Entrepreneurial

Top 10 tech investing trends for 2011

By Guest Contributor
January 4, 2011

– Dave McClure is a Silicon Valley venture capitalist and the founder of Internet seed fund 500Startups. He has worked with companies such as PayPal, Mint, Founders Fund, Facebook, LinkedIn, SlideShare, Twilio, Simply Hired, O’Reilly Media, Intel and Microsoft. The views expressed are his own. –

Over the holidays Silicon Valley is a ghost town while most geeks and venture capitalists are busy hitting the slopes at Tahoe or playing Angry Birds Holiday Edition.

If you haven’t had enough football or eggnog yet, stop reading this blather and go watch some grown men beat the snot out of each other while drinking yourself into yuletide stupor. If that doesn’t sound more appealing then you’ll just have to settle for my crazy tech predictions for this year.

With no further ado, I bring you the top 10 tech trends for 2011:

1. (Way too many) Groupons, social games, photo-sharing, and “fart” 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.

Alright folks, that’s a wrap. Tell me why I’m wrong, stupid, or crazy in the comments below. Happy New Year to everyone.

Comments
6 comments so far | RSS Comments RSS

Nice work McClure, but what I want from you is one super specific, hairy, audacious metric change we can expect by 2012! 50% of websites will be multi-lingual?

Posted by leonardspeiser | Report as abusive
 

Always an interesting read from McClure.

One more I think is going to be big in 2011 is content curation. Lots of startups trying to tackle the firehose of information that we all experience online.

My favorite of these is Blekko, the slashtaggin search engine.

Posted by jim_shook | Report as abusive
 

I reckon 51% would be more realistic…

Posted by Jimmy.Nicol | Report as abusive
 

Thanks for writing the insightful post, Dave. In regards to your second trend (surrounding Location-based services), we at Location Labs (www.location-labs.com) completely agree that 2011 will be the year LBS technology ‘takes off.’ We have been in the location game for a while now, partnering with media giants like CBS Outdoor for their innovative ‘Minority Report’ campaign in Penn Station, as well as with leading mobile and location marketing providers like Placecast, who leverages our Universal Location Service (and geofencing technology) to provide consumers with coupons and targeted discount offers. We have also partnered with developers to build and launch location check-in apps (MayorMaker and TweetMover) and are powering family safety location apps offered by all the major wireless carriers, including AT&T(FamilyMap), Sprint (Family Locator) and T-Mobile (Family Allowances). And – this is just the beginning. We expect mainstream adoption of LBS to skyrocket (in 2011 and beyond), especially as both consumers and businesses realize the infinite benefits…and, as a leader in the LBS space, we are excited about what the future holds.

Posted by kedar_ll | Report as abusive
 

Agreed on the Blekko front there, fantastic site.

Posted by NicholasBateman | Report as abusive
 

I think #5 is significant. ICANN ceded governance of the Internet to an international body almost two years ago, mirroring an amazing uptick in non-English speaking sites.

Lachlan Murdoch of the News Corp once remarked that future newsrooms need only be in one of four languages: English, Spanish, Mandarin, and Hindi. I envision a Translation Turing Test where one could have a web experience and not know nor care about the provenance of the website. When English ceases being the lingua franca of international trade, there will be a seismic shift in lobbying for taxes and use fees that will make last year’s kerfuffle between Orbitz and the airlines like like kindergarten.

Posted by connectme | Report as abusive
 

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