Is The Tech IPO Deep Freeze Finally Thawing?

Courtesy 20th Century Fox

From my Forbes.com blog The New Persuaders:

Facebook’s initial public offering in May was supposed to be the bellwether for an expected pile of IPOs this year, but the subsequent dive in the social network’s shares appeared to put new offerings into a deep freeze. Now, it looks like the mini-Ice Age for IPOs is starting to thaw.

Today, two companies that were widely expected to file for an IPO before Facebook’s IPO faceplant, said they plan to go public this month. Internet security firm Palo Alto Networks aims to raise up to $175 million with an offering at $34 to $37 a share.  Kayak, which had put off an IPO expected late last year, also priced its offering, hoping to raise $87.5 million at $22 to $25 a share.

Given that Facebook’s IPO was supposed to be a sure thing–and most assuredly wasn’t–there’s certainly no guarantee that these two companies will help bring back the IPO market. Investors will be cautious about every new IPO, not only because of Facebook, but because of the poor subsequent performances of tech IPOs such as Groupon and Zynga. What’s more, the economy is simply too uncertain to bet on a momentum-driven market like IPOs.

Nonetheless, successful IPOs by Palo Alto Networks and Kayak–on top of another recent IPO success by ServiceNow in June–would inject new life into the technology investment cycle. Indeed, investors such as YCombinator’s Paul Graham have warned that Facebook’s face plant has already cooled early-stage tech investment. So any revival would be positive for the innovation and growth that comes out of that cycle. …

Read the complete post on The New Persuaders.

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What’s the Next Breakout Mobile Startup? Here’s What VCs Think

Cross-posted from my Forbes.com blog The New Persuaders.

Mobile computing is arguably the most disruptive force in tech right now. Just look at what it did to Zynga’s stock today. Or what it has already done to Facebook’s and Google’s shares.

Today, a group of venture capitalists laid out what they think is coming for mobile investment this year–in other words, who’s going to disrupt whom next. On a panel at the AlwaysOn OnMobile conference in Redwood City (Calif.) were host Mihir Jobalia, managing Director at KPMG; Rob Coneybeer, cofounder and managing director at Shasta Ventures; Paul Santinelli, a partner at North Bridge Venture Partners; Sling cofounder Jason Krikorian, now general partner at DCM and the Android Investment Fund; Navin Chaddha, managing director at Mayfield Fund; and Aydin Senkut, founder and president of Felicis Ventures.

Here’s what they had to say:

Q: What are the opportunities and challenges in Apple’s iOS vs. Google’s Android?

Chaddha: With Android, even though it’s open, not having control is a big issue. If developers have an app, they go to iOS first, then they look at Android, but there are so many choices, phones. It’s just hard. In the iOS, iPad and iPhone are all the same–life is easy.

Senkut: iOS’s big advantage is monetization. If you want growth and high numbers, it’s difficult without Android.

Coneybeer: It’s a stable duopoly. You need to do both. But nobody’s talking about any other platform now. For developers, you’re looking at a five-year-plus duopoly.

Santinelli: In a few years, you’ll be able to do all development in HTML5. It will solve a lot of those fragmentation problems.

Q: Where are the most interesting growth opportunities in the next five years?

Read the full post at The New Persuaders.

The Top 10 Tech Trends, Straight From the Top 5 Tech VCs

Cross-posted from my Forbes blog The New Persuaders:

Everyone in Silicon Valley wants to know what’s coming next, and every year for the past 13 years, a panel of the most forward-thinking minds in technology and tech finance convenes here to provide a look at what innovations are likely to emerge in the next few years.

Last night it was time again for the Top 10 Tech Trends dinner, hosted by the Churchill Club, which puts on a bunch of Valley events with top tech folks every year. I wrote about last year’s here as well.

This year, the 14th, the panel is especially venture capital-heavy, but these folks are also, to a person, heavyweights in the Valley, so their opinions carry special weight. On the panel: Kevin Efrusy, general partner at Accel PartnersBing Gordon, investment partner at Kleiner Perkins Caufield & ByersReid Hoffman, partner at Greylock and executive chairman and cofounder of LinkedIn; panel regular Steve Jurvetson, managing director of Draper Fisher Jurvetson; and Peter Thiel, president of Clarium Capital. Moderating the festivities in place of longtime emcee  Tony Perkins, Churchill Club cofounder with Forbes Publisher Rich Karlgaard, are Forbes’ Eric Savitz, San Francisco bureau chief for the magazine, and Managing Editor Bruce Upbin.

The panel portion of the dinner, which attracts several hundred people (you can watch it live here for a fee), starts at 7 p.m. Pacific at the Hyatt Regency Santa Clara. The audience gets to vote–in past years, with red and green cards as well as electronic voting devices. This year, they’ll be using a Twitter-based polling system. Panel members have similar red-green paddles they hold up. I’ll post the highlights as they happen.

And we’re underway. Eric and Bruce will describe each trend and then the owner of that trend, one of the panel members, will explain it.

1) Radical Globalization of Social Commerce: Efrusy explains that companies today will be instantly global, or they will fall behind those that aren’t. For the previous Web generation, international was a distinct minority. Groupon, for example, was half international when it went public last year. If you want to be the leading global player, just leading the U.S. might not be enough. You can’t wait to win the U.S. and then open an office.

The other panel members wave half-red, half-green panels. Gordon, who waved a red, says that’s going to take awhile. Hoffman, also red, said the U.S. is still the most important. Thiel’s in-between, I think, but because he thinks it’s not very interesting. Jurvetson says it’s true, but 12 years old. It’s what every consumer Internet startup has been doing for 12 years. Thiel on second thought thinks it’s a worthwhile rule to go international early to avoid local copycats.

The audience shows mostly greens, matched by about 70% supporting the trend on TwitPolls.

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What’s Coming in Internet Advertising: 12 Predictions for 2012

I did my annual predictions first on my Forbes blog, The New Persuaders, since they’re focused largely on the Internet media and advertising I cover there. On that blog, they’re done as separate posts, but I wanted to gather them up in one place here, as I’ve done in previous years. So here’s what I think will happen (or in some cases, not happen) this year in my corner of the technology and startup world:

Facebook goes public, but won’t start an IPO landslide: Facebook will make the signature stock offering of the decade, one that reportedly will value the social network at up to $100 billion. But it won’t launch a thousand IPOs as a gazillion venture capitalists and angel investors hope.

Of course, the first part of that prediction is a gimme. But I can’t go without mentioning it because the Facebook IPO will be one of the biggest stories of 2012. Assuming Goldman Sachs or Morgan Stanley don’t stumble in pricing and selling the offering, Facebook’s IPO will be every bit as important as Google’s in 2004. It will be a sign that Facebook is a real, sustainable company (if there was any doubt left by now), but also a sign that social networking is getting woven into the fabric of our entire online experience.

The second part of the prediction depends less on how the Facebook IPO goes than on how (or whether) the economy recovers. If the recover remains slow to nonexistent and the stock market reflects that, IPOs will be sparse. If we get the slow but growing economic improvement we seem to be seeing now, more companies will go public but not a gusher. But the point is that Facebook is such a singular success that it’s not going to set the tone for lesser (often far lesser) Internet companies.

Facebook’s ad business booms–but not at Google’s expense: Facebook’s social advertising looks promising, but won’t come close to challenging Google’s huge success in search ads this year–maybe ever.

Obviously, Facebook is having no problem raking in the bucks from advertisers eager to reach its 800 million-plus audience–or more specifically, the millions of people in whatever target markets they choose. EMarketer reckons the company will gross nearly $6 billion in ad revenues this year, up from $4 billion in 2011. And that’s before we know anything about Facebook’s likely plans for mobile ads or an ad network a la Google’s AdSense that would spread its ads around the Web.

From reading a lot of articlesyou’d think Facebook is stealing all that money directly from Google. That’s not mainly the case, given Google’s own considerable growth in display advertising, though Facebook’s success may well blunt that growth in the future. Instead, Facebook currently is eating Yahoo’s and AOL’s lunches, and those of many ad networks that, until Facebook ramped up its ad business, were the main alternative for advertisers looking to target sizable audiences.

What would make Facebook a huge Google-scale company is the theft of an entirely different meal: television advertising. After all, Facebook shows much more promise as a brand advertising medium than a direct-marketing medium like Google. It needs only to draw a small fraction of the $60 billion or so spent on television advertising, the biggest brand medium, to be enormously successful. But even then, it’s not mainly a Facebook vs. Google contest.

Facebook still needs to answer a big question, however. That’s whether its “social ads,” which incorporate people’s friends in ads in a 21st century version of word-of-mouth marketing, will have nearly the effectiveness in driving attention and ultimately sales as search ads, which appear in direct response to related queries, often involving products people are looking to buy. The potential is intriguing, and there are some nice examples of how well social advertising can work.

But despite Facebook’s considerable work in providing new kinds of metrics on marketing and advertising impact on its users, marketers and agencies aren’t yet universally convinced they need to spend a lot of money on Facebook ads. After all, they can get a lot of mileage out of their free Facebook Pages and Like buttons around the Web. (Not to mention, it remains to be seen whether these ultra-personal ads will cross what blogger Robert Scoble calls the Facebook freaky line.)

Bottom line: If Facebook is to be the Google of the this decade, its advertising has to at least approach the engagement of search ads, especially as Google itself moves to become more of a brand advertising platform with YouTube and continues its push into display ads. While Facebook is building what seems likely to become a great business on anew vision of advertising that could change many decades of tradition,2012 won’t be the year it closes that deal.

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Do@ Aims to Disrupt Mobile Search–Including Google

It’s ironic, or maybe apropos, that you can’t find anything about the new mobile search application Do@ by Googling it. Google doesn’t track the @ symbol at all. But the Israeli company (pronounced “do-at”), which launched its free iPhone app today at TechCrunch Disrupt in New York, is looking to do a number on Google. It aims to provide a new way to find stuff specifically when you’re on your phone and the iconic list of site links becomes cumbersome. Instead, a search using Do@ helps you zero in quickly what category of information you want and then sends you directly to the app that’s most likely to have just what you’re looking for.

Here’s how it works: Search for, say, “Bob Marley” using Do@, and you’re presented with a drop-down list with the query followed by categories designated with the @ sign, such as @music (where you’ll see results inside apps such as Pandora or iTunes or SoundCloud) or @movies (where the likes of Flixster or IMBD.com provide results).

These categories are relevant to the particular query, so a search on “sushi,” and you see “sushi @restaurants,” “sushi @food,” and so on. Then when you click on one of those, you’re whisked to an app or service such as Foodspotting or Flixster, which then shows its own mobile-optimized results for that query. You can swipe through multiple apps for a query to get more quickly to just what information you want.

You’re seeing only a selected subset of Web sites and services this way, of course, but for common queries made from a mobile phone, that may be better in most cases than a huge list of links. Do@ ranks the lists of apps and services itself at first, but you can choose your favorites or, if you’re signed into Facebook, get your friends’ amalgamated choices. Essentially, says cofounder Ami Ben David, publishers answer users’ queries themselves, using their own apps or services, their own brands, and their own business models.

The judges at the TechCrunch Disrupt startup competition who viewed the demo questioned how Do@ knows the results it’s presenting–that is, the results inside other apps and services–are actually relevant for users. “We try to stay away from making these decisions for users,” Ben David said. The judges, including Bing’s Barney Pell and Google’s Bradley Horowitz, weren’t really buying this, noting that Do@ needs to objectively determine whether its partner apps and services are actually delivering the goods.

When Ben David first demonstrated the service to me in early March, he said Do@, which has $8.6 million in venture funding including a recent $7 million round led by Draper Fisher Jurvetson, is “trying to be completely different.” That’s commendable, but it’s also the company’s key challenge. Google’s list of links may not be perfect for many mobile searches, but it’s still not bad, and Google’s Instant Search solves some of the hassle of doing multiple search queries on a phone keyboard. Persuading users to change their behavior, even for something that may work better in many cases, is a huge hurdle that virtually no Google rival has yet jumped.

And given that Do@ isn’t doing the heavy lifting to index the Web’s huge collection of sites, or vetting the actual search results its partners offer, its key offering amounts to a new user interface for mobile search. Which sounds like a set of features–albeit a very nicely designed set of features, one likely to be copied if it proves effective–more than a company.

What’s Coming on the Internet in 2011 (Or Not)

I know I shouldn’t do it–predictions too often are either obvious or wrong–but I can’t help it. If I have to think about what’s coming in 2011, and I do, I might as well inflict those thoughts on the rest of the world. Isn’t that what blogging is all about? Anyway, here’s what I expect to see this year:

* There will be at least one monster initial public offering in tech. Take your pick (in more or less descending order of likelihood): SkypeGroupon, ZyngaDemand MediaLinkedIn, Twitter, Facebook (only if it has to). But despite many stories that will call this event a bellwether,  the IPO won’t bring back anything like the bubble days of the late 1990s (and thank goodness for that) because there are still only a few marquee names that can net multibillion-dollar valuations. UPDATE: Well, so much for that descending order. LinkedIn apparently will be the first to file–though whether it will be a “monster” IPO is another question. UPDATE 2: Well, here’s that monster IPO–since it’s hard to believe Facebook won’t go public if it has to disclose financials anyway. But it likely won’t happen until early 2012. Update 3: Now Groupon appears to be leading the IPO derby. Update 4, 1/20/11: Now it looks like Demand Media will be the first out. Again, not sure that’s the monster one, but if it’s successful, more will come.

* App fever will cool. Good apps that encapsulate a useful task or bit of entertainment–Angry Birds, AroundMe, Google Voice–will continue to do well. But those apps that do little more than apply a pretty layer atop Web content won’t get much traction–and moneymaking opportunities are uncertain in any case. The bigger issue: Once HTML5 becomes the widespread standard for creating Web services, enabling much more interactive Web services right from the browser, I wonder whether the need for separate apps will gradually fade. Continue reading

Mike Moritz and Steve Streit at TechCrunch Disrupt

Michael Moritz, perhaps the key partner at Sequoia Capital, is “the most powerful venture capitalist in Silicon Valley,” says TechCrunch editor Mike Arrington. Moritz is onstage with Steve Streit, founder and CEO of financial services company Green Dot, a Sequoia-backed company that went public in July at a $2 billion valuation. They’ll be talking about “The Road Less Traveled.”

Streit’s talking about how Green Dot, which issues reloadable prepaid debit cards, got started. What’s more interesting than the particulars is how this company went public completely under the Silicon Valley radar. Probably has a lot to do with being in financial services and aiming to be a bank holding company, which requires adherence to a lot of regulations–and not shooting your mouth off like so many startups do in ways that we love so much. Plus, it takes a long time to make it work in that business–seven years in Green Dot’s case.

Arrington tries to get Streit to describe how Moritz works, but that’s not really working beyond platitudes. Arrington asks Moritz if he’s better at discovering new talent  or making whatever opportunity is there a success? Moritz implies the former, despite Sequoia’s (not always deserved) reputation for replacing founders at the drop of a hat. In fact, Moritz says they look for entrepreneurs who look like they will be able to take the company all the way.

Now Streit opens up a little bit and says: Mike feels investments like Santana feels the guitar. He feels the investment in many ways more than the entrepreneur. He has said, “Steve, you don’t know what you’ve got here, back up a little bit” to realize it.

OK, well that’s it, and wish we’d heard more.

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