Top 10 Tech Investing Trends For 2011

This post by 500 Overlord Dave McClure was originally published on Reuters. No apologies for shameless plugs and links on several of our 500 Startups we believe embody these trends.

Top 10 Tech Trends for 2011

1. (Way too many) Groupons, social games and photo-sharing 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 even more ways to do photo-sharing on Facebook and Twitter, now new and improved with 37 shades of yellow-gray filters. Humbug. My first easy and obvious prediction is that VCs will waste a ton of money chasing hundreds of “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 offline 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. Our investment in Retailigence is also connected to this trend.

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. For more info on this topic, see p.5 of this 2009 report on global language trends by MyGengo, a 500 Startups portfolio company.

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. We’ve already invested in video monetization startup Brainient and education video site Udemy; and we have several other video distribution and promotion investments we will announce soon. Expect more innovation and development in video, as millions of iPad and other tablet devices become mainstream, and as YouTube continues to expand its influence on global culture and entertainment. 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 if they’ll exceed 50-60 million units. Nice problem to have for a product barely a year old, eh? At the same time Android devices are growing in popularity, and seem poised to compete effectively with Apple for mobile application dominance. Regardless, both platforms will drive huge amounts of user and developer activity, and the future couldn’t look brighter for startups focused on mobile apps and services. Our investments in mobile ads platform MediaLets and mobile analytics provider Apsalar reflect our strong belief in the growth of mobile infrastructure 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’s 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. Our investments in eye-tracking startup GazeHawk, foodie pic-porn startup Foodspotting, and in 955 Dreams and their new History of Jazz app for the iPad are great examples of where we see the industry heading with design and UX.

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 and more seniors are comfortable with computers and computing 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 global juggernaut 600 million users strong, and dominating our online experience. While Twitter has certainly  grown leaps and bounds too, it’s impossible to ignore how significant Facebook has become as a familiar and frequent environment… for everyone. And generally, this is a good thing. While the idiosyncrasies of Facebook platform change all the time, it’s worth the effort. And regardless of whether you’re building games or productivity tools, there’s no question enabling access and distribution through the Facebook ecosystem is a huge benefit for both developers and users. Our investments in this area include social media marketing platform Wildfire Interactive, shopping cart and e-commerce solution Payvment, and AppBistro which offers fan page apps and utilities. Expect these startups and more Facebook Connect and “Like” buttons popping up in an online 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!

Dave McClure

Geeks. Founders. Startups. The Internet Revolution.

Never miss a beat

  • http://blog.nextblitz.com gzino

    nice list, thoughts:

    #1 – agree
    #2 – boring
    #3 – yes – causing disintermediation in more industries, which is good thing
    #4 – tell us more
    #5 – interesting. scary.
    #6 – netflix is the new amazon.
    #7 – guess you had to throw a layup in there ; )
    #8 – agree can’t be understated, ux = best way deal with low signal to noise
    #9 – my 5-yr old had her grandma ready to sign up for a cs class tonight
    #10 – facebook is the new yahoo. yes social graph. but becoming too much of a media company. maybe not dead but on the decline w/o a re-invent on the fly.

  • http://www.stealthmode.com hardaway

    The Baby Boomers are now seniors, so they will be a huge market, especially for health care and lifestyle. Expect a lot of remote monitoring, because they don’t want to sit in the doctor’s office just to have their blood pressure checked I’ve been telling people about these opportunities for years, and now they are hitting us in the face. Good thing I know something about them:-)

    My point above will make necessary your point about UX.

  • Nataliehodge

    Nice post Dave, in addition to utilizing your marketing analytics strategies we are integrating health video content strategy utilizing brightcove / tremor media to augment the growth of our physician membership based practices as well as help us in the “activation” phase of our customers. Hope to create great health content for families that keeps them coming back to the site while parents are waking for a physician to sign up for our mobile platform. Love to hear from you guys what compelling content you’d like to hear from dr Rodgers, a pediatrician from akron oh, when I interview him next week? What’s the biggest question you have right now about your kid’s health?

  • http://twitter.com/ClaraAup Clara Aupetit

    Very interesting

  • http://www.darrenherman.com dherman76

    Nice list Dave, totally agree with #1

  • http://www.extrafeet.com/eville Don Synstelien

    Interesting list. My company is working on a problem listed in #2, but investors were only interested in #1. In fact, some of the investors that we’ve talked with indicated that if we started working on something from #1, they would hand over money right away.

    I guess the investors I spoke with were just full of Number 2 ;-)

  • http://twitter.com/jcbreed jonathan reed

    Totally agree with all and especially 7 and 9. There is a lot of potential in educational and healthcare apps and games for young children and older people (not done well at the moment). The ipad and iphone are the devices for this rather than the web, as they are easier to use for these groups.

  • http://500startups.com/ Dave McClure

    other trends i forgot / did not include:
    - Twitter
    - Quora
    - online payments
    - bunch of other stuff I can’t talk about or I’d have to KEEL u….

  • http://avc.com fredwilson

    great list dave. couldn’t agree more with this list

  • http://www.facebook.com/robertdewey Robert Dewey

    I like #2… and I realize that doesn’t sound right.

    One problem I see with LBS is that each service is its own ad silo. If you’re a store, you’ll have to run a coupon campaign on each of those services. I feel Facebook could own that area, but then I thought the same thing about Facebook owning 4sq…

  • Unohoo

    What do you think of ecommerce?

    • http://500hats.typepad.com davemc500hats

      i think i like money & other folks do too ;)

  • http://www.pallian.com/ Pallian

    Thanks Dave – you just made my day with #2! If you haven’t already checked it out – here you go, answer to your #2: http://geotoko.com
    We even have an cool video for you: http://geotoko.com/videos/intro

  • http://twitter.com/randallb Randall Bennett

    The only thing I disagree with is the online video monetization one. I think the problem still is a problem of creation, and not a problem of monetization / distribution. YouTube / Vimeo / Justin.TV / other online services figured out the distribution problem, but we still have a huge creation problem. I don’t see the video being created as disruptive enough yet.

    My take: As tech like DSLRs take hold, we’ll see TV quality stuff shot by one person, which would allow for more experimentation and disruption.

    Till then, we’re just not going to see any huge online video hits, in my view.

  • http://www.facebook.com/people/David-Henderson/503454660 David Henderson

    #1 = #2 ….or slight variation on theme

    deal=content=reward=incentive
    social=distribution
    traffic=to local real world destination

  • Patricia

    Most startups in video will have a hard time because of the way internet-delivered TV will disrupt, i would not invest in that arena without very serious caution.

  • http://twitter.com/durjoy Durjoy Ace Bhatta

    Great list, Dave. A couple notes regarding language / geographic arbitrage: US-based companies should view these new markets as opportunities AND threats. And as many offline companies have learned over the years, this idea of a “one global market” is mostly a myth.

    (Except for Facebook, our global overlords.)

  • http://www.evly.com Eran Eyal

    Dave, I think that that you are spot on the money but for one omission – items 3 and 6 are technically strongly related as YouTube is crowdsourcing.

    The point I would like to make (especially given the followup mention of Quora) is that the state of affairs in the world of crowdsourcing (whilst indicatively overall positive for the concept and its myriad of expressions). – crowdsourcing as a whole is incredibly fragmented and in its infancy.

    There are amazing models out there which employ crowdsourcing ranging from GroupOn leveraging group buying to YouTube with their successful rating model for videos helping the most popular videos go viral and give the originators massive credibility – a powerful mechanism for artists and brands around the world.

    So what’s the next “big thing”?

    Who is the possible “successor” to the Facebook crown?

    The answer for me is rather clear – it is a mega-platform – a crowdsourcing social network consolidator.

    A platform that takes the concept of Q&A to the next level creating a real social network of crowdsourcers – people connecting around commonality of values and finding solutions for mutual problems with scalability.

    I envisage a platform where users will choose not only to be able to connect to solve their problems ranging from crowdfunding, Q&A, polls, product creation, R&D and more on their profiles, but to easily escalate these to complete crowdsourcing sites at little or no cost with white-labelling solutions and bolstered by a 3rd party app marketplace. A playing field which is level by a provider of said technology for free – much like Facebook, but with a focus on value first and socializing around the values.

    Is this the face of the potential “Facebook Successor”?

    Enter the world of evly.
    http://www.evly.com

  • http://friendfeed.com/aden76 Aden Davies

    What about NFC? (Near Field Communication). It is in the Google Nexus S and will almost certainly be in iPhone 5. There will be one hell of an ecosystem around this…

  • http://www.noca.com PJ Gupta

    Make Online Payments #11 (or better yet part of the first 10). You mention it in passing in one of your comments, but this will be big. ecommerce/payments is the next most needed thing in the Internet after search/social media
    The old monopolies of VISA/MC will remain but startups will figure out creative ways to either build value on top of them or bypass them altogether. With the rise of social media exponential propagation of a new payments system is not just possible but likely (think paypal in 1999/2000).
    The big thing this year will be the recent Fed mandate on cutting down Debit fees with the explosive growth of Debit as a payment option and opportunities abound

  • http://twitter.com/wonderwhale wonderwhale

    Good read.. we’ve done iPad puzzles app – Zzup! and started with first puzzles for kids and we got lots of feedback from parents that their 3 year-olds smurfs picking iPad and apps in no time having lots of fun in interaction immediately.. if you want, you can check it out on http://zzupapp.com/

  • GenX

    Facebook sucks ass! -Gen X’er

  • http://twitter.com/sotong378 Sotong378~Wiki378

    Cloud primarily concern is about data and time lost …the actual value of time and data lost.

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  • http://just-u-nitepeoplesearch.ws/ Frass267

    Great information Dave, thank you for sharing!