Tomorrow’s world wide web

The internet has created opportunities for entrepreneurs everywhere. Nick Britton talks to some of them about burgeoning trends in online business

As you read this, somebody somewhere is launching an internet venture. A resurgence of investment in the sector (£257 million of disclosed venture capital invested last year across Europe, according to Library House) coupled with low barriers to entry, is creating an atmosphere in which entrepreneurs, not corporates, are driving innovation.

It must be a compelling environment, because Microsoft seems comfortable
paying US$240 million (£122 million) for a stake of 1.6 per cent in Facebook. That
gives the four-year-old social networking business a higher valuation than, say, 3i and Tate & Lyle put together.

When web companies go from start-up to stardom in so short a time, they throw up both opportunities and threats for all businesses with a stake in the online world. Here are some of the innovations that may soon be as mainstream as webmail or online shopping.

The new social networking
Until now, social networking has often sat awkwardly with work, with bosses fretting about hours wasted on Facebook. Eric Archambeau, partner at VC firm Wellington and co-founder of the business that became Yahoo Groups, believes that networking websites have a lot to offer the working world – and vice-versa.

‘There are limits to the number of times people will return to casual social networks, and their level of activity tends to taper off over time,’ he states. ‘The same is not true of professional networks, where you have goals you are trying to achieve, such as locating new partners, hiring staff, or finding out more about your counterpart in a deal.’

It’s a view that seems vindicated by Facebook’s five per cent drop in UK users between December and January, its first fall ever, according to marketing research company Nielsen. But Archambeau is far from dismissive of Facebook and its ilk. He reckons the smart money is on ventures that seamlessly combine social and professional networks in a way that maintains users’ privacy.

‘I think people are going to want to have separation between their private and professional lives,’ he argues. ‘If you go on a skiing trip during the weekend, you don’t necessarily want to bring the entire office with you, or have your boss and your boss’s boss look at the photos on Monday.’

Wellington’s portfolio company Amiando is one venture bridging the social/professional divide. It provides a platform compatible with existing social networks that allows its users to organise events both inside and outside work simultaneously – but without sharing all the details.

‘The next generation of activity in social networks will bring in features that vastly increase their usefulness and stickiness,’ Archambeau concludes.

A second life for Second Life?
Three-dimensional virtual world Second Life was founded in 2003 and now has millions of “residents” who create their own characters (avatars), buy land and interact with each other online. But just as social networking is turning from a toy into a tool, the technology behind virtual worlds may prove to have functions beyond pure escapism.

As early as 2004, technology giant Toshiba was working on three-dimensional software that would enable shoppers to “try on” clothes online via a virtual-reality version of themselves.

In February, Lastminute.com co-founder Brent Hobermann launched the beta version of Mydeco, an interior decoration website that will allow users to arrange furniture inside a 3D version of their front room. Technology-focused VC SPARK Ventures has already invested £5 million for a quarter of the company.

Bob Tarzey, service director at IT analyst Quocirca, says that such technologies could revolutionise e-commerce by making shoppers feel comfortable about buying more “personal” items like clothes, shoes or furniture online.

There are other applications, he adds: ‘IBM runs a global virtual conference, which even has a dress code for avatars. Virtual worlds could be the new web-conferencing.’
While some companies explore real-world applications of 3D visualisation, analytic software provider SPSS sees virtual worlds as potential mines of information for marketers.

Colin Shearer, senior VP of marketing strategy at the company, says: ‘These communities are big enough, elaborate enough, and international enough to give
very interesting insights into communities
that you couldn’t reach in other ways.’

Searching for perfection
Search advertising will account for around two-thirds of all online advertising spend in 2008, according to media investment specialist GroupM. It’s a growing market famously dominated by Google, but that has not stopped entrepreneurs trying to carve off
a piece of the action.

‘As more and more content goes online, and search engine optimisation becomes a reality, people are getting a lot of irrelevant results,’ says Gary Stewart, CEO of search venture Migoa. ‘If you type “flats London” into Google, you want to see flats in London, you don’t want a list of pages where those words turn up.’

The solution to delivering relevant, complete results in specific areas, argues Stewart, is a specialised or “vertical” search. Migoa, which has already received seed funding of €1 million (£754,000) and is close to securing more, has focused on the real estate markets in Spain and Germany to build a search engine that also throws in blogs, videos and elements of social networking. The idea is that the site becomes a trusted resource for people with a specialised interest in those markets.

According to Archambeau, Google is an ‘amazing’ company, but that does not mean it is invincible. ‘The larger you grow, the more apparent it is that you have holes,’ he states. ‘Look at Facebook – in theory Google could have created it, but it didn’t. No-one is able to take in every single innovation.’

For most entrepreneurs, though, Google remains more a fact of life than a potential
rival. ‘Google is the way we get most of our customers,’ says Stewart. ‘Within the foreseeable future, anyone who thinks they can kill Google is deluding themselves. Microsoft has to try and acquire Yahoo just to have a chance of doing it.’

Websites that know who you are
As web users want more precise search results, they also want more relevant content on websites they visit, according to Andy Bellinger, MD of content management specialist Red Dot. ‘Amazon telling you that the last ten people who bought a CD also bought these other CDs is not very personal to you,’ he says.

According to Bellinger, Red Dot’s products collect information about users by analysing how they use a website, then aim to shape content to fit their preferences without them even realising it.

‘One of our customers is the Chartered Institute of Management Accountants,’ he says.

‘An accountancy student and the CFO of a large corporation might both be looking at the site, but they are not going to want to see the same things.’

Doing more on the move
Archambeau believes the mobile internet has yet to live up to its hype. ‘It’s very simple. Look at the bandwidth on your laptop, and the bandwidth on your mobile. Yes, you can do email but, for more complex applications, what you get on your mobile is what you could have got on your PC ten years ago.’

That doesn’t mean that the commercial possibilities of the bandwidth currently available have been exhausted. Dominic Keen, formerly head of ventures at internet bank Egg, has recently received funding of £5 million for his new business, Mobank.
‘Our entry-level product is a payment portal on mobile phones, intended for simple day-to-day transactions like buying cinema tickets or paying bills,’ says Keen.

‘Customers can then elect to open a bank account with us, and further down the line we will be looking to migrate banking, especially for younger customers, from high street banks to mobile.’

Naturally, there will be challenges. ‘The mobile world has yet to produce one killer brand. There are operator brands, but there’s nothing with the profile of Lastminute.com or Amazon or Egg,’ Keen states, adding that poor usability and the difficulty of developing applications for different operating systems have held mobile back.

Such issues haven’t stopped Trutap, which has just launched a service
enabling Facebook users to update their profiles using their mobile phones. With Californian entrepreneur Doug Richard at the helm, Trutap shows how mobiles can complement rather than compete with the conventional internet.

For more ambitious applications, the issue of usability will have to be tackled. Vlad Sejnoha, chief scientist at speech technology specialist Nuance, thinks he has the answer. ‘Speech recognition is the missing element in the mobile explosion,’ he says, adding that a voice-enabled search engine would be a welcome gateway into the mobile web.

The disappearing internet
It’s become a cliché that eventually the internet will become so ubiquitous that we will stop thinking about it as a discrete entity. Key to that conceptual shift is cloud computing, which in its most radical form involves all data, applications and even processing power residing in large datacentres rather than on individual machines.
Zvi Schreiber is CEO and co-founder of G.ho.st, whose mission is to provide
‘a free virtual computer for every human being’. A virtual computer, unlike a physical one, can be accessed from any machine. Its entire operating system, along with all its data and applications, is located in the “cloud” – or to be more prosaic, in a datacentre whose exact location is unimportant to the user.

‘I think, ultimately, all data will be in the cloud, for two reasons,’ says Schreiber. ‘First, it will be available from everywhere, and second, it will be professionally managed, backed up and secured.’

Schreiber stops short of predicting that all processing power will also be in the cloud.
‘A lot of processing will still be done on your personal computer because it’s local and offers quick response times.’

While G.ho.st is still in its alpha phase (and plans to go beta this year), other companies have already commercialised elements of Schreiber’s vision. Huddle
has 1,000 clients and has been generating revenues from launch, claims CEO Alastair Mitchell. The company provides online work spaces so that people working on a project can share information and access documents simultaneously.

‘The second part of what we do, which is the important bit, is we link up all these work spaces into a network,’ Mitchell explains.
‘You can work on several projects and manage them all from one place.’

Whether or not the internet ends up servicing all our computing needs, it is already changing the way we work – and entrepreneurial companies are leading the revolution. Says Archambeau: ‘Developments in the web always follow the best entrepreneurs. They know better than we do what those developments
are going to be – that’s why they’re great entrepreneurs.’