Given my past performance, I’m going to refrain from making any predictions for the year ahead. Instead, below are the top five questions — and their related trends and themes — that I’ll be tracking in 2008 (in no particular order):
1. Can user-generated video be directly monetized and made to be profitable? The jury is still out on this, but I’m skeptical that the effective CPMs from running ads on UGV will outweigh the cost of goods sold (bandwidth, etc.) enough to make it a great business. In fact, one of the pioneers of UGV, VideoEgg, seems to be more focused on being an overlay ad network — that ought to tell you something. To date, UGV sites have kept going on the VC dollars they’ve raised and have used the audience gained by their user-created content to try to acquire, commission or license professional, quality content that can be profitable. So I think we’ll continue to see UGV being a loss leader of sorts. Ad format standardization should continue but, as I’ve written, it’s all about adoption.
2. Will recorded music continue the march towards being ad-supported? A flurry of deals from the
likes of iMeem indicate that the ad-supported model is very much top-of-mind with the major labels. Look for this trend to continue with lots of experimentation and some investment by the labels in the ad-supported model. But a great ad-supported business takes time to build. Remember that the labels have traditionally been wholesalers, and lack talent and experience in the media/ad model. But they are starting to change this by hiring new blood and tying up with partners that have an expertise in this area.
3. Will handset makers continue to gain more leverage with carriers? The iPhone may go down as not only a revolutionary device, but also a precedent-setting product in that it caused the balance of power between the handset maker and the carrier to shift. Recent announcements by carriers indicate a willingness to be more open with their networks and cede more power, and risk, to handset makers and others, who would in turn take on the burdens of customer acquisition in exchange for a greater piece of the upside.
4. As the social network turns, where will it go? Speaking of opening up platforms, most social networks have either opened up their platform to third-party applications or have plans to do so (either in-house or via Open Social). We have Facebook to thank for this. But what does that actually mean? How will the social networks and apps monetize this? Look for Facebook to iron out the wrinkles in Beacon, their monetization platform. After all, it’s still early days and advertisers will forgive them for being a bit brash. And if they start making some real money with Beacon, you can bet the others will follow.
5. Will there be a macro-economic slowdown and if so, what will be the effects on the online space? Two years ago, I felt we’d be in a recession by the end of the decade. The smart money handicaps it at nearly a 50 percent chance that there will be a U.S. recession in ’08. One way or another, it sure doesn’t look like it will be a boom year. The implications for online? I don’t think advertisers will abandon online advertising the way they did the last time around; in fact, they may even bolster their investments (to the detriment of less accountable media). But look for a flight to quality — to sites that clearly work, or are already trusted. That means Google, Yahoo and the other big boys. Marginal sites that are not a ‘must-buy’ in their category or not part of a quality network will suffer, as will unproven advertising media like widgets, UGV and virtual worlds. That would also spell trouble for startups that lack traction and are too dependent on an ad-supported model.
Obviously there are many more tech-related stories to track — going green, the wireless auction, the Olympics, etc. — but these are the ones that are top-of-mind for me. It should certainly be an interesting year!
Based out of London, Raghav “Rags” Gupta is VP of International Partnerships at Brightcove, where he has worked since ’05, prior to which he was a senior executive at Live365. His blog can be found at www.ragsgupta.com. The views expressed here are personal and do not necessarily reflect those of any company with which he is affiliated.