Digital Hot List 2009

Outlandish boasts aside, Mark Zuckerberg is a pretty smart guy. Though the founder and CEO of Facebook lost a bit of credibility in 2008 when he foolishly declared his Beacon ad model would change advertising for the next 100 years, he’s easily regained it all back on the strength of the seemingly effortless growth of his social media platform. Facebook is simply the hottest site in the digital world right now, thanks to Zuckerberg’s wise move three years ago to broaden beyond the college crowd (a move that earned Facebook the No. 1 position on our Digital Hot List in 2007). With exponential member growth across all demographic categories, a credible ad play that has marketers buying in and signing up (as they are on Twitter, No. 3 on this year’s list) and an inclusive model, Facebook stands as the sine qua non of social media. But Facebook is not the only digital success story, as AdweekMedia digital editors Mike Shields and Brian Morrissey spell out in this year’s Digital Hot List. No. 2 Hulu (up from No. 4 on last year’s list) made good use of “old media” by buying time on this year’s Super Bowl, then watched its uniques surge to 40 million a month—as it secured one of five online video ad dollars. No. 3 Twitter, meanwhile, is so red-hot, TV producers are starting to build “no Tweeting” clauses into actors’ contracts. Not on the Hot List but certainly meriting attention is the burgeoning business of e-readers. This fledgling industry has rapidly moved past Amazon’s Kindle, embracing all printed media, not just books anymore. Only last week, Barnes & Noble rolled out its category entrant, the nook. Digital editor Shields separates the hype from the realities for ad-supported publishers who are eager to embrace this new way to reach (especially younger) consumers but fully understand this is no panacea. As the digital industry gets back on its feet after a bruising 2009, expect these 10 leaders on our Digital Hot List, as well as the e-reader purveyors, to lead the way to recovery. —The Editors 1. FACEBOOKFacebook has more members than the population of all countries in the world save China, India and the United States—and it should overtake the U.S. next year. Not bad for a company that five years ago began in a college dorm room. Social media is joining search as a main conduit to information on the Web, and Facebook is the undisputed leader. How big is social? This year it passed porn as the Web’s No. 1 activity. It has become a trusted referral engine for users to share links and opinions, acting as a human-powered counterpoint to Google’s computer- driven discovery engine. Facebook has managed to balance its tremendous growth with the seeds of an ad model that will live up to founder Mark Zuckerberg’s boast that it would change media forever. By eschewing a focus on banner ads, Facebook has pioneered the use of engagement ads to get its users to fan brands, vote in their polls or watch their videos. The strategy is working: Facebook has done work with 80 of the top 100 brands and is now cash-flow positive and expecting more than $550 million in 2009 revenue. Not so shabby.Profile: Unique U.S. audience doubled to 94 million > Time spent per user a month crossed 3 hours, up 13 percent > Passed 300 million members > Expecting $500 million in revenue and now cash flow positive. LAST YEAR'S RANK: 2 2. HULUThe joint video venture announced in 2007 between NBC Universal and News Corp. was written off as a disaster in the making. Either the partnership’s competitive interests would crush it, or YouTube would. Two years later, even Disney is in as an equal partner (CBS remains glaringly absent). Some analysts estimate Hulu accounts for some 20 percent of all online video ad spend. Almost every major TV and movie company distributes content on the site. Hulu enjoyed a major traffic spike after kicking off a TV campaign during this past Super Bowl, but that could tail off if it starts to charge viewers. Though it still doesn’t sell all of its long-tail inventory, Hulu has set the pace in the market. The site has forced much larger YouTube to adjust its content approach by adding more ad-friendly long-form content.Profile: Hulu now reaches around 40 million uniques, per comScore > Some analysts estimate that the site will bring in $75 million–$100 million in revenue this year. LAST YEAR'S RANK: 4 3. TWITTERIt’s hard to turn on the TV nowadays without hearing about Twitter. In the blink of a tweet, the short-messaging service has become a cultural touchstone, used by Hollywood stars, pro athletes and politicians the world over for both the profound and utterly mundane. It played a role in springing a protester from an Egyptian jail, organizing anti-government demonstrations in Iran and detailing countless lunch orders. Other than Miley Cyrus swearing off it, Twitter’s had quite a run defining the latest Web zeitgeist. What’s more, Twitter represents the real-time Web of instant communications that’s sure to change how brands relate to consumers and media is distributed. An ad model is uncertain, but Twitter has broken out as a social-media platform. Profile: U.S. uniques reached 20.9 million, more than 17 times its base a year earlier > One in five Americans now Tweet, according to Pew > Closed $100 million financing round, and deals to feed real-time data to Microsoft and Google. LAST YEAR'S RANK: New to List 4. GOOGLEGoogle’s earnings reports have stood out this year for featuring something most media earnings reports have not: plus signs. Indeed, in an industry that’s endured roughly a 5 percent decline in ad revenue through the first half of 2009—hurt by a particularly soft display ad market—Google has provided Gibraltar-like solidity. Revenues climbed by 6 percent in Q1, 3 percent in Q2 and 7 percent in Q3. The majority of that is advertising. Just where would the online ad industry be this year without Google? Considering that search makes up roughly 47 percent of all online ad spending, and Google dominates the search business—well, in a bad place, that’s where. According to comScore, in September Americans conducted 13.8 billion core searches, and Google handled 64.9 percent of them. Profile: Search share at 65 percent > Nearly $6 billion in Q3 revenue and $1.6 billion in net income > Poised to stake pole position in mobile advertising with Android mobile operating system. LAST YEAR'S RANK: 1 5. iPHONEThe “Year of Mobile,” predicted every year since 2000, might actually be happening in ’09. The iPhone, which showed what’s possible with mobile computing when it debuted what some call the Jesus Phone two years ago, continued to steam ahead in consumer use (Apple says it’s sold 20 million) and just as crucially as a mobile platform. The iTunes App Store now boasts more than 85,000 tiny applications that are building an economy unto itself. Hundreds of marketers and publishers have joined the app rush by creating their own. The iPhone’s lasting effect will likely be awakening the telecom industry from its torpor. Google looks set to be a true Apple competitor with its Android operating system, which is forecast to become widespread in 2010 on devices from Verizon Wireless and T-Mobile. But Apple has a two-year head start, and Steve Jobs likely has more tricks up the sleeve of his black turtleneck.Profile: Sold over 30 million iPhones and cousin iPod Touch, and users have downloaded over 1.5 billion applications > App platform has spawned an estimated $2.4 billion in sales > Release of the iPhone 3GS paves the way for greater corporate adoption, but Android phones means competition is increasing. LAST YEAR'S RANK: 3 6. HUFFINGTONPOSTIt was going to be hard to top 2008 for HuffingtonPost. The left-leaning, politics-heavy news aggregator rode the wave of Obama enthusiasm to new heights last year, and most expected traffic to come back to earth. Instead, the site’s audience is up more than 50 percent. Some in the journalism world accuse the site of siphoning traffic—or even stealing content outright—but users don’t seem to care. In the past year, Arianna Huffington and her team have hardly stood still, as she her replaced original CEO, while expanding beyond politics and rolling out a new innovative integration with Facebook Connect. HuffPo’s main problem is that its ad business has yet to match its traffic and buzz. That's precisely why she brought on ex-Yahoo and AOL sales chief Greg Coleman to serve as chief revenue officer. Profile: Audience jumped 52 percent in August to 7.8 million uniques, according to Nielsen Online > HuffPo launched several local versions (Denver, New York) and new sections in past year (e.g. books). LAST YEAR'S RANK: 8 7. BINGMicrosoft has a tortured history when it comes to search. After ignoring it for years and allowing Google to become the glue that binds the disparate Web, the software giant stumbled in its attempts to build a competitor. Many expected as much from its latest try, snickering even at the name, Bing. Surprise! Bing has made steady progress since its debut in May, helped along by a catchy, $80 million ad campaign that looks ready to disprove the notion that good ol’ TV spots can’t change consumer search habits. The jury is still out whether Bing can chip away at Google’s massive lead in the market, but with the deal to provide search for Yahoo ready to go into force in 2010, Microsoft seems finally on its way to giving the market a Google alternative that should benefit consumers and advertisers alike.Profile: Search share 9.4 percent, up from 8.5 percent in ’08 > Microsoft’s share of search spend up to 5.3 percent in 3Q, up from 4.3 percent in Q2, per Efficient Frontier > Deal with Twitter and Facebook shows it can compete in race to own social search. LAST YEAR'S RANK: New to List 8. WSJ.comLet’s face it, News Corp. CEO Rupert Murdoch flip-flopped. He was in favor of making the Wall Street Journal’s Web site free before he was against it. When News Corp. acquired Dow Jones in 2006, making WSJ.com free so it would reach a broader audience (and cash in on that Web ad boom) was atop Murdoch’s list. But he rethought his position. The site still commands a subscription fee; plus, its audience spiked by nearly 45 percent—and the newspaper’s circulation is now the biggest in the country. Growth in print and on the Web—and making money from both? That's why these days the Journal’s model is the envy of the industry. Profile: Unique users soared by 44 percent to 6.6 million uniques in August, per comScore. LAST YEAR'S RANK: New to List 9. FEDERATED MEDIAFounder and CEO John Battelle has written often of “package goods media,” the stodgy one-way communications favored in the analog world. In the digital world, two-way “conversational media” is rising up. One hitch: this new form of blogs and apps has lacked a business model. Enter FM, which has helped define the roles brands will play in supporting quality content. FM has turned the ad network on its head, focusing on engagement over clicks and niches over mass. That’s resulted in trailblazing social campaigns for the likes of Microsoft, Intel and Toyota. Take ExecTweets, a Twitter curation service it launched for Microsoft in March. The collection of business leader updates boasts more than 1 million Twitter followers. When it comes to figuring out the social Web, FM continues to cement itself as a brand’s best friend.Profile: Reps over 100 social media properties, including Ask A Ninja, Boing Boing and Dooce, reaching 27 million users, per comScore > Recruited Scripps exec Deanna Brown as president > Has more than $50 million in venture backing. LAST YEAR'S RANK: New to List 10. ADDICTINGGAMESQuick, what’s the biggest Web property in the Viacom family? MTV.com? Nope. Maybe Nickelodeon or Comedy Central’s sites? Try again. It’s AddictingGames.com. Once an afterthought among a string of mostly underwhelming acquisitions by Viacom a few years ago, AddictingGames.com reached 15 million unique users over the summer. According to comScore, in 2009 casual gaming traffic is through the roof as recession-weary consumers turn to the Web for free and easy fun—and advertisers are noticing. AddictingGames’ mostly young-male user base is proving attractive to brands like Kmart and Apple.Profile: Reached 15 million unique users in July (+47 percent year over year), and users averaged 58 minutes (+116 percent) > Now third largest gaming site (after Yahoo Games and EA’s Pogo.com) > Timely games include Shut Up Kanye and Hero on the Hudson. LAST YEAR'S RANK: New to ListRelated: Digital Hot List 2008Related: Digital Hot List 2007

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Digital Hot List 2009

Brian Morrissey

Mike Shields

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Brian Morrissey

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