What I was right and wrong about in 2012

By Sarah Lacy , written on December 31, 2012

From The News Desk

I am a big fan of two things: Being the first to call myself out when my analysis is wrong, and being the first to yell "TOLD YOU SO!" when I'm right. Yeah, yeah, the latter is annoying. And maybe I'll work on that in the New Year. In the mean time, here are my two biggest whiffs, and two things I got right in 2012.

What I was wrong about:

How Larry Page would fare as CEO of Google -- Page started 2012 very, very badly. Facebook was poised to go public, and it was the story of the year. For the better part of six months, Eric Schmidt had been hanging his head in shame about missing social, and Larry Page was zipping up a hoody and vowing it wasn't too late. Google was starting to look dangerously like Yahoo when it was trying to be Google. Google+ embarrassingly sought to push itself by manipulating search results and betraying core values, without any explanation. When widely questioned by the press -- even the most supportive Google watchers -- Page went mute to the world and just got defensive in house. The moves seemed more about his pride and jealousy that Facebook was having more success recruiting employees and seemed poised to become the new Wall Street darling.

I wasn't alone. Even ex-Googler Chris Sacca mused at our PandoMonthly in November that what had worked about the Larry Page, Sergey Brin, and Eric Schmidt triumvirate was that Schmidt's CEO rigor allowed Page and Brin to suggest totally off the wall initiatives that no responsible CEO would champion. He worried that that would be gone now that Page was the one responsible for leading the company and answering to Wall Street.

But something happened -- not so coincidentally around the time of Facebook's botched IPO. Like some sort of Clarence-led journey in "It's A Wonderful Life," we all realized why Google's IPO had been so special -- it had mastered one of the best business models known to modern man. Facebook, while powerful, clearly had not.

With that Page & Co. seemed to get their mojo back. I still think Google+ is lame, but it actually shows promise as a business collaboration tool along with Hangout. And I'm not quite as effusive as some members of our staff about Google's mobile efforts. I've tried using the new apps, and I still find a lot of errors and frustration when I, say, head towards a Starbucks only to find I'm lost in a subdivision. I'm not a huge fan of replacing all the apps on my phone with Google versions.

But Google Fiber is one of the most exciting and potentially transformative things anyone in the Valley is working on right now. That's the old Google, and I'm glad to see I was wrong about Page's stewardship of the company.

Like a lot of people I expected Facebook's IPO to go well --  I didn't anticipate a massive Netscape-like pop, because as I argued more than a year ago, Facebook already had its "Netscape moment" via the secondary markets. Also, I knew the company wasn't aiming for that. It was very concerned about leaving money on the table, and best case wanted only a 10 percent pop or so.

But holy shit, I never expected an offering that had spent years in in the marking, with some of the smartest minds in Silicon Valley and Wall Street planning every single element of it, would possibly turn into such a clusterfuck. Everyone knew what was riding on this. It was a massive amount of equity the markets had to consume, and it would -- for better or worse -- dictate the broader exit economy in Silicon Valley and a lot of the mood. And just plain boneheaded mistakes were made.

This was one for the Valley history books, along with the raging success of Netscape and Google's IPOs.

Two things I totally called early in 2012:

LA's surge -- I called this one more than a year ago, technically. When I was still at TechCrunch, I started to cover a handful of LA startups like Machinima and ShoeDazzle that most of the tech blogosphere had ignored, and became convinced that this time LA was for real this time.

I had a ton of debates with Silicon Valley people about this -- mostly investors. And yeah, as we've written all year, it's been rocky. Tentpole companies like BetterWorks went under this year, ShoeDazzle had epic struggles and BeachMint has struggled as well. The LA ecosystem has learned the hard way that a big, honking valuation gets to be old news fast if you can't deliver on it. Meanwhile just slapping a celebrity -- or even worse just the word "celebrity" -- on your business model is beyond old.

Still, I think there are more signs of life in LA than signs of death. ShoeDazzle has regained control of its balance sheet at least, and its Valley-based investors are bullish on founder Brian Lee's plans for next year. BeachMint may too pull out of its funk. Meanwhile, we tease Science for its everything-in-a-box company building strategy, but the data-based accelerator has shown a lot of discipline in growing companies fast, shepherding them through the fundraising process, and shuttering them quickly if they fail. I can't speak for other accelerators and incubators in LA, but this one isn't a mere YC rip off. It's designed well for LA's specific strengths and weaknesses.

Meanwhile, the ecosystem is growing beyond the "Silicon Beach!" see-and-be-seen crowd. Major investors including Chris Sacca and David Lee have moved to LA for personal reasons, but Sacca has already started an LA fund and Lee expects SV Angel to do more deals in LA now that he's down there. Meanwhile, the long under-the-radar Nasty Gal is looking like the city's best, new ecommerce hope -- headquartered in downtown not at the beach -- and hot-up-and-comer Snapchat moved from Silicon Valley to LA.

This is a rare case where I put my money -- at least my young company's limited editorial budget -- where my mouth was. One of our first hires was an LA-based reporter at a time none of our competitors had anyone based there. And we quickly brought our popular PandoMonthly event series to LA, the only other city where we do these events aside from San Francisco and New York. And, while many people told us we'd have to drag Valley talent down to be interviewed, I insisted on featuring LA-based startup and tech talent or not doing the series at all. By the end of the year, our event with Elon Musk is by far the most viewed video and our second LA event with Chris Sacca was one of our most Tweeted and commented on.

Don't let silly reports like these fool you. LA's ecosystem is definitely behind New York in a lot of ways, and even New York has yet to show big $1 billion-plus wins this time around. But a year later, I'm more bullish on LA, and it's a lot less crazy to be now.

The hottest ecommerce companies wouldn't rely on celebrity endorsements; they'd become more like magazines -- I missed a lot of the Fab pivot story while I was out of maternity leave in 2011, so when I sat down with its founders in early 2012, I expected a well picked over narrative. But as I talked to Jason Goldberg and Bradford Shellhammer about what was working so well, it became clear they weren't etailers, they were a magazine publisher and editor respectively.

The two said my February post calling Fab a content -- not a commerce -- company was the first time anyone in the tech press had really absorbed their vision.

This wasn't a new trend to me. I'd spent a lot of time at TechCrunch writing about Jetsetter, Gilt's somewhat neglected travel vertical, which I fell in love with, because it was essentially a gorgeous and actionable travel magazine. I saw Fab as very much the same thing, but across an even bigger vertical.

This blossomed into one of the biggest trends we've seen in commerce this year, and the only way flash sale sites have retained relevancy. One Kings Lane has hired up staff members from Architectural Digest and the defunct Domino Magazine, and it's core to NastyGal's appeal too. The company even launched a print magazine. At our PandoMonthly with Ben Lerer, we talked at length about how much the well-timed acquisition of Jack Threads had transformed Thrillist along similar lines.

Meanwhile, Erin Griffith dug into this story too, writing about a lot of the challenges and pitfalls once it became a bandwagon everyone was jumping on.

So far, the trend is only yielding huge fundraisings at huge valuations. 2014 will tell whether this trend is sustainable. After all both content and commerce are challenging and expensive businesses to build and scale.

  • **
  • Of course, on a personal note, the biggest thing I was happy to be right about in 2012 was that the startup world was craving a new blog that wasn't afraid to take a stand on things -- right or wrong -- and to both call out big names in the ecosystem, when they were wrong, and champion others, when the rest of the press was missing the point.

I wanted to put together a news organization that fused some of the best things with old media -- like editing, custom illustrations, deep on-the-ground reporting, and long-form story telling -- with the immediacy and conversational voice of a blog.

Over and over again we heard the market was too crowded. Over and over again we heard no one wanted to read long form stuff online. Over and over again we heard the masses just don't care about quality. But I didn't believe it, and fortunately, I found enough people who agreed with me to invest and join the team.

A year later, hundreds of thousands of you made room for us in your daily reading diet. I'll always be relieved and grateful that our team wasn't alone in believing the startup world deserved better than re-written press releases. Getting to build the media company of your dreams is a luxury most reporters never get, and I certainly never thought I would.

A year in, this is still a job I hope to have the rest of my career. We promise not to take this trust for granted and to work hard to get much better in 2013.

[Header graphic by Hallie Bateman]