On tap for next year: Big changes are coming to everything from e-commerce and hardware to incubators and VC funds.
Only clairvoyants or perhaps Nate Silver can say with certainty what's on tap for technology next year--but here are eight educated predictions:
1. Social commerce margins collapse.
Why, you ask? Surely companies like Gilt Groupe, One Kings Lane, HauteLook, etc., are hot, hot, hot? I don’t think so--at least, not forever. Like social gaming, most will be seen as more of a flash-bang, not a steady flame. The Internet is responsible for a motivated and empowered consumer, who researches the best deals with a few fast clicks of her iPhone. Unfortunately, that translates into the absence of brand loyalty for social commerce companies. Unless a company has exclusivity--it’s the only place to get a deal on Armani, for example--it’s just part of a passing parade of options for the growing legions of Web-savvy consumers. This trend will really take off as meta-price engines accelerate.
2. Hard Tech makes a comeback.
We’ll see more Silicon Valley companies return to their roots next year and embrace hard tech. If enterprise value is not generated from exclusivity, it’s created by intellectual property--inventing and owning something unique. Assuming it’s wanted or needed, that innovation will drive consumer demand. Patents for that intellectual property will once again signify that a start-up should be taken seriously. Its initial growth may be slower but its competiveness over the long haul has greater potential to be exceptional.
3. The incubator starts to die (again).
Incubators, which take fledgling start-ups under their wing for mentorship, support, and funding, are struggling and some will take their last breaths in 2013. Even the most successful (or perhaps the only successful) example, Y Combinator, recently announced that it will now take less than 50 start-ups into its classes--versus the 84 it had previously welcomed. This means a higher bar for early-stage companies to hurdle but for those who make it, better odds of meaningful interaction, funding, and perhaps a faster path to maturation.
4. Venture funds will stop copying the "full-service" model.
There will be blowback against the "full service" model in the venture capital community, as a strong negative self-selection bias becomes clearer. If you are an entrepreneur who wants (and needs) a VC backer that offers full services, the odds are that you’re simply not as strong as others. Plus, the fund that’s rapidly becoming the most famous for this model actually seems to be doing full service most effectively for itself--with a record of major media hits--and overpaying for its investments.
5. The "techno left" and "workers’ rights left" will face more fissures generated by technology.
Uber is a prime example. The start-up provides an app that lets people quickly summon a car service--to the criticism of the established taxi industry, which says that Uber operates like a taxi company without the requisite licenses, lacking appropriate insurance and threatening jobs, etc. This is a case that has divided two groups--technical progressives and workers’ rights advocates--that would typically align. As technology pushes the boundaries, that division might be an emerging theme. And we may see some new and surprising (read: odd bedfellow) alliances as a result.
6. At least two major data breaches, compromising consumer credit, will happen.
Hackers devote enormous creative energy to crossing the virtual moats, breaching the barriers, and storming the castles of governments, top companies, and organizations. But it’s often simple human error, too--think the case of New York State Electric & Gas Company, when a contractor inadvertently exposed the sensitive personal information of 1.8 million customers. Regardless of intent, it’s a fair bet to think that at least two major data breaches will occur next year, either north of $100 million or involving the data of millions of people.
7. Cybernationalists will target companies as political statements, Saudi Aramco-style.
The Internet is both a weapon and a target for those who wage cyberattacks, enabling perpetrators to inflict harm and seize safeguarded and sensitive information. Cybernationalists may or may not be doing the bidding of their governments with these attacks--or may simply be expressing their ire toward another nation. This summer’s cyberattack against Saudi Aramco, Saudi Arabia’s national oil company, was “one of the most destructive hacker strikes against a single business.” Successes like the damage to Saudi Aramco will embolden cybernationalists to strike again, with greater force. It’s a good bet that consequently, governments will step up their offensive abilities (ahem, Stuxnet) and defensive postures.
8. Outdated laws plus leapfrogging technology will continue to equal conundrums for the courts.
If the law were an animal, it would be the plodding tortoise, struggling mightily to catch up to the leaps and bounds of technology’s hare. But unlike that old fable, it’s not yet clear whether the law can accelerate to an appropriate pace. As a result, there will be more areas of gray than pure black and white. Companies will ask how they can stay on the right side of the line when it’s always shifting. Courts will be asked to do more in 2013 than ever before and slowly, a body of precedent will develop. Think more cases like Occupy Wall Street and Twitter; Noah Kravitz and PhoneDog; and international pressure for companies like Facebook and Twitter to enforce anti-harassment and abuse policies.
MICHAEL FERTIK founded Reputation.com with the belief that businesses and individuals have the right to control and protect their online reputation and privacy. He is credited with pioneering the field of online reputation management. @michaelfertik