Facebook, whose revenues are said to be ramping up sharply (toward, no doubt, what its backers hope will be a truly cosmic IPO), is apparently planning to confront the problem of limited ad opportunity I talked about yesterday with a simple solution; eat all of it. The company is rumored to be planning to make itself into a complete media portal, serving all kinds of content in a truly social context and even providing for social communications. In fact, I’ve heard that they’re quietly planning to scrap their partnership with Skype (announced when Google+ burst on the scene) and develop their own framework for social and collaborative communication.
The problem with this model is that it presumes that social behavior underpins all commercial activity. Remember, it’s commercial activity that ads target; advertisers don’t give a darn about your social life except insofar as it is exploitable to manipulate your buying. Everyone’s research seems to agree that socially-driven buying is concentrated in the youth segment.
The point here is that Facebook is heading after a market space that is even more restricted than the overall ad-sponsorship market. Google has it right in that search ads are still the most likely things to impact retail activity. I just bought something online, and it was a purchase that online search impacted because it changed not only my preferred vendor but switched me to online fulfillment over retail instant gratification. Did I ask my Facebook (or Google+) friends about it? Didn’t even occur to me. And I probably spend more than your average 25-year-old.
For video, we’re seeing a bit more focus on the kind of features more likely to be associated with monetized video than passive streaming. Vendors are jumping onto this, not with what we’d like to see (a true, architected, service layer) but at least with silo video offerings. I noted that Alcatel-Lucent had announced a multi-screen application, and NSN did the same this week. The NSN offering is surprisingly glitzy for a company that’s not exactly a household word in effective marketing sensationalism; it demonstrates screen-switching and social video for example. And both NSN and Alcatel-Lucent may in fact be moving toward a unified service-layer approach. Whether for sales focus reasons or because they’re hoping to sell professional services, or just that they’re not there yet, the current material doesn’t talk about service-layer integration and orchestration.
It’s fair to ask what this is all going to mean, and I think one thing that’s certain is that the network of the future is going to revolve around the CDN. Content is the majority of traffic growth. Content is the majority of monetization opportunity. Content that has any monetization is served by a CDN to manage QoE. Content that has none is served by a CDN to control bandwidth utilization. Getting the picture here? But the CDN of the future isn’t the old Akamai model peering-point connection. It’s deeply distributed, it’s highly policy-managed with respect to where caches go and what goes into them, and it’s highly componentized so that it can be composed into flexible media offerings that are specific to the operators’ local needs and rules. You can see this model emerging from both Alcatel-Lucent and NSN, and also being expressed at least by Cisco and Juniper. You can even see it from CDN startups like Verivue. The fact is that every operator is going to need both bandwidth optimization and content monetization. That these missions are very different means that CDNs and the logic that’s built around them has to be very flexible. We’re working to find out just how flexible all these options really are, and we hope to provide some of that this month in Netwatcher, and more in future issues.
The whole video thing is going to be impacted by the fall season of technology product launches, among which are supposed to be Apple’s new iPhone and Amazon’s tablet. We are seeing iPhones and Android smartphones gaining traction even as gaming platforms, and obviously we’re seeing tablets increasingly as personal media portals. There will be people who will use smartphones more (youth), people who use tablets more (everyone else), and all of these people will be both stressing networks and generating opportunity. I don’t think that the OTT video market will really threaten channelized TV because I doubt that the delivery of that much material can be made affordable to the consumer and still return anything reasonable on investment for the operator. I do think that the revenue kicker it can add to commercials embedded in standard content could be very significant, and so I think you’re going to see more from vendors to address streaming and monetization of video.