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Top 10 Tech Investing Trends For 2011

This post by 500 Overlord Dave McClure was originally published on Reuters.

I bring you the top 10 tech trends for 2011:

1. (Way too many) Groupons, social games and photo-sharing apps

Unimaginative VCs — which is to say, all of us — tend to start the new year off throwing good money after bad on last year’s tired and expired ideas. 2011 will be no exception for “innovation imitation” with more group-buying ecommerce plays, more social game startups, and yet even more ways to do photo-sharing on Facebook and Twitter, now new and improved with 37 shades of yellow-gray filters. Bah humbug. My first easy and obvious prediction is that VCs will waste a ton of money chasing hundreds of new “me-too” startup ideas. Nothing new here Kmart shoppers… let’s move along.

2. Commerce and coupons for location-based services (LBS), aka “The $5 check-in”

While there have been a “bajillion” startups pitching “check-ins” and location-based services in 2010, I really believe 2011 is the year we see this category finally get some legs and take off. Why? Because companies are finally starting to provide discounts and coupons to customers via mobile devices. And once the affiliate market develops for exchanging location and profile data, we should see more people adopting check-in behavior to qualify for discounts and loyalty programs for their favorite online services. As I wrote earlier this year in a post called “Check-ins are coupons”, once financial incentives are combined with existing game mechanics, we’ll start seeing mainstream usage for services like Foursquare and Facebook Places. Going forward we will see an explosion of LBS innovation after Google, Facebook, and other platforms begin pushing revenue incentives for apps that facilitate location data.

3. Crowdsourcing: The Web-enabled mass assembly line

The Internet is a great platform for distribution, but now you can use it to reach not only customers, but also workers — it’s called crowdsourcing. While Amazon Mechanical Turk has been around for a few years enabling access to thousands of remote workers, new startups like Crowdflower (disclosure: I’m an investor) offer platforms for managing the distribution of small, specific tasks to a large and scalable workforce around the world.  By combining the Web with an “on-demand” workforce companies can grow rapidly, remixing both digital and human to weave an entirely new fabric of business services.

4. URLs for IRL: enabling the Internet of “things”

Yet another innovation around integration: the offline world is quickly becoming stapled into the future by combining physical representations with digital ones. Imagine if everything you touched, held, or viewed in real life became a separate online addressable entity… kind of like slapping a sticker with a URL onto anything and connecting it to the Web. Not quite cyberspace, rather this augmented reality is how we are building out the real world online, and subsequently can deliver benefits of identification, indexing, categorization, discovery, and location to the offline world. This new and enhanced Internet enables offline discovery and navigation of many previously hidden real-world resources.

5. The Emergence of global languages and geographic arbitrage

Current estimates suggest more that two billion people around the world use the Internet via PCs, and including mobile phones perhaps three billion people are online, or around half the entire population of the earth. As shown by this infographic, English and Mandarin dominate the online conversation with close to 500 million speakers online and more than a billion offline. Also growing in online influence: Spanish, Arabic, Hindi, and Portuguese. What’s interesting is that these languages also seem poised to drive cultural trends globally. Looking at average GDP and Internet penetration by language, we can map out a geographic playbook for any Internet startup to prioritize how they lay the online smackdown on the planet, and use geographic arbitrage to move the point of innovation, production, and transaction to optimal locations.

6. YouTube killed the video star: Distribution and monetization of online video

After years of free online video via YouTube, you’d think it’s impossible for anyone to make money online. But on the contrary: Apple, Netflix, and Hulu are laughing all the way to the bank, and even YouTube itself is rumored to be close to break-even. Massive distribution and monetization platforms are now a reality for online video, which should translate into tremendous opportunities for startups. Expect more innovation and development to come in the future, particularly as millions of iPad and other tablet devices become more common mainstream. Here’s lookin’ at you, kid.

7. More iPads, iPhones, iOs Apps and more Android on the way

Apple continues to be an irresistible force of nature when it comes to consumer computing devices and application platforms. Bloggers are already arguing whether Apple will “only” ship 45 million iPads in 2011, or whether they’ll exceed 50-60 million units. Nice problem to have for a product that’s barely a year old, eh? At the same time Android devices are growing in popularity, and seem likely to compete effectively with Apple for mobile application dominance. Regardless, both platforms will be driving huge amounts of user and developer activity, and the future couldn’t look brighter for startups focused on mobile apps and services.

8. Design is the new black: The growing importance of user experience and design

Along with Apple’s success — or perhaps because of it — design has become a critical skill for startups. Apple-fanatic obsession with simplicity and user experience has also become a priority for consumer-focused startups in particular. The most notable example of this is one of my former portfolio companies, Mint.com, acquired by Intuit in 2009. As with Apple, the Mint team had a never-ending passion for design and UX (user experience), and many people attribute much of Mint’s successes to their unique and compelling Web design. I expect the design trend to continue and even accelerate; look for growing and continuing investment in design-driven and UX-driven products.

9. Family 2.0: Apps for kids and grandmas

Better design and better user experience has made it easier for new audiences to start using the Web, particularly the young and the old. My kids – now 3 and 5 – have become big fans of using the iPhone and iPad, and when I watch them their experience is so natural and easy. They never had to read a manual, they just started touching and swiping and pinching – it was magical. But while kids have become easy and eager adopters of these devices, there remains quite a large amount of education content and apps to deliver. And not just for kids, but also for older folks too. More seniors are also getting on board with new devices, so expect a growing market for users of all ages.

10. Facebook is dead. Long live Facebook.

Some folks continue to complain that Facebook is overvalued, or Facebook has jumped the shark, or Facebook app development is challenging and the rules change constantly. To these folks I say: stop whining, get over yourselves, and get to work. Facebook is an unstoppable juggernaut that is dominating our online experience. While Twitter certainly has grown by leaps and bounds, it’s impossible to ignore how significant Facebook has become as a familiar and frequent online environment… for everyone. And generally, this is a good thing. While the idiosyncrasies of the Facebook platform change all the time, it’s worth the effort. And regardless of whether you’re building games or productivity, there is no question that enabling access and distribution through the Facebook ecosystem is a positive benefit for both developers and users. Expect more Facebook Connect and “like” buttons popping up in a neighborhood near you.

via : http://blog.500startups.com/

Which Identities Are We Using to Sign in Around the Web?

The days of having a separate login and password for each online service we use are behind us. Now, you can log into most sites and services using your social network’s ID.

The most popular social identities are Facebook (), Google (), Yahoo, and Twitter (), but are they always being used in the same way? The infographic below, courtesy of social optimization platform Gigya, shows that users trust different identities on different services. For example, users are most likely to log into entertainment sites via Facebook, but when it comes to news sites, the social identity of choice is Twitter. Furthermore, the infographic shows what profile data is available to services after users log in using various online identities. Check out a bigger version of the infographic here.

Web 2.0 to China - Ok, Let’s Try This Again…

Yesterday, I had lunch with one of the top people in the Chinese Internet scene who said, “We have a saying here, ‘Internet multinationals all fail in China, Google was just the last one to go.’” As sayings go, that’s not especially catchy. But it is devastating. And true even if you count Google’s recent actions as a China morally-based forfeit. The stark truth is there are already more Chinese than Americans online and China is only at about 20% Internet penetration. And yet, so far, Yahoo is the only one to play this market well, by swapping its local assets and $1 billion for a 40% stake in Alibaba back in 2005.

But a funny thing has happened between my last trip to China in October of last year and my current trip. The Silicon Valley Web 2.0 gang has invaded. OK, “invaded” is the wrong word, it’s more like gingerly “waded into the pool.” Most of the entrants are being very cautious, staying below the radar with limited, hedged plans. But there is a clear trend of Web 2.0 testing the Chinese waters—and hoping it doesn’t make the mistake the first generation made.

The picture above– snapped at a Beijing newsstand where Scarlett Johansson and Sarah Jessica Parker were the only other faces I recognized– is a good metaphor for the kind of hey!-don’t-look-at-us!, easing-into-the-market approach the Web 2.0 generation is taking. (Note the word “metaphor.” I’m not implying Facebook planted this or even pitched the story to what I understand is an English language learning magazine.)

There is Playfish’s office, the Zynga acquisition of XPD Media and Hulu CEO Jason Killar’s recent visit to Beijing where he announced an impending China launch. Just last weekend Max Levchin of Slide hosted a developer day at the company’s Shanghai office. Who even knew Slide had a Shanghai office? (It’s interesting that Levchin grew up in Soviet Russia just like Google founder Sergey Brin but apparently doesn’t have the same hang up with the Chinese government.) Facebook is reportedly opening an office next and I spoke with several people over the last week who said they had gotten calls from headhunters.

Will Silicon Valley Web 2.0 companies do better than the 1.0 generation? It depends on what the community has learned from such abject failure. A few lessons seem obvious, judging by the new, more cautious approach.

Lesson #1: The Valley learned it can’t be cocky. No one is making bold statements about taking over the Chinese market the way Web 1.0 leaders did. I remember a keynote by Meg Whitman in the early 2000s where she boasted that the “Sun never sets on eBay,” so assured of its future in China. Yeah, that didn’t go so well. No one is swaggering into China with the same bravado today. China has developed more $1 billion-plus Internet companies than any other market and most of them started out as US copycats on features, where they excelled was in process, execution and business models. Today, Web entrepreneurs get that.

Lesson #2: It’s China’s house, you have to play by China’s rules. A lot of people hate this one, but it’s just reality. You know that scene in “Jerry Maguire” where Tom Cruise storms out of the office and says “WHO IS COMING WITH ME?” and pretty much only Renee Zellweger joins him? That’s pretty much what Google’s pull out of the China market in March was. Since that date, Web 2.0 companies have only upped their China hires.

Lesson #3: Hire first, launch later. Most of these offices are just development offices, taking advantage of local talent. But make no mistake: This is a savvy way to asses the market and build connections. Talent isn’t that cheap in Beijing and Shanghai relative to the rest of the emerging world and the price is escalating. Call it the Hulu model– the company had an R&D division in Bejing long before it announced its recent intention to actually launch service in China.

All-in-all these three lessons make for a smart strategy. China is the only country outside the United States that’s given birth to several billion-dollar-plus Internet companies and there’s some $20 billion in venture capital sloshing around this country, by some estimates, that’s anxious to find the next local crop. There’s no question there’s a lot of momentum investing here and a lot of these startups will fail. But whenever you have this much activity and 400 million people online, there will be more big hits too. This is simply not our market for the taking.

But where the Web 1.0 generation was too cocky, the question is whether the Web 2.0 generation is being too cautious. Online games and virtual goods are already big markets in China—bigger than in the US in fact. And there are already big local iterations of things like Facebook and Twitter. Is it already too late for some of these companies?

Clearly, the Valley is still trying to figure out how it plays in China. At least this generation is trying to learn, listen and make friends first and colonize later.

by Sarah Lacy via techcrunch.com