick up this year, have been seen everywhere. They’re like Kinko’s or Starbucks now. You can hardly enter a site without seeing widgets or having the ability to download one. These interactive units are getting big recognition and show no signs of slowing down.
The starting recession has impacted the industry somewhat, but where the real implications are, are in the early part of this coming year. If financial services aren’t making money, they will have to cut their budgets and the financial services industry takes up half of the spots for Nielsen’s top ten online advertisers. It looks as though this may be the pin-prick that finally bursts the bubble. And then there’s Yahoo. When Terry Semel was replaced by Jerry Yang this past summer, there was a lot of buzz and hope that this change may be what Yahoo needs to gain back the momentum it once had. However as the months went by, more and more executives continued to leave Yahoo. This to a certain degree was a surprise, but to many industry insiders became a clear warning sign for the future of the company. Although Yang is a smart guy, he isn’t looking like the man for the job and yet, theirs is still some faith that the company has enough potential to pull through and make the turn happen. Perhaps it will be the work of Susan Decker, or maybe this one-time front-runner of the Internet will slowly but surely become obsolete.
2008 is going to be interesting. We will finally know if Google is allowed to buy DoubleClick. Online ad spend is projected to outgrow radio and with the help of the writer’s strike, may outgrow traditional media faster than originally predicted. Social networks will be put to the test as now all eyes are on every move and mistake. And two major events: the U.S. presidential election and the 2008 Beijing Summer Olympics will surge the web with new advertising opportunities, and new follies that will be written about. The prediction for ’08 is uncertain, but whether the industry bustles and explodes with wealth as everyone would like; or bursts and deflates as everyone predicts, there is sure to be a good story to tell.