Small Business Labs

Signs Point to a Better 2010 Tech IPO Market

Going public has long been the dream for tech company founders and their investors.  But the last few years have not been good for companies hoping to do an initial public offering (IPO).  The financial crisis and Sarbanes-Oxley reporting requirements severely limited their number.

But the IPO market seems to be thawing.  Q4 2009 has already seen the most IPOs since Q1 of 2008.  Last week security software company Fortinet had a very successful offering and several more IPOs are slated for debut before the year is out. 

2010 also looks to be a much stronger year for IPOs.  The drivers are:

1.  The economy and stock market are improving, opening the IPO window for companies that have shown the ability to thrive during the downturn.   

2.  Successful private companies with strong operating track records are positioning to go public.   Facebook is the best example and their recent announcementof creating two stock classes indicates they are on the IPO path. 

3.  Investor interest in clean tech and environmental company public offerings.  Several clean tech firms, including electric car company Tesla Motors and smart grid supplier Silver Spring Networks, appear to be planning 2009 IPOs.  Neither of these companies is reported to be profitable. They will be going public on a future growth story - a clear indicator of renewed investor interest in growth IPOs - at least in clean tech.   

While the glory IPO days of the late 90s are not going to return, we expect 2010 will be a much stronger IPO year than the last few.  The industries likely to lead the IPO markets are social computing, clean tech, security and cloud computing. 

Etsy Continues Rapid Growth

The Compete blog has an excellent analysis of Etsy's traffic growth.  For those not familiar with Etsy, it is an online marketplace for handmade or craft items.  Think of Etsy as the eBay of crafts.

The chart below is taken from the Compete post and shows that Etsy's monthly traffic has more than doubled over the last year. 

 
  
Several interesting data points in Compete's analysis:

• Facebook refers 23% of Etsy's traffic and is the top referring site
• Google refers 12% of Etsy's traffic and is the 2nd largest referring site
• 98% of Etsy's search engine traffic comes from organic search

See the Compete blog for more details. 
 

Local Web Continues to Grow - Twitter Adding Location Data

The New York Times covers Twitter's planned release of geolocation data.  The new feature will take advantage of geolocation data in cellphones letting users include their location in tweets. 

This will allow users to search Twitter by location, improving its use for location applications like local commerce.  It will also allow comparisons across geography.  For example you could compare what  people in New York tweeting about swine flu versus people in Texas. 

More evidence of the growth of the local web. 

Steve King Named 2009 SNCR Fellow of the Year

The Society for New Communications Research (SNCR) named Steve King the 2009 Fellow of the Year at their recent awards gala in Boston.  SNCR Executive Director Jen McClure stated: "His vision for SNCR’s potential, his impressive experience and expertise as a business leader and researcher, and his unwavering commitment to the Society’s mission and goals is greatly appreciated, and I am honored to work with him as a colleague on our board of directors and as a Fellow conducting research on behalf of our organization.”

As managing director of Emergent Research and a fellow SNCR fellow, I'm delighted that Steve received this recognition. Emergent Research looks forward to continuing our work with SNCR to better understand social media's evolving and growing role in marketing, media and society. 

The Rise of Social Media Peer Groups

The Society for New Communications Research(SNCR) just released the preliminary results of a new study showing that corporate decision makers are increasingly turning to online social networks for assistance in decision-making.  

The study, The New Symbiosis of Professional Networks, examines the role that social media has on decision-making among business professionals.  Key findings include:

• Professional decision making is becoming more social as decision-makers utilize social network to research, inform and validate decisions.
• Professionals trust online information almost as much as information received in-person. 
• Reliance on web-based professional networks and online communities has increased significantly over the past 3 years.
• Social media is being used by decision-makers of all ages with older (55+) and younger (20-35) being more active than middle aged professionals.
• Decision-makers are using social media to collaborate with more people outside their company than within. 

This study shows the extent social media is disrupting traditional corporate decision-making processes.  It also illustrates the growing role online social media peer groups are playing.   Through the use of online networks and communities, decision-makers are connecting and collaborating with a mix of peers, experts and colleagues from both inside and outside of their companies. 

The final report will be out in a few more weeks, but a detailed presentation of the resultswith lots of interesting data is available at the SNCR website. 

The study was conducted by SNCR Research Fellows Don Bulmer and Vanessa DiMauro.  In addition to being SNCR Fellows, Don is VP of Global Communications at SAP and Vanessa is the CEO of Leader Networks.  Don has more information on the study on his blog.

Home Businesses and Their Employees

Based on questions and feedback we are getting on the homepreneur study, the finding that roughly half of homepreneurs have employees seems to be the most surprising result.

We weren't surprised by these results, mainly because we were surprised by this years ago when we first started researching home-based businesses.  Over the years our conversations, interviews and surveys of home-based business owners have consistently shown that a high percentage are employers. 

While there haven't been a lot of recent studies on home-based businesses, others have shown similar results.  The Council of Smaller Enterprises (COSE), a Cleveland-based small business support organization, released an excellent study on home-based businesses about a year ago.  They surveyed their home-based business members.  We posted on the study when it was released. 

The most interesting overlap across the two studies was the number of home-based businesses with employees.  The COSE survey (mostly northern Ohio COSE members ) and the SBSI survey (national) both found that about half of home-based businesses have employees. 

The SBA study referenced in the homepreneur report - Startup Business Characteristics - also supports the data on employer home-based businesses. 

The trends driving the growth of homepreneurs are strong.  We expect to see their numbers and the number of people they employ to outgrow the overall economy in the coming years. 

It's All About Leads

Yes, this is pretty obvious.  But we often overlook the importance of leads and lead generation.  Also overlooked is how central lead generation is to the business models of many of the Internet's most successful companies - and how lead generation is changing media and marketing. 

Google is, of course, all about leads via adwords.  So is eBay and all the other online markets.  For example, I just made a restaurant reservation using Open Table.  It is a public company worth $600 million that gets a big chunk of its revenue generating leads. 

We recently posted on social game companies.  Rapidly growing rapidly and hugely successful, these firms are lead generation platforms disguised as casual game companies. 

On the marketing side, firms that provide lead generation services are thriving while traditional marketing agencies struggle.  Hubspot, a successful Internet marketing firm that is an agency/services/web analytics hybrid, is a good example. 

The shift towards lead generation is also a major driver of the disruption of the media industry.  Traditional media's marketing strengths are awareness and branding.  Not good when advertisers are focusing on lead generation.  Most new media companies tightly focus on generating leads for their clients. 

The trends driving the need for leads are diverse and strong.  Increased competition is a key driver, as is the growing consumer and B2B customer immunity to traditional advertising.  

Enabling and driving this trend is the the increasing power of analytical software and the growing reach and data intensiveness of the Internet.  These tools and data are making it easier for even small businesses to run sophisticated lead generation programs. 

Like most trends, the shift towards lead generation is not new.  Many of the online methods and approaches considered innovative today were in use decades ago by the direct marketing industry.  But despite its age, the shift towards lead generation is just beginning.   

The Average American No Longer Exists

That the U.S. has become more multi-cultural is no surprise.  But the extent of the demographic changes that have occurred over the last few decades can be surprising.

According to an article in Advertising Age that anticipates the results of the 2010 Census, there is no longer an average American. Key quote:

"The concept of an 'average American' is gone, probably forever," demographics expert Peter Francese writes in 2010 America, a new Ad Age white paper. "The average American has been replaced by a complex, multidimensional society that defies simplistic labeling."

Examples of this include:

• Married couples with children account for only 22% of households
• White non-hispanics comprise less than 50% of the populations of Texas or California
• In the nation's top 10 cities, no racial or ethnic category describes the population majority

Going forward, the country will become even more multi-ethnic and multi-cultural.  80% of people 65 or older are white non-hispanics; but just 54% of children under 18 are white non-hispanics.  In 2010, hispanics will be the largest minority (50 million) and the fastest growing.

Ad Age has a more detail and projections in a white paper they have for sale. 

The Rise of Social Games

Social games are online games that are played on social networks like Facebook or MySpace, or on smartphones like the iPhone. 

One of the most popular is Zynga's Farmville.  It is a Facebook application that allows users to grow digital crops and sell them for virtual money - which is used to buy virtual items that help you improve your farm such as tractors and tools.  As silly as this game sounds, there are roughly 61 million players around the world. 

The game is social because all the players are logged into Facebook and users can choose to work together or compete with one another.  During my very brief Farmville experience, I neglected to water my crops.  But in an interesting example of the social nature of the game, a friend of mine noticed this and watered them for me. 

Besides Zynga, two other social gaming firms have popular games.  Playfish has 21 million users of its Pet Society game and Playdom has 16 million users for its Mobster game. 

The companies make money two ways.  The first is selling virtual goods to game players.  Using a credit card or Paypal, users improve their game performance by buying items that speed up play or make it easier to reach a higher level in the game. 

The other - and much larger - revenue stream comes from lead generation for companies advertising on the games.  The game companies offer virtual cash in exchange for game players taking offers from advertisers.  Sign up for a credit card or Netflix, buy ringtones or an energy drink and you get rewarded with virtual cash.  The company gets rewarded with real cash.

These companies already have substantial revenues and are growing very rapidly.  Not surprisingly, they are also rumored to be quite profitable (all three are private) - which is not surprising since they are selling virtual goods and trading fake money for real money.   

For more on social games see BusinessWeek's article on the App Economy or the Tech Crunch review of social game companies. 

The Policy Dialog on Entrepreneurship

One of our 2009 Top 10 Small Business Trends is government playing an increasing role in the economy.  The recession, corporate misbehavior and regulatory failure are leading to greater government intervention in the economy.

Because of this, keeping up with and tracking policy and programs has become more important.  A resource we use to stay abreast of policy issues that impact small business is The Policy Dialog on Entrepreneurship.  Part of Entrepreneurship.org and in partnership with the Kauffman Foundation, the site covers a range of policy issues related to starting and operating small businesses. 

They have two weekly newsletters well worth subscribing to.