Given rather unexpected developments in 2016 on both sides of the Atlantic (and I don’t mean that Leicester City thing), it's harder than ever to feel confident in predicting anything, let alone developments in the TMC sector. However, it's that time of year again, and we're officially not allowed any mulled wine until we've come up with some bankable predictions for 2017. So, here goes…
Chatbots on the rise
Chatbots have been creeping into the customer service industry over the last two or three years, but their use has been limited and remains, to some, unwelcome (remember Microsoft's Clippy?!). However, 2017 could see a marked increase in their application and take-up, for various reasons:
- AI capabilities are developing apace. Chatbots are becoming able to analyse and apply a deeper understanding of human behavior and language, enabling more 'human' conversations to take place;
- speech recognition is also advancing, vastly improving customer experience;
- digital assistants like Siri, Alexa, and Google Now are used more widely than ever before – people are more used to talking to machines and getting them to do what they want. It is predicted that by 2019, over 110 million consumer devices with embedded intelligent assistants will be installed in US households;
- brand-conscious consumer businesses are able to bake their brand into chatbots' characteristics and behaviour much more effectively than they can with people – code being a far more effective tool than a call script can ever be; and
- the use of messaging apps, the rails on which chatbots run, is increasing massively - second only to social media apps in terms of downloads - and the messenger providers are creating platforms to allow for bots. In April 2016, Facebook launched its bots for messenger platform, to enable businesses to "build deeper interactions with their customers on Messenger in a way that is contextual, convenient, and delightful, with control at its core."
The rise of bots will trigger interesting data protection issues in some markets, where automated processing of data for decision making purposes is specifically regulated. Data exports will also be an issue where bot servers are housed outside Europe. Also, of course, the technology will deploy new targets for cyber criminals. Much like Uber (as discussed below) the impact may, however, be greatest in terms of employment levels in the customer service sector rather than in terms of legal issues (although ironically, Facebook's release of its bot platform ends with a statement explaining how the business is "putting people first"). $1b dollar valuations for companies like Canada's Kik, as well as the publicly stated strategies of the likes of Google and Microsoft, evidence the investability and potential of bot technology. Like Arnie, Clippy may have been defeated in his first outing, but he'll be back.
...which will be part of further growth in the wider AI sector
According to IDC, by 2019, 40% of digital transformation initiatives, and 100% of IoT initiatives, will be supported by AI capabilities. IDC also states that the top three AI use cases in terms of spending are medical diagnostics and treatment, quality management in manufacturing, and automated service agents in retail. By 2018, IDC states that 75% of developer teams will include AI functionality in one or more applications or services (last year this prediction was 50%).
The legal issues raised by the increased use of AI in society will only really become clear as the technology develops and its impact on society is felt. We mention data protection issues above, relating to automated decision making and export, but the issues being discussed currently are more philosophical – who is responsible for the action of a robot or computer platform? The answer to this question (often asked rather dramatically in the context of a criminal act) is actually rather dull – the liability will almost always lie with the person responsible for operating the robot or platform.
The keenest impact of AI may well be felt in the legal profession with law firms (like us) already investing in technology to build efficiencies and lower the cost of advice – any decision or problem to be analysed on a repeated basis, with common variables, such as a compensation claim for late delivery of goods, can be processed and the outcome achieved by a relatively simple AI tool given the right information. The shape of our profession may not dramatically change in 2017, but we predict this coming year will see a significant increase in investment in AI technology in professional services generally.
Return of the IPO market, or the Trump effect?
Is the IPO market another likely comeback? CNBC recently reported that as uncertainty around the US election passes, investors should expect some big Nasdaq IPOs in 2017. 2016 was weak at best – 80 companies listing in the first three quarters, versus 143 in 2015. Those tipped for potential 2017 listings include messaging app Snapchat, vacation rental platform Airbnb, big-data analyser Palantir, ride sharing Lyft (possibly pipping Uber to an IPO), and music streamer Spotify.
Back here in the UK, 2016 data is also depressing, and no doubt reflects Brexit-related delays. According to figures from EY, while the number of listings on both the main market and AIM increased (by 43% and 17% respectively), aggregate values fell sharply (by 56% and 83%). According to EY:
- "The resolution of political uncertainty due to the EU referendum will see IPO activity pick up on the back of reduced volatility, rising indices and strong aftermarket performance of new IPOs…
- US and Asian investors’ interest will help drive pricing, making IPOs more attractive to business leaders and their backers…
- While 2017 looks set for an IPO resurgence, longer term it is possible that the triggering of Article 50 and the renegotiation of Britain’s trading relationships will drive volatility, which will impact IPO windows"
Talk of an IPO revival led by Snapchat has been countered by voices recalling the hype and expectation surrounding Facebook's listing in 2012, and the subsequent downward spiral in its share price, in market conditions which, in many ways, were similar then to those now. Also, the Trump presidency is cited by some as very bad news for Silicon Valley, M&A and IPOs. However, as markets stabilise nothing seems certain, and the queue of capital-hungry businesses, built up during the hiatus in 2016, might seem more likely to suggest an uptick into 2017.
More people than ever before will use the internet... but more than half the world's population still won't
According to data published by the ITU, the beginning of 2017 will see 3.9 billion people, 53% of the world's population, not using the internet. In Africa, the figure rises to 75% (compared to 21% in Europe). The data also shows that:
- internet penetration rates remain higher for men than women in all regions of the world, with the most pronounced differences being in the least developed nations (a gender gap of 23% in Africa compared to 2% in the USA for example);
- the developed world has 1 billion internet users, while the less developed world has 2.5 billion;
- mobile is driving growth in the developing world. In developing countries the number of mobile broadband subscriptions continues to grow at double digit rates, reaching a penetration rate of roughly 41%, whereas fixed broadband subscriptions remain below 1%. To contrast that, seven billion people (95% of the global population) live in an area that is covered by a mobile-cellular network;
- in 2015, the Broadband Commission for Digital Development set a target: "By 2015, entry-level broadband services should be made affordable in developing countries through adequate regulation and market forces (amounting to less than 5% of average monthly income)”. While five LDCs (Least Developed Countries) achieved the Broadband Commission target, in the majority of the world’s poorest countries, broadband remains unaffordable; and
- broadband speeds remain much slower in the developing world. In early 2016, three out of four fixed-broadband subscriptions had advertised speeds of 10 Mbit/s and above in the developed countries, compared with two out of four in the developing countries. In the less developed countries only 7% of fixed-broadband subscriptions are advertised at speeds above 10 Mbit/s.
See our predictions for the telecoms sector here.
The Internet of Things will remain unconnected, for now
There has been a lot of commentary on the growth of the Internet of Things (IoT) but not many of us have yet felt the impact. This is, perhaps, unsurprising - Cisco has stated that the IoT will grow in a similar way to the internet, with businesses leading the way followed by mass consumer adoption. Predicted figures for the number of devices vary greatly, but all are in the billions. Areas that are likely to fuel growth over the coming months and years include:
- smart cities – with around a half of the world's population living in cities, local governments' objectives to better manage resources and infrastructure such as traffic, power and waste systems will mean connected devices impact people's lives, albeit possibly without them being aware;
- connected vehicles – possibly the fastest growing consumer sector, the auto sector has embraced connectivity to enhance safety and security like no other sector. It is predicted that by 2020, more than 250 million cars will be connected worldwide;
- connected homes – despite high profile acquisitions such as Google's purchase of Nest, the connected home remains a niche play for now. The ability to control lighting and heating from outside the home is interesting to some but not exciting to most. However, as products enter the home that are pre-connected (rather than retro-fit), such as those compatible with Amazon's new Dash Replenishment Service (which allows, say, your washing machine to order new detergent directly), and as consumers become more used to using connected devices generally, take-up will increase; and
- use of biometric data – the monitoring of biometric data such as blood pressure has become an everyday part of life for users of some wearable technology, and such use is set to grow. It is even likely one day to form part of connected vehicles, for example, enabling the vehicle to monitor levels of wakefulness in long distance lorry drivers, and intervening or sounding an alarm where levels drop below a certain threshold.
Two key challenges are holding back rapid growth: first, lack of trust, and second, lack of common standards. As businesses are able to demonstrate the benefits of connected devices to users (particularly consumers), the cynicism around allowing big business access to data about their use of devices may dissipate. As standards are developed between manufacturers, allowing an open architecture based ecosystem to develop around application development, someone may eventually come up with the killer use case that has thus far eluded the sector. All that being said, there is a long road ahead and we don't see 2017 as being the year that the IoT finally becomes mainstream.
...but connected devices will mean big websites are attacked, many more times
On 21 October 2016, a number of major websites including the New York Times, Spotify and Twitter, suffered a distributed denial of service (DDOS) attack, and shut down for several hours. The attack involved tens of millions of IoT devices being deployed to send a US domain name server, Dyn, overwhelming traffic. The attack was made possible by the devices becoming infected with malware known as "Mirai botnet" – a virus that looks for IoT devices including those in the connected home. The malware is designed to use the devices it infects to carry out cyberattacks, which is pretty easy given they mostly use default usernames and passwords published online. As more unsecured IoT devices become connected to the internet, through the home, car or otherwise, the likelihood of further successful attacks would seem to increase and we may see regulatory steps to combat this. See more predictions for cybersecurity here
We will all be immersed
You may have noticed the proliferation of Virtual Reality headsets from the likes of Sony, Oculus, Samsung and even Google (at least, if you like wearing cardboard on your face). You may also have noticed that they're not exactly this year's Cabbage Patch Doll, with few models flying off shelves. However, Augmented and Virtual reality will continue to gather pace outside of Video Games. According to IDC, in 2017, 30% of consumer-facing Global 2000 companies will experiment with Augmented Reality and/or Virtual Reality as part of their marketing efforts. IDC states that more businesses will engage with customers through “immersive interfaces” including AR and VR, and also that, in 2018, the monthly active user base of consumers using mobile augmented reality apps (e.g., Pokemon Go) will exceed 400 million, with over 20% of commercial media on Facebook being 360 degree video enabled.
AR platforms can raise some interesting questions around advertising laws and, in particular, the regulators' (such as the UK's ASA) requirements to clearly distinguish advertising content (including product placement) from other content. They also raise privacy issues to the extent advertisers collect and process personal data from users, especially as AR can be applied to track image and location of users. AR used on products (such as, say, alcohol, allowing users to experience video and other content through their screen when aimed at the product), must avoid obscuring product labelling or otherwise contravening packaging laws. As always, the industry will balance innovation and customer experience with the requirements of the law. 2017 will be no different.
...and we'll all be hapnotised (man)
Haptic feedback is the use of the sense of touch in a user interface, such as a virtual button, or keyboard whose individual keys provide tactile feedback when pressed. Apple has deployed this, for example, in the fixed trackpads on models such as the Macbook's "Taptic Engine" – an electromagnetic motor to trick your fingers into feeling things that aren’t actually there by using the motor's oscillation to makes it feel like you’re depressing a mechanical button, rather than a stationary piece of glass. The underlying technology relies on a core component, Electro-Active Polymer Actuators (EAPs), which are polymers that exhibit a change in size or shape when stimulated by an electric field. Advancements in the technology are expected to develop more quickly due to the decreasing costs of EAPS.
The consumer electronics sector has been the area of fastest growth for haptic technology recently, followed by healthcare, however, the development of the technology is likely to see more widespread use of basic 'button' functions, such as in cars (Audi having demonstrated a haptic feedback function in its forthcoming A8 dashboard at CES this year). It will also see more innovation, though, leading to ever more subtle and fascinating interactions between human and device – 'bumpy pixels' allowing screen interfaces to carry realistic physical forms, for users to receive feedback dependent on tasks (such as scrolling to the end of a video clip triggering a small bump), or for viewers of a tense moment in a film to feel the actor's heartbeat, for example. Haptics could be used to aid accessibility for partially sighted or blind users (and this may, in time, be required under disability discrimination laws). One of the most subtle potential use of haptics will be the influencing of customers' web journeys – perhaps exploiting positive subliminal tactile feedback to encourage them to remain on certain pages, or even make purchases.
In mobile, the spread of the technology will, to a degree, depend on motor technology and power consumption, but widespread growth is likely to gather pace in 2017. User Interface designers are referring to the developing technology as Hapnotic Feedback, so prepare to be hapnotised.
Uber will continue to Uberise
According to Wikipedia, the term "Uberisation" means "a transition to an operational model which enables economic agents to exchange underutilized capacity of existing assets or human resources with close to zero transaction cost.". This model has propelled Uber quickly to become the world’s largest private venture-backed startup, raising more than more than $9 billion in funding, and disrupting the taxi markets in 527 cities across 77 countries. Uber's ride has not been as smooth as their cars, with cities, taxi lobbies and even drivers taking legal action threatening to slow or halt its growth, and some extremely negative PR along the way. Key victories such as the win against Transport for London have been tempered by rulings relating to the employment status of its drivers (leading to a potential obligation to pay employment-like benefits such as paid leave). In addition, while its finances are not published, leaked documents, and evidence of its heavy upfront investments in entering markets and fighting opposition to gain traction, suggest it is some way from being profitable. Given all this, one might be forgiven for thinking its growth will slow one day soon, as investors demand a chink of light at the end of the tunnel. However, there are a few key reasons to follow the money here:
- Uber is in 527 cities. That's a lot, but there are over 4,000 cities in the world with populations of over 100,000 (and only 295 of these are the US). Uber has not even launched yet in most of its addressable market (for its current core products, that is).
- As mentioned above, the two key threats to Uber's current model are state regulation regarding the taxi market, and the possibility that its drivers need to be treated as workers or employees. State regulation has not, so far, stopped Uber from expanding more quickly than anyone could have predicted. The employment issue, could, however, slow it down and significantly impact its business model, although as these claims have only recently started to emerge, it is unclear whether they will be upheld and whether they will apply across multiple jurisdictions. However, driverless technology, already being trialed by Uber and competitors, could dispense with the need for any kind of workers, let alone those with employment status.
- Lastly, and, perhaps, most importantly, when we think of Uber we tend to think of taxis (usually Black Toyota Prius') taking people from place to place within urbanised areas – such as San Francisco, London and Toronto. However, Uber's success has not come about due to its cars or its drivers, it has come from the game-changing effect of its technology on an inefficient market. Leveraging a simple combination of the internet, mobile devices, the rise of the gig economy, and the simple premise of deploying under-utilised capacity with real-time demand, has enabled it to transform the taxi market. How many more markets can be Uberised? Uber has entered the food delivery market (UberEats), the consumable delivery market (UberEssentials), and even the ice cream truck delivery service. However the possibilities are almost endless, and its financial muscle and unrivalled experience (or perhaps only rivaled by Airbnb) in developing processes and playbooks for launching new products in new cities, means it's better placed than any other business to grow into new sectors.
The dilemma will be which use cases to prioritise within the sharing economy – distribution of food waste? Use of under-utilised freezer space (and note that Electrolux is rumored to be building capabilities around fridge sharing technology for its users)? Use of someone's garage to store goods? Use of un-used wifi capacity? We've long accepted the concept of "surge pricing" (albeit not in name) for airline tickets, and it's easy to see how it could be applied to add efficiencies to numerous markets globally. Put simply, the sharing economy is in its infancy and Uber is ideally placed to become to that market what Google is to adtech. Other businesses in the same space will need to gain ground rapidly to keep up.
Facebook's existential crisis?
The power of social media to influence politics and government is not a new concept. Obama's presidential win in 2008 was dubbed the "Facebook election" and the catalysing effect of social media on the Arab Spring is well documented. However, the 2016 US election and the Brexit vote have taken the debate about the effect of social media to a new level. Remain voters are wondering how their Facebook feeds got the results SO wrong. Facebook has confirmed: "We believe that our role on News Feed is to help people connect to the stories that matter to them most,”. What this means is that the Facebook news feed is curated by software to be tailored specifically to your likes and dislikes – so if you spent time liking pro-Hilary comments or publications and reading pro-Hilary articles, then it is exactly that sort of content that Facebook will show you – creating a kind of snowball effect re-inforcing your views. There is also the phenomenon of 'fake news' which was cited as influencing a percentage of the voters (although the percentage of news stories published by the fake sites is estimated as being less than 1%).
Media bias is, of course, nothing new – we all know the political leanings of the Daily Mail and New York Post, and readers select these publications where they reflect their own views. Facebook is only doing the same, by allowing the users to select their own bias, however the difference is the scale – never before has there been a publisher with around two billion readers – in fact it's hard to think of a company that has ever had that many customers. Facebook has understandably said that it leans towards allowing users to circulate and consume anything they want but it is also planning to take steps to address fake news. Our predictions around the tension between freedom of expression and truth in the world of user generated content and how, or whether, regulation can help, are discussed in our article.
...and in other predictions...
- South Korean publisher ETNews has reported that Samsung is working to mass produce foldable displays by the end of this year, with market availability set for 2017. It has been said by some that foldable screens will be as big a breakthrough as touchscreens were ten years ago.
- Moscow will continue its cyber offensive, and the Trump administration may require security access to technology devices, a combination likely to generate further innovation in cybersecurity products?
- Protests around the Investigatory Powers Bill are likely to gain momentum but come to little, for now. As the Bill has received Royal assent, the protests are too late to derail it. The law will require IPSs to retain data about customers browsing behaviour for up to 12 months. It is striking that such a controversial piece of law made it through Parliament so easily, with the volatile political events in the second half of 2016 certainly playing their part in burying this bad news. A recent petition will, at least, trigger a Parliamentary debate, and current legal challenges on the data retention requirements may lead to a tabling of amendments, but don't expect any dramatic changes any time soon.
Right, that's it for this year. Now where's that mulled wine…?