• by Tanya Gazdik , Staff Writer, January 8, 2008

The beginning of the new calendar year is the perfect time to get out the crystal ball and give it a polish. The analysts at eMarketer have issued their predictions for 2008 in key online areas, including advertising, videos, social networks, e-commerce and entertainment.

Insert sigh of relief here: The forecast finds online advertising will ride out potential economic storms in the U.S. (see related story, "Online Ad Business Recession-Proof, Analysts Say" which includes a similar take from Piper Jaffray.)

Meanwhile, YouTube will decide the election and social networks continue to expand while the surge in online video growth slows, predicts eMarketer.

The 10 predictions for 2008, according to eMarketer:

1. Online ads stay resilient.

2. Video surge slows.

3. Social network advertising hits $1.6 billion.

4. Networking goes beyond MySpace and Facebook.

5. YouTube decides the election.

6. Beijing Olympics pumps ad spend.

7. "Buy online, pick up in-store" becomes stock feature.

8. Movie downloads go mainstream.

9. Music marketers roll out new business models.

10. Dynamic ads heighten gaming revenue potential.

Overall U.S. online ad spend will be resilient, even if the economy slides into recession (Excuse me, but "If"? Has eMarketer checked out the unemployment rates lately? How about the real estate and mortgage markets?) With money tight, marketing executives will gravitate toward the internet, looking for more measurable ad formats to buttress their positions.

The surge in online video growth is expected to slow in 2008 with 74% growth (down from 89% in 2007) and a spending increase of $1.35 billion, says eMarketer.

In 2008, the array of video available online will jump dramatically, both from professional content producers - like TV networks - and from amateurs churning out user-generated content. Online video players such as Google, Microsoft and the TV networks will fortify their video offerings by buying small, ad-related companies. However, ad dollars on video will remain small relative to the total U.S. online ad spending, says eMarketer.

The gravy train is just starting to roll out of the station for social networks, says eMarketer. U.S. ad spending on social networks will climb to $1.6 billion in 2008, from $920 million in 2007 - a 70% growth rate. Although targeted advertising is getting the lion's share of attention and will continue to be hot in 2008, other forms of social-network marketing, such as search advertising, widgets and e-commerce, will draw marketer interest.

In addition, self-serve advertising systems will create a new market for local and small businesses to promote themselves via social networks. Social networking will remain a key online activity, with 44% of U.S. consumers using social networking at least once a month in 2008. While MySpace and Facebook continue to dominate the market, social networking activities will extend beyond a single destination site, according to eMarketer.

Profiles will eventually become portable, meaning consumers need only create one and be able to use it in many places on the web. (We're seeing this already with a new application from Boulder, Colo.-based Fuser that allows users to access some MySpace features via their Facebook profiles.)

Widgets that today work with only one social-network site will be designed on an open platform, extending their reach. Activities such as online shopping, searching and even sending email will be enhanced with social-networking features.

Meanwhile, YouTube attracts the most online traffic and is consistently rated the favorite social media site by U.S. Internet users. The site will play a decisive role in the 2008 U.S. presidential election by either airing a user-submitted clip that embarrasses a leading candidate or setting the tone of the campaign through its series of sponsored debates, predicts eMarketer. (One can only begin to imagine what this might end up being!)

The Beijing Olympics, along with the U.S. election - will spike advertising spending in all channels but will give a particular boost to the online sector.

As the internet market matures, the growth rate of online ad spending will taper off, dipping to under 30% in 2007 for the first time since 2004, according to eMarketer. But in 2008, growth will surge upwards to 29%, before declining to 18% the next year, predicts eMarketer.

E-Commerce comes into its own in 2008 with multichannel retailers rolling out more "buy online, pick up in-store" services, joining big-name retailers such as Circuit City, JC Penney and Sears. Consumers like the service because it allows them to avoid shipping fees. (Along with this goes "buy online, return in-store" - a post-holiday phenomenon that retailers are no doubt coming to grips with even as you read this.)

At home, U.S. consumer spending on movie downloads will more than double from 2007 to 2008, from $114 million to $245 million, forecasts eMarketer. The result is that digital services, such as iTunes, Netflix, Amazon Unbox, Movielink/Blockbuster, Vongo and others will become more popular with the mainstream (and prices will continue to adjust with the competition, no doubt.)

Music labels and marketers will step up their experimentation with new and emerging business models as the CD continues to fade away. Worldwide recorded music spending has declined year after year - from $32 billion in 2006 to $28 billion in 2008, hitting a low of $26 billion in 2011, forecasts eMarketer.

Old videogames will have new life breathed into them by companies such as Double Fusion, which serves ads in real time. Advertisers will purchase advertising that is served on free casual games that consumers download. The same concept will apply to console games distributed online for Xbox and Wii, with firms such as Microsoft's Massive providing the technology, says eMarketer. (And with more Gen X, middle-aged and older consumers discovering console gaming, think bowling, that will open up a whole new venue for advertising.)

Welcome to 2008.