What Will Drive Online Ads Next Year?

2006 was another strong year for online advertising. As we wind down the work and wait patiently for vendors to deliver us boxes of cookies, it seems like a great time to think about not just what we’ve completed but also what’s to come. I’ve written these types of columns before and, by and large, they disappoint my readers. Expectations run high when you talk about the future. People want to hear there will be amazing gizmos and tactics that will emerge from deep, dark labs.

The fact is most of these innovations fall flat for me. Certainly, things are getting better, but I don’t know that they are getting remarkably better. Technology’s progress is slow, and I have the sense that a lot of innovations are put out simply to keep the new product supply line rolling rather than actually providing any real, new value.

What has a much greater effect are the changes in attitudes that dictate how companies and their partners invest and plan. A company’s overall sense of where the market is heading drives it to adjust its marketing strategy, which naturally results in a shift in spending. The evolution of priorities outweighs the introduction of tactics.

But to be fair to both sides of the equation — technology and tactics — I’ve chosen the one thing from each that I believe will drive the interactive advertising market the most in 2007. These are the killer apps: the things that will open up new opportunities and introduce new challenges for marketers.

2007’s Tech Driver: LCD TVs

LCD televisions’ widespread adoption will cause a far more significant shift in TV watching behavior than even DVRs. LCD TVs are pretty amazing devices. They offer an amazing level of clarity and brightness, are often built around a movie-screen ratio, and are (of course) flat as a pancake. Plus, and this is the big one, you can easily plug your computer into one and use it as a monitor.

This causes a few things to happen inside the consumer’s media environment. First, the form factor allows for a great TV-viewing experience, without a significant television presence. The archetypal argument that occurs in living rooms around the nation is the desire of one family member (Let’s call him “Dad.”) to want a home-theater set up. Another family member (Let’s call her, oh, I don’t know, how about “Mom”?) doesn’t want the entire room taken up by the Behemoth Box.

LCD TVs solve this problem beautifully, which means the TV’s presence can be more casual, and, therefore, viewing can be more readily available. Of course, plasma TVs do all this as well, but the LCDs have a lower price point and are dropping rapidly. They are the leaders in the space.

More important to us interactive marketers is that little socket on the back you can plug your computer into. I’ve never seen any of the research houses ask this question, but I’d bet this is an infrequently used feature. It is, however, an absolute Trojan horse for the spread of interactive television and probably the middle step toward fully digital set-top boxes.

The growth of online video availability clearly represents a challenge to several industries, cable and video rental businesses being chief on the list. These industries are clinging to a baked-in behavior: the desire to watch video in the living room. Sure, it’s cool to watch a TV show or movie on your laptop, but really only in out-of-home environments, like airplanes.

Consumers, however, will begin to realize they can buy a movie on iTunes, plug their computer into the TV, and watch the movie on the TV. From there, it will be a short step to realize that a cheaper, purpose-built computer may be better for the job, and the path to our digital television future is paved.

2007’s Business Priority Driver: Relationships

Oh my goodness, what an overused word! Relationships seemed to pop into favor not too long ago, probably with the advent of CRM (define) software. That was when companies realized they needed relationships with consumers and figured they could get them by simply installing some software.

That didn’t quite work.

But the relationships I’m talking about are as esoteric or softly measured as we’ve seen in the past. In particular, I’m thinking about consumer packaged goods (CPG) companies here, but the issue is the same for nearly everyone. Or, rather, everyone who goes through the channel to sell to consumers.

The tides of business have not been kind to manufacturers of late. True, the makers of stuff always had a tough relationship with the sellers of stuff. Each thought they had the lion’s share of the value equation in getting things to consumers. Each thought they should set the rules. Each was right and each was wrong, but the situation was managed, often by some highly diplomatic sales reps.

But two things are changing that: big stores and private labels. The big retailer chains are exerting enormous amounts of pressure on manufacturers to lower prices, change shipping procedures, and even pay for ads. Right, manufacturers will foot the bill for ads for the retailer, which happen to mention the manufacturer’s product, usually at the end and usually in the context of “on sale now.”

The second punch comes in the form of private labels. At the store, consumers often find a product very similar to the manufacturer’s, of course at a discount. It’s a tough selling condition, for sure.

The only path out of this situation for the manufacturer is to ensure consumers walk into the store with the express purpose of buying the manufacturer’s brand. That’s the ultimate trump card in this game, and the only way that’s going to happen is if the manufacturer connects with consumers in a real way.

That drive toward relationships will shape the interactive advertising world in the next 12 months at least. We see it already in the shift Anheuser-Busch just announced in its advertising dollars, focusing more spending online and (assumedly) toward its new Bud.tv offering. Owning your own TV network is clearly a play toward forging a more lasting bond with your consumers.

Thanks for a Great Year

Thanks to everyone at ClickZ and, of course, to all you readers for a great 2006. Have a wonderful holiday. And make sure those vendors don’t cheat you on the gifts. If they show up for a meeting without at least a box of cookies, send them away!

Meet Gary at Search Engine Strategies in Chicago, December 4-7, at the Hilton Chicago.