Und nun wollen wir glauben an ein langes Jahr, das uns
gegeben ist, neu, unberührt, voll nie gewesener Dinge...
"And now we would like to believe in a long year, given to us new, untouched, full of things that never before were..." -- Rainer Maria Rilke in a letter to his wife, January 1, 1907
I thought I'd start the new year with a few technology related anticipations.
1/ People will continue to awaken to the idea that social media and our social lives should not be synonymous with massive companies that monetize our attention and interactions with one another via advertising. I strongly believe we have the technical capability and increasingly, the consumer demand for social platforms that will allow us to communicate and share content with people that we care for without giving an effectively free license for that media and data to be compromised or sold and our privacy and attention jeopardized. Protocols like Scuttlebutt demonstrate how truly p2p social media might be designed, platforms like Steemit show how you might built endogenous content-monetization structures, and the increasing popularity of messengers like Signal or Telegram, and browsers like DuckDuckGo and Brave are encouraging.
Contextual Data: From Q32017 to Q32018, FB DAUs in the US & Canada didn’t grow (stayed flat at 185M). Europe DAUs grew only 1.5% yoy from 274M to 278M. However FB is growing quickly in Asia-Pacific and ‘Rest of World’. FB makes approximately $24 per user per year globally, and is doing annually approximately $52B in revenue at 40-45% operating margins. It also has 4 of the world’s top 5 most downloaded apps.
2/ Mobile-first consumer subscription software will continue to soar, although with more scrutiny on predatory practices and annual renewal rates, particularly for those apps that have favored annual subscriptions over monthly. A majority of the time these annual subscriptions represent one-off purchases (renewal rates under 50% are very common). Consumers will start to demand better tools for monitoring, organizing and managing services they have subscribed to.
Contextual Data: Sensor Tower estimates that Q32018 App Store revenue was $18B globally, up 23% from the year prior. $12B of those $18B came from the iOS App Store. Apple takes between 15-30% of subscription revenue and 30% of in-app purchases so safe to say if Sensor Tower is correct Apple is making ±$3B per quarter via App Store revenue. For it’s part Apple breaks out Total Services revenue which has been growing 20-30% yoy and in the most recent quarter reached $10B.
3/ Relations between the world's two largest superpowers will continue to deteriorate. On the American side, misperceptions and poor leadership will plague negotiations. Unpredictable incidents like the arrest of the Huawei CFO, which Trump reportedly was not aware of prior to the incident, will destabilize attempts at unwinding tension, and may provoke nationalistic fury from the Chinese directed towards America which we have largely avoided until now. On the Chinese side, the pursuit of 6%+ GDP growth at almost any cost (despite the fact that net new labourers has turned negative) will keep them at the negotiating table, but they will be increasingly sensitive to any actions that may jeopardize their own legitimacy and may therefore respond unpredictably.
Contextual Data: China's economy grew at 6.5% yoy in Q30218, down from 6.7% in Q2 and 6.8% in Q1
4/ There will be a deserved increase of concern over smartphone addiction, accompanied by an increase in smartphone usage. More links will be found between smartphone usage and anxiety, particularly among children and adolescents. This will help fuel a renewed push towards a clearer understanding of our own mental health and wellness, mindfulness, meditation, and the impact of psychedelics on consciousness and their capacity to treat mental health issues. The irony will be lost on people who will turn to smartphones to try and solve their smartphone addiction problems.
5/ As investor confidence and valuations continue to fall, several tech stocks will start to look cheap on a FCF yield basis. Network effects and monopoly power will continue to buoy profits, and with a split legislature and profit-driven President in power, legislative action to counter monopoly effects will not come to pass in 2019.
Contextual Data: In the twelve months ending Sep 30, 2018, Apple had ±$63.4B in free cash flow (based on my rough workings). At today's market cap of $675B that represents 9.4% FCF yield