THE BLOG
12/13/2012 05:43 pm ET | Updated Feb 12, 2013

What to Expect in Tech -- 2013 Predictions

The bookends of our years allow us moments of consideration. The year in our rearview may have brought us pride or anguish, but it was likely filled with the unforeseen. Our lives and our world are so dynamic, the infinite possibilities so volatile, that our track record of prediction is shoddy. We envision the future by what we can grab and extrapolate from today. The tendency is best summed up in the pithy, and tragically true military axiom, "Generals are always prepared to fight the last war."

Mischaracterization of the future is especially fruitful in my chosen industry, tech. Investors and consumers still remember the scars of the dot-com bubble, and the more recent micro bubbles of Groupon, Zynga, and Facebook. Bubbles are synonymous with the tech industry, where hype is too often confused with substance. At its simplest, a bubble is a popularly held misconception.

We are familiar with being wrong about the future. But the business will always demand and reward foresight; the uncertainty of the future provides moments of opportunity for those few people clear-eyed and prepared to seize them. With that humbling primer laid, here are my trend lines in tech for 2013:

Social commerce bubble starts to deflate. The major players in this space face a familiar problem throughout tech history: sky-high valuations, zero profits. The early darling of the flash-sale industry, Gilt Groupe, sits on rocky terrain, as the company continues to lose money and revenue growth has fallen from 90 percent in 2011 to 15.5 percent in 2012. The fortunes of Gilt are a storyline to watch in 2013, as CEO Kevin Ryan hands the reins over to a successor in the first quarter of the year.

While Gilt may be the name brand in e-commerce, it will hardly be the only company to face challenges. Ironically, investors may have seeded their own demise in e-commerce. "After pouring more money into retail startups in the third quarter than in any period since the dot-com bust in 2000, venture capitalists concerned over the formation of an e-commerce bubble are balking at deals they consider overpriced," reports Bloomberg News. Fab, BeachMint, ShoeDazzle, and Zulily each received venture capital at what now looks like inflated valuations. The money that chased the flash sale trend now looks expensive, as Fab and others have had to decrease their valuations, lay off employees, and nix plans for overseas expansion. I expect to see companies in this space come back to earth in 2013.

Someone will win the P2P task marketplace. The innovators behind these quirky online marketplaces have found opportunity in everyday tasks and services. Transparent, clean and organized, startups like TaskRabbit, Exec, Zaarly, Fiverr, and Gigwalk feel like the 2.0 iterations of Ebay or Craigslist. Yet, demand is unlikely to accommodate this many players in the P2P task marketplace. Additionally, the business models in this space are constricted by geography, and thus these online marketplaces are at risk of being Samwer-ed (see this TechCruch article). P2P is here to stay, and one of the aforementioned marketplaces will eventually emerge from the pack in the next 12 months.

Loyalty Programs: brace for impact. Not too long ago, the world fell in love with daily deals. The behemoths in the space, Grouponn and Living Social, grew at an exponential pace. The future seemed so flush in 2010 that Andrew Mason, CEO of Groupon, turned down Google's $6 billion acquisition offer. As recently as November, Groupon had lost 90 percent of its value since its IPO peak. LivingSocial has stalked a similar path, recently announcing that it was cutting 400 employees, or 9 percent of its workforce. Not to mention the pack of copycat daily deal sites that either sputtered out or were acquired by Groupon and LivingSocial, the names of which we are hard-pressed to even recall. The essential problem with daily deals is they are competing in a space with low barriers to entry and high marketing costs. They aren't selling anything proprietary, and they haven't been able to prove to businesses that subsidizing customers is a successful model for growth.

Today's equivalent of the online coupon fad are loyalty programs, the malignant growth of which is quite reminiscent of daily deals sites in 2010-11. Belly leads the group, rapidly expanding nationally from its headquarters in Chicago. Belly is the brainchild of LightBank co-founders Eric Lefkofsky and Brad Keywell, who, perhaps incidentally, also helped found GroupOn. But as with online coupons, loyalty programs face low barriers to entry and the insurmountable challenge of building brand loyalty (to the loyalty program, that is). And thus these companies abound: PunchCard, Punchd!, Perka, ShopKick, LevelUp, and on... The point here is self-evident: Loyalty programs are as much of a fad as daily deals ever were. These companies will not rise as high, but they'll fall as hard.

Crowdfunding grows up. Crowdfunding is a soft spot for the tech industry. It almost feels like a culmination, turning the democratizing tool of the Internet, used to disrupt so many staid, entrenched industries, back on the venture capitalists that have fed startups for so long.

In the new year, I predict two phases of maturation in crowdfunding. First, Kickstarter's predominance will ebb, as it will be pushed by competition to reform its more draconian policies. Additionally, specialized platforms, like Christie Street, will gain market share. Christie Street, which adds a threshold of credibility to inventions and decreases risk for investors/customers, is a model of the logical next step in crowdfunding platforms.

As crowdfunding continues to mature from within, it will also receive support from the government. Perhaps the most important development in crowdfunding during 2013 already happened in April of 2012. With the signing of the JOBS Act, President Obama passed legislation allowing investors to buy debt and equity in the companies they crowdfund online. The change is expected to bring $4.3 billion to crowdfunding platforms in the new year, up from $1.5 billion in 2011. Entrepreneurs and seed stage investors welcome this necessary change. Increased liquidity in this market will spur further innovation. I'm excited to see what comes out of the space next year.

Bold Prediction: Yahoo to acquire FourSquare. Marissa Mayer knows better than anyone that she and Yahoo will live or die with mobile. That Mayer's mandate is so clear, makes bringing Yahoo back to relevancy no less difficult. I don't expect Mayer is being entirely honest when she says Yahoo will move into mobile through small acquisitions. The first two companies on her shopping spree should be considered just a toe dipped into the water. (Stamped, a boutique app developer, was bought for $10 million and OnTheAir was a blatant acqui-hire.) The fact is, to catch up with the widening lead of Facebook and Google in mobile, Mayer and Yahoo will need more than just a toe in the water; at some point they are going to cannonball into the mobile pool. My bet is on FourSquare.

The Cloud floats higher. The fledgling Software as a Service (SaaS) phenomenon marks a sober and mature new reality for the tech industry. Once derided by Steve Jobs as "a feature, not a company," Dropbox crossed the 100 million-user mark in November. Box, the enterprise file storage and content management service, received a $125 million round of funding in July. Unlike other memorable billion-dollar tech valuations, Box's $1.2 billion valuation is based on fundamentals: Box's software is used by 140,000 companies, including 92 percent of the Fortune 500. And, of course, Salesforce is on the verge of carving its place next to Oracle, Microsoft, and SAP on the Mount Rushmore of software. Analysts expect, as I do, too, to see Salesforce use its lead in CRM software to dramatically increase revenues next year.

On both ends of those three bellwether brands, companies will continue to innovate layers into the cloud throughout 2013. Expect to see the big boys (SAP, Oracle, Microsoft, and others) put an increasing amount of money into SaaS acquisitions. On the startup level, companies with disruptive potential will thrive. TigerText is a wonderful example of how the cloud can transform communication in an industry ripe for innovation, health care. ZenDesk provides simplicity to a process where it is most needed, customer service. And Revinate sells software that cuts through the clutter of social media to provide actionable insights for companies in hospitality.

"After a decade of going crazy over Farmville and Angry Birds and me-too photo-filtering apps and other such fluff, Silicon Valley is finally getting back to its roots -- making real software to run real businesses." -- Dan Lyons, ReadWrite


As we cross into the new year, we all hope the future brings more bounty than the past. It often has for those bold and wise enough to define it. But, to hedge my bets as any wise investor does, I leave you with this quote: "Predictions are very difficult, especially about the future." Cheers to 2013.