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The flat-panel TV industry is coming of age in the U.S. at a less-than-desirable time.

As energy costs, food prices, and mortgage defaults are on the rise, the first things to go for many consumers are luxury buys. Tightening one's budget can mean ruling out the purchase of a larger TV.

Vizio will face stiffer competition this year.

So what's an industry to do?

Give consumers more lower-priced options, according to Paul Gagnon, who monitors the television industry for DisplaySearch. He expects the top-tier TV brands (Samsung, Sony, Sharp, Panasonic, et al) to move in this direction, since TVs in smaller sizes and ones with fewer bells and whistles are going to be a lot more attractive during tougher economic times.

The current economic environment "puts pressure on brands to occupy that middle ground," Gagnon said. "It makes the focal point in the second half of the year on more aggressive price point products, like 32-inch LCD and plasma." LG put out the first 32-inch plasma last year.

Basically, if you shop for a television at Wal-Mart Stores, Circuit City, or Best Buy, your best bet is going to be on newer, smaller sizes because that's where much of the price competition between brands will be. And when TV vendors fight, we all win.

And though the top TV guys are going to be squabbling with each other over consumer dollars and jostling for position on store shelves in the next couple months, they'll at least be united in one purpose: attempting to take down Vizio. The upstart TV maker experienced unbridled success last year selling mainly through club stores and significantly undercutting the top-tier brands on price.

Everyone is gunning for Vizio--it's apparent in both the price competition, and in the snide remarks and left-handed compliments the marketing execs of the traditional top brands make at TV industry conferences. But Vizio isn't alone. Syntax-Brillian (under the Olevia brand) and Westinghouse are also making inroads into territory occupied by the top names in electronics.

"As flat panel transitions to a mainstream, mature category, big brands are looking at more entry-level markets," said Gagnon. "Sony, Samsung are certainly going to try to play head to head with Vizio on their turf. Price points will get pretty aggressive."

Sony actually started this a year ago, when it launched a specific line of TVs for Target and Wal-Mart. The experiment has gone well, as Sony has already said it's expanding the number of models it will sell through those channels this year.

The average price difference on similar models and screen size between Vizio and the mainstream brands was $200 last year, according to DisplaySearch. Competitors will try to narrow that price advantage to $100 this year, and cross their fingers that having a brand name will help them recapture market share.

Google spokesman Adam Kovacevich moderates a chat about the Internet economy with (from left) Robert Atkinson of the Information Technology and Innovation Foundation, Edwin Garrubbo of the Electronic Retailing Association, Michael Avon of Columbia Capital, and Google chief economist Hal Varian at the company's D.C. headquarters Friday.

(Credit: Anne Broache/CNET News.com)

WASHINGTON--The U.S. economy as a whole may not have the sunniest prognosis lately, but Google's chief economist and other industry watchers on Friday diagnosed the Internet sector as relatively healthy.

During a panel discussion at Google's D.C. headquarters, professor-turned-in-house-economist Hal Varian argued that an analysis of search queries at his company's site mirrors deeper economic trends. Job-related searches are up as a share of total searches, for instance, and real-estate and luxury goods searches are down--exactly what you'd expect in a "recessionary environment," Varian said.

But overall, the total number of searches on any topic continues to grow "very dramatically" from year to year, and e-commerce sales also continue to climb, Varian said.

"The lesson you learn from looking at query patterns on Google is, yes, we're seeing an economic slowdown, but no, that's not an Internet slowdown," said Varian, who admitted that his day job focuses on a more microeconomic task: the economics of Google's advertising auctions. "The Internet is still looking pretty strong, compared to most of these other sectors."

According to the latest U.S. Census Bureau figures, e-commerce sales have experienced a steady uptick since the turn of the century, estimated at $136.4 billion in 2007--an increase of 19.0 percent over 2006.

Other panelists were similarly optimistic. Edwin Garrubbo, chairman of the Electronic Retailing Association, which represents direct marketers, cited Forrester Research statistics estimating that e-commerce sales will surpass $200 billion this year and hit $300 billion by 2011, with double-digit growth each year in between.

To be sure, online sales still account for only a fraction of total retail sales--about 3.4 percent in 2007, up from 2.6 percent in 2006, according to the Census Bureau. Saks Fifth Avenue, for instance, currently does the largest volume of its sales at its flagship Manhattan store, but its online counterpart ranks second by that metric, and Garrubbo predicted that "it's only a matter of time before the potential for that online business is going to far exceed New York's"--and eventually that of "all of its other stores combined."

In the venture capital world, investing is down about 10 percent overall from last year, and the number of early-stage companies has dropped more significantly, but that's not necessarily a sign of trouble, suggested Michael Avon, a principal investor at Columbia Capital. After all, last year's investment numbers were the highest since 2002 or 2003, he said.

"Anecdotally, in the Internet, I think we're seeing more good opportunities now than six months ago," said Avon, whose portfolio includes Internet, digital media, and enterprise software firms.

In the firms he manages, "we haven't seen significant pullback yet in ad spending or in consumer spending on digital goods," though he acknowledged seeing some of the "froth" being skimmed off of deals.

His statements seem consistent with a recent report by Dow Jones VentureSource and Ernst & Young, which found that while venture capital dollars are scarcer overall, companies focusing on communications, electronics, information services, semiconductors, and software actually took in a total of $3.88 billion in the first quarter of 2008, marking a 20 percent gain year over year.

Even so, it's clear that at least some smaller companies at the Web 2.0 summit in San Francisco this week are opting to proceed cautiously, as CNET News.com reported Friday.

Avon, for his part, said he advises start-up firms to be "incredibly careful with cash," since many a promising company has failed for misjudging its cash needs, and to try to experiment with multiple sources of revenue--not banking entirely on advertising, for instance.

Robert Atkinson, president of a think tank called the Information Technology and Innovation Foundation, argued that information technology is such a major economic driver that, since 1995, it has enabled the U.S. economy to be $2 trillion larger than it would be, absent technology.

"There's absolutely no evidence that somehow, we're at the end of the IT revolution," Atkinson said, adding, "I think we've got a minimum of 10 or 15 years, maybe a lot longer."

It was just a matter of time. Silicon Valley, which has remained largely impervious to the increasingly global economic downturn, is starting to feel the strain, according to The New York Times. It's not that housing prices are in freefall (they're not) or that people are being laid off en masse (they're not), but rather that the exit opportunities have largely dried up. According to the Times:

During the first three months of the year, only five companies backed by venture capital investors went public on Wall Street...That is down from 31 in the fourth quarter of last year, and is roughly the same level as at the nadir of the dot-com bust.

There was also a sharp falloff in the acquisition of start-up companies by bigger corporations...There were only 56 acquisitions in the first three months of the year, down from 83 in the fourth quarter.

... Read more

Best Buy reported its fourth-quarter earnings Wednesday and the results were surprisingly good.

The largest consumer electronics retailer in the U.S. posted earnings of $737 million, which comes out to $1.71 per share. Analysts were expecting $1.65 per share. Fourth-quarter earnings per share were also significantly better than the $1.55 posted the same quarter a year ago.

For the fiscal year, revenue was also up 11 percent over a year earlier to reach $40 billion, which Best Buy said was aided by the opening of 137 new retail outlets worldwide.

Wednesday's results sent Best Buy shares up 8 percent in pre-market trading, but they fell back down the same day that Federal Reserve Chairman Ben Bernanke said a U.S. recession "is possible." But for CE makers and analysts watching consumer spending habits, Best Buy's earnings must be somewhat comforting since it appears, at least through the end of March, that people are still shopping for what are essentially luxury goods--TVs, GPS systems, cameras, phones, and notebook PCs.

But it's only a slight comfort because Best Buy's chief competitors aren't handling the current situation nearly as gracefully. Circuit City is having a rough time of it, and CompUSA was killed off late last year, only to be resurrected in January by Systemax.

Best Buy does have some things going for it that its rivals don't. For one, it's cornered the market as the place to shop for a PC at retail. It's the only big-box retailer that offers every single major PC brand--Hewlett-Packard, Dell, Lenovo, Apple, Sony, Toshiba, and Acer.

Crowdsourcing has entered the mainstream big-time. It has become daunting to find a brand these days that does NOT have some crowdsourcing program in place.

My Starbucks Idea is just the latest example: Starbucks asks its consumers for advice, and besides certainly receiving a lot of good ideas, the troubled coffee chain makes consumers feel part of the brand remake.

It's the same template as usual: engage your community, harness its creativity, and let it create the content for you.

It works, sure, but it's getting stale. For some reason, marketing trends take two to three years before they are fully embraced, but if they are, then they become annoyingly ubiquitous (remember the "Tipping Point"?).

The reason is simple: Marketing executives are notoriously risk-averse (Seth Godin once reckoned that only if you're willing to put your job on the line will you do something truly innovative in marketing), and a model like crowdsourcing provides the right balance between safety net ("many others are doing it") and cutting edge ("crowdsourcing?" the CEO shrugged).

Crowdsourcing was a disruptive innovation two years ago, but now it's time to innovate crowdsourcing. It is a viable trend that has implications far beyond the marketing profession, but someone needs to take it to the next level.

So in the spirit of crowdsourcing, let me ask you: in the next stage, what could be a more innovative application of crowdsourcing?

(Credit: Morgan Stanley)

Reading through Morgan Stanley's January 6 report entitled "There Will Be Blood," it's hard to feel cheery about 2008. That is, unless you're an open-source company, in which case perhaps you're recession proof.

Perhaps.

But with Morgan Stanley projecting a pullback in IT spending in 2008, and especially for hardware, being open source, by itself, won't save a company. (Note: The "Blood" report is available only to clients, thus there's no link for it.)

Open-source companies should be hedging their bets by making sure they have money in the bank and lots of customers. In a downturn, it may well be easier for open-source companies to acquire new customers than their proprietary cousins, but this doesn't mean it will be easy. Having enough cash to weather the storm is critical.

As for tech, generally, the reasons for a bleak outlook are several, according to the Morgan Stanley report:

AT&T's stock took a hit Tuesday after the company's CEO told investors that a weak economy is hurting the company's landline and broadband business.

Randall Stephenson, AT&T's CEO, said Tuesday during a Citigroup investor conference that the company was forced to cut off some of its broadband and landline customers in the consumer segment in the fourth quarter because they were not able to pay their bills. The news shook investors, and the stock dipped $1.87, or 4.5 percent, to $39.16 per share at the closing bell.

Stephenson was responding to a question posed by an analyst who asked whether the weak economy had affected AT&T's business. And essentially Stephenson, said yes it had.

"We're really experiencing some softness on the consumer side of the house from the economy," Stephenson said, according to a transcript of the event.

While he acknowledged that all consumer services are being affected, Stephenson said that wireless hasn't been affected as much.

"As the economy gets soft, wireless starts to become the last thing" that consumers let go off, he said. "And traditional access lines become one of the first...."

This trend suggests a shift in how people view their cell phones. In the past during financial hard times, people would do all they could to keep their landline phone. But now it appears that people are more dependent on their wireless phones. As a result, they may cut their landline phone at home to save money.

Stephenson's news, which some fear is another sign that the U.S. economy is heading toward a recession, was enough to also hurt some of the other major phone companies too.

Verizon Communications, the second largest phone company after AT&T, fell 2.73 percent to close at $41.75. Qwest Communications International saw its shares dip 5.82 percent to $6.15. And shares in wireless operator Sprint Nextel fell 3.24 percent to $12.53.

With everyone becoming a producer in the YouTube age, self-branding ("The Brand Called You") has evolved from a fancy to a necessity.

Andy Warhol's 15 minutes of fame have shrunk to 5 seconds of microfame, and in the contained public arena of social networks, amateur paparazzi--thanks to the viral nature of social media--have the power to grant celebrity status. That, in a nutshell, is the thesis of Clive Thompson's poignant piece for Wired on the rise of "microcelebrities."

As Facebook walls make personal communications open to the rest of your trusted network, even your most private moments become public relations. What used to be said in e-mail is now "the writing on the wall." This radical transparency lets more and more Internet users nurture their image, manage their privacy, stage their public appearances, and distribute carefully chosen content to their circle of online friends.

PR professionals will have mixed emotions about this trend, as the borders between profession and confession are increasingly blurry. Thompson quotes Theresa Senft, a media studies professor and one of the first to identify the rise of microcelebrities: "People are using the same techniques employed on Madison Avenue to manage their personal lives. Corporations are getting humanized, and humans are getting corporatized." And he writes: "In essence, I'm sending out press releases. Adapting to microcelebrity means learning to manage our own identity and 'message' almost like a self-contained public-relations department."

The growing sophistication for managing one's online reputation is supported by the findings of a recently released study by the Pew Internet & American Life Project, stating that Internet users have become more aware of their digital footprint: In 2007, 47 percent searched for information about themselves online, compared to just 22 percent in 2002, and 60 percent of U.S. Internet users surveyed were not concerned about how much information is available about them online.

This stands in stark contrast to the 84 percent, who, in a similar study in 2000, had expressed concern about third parties getting personal information about them from the Internet. Teenagers, the Pew study shows, understand the implications of their digital footprint best, protecting their privacy by using pseudonyms or private accounts, and locking personal details into "walled gardens."

Everyone wants to be a designer. That's the value proposition of JuJups.com, a new online service claiming it will allow consumers to design their own personalized and customized 3D content. 3D printing, as the underlying technology is called, is a form of rapid prototyping that builds up three-dimensional objects by "printing" successive layers of materials (polymer, cells, sugar, etc.) on top of each other.

(Credit: George Hart)

As a recent Wired story points out, 3D-printing technology has been around for a while, mostly used by professional design firms and design-intensive businesses such as automakers, handset makers, and aerospace companies. Recent advancements have enabled the technology to "print out" fully functional finished products, leading to a remarkable boom in equipment sales: according to market research firm Wohlers Associates, 8,000 machines, or 36 percent of the industry's two-decade worldwide sales total of 22,000, have been sold in the past two years alone.

Multi-material 3D printers, capable of producing 3D parts and assemblies made from different materials in a single build, are hitting the market, and companies like Freedom of Creation (FOC) are paving the way for making rapid manufacturing technologies accessible for consumers.

In addition, a steady drop in the price of printers has spawned many new businesses trying to push 3D printing into the consumer market: 3D Outlook Corporation is selling 3D models of mountains and other topographic 3D maps for prices below $100, catering to hikers, resorts, and real estate firms.

Companies such as Fabjectory and FigurePrints produce 3D models of virtual characters (from virtual worlds or games). SolidWorks, a U.S. unit of Dassault Systemes SA, a French maker of design software, has launched Cosmic Modelz, a site that lets kids use 3D printing technology to create their own customized action-figures. And now JuJups wants to step aggressively into the emerging market with a Web-based 3D-printing service for everyone.

The JuJups site, however, currently only offers customized designs of photo frames, which it then prints out on 3D color printing machines and ships to customers. Although the company says it plans to expand its printing capacity to support the growing demand for customized objects including giftware, memorabilia, toys, etc., it is a little odd that it put out a bold announcement (for immediate release) of an offering that is apparently not quite ready for prime time at this point.

The JuJups example shows that there's still a gap between hype and reality when it comes to 3D printing for consumers. Trendwatching, and other trend-spotting media (Times Online, Post-Gazette, Make) have long propagated "MIY" (make it yourself) culture as a key trend.

Terry Wohlers, president of Wohlers Associates, says 3D printing is the fastest-growing part of the rapid prototyping industry. Wired believes it is witnessing a design revolution. Earlier this year, Glen Emerson Morris, a technology consultant, predicted in the Advertising and Marketing Review that 3D printing (or desktop manufacturing, as he calls it) would hit the consumer market big time: "It will likely have an impact on society, politics, and business as great or greater than the Internet. So, fasten your seatbelts. This is going to be a really wild ride."

Morris argued that "one of the reasons consumer use of home 3D printing, better described as desktop manufacturing, is likely to take off quickly is that there is very little manufacturing being done in America anymore. As a result, there will be very little pressure by manufacturing special interests against it."

And yet, we're still sitting here with our seatbelts fastened--but the wild ride has yet to occur. Aside from the above-mentioned niche sites, the big mainstream push from Generation C (C = content) to Generation 3D has been lost somewhere along the way. When will big retailers start to add 3D printing features to their sites? Where are the powerful brands or smart start-ups embracing the model? When will see the YouTube of 3D printing?