BIA/Kelsey’s 2016 Predictions – Highlights of the Top 10
Throughout the year, BIA/Kelsey analysts make predictions, mapping the future of the local media and advertising landscape, to assist clients in their planning efforts. A compilation of the analyst team’s expectations for 2016 is published the report, What’s Next: BIA/Kelsey 2016 Analyst Predictions.
Delivering over 20 predictions, the report offers insights for our key coverage areas, including mobile, social media, online media, search, online video, programmatic advertising, software, print media, small-business marketing, local media sales, broadcast media, publishing and the on-demand economy.
1. Millennials will drive the next wave of marketing innovation.
The last few years has witnessed a shift in consumer interaction with marketing. It’s become apparent that millennials are materially different in their receptivity to marketing than preceding generations. They want high-touch personalization, and trust-based relationships with the brands and marketers they engage with.
The most impact will result from influencer based marketing, such as native advertising and content-centric marketing. This will take place in venues increasingly populated by Millennials, such as Snapchat Stories. Here there’s an inherent trust factor in messages from market influencers, and it will continue to grow as a new form of native advertising. Kim K was notorious for engaging in this sort of thing last year.
2. Facebook emerges as a giant in local marketing and offline attribution.
Facebook is a sleeping giant in the classic local dilemma of connecting online and offline worlds. Because it has billions of signed in mobile users that bounce around the physical/offline world, tracking behavior will become a key piece of the online/offline attribution puzzle. The company has taken steps in this direction through extrapolation methodologies with data partners like Datalogix.
The next step is to track directly via mobile signed-in users. Facebook will close the loop on a larger scale by subsidizing beacons throughout retail and SMB locations. This ties in nicely with Facebook’s effort to onboard local businesses to Facebook Pages and other SMB-geared products such as Local Awareness Ads and its new “Local Insights” analytics tool.
3. Data-driven local ad sales is the new normal.
It’s increasingly clear that the local advertising sales model is broken — too much cost, too much inefficiency — all while product margins and price points are under constant pressure. We expect to see more big channel companies embrace the tools that have been force multipliers for smaller channels — namely using smart outbound marketing to drive inbounds leads.
Over the longer term, we expect large deployed sales channels to dissolve into much smaller and more stratified organizations, involving fewer outside sales reps, a combination of in-house and offshore telesales, with increasing use of self-serve and auto renewal. Large sales channels are a great source of revenue, but they are also a huge cost center. Cost of sales needs to fall dramatically if traditional sellers are to survive over the long haul.
4. Data will unlock attribution, local’s holy grail.
Ad attribution has always been part art and part science. But we’ll begin to see its value truly unlocked by the latter, as smart data science and structured data flows from the Internet of Things and data management platforms. These factors will combine to bring promising advances in modeling the consumer journey and tying it back to campaign optimization.
Advertisers will be able to plan, execute, evaluate and optimize campaigns with greater intelligence, and in a growing number of scenarios. Publishers in turn will get smarter about yield management and revenue optimization.
5. Unicorns join the endangered species list.
The fabled “Unicorn Club” — involving companies with valuations of $1 billion or more – has sprouted largely from the on-demand economy. It has also come to represent a form of financial engineering that depends upon everything going right. In some cases this is unsustainable, as customer acquisition, revenue growth, and market share must keep rising to fuel a unicorn’s race to liquidity. All companies have challenges and the harsh reality of the unicorn is it must provide constant growth in key metrics to sustain its multi-billion valuation.
Several on-demand players, notably HomeJoy, have fallen victim to the over-inflated expectations of unicorn investors, who are quick to cut their losses and move on to the next bet. Companies in the on-demand economy building fundamentally sound revenue-based businesses will replace the “unicorn club.” These will fly or die based on sustainable growth and value creation in all sides of the marketplaces they’re building — local service providers, customers… and their own margins.
6. Mobile payments and beacons’ face a moment of truth.
Utility-oriented features will be the defining success factor for mobile payments. So far, mobile payments have been held back by a classic “solution in search of a problem” mindset. A few companies have broken that mold with features that engender real utility. That includes skipping lines (i.e. Starbucks) or saving money. We’ll see in-aisle payments develop as a retail payment method due to its ability to skip checkout aisles.
The winners in mobile payments in 2016 will be those that adopt these principles, as opposed to a promise of simply a lighter wallet. What’s at stake is finally bringing offline attribution to reality, with big implications for tracking ROI and efficacy in local advertising. Beacons meanwhile will stumble for consumer adoption due to opt-in friction at the app and settings level. Adoption will grow if beacon engagement is integrated more seamlessly for invisible or “background” functionality at the OS level. That means the next move is on Apple and Google.
7. Google launches assault on mobile apps.
With the erosion of search traffic due to increased app usage, we expect to see Google take the gloves off and begin its campaign to maintain and grow its total search consumer audience. We’re already seeing glimpses of this with the recent launch of virtual apps in search results so consumers don’t have to leave their browser and move to a (non-Google) native app experience.
While we believe that one of Google’s next big revenue streams will to involve massively scaled cloud computing infrastructure, the company will be fighting to maintain its massive revenue pie from search for the foreseeable future. The company can’t sit on its hands at this key inflection point in mobile user behavior.
8. The yellow pages industry will see more consolidation.
The North American yellow pages industry is ripe for yet another wave of consolidation. It’s been three years since Cerberus acquired YP from AT&T. Dex just entered into another prepackaged bankruptcy in order to shake off more debt, and hibu (with operations in the US, UK, Spain and Latin America) would seem to be ready to make another move, having recently sold off its operation in Spain.
The stars seem to be aligned to take a U.S. industry dominated by three players (four if you count YP as two companies), and reduce it to two, or possible a single entity. What does this achieve? Previous consolidations haven’t solved the industry’s fundamental issues, though they have helped the industry strip out costs and live to fight another day. Consolidation buys time, a commodity in short supply for the rapidly changing yellow pages industry.
9. The march of programmatic continues.
Programmatic advertising will continue its current rapid pace of growth. This will stimulate supporting functions such as increased technology, data integration and education/understanding among buy and sell-side ad communities. Most search and display advertising is already traded programmatically, and the very definition of programmatic is up for grabs.
The core values of programmatic exchanges are to support more effective audience targeting, efficient buying, campaign optimization and cross-screen deployments. This is what prompted Google CEO Sundar Pichai to say “programmatic is on fire.” The fire is also spreading to linear video — first in national television and eventually local broadcasting and cable. The latter will build momentum in 2016, but will take a few more years to happen in earnest.
10. SMBs get animated.
Immediacy and intimacy, combined with historically low video costs, will drive a renaissance of SMB web presence, this time around video. The short history of the Web is filled with evolutionary steps toward greater rich media and data, blended to provide a personalized or, at least, deeply customized experience. Video, which currently accounts for more than half of all data on the Internet, will increase in volume and importance over the next five years, becoming the primary touch point to local business.
Video is genuinely affordable for SMBs and their embrace of video throughout the customer lifecycle will determine how quickly SMB marketing engagement will evolve. Video will become the de facto medium for business advertising and marketing starting in 2016.