SpectatorBytes

I recently attended the Under the Radar Conference at the Microsoft Campus in Mountain View. I came across some interesting products and companies such as SlideRocket, Nuconomy, Orgoo, and TripIt. This was the third startup showcase in less than two weeks that I have attended. It was interesting to see next-gen product innovation in well-developed areas such as presentations, mail, analytics and travel. The innovation centered around leveraging existing Web services, platforms, existing products to create more efficient and compelling experiences.

This got me thinking that we are increasingly in a stage where technology innovation is taking a back seat to media innovation. In other words, the new companies and products that are emerging today focus on providing more efficient and richer consumer experiences rather than on developing new proprietary technologies. Declining production costs, broad deployment of infrastructure level web-services, and access to vast distribution are some of the factors are making this possib

The dramatic increase in the number of deals since 2003 – from 16 to 178 (see chart Chart Me Up: Web 2.0 Venture Deals) seems to suggest that this era of media innovation (rather than tech innovation) is currently in its full swing. This means that the “consumer tech” business is transforming into the consumer “digital media” business.
So what is this important? Because this suggests that the dynamics of the digital media business are poised to change. In this new era, Sillicon Valley is likely to become more like Hollywood. Not necessarily because of Hollywood’s celebrity culture but because the dynamics of the business are increasingly similar to those of the entertainment business — hit-driven, shorter lifecycles, more choices, etc.

This change in business dynamics is likely to have significant implications across the industry. Here are some of those implications:

- Developing product “hits” on the Web will become more difficult due to hyper-competition
- The life of “hits” on the Web is likely to be shorter than it has been
- Deadpools are poised to increase in size; failure rates will climb
- Community (investors, entrepreneurs, press) will need to adjust to deal with the higher failure rates (think how TV industry deals with TV pilots)
- Investors need to be prepared to make more investments and be able to participate at an earlier stage in a company’s lifecycle
- Proven entrepreneur talent is likely to extract greater value from investors
- Hit-makers like Clive David in Music and Brian Grazer in TV will play a key role in the digital media business (access to them will enhance chances of success)

This is not to say that we will not see new technology, game-changing innovation over the next few years (Semantic Web is certainly a field where we have begun to see innovation). However, the majority of entrepreneurial activity will likely evolve around media innovation than “pure” technology innovation.

Those who adjust to the new realities of the business will likely increase their overall chances of success.