What will happen to the internet in the next 10 years?
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What will the internet be like in the next 10 years: Will Google and Facebook fail?: 10 predictions for 2011 to 2020: A thought piece from www.improveyourwebsiteforfree.com.

Will these websites make students millionaires or millionaires broke?

May 2011 (click here to skip to update 1: June 2011)
(click here to skip to update 2: July 2011)
(click here to skip to update 3: August 2011)

Theglobe.com was a victim of the dotcom boom, will Facebook and friends go the same way? If you're not familiar with theglobe.com, it was the Facebook of it's time; a social networking site. In 1998, at it's peak, the holding company of the theglobe.com was worth over $800m , it was worth less than $4m by 2001 and at it's trough theglobe.com owed money.

What does the future of the Internet hold, and will the dotcom crash of 2000 happen again?

The history of theglobe.com could be repeated for today's giants: Facebook, Google, Twitter, LinkIn etc. although a widespread dotcom stockmarket crash may be less likely than in the past as the internet is a more mature market and revenue streams are better established.

History tells us the cataclysmic mistakes of the past can be repeated - there were two world wars.

I see four key risks to the giants of today which will also shape the future of the Internet:
(1) innovation of competitors;
(2) innovation of technology;
(3) regulation / legislation / litigation; and
(4) inter-continental / language / cultural risks.

Looking at each one in turn:

1) Innovation of competitors:
Although barriers to entry are higher than 20 years ago, to begin an Internet business all you need is an idea, a background in programming, time and a modest amount of money. Do you remember Facebook 5 years ago and Twitter 3 years ago? Probably not. Once momentum is gained, awareness of the general public can increase exponentially. Once a company becomes established (like Google or Facebook), awareness of the general public eventually diminishes as new competition can steal peoples attention, e.g. Twitter.

Google's market value was flat between 2006 to 2009, but hit the good times again once the US economy emerged from recession. Estimates for Facebook user numbers for the future range from 1 billion to 7.3billion+(more than the world's population!)
Source: OnMedea

In 2011 Google is worth around $150bn, Facebook $50bn and Twitter potentially $10bn, but how much will they be worth in 10 years?

Profits for Facebook are estimated at $1bn for 2011 (Source: Gigaom) and Google in the third quarter of 2010 made net profit of $2.17bn (Source: BBC) and Twitter are thought to make a lot of money from advetising.

As a very approximate calculation, you might put a company's worth at 12 times its yearly profits - so for Google this would be approximately $100bn ($2bn x 4 x 12), and Facebook at $12bn. The latest estimates for how much these companies are worth rightly include allowance for the huge growth potential these companies have, but how will those estimates hold-up over the next 10 years?

The problem is that the increased competition for advertising will push rates down, there will be other competitors entering the market and click through rates have been dropping for years now.

There will be other challenges, including regulation / legislation in respect of advertising, which I discuss later on in this article.

If advertising rates drop, or advertising money goes to competitors, how will Google, Facebook and Twitter etc. make serious money?

My first prediction for future of the Internet in the the next 10 years is that the value of Facebook + Google + Twitter in total will be significantly less than $200bn (vs. Approximately $210bn in 2011), potentially less than $50bn.

My second prediction is hundreds of twenty to thirty-nine year olds will lose a lot of money when they buy shares various internet based companies (e.g. Twitter, Groupon, Zyngna, Facebook etc.) and the share prices subsequently fall.

My third prediction is there will be at least 5 web based businesses which do not currently exist which will be worth over $5bn within the next ten years. These websites will be household names.

2) Innovation of technology:
The latest widely available hardware are tablets and 3D television. Tablets have some mileage to go and will eat into the market share of laptops (needless to say-bye bye to desktop computers - although these will continue to provide a cheap and therefore viable alternative to laptops) over the next 5 years.

The trends of the past will continue; faster, smaller, consolidation. Phones are now cameras and computers. Soon TVs must also become computers on a larger scale than already exists, and within 10 years I see wider integration of TVs with Internet and video telephones.

TV makers have been innovative in the last 5 years, bolstering revenues with HD and now 3D. There is certainly still mileage left in HD and 3D as still a low percentage of households have taken to the technology. Once game consoles and movies have exhausted the HD and 3D formats over the next 5 years, the only place to go is wide spread consolidation of TVs with other technologies, such as the Internet and telephony.

A potential stumbling block could be an energy crisis, which pushes technology towards a more minimalistic energy conscious scenario. However, I'm going to rule this out in the next ten years.

My fourth prediction for the future of the Internet in the next 10 years is that one or more of the major Internet based firms (such as Google / Facebook) will take over or merge with one of the major technology producers, such as Sony or Panasonic. Already Ericsson, Nokia and Microsoft have a strategic partnerships, I see more of these coming in the next 5 years. These partneships will be hugely popular with stock-markets, and will change the shape of our living rooms.

My fifth prediction for the future of the Internet in the next 10 years is that more than 20% of developed countries households will have TVs which download content from the internet. This will open up huge opportunities for large TV networks, advertisers and internet companies. But there will be huge winners and huge losers.

3) Regulation / legislation / litigation:

Today's litigious environment has not overlooked the Internet and related technology. Intellectual property rights are being aggressively defended with numerous outstanding cases between large corporations. Competition and privacy are being defended by regulators with multi-million dollar settlements (e.g. Microsoft in Europe and Google in the US). Individuals are defending their reputations through the courts, with cases being brought against Twitter and Facebook users. Even governments are on the defensive with the publication of sensitive information (e.g. Wikileaks).

Such legal wrangling will continue throughout the next ten years, although I cannot see any of the large corporations being significantly affected, they will just incur a lot a lawyer fees. Potentially we could see some rationalisation of the law across the globe, and various codes of conduct introduced to reduce risks in these areas.

My sixth prediction is increased levels of regulation of the Internet which will impact how 90% of Internet companies do business. This may even include forced encryption of data, detailed and worldwide enforceable rules on advertising and the creation of a worldwide regulator.

Additionally, what I believe there will be in the next 10 years is a major scandal or crisis centred on the Internet. I'm talking of the proportions of Enron, Worldcom, Tyco, Madoff proportions. My seventh prediction is therefore that there will be a $1bn+ scandal, where either a company's value / income / product benefits have been illegally over-inflated. There are already thousands of scams on the Internet, and I think it's time a whopper was uncovered.

(4) inter-continental / language / cultural risks:

The Internet is currently ruled by the West, but it wont be long before more widespread access and better infrasturcture in China means they will lead the way.

There will be competition and innovation which will eat into the dominance of the West. Already Yandex has raised over $1bn and I see at least 3 of the 5 companies as per my third prediction coming from developing markets particularly Russia, China, India and Brazil (the so call BRIC nations). This also forms part of the underlying reason for my second prediction as well.

For cultural and language reasons reasons I also see the rise of a Chinese behemoth of a company. Given the Chinese economy could over take the US in absolute size (but not per capita) by 2016, my eight prediction for the future of the Internet in the next 10 years is the largest Internet company in the world will be domiciled in China and not the US (in terms of pure Internet company Google was the largest at the start of 2011).

The emergence of competition from around the world will also lead to protectionism by governments, although I don't see this being a major issue. I do however see further cross border links and therefore my ninth prediction is that within the next ten years at least one Chinese company will have purchased a $5bn+ share in a US Internet company. This will potentially cause pressure and speculation from the media on the US government to act to protect US industries.

AND FINALLY-the Internet companies which make big money also make huge profits. They then use these profits for research, development, marketing and acquisitions. The problem here is the largest companies do something called choosing winners - it's what the communist governments would do. Companies such as google and Microsoft are bad at allocating capital and pick winners from their choice rather than survival of the fittest. This cannot go un-noticed by governments, and such picking of winners is bad for the economy. Currently the US is in trouble with a huge deficit, they will look to different areas to raise funds- potentially raising taxes in respect of oil revenues. However, my tenth and final prediction is that the US will charge some kind of super tax which will affect large hugely profitable companies such as google and Microsoft.

Please leave your comments, including your web address. Do you agree, or will Facebook and Google rule the world forever?

Update 1: June 2011

Four developments in the last month have been (1) Social networking: so called Facebook fatigue - reaching saturation point in more developed markets, Google launches it's latest attempt to steal market share (Google Plus) and MySpace sells for less than 10% of it's 2005 value; (2) Further anti-trust action against google; (3) Further internet based IPOs with apparent strong demand for such shares; and (4) Twitter struggle to finalise plans on how to best earn money from advertising without annoying users.

Facebook fatigue from Sky News. We will get a much better idea of what Facebook's Worldwide user base will look like once it reaches a stable level in the more developed markets (such as the US and UK). Google Plus has also been launched, we will see over the next year how much market share it can steal from Facebook. I would be impressed if google has 5m users (i.e. less than 1% of the Facebook market share) by end of 2011.

Google antitrust probe in US from BBC. Although this is a strain on Google's resources, I can't see this having a material impact on Google's market value

Pandora IPO from business week - the online radio company is now valued at around $3bn. It will be interesting to see the performance of these shares over the next year or two. Also, Zygna to raise $1bn (TBC) in IPO - from nine news and has a potential valuation of $20bn. This IPO worries me a little, I don't understand how Zygna can prevent competition (1) being more innovative, (2) stealing it's users and (3) eroding it's margins in the future.

Twitter plans bold advertisments from the FT.com. Twitter is the ultimate in convenient social networking, can they make adverts work with out annoying users and potentially losing users to competitors? They also look like they (amongst many others) could begin in direct competition with Groupon. It will be very interesting to see whether Groupon can reach revenues to match it's current market value.

Update 2: July 2011

The four main developments in July are:

(1) Google plus massively beats my prediction of 5m user by end of 2011, and bags an estimated 20m by end of July (TMCnet.com);

(2) Baidu's (China's largest internet company, and competitor to Google) profits surge in July, they sign a deal with music labels and also partners with Microsoft to provide English-language search results (all from the bbc.co.uk) - Google steal Facebook's social networking market share, now will Baidu and Microsoft steal Google's search market share?;

(3) Samsung, the electronics company, announces poor results due to low demand for TVs. These companies really need to react to better integrate the internet with their services otherwise they're in trouble. I'm still standing by prediction 5;

(4) Linkedin share value remains around 100% above the IPO value. I still stand by prediction 2, but this one will take another few years to play out.

Update 3: August 2011

The four main developments in August are:

(1) Social networking: Facebook reportedly made around $500m profit in the first half of 2011. Will they reach the reported $80bn valuation made earlier in 2011? Meanwhile, Twitter are to go ahead with promoted tweets, which all users will be forced to view.

(2) Emerging markets - China's 360buy.com considers US share sale in 2012 - more evidence of China's potential power over the web, and potential influence in the US.

(3) Litigation: Google settle an adverts related claim in the US for $500m. Patent wars continue, with an Apple claim resulting in blocking of rival products (the Samsung Galaxy tab). Google moves patents between companies, in an apparent attempt to position itself favourably for future patent wars.

(4) Internet TV - this space is still wide open, with Google already looking to produce operating systems for TVs, and potentially linking up with Intel and Sony. I still think TVs with internet capability will be massive soon.

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