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2006 was another exciting year on the Web. With the world Internet penetration reaching 16%, led by the Chinese, Indian and South American markets, the Web is definitely about to undergo another period of radical change and innovation.

With that in mind, we bring you the top 10 newsworthy storylines of 2006.

Bear in mind that somewhat fittingly, we’re delivering this list in text and video format for your reading and viewing please.

For the text list, do nothing. Just keep reading, to see the video format, click here.

10. SATELLITE RADIO GROUNDED? (see video)
Yes, we know. Terrestrial radio sucks. Mel Karmazin moved from Viacom (VIA) to Sirius (SIRI). And yes, Howard Stern followed. But, who cares. Who do you know that actually owns a satellite radio? I don’t. Not when you have Web radio anyway. Web radio is this year’s satellite radio. Last year satellite radio was on such lists. But something went wrong, very wrong.

First off, as bad as plain old radio might be, it didn’t go out of business altogether. In fact, radio giant Clear Channel Communications Inc. (CCU) has a market cap of over $17 billion. That’s approximately double the market cap of Sirius and XM (XMSR) combined. Clear Channel’s stock has outperformed the shares of both satellite radio companies over the last two years by a wide margin.

And the nature of competition changed. Enter Apple (AAPL), podcasts and even, Nokia (NOK). In fact, we think that companies with outdoor assets (Clear Channel for example) can Wifi-enable billboards and beam their signals to listeners and totally redefine the radio market.

The iPod was launched in 2001 and sold 70 million units in five years. Nokia Corporation thinks it will sell 80 million music phones this year. These devices are obviously delivery mechanisms and platforms for whatever radio is, becomes and competes with.

It’s not like people are not excited about radio, it’s just that the excitement has shifted: over the past five years, Apple Computer Inc.’s stock has risen from about $11 to $91.

One thing that keeps their stocks, well, on the ground is the heavy debt burden: XM and Sirius have balance sheets with over $1 billion in debt and they’re losing money to this day in 2006 off quarterly revenues of some $200 million.

Oh, I know what you are thinking, they are building market share, right. Well, let’s examine the tale of the tape: XM finished the third quarter with more than 7.2 million subscribers. Sirius has more than 5 million subscribers.

More importantly, both companies are reducing targets. That’s weak. Sirius cut its subscriber goal for the year and now say it expects to end 2006 with 5.9 million to 6.1 million subscribers, down from its previous estimate of 6.3 million. XM has cut its subscriber goal at least twice this year. It expects to end the year with 7.7 million to 7.9 million subscribers.

Come on? It’s so weak that some are calling for a merger. Problem. Who buys who?

XM’s enterprise value smaller than Sirius’ even though XM has a larger subscriber base. What does that say? One word: hype. Another word: flash.

Two wrongs don’t make a right. Besides, the FCC will probably not allow it, it sold two licenses to XM and Sirius to ensure competition. If it views satellite radio as one entity taking on terrestrial radio and Web radio, then it says a lot about the future of satellite radio, which held so much promise recently.

And… with Democrats in office, we don’t think that a one company market is realistic.

Lastly, the fact is that the companies’ technologies are somewhat different: they use different codecs.

So where does this lead Mel Karmazin? Who knows, Yahoo! (YHOO) maybe? I hear they need a good salesman.

9. VIDEO GAME MARKET ENTERS A NEW PHASE OF COMPETITION
(see video)
2006 marked the year that the Consoles Wars entered a whole new phase of competition: Wii vs. Ps3 vs. XBOX 360, with the latter coming out in 2005 and enjoying a one year advantage over the PS3, which missed its spring 2006 release date and had to take on Nintendo’s (OTCPK:NTDOY) Wii in November, which at $250 is half the price of the PS3.

What happened? According to market researcher NPD:

In the end: Sony Corp. (SNE) sold 197,000 PlayStation 3 consoles in the U.S. during November, missing its goal for initial shipments by half after parts shortages slowed production

Nintendo Co.’s Wii, which also was introduced last month, sold 476,000 units.

The Microsoft Corp. (MSFT) Xbox 360, on the market for the past year, sold 511,000 machines.

In November 2006, to pre-empt Sony’s PS3 release, MSFT converted its XBOX 360 into an actual entertainment system. Microsoft’s vice president of entertainment and devices division (which oversees Xbox), Peter Moore, forecasts 13-15 million Xbox 360s by end the end of 2007.

Considering the news last Thursday that just one year after the November 22, 2005 launch of the XBOX 360, MSFT will be unleashing over 1,000 hours of programming and getting TV content to an audience that has in the past few years avoided television for video gaming, this is an interesting development. We’re talking content from Ultimate Fighting Championship, CBS (CBS), Viacom, WB and many others.

While analysts and gamers alike were busy talking about who won and who lost between the three, the mainstream media covered the sheer madness surrounding the release, reiterating once again that the video game industry deserves its place at the main table.

Video games will never be the same.

8. VERTICAL: CONTEXT IS KING (see video)
As the leaders galvanize their positions and the Web becomes more mature in general, it’s only normal that there is a movement to develop and aggregate content along vertical, niche or contextual lines. Recently, Spencer Wang, Bear Stearns Entertainment & Cable/Satellite TV Analyst unveiled a report called Why Aggregation & Context and Not (Necessarily) Content are King in Entertainment highlighted these trends quite well.

This is really not all that different than ABC, NBC and CBS making room for the cable stations as TV evolved.

Call it deportalization, call it maturing, whatever you call it, we expect this trend to accelerate in next year as even the major portals launch vertical niche properties.

7. NET NEUTRALITY (see video)
In 2006 a controversy erupted in the United States regarding the extent to which network neutrality should apply to the regulation of the Internet. The companies that provide the backbone on the Web sought to offer end users a better quality of service for their own service offerings or to services who pay the providers. However, five attempts by supporters to get bills with network neutrality provisions passed by Congress were defeated.

What’s the definition? Taken literally from Wikipedia:

Network neutrality is a general principle of Internet carrier regulation requiring networks to satisfy all application needs equally. For example, a perfectly neutral network would not give better service to some web sites than others, and it is argued that it would likewise not favor web-surfing or blogging over online gaming or Voice over IP.

Tim Berners-Lee defines it so as to allow connection to the Internet at various service levels and defines it as: “If I pay to connect to the net with a given quality of service, and you pay to connect to the net with the same or higher quality of service, then you and I can communicate across the net, with that quality of service.” We are not sure if this will ever pass, especially now that companies like Google (GOOG) – who oppose the bill – have established lobbyists on Capitol Hill.

6. OLD MEDIA MALAISE
(see video)
We’re not usually ones to cast old media as the troubled folk that some other new media sources do. Traditional networks, newspaper, radio magazines are powerhouses with strong balance sheet and stronger income statements.

But there has been a sense this year that so-called old media views the web as an integral and important part of their business.

This has been highlighted by management shuffle with musical chairs at:

- Time Warner AOL (TWX) fired Jon Miller and replaced him with NBC ad exec Randy Falco.
- CBS Digital brought in M&A dealmaker Quincy Smith
- News Corp.’s (NWS) FIM’s CEO Ross Levinsohn resigns and is replaced by cousin Peter.
- Viacom gets rid of Tom Freston and brings in Philippe Dauman, a lawyer with dealmaking expertise.

Old Media also embraced many open networks to get their content out to the masses.

Viacom struck a deal with Google. YouTube signed a deal with most media companies. Of course, Universal Music Group sued MySpace, but hey, at least they’re talking. Jokes aside, Bit Torrent too signed a deal with the labels.

All small and not so small steps bridging the gap between online and offline.

5. INTERNET GAMBLING TAKES A HIT (see video)
Like porn, gambling is one of those industries that lies beneath the surface, in the underbelly of the Web.

But much like porn, it is one of the most successful and lucrative ones.

When some politicians began to circulate the Internet Gambling Prohibition Act, a lot of people thought it would not pass. The measure was sent to President George W. Bush to sign into law, and sign it he did.

When President Bush, the House of Representatives and Senate passed the Internet Gambling Prohibition Act, they approved a bill that made it illegal for banks and credit-card companies to make payments to online gambling sites, effectively squeezing out an industry from the landscape.

The result: the stock market capitalization of the major gambling companies tumbled by $6.5 billion.

Britain’s PartyGaming Plc, operator of leading Internet poker site PartyPoker.com, and rivals Sportingbet and 888 Plc pulled out of the United States, their biggest source of revenue.

“This development is a significant setback for our company, our shareholders, our players and our industry,” PartyGaming Chief Executive Mitch Garber said.

“We believe that this will have a very material impact on the long-term prospects of online gambling, and in particular poker,” said analyst Julian Easthope at UBS. “This will lead to a rapid decline in the use of online poker sites.”

Whether or not these laws would be reversed or not will have a major, major implication.

One side factor is that we expect Fantasy gaming to pick up the slack in terms of presence and mindshare online, though clearly, for obvious reasons, that is a very different and smaller ballgame.

4. MICROSOFT GETS BACK ITS MOJO
(see video)
The launch of Microsoft Corp.’s Windows Vista will generate 100,000 new jobs and $70 billion in revenue to U.S. companies in the information technology industry during 2007, according to a report from research firm IDC.

Windows Vista will be installed on more than 90 million computers worldwide in its first year of shipment, according to IDC analyst John Gantz in a report. He said about 35 million units would be installed in the United States, driving nearly $4 billion in revenue to Microsoft.

Industry estimates for the Microsoft’s fiscal 2007 total revenue are around $50 billion.

“In the scheme of total IT spending” Vista revenue “will be small - about 1% of total IT spending in the US in 2007 and less than 4% of total spending on software, Gantz said.

Vista’s business versions entered the market on Nov. 30. The consumer version debut is scheduled for Jan. 30. Windows runs on about 90% of computers worldwide and is one of the two products (the other being Office) that make up about 90% of the company’s overall earnings. The last Windows update was in 2001 with Windows XP.

The report says that for every $1 of revenue that Microsoft earns from Vista, the technology “ecosystem” will reap $18. Microsoft’s partners are expected

See above regarding Microsoft's new programming releases for the Xbox.

Microsoft’s much ballyhooed music player, Zune, was unveiled to a lukewarm reception. But with sales of 1 million units projected by June, there’s a lot of upside for Redmond in music.

MSN Search? Well, sitting in third spot behind Google and Yahoo!, let’s just say that Microsoft has nowhere to go but up.
Best stat of all: in the past 12 months, Microsoft technically beat Google in terms of stock market return.

3. GOOGLE DOMINANCE (see video)
We’ve written plenty on Google. While Google’s stock did not have the torrid growth of previous years, its business model strengthened as it gained traction.

Highlights include Google entering into partnerships with Sun (SUNW) that suggest an Operating System might materialize sooner than later.

Google acquired numerous companies to develop an online productivity suite: online word processor Writely, a spreadsheet company and wiki Jotspot. When it added bells and whistles in its Gmail email service – like the ability to open and save documents from Microsoft in Google’s productivity system – it what was the clearest signal yet that Google was planning an assault on Microsoft’s core business, as Microsoft staged a strike on Google’s search business with the launch (or is it a relaunch) of MSN Search.

If there was any doubt of Google’s supremacy online, it was made clear when in the third quarter, Google accounted for 25% of all US ad dollars spent online. Yep, that stat is correct. Google owns web search and web advertising.

To ensure that it could benefit from up and coming advertising trends such as video, Google went out and purchased YouTube for a whopping $1.65 billion.

We still maintain that this deal was done before Steve Chen and Chad Hurley got a check from Sequoia, for our conspiracy theory, click here.

Google is also positioning itself for the wireless web and in fact to circumvent any spillover results of Net Neutrality becoming law. It has purchased tremendous amounts of dark fiber and rumors have circulated that Google might even make a run for a company like Level 3 (LVLT). Of course, these are merely rumors.

Google’s data mining ambitions continued to cause some to worry about Google’s long term plans. The company, quite simply, has more information on more people in more countries, than any other company at any point in history. And being in the information age, that is a cause for concern. Ironically, Google never had a registration service until a few years ago, but being able to track IPs and what not, it did not even that per se.

While we doubt Google can realistically overtake Microsoft in terms of market capitalization, it is feasible if many trends hold up. We also do not think that Google will be the first/only company to boast a market capitalization of a trillion dollars.

But we do know that Google is well on pace to be theStandard Oil and Microsoft of the 21 st century..

We’re just not sure if that is a good or bad thing in the information age.

So we have covered #10 to #3, #2 and #1 have a lot to do with the “little guy” taking control of the helm due to major trends with media and technology. (see video)

- Broadband now reaches over 50% of households.
- US is no longer the sole engine of Web growth.
- Total web internet population just over 17%, at just over 1 billion people.
- Cheaper hardware.
- Technology companies opening up their Open APIs.
- Free publishing tools such as blogging software have enabled millions of new properties to launch and scale, thanks to RSS and other media sharing tools and applications.
- Podcasting, which earned the Word of the Year in 2005 by New Oxford American Dictionary continued to gain traction, though it remains a very small sector.
- Venture capitalists getting back into the game.

The Web 2.0 hype died down, but that was more of a matter of semantics than anything else. What it represented only got stronger.

So, without further ado, the top two trends and storylines of 2006 are:

2. EXPLOSION OF SOCIAL MEDIA (see video)

The term social media was first coined back in 2004. Chris Shipley (Co-founder and Global Research Director for Guidewire Group) used the term in the months leading up to The BlogOn 2004 conference in July 2004.

Social media can take many different forms, including text, images, audio, and video.

Social media can include podcasts, videoblogging, photoblogging, blogging, wikis, mailing lists, bulletin boards, message boards, social bookmarking, multiple player gaming, social networks and viral video.

Social media, for the purposes of this article, is broken up into:

- Social news: digg vs. netscape
- Social bookmarking tools:
- Social networking: myspace, facebook, etc.

Our reasoning is that social bookmarking tools enable the sharing of media (what makes it social), whereas social networking tends to personal and entertainment oriented, social news is community oriented and generally informative.
Mainly, this is where we see the trends diverging in 2007. The model is too nascent to decree a final breakdown frankly.

By 2005, MySpace had galvanized its leadership role and others began to develop niches. We no longer heard of new social networking sites replacing MySpace, but rather, competing with them.

What does the future hold for social media? Well, that’s up to you to decide, really.

1. ONLINE VIDEO (see video)

The trends that we highlighted above caused web video to simply explode. It was a matter of time really, but many of the people who expected web and video to mesh so well in the late 1990s were simply ahead of their time.

YouTube, a company that launched a mere 19 months ago scaled rapidly to now serve up 100 million daily video streams.

This year, Google ponied up $1.65 billion to acquire it. This was not a great thing for second tier video sites, many of whom will have a hard time gaining traction now that GooTube will consolidate the file sharing video space.

The online video industry is still largely nascent: 27 online video companies secured $126.7 million in financing in 2003, 23 secured $121 million in 2004, and 37 companies secured $160.7 million in financing in 2005 (Thomson Financial).

However, in 2005, the entire U.S. venture capital industry invested $20 billion in 3,000 new companies, so only 5.3% of that was invested in online video.

Most of these funded companies are video technology and distribution companies, very few are content companies.

Regardless, from the amateur filmmaker, to the funny home video sitting in one’s library, to libraries of film studios, the Web created an entirely new demand and market for them all.

Source: Top 10 Tech Storylines of 2006