The VC interest in last.fm continues unabated. I have been asked by a few VCs whether this is just a feeding frenzy created by Yahoo and Google’s current shopping spree OR if it’s a sustainable business on its own.
I think it's very sustainable and here’s why.
last.fm is valuable because it provides a compelling mechanism for consumers to find tunes that they like and therefore more likely to buy.
True, but more importantly
Last.fm is valuable because, by using its collaborative filtering mechanism, it has grabbed an early dominance as the platform for intermediating between what consumers and the music they want. Clay Shirky tells us why this could be so valuable:
"The (music label) industry harvests the aggregate taste of music lovers and sells it back to us as popularity, without offering anyone the chance to be heard without their approval… The industry's judgment, not ours, still determines the entire domain in which any collaborative filtering will subsequently operate. A working 'publish, then filter' system that used our collective judgment to sort new music before it gets played on the radio or sold at the record store would be a revolution."
True, but also (and potentially of most significance)
last.fm is valuable because it could be a mechanism for consumers to find the stuff that’s most valuable to them (not just music). Which means it could be the next generation of search (and I'm not going to bang on why that is valuable).
Let me take a few more paragraphs to explain this point about "next generation search" (clue: it isn't about people searching for stuff but about people finding stuff).
Because media production is cheaper and more atomised, attention from consumers is scarcer and consequently more valuable. This means that there is greater value ascribed to not only low cost production and distribution but also search (explained in phenomenal detail by Umair Haque).
I use “search” here as a very loose term: it refers to something more than just Google. It is about the way that consumers are fed (or discover) media most efficiently which is uber-relevant to them. This is about a number of things: tagging (del.icio.us), multimedia analysis (Riya. Omniperception, Blinkx), aggregation etc etc.
There is enormous value in delivering what the consumer wants without them asking for it.
With this type of smart aggregation, predicition is the key (this is composed of user profiling, collaborative filters, community recommendations, similarity & difference filters). last.fm has all of these.
So I believe last.fm does have stand-alone value.
It has the opportunity to win short term advantage. And in the longer term it can win big.