#ftmedia12 - Investment in Digital Media

Panel discussion between:

• Neil Rimer, Index Ventures
• Dharmash Mistry, Balderton Capital
• Leonid Boguslavsky, ru-Net Holdings

Chair: Richard Waters, west coast managing editor, Financial Times

Inevitably, the discussion kicks off with Facebook, given its forthcoming IPO.** Boguslavsky** thinks it will be large, but there are questions about how far it can go. Mistry thinks that we’re just at the beginning of the Facebook story – there are many areas where they could monetise where they haven’t yet. The first question, he suggests, is “could Facebook be more valuable than Google” – and he thinks it could. The amount of information that people are contributing hourly to Facebook means it could provide increadible search results – so we could be looking at a world where you can live without Google, but can’t live without Facebook.

Boguslavsky: humans have three major activities: information, entertainment and goods/services. The space indside those three dimensions is the space that both Facebook and Google are trying to grab. Mistry points out that media has content, which Facebook doesn’t, but they both have audiences, and they need to figure out how to share them. Yesterday, they investing in a fashion brand called Nasty Gal. The business was born on the internet, and her entire following is based on Facebook, and her customers sharing what they bought and what they like. And now platforms like Pinterest are emerging. Some sites are so broad and deep – like Etsy – that they’d need an army of merchandisers. And here people are doing it for free for you. They’re social businesses.

Rimer describes the trend of businesses building themselves off the distribution platform built by others – the companies Mistry is describing are doing just that. Mistry thinks companies like Conde Naste and The Guardian are doing a good job of pushing their content out into new channels, rather than just publishing old-style content in new formats.

Insurgents are attacking many parts of the vlue chain in media. Those companies who have been able to cannibalise themselves have done the most interesting things, suggests Rimer. Some photolibraries have embraced microstock and cannibalised their own businesses before other did it.

Is unbundling of video and TV channels going to happen? Rimer thinks that customers want the content they want when they want it and where they want it – but their is an issue with network capacity. But generally, getting praise for traditional media companies from the panel was nigh-impossible for Waters.

The standardisation of mobile platforms that iOS triggered is good news for investors, says Mistry. There’s Apple, Android and maybe Microsoft, still. They can now invest and they’re seeing real innovation, with uses emerging to help, for example, medical staff diagnose conditions better. Maybe there will be a choke point on innovation, but they haven’t see it yet. Boguslavsky is less keen – he doens’t think the advertising oportunity is there on mobile devices. The important thing to do is to create new mobile advertsing products. Rimer thinks we’re just moving towards an age of computers with different screen sizes. Think more about customers and products rather than the device – sell them a product they can access through any device. But the dominance of just one platform would be a problem.

If you acquire your customers through Google or Facebook, and monetise them through Apple, you have a bad business model. You need to break one of those dependencies, suggests Mistry. Zynga are trying to break their dependence on Facbook, for example.

Some discussion about the limits of bandwidth, and Mistry suggests that people are cautious of investing in businesses that require more bandwidth from their products than current bandwidth can support.

Lots of questions from the floor about privacy – and a distinct lack of answers from the panel. There was evasion and dismissal, but no real engagement with thee topic – probably one to watch…