2011: just where is digital going?

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I think it was Bill Gates who pointed out that people often over-estimate the impact of technologies in the short-term and under-estimate them in the longer term. 25 years ago if you’d have told a typical yuppie holding a Dom Jolly-esque mobile phone that one day even primary school children and the homeless would have mobile phones you would have been laughed at, but it has come to pass.

Becky asked me to pull some predictions together last year which can be found here and get a rough idea of my record of success (or the lack of it) in my virtual crystal gazing. So I thought I would have another go at it this year.

As Bill recognised there is a real difficulty in squeezing things into a 12 month time frame. Key factors that I think may influence things include:

  • Whether the western world as a whole will go into the second dip of a double-dip recession. I think that will be increasingly likely for a number of reasons: growing inflation in China, a Republican majority in Congress which will be fighting President Obama on issues like tax cuts and welfare reform, UK government spending cutbacks together with likely interest rises and government-sanctioned inflation will crush UK growth, as for the Eurozone it’s anyone’s guess at the moment
  • A second reason is the amount of law suits currently under way between many of the major players currently shaping the future of mobile devices. Whilst they could win in the marketplace, they could be just as easily shutdown in the law courts. I don’t see compromise happening in a lot of cases simply because so many of them have too much to lose. Microsoft is out there fighting for relevance in the fast-approaching mobile future, Apple could see its major growth areas in tablet computing and smartphones wiped out by the courts and Nokia is struggling to stay alive

Net neutrality and intellectual property legislation could throw a spanner in the works:

  • Ed Vaizey recently declared the end of net neutrality in the UK at the FT World Telecommunications conference and although there will be a lot of political shellacking it will get steam-rolled through. This boils down to walking away from a free market for online services. Unlike the Digital Economy Act, this is a potential money spinner for both large media companies and large ISPs so will feature little corporate lobbying against it save from Google, possibly joined by Facebook, Microsoft and Yahoo!. Its also an issue that most politicians don’t understand the significance of so will likely do as their told by the whips. I expect Tom Watson to be ‘pissing in the proverbial hurricane’ on this and Ofcom or its equivalent will smile and nod indulgently at the Open Rights group but pay no real attention. The UK is likely to be used as an ‘example’ by lobbyists looking to secure similar measures elsewhere
  • Implementation of ACTA could put a break on internet and technology innovation as it puts old media rights ahead of new realities of a digital world and consumer protection concepts like fair use which were established during the late 20th and early 21st century.  It could have as big an impact as the Multi-Fibre Arrangement had on the textile industry in the late 20th century. In many ways the analogy is similar, an old uncompetitive industry had protective barriers to help it change or adapt in an orderly manner rather than getting washed away by new cheaper threats. Except ACTA is more about moderating the market flow between the media industry versus new online services rather than the flow of trade around the world in the geographic sense. Whole areas of innovation will now be out of bounds

Enough excuses, 2011 predictions

I suspect that this will be Facebook’s best year ever, however its future beyond 2011 will be significantly influenced by Facebook Messaging. Facebook has a challenge. In order for it it to make money it needs to be able to target advertisements effectively and it has to have active members. There are a number challenges to the activeness of Facebook members:

  • Privacy concerns are starting to bite, as danah boyd talked about earlier this year. Add into this consumers increasing awareness of the economic impact that overly frank imagery can have
  • Facebook is being seen by its audience as a utility. Many Facebook users log-on to do specific tasks such as find out and respond to event invitations or play Farmville. It’s arguable whether these are truly active engaged Facebook users

Inactive members are a dead-weight that take up storage space on their systems. Individually that cost is not significant but with a large amount of inactive users it starts to cost on a number of fronts: less compelling content to vend advertisements against, less eyeballs to vend advertisements to all adversely affect advertising revenue and then the direct associated storage cost of the inactive profile.

I think that its no accident that the likes of Zynga have been expanding their wings beyond Facebook. Facebook can’t use the stick of kicking out inactive profiles mainly because this would cause dissonance from active members who would see their precious friend numbers decline. Facebook, connect, like and share is about data gathering primarily, though like also makes your Facebook profile look more active than it really is – in this respect it is a shell game that advertisers will eventually wise up to.

Facebook messaging is interesting because IF consumers adopt it, they will be checking in on a regular basis and their communications can be mined for advertisement targeting purposes. So 2011 will be make or break time for Facebook Messaging and the future of the social network as a successful business.

2011 will be make-or-break for Twitter. 2011 should start to see the fruits of Dick Costolo’s efforts to provide a clear long-term vision for Twitter and execute on it. Costolo should be able to formulate a vision by the end of this year and start executing in 2011, whilst Twitter is popular there is still considerable room for future audience growth.

Couponsthe economic condition means that coupons aren’t likely to go away though there will be a thinning out of competition in this field. On the face of it Groupon should be a big winner at least in the US because of its fast-growing audience. I expect that some marketers will get vocal about educating consumers to expect discounts as this diminishes the power of brands, but then many GroupOn clients will be small or medium-sized enterprises more bothered about survival through having an adequate cash-flow.

Depressing though the thought is Carol Bartz will still be employed by Yahoo!. This is probably the prediction I feel most confident about, as I wrote in October; you have a board that can’t or mostly likely won’t stand up to a strong but non-performing CEO in Carol Bartz. If you look at the likes of Hewlett-Packard and the trials that they went through getting rid of Fiorina and Hurd, combined with shareholders that won’t be placated no matter what they do; doing nothing looks like a good strategy.

Given the staff exodus from Yahoo! there probably isn’t a viable interim CEO candidate if Bartz disappeared in the morning. She doesn’t seem to be prepared to man-up and take responsibility for the company’s current failings, believing that given enough time she can turn things around – so we can’t expect her to resign for a good part of 2011. Barring a major disaster, I could see Bartz serving out all of her remaining contract of employment out (which has about a year-and-a-quarter to go).

Gadget sales will have peaked in 2010. A combination of inflation in China, rising interest rates in many countries and the second arm of a double-dip recession I suspect that gadget sales will only be on a par with 2010 or slightly lower rather than showing further growth.

Generation-y will have to suck it up. Up until now generation-y have been pandered to by parents marketers and pundits; however large unemployment numbers and employers having a whip-hand will force them to suck it up in a similar way to what generation-x went through before them. In the same way that the public sector was the miracle market demographic during 2008-to-mid-2010 boomers will be that demographic for 2011. Not having to pay mortgage payments (which are likely to rise) or rent (which is already rising), they are likely to have a better disposable income than most, although many of them may end up being The Bank of Gen-Y so they may not be the saviour that many brands would be looking for.