Internet New Media
Uploading and Downloading Financial Returns
Cascadia Capital’s 2007 Internet New Media Guide provides a host of fresh and forward-looking insights for those trying to assess and analyze this quintessential and dynamic 21st century market. Obtain a copy of the report.
Market Insight
The Internet New Media industry is beginning its second decade with a huge burst of activity that signals the arrival of true convergence across all of its segments. The last 12 months have seen constant upgrades and new initiatives among the mega-search engines; big moves by dominant portals and platforms Ð especially Google, which is defining how the Internet is navigated and utilized while at the same time expanding its business to include applications and traditional media distribution channels, such as radio. The mass acceptance of user-generated content like Wikipedia; the rise of social networking sites like Facebook; the daily and ever-increasing growth of the blogosphere; the profusion of vertical communities and content; and the uploading and downloading of new revenue and profit streams in the digital entertainment business all signal the continued convergence of traditional and new media, content, communication, commerce and contact.
Over the past year, we've also found that Internet New Media doesn't always fit the traditional financing mold. Many of the companies in this market have strong cash flow and are self-funding, and the timeline from initial buildup to exit via acquisition can be very rapid.
Finally, there is little doubt that the right online content presented in the right way can generate meaningful advertising revenues. The big questions going forward are: which advertising revenue model makes the most sense, and how will marketers segment, target and monetize consumers Ð particularly along the mid- and long-tail of the Internet.
Trends to Watch
Perhaps the most compelling development on the Internet is the emergence of social networking. We see five trends that reinforce the importance of social networking for investors:
- Social networking is already main stream. Two-thirds of Americans on the Internet visit social networking sites and 60 percent of the global Internet audience visits social networking sites.
- The demographics of social networking are aging Ð 40 percent of users of are now between 35 and 54.
- Social networking is disruptive to traditional Internet portals. This is evidenced by the fact that marketers have already begun to shift dollars in the direction of social networks; forty percent of major advertisers plan to advertise on social networking sites in the next year, and overall advertising on social networking sites is expected to grow from $1.2 billion in 2007 to $3.6 billion in 2011.
- The next big step for the social networking movement could be mobile technology. Approximately 40 percent of the time spent on mobile phones by the 13-24 year-old age group is used to access user-generated content and engage in social networking.
- Corporate adoption is another new horizon because of the ability of social networking to bring customers together online. We cite Cisco's purchases of Tribe and Five Across as good examples of enterprise moving into the social networking arena with a B2B strategy. Others are expected to follow in 2008 and beyond.
Financing the Future
The next 12 months in the Internet New Media space will re-define the notion of collaboration and sharing. The Internet—with open-source software development, user-generated content and social-networking sites—has taught us that there's so much to learn from one another, that no one group has all the answers, and that the world can actually be a more constructive place if we just stay connected.
The 1980's were about the individual (think Apple, Steve Jobs and the Macintosh and the rise of the standalone personal computer); the 1990's were about the team (think Microsoft) and then also the rise of the early Internet , which gave way quickly to the Portal Era, the first era for the Internet New Media industry. The first decade of the 21st century has been first about search and collaboration (think the major search portals and collaborative sites like Wikipedia); by necessity, the next decade of this still young century will be about sharing on the Internet: the era of the Social Internet.
Investors will have to stay attuned and abreast of the mercurial Internet New Media market in 2008 to pick up on the new ways that online technology engenders sharing. Finding the right companies that are breaking new ground in collaboration and collaborative communications will be an essential to-do in 2008.