LIVE from TechCrunch Disrupt: Peter Thiel

Peter Thiel may be best known for being an early investor in Facebook, though his investments look like a Who’s Who of hot (and once-hot) companies in latter-day Internet startups: Yelp, LinkedIn, Powerset, Friendster, Slide, and many more. The president of the hedge fund Clarium Capital, Thiel is speaking in a fireside chat with my onetime colleague Sarah Lacy at TechCrunch Disrupt this morning in San Francisco.

Q: Is Silicon Valley still the center of innovation? Thiel: Silicon Valley is still the center for a lot of technology innovation. But incredible stagnation in U.S. economy. One of the questions being asked about Silicon Valley is how are we actually doing things to make the country and the world better? Lately there’s not that much to move the dial, outside the Internet. We need to be spending a lot more time on breakthrough vs. incremental things (paraphrasing).

Q: A lot of people say it’s not up to VCs here to do basic science–an obstacle to cleantech development. Thiel: Says that’s true. (But) you want to be focused on some of the harder-tech companies.

Q: What’s the most far-out investment you’ve done? Space-X, Elon Musk’s rocket company. The economics are not terrible–people generally pay in advance for launches. It’s just the kind of thing that’s not in people’s mental framework to look at. We should go back to the 1950s and 1960s and look at the classic science fiction things that were supposed to happen–biotech, AI, …

Q: Back in 2006, you said we’re not in another Internet bubble? Were we, or are we now given even higher valuations? Thiel: I don’t think that we are at a crazy valuation point. I suspect Facebook is still among the most undervalued company in the Internet, even at $30 billion. If you had a choice between Google and Facebook, you should be long Facebook.

Q: Would you fund Facebook today? Thiel: We would not be categorically against it. But I think the angel/early VC thing feels very crowded. You have to be very careful. It’s not as contrarian as it was three or four years ago.

Q: Are we at the point with Internet companies like where auto industry was in 1950s? Thiel: More like 1940s. But it’s a lot harder to make incremental progress. So we’re more focused on breakthrough technology areas.

Q: Has Google joined the Microsoft category of companies that are not fundamentally innovators anymore? Thiel: Maybe not quite yet, but possibly. Apple still very innovative. By definition what is technology, what is disruptive, changes.

Q: What about Facebook–still innovative? Thiel: Yes–if Zuckerberg stays in charge.

Q: Is Zuckerberg an evil genius like the movie indicates? Thiel: I would beg to disagree. Hollywood is this nasty zero-sum game where everyone is trying to stomp on each other. I.e., not like Silicon Valley. If this movie encourages people to go create companies in Silicon Valley, that will be a good impact.

Q: What kind of investing do you like among all you do (venture, angel, hedge fund)? Thiel: I like them all. We haven’t invested in any cleantech companies. The challenge is to create something that’s cheaper than oil. To the extent it’s more expensive, it’s not going to work.

Apparently Thiel has an announcement: We’re offering 20 kids under 20 money to create something great. One of the big problems with the (higher) education system is just that it costs so much more. It’s a lot harder to take big risks. You can apply for the two-year program individually or with up to four partners, and get up to $100,000 to start companies.

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LIVE from TechCrunch Disrupt: Fireside Chat with Reid Hoffman and David Sze

Now we’re on to the fireside chat with Reid Hoffman, cofounder of LinkedIn prolific angel investor, and VC David Sze. They’re both partners at Greylock Partners. TechCrunch editors Mike Arrington and Erick Schonfeld are moderating.

Hoffman: Today, we’re announcing Greylock Discovery Fund, a $20 million seed fund to operate very quickly to invest in startups with only a single partner OK.

Facebook, Zynga, Twitter, Pandora, LinkedIn–these companies are some of the most successful startups in the Valley, and most had many naysayers.

Q: What disruptive spaces are underinvested in? Hoffman: Mobile e-commerce. Consumerification of the enterprise.

Q: Are Silicon Valley startups really tackling hard problems? Hoffman: Yes. But is it important to be doing stuff in the hard sciences? It would be great.

Q: What happened to Cuil (which appears to have hit the skids)? Sze: Not close enough to say. Cuil is not done, it’s in the process of a lot of things.

Q: Is it a good thing that things sometimes go wrong? Sze: Yes, it shows you’re taking risks.

Q: Digg seems to be at an inflection point–what’s next? Sze: The last launch didn’t go well, but they’ve made some changes. All the successful companies hit these points. The key is the ability to power through them.

Q: What were LinkedIn’s inflection points? Hoffman: Every year, you actually hit something, no matter how well you’re doing.

Q: Can LinkedIn really overcome Facebook’s more universal appeal? Hoffman: All our numbers are better every month and every quarter. It’s a different consumer value proposition. Sze: Stuff happens in email (but that doesn’t mean LinkedIn isn’t of value in a professional setting). We want some separate between different things. (I agree–very different kinds of services. Some overlap, but I’m doubtful I’ll go full bore on Facebook for all professional things. But the question is how big LinkedIn can be. Less sure of that.)

LIVE from TechCrunch Disrupt: Super Angels Vs. Super VCs

The upcoming panel at the TechCrunch Disrupt conference in San Francisco this week suddenly became the flashpoint for the show last week when TechCrunch editor Mike Arrington wrote a blog post on how he crashed a dinner of angel investors and accused them of collusion. A maelstrom of charges, leaked emails, and countercharges ensued. Now some of the principals in this controversy are onstage together with Arrington: Dave McClure of 500 Startups, Ron Conway of SV Angel, Chris Sacca of Lowercase Capital, Chris Dixon of Founder Collective, Roelof Botha of Sequoia Capital, and Mark Suster of GRP. Oh, and Yossi Vardi has crashed the panel. Here we go:

Arrington asks: Anything else you guys want to add on Angelgate? McClure: No. Sacca: Not really. We have to thank Ron for starting this industry. It seems worth getting past. This whole thing is a total waste of time. Conway: nothing more to say. OK, I guess enough of that.

Arrington: How are super angels different from VCs? McClure: Bigger funds can’t invest a small enough amount to do startups.

Arrington: Do you take money off the table when entrepreneurs do (pre-IPO)? McClure: Yes, but only if the founders cash out some. Botha: No. McClure: Of course he doesn’t, because they’re going for the big score when there’s an IPO. Conway: The rank and file engineer has a right to get liquidity at the same time as the investors and the founder. McClure: True.  Suster: Founders should be able to take “feed the family” money off the table. But if and only if you’ve achieved something in the business. McClure: VCs will get squeezed out of deals if they don’t offer founder liquidity.

Arrington: Valuations are going up. What are you doing to counter that? (Laughter throughout the room, as it’s obvious this is a backdoor into Angelgate.) McClure: We’d have to have dinner on that. (More laughs.) Dixon: None of the last 15 investments we’ve done has been larger than $5 million pre.

Arrington: Why should the entrepreneur care? McClure: Because more startups need to be ready for small exits. You have a higher probability of a $50 million to $100 million exits. If you get too high a valuation or too high a round, you have to go for the fences, and that may not be appropriate (paraphrasing).

Arrington: Is it really best to think small, to go for a $25 million company? Conway: We invest, and two years later the entrepreneur decides if they want to sell or keep going for something more. A great entrepreneur does not talk about the liquidity event when he’s talking to us. Sacca: People get rich on $20 million exits. That’s real money. No one in the audience would sneeze at $4 million (apiece for, say, five founders). (Amen.)

Arrington: There’s a cult of personality developing in the angel community that isn’t good. We need $1 billion-$2 billion-$10 billion IPOs and exits. Sacca: They may not be magazine cover stories. But $20 million-exit companies are not “dipshit companies,” as Arrington called them.

And it’s over, with people on the panel more angry with each other than when they started.

LIVE from TechCrunch Disrupt: John Doerr, Mark Pincus, Bing Gordon

TechCrunch Disrupt, the tech blog’s annual conference in San Francisco, is underway. I’ll liveblog the highlights of this first panel of luminaries, which is looking at Building Internet Treasures. FYI, John Doerr is a partner at Kleiner Perkins, as is Bing Gordon (former longtime creative guy at Electronic Arts), and Mark Pincus is CEO of social game giant Zynga.

Actually, Doerr is soliciting audience questions for everyone, and then they presumably will address them. They’re all over the place–where do you look for new ideas, what about micropayments, the wisdom of developing on a closed platform (in other words, Facebook), is advertising the revenue model for the Internet, what’s the future of companies like Groupon, what matters most for the future of the Internet, what is the future of social games, is the intelligent Web real or a myth, is there a future for Flash vs. HTML5, Internet disruption in health care.

Pincus starts out. 33 million people as of yesterday played a Zynga game. 1200 full-time people. Won’t disclose revenues.

Pincus says the best companies are creating products and services that we now can’t imagine living without–Amazon, Google, etc. That’s what an Internet “treasure” is. He says Zynga measures its users’ “net promotion score,” which has to do with how much they spread the word of their game experiences to others, if I understand correctly.

Doerr says he’s getting a different sense of games culture today–more analytical than creative. “We’re data junkies. We measure everything,” he says, and Zynga has invested in big data warehouses–more than a petabyte of data a day. “We’re adding a thousand servers a week.” Yikes.

But, he adds, design and creativity still really matters.

Doerr: What is disruptive about social games? Gordon: Four big disruptions from the Internet: Social, analytics, APIable Internet (app economy) and new payment methods. What’s disruptive about social games is that they combine all four in one. Pincus: In summer 2007, I was here for the Facebook apps platform launch (so was I). Games and fun were not a big macro on the Internet yet. The disruptive thing for me was not apps and platforms, but that they took down the barriers to entry to playing games–you could now design games that three clicks in, you know how to play them.

Doerr: Is the social Web going to create other great possibilities beyond games? Pincus: We are going through the biggest change in Internet consumer behavior since using the browser. Somebody will become the travel icon on my phone–and be that throughout the Web as a result. Health is waiting for someone to turn it into a consumer product that’s useful.

Turns out John Doerr’s daughter Mary, in high school when meeting Pincus along with her dad and Gordon to assess whether Kleiner would invest in Zynga, sealed the deal by saying, “He’s cool.”

Pincus: Wanted to keep control of the company to avoid “death by a thousand compromises.”

Doerr: Zynga has the notion that every employee is a CEO. That can’t be right, can it? Pincus: We sure try. People have to define what they’re the CEO of, and how they’re going to kill it (that goal).

Doerr: Is it the app economy? Pincus: Every consumer behavior on the Web is going to become an app and a new kind of industry. Consumers are going to expect the way they interact with a service is an app.

Will there be a revenue stream besides advertising? Pincus: I’m a big believer in the user-pay economy. Just as offline, ads will eventually be a small part of the overall Internet economy. Advertising [online] is only a $50 billion industry–smaller than the auto industry.

Pincus: We’re still far far away from being an Internet treasure. People can still imagine life without playing our games. Gordon: I don’t know, I was harvesting wheat at 6:15 this morning. Pincus: We have to make the daily grind have more meaning. It’s a big challenge.

Live at SMX: State of the Search (Marketing) Union

Where is Internet search heading? That’s the topic of a panel on this last day of the Search Marketing Expo, the conference in Santa Clara held by Search Engine Land, Danny Sullivan’s most excellent Web site. Offering their thoughts will be Vanessa Fox, contributing editor at Search Engine Land; Avinash Kaushik, analytics evangelist at Google; Misty Locke, president of Range Online Media and chief strategy officer at Range Online Media / iProspect; and David Roth, director of search engine marketing at Yahoo!. (I guess Microsoft is leaving whatever it had to say to Steve Ballmer, who keynoted Tuesday.) I’ll liveblog the highlights of the panel here. (Actually, it turns out that, apropos of the thrust of the show, the panelists end up talking more about search marketing than core search.)

Sherman says we’ve seen more radical change in the past year than in the previous 15, and he’s not seeing that slow down. Sounds about right to me, though I think the search interface has a lot of change to come.

Key question to start: A year after the economic meltdown, how’s search doing? Roth says the meltdown allowed Yahoo to change its search engine marketing strategy, optimizing for profits vs. revenue or ROI. Locke says e-commerce performed very well in particular. The economy actually helped her business, since search, which is directed at people ready to buy, did well. Fox says large brands are still lagging in use of search.

Do branding and search ads mix? Kaushik says branding was really a metaphor for creating demand. Search, by contrast, is no mere metaphor but a direct driver of behavior. Search can be a massively effective way to show relevance for the right group of people, though.

How’s the Microsoft-Yahoo deal going? Roth says integration is on, a lot of resources being put against it. Proof will come when advertisers move over (which I believe is going to take awhile). Yahoo will continue to work on Search Boss, Search Monkey, and other features outside the search index.

How’s the cultural integration going with Microsoft and Yahoo? Roth says, true enough, too early to say. A lot of it remains to be seen how that’s going to work out. Everybody on this project understands that this is critical, that this is an “absolutely must work” project.

Are search marketers excited about this deal? Locke: Very excited. This gives us a viable No. 2. Now will be 60% of time spent on Google, 40% on Bing, where before it was 80% Google.

What are the prospects for greater reach with this deal? Locke: Not sure. Microsoft has always shown higher ROI, so looking to see if that holds. Cashback is a big new customer driver for many of our customers.

Now with this consolidation to two major players, what’s the landscape? Kaushik: Competition is a really good thing. But it’s prudent to have a portfolio strategy with acquisitions. People get far too obsessed between Microsoft and Google and Yahoo, but people need to pay attention to using those ad venues in unique ways. Fox isn’t sure how Search Monkey and Boss will work for Yahoo when it doesn’t control the index–not sure how much Yahoo will be motivated to keep improving search.

Why is Google’s Caffeine search index infrastructure improvement late, and what impact will Caffeine have? Fox (who used to work at Google) says search engine optimization (SEO) techniques could change a lot as a result of the speed of indexing. Kaushik says Google plans to continue providing search marketers more tools to analyze what they’re doing. Focus is “self-help at scale.” Also focused on providing tools to use search data to improve SEO and divine what impact various search keywords have.

Who’s really doing what in the Microsoft-Yahoo deal? Roth says Yahoo is staying committed in search, including the sales side. Yahoo is going to maintain the high touch with the big customers. The small businesses will be managed more directly on the Microsoft side. As for the platform, the work will be on making Microsoft’s AdCenter the platform. (So much for Panama and all that other stuff Yahoo has been working on for years?)

Could social media replace search as the way people interact chiefly with the Web? One reporter last week told Fox search is the old thing, social media is the thing now–but she thinks it’s not either-or (true). Locke says search is just starting to become the marketing vehicle that most effectively drives consumer behavior. But we’ll have to find new ways to be relevant. Roth says it’s actually the search marketers who are starting to do Facebook ads and other social marketing. Kaushik says marketers will continue to do both. He once said at a conference that Twitter was the dumbest thing on Earth, and got hundreds of hate emails. Now he thinks it’s the best thing since sliced bread. But the key will be using the right marketing for each medium–you can’t just shout in the social media realm.

If you’re going from mass-marketing to individual touch, how do you manage the data overload? Kaushik: We put on the wrong lens when we ask how can we make advertising more relevant? What we do today is try to influence people to do something. One emerging way to influence people is to have these conversations (with social marketing). We are going to be forced to accept this reality that the way we influence people is changing. The Mad Men era is dead.

Will search become another function of marketing rather than a broad marketing method of its own? (Not sure I understand that question.) Kaushik: In so many words, no. Roth: Social media is the first channel that has delivered on the promise of really engaging customers. Social media is absolutely breaking down the silos in marketing. Everything needs to be social in some way.

What’s going to happen when we get unethical marketing using social data and maybe the government gets involved? Nobody wants to answer at first. Kaushik: If you look at the sides of Egyptian tombs, there is spam in those characters too. (OK, if you say so.) You need to provide incentives to do the right thing. In search, there is so much more incentive to do things the right way. We need to keep making sure we provide those incentives in advertising channels. Locke says there will always be spam, etc. But what’s different about this is it’s now the users who are actually policing. The authenticity, consumers can sniff that. Marketing has to be so good that you don’t get called out by the consumer.

Roth says there’s a good chance of government intervention. But the legislators aren’t really up to speed on what’s going on.

Is mobile here? Roth: It’s here but maybe it’s not what we thought it would be. Citi’s Mark Mahaney says now that we’re at 20% of wireless phones being smartphones, ubiquitous Web access could soon become the norm. Kaushik mentions that voice search changes the search game: He recently used an Android phone to speak “Exploratorium location” (or something like that), and that “query” was transcribed by Google servers, which then sent directions based on where he was (which Google knew from the GPS in the phone). That’s a “search,” but a very different one.

Peter Norvig: An Insider’s Look at Google Research

Google is such a business powerhouse that people sometimes forget that every single penny depends on the research of thousands of engineers toiling in the bowels of the Googleplex. That’s why I always like to hear what Google’s rocket scientists have to say. This morning, at the Search Marketing Expo, Pete Norvig, Google’s director of research, is holding forth. I’ll liveblog the highlights here. (And there’s more coverage by Cade Metz at The Register and Tom Krazit at CNET News’ Relevant Results.)

His opening Powerpoint slide promises a review of 21 projects in 15 minutes:

1) Person Finder, following the Chile earthquake.

2) Power Meter you can plug into your house power system to monitor how much you use.

3) Earth Engine, which can show areas of deforestation using Google Earth.

4) Trike and Snowmobile that can contribute to Google Earth views.

5) User photos in Google Street View.

6) Image Swirl, image recognition software.

7) Web-scale image annotation, matching words for images.

8) Image rotation captchas, so you don’t have to divine those increasingly ridiculous captchas.

9) Google Goggles, take a photo of a product and Google will tell you what it is.

10) Discontinuous video scene-carving.

11) Sharing cluster data.

12) App Inventor for Android, introductory programming development environment for phones, in alpha test.

13) Speech recognition, and how much better it’s doing over time.

14) Punctuation/capitalization in transcribed speech. (I want this!)

15) Translating phones, or at least two pieces of it–translation and voice recognition.

16) Low-resource MT: Yiddish–better translation even with languages with not much written material.

17) Sound understanding: Show me all the car crashes in YouTube. Not quite there yet, but it’s coming.

18) Google Squared

19) Clustering of words within a context, like “Whistler” creates clusters of the painter, Olympics, British Columbia, etc.

20) Attribute extraction, to improve search results.

21) Browser size–tool that puts overlay on pages that shows which percentage of the page can be seen on each browser.

Whew. Barely kept up there.

Norvig: We’re trying to observe the world of the Web… try to understand all of that that’s going on by observing the data and creating models.

Chris Sherman at Search Engine Land, which puts on the SMX show, asks about 20% time. Norvig says Google’s ability to scale Webwide using Google’s infrastructure is key, because it allows much faster testing and deployment.

How do you decide the balance between short-term and long-term research? Norvig: We’re pushing very hard toward doing something useful. Always in service of something we eventually want to get out there.

Danny Sullivan, Search Engine Land’s editor in chief, asks about what has come out of 20% time. Norvig: Gmail is one example. Though right away that became that engineer’s 100% time. Speech recognition is another.

How much are cofounder Larry Page and Sergey Brin involved now? Norvig: They’re very involved. They’re setting the long-range direction. And they’re really trying to evaluate as many projects as they can. Their life hasn’t changed very much, because they’re still at their deep level. But for rest of us, a lot has changed–takes them longer for them to get to any particular new project.

What are you researching now? Norvig: Education. Ways to lead people to information over an entire semester, not just this moment.

How are projects segmented in various regions? Norvig: Some are local because we need local translations or products. Remote product development sometimes because that’s where the right people are.

What technologies do you see out there that would change how search is done? Norvig: Lots of emphasis on mobile.

How has Google come up with new signals to do real-time search? Norvig: One thing that I still think is overhyped in PageRank. Just one of many things. We never felt that it was such a big factor. It’s got the catchy name but we’ve always looked at all the available data. How do users interact with them, etc. You’re combining every available signal. It’s just a slightly different combination.

What enables that is the infrastructure that we’ve built. That’s allowed us to do real-time.  I remember when we went to hourly (updates of the index), and Larry pushed back and said that’s not good enough. The engineers said, well, we can’t do better yet. In the end, Larry gave in, but said they needed to call it the 3600-second index, otherwise the hour would remain an hour.

Is it time for new marketing beyond PageRank? Norvig: I think that’s right. We need some better branding.

On the Caffeine infrastructure update, what’s your group’s role and where’s it at? Norvig: Gives only vague timing, despite coverage lately that it might be late.

Do you have some signals Google uses that people don’t realize? Norvig: Bibliographies in Google’s book scanning.

How separate is the search and the ad side? Norvig: Just the way a newspaper has editorial content and advertising content, and those don’t mix. Of course, we use Google File System and Big Tableing and things like that in both.

Is there more work put into core search vs. ads? Norvig: Doesn’t quite say (though I suspect most of it is core).

Now that the Web is an index of objects as much as pages, will there be a different notion of how to treat those objects, like companies or people’s names? Norvig: We are moving in that direction. We want to support types of queries like “show me these types of companies and rank them by revenue.” You’re on your own now unless some page has done that.

What are the really hard problems today? Norvig: Vision is the big problem today. There haven’t been really big breakthroughs from 20 years ago. Still images and especially video images. There’s just so much more data involved in video vs. a text file. And parsing video into understandable objects. I’m excited about that.

Do you have any solutions for email overload? Norvig: Actually I had an intern last summer working on that project. Some experimental things will roll out before long. Another thing is saying, Is email the right tool? Maybe just slashing all that down and starting all over again is the way to go. Google Wave? Google Buzz? Not sure, but maybe. But still people trying to figure out where Wave works. Do I make a Google doc, do I make a Wave, do I make a site? I think we’re going to have to see some consolidation… based on the content.

Sergey has talked about embedded chip in your head to do searches–anybody doing that? Norvig: Uh, not yet.

How do you ensure that people get training and knowledge to work at Google? Norvig: When people doing information retrieval in college come to Google, they realize all I knew was wrong. That’s changing a little bit. Also we have an internal course on all the Google tools. Then give them a starter project. Then they get ready to do something else on their own.

Do you move people around a lot to different projects? Norvig: We encourage that. We like to keep our projects short–three or six months rather than a year. Often they find a couple things out of those projects to do, so they stay a little in that same area for awhile. But we do make it easier to move from one place to another.

What’s next in search–any dramatic changes in the metaphor beyond the list? Norvig: You see the page becoming more interesting and varied–pictures, video, etc., rather than 10 links. Mobile is also driving things hard because the screen is so small. There we’re really forced to do a better job. That will require more of a partnership, more interactive. Won’t be as stateless–will have more of a dialogue that both sides are contributing to. Right now, we force the user to do most of the work.

And that’s  a wrap.

What I’d Like to Happen in 2010 (But Probably Won’t)

I just foolishly offered some predictions on what will happen in tech and and on the Internet this year (and what won’t happen). Now, I’d like to offer a few things that I wish would happen:
* Cell phones provide decent call quality. I really don’t get folks who don’t have a landline, because cell call quality often sucks, and I simply refuse to inflict this on people I’m talking to if I don’t have to. I’m not the first to point out that cell phones have improved in every way except as phones, and I’m pretty sure I won’t be the last, especially as data-intensive apps hog more and more bandwidth.
* A cheap, fast, and simple way to get Internet video onto my TV. Yeah, I know there are many ways to do this, but somewhere along the line, they all seem to require some kluge to work. Sorry, life’s too short. Really, can it be so hard to come up with something that just works, like Tivo? (Come to think of it, maybe Tivo is it–just not the model I own today.)
* Apple gets the iPhone onto Verizon’s network. I know, unlikely at best. But I’d buy an iPhone right now if I didn’t have to deal with AT&T’s spotty network, at least in the Bay Area. Otherwise, I’ll stick with the Touch and cadge WiFi where I can get it.
* Someone figures out how to help individuals sift through the data deluge flooding us from Twitter, Facebook, news sites, YouTube videos, and who knows what-all. I sure wish, and whoever does this in a reasonably comprehensive way will have a heckuva business. But I’m not holding my breath.

What Won’t Happen on the Internet in 2010

Against my better judgment, I just posted a few predictions for the parts of tech and the Internet that I pay attention to. But maybe it’s just as important to note what won’t happen:
* Tablets won’t be the next big thing in client computing. Oh, Apple will create a lot of buzz over whatever it releases. But as my former colleague Steve Wildstrom notes, the key will be the user interface–specifically, user input. Like it or not, a keyboard is still key to doing (as opposed to watching) anything online. A virtual keyboard might work, and voice commands might work as a way to surf to the most-visited sites. But beyond typing 140 characters at a time, a real keyboard still seems mandatory. So does an easier way to upload video and communicate via voice and video in real-time. This is one reason the iPhone and other smartphones are so popular–you can take a photo or record video, send it, and then communicate about it all on the same device. I’m not sure how a tablet is going to do that elegantly–though if anyone can figure it out, it’s Apple.
* There won’t be as many tech IPOs as venture capitalists and startups are hoping. A lot of folks are predicting a significant number this year, and I don’t doubt there will be a noticeable improvement from the drought of recent years. But I’m skeptical that there will be enough to save the bacon of many startups and VCs. The economy’s too uncertain, and retail stock buyers don’t seem ready to step up for what they surely remember are very speculative investments. If I’m wrong about the number of IPO filings, it will be only because there will be too many offerings that people shouldn’t be buying anyway.
* In particular, Twitter won’t go public. Neither will Facebook (though I’m less sure about that). The thing is, both can afford to wait until the economy or the IPO outlook really turns around. There’s no reason for them to lead the way in an uncertain market and risk getting less than top dollar.
* Real-time won’t be a business, except for Ron Conway and betaworks. Oh, it’s important, but as I’ve said before, I think the appeal of most so-called real-time technologies and companies is the social aspect. In other words, the key thing is less real-time than real people.
* Online advertisers won’t escape a privacy backlash, because they’ve been careless about addressing people’s concerns. I think the real problem is poorly targeted advertising, since the right advertisement is likely to be overcome any sense of spookiness. If the ad scientists hadn’t gone all geeky and named targeting advertising “behavioral targeting,” and then often tried to hide what they’re doing, they would be in a much better position. “Personalized advertising,” fully disclosed, might have worked much better. But it’s probably too late for semantic tricks at this point–especially for lawmakers looking to make headlines. At the same time, this won’t tank online advertising, or even dent it much. Advertisers will find ways to get around any restrictions that are imposed, which will be so general as to be fairly meaningless.
* Google won’t get hit with a major antitrust lawsuit that so many have been predicting for years. It’s just tough to pin particularly egregious competitive behavior on the search giant–not yet, anyway. It also must have learned something from Justice’s slapdown on its aborted Yahoo deal. So while there will be some noise–perhaps around the Google Books agreement–Google may skate by. As it continues to vacuum up more online services, however, the US. or Europeans regulators will keep looking for a way to limit its power.

What Will Happen on the Internet in 2010

Predictions may be more useful for the writer than the reader. After all, if you’re as specific or as provocative as you should be, you’re going to be wrong at least half the time, and that’s not a very dependable percentage to prove your worthiness as a futurist. For me and other prognosticators, though, predictions are a useful way to ready ourselves for the coming year (OK, it’s already here)–to tell ourselves what to pay attention to and to provide a vantage point for assessing the many events and announcements to come.

So here’s my attempt to predict a bit of what’s going to happen in technology, mainly on the Internet–that is, the scattered parts of it I pay attention to. I’m also going to follow up with two separate but related posts: what won’t happen this year, and what I wish would happen but probably won’t.
* Merger mania will accelerate in technology. Valuations of private companies in particular seem low enough, but won’t be forever. And the industry’s leaders–Cisco, Google, Microsoft, HP, etc.–not only have the cash but have said they’re ready to spend it. Both sides know that cosmic convergence won’t last for long, so they’re ready to deal. I don’t know that multibillion-dollar deals will happen but I bet there will be many smaller deals.
* Branding will start to become more apparent in Internet advertising. That’s mostly because brands won’t be able to treat “digital,” as traditional ad types quaintly call it, as an add-on anymore. The Web is becoming the main event for too many consumers now. Plus, targeting technologies of all kinds, along with new ad formats, are starting to get good enough that brands can stomach using them. Not least, display ads, the chief vehicle for online brand advertising, will be a big focus for Google this year. While it’s not at all certain Google can master branded display ads, its efforts no doubt will move things forward.
* Google’s software efforts will finally establish it as more than a search company, making it apparent what this pony’s second trick is: Whether it’s because of Google Apps, Android, Chrome OS and the Chrome browser, or some new product, Google will be seen as the software company it really is. It will continue to be seen as a media company as well, but that’s only because software provided as a service on the Net is the new media. It’s just that few people realize this, least of all traditional media, to their everlasting detriment.
* Yahoo will surprise on the upside, thanks in part to that pickup in brand ad spending, which has always been Yahoo’s strength. Also, people may be underestimating CEO Carol Bartz’s ability to get Yahoo, which has more resources than its performance in recent years would indicate, back on track.
* Mobile applications will start to take off. Only start? For the masses, yes. I can assure you that even many of my tech-savvy friends in the Valley have no idea what Foursquare is. Plus, bandwidth limitations will only get worse, which could delay mass rollouts of data-intensive apps. But there’s a reason smartphones are exploding, and it’s not because they’re a computer in your pocket. They’re the Internet in your pocket.
* Twitter’s main business model will become more apparent–whatever it turns out to be. But it won’t knock everyone’s socks off–at least if it turns out to be mainly selling data feeds to other companies. I’m also not sure lead generation, e-commerce or even in-stream ads are killer businesses. None of that sounds like the next AdWords to me. I’m not privy to Twitter’s plans, but I have to think the ambitions of its founders and everyone around them require some new kind of advertising that’s just as fast and easy for advertisers as search ads.
* Facebook will keep growing, providing perhaps the first test of whether social media is a blockbuster business after all. Although I’ve been on Facebook a long time now, anecdotally it feels like my generation (let’s just say, not in our 20s and 30s, OK?) has just started embracing it bigtime. And that’s a lot of people. Eventually, and I think before long, Facebook’s scale could create fairly specific audiences that could rival the reach of television. That’s the Holy Grail. What I don’t know yet is if Facebook will be able to seize that opportunity.

Greetings

On Dec. 1, I’m leaving BusinessWeek magazine after 21 years as a writer and bureau chief in Silicon Valley for some new adventures of my own making. For the last few years, my Web site has been businessweek.com and its Tech Beat blog. Suddenly it’s time (and yes, WAY overdue) to set up a more independent presence online. For now, while I take some time to decompress and get some planned projects rolling, this will be my main online home and outlet for blogging.

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