Nine Great Innovations, Opportunities and Challenges for 2012 - Slide 2

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Leveraging innovations in Big Data, GP Bullhound predicts that recommendation engines will evolve in 2012 by integrating user-specific preferences and social mapping in order to provide more accurate, targeted recommendations curated just for you.

Recommendation engines have employed a breadth of tools to identify individual consumer preferences. Some engines require users to take a short quiz (Shoedazzle, Ness) to associate them with a targeted preference category, and others, for example BeachMint (fashion), focus on celebrity endorsement, under the assumption that individuals who associate with a celebrity will also associate with their lifestyle preferences. Similarly, subscription models, like Birchbox (beauty), focus on curating products for a highly targeted audience that associates with their brand.

Not to be overlooked, social networks are set to play an important role in personalizing recommendations as retailers leverage friends’ interests to predict purchasing behavior. At F8, Facebook announced its Open Graph lifestyle application partners, who gain access into Facebook users’ timelines to actively post user activities, like “listened to [song]” “read [article]”. Google also recently introduced Schemer, a social discovery service, which leverages social circles to help users determine what to do next.

For online retailers, personalized recommendations can provide a distinct advantage, differentiating them against their peers and mitigating the strengths of larger competitors, such as Amazon, whose selection and pricing remain the industry’s gold standard. As such, in November 2011, eBay acquired access into the recommendations space through recommendations platform Hunch, which connects users and their affinities through a “taste graph.” Further, Gap’s newest brand, Piperlime, features curated selections from leading women’s fashion trendsetters and stylists as another early indicator.

Companies to Watch: blekko, Ness, AHAlife, BeachMint, ShoeDazzle, Polyvore, WANTFUL, OpenSky, Trippy, gtrot, Jetsetter

As technology analysts and advisors, GP Bullhound expects a volatile 2012 with pockets of great innovation, opportunity and new successes, but also continued challenges as commoditization will wreak havoc to some industries, and hype will remain in others creating near-term opportunity and in some cases long-term issues.

We are entering the new year under rather unusual circumstances. The macroeconomic outlook remains cloudier than ever due to unprecedented uncertainty around a number of major global economic and political situations including the fate of the Euro and the European economies, the status of the U.S. recovery and the role of the U.S. dollar, nervousness in recently outperforming emerging markets, like Brazil, and the global impact of a slowdown in China just to mention a few.

Some things do remain the same however such as the continued global Internet trend, the rapid mobilization of users and applications and the inevitable trend of increased online social interaction.

In 2012, GP Bullhound expects Internet to continue its inevitable shift from being an information and content channel to a trusted platform for socializing, sharing, communicating and most importantly for 2012, consuming. Furthermore, they expect a lot of opportunity to come out of the rapid adoption of mobile online activities, particularly in emerging markets. They also expect to see some much needed innovation in the enterprise software arena, which is now well behind the consumer technology curve.

The macroeconomic outlook however remains cloudier with unprecedented levels of uncertainty on a global scale. In an ever-more connected and competitive global technology world, there will be little room to hide without differentiated products or services. The value of IP will continue to rise, while commoditization will punish the me-too players. As a consequence, they are seeing investors and acquirers becoming increasingly willing to travel far to find best-of-breed companies, supporting an anticipated rise in cross-border acquisitions and investment activities. All in all, they look forward to an interesting 2012.

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