Well, 2008 is over and what a year it has been! It's time to score the predictions I made a year ago and to start thinking about a new set of predictions of 2009. As one of our portfolio company CEOs wrote to me today: "2009 should be a hoot!"
Before I get to the hoot, let's see how I did with 2008:
- A combination of US recession and the waning efficacy of online ads will hit the Internet advertising industry hard. MOSTLY TRUE, although the final numbers are yet to be released. I suspect the combined slowdown of Q3 and Q4 will lead to a nearly flat year for offline advertising and a lowish growth year for online, with the bulk of the spoils going to performance-based networks like Google and specialised online lead gen companies like Zieltraffic (for financial services) and Internet Media Group (for online education).
- The Structure of Networks -- social and otherwise -- will migrate to the core of the Web, replacing the Structure of Documents on which it was originally built (HTML and all that). Someone will figure out that applying the Google PageRank concept to networks of people is even more interesting: if we can identify influencers and how information flows among them, we can really start targeting campaigns. NOT YET REALLY, although the trend is clearly in this direction. During the current downturn, a lot of investment will go into increasing the efficacy of online advertising. Facebook founder Mark Zuckerberg understands this clearly, though he hasn't worked out quite how to monetise the idea.
- 2008 will the year of the Return of the ERP Vendor. SAP, Oracle and the midmarket vendors will make progress with their own SaaS offerings and will shrink the valuation gap with the pure-play SaaS vendors. HALF TRUE, the valuation gap has shrunk from 3-4x revenues to 1-2x. But this has more to do with the general bearishness of the markets than with the success of ERP vendors' SaaS offerings. Keep an eye on Oracle, who are doing their best to steal some of the Web 2.0 sizzle with new offerings.
- The Web 2.0 financial bubble -- fuelled by VC cash being round-tripped between startups buying and selling ad space -- will pop as a result of the weaker ad market and the failure of 100s of undifferentiated 'feature' startups to gain traction. TRUE, here's a list of 10 in particular, but the roster of the dead runs into the 100s with more to come.
- The mobile web will continue to be stymied by the difficulty of discovering content on mobile devices. iPhone and other large-screen devices will help commuters surf the old Web, but mobile browsing won't take off until someone invents a new search paradigm that works on mass market mobiles. TRUE.
- As a result the mobile advertising market will fail to take off... yet again. TRUE.
- What on earth is UWB? Anyone remember? Anyone care? STILL TRUE.
- The success of the Nintendo Wii will spark a whole host of new physical interactive video games, providing a boost to vendors of chips to the console companies. FALSE so far. Wii continues to rock'n'roll, and the imitators are far behind. But in a bow to the new innovation leader, both Sony and Microsoft are working on motion-sensing controllers for their PS3 and Xbox platforms. Meanwhile the Wii continues to stoke the creative juices of independent developers -- here are Wired's faves.
- Social networks will see huge monetisation efforts and some applications and ad networks will make a financial killing. But their performance will be erratic and useage of networks will be highly volatile as consumers get tired of being poked, zombied and voted HOTorNOT. I think this is TRUE. Social networks (broadly defined and including YouTube) have failed to live up to their lofty valuations, which were based on unrealistic advertising yields. The advertising bust has blown this issue wide open.
- Some element of Open Source or "free" distribution models will become part and parcel of every software vendors' go-to-market strategy. Again, NOT QUITE YET. This will take more time.
- [Bonus, more of a hope than a prediction]: 2008 will mark the return of the Basic Business Phone, and it will be a runaway bestseller. Nokia or someone nimbler will launch a high-performance phone that makes phone calls, has a long battery life, global coverage, and a simple, fast interface. And absolutely nothing more! I so wish... I'M STILL WAITING!!
That makes it 6/10, which is worse than last year's score of 7/10. I need to steer clear of technology developments themselves -- those predictions always underestimate how long it takes for innovation to find the right application and to get adopted... Stay tuned for my shot at 2009.