eMarketer Chairman Predicts 2011 Trends

Proximity Ads to Hit $1.8 Billion by 2015

Larry Chase: Mobile ad spend is obviously rocketing, but is it manifesting differently from what people predicted?

Sam Alfstad: One of our analysts said mobile search would develop the same way as online search. The fact is mobile is developing completely differently from online. For example, most people use Google Maps to search on their mobiles. They hit the GPS to find their location and look for the nearest pizza place. That's a huge factor for local business.

LC: You're saying it's more of a proximity thing than a textual search thing?

SA: The most powerful part of mobile is "location, location, location."

In many ways, it's point-of-purchase advertising. POP advertising was some of the most expensive advertising you could buy, and some of the most valuable because advertisers wanted to be there right when consumers are reaching for their wallets. That is what mobile and location can provide: place and context.

LC: So then they're not just searching for the next Toyota they want to buy, but "What's around me?"

SA: It's a tremendously powerful tool because it gives you the search and the discovery in one place. You find these wonderful things popping up right in the palm of your hand.

ABI Research estimated mobile location-based ad spending at $42.8 million in 2010, and we're predicting it's going to soar to $1.8 billion by 2015, which is a huge leap.

LC: Other than OpenTable and other apps that tell you where is the closest thing, how is proximity being manifested? As a coupon?

SA: Deloitte's 25th annual holiday shopping survey found that 17% would use their smartphones for shopping [such as finding a store that sells what you're looking for], and 56% would use their devices to research prices. If it's happening even close to those numbers, retailers will have to take note and respond.

Tablets Fuel Video Use

LC: Gartner predicts in 2011 almost 55 million tablets will be sold. That's a game-changer, isn't it?

SA: If tablets grow, video will grow. It puts the pressure on publications to have more video content. When you read The New York Times on the iPad, if you read a review of a play, what looks like a photo is actually a video. When you click it, suddenly you're watching a scene from the play. That kind of integration is going to continue.

LC: Where does the tablet fit in the advertising food chain?

SA: It depends on how the content providers are using the tablet. It's a great print ad display and a great TV/video commercial display. It's just a bigger, easier playing field than the phone and much more mobile and "always-on" than your computer.

Facebook is Now No. 1 for Display Ads Online

LC: Unlike Friendster and Myspace, Facebook has real staying power, doesn't it?

SA: Facebook is now the largest display advertiser online. People are using it all the time. It has over 500 million users around the world. And yet, it was invented only in 2004.

LC: The trend I find fascinating is that it's getting used more and more as an e-commerce platform.

SA: And more and more as a communication platform. You get emails from people that they launched from Facebook. It's jumping the walls.

Fee Versus Free

LC: When it comes to content, I know you come down on fee over free, right?

SA: [Publishers] can't keep playing the game that the Internet wants to be free. Sooner or later, people are going to have to start charging.

LC: So you get "eMarketer Lite" for nothing but to get the deep dish, the real skinny, you pay.

SA: That's what we've been doing for 10 years. It's never been a problem for us to charge for our content. We give the newsletter away.

LC: That's your loss leader.

SA: But it's not a loss leader because we make money on advertising in the newsletter and our subscription product.

Way back when, people talked about "versioning," how to make money on different versions of your product each step of the way.

Creating the first information product is expensive. With a newspaper, the first paper you print is expensive. So, you have to figure out ways to make money on each level.

If you think the information you publish is valuable, you have to start charging for it. I don't know why publishers are still so intimidated by that.

LC: They're scared that people will go elsewhere because there are so many "elsewheres."

SA: If you're going to give some version of your product away, then make some money on the advertising. You have to believe in your product enough to charge for it. No business model says you can give it away forever.

People are saying interruptive advertising is going away. A lot of our analysts are saying that, too. I don't believe that.

I believe interruptive advertising is going to be more a part of online and on the phone and anywhere else. If you want this content for free, you're going to have sit there for 10 or 15 seconds to look at an ad before you can get to the Times article you want to read.

Mobile Commerce is Coming

LC: In terms of using your phone as a payment device, I believe [eMarketer principal analyst] Noah Elkin said he saw a big future there.

SA: When we were looking at expanding in Japan well over 10 years ago, [Japanese telecom] docomo already had that capability on its mobile phones. You could wave your phone in front of a Coke machine and get a Coke.

In the U.S., nobody knows how to do micropayments, but there the charges all go on the docomo phone bill. We have been very slow to adopt this because of the strangeness of the telecom networks in the U.S. with competing formats and protocols.

End of the Digital Ghetto

LC: You have predicted that we will soon see the end of the "digital ghetto." What do you mean?

SA: 2011 is the year that the walls start tumbling down.

Over the last decade, digital marketing has been put in a ghetto because it was something different, something you had to get into and understand because it was some kind of wildly arcane or technical hurdle to overcome.

The primacy of the brand is going to become more important as things get more complex. Marketers have more channels to get the word out and connect with the consumer. This puts more pressure on them to be sure the central message, the brand image, stays clear throughout the channels.

LC: eMarketer predicts that the digital media spend will surpass newspapers in 2011. What are the implications?

SA: Even that measurement gets tricky now. Are we counting newspaper as the paper itself or are we counting the website, and which side of the fence do you count newspaper website advertising on? Is it digital or is it a newspaper?

The walls don't make any sense anymore.

About Sam Alfstad

Sam Alfstad began his career in the mailroom of a New York City advertising agency and rose to become creative director at the William Esty and D'Arcy, McManus & Masius agencies. He was later senior vice president at Laurence, Charles and Free before starting his own agency, the Alfstad Blank Group (TA_G).

In 1996, Sam co-founded eMarketer, where he serves as Chairman and Chief Knowledge Officer, responsible for editorial and publishing development.

In addition, Sam is currently a director of Beehive Ventures, and sits on the boards of a number of B2B firms.