2014: Make or Break for These 3 NYC Startup Trends
The future-studies writer and speaker John Naisbitt has said: "Trends, like horses, are easier to ride in the direction they are going."
In that spirit, let's examine where some of the emerging trends in New York City's tech startup boom are headed.
The coming year will be make-or-break for native advertising, one of the most talked-about trends in New York's media industry.
To use the term native advertising in early 2013 required the use of quotation marks and a definition. It was compared to advertorials, and often called "sponsored content." Plenty of journalists shuddered, watching the lines blur between content (articles, multimedia packages, etc.) created by an editorial department and that created by advertisers--often with the explicit goal of looking and feeling as similar to editorial content as possible.
Today, entire media brands, including New York City-based Buzzfeed and The Atlantic's Quartz, have been started-up around--and sustained by--native advertising. The online women's publication Refinery 29, also based in New York City, tried both native advertising and online retail last year, and the native advertising proved a far better revenue stream. A recent survey of online publications the Federal Trade Commission has cited found that 73 percent currently do native advertising. Seventeen percent more were considering it.
The age of native advertising is here. We're deep in it. But it certainly hasn't reached a breaking point.
It's worth considering that native advertising in itself is a conundrum, as Bob Garfield, a media critic and host of the radio show "On the Media," smartly points out. He says that a piece of sponsored content's effectiveness depends on readers confusing it with trusted editorial content. But that blurred line creates ethical problems for editorial publications. In order to diminish the ethical problems, publications can clearly mark content as "sponsored." With that, Garfield says in the New York Times, "what will also diminish, to near vanishing point, is the readership of those adverts."
Critics from the marketing side of the spectrum complain that native advertising doesn't go far enough. They say it's too "island-like" with stand-alone pages, and devoid of any call to action.
With Vanity Fair trying it last month, and the New York Times this week jumping into the native advertising pool, it's clearly a trend with legs. It's probably not going to vanish--or even diminish much this year. In fact, I'd suggest we'll see the "native" drop out of the phrase "native advertising" as it becomes ubiquitous. But there's room for innovation here. New York City is also home to dozens upon dozens of ad-tech firms working with an almost unimaginable amount of data on how we interact with online advertising. Here's hoping they can steer this trend to a place that's good for brands, publications, and consumers.
In the business of fashion, where New York tends to lead the rest of the United States, if not world, this year is expected to be pivotal for flash sales.
In 2013, we saw Fab.com amass another $150 million in venture capital funding, and join the unicorn club, achieving a $1 billion valuation. The company had already been pivoting away from its flash-sale model when it then laid off more than 100 staffers--mostly those who'd been working on flash sales--and truly pivoted into straight online retail. A co-founder departed as well. Tuesday, the company all-but-eliminated its European operations.
But just when we might have thought flash sales were losing their lustre, the flash-sale-for-kids'-stuff site Zulily, filed for an IPO. The company's stock saw a nice pop in its opening week. Meanwhile, the big names in flash sales--Gilt Groupe and One King's Lane--are both steadily cruising along.
Some companies are hedging their bets--or growing out of the old "flash sale" skin. For example, New York City-based JackThreads, which is owned by Thrillist, expected to make upward of $75 million last year, and bring in more than of the company's revenue. Growth looks good, and the site has more than 4 million members. But it also is looking less and less like a flash-sale site and more like a traditional ecommerce site. It still does flash sales, but, as a spokeswoman for the company says, "we don't think of ourselves as flash sales anymore." The growth is in curating collections, and selling private-label goods in an expanding roster of categories.
Want to know which way the wind will blow? Keep one eye on JackThreads as it grows this year, and the other on the big guys, especially for funding announcements, acquisitions, or IPO whispers. It could be the end of an era.
Brooklyn and Queens
This year we'll know whether the city's tech startup scene can gain geographical diversity.
New York City's newly inaugurated mayor, Bill de Blasio, talks a big game about wanting to spread out the wealth of startups concentrated around the Union Square, Gramercy, and Tribeca neighborhoods of Manhattan. When I spoke with him last year, he not only said that the increasing concentration of small companies and tech startups in Downtown Brooklyn and the Dumbo neighborhood were "very promising," but also suggested creating startup hubs further into the outer boroughs. He said:
Now let's talk about Long Island City and the surrounding areas, which I think offer a great opportunity and in close proximity to Roosevelt island and the Cornell Tech campus. There are other locations in the Bronx and Staten Island too, or deeper into Queens or Brooklyn that can also be developed.
Making this happen won't be easy. With venture capitalists and so many existing tech-company peers concentrated in Silicon Alley, it will require a lot of incentive to get certain companies to set up shop in the outer edges of the outer boroughs. Sure, Uber and Aereo are paving the way by having their New York City offices in the formerly industrial Queens neighborhood Long Island City, but they are both companies that require extra space--Uber for parking, and to be convenient to drivers, and Aereo for all those little antennae.
De Blasio already has huge shoes to fill in terms of how Mayor Mike Bloomberg (who on his social-media profiles often listed "entrepreneur" before "Mayor") fostered growth in the tech sector. According to at least one report, more people are now employed in New York City by technology companies than by financial firms.
There's a lot that remains to be seen about how de Blasio treats the new ecosystem remaining from the Bloomberg years. And one of the first indicators we'll see is whether he works toward providing incentives to small companies to startup outside of the Broadway-Park Avenue tech corridor. It's unlikely to happen without some pretty big carrots.
CHRISTINE LAGORIO-CHAFKIN | Staff Writer | Senior Writer
Christine Lagorio-Chafkin is a writer, editor, and reporter whose work has appeared in The New York Times, The Washington Post, The San Francisco Chronicle, The Village Voice, and The Believer, among other publications. She is a senior writer at Inc.