A couple of weeks ago, I reviewed my 2016 predictions with a view to seeing what I got right and wrong, and why. This week, it’s time for a new set of predictions for 2017. I’m going to do it mostly on a per-company basis and I’m also going to include one big question for each of these companies.
At Alphabet this year, I see the belt-tightening trend of the past year continuing with more fallout for the Other Bets. Specifically, I think we might see Nest integrated more tightly into Google’s new brand hardware initiative under Rick Osterloh. To the extent Google is pushing its own brand deeper into hardware, it makes sense to have Nest be a part of that, so I wouldn’t be surprised if we see some slightly different branding at the very least. I would also expect Google to announce a Pixel 2 in the fall and probably also new entries in other hardware categories like smartwatches (where Android Wear appears to be flailing), tablets, and laptops. As a result of all of this, I suspect Google’s relationship with all its OEMs, especially Samsung, will worsen in 2017. I would also expect Google to pay a big fine to the EU at some point to settle and move on from its competition case there. We’ll likely see YouTube launch its TV service this year into an increasingly crowded market that already features Sling, Sony, AT&T, and soon Amazon and Hulu.
Big question: will the Google Fiber division be shut down or spun off entirely?
I would absolutely expect Amazon to keep growing like gangbusters on the e-commerce side – its ability to not just maintain but accelerate growth has been the big upside surprise of the last couple of years, driven in part by the increasing contribution of third-party sellers who now make up over half of its unit sales. I’d also expect the AWS business to continue to generate growing revenues and profits, though it will likely come under increasing pressure from Microsoft’s cloud efforts. The Echo devices will continue to sell well, but Amazon’s biggest challenge around Alexa is to get it into more devices that leave the home because a virtual assistant can only be really useful if it’s always with you. We may see an Alexa app for iPhone or Android (it would do better on the latter, where it could be made the default) but, ultimately, Amazon probably needs to launch its own phones (again) to really make this work. An Alexa-centric phone would be a lot more successful than Amazon’s last shopping-centric effort.
Big question: can Amazon replicate its success of a handful of major markets in others?
We’re already seeing the usual reports of supply chain cuts with regard to the new iPhones but I suspect we’ll see year on year growth over at least the first couple of quarters, if not the full year. In the latter part of the year, much depends on what Apple actually launches – if it’s the big bang, tenth anniversary release we’ve been led to expect, I suspect we could see another super-cycle of sales (though, of course, the downside may well be another year of declines from late 2018 onwards). If it’s more of an incremental release, then I suspect we’ll see a dip again.
Regardless, Apple now has a massive installed base of devices which will upgrade with some frequency and will, therefore, drive a large number of sales and revenues from Services, notably the App Store, and increasingly from subscription content like Music. I think Apple finally needs to put out a subscription video service in 2017 but it seems to have backed off from that goal recently. I suspect iPad shipments will start to flatten out, while Mac sales should bounce back a little from a down year. Apple Watch sales should be healthy but not much above this year’s.
Big question: can Apple drive overall revenue growth in 2017?
Facebook has already said it expects revenue growth to slow a little in 2017 as ad load saturates and increasing ad load stops being a driver of revenue. But given the combined effects of a growing user base, rising ad prices, the growth of Instagram, and other drivers, I suspect we’ll still see very healthy ad revenue growth from Facebook. It’s less clear we’ll see growth in the rest of the business, which continues to be a tiny fraction of the total. Though Facebook has made some progress in new flavors of payments as well as e-commerce and Oculus hardware, the company’s own guidance suggests these won’t drive meaningful revenue in the short term. Increasing monetization of WhatsApp and Messenger will provide another boost to ad revenue in 2017, though likely modest as Facebook protects the core user experience in these much more intimate settings. I suspect Facebook will continue to face challenges with its internet access efforts, from Free Basics to drones, and may well start to back off on some of these in 2017.
Big question: will we see any products from Facebook’s new hardware group?
In hindsight, 2016 was something of a comeback year for Microsoft, with revenue growth starting to turn around, several well-reviewed consumer products across hardware and software, and accelerating momentum in cloud. But there are still big challenges – it’s increasingly clear Windows 10 adoption is going more slowly than the company forecast and it’s had to abandon smartphones entirely. Gaming is the one bright spot in terms of generating meaningful consumer revenue, while search is a useful secondary consumer revenue source. But beyond that Microsoft’s consumer strategy is still patchy and mostly revolves around free apps and services. Its strategy for competing with the Amazon Echo and Google Home seems to be focused on enabling OEMs. That could lead to some interesting new devices and probably plays to Microsoft’s strengths but we could see a situation in which Microsoft still has to make its own hardware to show OEMs the way.
Big question: do we see a Surface-branded smartphone reboot in 2017?
Samsung’s 2016 was two very different things: up until about September, it looked like a great year, with the new Galaxy S products and the Note7 favorably reviewed and selling well. Then the Note7 fires began and things went pretty rapidly downhill. As we head into CES this week, we still have no official explanation from Samsung for the fires and US wireless carriers are pushing updates to brick the remaining Note7 devices in the wild. As such, this cloud will hang over any announcements Samsung makes at CES and throughout the first part of 2017. Whether that continues through the rest of 2017 depends on two things: a clear statement from Samsung of the cause of the fires and what it will do to prevent similar problems in future devices, and a big launch in the first half of the year that wows consumers and doesn’t suffer from any battery issues. Beyond that, Samsung will complete its Harman acquisition, which looks really smart (though we likely won’t see many synergies until next year) and the semiconductor business should continue to be a useful secondary driver of revenue and profit.
Big question: do we see a big shift in smartphone strategy from Samsung in 2017 in response to increasingly challenging market conditions?
It seems increasingly likely we’ll see an IPO from Snap (formerly Snapchat) in 2017. So much of what the company will do in the coming months will be geared towards driving its valuation up. That means more emphasis on becoming a serious alternative to Google and Facebook for advertisers and moving beyond its current novelty/experimental status. We’ll probably see more big content deals designed to increase video engagement and, therefore, ad revenues and more efforts to track ad effectiveness, providing analytics tools similar to what other platforms offer. We’ll also likely continue to see the same breakneck pace of feature rollouts which has characterized Snapchat from the beginning. And I wouldn’t be surprised if we see version two of Spectacles, perhaps with some rudimentary AR capabilities.
Big question: is Snap able to convince investors it’s another Facebook, not another Twitter?
Speaking of Twitter, this is a make-or-break year for both the company and CEO Jack Dorsey. 2016 was the year in which the company tried and largely failed to grow its monthly active user base and I suspect we’ll see very modest growth in 2017, too. The fact the company still hasn’t begun providing daily active user numbers suggests they aren’t pretty and engagement of a large audience remains a key challenge. Jack Dorsey seems to simultaneously want to over-control the product (driving out several executives in the process) while not really having enough time to do it properly, given he’s also CEO of Square. All this will come to a head in 2017 and either we’ll see an unexpected turnaround or Dorsey will be forced out in 2017.
Big question: does Twitter finally address its abuse problem in a satisfactory way in 2017?