VCs failed this time around for one simple reason, the Web was a haven for free, ad-supported content or services, and VCs lacked experience in advertising. Consider the fact that they so heavily bet on user generated content (UGC), which failed to take off…
You never know who is swimming naked until the tide goes down. Well, the tide has all but disappeared and you are seeing social media and UGC in its last throes.
Google remains the only really successful ad-supported technology company. Name me another one? You can’t, you won’t.
I am a content guy, regular readers know my frustration at VCs who have failed to understand media, content and advertising. People spend 47% of their time consuming content online, more so than social networking, search, etc., yet if you look at where the VC money went, it was anywhere but content. We’re a perfect example of that: met with 10 or so VCs, never got anything resembling a respectable term sheet. No problem. It’s our salvation now.
But as VCs continue to force their social media/UGC leaning portfolio companies to batten down the hatches, they will miss out on profiting from the next wave of growth. After all, when the economy shrinks and people’s discretionary income disappears, they tend to stay home, turn on their PCs, surf the Web and consume more content.
The number of partnerships we sign has grown as the number of layoffs has risen. Why? Media firms lay people off, have less resources yet people and marketers continue to flood the Web and consume content in droves.
Yet there’s only so much UGCrap they will consume. VCs, frankly, don’t have a clue about what makes for a successful new media company, let alone content play. Here’s a hint: it doesn’t involve a cat and a toilet.
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WatchMojo NewsletterConsumers - the engine that kept the American economy humming - seem to be losing confidence, and the ability to shop. From NY Times:
Suddenly, our consumer society is doing a lot less consuming. The numbers are pretty incredible. Sales of new vehicles have dropped 32 percent in the third quarter. Consumer spending appears likely to fall next year for the first time since 1980 and perhaps by the largest amount since 1942.
Well… I will say this, up to this fall, when I would send out follow-up emails to folks at other companies, I’d say 99% of those emails would go through… then in September, I saw about 5-10% bounce back, now, I’d say 10-15% seem to bounce back. Not all of those are explained by layoffs, but a good portion are.
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