While the economy drove down advertising rates, it made valuations affordable, allowing industries to consolidate, according to Mike Kelley, partner at PricewaterhouseCoopers' Entertainment Media & Communications practice in New York. That glut of cash will push companies into merger and acquisition (M&A) mode in 2010, he says.
Some of that activity could include smaller niche search engines like those built around what Kelly calls "splintering," using subcategories like health, travel, retail, or science.
Bing and Google have begun to splinter, adding categories. Publishers like Hearst, have begun to build these kind of sites, too.
Take Yelp, for example. Reports suggest Google has been in talks to acquire the directory. The site has a search engine to help users find consumer reviews for a variety of things from eateries to shopping to local services, according to Mark Simon, vice president of industry relations at DidIt. "This can be a helpful addition to Google's user base by helping them fine-tune their search selections by the peer review process," he says. "These opinions will give Google a more rewarding engine to utilize for their visitors."
Kelley, demonstrating his point on splintering, directs me to LMK.com, recently launched by Hearst, which focuses on search of news, sports, money, life and people content. The "LMK" in the URL stands for Let Me Know.
The site, which lives up to its name, spiders out to the Web and updates every three minutes. The sports portion of the site segments college football into teams, players and coaches. "This is very different than the soldier lineup of search results you typically see," Kelley says. "A site like this might be attractive to a bigger search engine. They could bolt that on to deliver a content experience right up there with publishers."
Kelley says such is why Microsoft bought into Facebook and News Corp into MySpace. The next step will be to crack the code on new advertising applications. These revenue models will come from brands and agencies trying to find innovation in online advertising, he says.
The "splinter" affect will pick up in 2010, Kelley says. He believes people have begun to search more in sites like LinkedIn rather than Google for information on people, for example.
When researching someone before a meeting, you not only want to know about the person, but discover who knows them. This becomes part of the social graph that larger search engines, such as Google and Bing, have begun to create. You may begin searching for information in the larger search engines, but quickly discover the smaller engines allow you to drill down into the subject.
Similar to behavioral targeting, these engines deliver advertisers a targeted audience, as long as they have the mass in searchers to support the site.
If the search engine can deliver advertisers the people most likely to buy vs. a lot of people that might buy, the niche site becomes more attractive to those paying for the clicks.
PwC also expects to see more initial public offerings (IPO) in 2010 from private equity as the markets continue to firm up. More the half of the IPOs completed during 2009 were by financial-sponsor-backed, primarily private equity, companies, a trend expected to continue into 2010.