Consumers spent more time, and advertisers more money, on digital media in 2016 than ever before, while traditional formats remained stagnant or even showed signs of deterioration. Google and Facebook have emerged as the clear winners, controlling roughly two-thirds of global ad revenue. In the year ahead, this duopoly will force marketers to develop authentic and innovative methods of reaching their audience, such as the integration of augmented- and virtual-reality campaigns, the use of voice search powered by artificial intelligence, and the implementation of chatbots to reach consumers on the devices with which they're spending the most time. And while consumers increasingly turn to digital media, the contrasts with linear TV will fade. Digital giants like Netflix will expand their household presence, while social platforms like Facebook, Twitter, and Snapchat aggressively invest in video-first strategies. 

Below are our top predictions for the digital media industry in 2017. These predictions are based on our ongoing tracking, analysis, and forecasting of the digital media market, and conversations with industry executives.

Consolidation in the digital media space will accelerate as VC money thins and legacy media companies vie for digital audiences, culminating with an acquisition of Twitter. Venture capital investments in digital media companies hit a three-year low in Q2 2016, according to CB Insights data cited by Bloomberg. The slowdown reflects an overcrowded landscape in which investors see limited prospects for niche players to compete for ad dollars with well-established media brands and tech giants like Facebook and Google. This opens the door for more consolidation in 2017, as companies look to diversify content and build larger audiences:

  • Large telecommunication and television companies will acquire digital media brands to build out their digital audiences, especially mobile-first ones that skew toward younger generations.
  • Smaller digital media targets will be eager to partner with larger, better capitalized companies in order to focus on products that grow audiences. With less pressure to drive revenue growth, digital media companies can build improved products that keep users engaged.  
  • Twitter will get acquired by a digital-media company. While a potential purchase of Twitter was heavily rumored this year, speculation died down in October. The company’s renewed focus on live video will attract a large media company that lacks the technical expertise.  

Credible threats emerge to Google and Facebook's [...]