It's that time of the year when journalists, analysts, and bloggers fire their prophecy guns, predicting what will happen in the next 12 months. Most year-end predictions fall into four categories of uselessness: Fish in the Barrel, Shots in the Dark, Wish-Fulfillment, and Self-Service.
Fish in the Barrel are predictions so obvious that they're almost sure to come true. You make this sort of prediction if you're afraid someone will come back in 12 months and point out how many things you missed. Any good prediction list should include about 60% fish, to ensure a nice overall score. For example, the San Jose Mercury News recently predicted that M&A activity will increase in cloud computing in 2011 (link). Gosh, really?
In this spirit, I'd like to predict that water will flow downhill throughout the year. Please keep track of that; I know I will.
Shots in the Dark are things that no one can really predict, but that involve prominent names, so they sound insightful and interesting. You need about 20% of this sort of prediction on your list -- not enough to ruin your average, but enough so you'll sound bold. Besides, if you get lucky and hit on one of these, you can claim credit for the rest of your career. The Merc predicted that Google will buy Twitter this year. Nice.
My shot in the dark is the Newt Gingrich will marry Lindsay Lohan in 2011. I know it's a stretch, but if I'm wrong I can pass it off as a joke, and if I'm right I'll be famous forever.
Wish fulfillment. This is the other 20% of a good prediction list: You should predict one or two things that everyone agrees ought to happen, even if it they aren't likely to actually come true. You don't get blamed if these are wrong, because the failure of the prediction shows that there's something wrong with reality, not wrong with you. The Merc's prediction that Carol Bartz will be fired from Yahoo in 2011 fits in this category.
My wish fulfillment prediction for 2011 is that mobile web apps will take over from native mobile apps. I've been predicting that for years (link); if I keep doing it long enough I'll eventually be right. But in reality I think it won't happen in 2011, because APIs and browser infrastructure for disconnected web apps aren't fully mature yet. Maybe 2012...
Self-Service. These predictions are a whole separate activity. Many industry publications fill valuable column-inches, and reward advertisers, by asking industry CEOs to predict the next year. Most of the CEOs have no idea what to say, so they pass off the task to their PR departments, who naturally predict that the most important event of the next year will be the total dominance of their employer. That's how Wireless Week came up with the following stunning forecasts (link):
--A mobile operator predicts that this will be the year of 4G
--A mobile transactions company predicts that it'll be the year of mobile payments
--A networking equipment company predicts that it'll be the year of WiFi
And on and on. Along these lines, I'd like to predict that 2011 is the year that my startup, Cera Technology, will take over the galaxy.
(By the way, it really will.)
The trouble with all of these sorts of predictions is that you can't do much with them. They're fun to read (and that's probably their main point), but if you take action based on them you'll put your business at risk. Even the fish in a barrel are riskier than they look, because they're built on straight-line predictions of current events, and the past is a poor predictor of the future. For example, here's ReadWriteWeb in 2007 on a thing called SecondLife (link):
SecondLife will become an important platform for marketing, promotion, and of course social networking - as people and businesses figure out different uses for it. Also we think SecondLife will continue its expansion worldwide. Currently you can find Habbo and SecondLife cards in most supermarkets (Wallgreens, CVS) in the US, so this trend should continue in other parts of the world. In short, virtual worlds will become an integral part of the real world in 2007.
Ooookay.
I am not trying to pick on ReadWriteWeb; it's an excellent site, and there were huge numbers of predictions like this at the time. But you get my point.
Since it's impossible to accurately predict the future, the forecast I'd like to see isn't a list of what will happen, but a list of what could happen. And I'm not looking for small things, but the big surprise changes that make or break companies and industries. Specifically, what assumptions are we making that could turn out to be wrong? How would that change the balance of power in the market? And what should we do about it?
Here are my four forecasts of possible game-changers in 2011:
1. The Mobile Data Market Stops Growing
That's a prediction you won't see in many places, but think about it for a minute. Every market eventually saturates. The question isn't whether mobile data will saturate, but when.
Right now everyone's assuming the saturation point is far away, because smartphones are owned by only at most a third of phone users in the US and Europe (link). The other two thirds are still available! I have no doubt that most of those people will eventually get smartphones as their prices drop. Horace Dediu has made this case very persuasively (link).
What I'm not sure of, though, is that those people getting cheap smartphones will pay for data plans.
When I was at Palm, we studied the market for mobile devices very intensely. At the time, about a third of mobile phone users were willing to pay extra for any sort of advanced feature. The other two thirds weren't willing to pay anything extra. Many of them were too poor, some of them were too cheap, and some of them just didn't see any value in it.
If you gave them free hardware, like a cameraphone, they'd take it of course. But when it came time to pay for camera-related services, they took one look at the first month's bill and then stopped sending photos to each other. That's why multimedia messaging was a business failure.
Things have changed since I left Palm. Smartphones are a lot more capable than they were four years ago, the networks are better, and Apple has spent years advertising the benefits of an iPhone. I'm sure that has increased the number of people willing to pay extra for mobile data. But by how much?
No one I know of has studied this directly, but I did recently see some consumer research from one of the major analysis firms. It suggested that the percent of people willing to pay extra has risen to about 40%. If that's true, then rather than being a third penetrated, the mobile data market may be about 75% penetrated. Given the rapid growth of smartphone sales, we could hit the demand wall as soon as late 2011.
I'd be delighted to be wrong in this forecast. Maybe the willing customers are growing much faster than the studies indicate. Maybe the new devices coming this year will suck in a bunch more people. I hope so. But if you think 100% of the population is going to willingly add $200 or more a year to their phone bills just to browse the web from a bus, you're living in fantasyland. And the end may be a lot closer than you think.
What it means. The major mobile companies should be conducting careful consumer research on the willingness of people to pay for data plans. Match that up with the growth rate of smartphones, and see where the lines cross. Then invest (or hide) appropriately.
2. Facebook Becomes Passé
No, Facebook won't die in 2011; I'm sure it will continue to grow throughout the year. But right now Facebook is seen as the hottest player in the Internet, the leading disruptor that forces everyone else to react to it (link, link).
By contrast Google, the previous lead disruptor, is looking more and more like a typical big company trying to hit its growth targets. The most striking evidence for this has been Google's public switch from internally-generated innovation to acquisitions. At the peak of Google's rise, analysts fawned over its plan to innovate internally by hiring bright people and turning them loose on problems. An article in Fortune Magazine in 2006, Chaos by Design, said Google had figured out how to create an internal atmosphere of "structured chaos" in which new ideas would bubble to the top automatically (link). Four years later, Google's VP of corporate development says acquired companies can move faster than Google itself can (link).
"The stunning success of acquisitions that led to products like Google Maps, Android and YouTube has also opened Google to criticism that the company has become Silicon Valley's answer to the New York Yankees, using its wad of cash to buy talent rather than developing it from within." --San Jose Mercury News
It's not a shocking change. Tech Overlords don't last forever, and in fact it seems like their reigns have become shorter over time. IBM was the dominant player for about 25 years, Microsoft for maybe 15, and Google has held that role for less than ten.
If Facebook is the new leader in disruption, what could knock it off the throne? I think its own success may carry the seeds. As Facebook has become more and more popular, the young people who first fueled its success have started to look elsewhere for their social connections. I've been watching the online habits of my teenage daughter and her friends. They use Facebook, of course, but it's just one in a constellation of social tools they use, and it's not at the center.
The hot property among the people I watch appears to be Tumblr, which is a combination of social network and blogging platform. Unlike Facebook, which focuses on your connections, Tumblr focuses on shared self-expression. It's a new social medium, the easiest place online to say "I love these shoes" or "here's how I feel" or "listen to this song that my friend just posted." For users who want to communicate feelings more than ideas, Tumblr is a unique vehicle. No wonder it's popular among teens, who by definition are sorting out their feelings.
The other thing that makes Tumblr different is that it's not overrun by 40-year-olds reconnecting with their high school classmates.
Here's a Tumblr user on the difference between Tumblr and Facebook, expressed through video clips, which is very typical of the way Tumblr users communicate: link.
I'm not saying that Tumblr is the next Facebook. Right now Facebook has about 30 times more traffic in the US; comparing them is like comparing a ladybug to a wolverine. For all I know, in another six months the kids may have moved on to something else. But the lesson of Tumblr is that Facebook encodes one particular type of social interaction, the friends-list-with-status-updates. The real world of social interaction is far, far richer than that, and we don't know how it will translate online. Chances are that at some point Facebook's powerful paradigm will turn into a straitjacket.
Will that happen in 2011? I have no clue. But I bet it'll take a lot less than a decade.
What it means. Rather than trying to compete with Facebook head on, I'd be looking at other paradigms for social interaction online. What social needs do people have? Approval? Validation? Stimulation? How can you deliver those things online, more effectively than people can get them in person?
3. Book Publishing Dies
Someday, ebooks will enable established authors to sell their writing directly to the public, bypassing the publishers and bookstores and taking 70-80% of the revenue for themselves, rather than giving 85% of it to middlemen. I have no doubt whatsoever that this will happen. The trick is figuring out when. People have been predicting it for more than a decade, but so far the publishers are still in charge.
As you know if you've been reading this blog for a while, I've tried to do some economic analysis on when we'll reach the tipping point where publishers become redundant (link). I won't repeat the whole analysis here, but the summary is that when about 20% of the book-buying public has ebook readers or tablets, it'll make economic sense for an established author to drop print entirely and go straight to electronic distribution (because they can make so much more per copy sold electronically). We're likely to see slow progress for ebooks until that point, and then an accelerating stampede after.
We're not close to the 20% tablet penetration figure yet, and we won't hit it in 2011. But 20% is just an average across all authors; some may find that the market has shifted for them earlier than others.
So I was fascinated when I ran across this LA Times article on authors who have already decided to start ditching their publishers (link). These aren't vanity writers going electronic because they can't get into print; they're established authors who are pulling their backlist books out of print because they can make more money selling them electronically. One of the authors, Joe Konrath, detailed the economics of his decision here.
Check out the Times article and Konrath's scenario on the potential death spiral for bookstores (link). The rumbling sound you'll hear is the Four Horsemen riding after the book publishing industry. Will they arrive in 2011? Not for all publishers, and not all at once. My guess is that we'll continue to hear more hype than action in 2011, with the big switch starting in 2012 or 2013. But the situation is fragile, and today's migration could turn into a stampede sooner than I expect.
What it means. As I've said before, publishers need to find a way to deliver real value to authors and readers in an electronic world. Maybe it's editing services, maybe it's marketing, maybe it's something I can't think of. But it's different from what most of them do today. And no, helping an author navigate the variety of ebook stores is not the answer. An agent can do that.
4. The Year of the Tablet Backlash
I'm sure Apple is going to sell a lot of iPads, Amazon (and maybe B&N) will sell a lot of e-readers, and hopefully the HP/Palm tablet will be interesting. But I think it's very likely that most of the other tablets entering the market this year will exit just as quickly. Why? Because there's no particular user problem they're solving.
I've seen these consumer electronics bubbles before. One company has a successful product, somebody else copies it ineptly, and everyone else piles on because they don't want to be left behind. Never mind that they don't know why they're building the products, or for whom. The result is inevitably a big overshoot, inventory writeoffs, damaged careers, and a press backlash as the manufacturers run away from the market and customers feel burned.
This is another case where I'd be very happy to be wrong, but the situation smells very much like the other product bubbles I've lived through. If the tablet market does take off, it'll probably be because the manufacturers were rescued by an unexpected killer app. If things end badly, give some blame to Google for feeding the overshoot by pushing Android as a tablet OS even though they have no clear idea what the market is for it. Credibility is a precious resource, hard to accumulate and easy to squander. When you have a powerful brand, you can convince people to follow you up the hill on a crusade once, or maybe twice. But after you've burned them enough, they won't follow you readily again. Just ask Microsoft.
What it means. If you're making a tablet app, don't depend exclusively on Android. And if you're creating tablet hardware, the product you should be building is an info pad (link).
There you are, my four forecasts of big game-changers that could happen in 2011. What do you think? You're welcome to disagree with these, but I'm most interested in your predictions of other big, surprising changes that could happen in the next 12 months.
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