Tech Trends for 2009 — This Time Global

Last year, I limited my predictions to the U.S. market. But the global economic meltdown has made the world flatter — and landed our nation flat broke. So to keep things interesting, I’ll extend my prognostication across borders.

I was playing with the idea of titling this column “Top Ten Tech Bailouts for 2009″ or “DeathCrunch: 2009,” but thought it best to keep our VentureBeat readers in high spirits (what with the holiday cheer and all). So without further ado, here are my top global trends to watch for the new year:

PC and online gaming continue healthy growth

There is no better indicator of this than World of Warcraft’s Wrath of the Lich King’s first-day sale of 2.8 million copies in mid-November. At $40 each, this accounts for $112 million, an astounding figure. I imagine the folks at Blizzard Entertainment had a pretty nice holiday party — drinking eggnog and munching on gingerbread cookies, macaroons and Turkish Delight to their hearts’ content…

And it’s not just the geeks keeping this segment of the market afloat either. Remember Swingers? Solid proof that cool, hip, unemployed men (and there will be many more of them) tend to play a lot of games.

But does this mean that all video game companies are recession-proof? Will that many more people opt for lazy, relatively inexpensive entertainment over going out? Not really. The NPD Group, a leading consumer market research firm, recently issued a report showing a dip in the overall video game market. October saw an 18 percent increase over sales from last year, but November’s sales were only up 10 percent. So the downturn is in fact taking a toll.

Console sales — which made up $9.4 billion of the $18.9 billion gaming industry in 2007 (according to the Entertainment Software Association) — will take a major hit. How many people will be willing to drop a few hundred bucks on a console? Plus $50 more for a game easily finished in a few days or weeks? That’s a lot to ask in the current environment. Even perennial favorites like Rock Band and Wii Fit will probably trend down due to expensive accessories.

PC and online gaming account for only 9.5 percent of total gaming sales ($9.5 billion). But the segment has the strongest prospects for growth. MMORPGs (massively-multiplayer online role-playing games) and others with multi-dimensional interaction options provide continuous character development, storylines and gameplay that bring you into contact with likeminded others. This gives them longevity and makes them worthier of that initial investment.

Video game makers should take note: Titles that deliver more value over a longer period of time will bring in more money during tough times — and that’s exactly what PC and online games do.

Surface computing slowly breaks into the mainstream

Traditional mouse and keyboard setups will start to be replaced by touch-sensitive screens that allow users to control functions with their fingertips. Hewlett-Packard’s TouchSmart PC is just the beginning.

I’m far from becoming a Microsoft fan, but Microsoft Surface is an important step forward for this technology, which will only become more pervasive in the next year. And Microsoft isn’t the only player in the game. As a TEDster, I have to plug Jeff Han’s multi-touch interface (see video below). All the while, Innotive, a company I advised, offers very cool interactive display technology.

The novelty of surface computing has led Microsoft into partnerships with Sheraton Hotels, Disney and Harrah’s Casino Hotels. These resorts have installed touch screens in their lobbies to provide local information and media tailored to their customers’ needs. The technology may only be mindly entertaining for now, but it provides substantial practical value. With the ubiquity of the iPhone, multi-touch screens are becoming increasingly intuitive, and already feel more natural than typing on a keypad in some settings. Say, for example, you are presented with a multi-touch screen as a menu in a restaurant — one click with your finger orders your meal.

But there’s even more potential in the boardroom with smart white boards becoming a reality. Imagine all the graphic facilitation geeks in your office suddenly gaining the ability to map out their ideas with just their hands? Joyous pandemonium! Dry-erase marker bonfires amid hearty rounds of Kumbaya! (At least that’s how I picture it.)



Shift from offline to online ad spend picks up speed

Advertising goliath GroupM projects that global ad spend will decrease by 0.2 percent to $458 billion in 2009 — dropping 3.2 percent to $157 billion in the U.S. alone. But I think online ad spend is a different story, and should see slow but steady growth. After all, eMarketer forecasts an 8.8 percent increase in online ad spend from $23.6 to $25.7 billion in 2009, and a 10.8 percent increase in 2010.

What will drive this growth? In short, more advertisers waking up to smell the recession. Newspapers make up only 5 percent of Americans’ media diet, yet they consume 30 percent of ad dollars. A report from Morgan Stanley last month revealed that, last year, advertisers spent $288 per home on internet advertising and $818 per home on newspaper ads. There’s something wrong with that picture when “death spiral” is the phrase usually ascribed to the state of print journalism. And more brands are starting to realize it — newspaper advertising has dropped 18 percent (about $2 billion) from this quarter last year.

Innovation increasingly imported from Asia

I appreciate Fareed Zakaria’s vision of a post-American world, but if we’re talking about 2009, I’d narrow it down to just Asia. Already, China and India produce five times as many engineers as the U.S., and it’s predicted that 90 percent of all engineers will hail from Asia by 2011. Yes, as in two years from now.

For the time being, the U.S. leads in R&D worldwide with 35 percent of the total output. China comes in second with 16 percent, and Japan in third with 13 percent — but both are catching up fast. The money is there, no doubt. It’s the culture of creativity and entrepreneurship that will really give these countries the boost they need. Innovation and idea generation are fairly strong in Japan and Korea, and have been picking up in China and India due to improving education and a reverse diaspora. Taking these factors into account, Asia is clearly poised to overtake the west in technological achievement in the coming decade.

As a student of Czech economist Joseph Schumpeter and Columbia University’s Richard Nelson, I believe that this type of achievement is the primary driver for long-term economic growth. With its workforce dominating engineering, its growing entrepreneurial spirit and its hunger for knowledge, Asia is positioning itself as the world’s primary economic engine — with the potential to reign indefinitely.

Regardless, the U.S. will maintain its leadership in innovation through the end of next year, but perhaps not long after that. Will Asia’s brute strength in the tech arena outweigh cultural, legal and policy limitations?

This is a question not just for 2009, but the next five or even ten years. For now, these are my predictions for the year ahead. Do you agree? What global trends do you taking hold in 2009 and beyond?


Originally posted at VentureBeat.

@ Social Gaming Summit

I'm at the Social Gaming Summit today at the UCSF Mission Bay Conference Center. I'll blog about this later.

@ Web 2.0 Expo

Attending the Web 2.0 Expo this week. Checking out cool companies, listening for new trends, and meeting good people.

My friend and co-founder from my first two startups, Jimmy Kim, is visiting from Korea to talk. He's speaking on the Global Design Trends panel at 2:40pm tomorrow.

Timely article in this week's Fortune about his company, Nexon:

Guess who's rewriting the rules of gaming?
Girls, office drones, and other non-teenage boys hooked on new, free-to-play online games, that's who. It's bad news for giants like Electronic Arts and Activision; good news for startups and ... no joke ... Target.

Where Technology Is Ubiquitous, Opportunity Abounds

My second column is up at AlwaysOn. Check it out!

Where Technology Is Ubiquitous, Opportunity Abounds
What the United States and others can learn from Korea's ubiquitous broadband environment.
Back in 2001, during the second year I was living in Korea, I encountered Hangame.com just as it was launching paid services for its online casual games (for example, Tetris, blackjack, chess, and pool). The world's leading casual online gaming company was about to begin charging users a fee of less than a dollar to do things like extend playing time and host private group games.

"Only in Korea or Asia could this happen," I said to myself. Americans would never pay 50 cents for such a service. If the price were that low, Americans would expect it to be free; they wouldn't recognize the value that Korean online gamers have accepted.

Or so I thought in my American arrogance. Within months, Hangame's revenues hit $30,000 per day on micropayments of 50 cents on average. Within a year, that number had risen to $80,000, and by 2004 revenues per day exceeded $254,000 and accounted for more than $93 million for the year.

Two years ago, when camera phone sales exploded in Korea, I said once again -- though with a tad less arrogance -- "Only in Asia." I simply couldn't imagine Americans taking to camera phones in the same way that the Koreans and Japanese had. Once again, American consumers proved me wrong: When I came back to the United States last May, I found that the camera phone market had exploded here as well -- and so I ate my words again.

As I passed my second year in Asia, I came to realize that while I'd once deemed cultural factors to be a driving force behind the use of technology and the Internet, the real driver was the ubiquity and power of technology itself. The Korean government's build-it-and-they-shall-come approach spurred a broadband revolution in that country that the U.S. cable industry could learn from. With 75 percent of Korean households having broadband access (compared with 20 percent of U.S. households) and almost 80 percent having wireless phones, the ubiquity of broadband and wireless services has created a development environment that's completely different than that which exists here in terms of services, products, and human behavior.

Camera phones provide one example. Blogs provide another. With 98 percent of Korean Internet users having broadband access -- and their average pipes providing speeds of 20 megabits per second (vs. 2 megabits per second in the United States) -- the blogging phenomenon in Korea has evolved quite differently than the blogging phenomenon here.

Blogs, in fact, were relatively late coming to South Korea, with Korea Telecom's portal service Hitel representing the first major launch (in April 2003) and NHN (Korea's leading portal by revenues and the parent company of Hangame) the second (in October 2003). But here's the interesting part: While in the United States text blogging led to photo blogging, which led to podcasting and finally video blogging, Korea's immersed broadband world allowed its providers and users to skip all of those stages: All blogs were text, photo, audio, and video blogs from the start -- without any distinctions.

Says Doug Yeum, CEO of Xfiniti (the company that developed Korea Telecom's blog service), "We wanted to make [blogging] multimedia from the beginning. Since our target base was the younger generation, having multimedia was essential. In the United States, developers are too conscious about speed -- and they probably have to be -- so most blogging services utilize static HTML, while in Korea we use dynamic page formats."

If you visit any Korean blogs, you'll soon discover that they're all like MySpace on steroids ... lots of steroids. One hybrid service to develop out of Korea's broadband incubator is CyWorld (HatTip to Pip Coburn, who mentioned this site in a prior post). Think of a blog, social network, and Flickr (a social network that lets users manage and share their photos online) rolled into one, and you begin to get an idea of what CyWorld is all about. In about 18 months, CyWorld went from nothing to being Korea's leading Web site in terms of page views and visit durations, and 19th in the world in terms of traffic (after AOL.com and Amazon.com), according to Alexa Traffic Rankings. (And we thought Friendster -- the hot social network that gained millions of users -- was viral and sticky.) It also makes money.

CyWorld's 10 million users -- who represent approximately one-fifth of South Korea's population -- make free "mini-hompies" (blog, social network, and Flickr combinations) and typically select who can access their personal sites. These sites typically include photos (for which there's unlimited space), background music, and customized avatar products. (For an example of one such customized avatar, check out my friend's mini-hompy: His avatar shares his hairstyle!) CyWorld charges approximately $1 to $2 a month to maintain background music or to purchase a virtual couch-micropayments that amounted to more than $114 million in 2004 for SK Communication, owner of the NATE portal that provides Cyworld.

As broadband becomes ubiquitous throughout the world, we can expect certain behaviors and protocols to evolve that transcend culture. And as the pipes grow fatter for everyone in this country, I believe we'll witness the following trends here:

Rapid growth of micropayments. Although micropayments have met with skepticism in the past, much of that criticism was directed at paying for content, not services. Even in Korea, efforts to sell content haven't met with much success: It's services and products (even if only virtual) that people are willing to spend their hard-earned dimes on. A recent survey by Peppercoin and Ipsos-Insight revealed that from October 2003 to September 2004, the number of Americans who bought something online for $2 or less grew from 4 million to 14 million-figures that indicate Americans are growing more comfortable with micropayments. Expect this slice of the U.S. online market to explode well beyond iTunes.

Increased presence of avatars (and avatar-related services). In Korea, avatars-which are targeted primarily at teens and 20-somethings-represent a significant portion of online revenue. Expect avatar services and sales to grow in the United States (and elsewhere) as well -- but to spread well beyond the under -- 30 demographic. I believe the U.S. market will see older users innovate and adopt such virtual representations as well -- though the cartoonish representations that dot Asian Internet services will probably be replaced by icons and information slides that follow the user around the site (and possibly other sites). In fact, I believe AlwaysOn creator and editor-in-chief Tony Perkins has a similar vision for AlwaysOn, so perhaps we'll see them on this site within the year.

Significant growth of the video game industry. Although the $11 billion video game industry already surpassed the movie industry's annual box office receipts a couple years ago, get ready for it to overtake the overall movie industry within the decade: As broadband grows, so too will the gaming market, driven by casual online gaming, wireless gaming, and advertising within video games (which the Yankee Group predicts will increase from $79 million in 2003 to $260 million by 2008).

A move to the PC as entertainment epicenter. More than 70 percent of South Koreans chose the PC over the TV as their preferred source of entertainment in a recent survey, making Korea the only member nation in the Organization for Economic Cooperation and Development (OECD) in which a majority of its population preferred the PC to the TV. While a lack of content and quality programming from the network and cable industries has something to do with this preference, it's also driven by the presence of high-speed access on every street corner along with abundant libraries of music, movies, and entertainment. When an always-on environment truly comes to fruition in the United States, look for a significant portion of the population to shift to the PC as their entertainment epicenter.

Total blog integration. According to a recent Pew Internet & American Life Project study, 27 percent of Internet users read blogs-a tremendous jump from the 11 percent who were doing so in spring 2003. Still, 38 percent of Internet users don't know what a blog is. Expect this to change within the next five years as broadband enables more functionality on blogs, increasing their viewership to more than 60 percent of the online population.

Korea's broadband environment allowed a nation of just 48 million to create the first MMORPG (massive multiplayer online role playing game), the first paid online casual gaming services, the first avatar services, and the first mini-hompies. Just imagine, then, what America -- with all of its resources and people -- will be able to do once broadband is finally ubiquitous here. You can't learn to swim until you get in the water, but once that pool is full, expect a flood of innovation on these shores!


UPDATE: OhmyNews International, the site that launched "citizen journalism," is reprinting my article in their English/tech section. I posted on them earlier here. Thanks to the OMNI editor, Todd!

UPDATE (04/07): Since AlwaysOn's old pages were deleted and I don't think they will restore it for a while so you can just read it here or at OhmyNews. Thanks!