I am including companies like Apple and Microsoft, who are not all about the Internet, for now at least, but clearly will be shape it in the next 10 years. This won’t be a comprehensive list of tech companies, as I like to make informed predictions.
Factors to be considered for a 10 year prediction
I was analysing companies for the following attributes:
- Foremost is innovation, in 10 years the Internet will be a different place and the only companies that will grow are those that innovate daily.
- Strong technology and network affects. Both of these factors lead to long term stability on the Internet.
- In large markets that have lots of room to grow.
- Either already sufficient diversified or have the positioning to be diversified in the future. Diversification goes hand in hand with innovation, all innovative companies would tend to become diversified in the long term.
Winners - Predictions of the rising stars:
Google (GOOG)
I am always in favor of the under dog and feel that the Internet is dynamic enough that most cash cows will die and other things will take over within 10 years. However Google never fails to impress me. They are vertically and horizontally integrating into every part of the Internet (YouTube, Google DNS, Google OS etc). Their constant innovation will ensure that they don’t become irrelevant. They clearly missed Social Networking, but they keep doing everything else right.
At the end of the day as long as Google controls search, the conduit to the Internet will still be theirs. Without a strong social network, they do lose the random “discovery” aspect of the Internet, but I think they can control the rest of how people get to data. Or conversely, if it becomes important, they could buy Facebook, Twitter or Digg. For now, their search deals with Facebook, Twitter, and Myspace, ensure they won’t be totally left behind as the social web expands.
Amazon (AMZN)
Amazon is a ridiculously smart company. They continue to innovate in areas that most people don’t realize; they control e-commerce and continue to extend themselves to be much more than an e-commerce site but a platform (through fulfilment and their market place etc). With One-click payments and Amazon Flexible Payments, they are also one of the easiest way to pay for things online. AWS make them the leader in cloud computing infrastructure.
The things Amazon does in-house are leading the technology world (AWS, Kindle), they also make great acquisitions (see Zappos, Alexa, IMDB). It is really hard to see how Amazon will not continue to own e-commerce online and extend themselves in to synergistic verticals/ horizontals.
Apple (AAPL)
There are enough fan boys out there that I don’t need to sell Apple too much. Their Achilles heel is that they are more closed than Microsoft and that might hurt them, but in terms of the ability to innovate and change hardware they are un-paralleled. Hardware and computer interfaces still have a long way to go, and Apple will probably be the one to push them for the foreseeable future. Their only weakness is their Web app ability (and their closed nature), which in some ways might kill them if hardware innovation becomes too commoditized, but I don’t think that is happening too soon.
Activision Blizzard (ATVI)
ATVI has a market cap of 14bn, but there’s still opportunity for them to expand. World of Warcraft is under-leveraged yet continues to reap large revenues. Diablo III will be a big hit. Guitar Hero is awesome. Almost everything they touch is high quality and does very well. If they do a reasonable job with launching on new platforms (Facebook + Mobile) and take advantage of Virtual Goods based models, they will continue to be successful.
Comscore (SCOR)
I didn’t realize ComScore was public until I was doing research for this blog post. The Internet is going to become even bigger in terms of Market Share and usage, on top of that, analysing the Internet has yet to be perfected. I think there will be more innovation in this space and ComScore will push/ buy a lot of it. It also seems very undervalued.
Facebook (not public yet)
I was going to put Facebook in the next category (unstable), but actually I think most tech people underestimate Facebook. Even though they are not yet the biggest website in the world, they have, by far, the most information about their registered users. Facebook has really changed the Internet, and they are collecting together smart people to continue innovating. The thing that might destroy them is similar to what might destroy Apple, they are a walled garden. The Internet and entrepreneurs don’t like being imprisoned in walls and so will fight it. If they open up or become more infrastructural then they might stop the anti-wall tide. So far, it seems that that is their goal with Facebook Platform.
Facebook could at some point switch on a revenue stream that would surprise us all. That might be in Facebook payments or it might be in something else, but as long as they are experimenting, I am sure they will find it and when they do they will be very formidable. As they have leverage with their userbase and don’t have to solve the “chicken or the egg” problem.
Zynga (not public yet)
Perhaps I am slightly biased (Union Square Ventures invested in Heyzap and Zynga), but Zynga has grown ridiculously fast, and I am sure they will have a long way to go before they peak. They define a whole new era of gaming and execute tenaciously on their goals. I imagine they will continue to do bigger and bigger hits across many more platforms.
Skype (not public yet)
I love Skype. They have a massive and growing user base. They control Internet telephony and even before they were spun off they were making great moves in Video Chat and offline phones. I can imagine in 10 years, every mobile/ land-line will be Skype enabled. I am sure if they do more innovation for a couple of years and re-list it will be much higher than their spin-off price.
Unstable - Predictions of the ones that will go either very high or fall very low
Paypal (EBAY)
Paypal is in a great place as they could effectively be the “Bank of the Internet.” On a personal level, I have been locked out of my Paypal multiple times, and their recovery procedures can be a real pain so that bit I don’t like about them. Also I don’t really see that much innovation coming from them. Overall I really don’t know what will happen with Paypal, options are:
- A disruptive startup comes along and takes their market. Something like Square, Facebook or a better Internet bank
- They keep their share and nothing much happens
- They innovate more and start taking on other banks more directly
Twitter (not public yet)
Really undecided on whether Twitter will be around in 10 years. They still have some time to go before they are really mature and have a scalable business model. They do provide a lot of value and have a good network effect of users so that’s something that they could leverage to continue to grow.
Microsoft (MSFT)
As much as Microsoft missed the Internet, they are still around and still making a ton of profit. No one is really making a dent on their enterprise foot hold of the OS and Office, though many are making valiant efforts (Google Docs). They are also finally doing something right with Bing. Also they are owning the traditional console market with Xbox 360. Given their cash reserves and overall impetus, I wouldn’t be surprised if they come up with other cash cows and preserve their existing ones. Alternatively, they may just continue to miss the boat and Windows+Office could become completely irrelevant as everything moves to the web. That’s why I put them in the unstable section.
Yahoo! (YHOO)
They are so low that the only way is up. They have really made some awful strategic moves with giving away search to Bing, but I do think that they could come up with something. Yahoo has a lot of users with their portal, mail, IM and Flickr, so if they could just do something right then they could galvanise those users in to making money. Also Yahoo Finance is still way better than Google finance hence the links below, (still nothing beats Bloomberg, why not?).
Boring - Predictions of the neutral
I won’t comment on these companies. Mostly they have some strong sites/ domains in their portfolio and are likely to survive and continue to acquire other good companies. I wouldn’t expect much actual innovation though.
Expedia (EXPE)
Flowers.com (FLWS)
Netflix (NFLX)
Note on Netflix: I think the whole market is shrinking, prices of on-demand Movies are going to go down and people are going to either pay very little at home or lots in the cinema. Maybe 3d movies and other technology could save them.
Fail - Predictions of the fallen
Myspace (part of Newscorp)
Myspace is quickly becoming irrelevant, and that is FIM’s biggest site.They are currently under-leveraged, but alas don’t think it’s going to happen.
Ebay (EBAY)
Ebay seems to have forsaken its auctions business, the consumer experience has not improved for 5 years and everything is about power sellers. I think Amazon is going to beat them at the power sellers business, and someone else may come along with a dedicated consumer auctions business and take that market.
[Update removed Omniture as it was acquired by Adobe in 2009]
Priceline (PCLN)
Was tempted to put Priceline in neutral, but I still feel like in 10 years they won't be around. Not very impressed with my experience of them. Seems very gimmicky and slightly scammy (see CNET article).
Verisign (VRSN)
I don’t have a good feeling about Verisign. SSL and .com seem like their cash cows and those are not long-term businesses. A lot of other stuff they do seems to be more of giving an impression of security rather than true security. This part is not that well researched so take it with a grain of salt.
Conclusions
I am very optimistic about the Internet. I am certain that at least 100 other companies will be on this list in 10 years time and most likely even my favorites will disappear. The Internet is still in its infancy, and there is still room for tremendous growth. It certainly is an exciting time to be in the industry!
Notes:
Nasdaq Internet Index (QNET) - Was a useful source of info
Thanks to Dru Wynings and Jude Gomila for reviewing this post.
All views are mine, and don't make any investment decisions based on what I say :).
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