This is a re-cap of DealMaker Media | Strategy Series - VC Outlook for 2008 on December 5, 2007.

MODERATOR: Harold DeGraff, Partner, Perkins Coie

PANELISTS: Duncan Davidson, Managing Director - VantagePoint Venture Partners
Rob Hayes, Partner - First Round Capital
Jim Long, Partner - Gabriel Venture Partners
Will Price, Managing Director – Hummer Winblad

Social networking was discussed in length, but the panel felt money would not go to yet another social network. Instead, Will Price focused on adjacent areas such as analytics (he frequently cited Hummer’s investment in Omniture). He spoke enthusiastically about the rich information mining capabilities promised by the opening of the social graph and the possibilities social networks offer to finally explore these inter-connections between people first discussed 40 years ago when Stanley Milgram did his "Six degrees of Separation" experiments at Harvard in 1967. Will mentioned the study of churn rates for cell phone users and how a friend leaving a network has a direct measurable probability on that of anothers’. Vodaphone and O2 are reaping the benefits of such “social-churn” analytics. Also, mentioned was the ability to identify influencers and trend mavens a la The Tipping Point in order to better target customer segments. There is a wait-and-see mentality on whether Google’s OpenSocial initiative will be the key to opening the social graph for these types of analyses. Duncan tentatively cautioned over-analysis of data in making advertising decisions.

There was consensus that online advertising potential still remains untapped. However, the VCs felt companies generating page views were over-valued (they cited RockYou and Flixster). The thought is such businesses will never be able to monetize via ad-revenue effectively due to poor targeting capabilities and lack of control of the appropriateness of the content. The anecdote given: Coca-Cola does not want to advertise against a slideshow of someone killing a cat. Cited was the case this summer of advertisers such as Vodafone, Virgin and Prudential pulling out of Facebook after their ads were displayed against content by the British National Party (Nazi Party in the UK). The emphasis instead was on companies that offer greater interactivity and measure on total time spent instead of page views. A gentleman from Newsgator cited his business as an example of effectively monetizing online advertisement.

To sum it up, the panel felt that while a bubble was looming, as evidenced by hyper valuations (that the VCs themselves are driving), they are still focused on investment fundamentals like cash-flow b-e and customer growth that start ups can produce in a consistent and predictable manner.