Friday, February 15, 2008

What's Next? | OnLine Spin

Thursday, February 14, 2008 
By Dave Morgan

Yes. It's true. I'm leaving AOL and heading back to the start-up world. I've had a great time at AOL and am very bullish on its future, but the prospect of starting a new company in this market was just too great. Why? What's so good about the current market? Well, it's pretty simple. While I've been fortunate to have been able to launch two successful start-ups in the online advertising market, Real Media in 1995 and TACODA in 2001, I don't think that, in either of those cases, the same level of opportunity existed that is out there today. It's too early to talk about my new company, but here are some of my general thoughts on the digital media and marketing sector:

  • Big market growing fast. Online advertising is already a huge market, is growing fast, and is poised to accelerate as new consumer devices and new markets come online. Every media company today knows that its future is digital -- and every marketer today knows that it needs to learn how to communicate to its customers and prospects digitally. Most analysts expect global growth rates of more than 25% per year for years. Enough said.
  • Lots of "white space." While the market is very big with many big players, it has grown so fast that there are many, many areas where the market and its participants lack critical tools and services, from a clunking supply chain to complex buying and selling practices to the fact that the vast majority of ads that online consumers receive everyday are irrelevant and annoying. There are enormous opportunities for start-up companies and innovators to fill these spaces and build some very interesting businesses.
  • Geographic market expansion. The Internet is a global phenomenon, with future growth opportunities for most media companies and marketers outside of the U.S. However, at this point, most of the major Internet companies are still quite U.S.-centric, with a heavy over-balance on U.S. revenues. Those that do operate outside of the U.S. tend to limit themselves to large, mature markets like the U.K., Japan and the large national markets in Europe. In total, the markets outside the U.S. are going to grow much faster than those within the U.S, and the smaller emerging markets are going to enjoy extraordinary growth. In several years, Internet companies that find themselves without globally balanced market penetration will have to fix that strategy -- or face losing to those firms that are globally balanced. This is a big opportunity.
  • Abundance of money, talent and instant infrastructure. There has never existed as much money, trained and motivated talent and "instant infrastructure" with which to launch start-ups in digital media and marketing. The venture capital sector is well-stocked and aggressive. There are lots and lots of folks available in this market that are talented, well-trained, hard-working, ready to take risks, hoping to make a difference and ready for a change. Finally, we are now in a period of instant infrastructure. It is incredible what start-ups can rent easily and cheaply or get for free these days, from server space to bandwidth to VOIP to open source software. Gone are the days of having to buy racks and racks of servers and software and hosting in a front-loaded deal to get a tech company up and running. It's never been easier to start a business.
  • Distracted incumbents. While the market is quite dynamic and growing fast, many of the market incumbents are focused more on battling their competitors than serving their customers and partners. You don't need to see more than one $40+ billion dollar takeover attempt to know that. Caught up in competitive dynamics, most of the large online and offline media and agency companies are playing offense and defense against each other and are losing sight of their reason for being. That is an opportunity.
  • Economic uncertainty. The best place to be when revenue is hard to generate is a pre-revenue company. Whether or not we are headed into (or are already in) an economic downturn, and whether or not that will impact advertising expenditures, many in the market are already exercising caution. In times like that, big companies start acting more defensively and give up more white space to start-ups. This is good for start-ups.

It's a good time to be in our business and know where you're going. What do you think?

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