On August 9, 1995, a 16-month old “web browser” company named Netscape, founded by a 23-year old Illinois programmer, went public. In much the same way Netscape’s IPO became regarded as the starter pistol for the tech boom years that followed, some now reference Facebook’s 2005 institutional round as the unofficial start of the current consumer internet revival. Five years into this investment cycle an examination is probably in order. True, while there exists some froth in the broad consumer internet sector we are not headed for some spring 2000-like meltdown. Indeed, what is driving the accelerated investment pace is intense innovation spurred by a variety of factors that will be with us for some time.
Much of the early promise of the consumer internet is only now coming to fruition. If we learned anything from “The Jetsons,” the future eventually arrives although never quite in the way we envisioned. Most VCs of a certain age will remember the bold promise of consumer internet pitches of the 1990s about the disintermediation of industry juggernauts, price compression, and the elimination of nagging inefficiencies across industries. However, in order for many of those Sharpie’d diagrams of a decade ago to ever leap off the whiteboard and become companies of significance many things that were not then in evidence had to fall into place with almost military precision. Fortunately, these elements are in evidence today and largely responsible for the current consumer internet innovation boom:
- a collapse in application development costs, creating “lean”, capital efficient businesses;
- advances in search engine optimization, security and payment processing;
- the explosion of cheap, ubiquitous broadband enabling the distribution of rich applications offering compelling user experiences;
- a massive shift in advertising spend online and the ability to accurately monetize traffic;
- viral marketing and network effect dynamics;
- media portability and customizability (i.e., user-generated content);
- the arrival of iconic, game-changing devices (iPhone, iPad) enabling companies to extend their brands; and, most of all,
- engaged, demanding consumers emboldening start-ups and their investors to push further out on the risk profile to deliver exciting innovation.
Of course, none of this would amount to much were it not for the dramatic evolution of how users were interacting with and embracing technology as part of their daily lives. In-car navigation systems and applications like voice-recognition software are redefining how we interact with our computers, what we expect of them, and how increasingly integrated they’ve become in our lives.
The Netscape IPO was so seminal partly because the browser was very humanizing. It took something that was arcane at the time—the World Wide Web—and made it accessible to millions. This evolution of human/computer interaction is still in its infancy. Teams continue to innovate around what we demand of our devices and – at the risk of sounding a bit melodramatic here – around how we interact with each other and the businesses we patronize, and about the type of people we wish to become and the society we wish to inhabit.
However, what we see today is but a skeletal representation of the applications that will be forthcoming. Take Location-Based-Services as one obvious example, but we can say much the same about next-generation search, vertical social networks, even ecommerce. Inarguably, LBS is a “hot” sector with companies like Foursquare becoming media darlings du jour. However, for anyone who’s been following LBS closely, today’s “check-in” and gaming technologies – as intriguing as they may be — are decidedly version 1.0. The innovations coming shortly will make such functionality seem so 2009. That’s not intended as a dig at Foursquare; indeed, Foursquare is just as likely to be providing this next wave of innovation as anyone. My point is that we are perhaps in the second or third inning here.
Being able to discern from my device where my friends are now or what store coupons I can redeem today is all well and good, but the coming wave of LBS 2.0 applications – some of which are already here — will be able to discern where we will be tomorrow and push content and services to help us plan travel, connect with friends, inform us of upcoming events (and purchase tickets seamlessly, naturally). In short, they will be richer, more relevant and more useful.
LBS 3.0 will consist of applications extending that v2.0 thread of innovation further – say, allowing you to create wholly customized experiences around your interests with geo-tagged content and advertisements so well targeted as to be fully embedded into your experience. Going to be in Rome Wednesday with a few hours to kill? Take a fully customized walking tour of Vatican City on your GPS-enabled device. You will hear all the usual tour book content but — since your interests are, say, fashion and Renaissance architecture — the content you receive will emphasize those interests. Taking your spouse? Using a separate device, he or she will be able to walk down the same streets as you and get an entirely different tour experience because, naturally, your interests differ. And so it goes…
Yes, this is a very exciting time to be investing in consumer internet. The notion that a slowdown is imminent would require a belief that innovation is fading and consumers are not demanding these kinds of rich applications. This is folly. The blogosphere may spend its time on marginalia like AngelGate and so on, but such harmless distractions have little bearing on the prospects of teams quietly building the next wave of game-changing consumer internet companies. So, freshen your drinks, get a ringside seat and get comfortable; we’re going to be here a while.