• by Tom Hespos , December 20, 2004

Last week, I talked about 2004 and how audience fragmentation has actually helped the online marketing business. And I promised some predictions for 2005. Before we get to those predictions, I'd like you to take note of a few trends that have emerged and that I believe will affect the media landscape in the coming year.

First and foremost, audience fragmentation has accelerated and there's no reason to think it will stop anytime soon, especially with all the new media choices open to consumers. Technology will continue to bring us new media, including mutant strains of things that are familiar to us. (After all, aren't satellite radio and Internet radio just mutations of terrestrial radio, with different delivery mechanisms and wider arrays of choice?) The ways in which technology has the potential to alter media consumption are staggering in number. But they all contribute to one consequence - continued audience fragmentation.

That said, here are some of my 2005 predictions...

Clients Get Smart About Fragmentation - The forward-thinking ones understand that the fragmentation problem isn't solved by Internet advertising alone. All forms of new media are contributing to erosion of audiences in broadcast and print. Look for online to make significant gains in 2005, but also look for clients to depend on agencies for advice on emerging media and models. You will get more questions about iTV, DVRs, and satellite radio. I also predict that many advertisers will turn to their interactive agencies for this kind of advice, mainly because interactive agencies have terrific experience with new technology and with emerging media models.

The Big DVR Backlash - The penetration of subscription-model DVRs will become significant enough to cause even more worry for the broadcast advertising model. The consumer offering will change. Either commercial-skipping will be altered in some way or the subscription-based models will begin inserting advertising. In either case, consumers will revolt. The alternative will be DVRs that can be purchased outright by the consumer without subscription fees. Some of these DVRs will be PC based. Others will simply be big hard drives in a box. TiVo and DVRs from the cable company will start to die a slow death, and pay-once, no subscription boxes will begin to flourish. Consumers will aim to consume television and radio the way they want to, without advertising, without monthly fees, and most importantly, without the DVR companies changing models on them.

Satellite Radio and Digital Audio Players Converge - Sirius and/or XM will see an opportunity in the number of people running around with iPods and other such devices. I predict a convergence of satellite and digital audio - perhaps a plug-in device for the iPod that lets users tune in to satellite radio channels.

Self-Service Drives Growth - Local and regional businesses will wake up with respect to local search. They will test local and regional campaigns on their own. Smaller agencies with regional chains as clients will succeed in breaking off a chunk of this media spending. SEM firms that can make it cost-effective for a smaller business to hire them will also benefit. But by and large, there will be a lot of self-service online advertising that won't be managed by agencies.

Speaking of self-service, 2005 will be the year that non-search companies employ self-service technology to tap into small businesses. Look for ad networks to be the first non-search folks in a while to go direct to small business with a self-service ad offering. (And yes, I know that media sellers have done this before. But the current business climate is completely different than it was six years ago and this time it will fly.)

Internet Radio Goes Mainstream - A combination of familiar measurement models, increased consumption and an advertiser need to beef up the audience they reach with 30 seconds and 60 seconds on radio will make this the breakout year for Internet radio. Clients will look to supplement their terrestrial radio buys and Internet radio will be part of the solution.

Internet Upfronts Are Formally Established - Clients become tired of being locked out of premiere sponsorships and desirable blocks of online ad inventory. This will lead to movement on the upfront conundrum. Look for the Big Three to start floating the idea to the agency community again soon. But don't look for the hype and fanfare associated with upfronts in broadcast - everybody's already had their USRDA of that type of thing.

Consumer Content Creation Cacophony - On the heels of the blogging phenomenon, new tools emerge to make online publishing easier. Blogging software won't require an advanced degree to install on one's own Web server. Streaming audio tools for people who want their own online radio programs will go mainstream. The consumer-generated content sector will get bigger in 2005, and advertisers will puzzle over how to make it work for them.

The FCC Exceeds Its Mandate - Michael Powell and crew will attempt to enforce indecency standards on either cable TV or satellite radio and will be taken to task for overstepping its bounds. The resulting controversy will result in either further clarification of the FCC's rules (what constitutes an indecency violation) and boundaries (which media are subject to FCC regulation and which are not) or an overhaul of the legislation that created the FCC in the first place.

And, finally, my last prediction...

Consolidation Mania 2005 - A large enough percentage of mainstream advertising budgets will be allocated to online for big agency holding companies to once again consider the acquisition of online agencies. It will really start to heat up when more and more advertisers make a point of seeking depth of online marketing expertise in a new agency partner. Independents, especially those with search engine marketing expertise, will be the first to get glommed up.