[Editor's note: This is an Op-Ed piece from Baris Karadogan, a venture capitalist with ComVentures]
It’s becoming customary among VC bloggers to make predictions for 2008. At the risk of educating my competitors, here are my technology predictions for 2008.
1) Google’s Android and the Open Handset Alliance will succeed. By this, I mean handsets will become more like PC’s and wireless carriers will become more like landline DSL providers. This is a bold statement because both handset makers (like Nokia) and carriers (like Vodafone) don’t want this to happen. So why do I predict a change in an industry where dinosaurs were surviving for such a long time?
Because a meteor the size of Texas hit the wireless industry in 2007 and it was called the iPhone. For the first time in the wireless industry, the handset chose the carrier as opposed to the carrier choosing the handset. The product was so impactful and well designed that some carriers agreed to share 30-40% of their data revenues with Apple in order to have the device on their network. That could be a very meaningful $200 dollars to Apple (rough math, based reports of 40 percent of a $30 data bill every month over two years). Why did carriers agree to that? Because the carriers did the math and the revenue share probably was equivalent to the customer acquisition cost they’d otherwise have to pay which, in the US at least, is about $200.In return for that bargain, the carriers gave up ALL revenue from applications, ringtones etc. The consumers wanted it, they gave it, and doing so opened up the market.
In doing so, they catalyzed the next innovation from Google. Android and the Open Handset Alliance enable other people to quickly create new iPhones. It creates an environment that lets developers focus on what they do best, which is writing innovative applications. So somebody can come up with a device so compelling that it too will be able to chose their carrier (if carriers need a nudge, Google can share search revenues; if carriers need a punch, Google will fund an open carrier). Once that happens, the carriers become a dumb pipe, but a dumb pipe with similar economics as before, because they won’t have as large customer acquisition costs.
The second reason carriers may embrace Android is so they don’t have to be held hostage by Nokia, the world’s largest phone maker which is exerting increasing pressure on carriers. Nokia is even building an ad network and making carriers pay them a piece of their ad revenues. Carriers, especially the European ones, are so dependent on Nokia that they may welcome a cheap Android phone that has a few killer apps built by young application developers.
Which brings me to my third and final reason why Android will succeed:the developers. They’re frustrated. It is frustrating to write mobile apps if you have to test them with 100s of handset each running a slightly different operating system, in slightly different carrier networks. Getting apps and phones certified is a big daunting, time-consuming and frustrating task. Palm will attest to that, having lost 25% of its market cap because it missed certification. Android sets these developers free.
So, between independently innovative products, a tough supplier to the market, frustrated developers and a tough carrier business model, this industry is ripe for big changes, and I predict it will start happening in 2008.
2) Gaming takes off. I think people will realize that they were all gamers all along. Three things will make the non-gamer realize his or her true forgotten self:
2a) Casual games become social. When you play chess or any casual game on Yahoo, you are playing a stranger, all you know is his overall score. You don’t know your record against him, you don’t know if he lives nearby, and more importantly you don’t know if you know him. In contrast, if you play Attack! on Facebook, you know a lot more about that person, you can play against your friends, and you know your overall score and your score among your friends. Playing against a stranger is one thing, playing against an old high school buddy is another. This is a big deal which makes games a lot more addictive, and it is happening full speed in 2008.
2b) MMO’s become casual. MMO’s will extend their experience beyond the main game. You will be able to play a small version of WoW on your cell to win a small number of experience points. The game will be different but it will be the extension of the overall experience. So when you have three hours free, you’ll play the real thing, when you have 30 minutes free you’ll play a small casual game on your PC that counts towards your experience in the big game and when you have 5 minutes free you’ll play the mobile handset version. A lot has been written about this and the best can be found here.
2c) Hardcore games become immersive. Playstation 3 has incredible graphics, at times I can’t tell what’s real video and what’s computer generated, but you still have to use a very complicated controller. The Wii on the other hand has unrealistic graphics but every body who gets within 5 meters of the box wants to play (I am serious). Put the two and two together. Superbly realistic graphics combined with immersive controls will make hardcore games a generalized form of entertainment. What do I mean by that? I mean, why would you watch an action movie passively, when you can be in it with your friends? Hard core games with easy immersive controls can let anybody play and why would you give up interactive entertainment for passive entertainment. Watching a game will be almost as satisfying as watching a movie and you’ll have the option to interact with it if you want to. It’s hard to see why you wouldn’t.
3) Success of the TJ Watson Portfolio. Five computing clouds are poised to deliver what most of us need. I wrote about this for GigaOm last month. Google and Amazon give us consumer apps and infrastructure, Salesforce.com and VMWare give us enterprise apps and infrastructure and Akamai brings them all together. I predict a basket of these stocks will weather any downturn much better than others simply because of their unique position in the industry. I’ve put my money where my mouth is, you can follow the returns of this portfolio here.
4) At least one creative solution to the music industry woes will emerge in 2008. This is where I risk educating my competition, but I will say this: 2008 won’t be as bad for the music labels as people think. And it won’t be because of their embrace of MP3, though that will help. There are enough creative people in the industry, and by now enough people who understand digital, that somebody will think outside the box. That’s all I’ll say for this one.
15 Comments
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Finnsense said:
I have to disagree with point number 1. The iPhone is a much smaller deal than people in the US seem to think. Globally, Apple have sold half the number of iPhones than Nokia sold of the N95 since Summer - and half the poeple I know have a smartphone other than the N95 and are tied in for at least another year. Further, the iPhone has been a relative flop in the UK.
Nokia already have phones coming with all the features of the iPhone and more. Plus you are never tied to a carrier with Nokia and contrary to what you say, Nokia phones use the S40 or S60 platforms which are easy to develop for and actually exist.
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Uday Subbarayan said:
I doubt whether Google’s Android will succeed!
I am reposting the comment, i made earlier here:
http://1vc.typepad.com/soaring_on_ridgelift/2007/11/dj-vu-all-over-.htmlAndroid: It’s a chicken & egg problem. Google needs lot’s of developers to get more devices & developers needs more devices to develop applications!
So, which one will Google will go after?
As as an entrepreneur/engineer, why should I bother about Android now, when there is NO Android device in the consumers hand? J2ME is fine for me!
From the device manufacturer perspective, why should they promote someone else platform, if it competes with their own and more over no developer community?
———-xxx——————-
I love to hear from the community, why i should develop apps for Android “now”? -
BK said:
Uday,
I’ll give a longer answer to the questions once more comments come, but if you are wondering why you should develop apss for Android, how about the $10M prize?Re: the manufacturer…what if this was a way to enable a manufacturer who didn’t build cell phones before?
It’s all about enabling.
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Stefan Constantinescu said:
“By this, I mean handsets will become more like PC’s and wireless carriers will become more like landline DSL providers. This is a bold statement because both handset makers (like Nokia) and carriers (like Vodafone) don’t want this to happen.”
Ummm … what? Nokia would like nothing more than to stop bending over backwards to the operators around the world and just sell their devices like people buy computers today. You must be unaware of their unlock campaign in NYC and how people who aren’t living in America are buying their mobile phones.
Just because the iPhone woke up the American wireless market doesn’t mean the rest of the world was asleep. Go to any phone shop in the EU and be shocked by how many models you can choose from versus a single kiosk that has a handful of models an operator subsides.
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Yuri Ammosov said:
BK: it is not $10M. It is only $10000 if Google notices you, $100 000 if Google feels nice about you and $275 000 if someone at Google loves you.
Do YOU think you should spend you breakfast money to write an android app if all you plan to get is $275 k?
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Yuri Ammosov said:
Stephan: it must also be added that locked phones are a staple of US market, too. In France, for example, all phones MUST be sold unlocked; and in Russia, there were never any locked phones at all - locals simply won’t buy them.
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Uday Subbarayan said:
Baris,
“how about the $10M prize?”
This is just (marketing)gimmicks! The previous poster has the details. It doesn’t interest me.1)if a technology needs $ to attract developers, then there is a problem. what customer problem, i can solve with Android, when there is no customer!
2)regarding manufacturer:
I agree in theory but in reality, we know how hard it will be for an another new phone company!(big company or a startup)Though i sound negative, i wish Android succeeds(for all the good reasons) but not sure, how.
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Sanjay Vijayakumar said:
Hey - Pretty Interesting predictions and even more interesting comments too. Seems like the mobile scene at different ends of the spectrum in various parts of the world.
Some random thoughts from India where the scene is a bit different. Market Scene, Music Industry, Gaming and Social Networking are commented on personal experience.
Land of the unlocked - from IPhones to Nokia’s - the concept of being tied to a carrier does exist very partially with two operators of the total 7 opting for locked phones “without” SIMS. These guys are on CDMA while the remaining five are GSM and control 80% of the total market.
With 8M+ new users per month, India creates unique situations that one really cant predict what will work here. Lowest ARPU’s in the world at sub 8$, 25 states with 1600 Languages, a country that is so vivid in religion, culture, food and climate - that it is literally like 25 Countries put together.
Consider this.
1. There are 200M+ mobile phones against 3M Broadband Connections. ( The gap is predicted to become 500M and 20M by 2010)
2. Atleast 200M people will use the Internet for the first time in their lives through a Mobile Phone in India. So prolly, we might do mobile transactions in a small screen as many havent seen a Computer, save an ECommerce Transaction
In such a dynamic market, there is not a single mobile application that has mass usage. This can be attributed to the numerous handsets under the sun - and yes, they are all not Series 60 and Nokias.
Iphones work without a glitch out here but after using one for two months, i have realized that its more of a cool phone than a useful phone. That might be due to various reasons like high sms usage, high voice usage ( phone heats up big time )and the data rates being pretty high over here - 2.5$ per MB.
Social Networking also seems not to really take off simply because there arent that many broadband users ( that’s when compared to the mobile users :-)
Assume i click a photo with my camera phone - i will never find a PC besides me to transfer it. Even if i find a PC, it wont have internet and if its my lucky day and has internet - it still wont be broadband. But yet 1 in 5 Indians have a mobile phone while 1 in 350 have a broadband connection. Buy 2010, 1 in 3 will have a mobile phone.
Thus User Generated Content will take off in India pretty much like MCommerce once the platforms to share Mobile Content over Social Networks come into picture where Internet is just a part of the scene. Internet can exist, but is not really a necessity to share content.
Gaming pretty much happens a lot in India over mobile phones but we are the land of Pirates too so no revenue opportunity in the near term.
Mobile Music Industry has over taken conventional music over here and there are three things that work in India - ABC
Astrology, Bollywood and Cricket.
The Mobile Music Rights and DRM literally are very confusing terms out here in India and scene would pretty much be the same for another year.:-)
The Author is Co-founder and CEO of MobME - Mobile Media and Entertainment - rated as one of India’s 100 Innovative Startups and the youngest company amongst 100 Indian IT Innovators for 2007 alongside HP,TI,Rueters. :-)
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Lisa Peters said:
They’re giving away a cash prize at Internet Evolution for web predictions.
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Bob said:
…”.At the risk of educating my competitors, here are my technology predictions for 2008″.
This was the funniest line. What you forgot to say is that entrepreneurs are educating you. I always find it interesting when pitching VC’s how they sit back and get educated and then turn it around as if they are visionaries. Give me a break!
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Bob said:
Sanjay, Excellent post! Clearly you understand the barriers in India.
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Certified Internet Marketer said:
Well I think that’s pretty interesting! Anyone else?
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http://CertifiedInternetMarketer.com -
Max said:
VentureBeat thanks for this post!
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Deah Mave said:
I have my doubt about Android - like a lot of Google innovations this will also disappear.
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