2010-09-13 Bright future for online ads; newspaper revenues will stabilize

Intelligence Report - 09/13/2010
By Mark Glaser & Corbin Hiar




Google makes search "Instant"; renews AOL search deal

Tired of wading through pages of search results without finding what you wanted? Google is trying to change that even before you finish typing your search with the new Google Instant search. As Google CEO Eric Schmidt described it in a keynote speech, Instant has the “ability to tell me things I didn’t know but am probably very interested in.” Instant works by offering immediate suggestions -- with associated images and advertisements -- after each keystroke a user enters into Google’s search box. Although the company is staying mum on how it expects the technology to affect its lucrative AdWords system, it claims Instant can shave seconds off the search process and provide more targeted, useful results. AdAge's Irina Slutsky noticed that just typing in an "a" in the search box brought up a page full of Amazon links, while "t" gave results for Target and "f" for Facebook. "We haven't directly analyzed if people are distracted by the top or intermediate results, but if they're looking for aardvarks and Amazon comes up...I think it’s a very small effect," Google engineer Othar Hansson told AdAge.

Meanwhile, AOL announced it had signed an expanded search deal with Google. The five year agreement expands upon the previous arrangements AOL had with the search giant. In addition to relying on Google technology for its online searches, AOL will now use it on mobile sites and increase the amount of video content it shares with Google’s YouTube site. The deal allows Google to hold onto the 2.3% of the search market AOL’s portals represent, according to comScore. That might not seem like much to Google, which controls over 65% of the market, but it would have been a big boost to its insurgent search rival, Bing. Yahoo already uses Bing technology to power its searches and, together with queries in the Bing portal, Microsoft controls 27% of the search market. While the deal is a strategic victory for Google, it is not likely to be a big revenue earner. “This is a better deal for us on a per search basis," AOL CEO Tim Armstrong told PaidContent. Why not make a deal with Bing? Business Insider's Nicholas Carlson says that would make AOL less enticing as a buyout target for Microsoft at a later date.


Apple launches Ping social network, unfriends Facebook

Can Apple expand beyond hardware and mobile chic and make a stab at social networking? It's trying with the new Ping network embedded into iTunes 10, allowing people to share favorites and make suggestions to friends. The advantage of Ping is that it lives in a service that has 160 million existing customers, and possibly the most successful micropayment service in the world. And just like rival networks Facebook and Twitter, Ping users can friend one another and follow their favorite musicians. The main problem is that users can't bring their friends from other networks into Ping very easily. The new network was intended to sync with Facebook Connect, but AllThingsD's Kara Swisher reports that Apple removed the option after Facebook made what Jobs called “onerous terms” for the service. The New York Times' Miguel Helft reports that Facebook was concerned that millions of Ping users tapping into their system could cause “site stability” problems. Most likely, the two sides will find common ground. “Having access to Facebook is key for any budding service with a social spin, and even Apple will eventually have to come to terms with that," VentureBeat's Devindra Hardawar predicts.

So can Ping succeed in the long run? GigaOm's Om Malik predicts that it “could have tremendous impact on social sharing and commerce.” Ping users can help other music lovers discover gems hidden in iTunes’ library of 10 million songs, a model that Malik believes could be picked up on by Amazon and other sites with a sprawling range of commercial offerings. But it has a long way to go to challenge social giant Facebook. Computerworld’s Jonny Evans is critical of its lack of “user-focused feature additions and user-created content. Without those it will fall flat and become a ghost within the iTunes shell.” Indeed, most of the content that has flooded the fledgling network so far has been spam, due to an embarrassing technical oversight. Despite its difficult launch, Ping could still suffocate MySpace, an already sickly social network. Many musicians and music lovers use MySpace to publicize or discover music. But with Ping integrated seamlessly into iTunes, the point of sale for most online music purchases, musicians may begin directing their devoted fans there instead of MySpace.

As Digg staggers, Reddit wants to bury it

In its six years of existence, social news site Digg has kept news junkies hooked on a steady diet of crowd-promoted content and provided publishers with a healthy stream of referral traffic. Since an ill-conceived redesign of the site’s infrastructure this summer, Digg has been doing neither function as well. According to John Boitnott of VentureBeat, Digg users have fled in droves, driving the site’s bounce rate up 20% since the update. That means fewer page views for Digg and lower click-through rates for the publishers whose content is featured there. Many longtime users are upset about the site’s reconfiguration towards more personalized results featuring what they view as more corporate content. They saw Digg as a community and its various verticals as so many scoreboards onto which they could help “digg” or “bury” unique content (the latter feature was eliminated in the redesign). In trying to mimic the success of Facebook and Twitter, Digg’s engineers took away many of the community's favorite features. That has led to an executive shuffle, with Digg founder Kevin Rose stepping down as CEO.

Digg users have protested site changes in the past but never with the same fury and indignation. Thousands of them took part in a first-ever “Abandon Digg Day.” The protests also come at a critical time in Digg’s history. Rose told BusinessWeek's Ari Levy that Digg is now only attracting “25 million visitors a month, down from about 30 million a year ago.” Levy notes that Twitter, which has become a popular network for sharing the news, has more than 190 million monthly visitors. While Rose remains sanguine about the uproar, the site’s primary competitor Reddit has profited from Digg’s debacle. As VentureBeat’s Boitnott reports, the Conde Nast-owned social news network Reddit "is not only grabbing traffic from Digg in the wake of that site’s troubled redesign, but it is also reporting a healthy jump in advertising deals and subscriptions” to its premium service offering. “It’s certainly an opportunity for us,” Reddit’s community manager Erik Martin said to Boitnott. “A lot of people are coming from Digg and that’s great.”

Apple loosens restrictions on mobile apps, ads

With Android rising and eventually eclipsing iOS in mobile use (see Research item below), Apple was forced to act -- and that meant finally loosening some tight controls in the App Store. First, Apple shared its previously secret app-evaluation criteria with the development community. And then it announced that apps built with Adobe software such as Flash, and ads from networks such as Google's AdMob, would be allowed on the iPhone and iPad. “This is gold. This is great. It feels like we’re finally getting a clue about what Apple wants,” Dollar App's Dom Sagolla told the New York Times. But, of course, the devil is in the details: The guidelines leave much room for interpretation. According to Apple, an app can be rejected if it “doesn’t do something useful or provide some form of lasting entertainment.” The announcement provides even less guidance for Adobe, Google and the publishers who employ their technologies. The brief press release announcing the changes did not mention Adobe specifically, but most observers believe it will allow Flash to be used in apps, but not on the mobile web because it would require downloading code to run.

Still, Fast Company's Kit Eaton wonders what would happen if you produced a new browser app for the iPhone that already had code built-in to run Flash: "You'd get de facto 'full web browsing' experience, complete with Flash, on the iPhone." But even without access to the mobile web, Eaton predicts that “we may see a sudden boost in e-magazine versions of well-known titles arriving on the iPad and iPhone (because many of these publishers already use Adobe tools to format their paper magazines, as well as deliver and track advertising campaigns via Flash).” There is still lingering uncertainty about how Apple plans to allow AdMob and iAd rivals sell in-app advertising. “Apple did not respond to our questions about any potential changes for third-party advertisers,” wrote Ars Technica's Chris Foresman. “Presumably, mobile ad firms owned by competing platforms will still face some restrictions." Questions aside, both Adobe and Google are officially welcoming whatever increased access Apple has offered them to its device network.


Kagan: Bright future for online ads; newspaper revenues will stabilize

When the recession finally fades, it will fade in a big way for online advertising. According to research firm SNL Kagan, online ad spending in the U.S. will more than double to $60 billion by 2019. Over the same period, Kagan forecasts that the overall U.S. ad market will only grow by 29% to $275.8 billion. Newspapers will continue to bleed print ad revenue over the next few years but a booming market for online advertising will help make up for some of the difference and eventually stem the industry’s revenue decline. Kagan’s estimates for the newspaper industry are mirrored in the quarterly results reported by the Newspaper Association of America. The NAA found overall ad sales shrunk by 5.6% from the second quarter in 2009 -- the smallest Q2 decline since 2006 -- while online sales grew 14% to $743.9 million. Kagan predicts that total newspaper ad spending will decline slightly to $23 billion in 2011, approximately the same spending level it projects for 2019. Kagan’s upward forecast of 2.8% for total U.S. ad spending in 2010 is slightly above recent estimates from ZenithOptimedia (1.3%) and Carat (1.1%).


Smartphone market booming, with Android leading growth

Forget about "feature phones," those old cell candy bars with poor web access. The future is in smartphones and it's coming fast. Neilsen believes that by 2011, there will be more smartphones in the U.S. market than there are standard, feature phones. Only 21% of Americans were using a smartphone at the end of 2009, but that percentage will increase dramatically as consumers replace their existing phones and prices for smartphones continue to fall. According to IDC, the adoption of smartphones worldwide will increase by 55% in 2010, with Android devices poised to lead the expanding market. IDC cites similar factors in its increased growth estimate for the world market: “Additional product introductions and an expected flurry of smartphone buying activity in the second half of the year will push the market well above previous expectations,” said IDC's Kevin Restivo. While IDC believes that BlackBerry’s Symbian will continue to be the dominant OS in 2014 with a 32.9% share of the market, the fast-growing Android OS will increase its share from 16.3% to 24.6% over the same period. Gartner is even more bullish on Android, predicting it will nearly catch Symbian by 2014 (29.6% to 30.2%).

Of Note

comScore: Facebook Takes Lead In Time Spent (MediaPost)
Facebook in August for the first time took the top spot with a total of 41.1 billion minutes, Google was second with 39.8 billion minutes and Yahoo was third, with 37.7 billion

Retargeting Ads Follow Surfers to Other Sites (NY Times)
Ad retargeting has reached a level of precision that is leaving consumers with the palpable feeling that they are being watched as they roam the virtual aisles of online stores

Google settles Buzz privacy lawsuits (MediaPost)
Google has agreed to pay $8.5 million to settle a privacy class-action lawsuit stemming from the way Buzz told people who you emailed the most

Comscore: Live Streaming Video Jumps 600% in Past Year (Comscore release)
The amount of time Americans spent watching video for the major live video publishers has grown 648% to more than 1.4 billion minutes, while YouTube and Hulu increased 68% and 75%, respectively

Twitter plans to record all links clicked (CNET)
By the end of the year, Twitter expects to be recording and analyzing every link users click on when using its website or any third-party microblogging apps.

How to Teach Social Media in Journalism Schools (PBS MediaShift)
Hermida: "Students are encouraged to be active on social media, showing they are contributing to the conversation rather than just taking."


openquoteEvery time [Justin] Bieber tweets, his messages have to be delivered to more than five million people who then endlessly retweet it. Apparently, his account receives more than 60 @-replies per second for a while after he tweets, which is something Twitter wasn’t originally designed to handle.closequote

Dustin Curtis, blogger and web designer

3% of Twitter’s Servers Dedicated to Justin Bieber (Mashable)


The OPA Intelligence Report is a bi-weekly email summarizing and commenting on important news and research for the online publishing industry. As always, feedback is welcome at feedback@online-publishers.org.