Predictions for 2006 from an Indian perspective

It is the season to be jolly – but for those of us who compulsively seek out the next big thing, it is the season to ponder on the future and plan our strategy.

So, in no particular order, here are some of my predictions for 2006.

1. The Web 2.0 bubble will burst: This will happen due to two reasons. Firstly, it will become clear that most, if not all Web 2.0 sites have been unable to reach out beyond the very limited geek-dominated market of early adopters (illustration: even the supposedly wildly popular del.icio.us service has just 300,000 users. An anecdotal review of the popular links on del.icio.us will reveal this as well). Secondly, the acquisition spree seen in 2005 will slow as the big players digest their acquisitions of 2005 and re-evaluate some of their more outlandish purchases (Skype comes to mind). This time though the bubble will burst quietly with websites getting shut down quietly without much buzz. Not too many employees will be displaced as Web2.0 startups have hired very sparingly.

2. Yahoo will continue upswing: Yahoo will continue to make mindshare inroads into Google’s territory because of Yahoo’s superior partnering strategies (e.g. its recent partnership with Six Apart for MovableType) and also the fact that Yahoo “gets” content much more than Google does (also see prediction #8 below). Towards the end of 2006, Yahoo will start to emerge as a bigger threat to Microsoft than Google.

3. Outsourcing: A shortage of good tech workers, an unsustainable spree of pay hikes and continuing competition from companies like Accenture and IBM will start impacting the major Indian outsourcing companies. Also, 2005 has seen a trickle of good engineers leaving big Indian IT companies to join startup technology companies. 2006 will see a flood. Startups in India will have a good hiring year.

4. The blogosphere expands and consolidates: Professional, political and passionate bloggers will continue to see a fast growth in their readership. Overall the blogosphere will start to consolidate attention and resources into a relatively few trusted blogs. “me-too” bloggers will start to drop off the blogosphere, as the novelty of blogging wears off. With the decline of me-too bloggers, advertising-driven blogging sites will start to see a decline in growth rate. The absolute number of bloggers will still see a sharp increase over 2005 (the number of blogs could possibly reach 150 million)

5. Resurgence of newspapers: 2006 will be the year newspapers make a big comeback. This comeback will be led by a few simple but powerful trends. Firstly, newspapers will increasingly recruit subject specialist bloggers and hyperlocal bloggers over more generalist journalists. This will allow them to replace boring newspeak with much more insightful articles from writers whom people already know and trust. Secondly, a readership already weary with the tedium of keeping track of too many blogs will return to the relative comfort of reading newspapers (albeit online). Whether newspapers can successfully monetize this new interest will be the next big question.

6. Consumer storage will be hot: As the average consumer continues to amass gigabytes of data, the storage, backup and disaster recovery problem will be hot. 2006 will see several technologies that were hitherto reserved for mission-critical IT networks retargetted towards individual users and small businesses.

7. Major breakthrough in the attention problem: As companies and individuals slowly start to realize that they are losing productivity because of too many interrupts (email, IM, phone calls, …), a major breakthrough technology will alleviate the problem to a large extent.

8. Content will become more valuable: Due to several factors (such as Google’s algorithm-driven approach to ranking relevancy and the Web2.0 bubble), content in 2005 is being treated as a mere commodity. 2006 will start to see a reversal of this trend, as content creators (e.g. bloggers, photographers and musicians) get a more equitable share of online advertising revenues. This trend will be driven by a simple consumer behavior – consumers prefer better content over better technology or delivery mechanisms. This inherently means that content needs to be valued higher than it currently is.

9. U.S. real-estate slowdown will have global consequences: Interest rates, U.S. bond prices, U.S. consumer confidence, dollar exchange rates (and hence the offshoring business), combined with the huge (and increasing) U.S. trade deficit are all pieces of a fragile domino game. This game could easily turn ugly if the U.S. real estate market accelerates its slowdown, or even worse, turns out to be a bubble. Bad news in the U.S. housing market could trigger a global recession.

10. Uncertainty in China will cause investors to hedge bets: The risk of social unrest will weigh on the minds of investors in China. The heavy handed approach of the Chinese government might provide stability in the short term, but it still risks the chaos of a possible widespread unrest in the medium term. Whether India will gain from this is unclear. Investors might look at even safer bets such as eastern europe, south america and south africa.

Predictions can never be objective – they are heavily biased by an individual’s perspective, his network of advisors and his mental model of the world around him. I’d love to get your feedback on these predictions.

Lastly, thanks to Alok Mittal for inviting me to post on VentureWoods.

(Cross-posted from www.mungee.org)