Crystal-Clear Crystal Balls

Dec 28 1998

December gives professional pundits the shivers: It's the month for making new predictions and evaluating previous prognostications.

But examine last year's round of forecasts for the Internet Economy, and you'll find the analyst community did pretty well in its predictions.

The big call for 1998 was the coming-of-age of online commerce. They hit that one on the button. "We thought 1998 was going to be the year people got serious about e-commerce," says Mike Katz, director of the Technology Center at PricewaterhouseCoopers. "The feeding frenzy going on around holiday e-commerce now is evidence of that."

Cyber Dialogue saw the e-commerce wave approaching, too, though Thomas Miller, VP at the New York research firm, overreached. For instance, he thought the phenomenon would result in the closing of some physical stores - and while Egghead shut its stores and moved to the Web, it didn't start a trend. Miller also thought some successful online brands would open stores in the real world, and that didn't really happen, either.

As anticipated, Web advertising picked up steam. "All of a sudden the Internet is a part of the sales cycle," says Jupiter Communications' director Evan Neufeld, who predicted a record $1.9 billion in online ad revenues for 1998. This figure matches the Internet Advertising Bureau's latest $2 billion estimate.

Propelling the growth in ad revenues: an expanding population of Internet users. International Data Corp.'s aggressive prediction of 100 million surfers worldwide by the end of the year seems on track, despite the global economic crisis.

"Our Internet analysts in Asia found that Internet adoption wasn't hit as badly as overall information-technology spending," says Frank Gens, International Data Corp.'s senior VP of Internet research. "And European adoption was stronger than expected."

Less reliable were forecasts about technology. Jackie Fenn, a VP at the Gartner Group , had expected quicker acceptance of biometric technology and videoconferencing.

On the other hand, both Fenn and Gens accurately called the move to Internet appliances, shipments of which have doubled over the course of the year. Gens also predicted that applications for these devices would take off - which they haven't.

Internet industry pundit Bob Metcalfe nailed quite a few trends, having predicted continued inroads by Java, the rise of communities and data mining, as well as continued foot-dragging on digital subscriber-line Web access. Says Metcalfe: "The telcos, as usual, are talking big and delivering small, as they did with ISDN."

Metcalfe also missed a few. For instance, he anticipated consolidation of ISPs into the big telecom companies. In fact, consolidation ran rampant in 1998 among I-Builder firms, as predicted by John McCarthy, group director at Forrester Research . "The market was way too fragmented; nobody had a complete solution," McCarthy says.

Metcalfe also made a bad call on Microsoft . "I predicted Gates would have an antitrust epiphany," that would shake him from his defiant track and make him "clean up his act." So far as we can tell, the act hasn't changed.