I’m keen to understand how the global recession is impacting social media and particularly the North American powerhouse, Silicon Valley. I’m interested in the develpments occurring at Silicon Valley mostly because today we can consider it the backbone behind a lot of the big Web 2.0 companies.
Belts seem to be tightening in all industries across the board - banking, automotive, retail and so on - yet we’re still seeing big injections of capital in many of the Web 2.0 companies.
Take micro-blogging service Twitter for example. It was announced this week that Twitter has managed to raise $35 million in venture capital in spite of the challenging economic climate. This capital has come from Institutional Venture Partners and Benchmark Capital.
Are venture capitalists finally seeing the real value of Web 2.0 in helping deal with challenging times ahead?
I think that social media will come out on top in these tough times as people start using it as a means of cost-saving on entertainment. This is especially important at a time when people are becoming increasingly budget-conscious and are rather choosing to bunker indoors and save their pennies.
I’m a good example of this. I seem to find myself on fewer outings to the movies and instead I keep my cinema experience to my lounge room with my LCD TV, entertainment system and complete surround sound system. In fact, I can’t remember the last movie I saw at the cinemas but I could rattle off at least five DVDs that I have watched at home. I also spend less time travelling and more time talking to my friends overseas via Facebook and Twitter.
There are a plethora of online technologies and digital devices out there that provide consumers with their own portal to entertainment. Aside from big screen TVs that bring you a cinema at home, there are also notebook PCs to consider.
Notebooks are another means of cost-effective entertainment to online services such as online gaming, online video, video conferencing and instant connection to friends and family via IM, social networking sites, email or Skype with those embedded with broadband solutions.
Interestingly enough, consumer experts are also already tipping that many Australians will use the planned $950 Rudd Government cash handouts to splurge on games and gadgets, following record spending on electronics last year (as reported by the Courier Mail).
I’ll be watching these developments closely but please feel free to share any information specifically around how you think social media will fare in light of the global recession.
I’ve worked with a lot of tech start-ups; many had ill-defined paths to revenue. Some had no path at all. I share Om Malik’s skepticism (see here and here) towards the soundness of all that VC money deposited in the bank accounts of developers of “Widgets, Facebook Applications, OpenSocial Web 2.0 gee gaws.”
Of course, a lot of start-ups require a large amount of capital to fund product development, marketing, etc. But developers of these ‘demi-apps’ don’t necessarily need much funding to get going or thrive. Furthermore, social networking facilitates a level of user engagement that – to me anyway – presents a much more tantalizing opportunity for funding than VCs.
See this article in the June issue of The Atlantic about Senator Obama’s “Amazing Money Machine.” With the passion that some users have for widgets, and with the technology to build and leverage strong networks of like-minded people, doesn’t it make more sense for these companies to try to tap into their users for funding?
There’s been a lot of moaning and groaning about Twitter outages recently (not a widget I know, but bear with me). From what I see on CrunchBase the company has raised $5.4 million. With their user base, however, and the obvious passion that user base has for the service, maybe the ‘Obama money machine’ might help solve the problems.
To be sure, tech start-ups don’t necessarily have the appeal of a candidate for the presidency of the United States, but who says they need to raise $50 million a month?
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