Predictions for the consumer internet in 2008

[Editor’s note: This is an Op-Ed piece by Jeremy Liew, partner at venture capital firm Lightspeed Venture Partners. Jeremy blogs regularly here.]

Here are my predictions for the consumer internet in 2008.

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1. Advertising in social media, online video and games start to become scalable.

Social media, online video and games are at early stages of development for advertising. A small percentage of advertising dollars are being spent on these three media relative to time spent. Some people have questioned if social media will be a media business at all, or online if video is a good way to monetize.

The slow start is because there are no standards yet in any of these media. If an advertiser wants to buy TV advertising across NBC, CBS, ABC and FOX, they can buy a common unit, the 30 second spot. If she wants to buy print advertising across Time, Fortune, Forbes, Newseek and Business Week, she could similarly buy a common unit (e.g. a full page ad). But to buy across YouTube, Metacafe and Break, or across Myspace, Facebook and Bebo, or across GTA, Wild Tangent games and Pogo.com games, she needs to buy custom ad units on each property. This makes ad sales look more like business development – she is negotiating not just price, demographics and reach, but also what the actual units are. This is what makes new forms of advertising so hard. All three industries need ad unit standards to be able to scale. Otherwise they will be trapped by demands for customization.

This year, standards will start to emerge in each media. Ad networks will also gain share in each media, helping make the process of both buying and selling advertising easier. I don’t know what these standards will be for (i) social media (it could be behavioral targeting, content targeting, demographic targeting or social ads) (ii) online video (contextual targeting, overlays or pre-roll) and (iii) in game advertising (rich media or product placements), but I am confident that we will start to see growing support from both advertisers and publishers for the more successful ad units.

2. Structured web emerges.

The last couple of years have seen an explosion of user-generated content, across blogs, social networks, social media sites and user reviews. Previously, when most web content was created by editors, there was good structure and metadata around it. By contrast, most of the user- generated content has been unstructured, and hence the ease with which people and computers can access and use this data has declined.

But Meaning = Data + Structure. Search on user-generated sites has not been a great experience so far. This year we should start to see some point solutions emerge to help add structure to unstructured data, substantially improving the user experience. This will include both explicit (user-generated structure) and implicit (inferring structure from domain knowledge or user behavior) methods.

3. Games 2.0

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Tens of millions of users are now using casual immersive worlds and playing MMOGs. These sites are some of the stickiest on the web, resulting in some of the highest levels of time spent per month online, and indicating that this is becoming a primary form of online communication for some users. Many of these users skew young, and if you believe that demographics is destiny, then you will expect this behavior to spread. The social aspects of these games is key to their popularity

Even more people are playing casual games online. These people often don’t have the ability to commit the time that MMOGs demand. They want to play with their friends, but instead of spending hours online together, they want to do it on their own schedule and in bite sized chunks.

These trends are likely to come together in asynchronous multiplayer games.

Other key drivers of growth for these products will include innovation in business models (free to play, ad- based and digital goods- based models) and channels (in-browser gaming, mobile, widgets).

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