It goes like this. Such well-run shows as these that are filled with excited professionals, more than any ever before, it seems to me, must imply that our market's growth is sustainable and may even be accelerating. These are exciting times--far more exciting than those of six years ago, since people are actually making money and (ahem) providing value in exchange for that money.
Ad: Tech's introductory keynote, by Mark Kvamme, a venture partner with Sequoia Capital, featured some great data that may have been arranged just to fan the flames of this excitement. Mr. Kvamme pointed out that Web commerce represents about 2 percent of the GDP in the U.S., with our backwards broadband, but that Web commerce represents as much as 60 percent of the GDP in South Korea, which has fantastic broadband and broadband penetration.
He also made a bold prediction. While Jupiter, as recently as 2004, issued interactive ad spending projections of $12.3 billion for 2006, $13.8 billion for 2007, $15 billion for 2008, and $16.1 billion for 2009, Mr. Kvamme said he thinks that we may actually reach $30 billion by the end of this decade.
Now, I admit that our industry's growth has far exceeded the then-favorable predictions of Jupiter from 2004. After all, our industry crested $13.2 billion in overall ad spending last year already. So, we're well ahead of the pace that had been projected. But--nearly doubling these projections?
This is where the conflict comes in--how will an industry that has seen so little innovation in the past two years get there? Walking around the show floor here at Ad: Tech, I found so many companies that are one-offs of each others' models, or worse, the same models I've complained about in this space before. It's almost as though passage here required a network model or an affiliate model or both, there are so many companies that make the same claims.
So, where are the next companies that are going to drive this continued growth? Sure, many of these networks are doing VERY cool things to create new efficiencies for advertisers and publishers, and I'm sure I'll write about them in the next few weeks because I heard some pretty compelling pitches today. But, while these are nice models that may eventually help make the second 100 sites as robust as the first 100 sites, not a one of them is going to drive $2 billion in revenue in the next three years, like a Google or a Yahoo will.
Maybe I should pose the question a different way. Instead of where are the companies, where are the innovations that will explode one segment or another and create a whole new sub-segment?
Perhaps I'm wrong, and there are multiple companies here this week that will explode their sub-segments and generate such tremendous value for marketers that we will bring that much more revenue online. If so, however, I'm not the only one who needs to be convinced.
"I walk around this and the other shows and they haven't changed much in the last couple of years," said Richard de Silva, a principal with Highland Capital Partners. "This market is ready for some major innovations, and there's a new wave of brilliant entrepreneurs working on ways to fuel a third generation of growth in online advertising. Until these new models are ready for prime time, we will see a lot of copy-cat companies which need to eventually consolidate."
Perhaps some of the sub-segments that I've written about in the past--especially e-mail and local--will really take off in the next two to three years. In fact, I'd bank on that, with the local segment generating well beyond $3 billion by Q4 07, and e-mail exceeding $2.5 billion in the same time frame (up from $850 million in 2005). That won't get us to $30 billion, however. It won't even get us to $20 billion.
What will? Has it been invented yet?