For those of us in the tech market, 2006 was a relatively good year. Apple gained market share, laptops moved past desktops in terms of units sold and HP and Dell both sold more PC’s this year then last. And, the overall tech market remained strong as consumers started adopting technology in greater numbers.

In 2006, we sold around 863 million cell phones world wide, and shipped close to 230 million PC’s. Although PC growth was around 10% WW this year, it most likely will rise next year with Microsoft finally getting Vista out the door and more people in business and consumer markets buying newer PC’s to support Vista upgrades. But, if history is our guide, Vista’s real impact on pushing PC sales up significantly most likely will come in 2008, the second year Vista is in the market, not necessarily 2007.

2006 was also a good year for companies like MySpace and YouTube who found sugar daddies to help them grow their presence. Interestingly, Time Magazine’s person of the year is “YOU”, a play on the idea of technology allowing content, communications and social connectivity to allow people to be more individual and make all types of things in their lives more personal.

But, for some in the Valley, 2006 was also a tough year thanks to the options scandals and having to deal with the legal and PR hassles that came with these revelations. I expect this headache to go into 2007 and we may still have some big surprises in store if more related news comes out in the coming year. And, HP has to be glad 2006 is finally over and although there are still some legal loose ends to their spying episodes, much of this fiasco is now behind them.

So, what should we expect in 2007?

Here are my predictions for the tech market in the coming year.

1-Cell phone’s become the next major technology music platform.

By the end of 2007, the cell phone will become the largest selling music device and be at the center of innovation in media based smart phones. This does not mean that Apple’s iPod market share will go down. We worked recently on a study that showed that especially Gen X and Gen Y will carry at least two devices with them. One is a cell phone, optimized for communications and IM, and the other is something like an iPod that is optimized for entertainment. The big problem with using a cell phone for things like video and mobile TV is its draw on the battery. Kids told us that they would like to listen to music on their phone’s but were highly reluctant to watch much video or TV since this would kill the battery life and decrease their ability to talk and IM with their friends. If this plays out properly, the only real new application that this demographic will support on cell phones is music and this will push all the hand set makers in this direction.

Also, check out the Freedom MP3 DRM from PassAlong Networks. This new DRM could have major ramifications for the music industry since it wraps a DRM around MP3s and could conceivably make it possible for the music industry to sell legal MP3’s that could work on any cell phone or music player that can playback MP3 files.

http://www.passalongnetworks.com



2-Smart Phones demand to increase

Smart Phones like Palm’s Treo, Motorola’s Q and RIM’s Blackberry are poised to become an even larger part of the cell phone market. We define smart phones as ones that have an OS and can support a broad range of applications. While these phones will never become the lion share of the market, they are gaining a lot of ground in not only business but consumer markets as well. Palm’s new $199 Treo with Cingular is aimed strictly at consumers and we believe it will be a big hit. Today, smart phones are less then 5% of the total cell phone market but we expect they will grow to become 18% of all cell phones sold by 2010. We will most likely ship one billion cell phones WW in 2007 and well over 1.5 billion in 2010, so 18% of a 1.5 billion market for smart phones is significant.


3-Whole Home Media and Content distribution

This will be a hot one. Apple’s ITV is poised to shake up the industry as Apple should deliver their take on Microsoft’s Media Center Edition concept by mid year. There is already real fear in the industry that Apple could “iPod” the mainstream players in the sense that they could deliver such an elegant and easy to use way to get content from the PC to the TV that it could have an iPod like effect and push users to Apple’s approach, making it hard for PC players and those sporting various versions of media adaptors to compete.
Regardless of Apple’s potential success, the idea of moving media around the house will be a major topic and issue in the coming year.

Also, wireless HD will be important and the only real practical way to move this new media around the house through some form of wireless networks. We should see a lot of approaches to this, but check out TZero’s UWB wireless HD system. One of the best we have seen to date.

http://www.tzerotech.com


4-Digital Eco-Systems

Now that competitors have finally figured out that Apple’s success with their iPod was tied to an end-to-end solution or a digital eco-system that included the PC, content and a mobile device, the industry has been more focused on creating similar solutions for consumer markets. Microsoft’s new Zune is a good example of trying to create a dedicated eco-system that goes across a PC, content and a mobile device, and Sony is doing something similar with their Connect Service. But this is not a flash in the pan concept. It is a critical element for the future of all consumer devices. In fact, all digital devices will need to be connected to the Internet or to each other and be part of a digital eco-system if they are going to succeed. This will emerge as a major issue for all tech companies in 2007 as more vendors realize that they can no longer create devices that are stand alone digital islands.

By the way, we will be publishing a new report entitled “Understanding Digital Consumer Eco-Sytems-What it takes to succeed in Consumer Markets” in February, 2007.



5-VOIP Goes Mainstream

VOIP is already a big part of the offerings from cable companies and even telecom vendors, but in 2007, this goes much more mainstream and becomes easier to use.
Now that Cisco/Linksys has rolled out their dedicated VOIP phone called the iPhone, the idea of VOIP as a true communications medium for consumers will also be a hot topic at next year. I have taken the Devicescape version of this phone with me on the road and now use it exclusively from my hotel once connected to a wireless router to call all over the world. We expect to see many new VOIP based products and solutions that now take aim at consumer markets and there should be a variety of innovative approaches to VOIP at this year’s event.

6-Mass Customization

Another trend is something we call “mass customization.” While business users might be OK with all of their PC’s being battleship gray or black, consumers want more color and ways to express their individual tastes through their digital devices. Companies like Skinit.com provides skins that can be applied to iPods, cell phones and laptops that make them very personal and ColorWare can even do custom paintjobs on a laptop top to make them stand out. Giving the consumer additional ways to make their digital devices more personal will become a major trend in consumer electronics and tech vendors are finally waking up to the fact that their one color approach to products is worthless with consumers. Also, expect cool industrial design to be another trend. More and more vendors are looking to the likes of Frog Design and others major industrial designers to help them make their product cool, especially to Gen X and Gen Y.

7-Gen X and Gen Y-They are Becoming the Most Important Tech Demographic

Five years ago, my son Ben, who is now 28, joined me to work specifically on understanding what Gen X and especially Gen Y wants in the way of technology.
He spends most of his time talking to kids about their likes and dislikes with tech devices and has a real pulse on what they want and how they plan to use technology in their digital lifestyles. One major conclusion from his research is that the age demographic of 14-24 has become the single most influential group when it comes to buying and recommending tech products.

Last summer I did a focus group with some parents and asked them who they take with them to the store when they buy a new PC or some type of technology. Over and over they said that they take their teen age son or daughter with them for two reasons.
The first is that the kid knows more about what they should buy then they do. And the second reason was the best. They said that if they went on their own and bought something their kid did not want or like, they would hear it the rest of their lives.

It turns out that parents and grandparents wanting to buy some new technology almost always turn to their kids and grandkids for advice, thus making them the most critical tech influence in the family, as well as to their friends.