2006 Predictions

Since 1997, It’s been a long run­ning game here at TNL.net cen­tral to make wild pre­dic­tions about the upcom­ing year that have turned out to be only some­what off (and, as always, I promise to revisit them around the end of next year to assess how far off base I was) so here goes this year’s edition.

Broad­band penetration

Broad­band pen­e­tra­tion will con­tinue to increase in the United States and Europe. Large scale deploy­ments of city-wide broad­band efforts in sev­eral large cities will start mak­ing inter­net access sim­i­lar to phone or elec­tric ser­vice, wide­spread and the type of thing few peo­ple think of. On the bleed­ing edge of the Inter­net access devel­op­ment world, some large scale net­works, most prob­a­bly com­ing from phone com­pa­nies, will break the 10-Mbps bar­rier and close in on the 100-Mbps speed, mak­ing inter­net access on par with reg­u­lar local net­work access.

The down­side of this wide­spread deploy­ment of high-speed inter­net access will be in the phone indus­try, where next gen­er­a­tion (3G) roll­outs of high speed wire­less net­works will prove costly and offer lack­lus­ter ser­vice con­sid­er­ing its high price. This will force a dras­tic reduc­tion in prices towards the end of the year or early 2007, in an attempt to recover some rev­enue from the large investments.

Impli­ca­tions of increased broad­band penetration

The increase in broad­band pen­e­tra­tion will have sev­eral large impli­ca­tions, includ­ing the roll­out of more voice over IP ser­vices, video ser­vices, and the infra­struc­ture security.

Voice Over IP

Voice over IP will con­tinue to see wide­spread deploy­ment and large phone com­pa­nies will start migrat­ing their full net­works to IP-based traf­fic. This will make VoIP the pri­mary form of tele­phone com­mu­ni­ca­tion for wired lines by the end of 2006, though few peo­ple will be aware of the change as it will largely hap­pen behind the scenes, not touch­ing people’s inde­pen­dent system.

Tele­phony ser­vices will increase as the VoIP phe­nom­e­non con­tin­ues to increase. Expect early efforts in video tele­phony to start rolling out and becom­ing more main­stream towards the end of the year. Also expect to see the rise of wire­less devices that can bridge the gap between com­puter and reg­u­lar tele­phony, pro­vid­ing access to the net­work in a num­ber of dif­fer­ent ways.

Video

Video over IP will be very hot in 2006, with sev­eral major changes in the indus­try. First will be the announce­ment, by Apple, of its new mac-mini intel-powered plat­form designed specif­i­cally for the liv­ing room. Fol­low­ing on the suc­cess of the iPod, Apple will mar­ket the device less as a com­puter and more as a video con­sump­tion tool that will include stun­ning high def­i­n­i­tion res­o­lu­tion and will offer direct access to the iMe­dia store (for­merly known as the iTunes music store) where one will be able to down­load movies and TV shows, as well as con­tent cre­ated by amateurs.

Google, in part­ner­ship with AOL (and its sis­ter com­pa­nies within the Time-Warner world), will offer a pay-per-view sys­tem, mir­ror­ing some of the iMe­dia store offer­ings. The sys­tem will be avail­able both in the AOL closed gar­den client (where it will use some level of accel­er­a­tion to speed up deliv­ery) and on the web through a new client pack­age offered by Google and largely devel­oped by the AOL client soft­ware team. The strength of the move will gen­er­ate enough pos­i­tive buzz for AOL that Time-Warner will be able to spin-off the unit and will be con­sid­er­ing an IPO towards the begin­ning of 2007.

See­ing their adver­tis­ing rev­enues erod­ing, TV sta­tions will start offer­ing more con­tent online, also spon­sored by adver­tis­ing. New types of online video ad inser­tion and track­ing sys­tem will be cre­ated by sev­eral com­pa­nies, with Google, Microsoft, and Yahoo! offer­ing aggre­gated model based on some­thing sim­i­lar to Google AdWords but offer­ing not only tar­get­ing based on key­words but also based on cer­tain demo­graphic information.

New video aggre­ga­tors will start appear­ing, offer­ing a way to cus­tomize your own TV sta­tion. Some will be acquired by the major por­tals (unless the por­tals them­selves have already devel­oped that capa­bil­ity by the time this trend man­i­fests itself). Mean­while, Tivo will recast itself as one of those por­tals and will be acquired by Microsoft and merged with MSNTV (unless it is acquired by Sony, and merged with the PlaySta­tion 3, or Pana­sonic, and kept as a standalone.)

Hav­ing lost in the bid­ding war for Tivo, Yahoo! will decide to acquire Net­Flix and merge it with some of its video offer­ings, pro­vid­ing not only dis­tri­b­u­tion of DVDs but also online stream­ing of content.

On the strength of rev­enues from online ads, some small cable or local TV sta­tions will start offer­ing their com­plete pro­gram­ming slate online, for free, and advert­ing sup­ported. This will ran­kle a few of the cable com­pa­nies and syn­di­ca­tors who looked to those com­pa­nies as another rev­enue stream. Mean­while, on the same basis, most local TV news will be avail­able online for free through an adver­tis­ing sup­ported model. Dur­ing one major story, a local TV station’s feed will com­pete with the national net­works in terms of report­ing, as more view­ers flood its web­site than watch the same story unfold on television.

The com­pe­ti­tion for those types of sto­ries will con­tinue to increase, as cit­i­zen jour­nal­ism pro­vides raw unscripted video of events. Video­cast­ing, fol­low­ing on the suc­cess of pod­cast­ing, will start see­ing some trac­tion with a few pod­cast­ing and vid­cast­ers sign­ing deals with tra­di­tional media. Tra­di­tional media will look at it as an inter­est­ing set of devel­op­ment but one that ulti­mately won’t be trusted by the pub­lic because they do not have the right seal of approval; their pre­dic­tion will turn out to be wrong.

Infra­struc­ture

The rise of broad­band and the increas­ing num­bers of basic ser­vices run­ning on the inter­net infra­struc­ture will give rise to fear that the infra­struc­ture is under-protected. From a tech­ni­cal pol­icy view­point, elec­tronic infra­struc­tures will become a major national secu­rity mat­ter with fears that the very open­ness of the inter­net could rep­re­sent a large secu­rity risk. This will be seized upon by the net­work providers (phone com­pa­nies, cable com­pa­nies) and some secu­rity con­sul­tants as a way to push for pol­icy that will allow those incum­bent com­mu­ni­ca­tions ser­vices to admin­is­ter their net­works with tighter con­trol, with deci­sion as to what they are will­ing to let run on the net­work and what they are not will­ing to. A sub­se­quent bat­tle will ensue as VoIP com­pa­nies and media com­pa­nies will com­plain about the net­work providers squeez­ing them out. No deci­sion on any of this will be made in 2006 but the debate will con­tinue through 2007 and beyond.

Growth and Scalability

2006 will be an explo­sive year in the Web 2.0 sphere. Explo­sive because it will see triple if not quadru­ple digit growth in num­ber of users but also explo­sive because it will see sev­eral pop­u­lar sites unable to deal with the capac­ity issues relat­ing to that explosion.

On the RSS end, the explo­sion in growth will really start when Inter­net Explorer 7.0 becomes a pri­or­ity upgrade on win­dows sta­tions. The inclu­sion of some RSS feeds as defaults in the browser will prove to be too much for some sites which had not expected the onslaught of mil­lions of new hits. Read­er­ship from RSS read­ers will increase as more users real­ize that they can get their favorite sites deliv­ered to them instead of going out and check­ing to see if they are updated.

As more peo­ple dis­cover RSS, more of them will start valu­ing blogs and many will start their own. How­ever, the con­cept of becom­ing a pro­fes­sional blog­ger will decrease as many peo­ple who thought they could make money off their blog will find that the effort in doing so was higher than they had expected and will aban­don their blog.

Mean­while, other web 2.0 sub­jects will fail: Tag­ging ser­vices like del.icio.us will be see as too com­pli­cated by the gen­eral pub­lic (although they will con­tinue to thrive in the more geeky world) but tag­ging of pic­tures (as in Flickr) will con­tinue to grow. Most blog net­works will fail to attain the amount of traf­fic required to play seri­ously in the adver­tis­ing world and will be forced to either merge or shut down. Mean­while, com­pa­nies offer­ing only a set of web ser­vices with the idea to gen­er­ate rev­enue solely from adver­tis­ing may find them­selves in a bind as adver­tis­ing rev­enue will fail to grow at the same pace as the new offerings.

Impli­ca­tions of Growth

The explo­sive growth in traf­fic see dur­ing 2006 has impli­ca­tions across a num­ber of play­ers in the blog­ging world and meta­data space. It also has impli­ca­tions in terms of scal­a­bil­ity, busi­ness, and trust.

Blog­ging, pod­cast­ing, vidcasting

As blog­ging takes bet­ter hold in the main­stream (your par­ents WILL be blog­ging), the num­ber of sub­scribers per indi­vid­ual blog feed will drop into the low teens, with blogs being read by close fam­ily mem­bers and friends only. A few break­out blogs, spe­cial­iz­ing on par­tic­u­lar nar­row sub­jects will man­age to increase their read­er­ship but the world will largely con­sol­i­date around less than 1,000 major blogs: of those, the vast major­ity will not be from any mem­bers of the Tech­no­rati 100 or any other such list. The vast major­ity of those main­stream blogs will be the ones cre­ated by main­stream media out­lets, which will use their exist­ing reach to heav­ily pro­mote their own blog.

Radio sta­tions will increas­ingly start offer­ing pod­casts and TV sta­tions will offer­ing vid­casts. Most, how­ever, will do so through cen­tral­ized host­ing capa­bil­i­ties pro­vided by their par­ent com­pa­nies. Smaller pod­cast­ers and vid­cast­ers will have a hard time to com­pete with those larger com­pa­nies as they are forced to look into ways to sup­port their own band­width costs and will sign con­tracts with host­ing ser­vices promis­ing a share of adver­tis­ing rev­enue in exchange for doing the host­ing: that share will largely go to the host­ing ser­vice with many podcasters/vidcasters find­ing they are not really mak­ing more than a few 100 dol­lars a months from all their hard work.

Crash and Burn

One of the host­ing ser­vices will crash in a major way, tak­ing with it a few days worth of the hard work of thou­sands of peo­ple who were host­ing on it. The provider will ini­tially recover but suf­fer a sub­se­quent crash that will seal its fate as a doomed com­pany. The major­ity of its users will leave and join one of the larger host­ing ser­vices pro­vided by Yahoo!, Microsoft, and Google.

Beyond the host­ing world, scal­a­bil­ity will also be a hot buzz­word as more ser­vices, rang­ing from RSS host­ing providers like Feed­Burner to search engines like Tech­no­rati and Feed­ster to ana­lyt­ics providers like Google and Mea­sureMap will expe­ri­ence tem­po­rary fail­ures and growth pains.

The cost of upgrad­ing the ser­vice infra­struc­ture will be too much to bear for some com­pa­nies, which will be forced to shut­ter their door, sell out, or merge with a sim­i­lar ser­vice. Mean­while, many web-based ser­vice com­pa­nies will fail to gen­er­ate enough adver­tis­ing rev­enue to con­tinue upgrad­ing. A flurry of merg­ers and clo­sures will hap­pen over a few months, lead­ing peo­ple to won­der if this is bub­ble bust 2.0.

The down­side of all those fears about a bust will be in the increased num­ber of neg­a­tive sto­ries about tech­nol­ogy in the main­stream media. Sto­ries will men­tion the hubris of web 2.0 founders and will show­case Google as a typ­i­cal exam­ple of this hubris, high­light­ing its free lunches and other things that were thought cool in 205: As a result of all those neg­a­tive sto­ries (and oth­ers but more on that later), Google will loose sev­eral bil­lions (pos­si­bly even tens of bil­lions) of dol­lars from the high of its mar­ket cap­i­tal­iza­tion, shed­ding any­where from 10 to 25 per­cent off its high.

After the con­sol­i­da­tion, there will only be one or two inde­pen­dent play­ers in each of the fol­low­ing (notwith­stand­ing the fact that there will also be offer­ing from the big­ger por­tal play­ers): blog host­ing , vlog host­ing, pod­cast host­ing (Word­Press and Type­pad will either be the two in these three sec­tors or will have merged), blog search, social net­works (speak­ing os social net­works, Yahoo! or Microsoft will buy LinkedIn (if it’s Microsoft, LinkedIn will quickly be inte­grated with Out­look and offer Plaxo-like features).

Mean­while, a sec­tor which will have been dec­i­mated will be tag­ging. Fol­low­ing slow adop­tion by the main­stream, largely due to the com­plex­ity of adding tags to pages, many tag­ging com­pa­nies will fail. Tag­ging, as a con­cept, how­ever, will remain and be adopted by most major search engines: as Meta­data entry is sim­pli­fied with the intro­duc­tion of Win­dows Vista and Office 12 (both of which will be deliv­ered by Microsoft to a rel­a­tively luke­warm mar­ket), and tag­ging becomes a browser fea­ture, it stops being a differentiator.

Trust is hot topic

Fear of Google know­ing a lit­tle too much about peo­ple will bring a slate of bad press for a com­pany that was the dar­ling of the main­stream media in 2005. The intro­duc­tion of its Google finance ser­vice, hook­ing up into people’s bank accounts and pay­ments sys­tems will be seen as the com­pany becom­ing too large a player, with fear of it becom­ing a monop­oly. The back­lash will first start in sil­i­con Val­ley, with many tech lumi­nar­ies start­ing to tear down the com­pany. It will con­tinue with pub­li­ca­tions that were once its biggest cheer­leader becom­ing its biggest detrac­tor. As a result, many of the com­pa­nies that relied on Google for key ser­vices (adver­tis­ing, ana­lyt­ics) will try to dis­tance them­selves from it and start look­ing for other providers (mean­while, com­pa­nies look­ing for fund­ing will excise Google from their busi­ness plans, in order to avoid being asso­ci­ated with it by VCs). Yahoo! will pick up some of the adsense/adwords busi­ness, along with Microsoft, which will offer a sim­i­lar service.

Mean­while, in the ana­lyt­ics space, new com­pa­nies will be formed and attract a lot of ven­ture cap­i­tal. Many of them will offer ways to opt-out of their track­ing and some will offer added incen­tive to peo­ple will­ing to pro­vide them with more infor­ma­tion. New mod­els in the space will emerge and at least one player will pro­vide a rev­o­lu­tion­ary approach that will change the ana­lyt­ics landscape.

In the blo­gos­phere too, trust will be a major sub­ject as some of the top blog­gers will grap­ple with issues sur­round­ing defama­tion of char­ac­ter, libel, accu­racy, and reli­a­bil­ity after a top-name blog­ger is sued for some­thing he/she said or linked to. Fur­ther­more, some of the top blog­gers will grap­ple with issues relat­ing to inva­sion of pri­vacy as they become more famous in the main­stream media.

On the Wikipedia end, anony­mous edit­ing will be aban­doned after the rev­e­la­tion of a major hack alter­ing minor facts over sev­eral months in an auto­mated fash­ion has ren­dered a core ver­sion of the wikipedia unus­able. The wikipedia trustee will revert wikipedia to an ear­lier date, eras­ing all changes per­formed dur­ing that period of times and destroy­ing sev­eral sig­nif­i­cant entries on 2006 cur­rent events. The main­stream press will pile on about the inac­cu­ra­cies of wikipedia, bring­ing back ear­lier scan­dals as proof that no infor­ma­tion on the inter­net can be trusted unless it comes from a reli­able source (inci­den­tally pre­sented as being a mem­ber of the media establishment).

Con­clu­sion

In late 2006, a sub­stan­tial por­tion of these pre­dic­tions will be wrong and some may turn out to be dead on (although most of the ones men­tion­ing com­pa­nies by name will most prob­a­bly be wrong).

Mean­while, on a per­sonal level, 2006 will be a year of big changes. How­ever, I promise it will also be a year of con­tin­ued writ­ing on TNL.net, even if it is at the same sub­stan­tial post every week or two rate that read­ers have got­ten accus­tomed to. I hope you’ll join me for the ride.