The ad:tech San Francisco keynoter chats with Kate Everett-Thorp about what venture capitalists are watching for in the world of Web 2.0.

So here we are again. With the Web 2.0 it's a great time to be an entrepreneur-- even better if you gained experience, insight and backbone from the last run. Venture capitalists are paying attention, my friends. The money is starting to break free. A few categories to watch will be consumer generated media, mobile, video on demand and anything that makes a consumer's life easier. Recent investments like Six Apart -- the creator of social networking site LiveJournal and maker of blogging applications like Moveable Type -- just snagged $12 million, and the hot acquisition market with Fox’s recent run at MySpace.com and Intermix’s 30 company sites like Grab.com and Flowgo.com have all refueled the industry frenzy over digital media.

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Although the U.S. blazed a trail with internet content, commerce and advertising, now it’s our turn to look over our shoulder and take notice of the innovations coming from abroad. Recent interest in mobile technology has driven our attention to the European and Asian markets to understand consumer behavior. Remember those people who never thought anyone would look at their phone, let alone watch television on it…I bet they are trying to get a new phone with video or a new video iPod! Another example may be the very infrastructure that allows us to advertise within these new and nascent venues. A small company called Interbine out of Israel, for instance, is working hard to create “useful” advertising spaces for marketers in mobile content environments. 

Two more areas to watch will be in the area of research and targeting technology. We aren’t a pioneering group of marketers that are willing to settle just yet. Instead, we will push hard in 2006 to create more valuable advertising inventory. Companies like Tacoda will lead the way as we add behavioral targeting to our digital marketing arsenal. As well as reaching our consumers with more intelligence, I predict we will also make great strides in our ability to harness the plethora of public opinion now available to us via blogs, message boards and postings. Companies like Umbria and Intelliseek are just now helping marketers harness the information available to them across the internet. Nielsen's recent acquisition of Intelliseek is a good indicator of the pending importance of this information to our marketplace.

And we would be remiss if we didn’t address the intense consumer desire to make entertainment -- movies, music, books -- available on our terms. Entrepreneurs and Venture Capitalists are diving in heads first, here. In the video category TiVo got our attention, then SlingBox reignited it, and a few stealth companies out there will move onto our collective radar soon. In music, Apple has taken over and put Sony’s Walkman and Creative’s ZEN behind. But, then you have the leaders who changed the distribution of such content. Web 1.0 brought us Napster and Listen.com, but what about the wave of smarter, less controversial companies like Pandora that are planning to make big changes in our ability to access and explore the daunting amount of music out there?

What we have in common across all of the Web 2.0 leaders is the understanding that the big man (publishers, distributors and networks) are taking a back seat to the consumers and their ability to choose. It’s an undeniable busy time for all things digital.

While putting together my thoughts on the topic, I took some time out to see what another venture capitalist was thinking. I recently spoke with Mark Kvamme from Sequoia Capital to see how he views this burst of energy and what it might mean for all the budding entrepreneurs out there.

Kate Everett-Thorp: There is a lot of buzz in the marketplace that this is the “second wave” for internet business growth. Is that how you see it?

Mark Kvamme: We are definitely in a “second wave.” We now have over 40 percent of homes connected to broadband services; most companies are now connected and using the internet to make their businesses more efficient, et cetera. We are seeing companies emerge that take advantage of ubiquitous internet coverage in corporate America and broadband usage (the always-on internet) at home.

Thorp: We have both been at this for some time. Looking back, I always felt that the mid-nineties were a time for basics (content), infrastructure (technology) and ecommerce. In ten years if we look back at today, what will have been the key categories?

Kvamme: I think it will be ecommerce and entertainment/media. Currently, only two percent plus of total commerce is done on the net in the U.S.A. In Korea, it is 30 percent. I think we will move to close to 20 to 30 percent in the next 10 years. That means close to $1 trillion of new commerce will be done on the net.

With broadband available to close to 50 percent of the homes in America, we will consume entertainment, advertising, and content over the net. Not just on our computer, but on our TV, phones and pretty much any device-- all will be connected to the net.

Thorp: As both an investor and entrepreneur you have seen the rise and fall of good ideas. What advice can you give our next round of developers -- or those going for number two or three -- to help them succeed this time around?

Kvamme: Focus on the users/customers with a unique product attribute that makes their life better. That is it. Most of the “bad” ideas are too complex, too expensive to bring to market, and offer no real benefit to the end user.

Thorp: You have recently made investments in the social networking space, LinkedIn. I wondered if you could share with us what impact you think these companies might have on digital communication?

Kvamme: People like to communicate and connect with other people. Any tool or technology that facilitates a person’s ability to more quickly, efficiently, effectively and communicate with another person will be a huge success.  See, for example, email, instant messaging, Skype and social Networking, with more to come.

Thorp: Sequoia Capital has done very well with its investments with the likes of Google, PayPal, eHarmony and Yahoo! Has your investment strategy changed? In the last five years, five months or five hours? 

Kvamme: It has never changed. 

Thorp: Lastly, I wondered if anything would be good enough to pop you out of the venture world and back in as an entrepreneur. I know you’d never name a company...or would you? But is there a category that excites you enough to consider it?

Kvamme: The simple answer is no. I really enjoy working with young smart people to help them build their dreams/companies. There is nothing more thrilling than that.