NewNet 2011: Advertising and Communication Will Drive Innovation

1Executive Summary

Three themes will drive NewNet technologies like social media and real-time feeds in 2011: advertising (and any other monetization strategies), communications integration and the interpretation, filtering and mining of information feeds and social graphs. Integrating NewNet tech with mobile and location-based services will be a given.

Social Media Advertising and Marketing

Although B2B licensing and consumer-paid content will both matter, advertising will be the most powerful NewNet revenue driver for the foreseeable future. To attract advertising big spenders, social media must deliver:

  • Scale
  • Distribution and targeting
  • Marketing formats unique to the medium that tap explicit preference, advocacy and pass-along, and real-time feedback
  • Measurement tools including benchmarks, media-buying “currency” and cross-media comparison

As I wrote earlier, “chances are, the next big advancement in social media marketing will be less about technology than coordination. Big branding campaigns need to use traditional media for reach, interactive media for targeting, and social media for engagement.”

Wildcard Prediction: Microsoft will build Facebook’s off-site ad network.

Communication Integration

I do not believe social network-style communications will replace email, even for younger audiences. Email remains more flexible and permanent — not to mention, too woven into corporate culture — to be replaced by Facebook Messaging with its subject-line-free, one-to-one only, folder- and topic-free organization approach.

That means either Facebook or some third party will have the opportunity to integrate email, IM and voice communications. Yes, it’s the specter of the Unified Communications Hub looming. Add richer contact relationship information, IM- and mobile presence management, and scheduling, and you’d have the world’s stickiest application, one with absolutely huge user lock-in potential. That’s what Mark Zuckerberg’s after with Facebook Messaging and Groups.

Can Facebook pull this off? Can Google or Microsoft? Not next year. But a lot of groundwork will be laid.

Wildcard Prediction: Phones are more important than email in gaining communication-hub position. Sure, the data will live in the sky, but to quote an old colleague, he who syncs best, wins.

Mining and Filtering the Feeds and Graphs

NewNet technologies are generating a lot of data. Who will figure out how to make the most of it? I’m thinking of two different strands of data analysis here. One is very public: Companies can apply user-manageable filters to things like news feeds and social graphs to make them more useful and flexible for consumers. The other is behind the scenes: Companies can tease out utility from those sources, and apply them to automatic routing, targeted marketing that doesn’t violate user privacy and search relevance.

In a somewhat similar vein, we’ll continue to see large companies with big customer bases create value-added services atop startups’ APIs. While Google may do a little of this itself, it’s more likely this will be the strategy of other big online players like Microsoft, Yahoo, and even Apple. While API control dominates most platform strategies, one of the originators of software platforms, Microsoft, may be the key proponent of this approach.

Wildcard Prediction: It will be a startup that makes data streams visible to users. It’s relatively easy to build TweetDeck, and tough to abandon an established UI. But the behind-the-scenes breakthrough will require big-company muscle to deploy widely, if not to develop.

Integrating Mobile and Location-Based Services

Mobile will be a source for NewNet innovation, and Facebook and Twitter, while definitely players here, are far from dominant. Facebook certainly scares up a lot of attention in mobile: Its non-announcement of a mythical Facebook phone captivated the industry in 2010. But for the next year at least, phone platforms as delivered by operating systems will continue to be the playground for Apple, Google, Microsoft, RIM and Nokia, not the social media guys. Partly due to that mobile OS fragmentation, the “pure” NewNet companies need to innovate in apps and services in order to ensure maximum distribution coverage.

Some company or companies will connect the dots between social games, location-based services and coupons/offers. We’ve already seen examples that tied two of each. But delivering an experience on all three could really take off. Any progress here would be a leading indicator for social commerce overall. User reviews and recommendations and group deals of the day are already widespread.

Obligatory Flippant M&A Musings

Best acquisition candidates for 2011? Zynga feels more like a media company than it does like Electronic Arts (EA’s in-game advertising and social/casual gaming Pogo efforts notwithstanding). Wouldn’t Zynga feel comfortable under News Corp. or Disney?

Over at Foursquare, CEO Dennis Crowley sold to Google before and didn’t like it, and turned down Yahoo, so I’m guessing M&A for that company won’t happen in 2011.

Relevant Analyst
P1040724

David Card

VP Research Gigaom Research

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