Why VCs Continue to Love Social Media Reply


The social networking sector has seen over 10 great successes from an investment standpoint: MySpace ($580 million), Beebo ($850 million), Instagram ($1 billion), Tumblr ($1.1 billion), Yammer ($1.2 billion), Facebook ($150 billion market cap), Twitter ($35 billion market cap), LinkedIn ($25 billion market cap), Pinterest (valued at $3.8 billion), Snapchat (reportedly valued at $3 billion), and most recently WhatsApp ($19 billion). Add to that Weibo, Vkontakte, Renren, and many other huge social networks that are popular overseas.

Given these successes, are there opportunities for more winners in this space? Absolutely.I’m proud to be an early venture investor in We Heart It, a rapidly growing image-based social network with 25M monthly unique users as of the time of this writing (primarily on mobile). We Heart It is a place for users to connect, get inspired, and express their creativity through images. Users can “heart” (tag) images on the web and mobile, or upload images from their smartphones.  They can browse on the We Heart It app and find a wide variety of images, from beautiful sunsets to interesting architecture to inspirational quotes to trendy clothes to gourmet food. They can organize images into collections (I have four, for instance: quotes, favorite ads, cities, San Francisco. They can follow their Facebook friends or complete strangers whose tastes are interesting or inspirational. Many users feel that expressing themselves visually through We Heart It is truly authentic, as indicated by the popularity of the above image from a user in the Netherlands, which has been hearted over 180,000 times.

I believe there will be more social media success stories in the future. Why? Because social media has become a primary consumer mode of engagement alongside television, movies, music, and news. Just like a consumer will listen to music through several apps or view different cable channels, she will also use different social networking apps. Remember that the average daily usage of Instagram is nine minutes (source: ComScore) while daily nonvoice use of cellphones is 141 minutes (source: eMarketer). That’s a lot of minutes left to spend texting and hearting. And visual communication in particular is growing, since we process visual information up to 60,000 times faster than text, and 75% of our brain’s sensory processing power is visual (source: We Heart It).

Different social media applications cater to different consumer needs, particularly on mobile, where switching between apps is so easy and the screen size is too small for “one app to rule them all,” e.g., LinkedIn for professional connections, Pinterest for product clipping and sharing, Tumblr for microblogging, Instagram for easy photo sharing, Snapchat for non-permanent expression, and We Heart It for inspiration and creative expression through images. Connecting with others, which psychologist Abraham Maslow called “belonging,” is an incredibly powerful, primal human need that’s integral to the Maslow hierarchy, with only safety and physical needs coming before it.

Read more about my thoughts on social media funding on VatorNews.

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