This marks the second year we’ve run these predictions, the 20th edition overall. If you’d like to see the full set of posts, head on over on my site. Below is a slightly shortened and edited version. I hope you enjoy! You can also watch us chop it up and explain how I came to these forecasts for the new year.
Prediction #1: ChatGPT Gets A Business Model
Let’s start our 2023 predictions 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.
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.
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. This 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 boy, 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.”
I tend to disagree with these, but certainly ChatGPT’s success is a reason for the folks at Google to be looking over their shoulders. 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.”
Here’s how I imagine it might work. Pairing the open APIs and source code of OpenAI (assuming the new 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 this problem, providing a fresh context for how humans like to gather information (in essence, by talking to each other). Pulling such a feat off would take an 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.
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. Add in partner data 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.” 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.
Prediction #4: Duopoly wars
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 worked 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.
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 and be a major digital advertising story this year.
So will Amazon. Here’s another player with superior data — this company knows what you look at, what you covet, and what you buy. Over the past five years, Amazon has quietly built a $30+ billion advertising business. 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.
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. Expect one hell of a war between these four in 2023.
Prediction #5: Netflix for the win
Next up: Netflix. 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.
For 2023, 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. 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.
Prediction #6: Crypto Treads Water
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. 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.
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.
Prediction #7: A good year for Tech IPOs
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.
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.
