Every year I enjoy writing a post with my predictions for the next year. It's a nice way to empty the old thoughts from my brains so there's room for new ones. Plus I leave a trail of blog posts so I can see how my thoughts change from year to year.
In retrospect I've realized that each year tends to have a theme or two, and that the hardest part about making accurate predictions for a given year is identifying the themes that will drive it.
In 2007 the driving themes were social networking and online entertainment. In 2008 the themes were distributed and mobile communication, with a dash of cloud computing sprinkled on top.
The theme for 2009 is almost absurdly easy to identify: the economy. If you thought 2008 was about the economy, just wait for 2009. You truly ain't seen nothin' yet. A deflationary black hole is sucking all of the money out of the economy and we haven't even seen the impact yet.
Every time I hear somebody talk about how the market has bottomed and the economy is starting to improve I mentally picture them in this position:
So if we're talking about the economy and you see me chuckle, you know why.
Hope is a great mindset to have and a fantastic slogan for winning Presidential campaigns apparently, but it is not such a great lens to view reality thru when you're trying to make money.
From a broad perspective I expect to see the following:
- I expect a whole lot less in terms of invention and innovation in 2009. Big companies in particular will be hunkering down and preserving cash, only funding projects with a very positive ROI. A bird in the hand is worth two in the bush right now.
- Internet penetration around the world will stagnate and possibly even fall a little. Municipalities will put wifi rollout plans on hold (along with many other what we consider "essential" services), and consumers–especially in lower income brackets–won't be able to afford computers and Internet service. Sadly, many people will opt to cut Internet access rather than cable when forced to make a decision.
- Products which require a big upfront cash outlay will see sales drop dramatically. The reason for this is simple: credit is much too expensive. When corporate bonds cost 30% to issue, most companies will choose to forego any expense whatever than pay guido rates for money.
- Internet advertising will get absolutely crushed. It will be laughable as a monetization strategy, a kiss of death for startups trying to get funding. Advertising only adds value when it connects somebody with something they need. There will be fewer needs, fewer new products, and fewer dollars to spend on products and advertising overall.
- VC money will all but completely dry up as VC's watch their investments from the last few years evaporate due to the swan dive of Internet advertising. Many startups will die.
- Acquisitions will grind to a halt as cash tightens, further driving VC's into a deep depression. Any companies with spare cash (those who saw what was coming) will be able to pick up brands and products for pennies on the dollar from startups starved for money if they're so inclined.
- People will become much more cautious about using hosted Web 2.0 software as startups continue to close their doors. After losing their data to dead startups they'll learn the hard way to be more protective of it.
- The "Green" bubble will pop. People will not have the extra cash to pay a "social premium", they will be worried about paying the bills and their jobs. Obvious faddish signs such as a Green search engine
only point out the bubbliciousness of this meme. Overtly
questionable research hyping the destruction of the environment won't help. By the way, religious attachments to either side of this
argument are annoying and comments to that tune will be deleted instantly. - Investments in Software as a Service (SaaS) will pay off big time. Customers will be much more willing to pay a small monthly fee for their software than having to buy equipment, spend tons of money on software, and then pay maintenance to boot. The premise-based model is very capital intensive, and capital is very expensive now.
In terms of specific companies and products here's what I'm predicting:
- In a mad rush for more cash Microsoft will release Windows 7, and it will do a spectacular belly-flop. New PC sales will slow to a crawl and the number of people who pay to upgrade will be miniscule. While it will be a nice operating system it will be a terrible financial failure. Microsoft stock easily trades in the teens.
- 2009 will be a terrible year for Apple. Their products sell largely based on brand and flash, and the premium for those will drop precipitously in 2009. They will have to drop prices quite a bit to stay competitive and that won't be good for their margins.
- People will only replace hardware when they absolutely have to, and this is going to crush the mobile handset market in particular. Instead of standing in line to buy a new phone for a certain feature they will make do with what they currently have, providing it still works. Hardware manufacturers will suffer greatly.
- Twitter will be acquired, strictly for the brand and user base, for pennies on the dollar compared to its previous valuations. It will be integrated as a feature into some unified communications platform. It is not viable as a stand-alone company unless the founders can afford to run it out of their basement.
- Google, in a desperate bid to drum up more cash, will start pasting annoying ads everywhere. This will result in a dramatic rise in the number of people who install ad-blocking software, killing the Internet advertising business even deader.
- As advertising rates drop and revenues fall thru the floor, FaceBook will start actively marketing itself to acquirers. The $1 Billion valuation that Mark "The Sucker" Zuckerberg turned down will look like a fantasyland dream come true.
- Yahoo! will also be acquired, primarily for brand and user base. I still think Microsoft buys them, but it'll be at a low, low price–possibly before or after a Chapter 11 bankruptcy.
On specific technologies and memes:
- The Cloud Computing Wars will really start to pick up.
Every tech company in the world will throw their hats into the ring and offer a cloud solution as a way to use all the hardware they have sitting around idle now. I think the race to watch here is between Microsoft and Amazon. One of
these two will emerge as the clear leader in 2009. - Low-cost collaboration solutions will be hot. Of course every company
on earth will be trying to cut costs to the bone which will translate
into nonexistant travel and T&E budgets. The alternative is, of
course, collaboration technology, but CHEAP collaboration technology.
Solutions which cost close to a million dollars to implement will not
receive funding. - The bump in collaboration will be good for XMPP, which will gain popularity and supporters due to its being the foundation of most modern collaboration platforms. This will be a good thing for platform inter-operability.
- Linked Data (a.k.a. Semantic Web) will see adoption
FIRST through the enterprise, as it's a very nifty solution to the data
integration problem. However, given the economic environment, this
will not happen in 2009. Linked Data as a mainstream technology is on
ice until 2010 at the earliest. - The Mobile Internet will gain marketshare. To simply browse the Web, an iPhone
is perfectly adequate and it's much cheaper than a laptop or a desktop. For the
next generation of Internet users, browsing on their phone will be
preferable to browsing on a full-size computer, simply because the mobile environment will be the default environment. - Social networks will flail wildly trying to find a monetization
strategy that works. At the butt-end of this process will emerge
social networks which are more difficult to use, annoying, commercial and much
less user-friendly. As in, "Click here to view Jason's profile, brought to you by Microsft, hosted by FaceBook, sponsored by Pontiac-Save American Jobs, Buy Our Crap!" - Several new online marketplaces will spring up to take the place of eBay, which is quickly becoming irrelevant to the secondhand market. New services will open which help people be thriftier by buying and selling used products and marketing their individual skills better.
So there we go. Not a sunny picture by any means, but a realistic one. 2009 is not likely to be a fun year in any sense. At some point soon I'll write up a scorecard of how I did on my 2008 predictions and take a look back at the year in retrospect and see how I've been doing.
