Startup opportunities abound in wake of Facebook IPO

Clearly Facebook is a dominant player in social media, but startups targeting niche audiences and mobile device access still have a chance to stand out.

Facebook may dominate the social media landscape today with 845 million users, but experts say that instead of consolidating around the market leader, the social media landscape is fragmenting, leaving big opportunities for startups, especially those targeting mobile users.

This could be good news for entrepreneurs and investors who might be green with envy over Facebook's projected $5 billion gain from its upcoming initial public offering . But for consumers, it means that managing Facebook, Google+, and Twitter accounts is just the beginning.

Fred Wilson, a venture capitalist and principal at Union Square Ventures, discussed this notion of a more fragmented social media landscape last week at an event at the Columbia University Graduate School of Journalism. Wilson, whose firm has invested in companies such as Twitter, FourSquare, and Etsy, said that most people will soon be engaged in not just one or two social media platforms, but several. And he said that the proliferation of mobile devices will help drive the next wave of innovation, since more and more people throughout the world will be accessing the Internet via a mobile device rather than a full-blown computer.

"This is great news for news and social media companies," he said. "There will be plenty of new voices and new content circulating. But for the rest of us, it could make life more complicated with more social media to manage."

With more than 854 million active users, it's hard to imagine that anyone other than the largest brands, such as Twitter or Google, could compete with Facebook. But even Facebook admits in filings with the Securities and Exchange Commission that it has many unnamed "mobile companies and smaller Internet companies that offer products and services that may compete with specific Facebook features." These may include mobile-specific social-networking apps, such as FourSquare, Path, and Instagram..

Wilson used his own family as an example to explain how social media is evolving. Wilson said he was surprised to learn recently that his two college-age daughters, who had grown up during Facebook's early years, are actually infrequent Facebook users. Instead, they're using other social-networking sites, such as Instagram and Foursquare.

Why the shift? Wilson attributes it to two things. First, Instagram and Foursquare were made for smartphones. Facebook is not.

"Facebook has mobile versions of its sites," Wilson said. "But it's a crunched down experience."

The second thing is that these apps have very targeted users in mind. Instagram is a popular photo-sharing app, while Foursquare is a location-based application that lets people check-in places and share their locations with friends.

Both of these functions are also baked into Facebook. In fact, Facebook users already upload more than 250 million photos every day to the site. And Facebook has had location check-ins and even local deals as part of its site for more than a year.

And yet, Instagram still managed to add 10 million registered users in less than a year. And it's still growing. Of course, that's a far cry from Facebook's 845 million users or even its 450 million mobile users.

Still, new social-networking companies, particularly ones targeting mobile users, have a huge opportunity to capture an audience. Facebook is addressing the mobile market by making its app available on both smartphones and feature phones. And the company has seen a surge in mobile device usage. Now more than half of its users are accessing Facebook every month from a mobile device. But the fact that users can't get the full Facebook experience through the various mobile apps limits how it can be used . What's more, some users find it overwhelming to interact with their full Facebook network of contacts from their mobile devices like they would from their computers at home or work.

In other words, Facebook might be a great way to get in touch with long lost friends or to periodically check up on people. But many users may not want their smartphones buzzing and vibrating every time someone from their third-grade class updates his status.

"A mobile device is the most intimate device you own," said Scott Kveton, CEO of Urban Airship, which offers a platform on which developers can create mobile apps."If I'm going to get an update on my phone, it better be good. It better be important. And I should care about it."

Kveton said this is why he really likes the mobile social-networking app Path. It was first launched for the Apple iPhone and is now available for Google Android devices. And it allows people to share photos, status, and location check-ins only with their closest friends. In fact, Path limits the number of people in your network to 150 people. And it's designed to offer people a more intimate experience.

Wilson also highlighted the fact that people are extending the number of social networks they belong to so that they can target specific audiences. He used his son as an example to illustrate this point. One evening while he was having dinner with his teenage son, he noticed that his son took a picture of his meal and posted it on Instagram. Wilson asked him why he didn't post this particular photo to Facebook. And his son said he didn't think his 2,000 Facebook friends would appreciate the post. But he said his much smaller group of Instagram followers, who all post pictures of what they eat and where they go, would be interested in the photo.

"What's happening is that the social media landscape is breaking into smaller, more relevant services, rather than just one big service," Wilson said. "People are cultivating multiple networks, some more intimate than others."

For Facebook, the challenge will not only be to find ways to make money from users who view Facebook on a mobile device. But the other challenge is in finding ways in which its subscribers can connect with smaller and more intimate groups of users. And of course, Facebook's challenges are opportunities for a growling list of social-networking startups.

 

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