Here Come The Giants
March 6th, 2007 by Jason Yau
The blogosphere and conference circuits have been abuzz lately with companies developing RIAs for managing, editing, arranging, and sharing all of the media flying out of our digital cameras and webcams practically faster than we can buy hard drive space for it. With this new set of sites, sharing videos on Youtube is passe. Digital effects, transitions, and mixing are the new “in” thing. However, until last week, it wasn’t clear if and when the “legacy” media sharing titans might get into the game. With the announcement of Photobucket’s new Adobe-built video editing tools, Conde Nast’s launch of flip.com, and open discussion of Photoshop going online, it’s clear that the slumbering media and online sharing giants have officially awakened. Deep pockets, and in the case of Conde Nast, valuable content libraries, make these larger companies serious forces to be reckoned with. All of this is both good news and bad news for startups and VCs.
The good news is that this validates the thesis of those of us who believe that users are creating more content than they have the tools to process properly today. I use the term “process” to include everything from touching up to remixing and creating arrangements. The bottom line is that the amount of digital media is exploding, and moving hundreds of photos straight from memory card to cookie cutter gallery isn’t likely to remain the standard for long.
Meanwhile, some are adopting an alarmist approach to the menacing threat of Adobe entering the RIA arena, which was once the purview of only startups. On the contrary, aside from the dozen or so startups that are directly competitive, I think Adobe’s entrance is potentially complementary to the rest of the market. Sites like Tabblo, Scrapblog, Flickr, and even Facebook would benefit from the availability of a free “Photoshop Online”. Image editing is beyond the scope of these sites, but providing that capability to their users would certainly be beneficial. I think it’s unlikely that Adobe has any interest in moving into many more markets beyond photo editing and video remixing, which lie in its core area of expertise. If Adobe is liberal with its standards and APIs, the rest of the Web 2.0 world will find creative ways to integrate with the tools it knows best.
From an investment perspective, it’s likely that the M&A activity in this area will pick up as others feel the need to jump on the bandwagon. That could be good news for anyone owning a stake in another reasonably successful player in the market. But, it also sets a dangerous precedent that Photobucket chose to jump into the fray by building rather than buying. Other cash-guzzling behemoths might just as easily follow suit. Based on my conversations with entrepreneurs in the trenches, many of the sites out there today have no more than a 6-12 month technology headstart against a well-capitalized development team. This means that Shutterfly, Kodak, Youtube, or even content-owners like Disney could well choose to break out the Legos rather than go shopping.
In order to be successful and head for a high-value exit, startups will need to differentiate in more ways than just technology (e.g. partnerships, content). We will be announcing an investment in this space very shortly that we expect to compete effectively in several of these areas. I’d be interested to hear other opinions on what it will take to compete and how Adobe figures into the equation.
Subscribe to our Feed
