Saturday, March 13, 2010

The Top Digital Deals for 2010

Kelly Porter from Woodside Capital Partners wrote a TechCrunch column that predicts what the top 10 digital deals of 2010 will be. By definition, this prediction is wrong as soon as it's made. So other than an example of hubris there's no value, right? Wrong. The reason to pay attention to PR gimmicks like this isn't to get specific picks but to get a feel for the logical thought process, the assumptions underlying the message. By exposing the logic we can gain insight into what technologically sophisticated players are thinking and worrying about.

Having this insight can be important, because a company or idea with the technorati wind at its back will have a far easier time raising money, growing and selling itself at a premium. Notice that all of the acquisition candidates in the TechCrunch list would be classified as "strategic acquisitions". Knowledge based businesses have the ability to provide enormous value leverage to the right acquirer, particularly if the market consensus supports the deal. And the difference in value creation from being a 'strategic' knowledge acquisition versus a 'financial' one can be huge.

So what does this specific list tell us about this particular group's view of the market?

First, by far the most common justification for acquisitions on this list is for existing market leaders to add capabilities that extends or strengthens their existing franchise, creating more value for existing customer segments. In other words, this market observer believes that the 2010 deal season will largely be winners consolidating their leadership positions. This makes sense to us.

The only other major conclusion that one can draw from this top ten list is that at least in the eyes of some observers, the short burst messaging platform Twitter has moved from being considered a niche concept to possibly becoming a social media platform play that acquires and integrates other solutions into its environment, like Facebook, Linked In or Google. This is an intriguing but clearly speculative prediction and I would look for much more validation before integrating this nugget into my thought process.

By paying attention to this type of industry 'fluff', you can get a sense of what "Techno-ventional" wisdom is which can help you position your company to sail with the technorati wind, not against it.

It makes sense to pay attention to the logic behind silly top ten lists when you're out on the Openwater.

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