The folly of trying to predict media
As an oxymoron, Technology forecasting may deserve a place alongside such chestnuts as business ethics and airline food. That's especially true when the technology relates to media - which is subject to the whims of consumer taste and so even more resistant to accurate prognostication. Nevertheless, industry predictions, especially bullish ones, retain near-mystical power for the role they play in driving business plans, justifying strategic investments and boosting marketing budgets.
As a result, the last decade has seen a surfeit of misguided predictions about the shape of things to come. Bought an Internet terminal or an e-book lately? Even when predictions about the New Next haven't been completely off, mass adoption of new innovations has often been slower than expected. By contrast, overnight sensations like YouTube usually go unheralded.
The boom-and-bust cycles of the high-tech world also defy reliable handicapping. Few foresaw Apple Inc.'s astonishing resurgence in a pricey portable music player. The ups and downs of Internet advertising in its early years have also kept experts off-balance, guessing too high or too low. Below we've assembled a short list of prominent missed predictions, now amusingly easy to see.
For all its high-tech cachet, Apple Inc. has had its share of technology flops over the years. There was the Newton handheld device of the early '90s or the Mac Cube, introduced in 2000 and in production for just one year. Apple TV may join that dubious company as well. But the many predictions in 2001 that the iPod would bomb turned out to be way off base.
At the time, even Apple diehards gathered on sites such as Apple-Insider and MacRumors.com saw little hope for the company's costly new MP3 player. "Great - just what the world needs, another freaking MP3 player. Go, Steve! Where's the Newton?!," wrote one. "I'd call it the Cube 2.0 as it won't sell, and be killed off in a short time," vented another on MacRumors.
Some analysts also surmised that, like the Mac itself, the iPod could have trouble succeeding outside a niche market. "The question is whether people want that robust of a feature set with that high of a price," NPD analyst Stephen Baker said in October 2001. Of course, that question was answered with a resounding "yes" when sales of the then-$399 device took off.
In April, Apple sold its 100 millionth iPod, making it the top-selling digital music player in history. Of the company's $5.2 billion second-quarter net sales in 2007, about one-third came from iPod sales. Beyond the numbers, the device has become a cultural icon, conferring youthful hipness, or the illusion of it, on devotees.
Apple's rebound on the lithe frame of the iPod has also made reports of its demise in the mid-'90s appear greatly exaggerated. New York Times technology columnist David Pogue compiled a list of them last year, including this Forrester Research analyst's eulogy: "Whether they stand alone or are acquired, Apple as we know it is cooked. It's so classic. It's so sad."
The Fifth Network?
One doesn't have to look back very far to find predictions that missed the mark. In its September 2005 issue, for instance, Wired ran a feature bearing the subhead: "Why Yahoo! Will Be the Center of the Million-Channel Universe." Huh? That bold assertion already inspires a snicker.
The article, part of a broader editorial package on the future of TV, discussed Yahoo's hiring of ABC television boss Lloyd Braun to lead its nascent media group in Los Angeles. As is now well known, Braun wound up exiting Yahoo last year after the Internet portal decided it didn't really want to create costly original programming after all. Yahoo even wound up killing one of its two original shows, Richard Bangs' Adventures.
The story also describes Yahoo's efforts to tackle the problem of video search, which has produced few results to date, and its involvement with Project Lightspeed, an IPTV initiative led by then-SBC, which has continued to fall short of projections for its roll-out to U.S. homes.
Most telling, however, is not what's in the story, but what's not. Nowhere in the article, or the entire "TV of Tomorrow" issue of Wired, is there any mention of YouTube. It wasn't until the breakout viral hit of the SNL video "Lazy Sunday" in early 2006 that the video-sharing site would burst into the public consciousness and become a true cultural phenomenon.
In an ironic twist, YouTube co-founder Jawed Karim in a lecture last year at his alma mater, the University of Illinois at Urbana-Champaign, traced the idea for YouTube to a Wired article about BitTorrent by Clive Thompson in the magazine's January 2005 issue.
Marriage Made in Hell
The most celebrated deal of the dot-com era (perhaps even the century) turned out to be the biggest dud. Analysts and other observers hailed the merger as the triumph of new media over old media, the Internet over Old Economy conglomerates. BusinessWeek wasted little time declaring AOL CEO Steve Case and president Robert Pittman as "Men of the Century" in a January 24, 2000 cover story.
"If the ascendance of the Net economy were not clear already, the January 10 announcement of America Online Inc.'s $183 billion deal to purchase Time Warner - the biggest deal ever - should be taken as proof positive," stated the article.
The move was viewed as a deal Time Warner had to make to remain relevant in the digital age. "This is amazing," enthused Merrill Lynch analyst Jessica Reif Cohen at the time. "It guarantees AOL getting broad access to consumers [and] it takes Time Warner to another level as far as new media and high-speed data connections," The newly tie-less Time Warner chairman and CEO Gerald Levin fueled exuberant expectations. "We've become a company of high-fives and hugs," he gushed the day of the announcement.
The hyperbole was soon replaced by harsh reality when the Internet bubble burst, taking AOL's huge valuation and profitability down with it. AOL Time Warner reported a massive loss of $99 billion in 2002, leading the company to replace Levin with Richard Parsons as CEO and later to drop "AOL" from its name. Internally, the merger was hobbled by a culture clash between the companies and the vaunted old-new media synergies never materialized.
AOL in 2006 switched to a primarily ad-based model, and rumors that Time Warner may spin off AOL continue to circulate.
Push Me, Fool Me
Wired's most infamous cover story appeared a decade ago when it proclaimed push technology as the Next Big Thing. The story argued that Web browsers would soon be rendered obsolete as all types of content would start popping up on devices from PCs to mobile phones to wristwatches.
Much of the hype surrounding push technology in the late '90s centered on the startup PointCast Network, whose software would automatically "push" news and other content to computer desktops without user intervention. Both Microsoft and Netscape integrated the company's technology into their software in the midst of their browser wars.
Of course, browsers weren't wiped out by push. They remain the standard means of navigating the Web. And search, the ultimate pull technology, subsequently exploded with the rise of Google and the search ecoystem it's spawned since. After rejecting a $350 million buyout offer from Rupert Murdoch, PointCast flamed out in spectacular style. Its technology never caught on with users, and employers banned it as a bandwidth hog.
Wired itself copped to its erroneous embrace of push a few years ago. But the magazine pointed out that its predictions about push were finally coming true in the form of new technologies like RSS feeds.
Applications such as widgets and mobile e-mail could also be seen as Web 2.0 versions of push. But these innovations can't match the breathless hype that greeted the original incarnation.
Off on Online
Forecasts for online advertising have been all over the map during the last several years. The boom-and-bust of the dot-com era followed by a Web 2.0 rebound has played havoc with analysts' projections. Predictions in the 2000-2001 period failed to factor in the impact of the bursting of the dot-com bubble on Web advertising.
In a December 2000 report, the Internet Advertising Bureau (now the Interactive Advertising Bureau) and Myers Reports boosted the forecast for online ad spending growth from 50 percent to 70 percent. The study cited a shift of Web advertising toward mainstream media as cause for its increased optimism. Obviously, the IAB couldn't have foreseen 9/11. But with the dot-com implosion already well under way in late 2000, why would it increase its growth forecast? Online ad dollars wound up falling from $8.2 billion to $7.2 billion in 2001, according to a later IAB/Price-waterhouseCoopers report.
Paradoxically, analysts in the post-9/11 period didn't envision online ad dollars rebounding to their present level. Last year, market researcher eMarketer estimated Web ad sales at $16 billion. But back in 2002, then-JPMorgan predicted online ad spending to be only half that amount in 2006 at $8.8 billion. Projections in 2003 by sources including PricewaterhouseCoopers, the Myers Report and Veronis Suhler Stevenson also came in around $8 billion. For its part, eMarketer also underestimated the online ad spend in 2006 at $9.3 billion.
Rupert Murdoch's 2005 decision to purchase social networking site MySpace.com for $580 million raised plenty of eyebrows at the time.
In sharp contrast to the exuberance that greeted initial reports of the new media/old media Time Warner-AOL deal, reaction to News Corp.'s takeover of MySpace was decidedly bearish, with wags dubbing the purchase "Murdoch's folly."
Why would anyone spend half a billion dollars on an Internet property with no discernible means of making money, people asked. And, even if News Corp. could sell ads on the site, would there still be an audience if the young hipsters fled, eschewing any associations with a big corporation?
Two years later, however, Murdoch's MySpace takeover has come to be seen as a brilliant strategic acquisition. For one thing, since taking over the site, its popularity has soared. Membership has grown from around 27 million members to 175 million; last summer, MySpace surpassed Yahoo Mail as the most visited domain on the Web, according to measurement company Hitwise.
Secondly, a $900 million three-year deal with Google, entered into last summer, ended doubts of even the most skeptical observers. With the deal, Google agreed to power search on the site and also will sell ads on other Fox sites, including movie review site Rotten Tomatoes.com and sports site Scout.com.
What's more, News Corp has found ways to distribute clips of Fox TV shows like "American Idol" and "The Simpsons" on the property, in addition to syndicating clips from other publishing companies, including The New York Times, at the social networking site.
In fact, so sharply did people revise their view of the move, that even Murdoch rival Sumner Redstone took note. After ousting Viacom CEO Tom Freston last September, Redstone blamed Freston for his "humiliating" failure to buy MySpace himself. "MySpace was sitting there for the taking for $500 million," Redstone told Charlie Rose last year. By that time, the company was already viewed as worth $1.5 billion.
(Not) Interactive TV
TV-related technologies have proven fertile ground for wildly optimistic outlooks. Maybe that's because the TV has long been viewed as the key consumer platform for achieving convergence, that ever-elusive vision of a seamless digital future. Usually any innovation preceded by the word "revolutionary" has turned out to be anything but.
Many of the misguided efforts can be grouped under the rubric of Interactive TV. On the low end of interactivity, the term might encompass video-on-demand or pay-per-view. But the more far-reaching expectations for Interactive TV conjured images of clicking the remote to order a pizza, or vote to decide the direction of a TV show's plot. Obviously, those more ambitious aspirations haven't come to fruition, or even close. Remember ACTV, AOL-TV and Wink? Among the biggest bombs was Microsoft's WebTV, now MSN TV. Founded in 1995, WebTV Networks was basically a set-top box that connected to the TV via the Internet. But WebTV and other specialized set-top boxes have failed to build momentum due to technical hurdles and a lack of compelling content.
Even gadgets that have gained traction, such as the digital video recorder, have spread more slowly than expected. Forrester predicted in 2000 that 53 million U.S. homes would have a DVR by 2005. In a March 2007 report, however, the research firm noted that only 13 million homes had DVRs. Oops. That didn't stop Forrester from predicting DVRs spreading to 65 million homes by 2011, mainly as a result of the technology being built into cable and satellite set-top boxes.
A PC for the People
In 1995, Oracle CEO Larry Ellison declared the pc dead, soon to be replaced by the low-cost network computer. To achieve his vision of an affordable, efficient Internet access terminal he created Network Computer Inc. Of course, network computers never took off. But that didn't keep the Silicon Valley billionaire from continuing to evangelize for a cheap PC-alternative.
Ellison's second attempt at popularizing the network computer failed in 2003 when his New Internet Computer Co., selling Web-surfing devices for under $200, was shut down after three years. Ellison wasn't the only one with high hopes for the concept of inexpensive, ubiquitous Internet appliances. Companies including 3Com, Sony and Compaq Computer were all coming out with such products in the late 1990s. And all wound up being scrapped after finding few customers.
These efforts weren't completely quixotic, however. Tim Bajarin, principal analyst at consultancy Creative Strategies, Inc, says one result was that PC makers began dropping prices in response to the threat posed by the network computer. "This led to PCs becoming under $500 and basically defeating the original purpose of a low-cost Internet PC," adds Bajarin.
It was the equivalent of "Dewey Beats Truman" in the digital world. Back in 1997, then-Forrester Research president George Colony famously dubbed startup online bookseller Amazon.com, "Amazon.toast" in the face of established offline competitors such as Barnes & Noble. Never mind that the book retailing giant wouldn't even get on the Internet until that year.
But Colony wasn't alone in doubting Amazon's chances against entrenched rivals. Other skeptics mocked Jeff Bezos' creation as "Amazon.org," a domain reserved for nonprofit organizations. Wall Street wasn't bullish on the company in the early days either. It would not be until the following year that then-Merrill Lynch analyst Henry Blodget would correctly predict that Amazon would hit $400 a share.
Perhaps its detractors should have noticed that one of Amazon's biggest institutional backers was top Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers. Its early confidence was handsomely rewarded as Amazon went on to become an online retail behemoth, last year posting earnings of $190 million on revenue of $10.7 billion. The company evolved into a media platform in its own right, offering digital downloads, blogs and original shows like the Bill Maher-hosted Amazon Fishbowl.
For his part, Colony survived the Amazon gaffe - he is now chairman, CEO and acting chief financial officer of Forrester.