Recently I outlined the two most important rules to follow when deciding what market to attack for your new business. In turn, many readers asked me which markets are most ripe for starting new businesses.
Here are the three areas I'd explore if I weren't already knee deep in social media at Buddy Media:
1. China + Internet = $$$$$$
A few months ago, a headline in Business Insider shouted "The China (Internet) Bubble Has Burst." I'm not a stock trader, so I'm not about to enter the debate about whether or not several of the high-flying Chinese internet companies are overvalued. But what's not up for debate is the fact that the Chinese market is a huge one with no signs of slowing in the next few years.
China is already home to 500 million Internet users, the largest population of Internet users on the globe and larger than the United States and Japan combined. According to iResearch, China Internet advertising revenue reached $8 billion in 2011 and is already larger than newspaper advertising in the country. This number is expected to double by the end of next year.
Many of the world's largest companies have set up shop in a huge way in China. And the real opportunity is selling online in China. The Boston Consulting Group released a report late last year that outlined the scope of the opportunity.
A few highlights:
- 23% of Chinese Internet users shopped online in 2010, and this figure is expected to double in the next four years. This means that an additional 30 million Chinese consumers will shop online for the first time every year for the next few years.
- E-commerce in China only represents 3.3% of all shopping today. This is expected to grow to 7.4% in 2015.
- The low cost of shipping in China is helping boost growth. It costs $1 on average to ship a 1 kg package there, compared to $6 in the U.S.
If I had the opportunity today (which I don't given my responsibilities over here), I would pack up, move to China and figure out a business—any business—in the exploding Chinese Internet market.
2. Online organization drives offline markets
The Internet is great at organizing people and starting movements. Without the Internet, and social media in particular, Hosni Mubarak would still be running Egypt, Libyan dictator Moammar Khadafi would still be alive and, well, Wall Street would never have been occupied.
Businesses can take advantage of these trends more cost effectively than ever before by using the Internet to create new markets and ecosystems that translate into offline revenue and value creation.
Take Ben McKean and Dan Leahy from a company called Savored in New York, which I invested in. They came up with an innovative membership service that lets consumers join and save up to 30% off many of the best restaurants in the country, including the world-famous Le Cirque in New York. Savored is using a members-only website and mobile platform to drive affluent customers into restaurants. It's a win for the consumer and a huge win for the restaurant.
The shining star of this new model is AirBnB, which lets property owners list their apartments and houses in a marketplace policed by a powerful peer-to-peer review system. AirBnB's last round of financing valued the business at more than $1 billion.
3. Content is once again king
One of the clearest paths to making money today is creating content. We're in a renaissance of content. There are more awesome TV shows than ever before. New websites with both innovative and traditional business models are building audiences more efficiently than ever before.
The great thing about content is that it can allow you to create a company around anything you're passionate about. Take Jonah Peretti, who will go down as the William Randolph Hearst of my generation. He co-founded The Huffington Post, which sold to AOL for $315 million, and now he has done it again with BuzzFeed.com.
Six years after launching, BuzzFeed.com reports that it has more than 30 million unique visitors and is well on its way to becoming one of the largest media companies online. Both businesses were born out of Jonah's interest in politics and pop culture, and a fascination about how content spreads through social connections.
Jonah is not alone, and success doesn't need to be measured in tens of millions of loyal visitors or millions of dollars in venture financing anyway. My friend Melanie Notkin started SavvyAuntie.com four years ago. A single woman and former marketing executive at American Express, the New York Times Company and L'Oreal, Mel identified childless professional women as an underserved market. She now has a loyal following on her site, happy advertisers like Disney and Pepsi, and a growing media empire built around her brand.
Some entrepreneurs can make it in content without even creating content. Gabe Rivera decided to start organizing headlines about the tech industry in 2005. His site Techmeme.com is a daily visit for almost everyone I know in the tech industry and he has since spawned three more sites—on the media business, politics, and celebrity news. All of this more than 15 years after Matt Drudge launched the first news aggregator, The Drudge Report, which is still one of the most trafficked sites on the Internet.
All of these businesses launched and reached critical mass with 10% of the funding it would take to launch a newspaper today (don't know why anyone would want to do that)!
With interest rates low and tax rates for regular income significantly higher than long-term capital gains tax rates, the actual cost of starting a business is lower than ever. If you have an idea you want to pursue, do it. And if you don't, give these three areas I've described a hard look.