I have long been a fan of the verticalization trend on the Web. It led me to define one of the most referenced frameworks for Web 3.0.
It has become increasingly possible to reach people in faraway places using the Web. And it has also become possible to hyper-target, and access and offer highly localized, specialized, and verticalized services. Both trends will continue, but to make money, the verticalization and localization trends look more promising to me, although cases like Facebook and Groupon speak to the contrary. Let’s put it this way: there will be a few large, global players. But there will be millions of smaller, niche, localized and/or verticalized businesses that will continue to open up entrepreneurial opportunities around the world. The latter is directly in line with our One Million by One Million work, and a trend that powers our mission for the next decade. Also relevant is my Web 3.0 = (4C + P + VS) formula. In particular, niche e-commerce is a vibrant trend that will continue to grow. Sub-trends like group-buying and daily deals will be layered on top of any niche to create more traction. Let’s take a look at the top 10 trends driving the vertical and local Web.
1. Niche E-Commerce:
Just as brick-and-mortar commerce went from general merchandising to specialty retail, e-commerce is moving from mass e-tail to specialty e-tail. From Amazon- or eBay-style e-commerce to boutique experiences like Blue Nile (diamonds), Blinds.com (window blinds), Sheetmusic.com, and Waterfilters.net. This trend will continue, and it will spread globally, as specialty retail on the net sweeps over the emerging markets, just as organized retail is also sweeping over them.
2. Niche Content Apps:
In the West, the content industry has imploded. But high-quality, specialized, niche content continues to be attractive. Look at the Economist, the WSJ, and Zagat. But the nature of content is changing, and apps are being introduced to give content more leverage. OpenTable is a great example of a tremendously useful restaurant reservation system that is an amalgamation of niche content and an app. Expect to see more.
3. Niche Community:
Yelp is a great example. A restaurant review and rating community that leverages user generated content and offers a great experience. Same with TripAdvisor and VirtualTourist in the domain of travel. Flickr in photos. SeekingAlpha in stock analysis.
4. Vertical Search:
Kayak (travel), SimplyHired (jobs), Trulia (real estate), Indeed (jobs), and many others are all going gangbusters. Niche e-commerce sites are often using vertical search effectively. Blinds.com is a very good example.
5. Local Search and Services:
We’re often looking for things within 15 miles of our home. Stores, restaurants, hair salons, nail salons, dry cleaners, a Japanese grocery store, a Jazzercise place. Service providers like Fresh Diet, which delivers home-cooked meals every day, are leveraging Google’s ability to hyper-target their offerings to consumers. Groupon has just introduced an entirely new paradigm for local service marketing using the social Web behavior pattern. All this makes it increasingly easy to take an industry that started life as local classifieds to a new level of precision and creativity.
6. Location-Based Services
Of course, local and location-based services are not the same. Often, we find ourselves in unknown cities or remote places without a clue as to where to eat or how to find a good dentist. With the penetration of GPS technology, as well as local online communities, for location-based services, it finally looks like their time has come.
And I am still waiting for real personalization. Not only personalization via local or location-based, but by demographic, psychographic, taste, style, passions, and a lot of other methods that still seem like voodoo. But maybe this decade we will see some real strides. And I believe, the technology we need for this trend to really take shape is expert systems. And with personalization will come the opportunity to do hyper-targeted advertising, offering that industry yet another level of precision.
8. Advertising and Transaction Business Models:
So far, we have overemphasized advertising as the business model of the Web. U.S. Internet advertising revenues hit $6.4 billion in the third quarter of 2010, representing the highest quarterly result ever for the industry and a 17% increase from Q3 2009. The industry is growing steadily and aggressively, with search advertising as its biggest beneficiary. According to S&P Equity Research, online ad revenue will increase by about 10% this year, pushing ad revenue to just over $28 billion in 2011. This trend will continue, as will the strong growth in transaction revenues, as fueled by online shoppers. A JP Morgan report forecasts that e-commerce revenue will grow to $680 billion worldwide in 2011 up 18.9% from 2010. E-commerce in the U.S. alone will grow 13.2% to $187 billion. JP Morgan anticipates that global e-commerce revenue will hit $963 billion by 2013. That, ladies and gentlemen, is almost a trillion dollars.
9. Subscription Business Models:
But as the Web verticalizes and localizes, we will find consumers more willing to pay for clean, focused, well-curated, personalized user experiences in the form of subscription revenues. This is my own instinct. We haven’t seen much of this trend yet, but I expect we will during this decade. It’s like a membership we’re often willing to pay to be part of an exclusive club for a suite of well-curated services.
10. Contextual Web:
And through all this, we’re inching closer to a contextual Web, an amalgamation of Content, Community, Commerce, Vertical Search, and Personalization in Context, and away from fragmented, commodity user experiences. In other words, Web 3.0 = (4C + P + VS).
I hope that some of my readers are going to use the framework and shape this next generation of the Internet. Remember, we want more precision and personalization, less of the deluge of irrelevant crap.