The one guarantee we can make for interactive media in 2006 is this—by this time next year, you'll be able to comfortably toss this article in the trash. Maybe even in six months. Because in this hyper-growing, constantly-being-reinvented space, nothing is permanent and change is guaranteed. "It's a medium that changes rapidly," said Alan Schanzer, managing partner of WPP's MEC Interaction. "It's hard to define. So much of what we are doing doesn't fit in to a historical model."
Think back to this time last year. Those with iPods were still using them to listen to songs. Few had consumed a vlog, a podcast or even watched much online video. Most people had never heard of MySpace and probably thought AOL wasn't worth much.
However, a few things are clear as we head into 2006. For one, most observers expect the medium to have another terrific year, following a 2005 that took in an estimated $12 billion in ad revenue. As marketers continue to shift spending from traditional to digital media, experts expect spending to surge between 20 percent and 30 percent this year. And while emerging segments like video games, mobile and blogs will all receive their share of attention, three areas in particular should enjoy hefty spikes in spending: search, video and behavioral targeting.
The rapid rise of paid search advertising—the backbone of those recent billion-dollar revenue quarters enjoyed by Google and Yahoo!—has been well-chronicled. The segment, which accounts for 40 percent of the current Internet ad market, should see growth slow a bit this year. Yet everybody will be watching to see how the new, deeper relationship between AOL and Google plays out and what exactly Microsoft's next move will be.
As for video, the content distribution revolution begun in 2005 shows no signs of stopping, as every producer of content experiments with new models, including ad-supported video online and selling individual shows via iTunes. "Almost everything is going to change in TV and film," said Scott Moore, Yahoo! vp of content operations. "You're going to see more and more original online video content."
Last year, users saw mainly repurposed content from the major broadcast and cable networks. Broadband launches included MTV's Overdrive and Comedy Central's Motherload. Free video popped up on sites like CNN.com, CBSNews.com and CBSSportsline.com. Web giants such as Yahoo! (Kevin Sites in the Hot Zone) and AOL (The Biz) launched original video franchises.
Now, advertisers are rushing to throw 30-second spots in front of such content. Online video ad spending will reach $640 million by 2007, up from $225 million last year, per eMarketer projections. "We can pretty much sell as much as we can serve," said Moore. The audience for online video is still developing. But already, MTV says it has delivered more than 125 million streams of unique content on Overdrive.
While Moore believes that pure Web players are better situated to score in the emerging medium, expect more ad-supported broadband platforms from TV—Cartoon Network is a good bet—and more experimentation with the direct sales of TV shows, online or via set-top boxes. Fox should be particularly interesting to watch in 2006; while other networks have been aggressive in the pay-per-view arena, the company is sitting on iPod-perfect fare such as Family Guy and 24. Also worth monitoring is AOL's soon-to-launch IN2TV, which begs the question: Will Web users really watch old episodes of Wonder Woman online?
Industry insiders say 2006 is the year of behavioral targeting, the promising tactic of targeting Web users based on their surfing habits. Last year, eMarketer predicted that spending in this area would approach $1 billion in 2005.
MEC Interaction's Schanzer estimates that 15 percent of online media buys feature some sort of behavioral targeting, and that figure may exceed 25 percent this year. Behavioral targeting also fits in with the industry's overarching emphasis on accountability. "[ROI] is just tougher to calculate in other media," said David Moore, CEO of 24/7 Real Media, which sells behavior-based ads. "The whole industry is becoming audience-centric."