Social Buying, Location Apps: 2011 Is A Year Of Maturing Markets

I ran across Jonathan Tower recently when I posted several 2011 predictions pieces on peHub. This managing director at Citron Capital’s venture arm has since put together some predictions of his own and several are well worth noting here.

Tower spends a lot of his time focused on consumer Internet, digital media and mobile applications companies, so his observations on topics such as location-based services and social buying come from front line experience.

Citron, of course, is the international private equity firm with a venture focus evenly split among early-, mid- and later-stage investments. About half of its investments are in information technology.

You can read Tower’s full post on his blog today. Here are edited excerpts of what he has to say:

*Expect to see a number of new entrants cleverly leveraging social buying and demand aggregation…in less obvious ways. (Groupon and HomeRun are successfully focused on restaurants, salons and other small and medium sized businesses.)  Examples of emerging categories are travel and events. For events, start-ups are already developing ingenious ways of enabling emerging musical acts to aggregate their global fan base and pre-sell venues in advance of tours. If successful, this approach could revolutionize how live events are produced, promoted and underwritten. Are you listening, LiveNation?

*Expect to see location-based services – tools and products – penetrate a number of new and interesting markets in the coming year. Location-based services are entering what could be considered a third wave of innovation, with applications now offering rich, customized user experiences. These applications reside at the intersection of location data, identity and content with mapping technologies and coupon (and) revenue incentives.

*Expect 2011 to be a watershed year for online advertising, given the impressive growth and continued innovation of display ad exchanges, bidding platforms and the increased effectiveness and monetization of online marketing campaigns. Direct marketers are being more effective at reaching their customers. Traditional media buyers, once hesitant, are more readily embracing social media strategies and “promoted” ad campaigns, and putting significant resources behind them.

*Expect in 2011 secondary markets will be further institutionalized as an asset class. The stigma that was once attached to being involved in secondary transactions seems to be losing its sting as well-known private equity names tapped into it to either provide much-needed liquidity to their investors or to “rightsize” their portfolios to prepare for new investment vehicles.

*Expect to see a wave of innovation around applications and services focused on tablets. The Consumer Electronics Association estimates that some 30 million tablets will be sold in 2011, nearly double last year’s figure of 17 million. New entrants such as Motorola, Samsung, Acer and Toshiba have tablets in the market or will launch offerings shortly. The deepening penetration of tablets is impacting the launch of new applications and even new startups seeking to leverage the white space between smart phones and laptops.

*A new generation of innovative e-commerce companies has emerged in the past year and is pushing the proverbial envelope and turning the notion of traditional e-commerce on its ear. The two micro-themes behind this renaissance in e-commerce are the leveraging of the social graph and customization, or long-tail economics.

Shopping online should be fun. It should be an experience of discovery, sharing and leveraging the wisdom of crowds. A number of startups are developing ecommerce platforms that cleverly stack recommendations and opinions from friends across social networks. They also get instant feedback before the purchase decision and layer in group buying and daily deal mechanics to drive urgency.