Keep an Eye on These Trends

I’ve been talking to a number of companies recently, and have gotten an interesting overview of some trends that are attracting interest and investment in the online media space. The hottest business ideas often involve cross-pollination of buzzwords. But in the end it’s all about execution. Time will tell which of these concepts fall by the wayside and which are truly great innovations. Without violating any NDAs, I’ll share a few notes:

• So far we’ve barely scratched the surface of the potential of community—the power of the colossal global online audience to create and distribute content, share experiences, provide advice and information, connect and network, and otherwise engage in activities that can be corralled into an environment that’s monetized with ads. The blindingly simple insight that the stuff of online media is collaborative, distributed, and democratic—not hierarchical and funneled into a unified voice—will be a rich mine of innovation for some time to come. First, you can’t ignore the tremendous economic advantage of the community model. A fixed platform investment scales with uptake. You don’t have to pay for additional content in order to drive additional traffic. Second, the audience manifests its interests, values, and priorities directly, through the content it creates, rather than indirectly through the content it consumes. This behavior has the potential to make them even more valuable to advertisers. And third, an audience that’s actively creating content is demonstrably more passionate and engaged than one that’s merely consuming content passively. That translates into all kinds of benefits, including more time on the site, more content created, more viral publicity, and the opportunity to gain deeper insight into the audience’s character. The takeaway: Facebook isn’t the end game of community by a long shot. Stay tuned for this strategy’s second wind and beyond. Emerging companies are looking across the spectrum of human interactions to identify opportunities to leverage the power of community to enhance the experience and improve outcomes.
  
  
• While no one has yet come up with the killer app of mobile, aside from phones and SMS, with so many smart people sinking their teeth into this opportunity a breakthrough can’t be too far away. With a tantalizing huge user base, the mobile platform is ripe for one or more big ideas to emerge suddenly and really catch on fast. The trick will be to intersect some of mobile’s unique properties—for example, portability, location, or voice—with other popular activities that are normally constrained in these areas. Device innovations will also be a factor. The iPhone and upcoming Google mobile platform are pointing the way toward a future with far richer capabilities. Expect some big, “how did we live without this?” mobile solutions to appear on the horizon in the 2008-2009 timeframe. But strictly speaking, these innovations may or may not be under the media (ad-supported) umbrella. Mobile advertising itself is in its infancy (think back to the little blinking boxes that constituted most online advertising 10 years ago). My advice here: don’t get tangled up in a long-term cellphone contract: change is coming.
  
  
• Speaking of online advertising, most of what’s available today still has a strong legacy in traditional media. Think back to how TV advertising in the 1950s mainly involved dramatizing what were formerly radio ads. It took another 20 years or so for TV ads to move into their own. Online advertising today is similar to those old ads, but it won’t evolve nearly so slowly. Awareness-oriented advertising is going to move in the direction of engagement and interactivity. Conversion-oriented ads will increasingly resemble lead gen. Transparency and data will be the keys required to unlock advertising spend. All sorts of companies, from agencies to online media properties to third parties, are working on pieces of the new generation of advertising. A dozen years from now we’ll look back and marvel that advertisers were willing to pay so much for the murky value propositions that surround the advertising business today. Advertising innovations have lagged behind the general pace of online media advances. Now they’re poised to start catching up.
  
  
• Finally, something that had almost dropped off my radar, but a few companies have brought it up, and that’s local information. The web does a great job of globalizing its audience, but paradoxically, the hyperlocal has remained a challenge. There are lots of products out there, but they all have room for improvement. The internet hasn’t been able to drive a stake in the heart of the venerable Yellow Pages; in fact, many local directory products haven’t changed much in the last 10 years, and often still license a Yellow Pages database for content. While most Silicon Valley innovators are focused on tough technical challenges, some entrepreneurs are revisiting more fundamental content challenges. The local advertising market is worth billions and is one of the few media areas where online hasn’t made a big dent. That could change.