Internet legend Marc Andreessen waxed positive about social networking and VC opportunities for the next five years during a packed luncheon at the Think Tomorrow — Today conference. Without spending too much time talking about his own social networking venture, Ning, he asserted that the decentralized “many to many” media world we now live in has created 40 million to 50 million early adopters.
The user empowerment that the Internet offers has also inverted adoption cycles to start first with consumers, then enterprises. It has traditionally been the other way around, he said, citing examples like blogging and social networking as consumer driven apps.
In a walk down memory lane, Andreessen further pointed out that we’ve seen about one killer app per year, starting with the Web browser (his brainchild circa ’94) then moving on to Yahoo!, eBay, Amazon, Google, Flickr, MySpace, Skype, etc.
“If you look at the common thread, these were all easy-to-understand tools that relate to how people live their lives,” he said. “They also had to do with communication and connecting people in new ways.”
Entrepreneurs and VCs should keep this frequency and set of factors in mind, he said, because we can expect about a dozen killer apps over the next 10 years. The iPhone is one place where some of this innovation will be channeled, given the widely anticipated 3G model and subsequent generations that will be smaller, faster and cheaper.
“It’s the first mobile device that software developers can write to and that people can use,” he said.
The second part speaks to a point we and others have echoed regarding the ease of use and appeal that will finally bring mobile search into the mainstream. The resulting market size of the iPhone and competing devices will feed back into the innovation cycle, creating more incentive to develop products. That plus the development-friendly environment Andreessen referenced, will bode well for innovation.
Other important places this innovation will happen include ad targeting. Stepping back, Andreessen contended that despite online fragmentation, ad revenues are declining in nearly every form of traditional media. The only place where it is rising is the Internet and video games. With this, ad targeting will continue to improve and drive growth — not only because of advertiser interest in following users online, but also because of Moore’s Law.
“The technology for ad serving and targeting is getting better and better because it is software,” he said. “This development cycle is antithetical to what media companies were built to do. Traditional media isn’t based on code, but on fixed standards. The format for delivering most television content today was invented in the ’40s.”
The innovation behind these ad serving technologies will drive the overall online ad pie from 20+ million today to about 100 million in the next five to seven years, he said. And an important piece of this puzzle will be ad networks, which can benefit from a network effect as they grow — seeing exponential returns from incremental traffic and distribution.
“A big battle over the next few years will be around ad networks,” he said. “AdSense has a lead there but there has to be about 200 different ad networks out there that are targeting in different ways.”