Hyperdifferentiation and Personalization

We live in an era where consumers are asking for products that are increasingly differentiated and yet personalized to their tastes. This is evident in a very wide variety of domains, ranging from new forms of personalized expression (Video Twitter anyone?), to personalized T-shorts and mugs (see KPCB funded zazzle.com), to hyperdifferentiated offerings and tastes in foods (e.g. increasing popularity of a much wider array of cuisines and restaurants) and beverages (e.g. explosion in the types of juices, flavored teas, coffees, beers that are available).

This theme is related closely to the concept of Long Tail. Due to the rapidly decreasing costs of offering a wide variety of products, it has become much more feasible today to cater to the long tail tastes of consumers. There is then also a positive feedback loop, where the wide variety of available products is fueling consumer demand for an even wider variety of products.

What does this mean in terms of startup opportunities in the Internet/Media/Mobile sectors? The good news is that this theme applies to almost all forms of content and access mechanisms, ranging from online videos to music and publishing. There now exists a market for a much wider variety of content than was historically available through traditional media.

The even better news is than since there is a niche audience for long tail content, advertisers are willing to pay a lot more for reaching out to that audience. The CPM that can be obtained through sponsorships for a niche content website (e.g. a site that targets college students, or a site that targets soccer moms) can easily be 5-10X the CPM that advertisers will shell out for untargetted eyeballs. Overall, this economics makes it feasible for a much larger number of startups to profitably enter the ecosystem of producing, hosting, organizing and delivering content to consumers.