Bing Gordon, a partner at Kleiner Perkins and former creative chief at Electronic Arts, engineers a new $250 million "S Fund" to prime a social media market he expects to grow 25 times bigger in the next five years. Social, mobile interactivity gives every business potential upside, Gordon says.
The instruments of this change - connected mobile devices - are breaking all growth records and expectations. Apple has already sold more than 10 million iPads since its April launch, representing more than $7 billion in revenue that didn't exist a year ago and a massive segue into commerce, gaming, enterprise and paid content. The iPad and iPhone and the devices they inspire are fundamental to rewiring all business and leisure and the universal adoption of a digital infrastructure.
That will spawn a cache of wealth - not only from the shift of conventional advertising and marketing dollars, commerce and fees to mobile, interactive devices and platforms - but the creation of new real-time revenues streams and businesses.
Google's aggressive courtship of GroupOn, and Facebook before it, indicates it is no different than other established media giant, such as News Corp. and Time Warner. It's finding new arenas to supercharge its maturing advertising-driven search business. So far, Google has mostly tapped its $33 billion in cash reserves to defend rather than to expand its competitive position - signaling that these new players are ushering in a dramatically different competitive dynamic.
That Google's heady algorithmic standard would clash with GroupOn's creative, loopy culture and destroy potential value is as real a possibility. Culture clash contributed to AOL Time Warner's demise. A mere decade since that unprecedented merger, which destroyed more than $200 billion market cap in just a few years, the so-called "new" media and "old" media industries are virtually valued at about $290 billion each, according to Henry Blodgett of Silicon Alley Insider.
None of that reflects the explosion of new value represented by GroupOn's social mobile buying and discounts. The business of local merchants and marketers drove newspapers, radio and TV station revenues for a century; it's now officially usurped.
Television advertiser spending online is expected to top $4 billion in 2011, growing 22% to become 10% share of nearly $42 billion in total spending, according to Borrell. But that's still less than half of a $10 billion mobile ad market that is just getting started. The location data, discounts and connections facilitated by GroupOn and its rivals simply represent an untapped market that could prove to be the most lucrative, given consumer behavior.
That is why John Bax, CEO of LivingSocial, a GroupOn wannabe in which Amazon invested $175 million this week, insists that GroupOn should hold out for two or three times what Google is offering. After all, Facebook founding CEO Mark Zuckerberg has rejected buyouts, beginning with a $1 billion offer from Yahoo! four years ago.
The offers are eclipsed by hints of the wealth creation to come.
Because advertising dollars follow consumer eyeballs, global Internet advertising is a $54 billion revenue opportunity, according to Morgan Staley's Mary Meeker. And that estimate doesn't take into account what's possible when social connections and recommendations become primary filters for commerce -whether it goods and services, entertainment or information.
Whoever thought "like" would become a measurement for marketing value? Facebook's 620 million users, up 51% from a year ago, pull the trigger on new ways for advertisers to monetize targeted connections every time 13 millions say they "like" Oreo cookies or 5.8 million declare their preference for Dr. Pepper. It is a unique, interactive lifeline to consumers that is unparalleled even by a mass television audience.
Notwithstanding all the hubbub about streaming video - from Netflix to YouTube - it is simply a means to a commercial end, whether paid content fees, marketing and transactions, increasingly on mobile devices.
The reticence of advertisers, ad agencies and media players to reinvent themselves for the social mobile realm is taking a toll, contributing to the costly, yawning gap between time spent by consumers and dollars spent by advertisers in the mobile interactive space.
The only companies innovating for growth are pulling away from the pack: Netflix's streaming content, Amazon's Kindle and mobile commerce apps, PayPal's mobile digital payments, Salesforce.com's real-time collaboration, Google's Android operating platform and Apple's catalytic ecosystem. Some days it seems they're all that matters.
GroupOn is not alone in new entrants defining the value proposition of a new mobile commercial age. SecondMarket and other companies that value private start-ups say Twitter is worth at least $4 billion, Zynga is worth at least $6 billion and Facebook has topped $50 billion. The disruptors have become the status quo.