For those of you who don’t know Terence Kawaja, he is one of the most influential (and funny) social media advisors around, and is also very experienced at investment banking. His opinion in social media makes waves across the investment world, influencing heavily where money will flow. He is also the founder of LUMA Partners, a successful investment bank focused on digital media.
Terence’s talk was about digital media as a whole, and his expectations of where we were going. We are in a new era in media that is driven by rich data streams, which provides for interesting opportunities in building broad ecosystems.
Interactions have changed fundamentally. From media presented to you, to going to a site to get the media you are seeking. But as of late, web 2.0 or 3.0, I call it ‘science-fied.’ Selling media as an art, to selling media as a science. It is personalized to the user experience, realtime push delivery. Extremely rapidly, companies that you’ve heard of earlier are being formed into 10-20-50 billion dollar companies, so rapidly and cheaply that its a bonanza for entrepreneurs that have great ideas. But on the other side, there are very few barriers, and little defensibility for successful companies.
Companies from a vast variety of background who have never compete with each other, are now converging business models and are all competing.
Especially four companies: Apple, Amazon, Google, and Facebook. As the Four Titans, they will increasingly find themselves together.
They all want access to the digital consumer: search, display, video, social, and commerce. The incumbents are the “gatekeepers,” either partners or enemies. And so, the titans have to figure out a way to license new content, or pay for access to get customers. The weapon which they can utilize are: software, devices, technology around location, cloud computing, payments, and AI. The path to returns is data, which is the gasoline, the life blood of digital media and the consumer.
His firm is also well known for “LUMAscapes” (see full coverage by VC Cafe). A LUMAscape, is a landscape of a sector, organizing confusing ecosystems. Each one provides a map, displaying differences and overlaps between companies and the industry as a whole. These are extremely complicated slides that have been downloaded over 740,000 times (according to their website). Terrence presented one of the LUMAscapes, which made the audience literally grasp for air:
He says that media is now based on audience as opposed to context. There is lots of fragmentation, and it is complicated: there are too many companies in this space. Fragmentation can’t be good for efficiency, but on the other side you have phenomenal chances for innovation. With no barrier, new companies start, and existing companies can adapt.
The budget for video media is bigger than it seems. Which is what makes VCs as excited as bank robbers are to go after the market.
There is disintermediation going on. Now, publishers are going directly to consumers, making big implications for incumbents. As a warning to investors and entrepreneurs, not everyone is going to win. Going forward, a lot of companies are doing similar things, but we may see only a few winners.
Google is the most prolific of digital media companies, with over 100 transactions. Google, Microsoft, Yahoo, and AOL have represented about one-half of M&A activity. But players from a variety of different sectors are interested in media, marketing, technology, commerce, networking, and this relates to a huge opportunity in digital media.
Back to the clash of the titans: If you can fill a need for the four companies, then they may buy you out instead of building the same thing. Israeli companies have have good success with exits, and there will likely be more because there is such terrific entrepreneurship going on in the Israeli marketplace.
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