Here's the second half of Eric Jhonsa's two-part column on tech predictions for 2020. The first half can be found here.
11. Apple Bundles Some of its Content Services -- And Maybe Other Things as Well
Following the 2019 launch of Apple's (AAPL) News+, Arcade and TV+ services, as well as an October report stating that Apple has talked with music labels about supporting an Apple Music/TV+ bundle, the rollout of one or more Apple content bundles feels like just a matter of time.
Conceivably, Apple could also include some non-content services within a bundle -- for example, iCloud storage subscriptions or App Store credits. And as some have argued, the company could also launch subscription bundles featuring content services and (at fixed intervals) hardware upgrades. October remarks from Tim Cook suggest Apple is at least exploring this possibility.
12. Growth-Stage Software Firms Become More Eager to Join Forces
The enterprise software market has certainly seen its share of M&A over the last few years. However, much of the acquiring has been done by larger software players (think Oracle (ORCL) , SAP (SAP) , Salesforce.com (CRM) or IBM (IBM) ) and private equity firms.
Though elevated valuations could restrain such dealmaking a bit, 2020 will most likely see additional software M&A by the aforementioned firms. But the timing also feels right for many smaller, publicly-traded, growth-stage software firms to explore merging with a peer or two, as the companies deal with competition both from larger enterprise software players and/or offerings launched by public cloud giants (particularly AWS).
These companies could wager that by teaming up they'll have more sales and marketing clout when battling larger peers for deals. They might also see opportunities to offer more comprehensive software platforms, as well as more easily finance large R&D investments in new products and machine learning-powered solutions.
13. Enterprise Hardware Firms Explore Their Options
Following a healthy 2018, things went downhill again for traditional enterprise hardware firms in 2019. And there's a good chance that 2020 won't be much better -- not when cloud infrastructure adoption keeps cannibalizing on-premise hardware sales and IT spending continues shifting towards software, security and cloud services.
Look for this state of affairs to motivate big name IT hardware firms to weigh their strategic options for strengthening their top and bottom line growth. These options could include merging with rivals to add scale and become more cost efficient, as well as using M&A to boost their exposure to faster growing areas.
The last months of 2019 have already seen some steps in this direction -- see the HP/Xerox soap opera, F5 Networks' (FFIV) $1 billion security acquisition and the newfound willingness of Cisco Systems (CSCO) (a company that has already spent heavily to boost its software and security exposure) to sell switching/routing processors and license its router OS a la carte to service providers. These moves are likely a sign of things to come.
14. Google Search Sees Tough Antitrust Scrutiny
Read some earnings call transcripts for publicly traded Internet firms, and there's a good chance you'll spot a complaint or two about Alphabet/Google (GOOGL) . Whether it's companies complaining about Google's integration of rival services within search results (see Yelp or TripAdvisor), or about having to spend more on Google ads due to organic search results being pushed further down on search pages (see Expedia or ANGI Homeservices), Google is a pretty common target of criticism.
Throw in other areas where Google has drawn heat from public and/or private companies -- for example, its Android app and service bundling policies, or the fact that companies often have to pay to have the top search listing on a page even when users are searching for the company's name -- and it's pretty likely that the federal and state regulators currently probing Google are getting an earful from corporate critics.
None of this by any means spells doom for Google Search, which maintains a very long list of competitive strengths as it tries to keep growing its search activity and ad spend. But scrutiny of how Google wields its search dominance could cause some headaches for Sundar Pichai's company as 2020 unfolds.
15. Online Grocery Sales Surge, While Restaurant Delivery Players Consolidate
Walmart (WMT) and Target (TGT) saw very strong growth for their grocery pickup and (to some extent) delivery services this year, and a slew of other bricks-and-mortar signaled that they were also serious about supporting online grocery services. In addition, Amazon.com (AMZN) recently made its AmazonFresh grocery delivery service (available in 20-plus metro areas and growing) free to Prime members.
Given the convenience benefits that grocery pickup and delivery provide, these services are likely to register another year of strong growth, and perhaps hit an inflection point in terms of U.S. consumer awareness and usage.
Restaurant delivery services should continue growing as well. But this is also an area where the top players (namely, DoorDash, Uber (UBER) , GrubHub (GRUB) and Postmates) have been collectively posting big losses for their delivery operations, thanks to a mixture of challenging industry economics and intense discounting and promotional activity.
2019 saw one restaurant delivery player (Square's (SQ) Caviar service, acquired by DoorDash) merge with a rival. Look for one or two more names to do the same in 2020, as well as for industry players in general to get more serious about paring their losses.
16. AI Services Relying on Natural-Language Processing Become Very Good
As Nvidia (NVDA) , Google and others have been eager to highlight, there have been major advances lately in the ability of neural networks to understand and respond to natural-language data such as voice commands, text messages, search queries and web articles.
Those advances should make themselves felt in 2020 within various consumer and business apps and services. Voice assistants, messaging chatbots and search engines should benefit, as might things like the natural-language query tools supported by analytics software or the machine learning programming interfaces (APIs) that cloud giants provide for developers.
17. Amazon Makes its Marketplace User Experience a Major Priority
In 2019, Amazon invested heavily both in making one-day shipping the norm for Prime members and (with the one-day effort boosting its order volumes) scaling out its internal delivery operations. But along the way, complaints continued to mount about counterfeit and/or low-quality goods on Amazon's sprawling seller marketplace. The timing feels right for Amazon, a company that has historically obsessed over the customer experience, to make a larger push to clean up its marketplace.
Likewise, with Amazon product searches now often filled with dozens of listings of similar goods (and in some cases, a few duplicate listings of the same item), the timing might also be right for Amazon to provide more curated shopping experiences that aim to help customers more quickly figure out the right product for their needs.
18. Asia Becomes a Key Growth Driver for Netflix
When Netflix (NFLX) broke out its international subscribers by region for the first time in December, the streaming giant revealed that only 9% of the 158.3 million paid subs it had at the end of September resided in the Asia-Pacific region. However, it also disclosed that its Asia-Pacific paid subs had grown by 62% annually, a rate three times as fast as Netflix's global paid subscriber growth rate.
The stage appears set for Asia to become a vital contributor to Netflix's global subscriber growth. Likely to help the company's cause: Its large original content investments in markets such as Japan, South Korea and India, and its rollout (starting with India and Malaysia in 2019) of cheap mobile-only plans within emerging markets.
19. Tesla's Model Y Fares Well, But Elon Musk's Autonomous Driving Promises Don't
Judging by the specs and prices that Tesla (TSLA) announced in March, the Model Y crossover, which is set to enter volume production in the summer of 2020, should see a strong initial reception. Working in Tesla's favor: SUV/crossover sales are now well above sedan sales in the U.S., and for now, there's only one direct rival in the same price range -- Ford's (F) Mustang Mach-E electric crossover, which is expected to see a couple of trims go on sale in late 2020 -- that looks competitive.
On the flip side, don't hold your breath waiting for Elon Musk's promise to "have a million [Tesla] cars capable of self-driving" on the road by the end of 2020 to pan out. For all of the advances it has made to date, Tesla's Autopilot system still has a ways to go before it can fully take over from human drivers, and it's worth remembering that Tesla still hasn't carried out an autonomous cross-country drive that was originally promised to happen in 2017 (Seven months ago, Musk said the trip would finally happen by the end of 2019. As of the time of this article, he has eight days left.).
20. Facebook's E-Commerce Momentum Accelerates
Facebook (FB) made it clear in 2019 that it wants to drive more e-commerce and payments activity across its platforms. Among other things, Mark Zuckerberg's firm unveiled an Instagram checkout service, a cross-platform payments service (Facebook Pay) and some initial steps to transform the Facebook Marketplace service from a mere Craigslist rival into something that can also square off against eBay (EBAY) and other peer-to-peer marketplaces. And it also of course unveiled its Libra cryptocurrency initiative.
While Libra's future depends a lot on what regulators in the U.S. and elsewhere decide, the Facebook e-commerce initiatives that aren't dependent on regulatory approval should collectively see strong user growth in 2020. And along the way, it wouldn't be surprising to see Facebook unveil additional e-commerce offerings, such as services meant to help businesses better connect with users on Messenger and WhatsApp.
(Apple, Cisco, Alphabet, Nvidia, Amazon, Facebook and Salesforce are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
