[via Fred Wilson] Steve Smith writes about opportunities in 2005: Behavioral Targeting, Vertical Search, Digital Distribution, Blogs, Streaming Video, Mobile Data and B2B Content.

Mobile Data: Once they get beyond ring tones and wallpaper, mobile phone users demonstrate an appetite for data, from stock and sports tickers to news alerts and soap opera updates. The comfort level with receiving content by phone is rising; just in the games category, downloads increased 75% in one quarter of 2004, according to enPocket. Revenue opportunities here are less significant than branding value for most content providers, however.

Vertical Search (or Google gets down to business): Enterprising content providers will start applying the search paradigm to drilling more efficiently and deeper into silos of vertical content. The model for this is GlobalSpec.com, an engineering information company that has build an impressive vertical portal. Engineers put in a search term and they get links to relevant Web information indexed for engineering terms as well as libraries of aggregated need-to-know data like regulatory information, patents, etc. By putting in a search term, engineers can call up a product diagram or vendor parts list that is directly relevant to the job on their desktop. Google cannot do this, but content experts managing the right search engine and partnerships with other providers can.

The problem in this world -- besides it being so young, which is when the really big bets are won and lost -- is that the new things coming along now often destroy money instead of merely shifting it. CraigsList gives control to the people so they stop paying for "services" they used to pay for. There's a lot of that going on. There will be a lot more. And it will have huge if sometimes left-field impact on various industries.

The only rule I can come up with is my First Law of Media (and Life): Bet on that which gives citizens control. And bet against those who try to maintain control apart from the public.

By that rule, mass-market TV is shrinking, niche content, aka cable (a proxy for control) is growing and so is the internet. The paid music business is shrinking, the free exchange of music is growing.

Alan Brown writes about five trends:

1. Connecting business with IT: Business-driven development.
2. Greater transparency in the software development process: Auditing, traceability, and accountability.
3. RAD using new programming models.
4. Collaboration among individuals and teams.
5. "Pay-per-use" software tools: New licensing and subscription offerings.

Robert Scoble has a nice breakdown:

1) News gathering (camera phones, recording devices, portable computers, etc).
2) News propogation and comparison (email, instant messaging, chat, newsgroups)
3) News production (photo editing applications, word processors, content management, er, blogging tools)
4) News distribution systems (databases, server farms, web servers)
5) News reading (Web browsers and RSS aggregators)
6) News finding and trend analysis (search, link analysis, pattern analysis)

In the wake of IBM's decision to sell its PC business, The New York Times writes:

The "thin client" concept has been debated in the industry for more than a decade. In the past, skeptics of that concept pointed to the PC's flexibility and convenience, as well as to the problems with mainframe computing.

Today, however, a number of factors ranging from the explosive growth of the Internet to increased computer and data security concerns are shifting the equation. Managing viruses and worms is easier on centralized systems, and software development is increasingly shifting to applications based on Internet-based standards.

"The days of the $3,000 desktop personal computer are over in the corporate world," said Terry Garnett, a venture capitalist who is a partner at Garnett & Helfrich Capital, based in Menlo Park, Calif. "This is a paradigm for the future and a signal of where things are going."

That trend has been reflected in recent analyst reports. On Thursday, for example, Rebecca Runkle, an analyst at Morgan Stanley, lowered her 2005 growth forecast for PC unit sales by 2 percentage points, to 9 percent. She noted that consumer, small-business and government markets all slowed late this year.

In May, I.B.M. began offering a thin software application called Workplace - based on the Java programming language -intended for Web-based computing where data is managed and stored centrally.

I.B.M. is betting that such systems will be increasingly attractive to corporate customers and will consequently diminish the once mighty personal computer business.

The Economist writes about one of the peer-to-peer technologies:

The most active P2P system, accounting for an estimated 35% of all internet traffic according to CacheLogic, is called BitTorrent. It is an open-source software project that is free to use and enables very large files to be stored and retrieved efficiently at essentially no cost. Though it is used for pirated music, it comes into its own when distributing really large files such as movies, games and large pieces of software such as the Linux operating system—things that would otherwise be very costly for companies or individuals to make available for download.

Part of BitTorrent's success stems from the way it creates incentives for users to give as well as to take. A study in 2000 on one P2P network showed that almost 70% of users never shared files, and around half of the files available were offered by just 1% of users. BitTorrent is designed to remedy this. It rewards those who share files with others by increasing the download rate at which generous users can receive content, explains Bram Cohen, the system's creator. More sharing means there are more potential locations where copies of a given file are located, which in turn increases access speed. BitTorrent uses a technique called swarming, in which files are broken into small chunks that are then passed between peers. Two peers downloading the same file at the same time can also swap chunks they have already received from other peers, increasing the efficiency of the transfer.

Continuing with our little peep into the future…

So what else is new, you might ask. Isn't this what millions of users do all over the world? They do but not in middle class India. Or at least, they could not till about late 2005 in middle-class India. What Meena was using was a NetPC—a device that displays a remote desktop over a broadband connection while all the processing, the applications, and content are on a centralised grid computer (NetGrid) which delivers computing as a utility much like electricity, telephony, or television.

Middle-class India is poor by developed country standards. About 40 million households with annual incomes of between Rs 1 lakh to 5 lakhs ($2,200 to 11,000) constitute the middle-class. Even at rock-bottom prices of Rs 18,000 ($400) for a PC, a vanishingly small number of middle-class households can afford one and even then, among those who can afford one, most don't find a PC very useful because of PCs don't deliver a rich enough portfolio of services to justify the expense.

A disruptive change occurred in late 2005. Computing was released from being tied to a PC and became available to a very large number of users as a utility much the same as electricity, water, and telephone service were. The change was brought about by three distinct innovations which mutually supported each other. First, was the availability of a NetPC, an access device that had the look and feel of a PC but at a price that was comparable to that of a cellular handset or about Rs 5,000 ($110). Second, the wide availability of inexpensive broadband connectivity throughout cities in India. Finally, the creation of a computing platform which aggregated within it all the processing power and storage sitting in individual PCs and made available a very wide range of applications and content which could be accessed from all across the country using the NetPCs.

This disruptive change allowed the rapid adoption of computing in more than 40 million homes and about 50 million other people in small and medium business and in educational institutions. The adoption was rapid because four principal barriers to the use of computers were lowered: Affordability, Desirability, Accessibility and Manageability.

PCs are hard to manage and administer, what with installation of software, frequent upgrades, spam, viruses, and so on. Desirability of using computing is directly related to how relevant the applications and content available to the user. Accessibility is important in an economy where everyone cannot afford to own a dedicated piece of equipment and needs shared access to computing facilities. Affordability is related to how low the entry barrier can be as regards to the capital equipment needed.

What NetPCs (along with the NetGrid) did was revolutionize the whole concept of computing for the masses. And in doing so, it made two other markets viable. First, it changed the broadband connectivity market. By making computing a utility delivered over broadband, it created the demand side of the market. That large demand brought economies of scale to bear on the supply of broadband connectivity and thus pushed costs and prices to levels that made the market work.

The second market it enabled was the market for applications from independent software vendors. Piracy caused the market to fail: Independent Software Vendors (ISVs) would not develop applications because they could not recover the cost of development. Lack of specialised applications lead to low desirability for computers which in turn depressed the applications market further. NetGrid provided a platform for ISVs to bring their applications to market free from the piracy issue.

The question is: how do we make this future a reality? The five dimensions we need to address are: devices, networks, infrastructure, services and payments.

Tomorrow: Devices