Predictions ’23: AI, Advertising, Crypto, Twitter (sorry), and Trump (double sorry)
The 20th (!) anniversary of my annual predictions.
I’ve used the image above for many years, mainly because I love how surprised the guy looks as he gazes into the crystal ball. Or maybe he’s just sat on something unpleasant. In any case, it pretty much sums up my approach to this, my 20th edition of annual predictions. I sit down, I might have an adult beverage on hand, and I just write until I feel like I’m done.
This year I did something different over on my site — I wrote three long posts, each with three or four predictions, and one summary post. I’m not going to repeat that for Medium, but if you want to read them at the original length, head here. Below is a slightly shortened and edited version. I hope you enjoy.
Let’s start our 2023 predictions off with some thoughts on artificial intelligence. With ChatGPT, Silicon Valley seems to have gotten a bit of its mojo back. After two decades spent simmering the magic of Apple, Google, Amazon and Facebook into a sticky lucre of corporate profit, here was the kind of technological marvel the industry seemed to have forgotten how to make — a magical tour de force that surprised, mystified, and delighted millions.
Even better, ChatGPT didn’t come from any of those corporate titans — not directly, anyway. Instead it came from a non-profit artificial intelligence research laboratory called OpenAI. Founded in 2015 with a mission of furthering “responsible AI,” OpenAI is backed by some of the most celebrated names in Valley technology — LinkedIn’s Reid Hoffman, PayPal’s Peter Theil, Tesla’s Elon Musk among them. Now this was more like it!
ChatGPT seemed to burst from nowhere — but of course, like Google or TikTok before it, its success leverages years of consumer behavioral data and decades of academic research in mathematics, artificial intelligence, and linguistic models. Over the past seven years, OpenAI has evolved its corporate structure to incorporate a for-profit model and more traditional venture investment schemes — with all their attendant complexities. Now owned in large part by the very investors who gave us tech’s last two decades of mixed blessings, it remains to be seen if OpenAI will remain true to its mission of ensuring “that artificial general intelligence benefits all of humanity.”
Prediction #1: Chat GPT Gets A Business Model
But let’s be real here: It takes capital to build at-scale AI applications — a lot of it. For all its tickling of the popular imagination, ChatGPT lacks a business model. And one of the most ironclad mandates of money is that money sown must become money reaped. Which takes us to the question driving my first predictions for the coming year: ChatGPT will drive several significant innovations in digital business models. The first will be for ChatGPT itself — it will start to license its technology to at-scale clients, initially to OEMs who will blend ChatGPT with their own offerings. The next two will come via ChatGPTs first big new clients. Google, which played an integral — if largely unsung — role in the technology behind ChatGPT — will launch a ChatGPT-like version of its core search offering. In enterprise markets, Microsoft, which invested a cool billion in the for-profit iteration of OpenAI — will launch a ChatGPT-inspired service aimed at its largest corporate clients.
Prediction #2: Google Launches Conversational Search
“Oh sh*t, Google’s screwed.” That’s the consensus of scores of hot-takes on ChatGPT’s launch. “‘Code Red’ for Google’s Search Business,” declared the New York Times. The NY Post, naturally, took it further: “‘Scary’ AI ChatGPT could eliminate Google within 2 years.” And Casey Newton, one of my favorite tech reporters, said ChatGPT makes Google “feel positively prehistoric.”
Ouch. I tend to disagree with all those hot takes, but as the old Valley trope states, only the paranoid survive, and certainly ChatGPT’s success is a reason for the folks at Google to be looking over their shoulders. Or perhaps more fittingly, into the mirror, where they likely see a company that’s developed an unflattering middle-age paunch. Could it really be outrun by a smaller, more agile version of itself? Is that even possible anymore?
I’m quite sure the board and major investors in Alphabet, Google’s parent company, are not only asking these questions, they’re demanding answers. And those answers will most likely take the form of a new product from Google in 2023 that I’ll call “Conversational Search.” (If you’ve read this site for the past two decades, that term will certainly resonate!).
Here’s how I imagine it might work. Pairing the open APIs and source code of OpenAI (assuming the newly for-profit company will allow it), Google’s massive trove of voice data, and/or its own internal chat platform, Google will build a novel conversational interface to its flagship Google search application. Text-based search has always had what I call a “modal” problem: often the first answer to a query isn’t accurate. Many in the search field wish they could pop up a modal dialog after an unsuccessful search, asking “Did you mean…?” This would allow the engine to both refine results, and gather critical data that would allow it to better answer the query next time. But there’s a problem: More than 50 percent of users will abandon their search when they see a modal dialog box.
The ChatGPT model of conversational “prompt and response” solves for this problem, providing a fresh context for how humans like to gather information (in essence, by talking to each other). The company will probably dub its first efforts in conversation search as “experimental” — Gmail was famously in beta for five years — but this will be deadly serious project.
Plus, it’ll be fun. Imagine a mashup of Google’s high-fidelity search with the serendipity and human-like conversational tone of ChatGPT. Unlike the stilted voice prompts of Alexa, Google Home, or (shudder) Siri, Conversational Search would be like talking with endlessly wise, patient, and intelligent guru. Pulling such a feat off would take and extraordinary amount of work, CPU cycles, and scale, but…Google is capable of all that and more. Plus, Google is strongly motivated to figure out a business model for Conversational Search, and it’s the one company both most likely to pull it off, and with the most to lose if it doesn’t. Marketers have been crying out for brand-friendly innovations in digital advertising, and Conversational Search could be just the ticket (for more on that, I’ll link to a future post here, once I’ve written it).
Prediction #3: Microsoft launches “Enterprise Explorer”
Microsoft also has a consumer search business (Bing, anyone?) but the company makes its money in enterprise software, and it’s already in the business of selling AI solutions to big companies worldwide. What I’ll call “Enterprise Explorer” could be a hugely successful — and profitable — upsell to its top clients, who wouldn’t mind paying, say, another $10 million or so a year to have a useful, sexy, and energizing new application at their disposal.
So what would Enterprise Explorer (E2, to be corporate cute) be? Built, again, from a mashup of OpenAI technology and Microsoft’s Azure compute platform, E2 would address some of ChatGPT’s most annoying problems — its indifference to truth, for example, or the biases inherent to its Web-scale training corpus. The idea would be this: Train a specific ChatGPT instance on just the body of data owned or operated by a particular corporation. Most large companies have access to petabytes of internal data — everything from customer databases to internal messaging and document management platforms, all accreted over decades. Add in partner data — cleaned and secured through industry-standard methods like data safe havens — and you could hit a tipping point in terms of pattern recognition and results. E2 could spark a revolution in accessing, querying, and delivering enterprise- and industry-specific intelligence — finally paying off decades of empty promises about the power of digitization and “executive information systems.” Imagine every employee being able to — quite literally — ask the enterprise questions about itself. The mind…boggles. As with Google and Conversational Search, pulling off such a feat would require a staggering amount of innovation and work. And again, just as with Google, Microsoft is deeply motivated to do exactly that.
I love advertising — particularly digital advertising. There, I said it. Was that so hard? Well, yes, the industry I’ve partnered with for more than three decades can be very difficult to defend — and the past ten or fifteen years have been particularly bad. I’m tempted to say that everything after Google Adwords was a net negative in the world, including Facebook, which was the bastard child of Google, and even the open web and programmatic advertising (a development I’ve previously called “heroic” and “the greatest single artifact of humankind”).
It’s fair to say I have a complicated relationship with what’s come to be called “ad tech” — we developed the first ad servers and banner ads at Wired in the 1990s, I wrote a book about the business and its breakout star (Google) in the early 2000s, I started an advertising-driven open-web business that nearly reached escape velocity around the same time, I still chair an adtech and data-driven descendant of that business today, I’ve work closely with the largest advertiser on the planet for nearly 15 years, I sit on the board of LiveRamp, an essential component of today’s digital marketing ecosystem, I’ve started or advised or invested in countless media companies — most of which are dependent on advertising in one form or another.
So yeah, I love advertising. And I kind of hate it too. With those caveats now duly noted, let’s get into what might be some of the most important developments in the space over the coming year.
First, let’s talk the elephants in the room: Apple, Amazon, Google, and Meta. Remember when they seemed immutable characters in some Marvel franchise — dubbed “The Four” by Prof. Galloway? Five years in, each of those companies has their share of worldly troubles, but no one paying attention would argue they’re going anywhere soon. They’re still four of the most valuable companies on earth, though Facebook (nee Meta) has really been working hard at failing these past few years. So what will happen with them this coming year?
Prediction #4: Duopoly wars
Throughout 2023, we’ll hear talk of “the new duopoly” — Amazon and Apple. Both have far smaller advertising businesses than either Meta or Google, but Amazon and Apple have strategic advantages that will allow them to steal significant share: They are much closer to the consumer than their rivals. Apple, of course, owns a massive consumer data platform (iOS and the iPhone), and despite the insanely great contradiction inherent in a “privacy” company building a data-driven advertising business, Apple will likely grow past $10 billion in advertising revenues in 2023. (I’d write thousands of words on the hypocrisy of Apple crippling the entire ad tech ecosystem even as it becomes what it claims it hates, but for now others have done a far better job). Regardless, Apple will be a major digital advertising story next year.
So will Amazon. Here’s another player with a superior data — this company knows what you look at, what you covet, and what you buy. That’s pretty much the entire bottom of the funnel, and over the past five years, Amazon has quietly built a $30+billion advertising business on top of it. Expect that to grow to nearly $40 billion in 2023 — and spark a wave of competitors in what is now known as the “retail media” business — advertising networks built on top of retail and consumer data (Target, Walmart, and many others have already built such businesses, and while they are viable, they pale in comparison to Amazon’s capacities).
Combined, Amazon and Apple will likely grow $15 billion or more in revenue in just one year — and that growth will come largely at the expense of its “Big Four” rivals Google and Facebook, each of which need tens of billions in growth each year to support their sagging stock prices. Expect one hell of a war between these four in 2023.
Next up in the advertising related predictions: Netflix. I’m sure you’ve been following the Netflix Finally Capitulates To The Advertising Model story, but just in case, here’s a primer. For more than a decade Netflix stood on holier-than-thou ground, claiming it would never allow advertising on its platform (that’d be the Netflix CEO in 2020). Industry folk predicted Netflix would start selling ads regardless (that’d be me, also in 2020). 2022 proved the year it happened. Given the press loves a good “I told you so” story, initial reviews of Netflix’s advertising business launch were laden with loving spoonfuls of schadenfreude. “Tepid,” wrote Variety, arguably the most important industry voice in Netflix’s world. “Least popular,” sniffed the Wall St. Journal, noting, of course, that Netflix’s stock has plummeted over the past year. “Giving money back to advertisers,” gloated Digiday.
Prediction #5: Netflix for the win
So what will happen in 2023? By year’s end Netflix’s experiment in advertising will be seen as a triumph. No company is more motivated, more data-driven, and has hired more accomplished industry veterans than Netflix, and if anyone is going to figure out what has so far been a total shitshow (that’d be the connected television market), it’s going to be Netflix. They’ll test, experiment, fail, learn, test some more, and figure out exactly how many ads each of us will tolerate, and they’ll translate that consumer sentiment into data-laden, at-scale advertising products that brand marketers will buy on sight. By this time next year, those spoonfuls of schadenfreude will have turned into paeans of praise.
And finally, Twitter. Oh, Twitter. In past years I’ve focused lengthy posts on Twitter — what the company should do, what it should avoid, who should buy it. Not this year. This year I’m focusing my predictions solely on one thing: Twitter’s mortality. Which is to say, the business that once constituted 90 percent of its revenue base, advertising, is perilously close to death. Given the company is no longer public, it’s impossible to know how badly Space Voldemort has damaged Twitter’s once-sterling reputation amongst many in the advertising business. However, insiders I’ve spoken to estimate Twitter’s US business, which is its largest, is down more than 60 percent year on year. Rough math would therefore put Twitter’s annual revenues — on track to be more than $5 billion in 2022 — at something like $3 billion on a go forward basis. That makes its consumer data business insanely important — Twitter’s data sales are a nearly half-billion-dollar profit driver that almost no one understands.
Prediction #6: Twitter rebounds
So here’s my prediction: In 2023, Elon will tire of Twitter, driven as much by the reality of his waning wealth at Tesla (prediction #8, here) as by the sheer biological reality of endorphin fatigue. He’ll hire a real CEO who commands respect in the ad world, contractually obligate himself to not meddle, and find some way to claim victory in what will otherwise become a world-class Harvard Business School Case in What Not To Do. Given all this, in 2023 Twitter will rebound, and by the end of the year, the stories will about the miraculous rebirth of The Bird, because, well, that’s always been Twitter’s story.
Let’s start with crypto. It’s hard to fathom how poorly the crypto market has had it these past twelve months, unless, like me, you were a participant in the Great Crypto Winter of 2018. During that downturn, crypto dropped as much as 90 percent — which means there’s plenty of “down” left in today’s already decimated markets. But what I find most interesting about crypto is how much of it is dominated by a day-trader’s sensibility. How much money did we make today? This week? This year? That thesis of crypto — that it’s all about money — was never what drove my interest in the space. Yes, I bought crypto, and yes on paper I made money — and lost more! But the point was always crypto’s thesis of decentralization, of new approaches to governance, and in particular — for me — new ways of architecting data flows in society. Those ideas have been gaining traction all year long, and I don’t see them losing steam in 2023.
Then again, the price of ETH and BTC have become leading indicators of the sector’s overall health, and it’s disingenuous to pretend they don’t matter as it relates to whether more substantive investments are made in projects that truly unlock crypto’s potential. A down market may be the best time to invest, but down markets usually mean far less investment.
Prediction #7: Crypto Treads Water
I don’t see crypto coming out of this down market over the next year. In fact, I predict that while there may be some significant swings one way or another, by the end of 2023, we’ll have essentially seen a push in the price of major crypto currencies. Is that a good thing? I think it is — the sector needs to find its floor, and start building from there once again. Everyone got well over their skis in ‘21-’22 — and many lost their way entirely. It’s time to find our way back.
Well it’s not a long leap from crypto winter to Tesla, which has had one hell of a winter in ’22 — down nearly 70 percent year on year at the time of this writing. I can hear the skeptics among you already rolling your eyes — what does this guy know about cars, much less EVs? The answer is very little — which makes me something of a proxy for a market that, until recently, Wall Street seemed to believe Tesla would dominate forever.
I’ll admit I was close to buying a Tesla this year — we already had an Audi plug in hybrid, but I wanted our second car to be a full EV. When it comes to buying cars, the opinion of my friends matter, and for years they’d all rave about their Teslas. But that is no longer the case. Musk’s psychotic break on Twitter has come home to roost, Tesla has become a partisan brand, and I personally don’t want to drive around in a car that intimates I might be supportive of Musk’s increasingly unhinged trolling. For me, anyway, buying a Tesla is off the table.
Fortunately there are now a ton of options when it comes to EVs — and many more on the way. It used to be your choices were a Tesla or a Chevy Bolt. Now you can pick between a Porsche, a BMW, a Volvo, a Mercedes, an Audi, a Mustang, any many more. Tesla’s stock isn’t falling simply because of its CEO’s Twitter obsession. It’s also falling because the rest of the market is catching up.
Prediction #8: Tesla Struggles
This all leads me to predict that Tesla’s stock will continue to fall, reaching new lows in 2023 that will only begin to recover when Musk abandons Twitter and focuses once again on the main source of his wealth. Caveat emptor on this one — I’m no stock picker, but this just feels right.
Speaking of stocks (and winters), it’s been a very long winter for tech IPOs — this list of likely 2022 IPOs from November of 2021 makes for sober reading. Of the eleven companies mentioned, only one — Mobileye — went public, thanks largely to its relationship with Intel. As CNBC put it, the tech IPO market collapsed in 2022. So I may be fixing to ruin an otherwise excellent batting average by predicting this: The tech IPO market will rebound in 2023, surprising pretty much everyone.
Prediction #9: A good year for Tech IPOs
My rationale? Tech IPOs have found their bottom, and there’s pretty much nowhere to go but up. Tech tends to lead all markets out of rough patches, and we’ve been in bumpy terrain for a while now. There’s just too much capital, too many good companies, and too much pent up demand for a positive story in markets, which are famously narrative driven. Storytellers, start your engines, because Tech IPOs will be back in 2023.
Prediction #10: Trump Bails
And finally (and unhappily, as even typing his name these days kind of makes me ill), let’s talk, for a short minute, about Donald Trump, who’s already announced his campaign for the 2024 presidency. I am absolutely not a seasoned politico, but in 2023, I predict Trump fades into irrelevance, eventually pulling out of the presidential race (which, like Elon, he’ll claim as a victory, or perhaps blame the numerous “witch hunts” that will continue to dog him). Others will take his mantle and his votes, or at least split them. It sure feels like the man has lost his power over enough of the base to control the GOP next year. And I’ll add one more bonus to this bonus prediction: In a desperate plea for attention, Trump will return to Twitter, re-joining around the same time Elon loses interest. That will ensure one thing — I’ll be staying off Twitter for most of the year!
If you’ve read all the way down to here, thank you and congratulations. I hope to be writing a fair bit more this coming year — and like Mike Mulligan and his steam shovel, I find it’s always better when there are people around.