Revisiting My 2016 Predictions

In January of this past year, I wrote a piece with a handful of “fairly confident” predictions for 2016. It seems like a good time to revisit those predictions to see which panned out, which didn’t, why, and where we might go from here. As you’ll see, I got some of the big ones right (and some wrong) but there were a lot of smaller predictions which panned out, too. I could forget that I made these predictions, but I think it’s always useful to hold yourself accountable.

Amazon

Main prediction: AWS and E-Commerce Driving Growth

Verdict: Correct

For Amazon, my main prediction was not only would AWS drive strong growth but the core e-commerce business would grow at a healthy rate, too. This was based in part on late 2015 performance but it’s clear 2016 was a great year for both these segments of Amazon. Amazon’s North American business, excluding AWS, has grown by 26% year on year over the past four quarters and its international business has grown at roughly the same rate. The investments Amazon has made in both processes and infrastructure over the last few years have paid off massively and its share of the growth in the e-commerce market is higher than it’s ever been.

It was feasible that brick-and-mortar competitors would eventually reach parity on some of these facets and that Amazon’s growth would slow as a result but that hasn’t happened. And the combination of AWS growth and the increasing contribution from Amazon’s third party sellers has driven increased profits. The one worry for investors is that Amazon continues to be somewhat unpredictable about when and if it will choose to reinvest those profits in the business, as it did this past quarter. It’s also still unclear, as I said early this year, that Amazon can replicate its success in a handful of key markets in others.

Apple

Main prediction: Continued Growth, Including iPhone

Verdict: Wrong

In early 2016, before Apple reported its results for the fourth quarter, it still seemed plausible Apple would grow in 2016, though financial analysts were starting to call for declines in Q4 2015 and beyond. In the end, Apple did grow in Q4 but hasn’t since. Despite the fact Apple analysts’ pessimism is often unwarranted, this was an exception. I got this one wrong, though analysts were early on their predictions.

In the end, I believe Apple will return to growth in the fourth quarter this year, as per its guidance, and growth will accelerate somewhat in early 2017. There’s still a question mark over growth beyond that however. I was right that iPad shipments wouldn’t return to growth despite the iPad Pro, though we did see one quarter of iPad revenue growth in 2016. I also forecast big changes for iMessage, which did come to pass in iOS 10, but my long shot bet about Apple launching its own HomeKit hardware was wrong. However, it did revamp HomeKit and made it much more usable as a platform, incorporating the Apple TV, and we finally saw meaningful third party hardware launched.

Facebook

Main prediction: Another Acquisition, Possibly an Asian Messaging App

Verdict: Wrong

Having made three large acquisitions – Oculus, Instagram, WhatsApp – I thought Facebook might be ready to make another, especially to penetrate more deeply into the Asian market. That turned out not to be the case. The big challenge here was the lack of available assets, with the largest owned by big internet companies already. What was interesting was Facebook did seem to spend 2016 trying to do better in messaging but did it organically, through a combination of beefing up Messenger with bots and by using Instagram as its chief weapon against Snapchat. I suspect we’ll continue to see this organic approach play out, especially as it appears to be working for Facebook so far, though the bots strategy was overblown and likely won’t make a big difference for the business in the short term.

Google/Alphabet

Main prediction: Alphabet Split Reveals Dichotomy in Businesses

Verdict: Correct

When I wrote my predictions in January, it wasn’t clear just what Alphabet’s finances would look like when it reported but it was already obvious the two halves of the business – Google and Other Bets – would look very different. My prediction here was the spotlight this separation would shine on the Other Bets would presage increased financial scrutiny and discipline on this side of the business. This is exactly what we’ve seen play out here. Ruth Porat, the CFO, has driven significantly increased financial discipline since her arrival and even my long shot bet that one of the Other Bets would be shut down, spun off, or scaled back has panned out. Boston Dynamics was put up for sale in March and Google Fiber has been scaled back significantly. There was also a change of leadership at Nest. On the plus side, Calico seems to be performing better and Waymo is now its own entity on the Other Bets side, so we’ll see how that affects the financial reporting going forward.

Microsoft

Main prediction: Surface Phones Launch, With as Little Success as Lumia

Verdict: Mixed

There was significant reporting that Microsoft was gearing up to launch Surface phones in 2016, so the focus of my prediction was on how those phones would fare, rather than that they would launch. As such, I was wrong about the launch, mostly because Microsoft’s plans here seem to have changed during the course of the year, but right about the ongoing parlous state of the smartphone business at Microsoft. Lumia phones continued to plummet in sales and revenues during the year and, in some ways, it’s unsurprising Microsoft backed off replacing them with something new.

If they ever do launch, the Surface phones have to be special to make any kind of difference in what’s now obviously a duopoly between iOS and Android. Windows Phone as a whole does continue to struggle, as I predicted, and the focus does indeed seem to be mostly on the enterprise market today. It’s also been interesting to see the Surface brand expand in other ways, with the launch of the Surface Studio. This revenue line will plateau and even fall a little in the coming months for Microsoft (mostly due to product release timing) but it continues to be an increasingly interesting part of Microsoft’s business.

Samsung

Main prediction: Smartphone Business Fades, Chips Ascendant

Verdict: Correct

Samsung was on an upward trajectory in late 2015 when it came to smartphones, so it seemed plausible this growth would continue in 2016. But I predicted pressured margins as Samsung pursued shipment growth. In the end, Samsung’s Galaxy S launch went better than expected and it had a strong start to the year. But, of course, the Note7 recall in the latter part of this year has set the company back quite a bit. It lost billions in revenue and profits and the damage to its brand in the short term is considerable, though I suspect mostly among non-customers. Its chip business struggled a little early in the year, but seems to have recovered towards the end of the year, and this continues to be a very important part of its business.

Twitter

Main prediction: Still no Core User Growth, Slowing Revenue Growth

Verdict: Correct

Twitter added half as many monthly active users in the last four quarters than it did in the prior year – 10 million versus 20 million. User numbers actually dipped slightly in the first quarter after I made this prediction. In addition, average revenue per user in the US performed poorly as well, which put further pressure on revenue growth. Despite my early optimism about Jack Dorsey’s leadership in the middle of last year, by the end of the year I had become disillusioned and these predictions have turned out to be depressingly correct. I still use Twitter a great deal and love the service, but I’m increasingly concerned the management just doesn’t know what to do to turn it into a truly mainstream service.

Onwards

I imagine I might write a similar piece in early 2017 but, for now, it’s interesting to look back on one of the most turbulent years in the tech industry. Some of the things I didn’t predict include Samsung’s acquisition of Harman, Snapchat’s renaming itself and its entry into hardware, and Apple’s fight with the FBI. Some of these things are just impossible to foresee because they flow from strategic changes that aren’t visible from the outside until suddenly they’re made manifest with a public announcement. But it continues to be an exciting industry to track and I’m looking forward to another interesting year in 2017.

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Jan Dawson

Jan Dawson is Founder and Chief Analyst at Jackdaw Research, a technology research and consulting firm focused on consumer technology. During his sixteen years as a technology analyst, Jan has covered everything from DSL to LTE, and from policy and regulation to smartphones and tablets. As such, he brings a unique perspective to the consumer technology space, pulling together insights on communications and content services, device hardware and software, and online services to provide big-picture market analysis and strategic advice to his clients. Jan has worked with many of the world’s largest operators, device and infrastructure vendors, online service providers and others to shape their strategies and help them understand the market. Prior to founding Jackdaw, Jan worked at Ovum for a number of years, most recently as Chief Telecoms Analyst, responsible for Ovum’s telecoms research agenda globally.

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