Tech Predictions for 2009

As we gear up for 2009, there remains many questions about the economy and the growth curve of the technology industry. As a team, we have come up with predictions for 2009. Ray Capece, Venture Files editor for Technosailor.com and I make our predictions.

As always, these are predictions. Last year, we were dangerously accurate with our predictions and would like to think that we have a good understanding of the business and technology marketplace in 2009.

Ray’s Predictions

  1. By now, all VC firms have had the ‘triage’ partners meeting — where they decide, whether existing portfolio companies will 1) receive additional funding, because they’re generating revenue and have the prospect of getting cash-flow positive; 2) be shut down (and recapture any remaining cash); and 3) receive no additional funding, but be left to their own devices (to get funding however they might on their own). In 2000, there were a good many in category #2, since dot.com rounds were in the $10s of millions; now, with social-networking investments averaging around $1M, there will be little cash if any to recover. But I predict there will be many in category #3 (also known as ‘the walking dead,’ since they’re burning their cash, no matter how slowly, till it’s gone.)
  2. Online advertising revenues in 2009 will continue to fall, as inventory outpaces demand. I *don’t* see the $$ flowing from other media to online offsetting this downward trend.
  3. Consumers have discretionary (albeit small) $$$ to spend. In times of bleak economy, they seek distractions (gaming and feel-good entertainment), and will happily pay $0.99 for iFart. The hope for developers in the social networking space will potentially lie with commerce in real and virtual goods. Facebook and the others need to make this extremely easy for third parties, and it will most certainly happen in 2009. (Yes, despite what others are saying about FB’s party line.)
  4. Consolidation always picks up in down times . . . good, small apps facing a difficult fund-raising environment reset their valuations lower, and robust companies with solid funding swoop in to pick up the team and technology on the cheap. It began in the fourth quarter with Pownce and others, will continue throughout 2009.
  5. As an extension to this prediction — we’ll see more Intellectual Property for sale on eBay.
  6. Apple will continue to grow its mobile share as others fumble about. Watch for new BlackBerry Curve to become the defacto standard for ‘button lovers.’

Aaron’s Take: While I agree with most of Ray’s predictions, I’m more bullish on early round VC. Even though we won’t see as much investment as we have, I believe it will still happen and companies that have already been funded will probably continue to receive investment funds, even if on down valuations, as long as they are somewhat viable. The reason is that most funds are long-haul investments of about 10 years.

Aaron’s Predictions

  1. Consolidations will occur en masse this year. Small companies with angel funding or Series A funding will be lumped into bigger conglomerates as the acquisition threshold is low.
  2. Brightkite will be acquired by Facebook, as poignantly pointed out by a commenter over at Read Write Web.
  3. The second Google Android-powered G2 phone will be released to T-Mobile in Q1. As the first one was a proof of concept that had little impact, the second iteration will be an essential release to prove the Android platform. No other carriers will take the platform until the concept is proven, but T-Mobile is already there and will be the victim for the second release.
  4. Twitter will *not* be acquired, but an advertising/partnership business model will emerge in Q2.
  5. Apple will release 3 new products this year. That is it. Their growth will continue upward but will see a decline over growth patterns of previous years.
  6. Net Neutrality will take a massive hit in 2009 with governments and companies looking to defend themselves in a down economy. The result will be regulations that will allow the big telecoms survive. Too big to Fail. Unless it’s the general public.
  7. No clear winner in the “single identity” space. OpenID fades, fbConnect gets fleshed out and adopted by many while Google Friend Connect makes significant inroads with others. An emerging war akin to Bluray vs. HD-DVD emerges between Facebook and Google with the internet world divided evenly among the two. Blogs and social networks will tend toward Facebook while bigger sites and services, possibly including newspaper walled gardens, trending toward Google.

Ray’s Take: Aaron’s crystal ball looks pretty good to me . . . except that, like Jonah in the whale’s belly, Twitter will be devoured.

Are You Captain of Your Destiny?

Returning to quickly skim my blog reader 1,000+ after two weeks’ head-in-the-sand, I see ‘Pownce acquired,’ and ‘Yahoo’s Chief of Insights Joins Bunchball.’ My spin radar immediately starts blipping, because I know that behind the ‘good news,’ guts are wrenching. Decisions are being made for people, and that never feels good. Yet another reminder that all the sacrifices may well be worth captaining your own destiny.

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Sustaining yourself with a small business doesn’t make headlines. Money-raising has been the mainstay of startup news since venture capital exploded on the scene in the ’80s. ‘Huffington Post Nabs $25M.’ And why not? It was validation that the company ‘has arrived.’ It was the Big Show. But ask any CEO what changes when investors step in. Everything.

No, they’re not (necessarily) evil. They’re just bound and determined to turn your company into a successful exit. It’s their job, in fact. It’s not about you, or even your technology.

Chances are, your primary mission is not to achieve successful exit. (If it is, you’re probably going to fail.) For most of you, it is about you — your passion for your technology, or your customers, or what you do.

If it sounds like that’s at odds with investors, well it often is.

So when Bunchball (the Silicon Valley company that applies gaming mechanics to making sites stickier) announces its new ex-Yahoo CEO, I hear a founder’s gut wrenching. When crafts-aggregator Etsy announces former NPR Digital head Maria Thomas taking the helm, I hear a gut wrenching.

Often from the outside, the decisions seem right. Geeky founders often don’t make the transition to leadership — ubergeek Bill Gates is an exception — and Heidrick & Struggles and CTPartners (formerly Christian & Timbers) and the like make a lot of money plucking SVPs out of big companies and placing them in VC-funded startups. (The genealogy of silly titles can actually be traced back to CEOs being made to step down — where do you think Chief Product Officer, Chief Strategy Officer, Chief of Insights, and other staff titles came from?) But then, investors aren’t all-wise. Gross blunders are made at the highest levels. (Remember when Pepsi head Sculley was brought in to run Apple? Not to mention Gil Amelio . . .)

There’s really only one way to avoid decisions in your company being made for you: captain your own destiny.

That usually means going slow, growing customer by customer, often staying small. If you want to go ‘big’ — and not everyone does — you’re most likely to find yourself at the investment/management crossroads. As an ambitious technologist/hard-core developer, you might decide to bring in someone to run the business. (Hey, it happens — sometimes founders themselves honestly recognize the need for new leadership.) That bespeaks true wisdom on the part of tech founders. Eric Schmidt’s install at Google was a coup — not a coup d’etat.

In his blog post, ‘10 Tips for Building a Profitable Business,’ Dogster CEO Ted Rheingold’s entreated:

So constantly ask yourself, are we spending 50% of our time selling? I bet you’ll always realize you’re focusing too much on the product and not enough on finding customers that want it.

Any of us who’ve consulted know that hard truth: love doing the work, hate hustling to get it. If that’s you, and you find yourself running a company, you either need to embrace being the CEO (read: chief salesman) and quit coding, or find someone who’s a good complement to you to do that job and leave you to program (or design, or write, or do whatever it is that you really do best.)

Once you’ve piloted your ship (to belabor the metaphor) past the shoals into the smooth waters of profitability and solvency, and feel the need to raise cash, get big, and pull away from your competition, the dynamics of a deal with a VC changes radically — you get the money on your terms. Still el capitan!

I’ve observed a lot of folks in charge of their destiny lately. (In the month of November, 533,000 who were not, had their ships sunk for them — so much for job security.) Software, the Interwebs, automatic ads, SEO, and (yes) social networking have made it a greater possibility than ever — unlike the previous waves of semiconductors, PCs, and computer networking. It’s akin to the artisans of the Renaissance — with skills, there’s always work. Entrepreneurs today can be captains of their destiny.

And I truly admire you folks. The ones scrapping it out, making a living, while they build their business, serve their customers, and develop a following. Those of you who eat, drink, and sleep (not much) your startups.

Remind yourself this at the end of your crappiest days: You’re the one making the decisions. Go make some really tough ones.

Social Media Quagmire

What happens when you build your business around a technology that disappears overnight? What happens when you build a client base, a pool of prospective clients or an otherwise niche demographic that is dependent on some other third party?

Many times it works out. Effective consultants have built their business on less than reliable third party access. However, there is an inherent risk that your way of life can change without any influence from you.

While Pownce has announced they are closing their doors (And we don’t really believe anyone outside of the Pownce four-some have built any kind of living around the microblogging service), I wonder what it would do to businesses built on the premise of Pownce availability?

The same goes for Twitter, where people have made an entire consultation around the use of Twitter. But what happens when Twitter goes away (and Twitter will go away at some point, undeniably without consultation with these consultants building their business on its existence)?

What happens when you as a consultant are hired to provide surefire, highly effective social media routines that will have a 95% possibility for 3-6 month positive effect on the growth and you recommend Twitter? And Twitter becomes 80% unreliable for an entire month, as it did in June and July?

What happens in a dying economy when companies want real returns and all you can give them is conversations with potential clients, and you have no solid way to convert those conversations into real customers?

Food for thought…

Pownce Dies, We Called It

The death of Pownce seems to have been a big news-getter. It’s unclear why except that star-power was behind the company (Kevin Rose of Digg, Ariel Waldman, Leah Culver). As noted in the myriad of echo chamber articles here, here, here, here, here and here (left unlinked because our policy is not to link to Dave Winer – go find it yourself) – Six Apart, the company behind Movable Type, Typepad and Vox has acquired Pownce and the talent pool, and plans to close down Pownce in two weeks.

Folks, for the record, we called it multiple times before. You can keep reading Technosailor.com as we’ll always break the news a year early. ;-)

Brightkite: Blazing New Paths in Microcontent

Picture 7.pngA few weeks ago, I received an invite to Brightkite so I signed up, being the early adopter that I am. What I saw instantly resonated with me.

Before I get into the technical and usability “stuff” let me explain the resonance I had. first there was Twitter which blazed onto the scene with the concept of microblogging in 140 characters or less. Twitter challenged the status quo by being so simplistic that anyone could use it. The beauty of twitter was hidden to the average user, and is still largely missed by people who haven’t used it. The beauty was in the API which allowed people to utilize Twitter from their cell phones (over text message), via desktop clients, and allowed developers to create cool mashups such as Summize (a search tool for Twitter) or Politweets which monitors Twitter for candidate mentions and displays the timeline in a relevant way. In other words, Twitter’s simplicity was the greatest strength for “selling” itself to the masses.

What Twitter didn’t do was provide context to the flow. It is difficult to track conversations. It is difficult to send tweets to only a select group of people.

Leah CulverThis is where Pownce showed promise. Pownce took the concept of Twitter and made it contextual. Groups were possible, so I could have “real life friends”, “internet friends”, or “PR bloggers”, for instance. Pownce added the ability to post images or mp3’s so I could share media with my friends. However, until recently, Pownce had no API and the API they do have now is too little, too late. There was no SMS integration so I couldn’t text my comments in while I was sitting in traffic on I-95. I was glued to a website, when I had other things to do, as opposed to having a client that just sat there in the background polling the service and letting me know when there was something important to read. Pownce has the high distinguishment of having the hottest developer, Leah Culver though, so that counts for something.

Brightkite has come along, and though in very early beta, they are building their service around making the service as accessible and easy to use for anyone. Therefore, the simplest of all APIs is text messaging, which Brightkite uses perfectly. The hitch here is a telco hitch. Verizon Wireless, according to Brightkite, cannot support Brightkite because the short code used for interacting, 80289, has not yet been approved by the carrier. Apparently, Verizon is building parental controls for their service to allow parents to restrict access to specific shortcodes and so are not approving anymore codes until that functionality is built. Those of us on Verizon continue to suffer.

However, mobile phone users (including Verizon Wireless) can interact with the service over email as well. Each user account is assigned a unique email address.

In addition to the limitations I’ve already listed, Brightkite is currently a US-only service. So Canadian and other non-US users have to use the email address route.

Brightkite operates primarily around a “Where are you now?” premise – which is different than Twitter which asks “What are you doing now?” Therefore, a primary action within the service is the “check in”. Check ins allow users to say “I’m at Starbucks in Columbia, MD” or “I am at Latitude and Longitude x and y” (think application development in the future with GPS integration on, say, an iPhone or Blackberry).

A lot of early adopters have complained some about the privacy issue here, and indeed it can be an issue. Largely, the specifics of where a person is is controlled by the user. For instance, a check in could be as specific as sending a message “@ 6490 Dobbin Center Way, Columbia, MD” or as generic as “@ Woodlawn, MD”. I use this tactic, for instance, when I check in. I will not give away exact location when I’m at home for privacy and protection reasons. However, when I’m out and about, I will almost always check in with an exact location.

In addition to these privacy options, users have the ability to set their “timeline” as public or private, similar to Twitter. By checking a “Trust User X” box when accepting friendship requests, you can designate with granularity who you want to see your posts, locations, etc.

Brightkite still has a long way to go. Some hurdles that need to be addressed are “threading” of conversations. Pownce does this well. Additionally, it’s a little difficult to respond to users.

I’d encourage a mirroring of the Twitter API. In other words “D user message” should send a private message to the user. “follow user” should send a friend request to the user being followed. “track terms” should give me the ability to see whenever anyone, regardless of friend status, mentions my tracked terms or phrases.

In addition, I’m concerned about the fact that the service is built on Rails. Twitter is the poster child for a bad Rails app, and history shows that, optimized to the extreme, Rails still doesn’t scale well.

Brightkite does provide the ability to cross post to Twitter and gives the user options for what, if anything, actually gets crossposted. However, the biggest complaint I hear from Twitter users is the Brightkite URL appended to every crossposted message. This is bad form, and subtracts from the same 140 character limitation that Twitter enforces.

Largely, I think Brightkite could be a killer app. It does everything that Twitter does well and expands on it by taking some of the better features from other services. But Brightkite is not really about being a “me too” service as much as it is about solving the problem of location. I see the possibility of a mashup service, or a partnership, with activity based companies like WhyGoSolo (no inside knowledge of whether these two are actually seeing this as well).

As a bonus, and if you’ve read this far, I have 10 Brightkite invites to give away for the first 10 commenters requesting one.

Leah Culver Photo courtesy of Tantek, Used under Creative Commons