Trends & innovations shaping the global tech sector
TECHNOLOGY
PREDICTIONS
2 01 8
Important disclosures appear at the back of this report
GP Bullhound LLP is authorised and regulated by the Financial Conduct Authority
GP Bullhound Inc is a member of FINRA
Dealmakers in Technology
Dealmakers in Technology
04 THE VIEW FROM GP BULLHOUND


Per Roman & Alec Dafferner, GP Bullhound
06 RECAP OF GP BULLHOUND'S 2017 PREDICTIONS
08 TECHNOLOGY PREDICTIONS 2018
10 TREND 1: AN UNEASY FUTURE FOR POLITICS AND TECHNOLOGY
12 TREND 2: CYBER SECURITY - EXPOSURE AND ADOPTION

14 EXPERT VIEW


Ben Brabyn, Level39
16 TREND 3: MOBILE TRUMPS TV IN CHINA
18 TREND 4: TRANSLATION TECHNOLOGY TAKES HOLD
20 TREND 5: OVER AND OUT, EMAIL
22 TREND 6: INTERNATIONAL LABOR ARBITRAGE FLOURISHES

24 EXPERT VIEW


Utpal Bhatt, Neo4j
26 TREND 7: THE UNLIKELY COMEBACK OF THE SOFTWARE SUITE
28 TREND 8: INDUSTRY 4.0

30 EXPERT VIEW


Aidan Quilligan, Accenture
32 TREND 9: REGULATORS RULE ON BOOM AND BUST OF ICOs
34 TREND 10: AUGMENTED REALITY ADAPTS FOR EARLY ADOPTION

36 EXPERT VIEW


Martin Herdina, Wikitude
38 METHODOLOGY
CONTENTS
GP BULLHOUND TECHNOLOGY PREDICTIONS 2018
3
EXECUTIVE SUMMARY
THE VIEW
From GP Bullhound
Per Roman
Managing Partner
4
Some commentators have argued that the
technology industry's vision of optimism and
openness has turned to anxiety and antagonism.
From the world's largest technology companies
through to the latest generation of innovators,
the role and responsibility of the digital economy
has increasingly come under scrutiny in the
past year.
And yet, the opinion of our leading team of
analysts and dealmakers is clear: technology
will continue to break down barriers in 2018.
Advances in the ability of computers to
recognize, comprehend and translate any
language mean that we stand on the brink
of universal understanding. We believe these
advances will see one billion people use
technology for translation in 2018, bringing us
closer to a fundamental shift in human-to-human
communication globally.
The rise of workplace messaging platforms
such as Slack and Messenger are also radically
transforming the way we communicate. In fact,
we believe that the efficiency and simplicity of
these platforms will mean that 2018 will be the
first ever year where we see a decline in the total
number of emails sent in the US.
Meanwhile, augmented reality's ability to break
down the barrier between the physical and the
digital will increasingly transform the way we
interact with the world around us. The rise of AR
platforms from Google and Apple will see vast
user adoption of the technology in 2018.
At GP Bullhound, we are a champion of
technology entrepreneurs. It is our belief that
a mission to create world-leading companies
provides tomorrow's economy with the energy
and purpose to address fundamental social,
industrial, and commercial challenges. It is this
positive take on the potential of technology that
first inspired us to create our annual Technology
Predictions report. In its eleventh edition, this
year's report is no less optimistic.
GP BULLHOUND TECHNOLOGY PREDICTIONS 2018
5
In 2018 smart technologies and digital
transformation take hold also in manufacturing
and the industrial sector. Smart factories are
projected to lead to a sevenfold increase
in overall productivity by 2022.(1) Related to
this trend, we also view the expansion and
consolidation of the enterprise software sector as
a major trend for 2018.
We have also examined two trends with
important economic consequences. In China, it is
no secret mobile is king the scale of this mobile-
first economy saw mobile payments reach
$5.5 trillion in 2016.(2) However, an unexpected
consequence of the explosion in usage of
smartphones is that we expect 2018 will be the
first year that time spent on mobile devices in the
country exceeds television usage.
On a global scale in 2018, with the ever growing
hunger from fast growing technology companies
to suck up talent, we expect more and more
companies to expand their presences outside
of current hubs such as Silicon Valley, Shenzen,
Berlin and Stockholm, where the cost of living
and employment have spiralled. Technology itself
is making it ever-easier for digital companies to
have distributed rather than concentrated staff.
This trend makes for a flatter world with more
employment opportunities globally.
There is, then, plenty of scope to be optimistic
about the year to come in tech. However, some
areas of the digital economy remain problematic
and we have sought to understand their impact
in the coming months. The interaction of politics
and technology will continue to unsettle voting
populations around the world, as the scale and
complexity of regulating digital campaigning
hinders progress. Likewise, consumers will
increasingly seek protection against growing
cyber threats, particularly with the rapid rise
in connected devices. Finally, the lack of
understanding and uncertainty surrounding initial
coin offerings will attract significant scrutiny from
the world's financial institutions and regulators.
These challenges are significant, but they do
not outweigh the vast potential for the digital
economy to positively transform business and
society. We hope this report provides a useful
roadmap to bring order to the complexities of
the coming year in tech and set us on a path to
opportunity and growth.
Sources: 1. Capgemini Smart Factories: How can manufacturers
realize the potential of digital industrial revolution; 2. Npr, In China,
a cashless trend is taking hold with mobile payment.
Alec Dafferner
Partner
THE PREDICTIONS
RECAP OF GP BULLHOUND'S
2017 Predictions
Before we dig into 2018, here is a brief recap of last year's predictions
and how we saw their development throughout the year.
The AR/VR market has seen continued growth with
a heightened focus on software development. 2017
saw the launch of key AR software development
platforms including Apple's ARKit, Google's ARCore
and Facebook's AR ecosystem. The launch of these
platforms will help drive the development and
adoption of AR content. However, while the AR market
has made great strides, the VR market is not meeting
expectations and we are seeing less activity in the
sector, resulting in the closure of some leading VR
content studios including CCP Games.
As predicted, the eSports industry grew rapidly in
2017: the market is expected to reach $941.4m by
2018, paving the way for a billion-dollar market.(1)
Major brands including NBC, ESPN, and Coca-Cola
increasingly view the industry as a vital channel
for reaching millennials. While these brands have
sponsored major finals, other notable partnerships
include YouTube's investment in Faceit and Sony's
partnership with tournament organizer ESL to power
PlayStation Vue. New eSports leagues have also
thrived, with Blizzard's Overwatch attracting 12 global
sponsors at a costly $20m each per franchise spot.
Artificial intelligence continued its rapid growth in
2017 through increased fundraising, acquisitions
and widespread adoption. The first half of 2017
saw total investment in AI firms hit a record
$22.9bn. Key deals included Cisco's acquisition of
MindMeld for $125m, and Facebook's acquisition
of Masquerade and Zurich Eye, and Microsoft's
acquisition of conversational AI startup Maluuba.
AI-powered Virtual Personal Assistants also continued
to develop. Nuance Communications released a
vitual assistant targeted at patients and healthcare
providers in September of this year. Further, Amazon
and Microsoft partnered to allow communication
between Alexa and Cortana.
As expected, cord cutting became even more
popular in 2017. Younger audiences' preference
for over-the-top (OTT) services is continuing to drive
the rise in cord cutting. Another key driver is the
consumption of user-generated content spurring
marketers to focus on digital media campaigns.
As predicted, more cable companies have started
to develop their own OTT services to retain market
share. Verizon plans to launch an OTT service soon,
Disney is launching an ESPN OTT package in 2018,
and A+E Networks, Viacom, Discovery, Scripps
Networks Interactive and AMC Networks entered a
partnership to launch a streaming bundle of cable
programming.
6
1. THE NEXT GENERATION
Of Artificial Intelligence
4. THE DAWN OF
VR/AR Content
3. E-SPORTS TAKES
Center Stage
2. CORDLESS CONTENT
Anywhere and Everywhere
Sources: 1. Statista: eSports market revenue worldwide from 2012 to 2020
Inaccurate prediction
Accurate prediction
Partially accurate prediction
GP BULLHOUND TECHNOLOGY PREDICTIONS 2018
7
Consumer acceptance has continued to pose a
barrier to broader adoption of autonomous vehicles
in 2017 one recent MIT study showed that 48%
of consumers would never purchase a car that
completely drives itself. We also predicted that there
would need to be greater clarity in the regulatory
framework to spur adoption of driverless technology.
In the US, Congress has made progress towards
creating clearer regulations and is currently in the
process of passing the first federal law governing
autonomous vehicles. We continue to believe in the
potential benefits of autonomous vehicles but we are
not quite there yet.
While blockchain has shown its ability to transform
several industries, our view on the consolidation
of P2P lending companies remains unrealized.
Blockchain technologies have impacted key
industries including finance, legal, and IoT, with
notable examples of companies offering blockchain
solutions in 2017 including PwC's Vulcan blockchain,
Microsoft's Project Bletchley and IBM's blockchain
solution. Although the pace of P2P lending
consolidation has not happened this year, the
struggles faced by leaders like Lending Club, On
Deck, and Prosper suggest consolidation, primarily
by banks, is not far off. PayPal's acquisition of Swift
Capital is an early sign of the things to come.
US and Asian social media offerings have converged
in 2017. Facebook for one launched a payments
platform, deployed messenger bots to automate
conversations, and expanded its marketplace to
include housing rentals and used car listings it is now
approaching the full-service platform prominent in
Asian social media. The year also saw notable deals
and launches by Asian social media giants, hinting
at Western expansion and replication of American
competitors. Line, for instance, launched an AI
platform including a voice-powered assistant Clova
akin to Amazon Echo or Google Home and increased
its stake in Snow, an Asian Snapchat clone, to 50%.
Our prediction that 2017 would see a growth in
investment in European SaaS companies was proven
true, with $3bn invested in the first half of the year
compared to only $1.7 billion during the same period
in 2016. Furthermore, European SaaS companies
proved attractive acquisition targets with the top five
transactions in the first half of 2017 accounting for a
combined value of 3.1 billion. Globally, there has
been continued consolidation with notable deals
including Cisco's acquisition of Viptela for $610m,
Oracle's acquisition of Moat for $850m, and CA
Technologies' acquisition of Veracode for $614m.
6. FINTECH
Shifting Tectonic Plates
5. DRIVERLESS CARS STILL
Require Human Direction
8. SaaS SOFTWARE
Reigning Supreme
7. SOCIAL MEDIA
Transformation
2017 has proven to be a strong year for European
tech companies, with the rise of many new titans.
Europe currently has 57 unicorns with two of those,
Spotify and Zalando, reaching valuations of over
$10bn in 2017. As explained in GP Bullhound's
recently published "Titans of Tech' report, European
tech companies are proving highly competitive due
to mobility of talent, more sustainable salary costs,
and better capital efficiency.
10. YEAR OF THE
European Decacorn
Inaccurate prediction
Accurate prediction
Partially accurate prediction
2017 was a tough year for tech IPOs in the US and high
volumes of public debuts masked a number of rocky
performances. Highly anticipated listings from Uber
and Airbnb did not materialize and the marquee IPO
of 2017 Snap has struggled significantly since going
public. Nonetheless, the volume of IPOs has risen in
US, Europe, and Asia with four unicorns going public
in the second quarter alone, equal to the equivalent
volume in 2015 and 2016. Solid IPOs from CarGurus,
MongoDB, and Qudian in the closing months of 2017
also indicate favorable conditions for the future.
9. TECH IPOS SET
For Take Off
THE PREDICTIONS
TECHNOLOGY
Predictions 2018
Over the past ten years, GP Bullhound's Predictions report has
established a reputation as an industry-leading analysis of the trends
and innovations shaping the global technology sector.
What follows are the ten trends we believe will define tech in 2018.
While mobile activity has been growing steadily
in China, the past year has seen the biggest
increase in the use of mobile in the country yet.
2018 is set to be mobile's peak year, accelerating
to overtake TV usage within the next two years.
Following a number of hacking scandals related to
national elections, 2018 will see tech firms coming
under greater scrutiny for the content they allow
on their platforms. With giants such as Facebook
already increasing their security budget, this trend will
shape the relationship between political bodies and
technology in the coming year.
1. AN UNEASY FUTURE
For Politics and Technology
3. MOBILE TRUMPS TV
In China
As machine learning perfects language recognition,
translation technology will see a boost in user
adoption in 2018. Using neural networking, computers
will be able to understand not just words but also
grammar, resulting in a more natural, flowing
translation and booming consumer usage.
As recurring data breaches continue to break
the news and users worry about the safety of their
personal information, security will see widespread
consumer adoption in the coming year. The rise of
connected devices in the home will only add fuel to
the fire of consumer concern for digital security.
4. TRANSLATION TECHNOLOGY
Takes Hold
2. CYBER SECURITY
Exposure and Adoption
8
GP BULLHOUND TECHNOLOGY PREDICTIONS 2018
9
6. INTERNATIONAL LABOR
Arbitrage Flourishes
As the cost of living in key tech hubs soars and
competition for talent becoming increasingly
tough, the new year will see smaller tech
companies looking to base their operations in up
and coming tech hubs around the world.
8. INDUSTRY
4.0
As factories embrace the benefits of artificial
intelligence and robotics, the fourth industrial
revolution has finally taken hold of the manufacturing
and production sector. These technologies will see
increasing adoption in the coming year, resulting in a
dramatic increase in quality and productivity.
10. AUGMENTED REALITY
Adapts for Early Adoption
The last six months have seen significant
developments in augmented reality, with tech giants
such as Apple and Google entering the field. As
smartphones become increasingly compatible with
the technology, 2018 will be AR's biggest year yet as
more consumers adopt the technology.
5. OVER AND OUT
Email
Traditional workplace communications will be
increasingly replaced by instant and more informal
messaging tools. 2018 will be the year the volume of
corporate emails sent in the US will cease to grow
and begin to decline as instant messaging platforms
such as Slack continue to gain traction.
9. REGULATORS RULE ON
Boom and Bust of ICOs
The use of blockchain and Initial Coin Offerings has
exploded in 2017. We predict regulatory agencies will
intervene in 2018 and create definitive guidelines and
regulations on the capital raising method. However,
innovation in ICOs will not lose momentum and the
volume of transactions will continue to grow.
7. THE UNLIKELY COMEBACK
Of the Software Suite
As the corporate world continues to embrace
digital transformation, businesses seeking to optimize
their product offering will return to spending on large
IT platforms. 2018 will see growth in the adoption
of software suites and increasing competition
amongst leaders in the field.
COMPANIES TO WATCH
AN UNEASY FUTURE
For Politics and Technology
PREDICTION 1
10
11
GP BULLHOUND TECHNOLOGY PREDICTIONS 2018
The percentage of US digital ad spend on Facebook
and Google is 63%, and the granularity with which
certain demographics can be targeted has lawmakers
asking: how do we prevent unwanted and malicious
meddling in political affairs?(1) And whose responsibility
is it to regulate and police such activity?
The history of digital political spending is relatively
short. Even as recently as 2014, digital advertising was
expensive, inaccurate and ineffective. Three years
later, we are seeing a transformative and paradigmatic
shift in the influence that digital political advertising has
on the outcome of elections. For example, in the 2016
election cycle Facebook took $4 out of every $5 of
political digital ad spend.(2)
Many people are attributing the victory of Donald
Trump in the US Presidential election to the use of
Facebook by his campaign and, more controversially,
groups linked to the Russian government.
There are two key considerations here: first, unaffiliated
actors with malicious motives are able to advertise
undetected on behalf of a chosen candidate. Second,
due to the nascent nature of the industry there is a
distinct lack of robust and effective regulation.
It is well documented that Russian internet groups
sought to influence US voters through online 'troll'
campaigns. They were able to do this undetected and
unregulated because the ads often highlighted social
issues without an overt political agenda, and they
operated on a large but diffuse scale, spending small
amounts of money on each ad. It is thought these ads
reached 126 million Americans.(3)
This is clearly not the first time that governments, including
the US, have tried to influence outcomes of elections
in other sovereign states. However, it is important to
understand the numbers to grasp why this is such an
important issue. In the 2012 US Presidential election, $159m
was spent on digital advertising. By 2016 that had grown
800% to $1.4bn and it is projected to grow to $1.9bn by the
2018 mid-term elections, and $2.8bn by 2020.(4)
Some argue it is the focus with which these ads can target
specific people that makes them effective,
while others argue that this digital lobbying does not have
the impact that the media wants to portray.
In any case, this debate has put a spotlight on the internet
companies: are they open neutral platforms, or should
they filter and select the content that gets published? The
issue is further complicated by the fact these platforms
now also actively engage in their own content creation,
arguably compromising any claim to neutrality.
The consensus seems to be that collaboration between
tech and government is the way to regulate political
digital advertising. But, increasingly the burden is shifting
onto corporates, who have previously advocated for no
regulation and reluctantly, they are enacting policies to
tackle the issue.
We predict this challenge will continue to attract
widespread popular and political scrutiny and the need
for greater responsibility will be a significant operational
and financial burden on tech firms. Facebook has
announced profitability will take a hit, with their operating
expenses rising from 45% to 50%, mostly due to increased
security spending, a portion of which is to prevent future
political meddling on their platform.(5)
The domination that certain large technology companies have over digital advertising
and content is not news. However, the way lobbying organizations and allegedly
nations are (ab)using the reach of these digital ad platforms to influence important
events is shining a fresh spotlight on the poster children of the technology industry.
Sources: 1. eMarketer, Google and Facebook tighten grip on US digital ad market; 2. LA Times, Despite backlash over political ads,
Facebook's role in elections will only grow; 3. Gizmodo, Everything we learned about Russian election interference form Facebook,
Twitter and Google; 4. LA Times, Despite backlash over political ads, Facebook's role in elections will only grow; 5. TechCrunch,
Facebook beats in Q3 with $4.7B profit, record share price despite Russia
*Borrell Associates, The Final Analysis: Political Advertising in 2016
US Presidential Elections Ad Spend*
2012 Election Cycle
2016 Election Cycle
44.7%
13.8%
6.3%
6.7%
6.2%
3.8%
2.1%
1.4%
14.4%
57.9%
9.5%
8.8%
7.2%
6.4%
1.7%
4%
3%
1.7%
Broadcast TV
Cable
Newspapers
Radio
Telemarketing
Out-of-Home
Magazines
Direct Mail
Digital
CYBER SECURITY
Exposure and Adoption
12
PREDICTION 2
Sources: 1. Arbor Networks, New consumer survey shows high anxiety about online security does not translate into action; 2. Pew
Research Center, A third of Americans live in a household with three or more smartphones; 3. Parks Associates, Nearly 50% of US
broadband households are very concerned about unauthorized access of their connected devices or personal data
* Gartner: IoT units installed based on category
As the list of major cyber security breaches
grows longer by the day, consumers are
increasingly being affected. Uber recently
announced it had concealed a data breach
affecting a staggering 57 million accounts,
while the hacking of Equifax, one of the three
largest credit agencies in the US, may have
exposed the social security numbers and
driver's license numbers of up to 143 million
consumers. Further still, in May a sophisticated
phishing scam fooled one million Gmail users.
While all this has served to raise awareness at
least 75% of consumers are concerned about
security, privacy, malware or websites tracking
them few consumers are educated on how to
limit their exposure to these kinds of incidents.(1)
A major factor in the shift towards adoption
of consumer cyber security is the fact that
consumers and households have never been as
connected, and exposed, as they are today.
Nearly one in five American households contain
10 or more internet connected devices, with
the median household containing five such
devices.(2) With each new device comes
another entry point for cyber criminals, and
people know it, with close to 50% of connected
US households very concerned someone can
access their devices or data without their
permission.(3)
To plug this gap, connected home providers
like Google and Symantec are selling security
software that detects and protects against
breaches of home networks. Features like
parental controls and visibility into the number
of devices accessing a network, usage time,
URLs visited and more, are increasingly putting
the power back into the consumer's hands.
Other companies like Yubico are trying to
address this issue with secure token solutions for
smartphones and laptops.
Providers of home network security software,
consumer fraud protection and device security
are set to benefit and will see a large increase
in the number of consumers actively seeking
and using third party solutions to protect their
devices and personal information.
It is hard to imagine a year when cyber security will not underpin a huge trend.
While we have previously discussed the security challenges facing businesses,
the cyber threats facing the exploding numbers of connected devices mean 2018
will see the widespread adoption of cyber security measures by ordinary consumers.
Consumer
Business: Cross-Industry
Business: Vertical-Specific
Number of connected devices globally (millions of units)*
2016
2017
2018
2020
1,316
8,380
11,196
20,415
13
GP BULLHOUND TECHNOLOGY PREDICTIONS 2018
COMPANIES TO WATCH
50%
worry about
data breaches
75%
want tight control
over personal
information
1/3
have 3 or more
smartphones
EXPERT VIEW
14
GP BULLHOUND TECHNOLOGY PREDICTIONS 2018
15
EXPERT VIEW
Ben Brabyn
Head, Level39
From revelations about Kremlin-sponsored
influence in the US election, the proliferation
of fake news and major attacks on major
organisations in both the public (NHS) and
private (Uber) sphere the conversation has
changed from one of potential risks to very real
attacks, international diplomatic incidents and
share-price threatening vulnerabilities.
At the start of 2017, Level39 the largest
concentration of cyber security start-ups in
London convened a group of industry experts
to discuss the biggest challenges facing British
cyber security. The group included figures from
Government and the fastest growing cyber
companies in the UK Darktrace and Digital
Shadows. What came up time and time again
in our discussion was a lack of awareness and
education about cyber risks. From CEOs to
employees at all levels people didn't know
enough to protect themselves, weren't taking
the risks seriously and leaving themselves and
their companies at risk.
The one positive result of the deluge of high
profile cyber attacks experienced around the
world is that the lack of awareness is starting
to change. Reading about cyber security on
a daily basis or, more importantly, realising
your Yahoo, TalkTalk or Uber account has been
compromised, acts as a quick wake up call.
As such, there is an opportunity for more
consumer-focused cyber security companies
looking to serve a newly enlightened, and
fearful, market. This has already started to play
out from a B2B perspective. Level39 member
Digital Shadows recently raised $26m in a round
led by Octopus Ventures, with investors realising
businesses around the world are increasingly
looking for a service that monitors online
corporate cyber threats.
If money is already flowing into corporate
cyber security, 2018 will see a similar appetite
for consumer-facing cyber protection. With the
proliferation of connected devices, hardware
and gaming, my prediction is that a major cyber
attack is coming aimed specifically at consumer
technologies. As soon as this happens, the
floodgates will open for consumer cyber security
and existing players will have to scale rapidly to
meet demand.
Fintech will also drive investment into cyber
security. The technology now exists for a wide
array of mobile payments, online remittances and
challenger banks to grow and thrive. However,
two elements are at play that fintechs need to
consider. Banks are now looking to cyber security,
not digitally-enabled services, as their biggest
challenge, and they are investing accordingly.
Secondly, the cyber security of some fintech
companies has never been truly tested. The
fintech start-ups and scale-ups themselves
need to be investing in their own cyber services
to continue their recent success. In both
situations, the real winners are the growing
cyber companies.
For the UK, there is a real opportunity to become
the most secure place in the world to do
business. The Government has clearly outlined
its commitment to this industry in the recent UK
Cyber Security Strategy and we can expect to
see significant public investment into fast-growth
start-ups and scale-ups.
If 2017 was the year cyber security entered the public consciousness,
2018 will be the year when consumers start demanding protection,
action and change. Cyber security has made international news
headlines with a consistency we've never seen before.
MOBILE TRUMPS TV
In China
16
PREDICTION 3
COMPANIES TO WATCH
17
GP BULLHOUND TECHNOLOGY PREDICTIONS 2018
A much shorter and less pervasive history of
television culture and usage has contributed
to the dominance of mobile. Meanwhile, the
smartphone has revolutionized the role mobile
devices play in consumer's everyday lives. As
a result, unlike the USA or Europe, the Chinese
population is mobile first.
WeChat for one has 494m active users,
equivalent to 79% of all smartphone users in
China.(1) The app is used in every aspect of
people's personal and professional lives, from
mobile payments, which reached $5.5 trillion in
2016, to hailing taxis, booking flights and much
more.(2) As a result, users spend on average 66
minutes in the app every day.(3) Similarly, Alibaba
generated $25.3bn in sales on Singles Day 2017,
of which about 90% were done via mobile.(4)
A changing media consumption and video
streaming landscape in China will accelerate
this trend. Paying for streamed video and music
is proving increasingly popular and available
content is moving audiences from TV to mobile.
Tencent Video has 15.2% of the 435 million
mobile video users, while Baidu's iQiyi, which
recently partnered with Netflix, is in a close
second with 14.7%.(5)
Online video content, live streaming, and short
videos combined grew 35.6% year-over-year in
March 2017 to almost 920m monthly active users,
leading to activity in the market by the Chinese
internet giants. Alibaba acquired Youku Tudou
China's answer to YouTube in 2016 and is doing
a major overhaul of its service, including the
finance, production and distribution of films and
TV programs for the platform.
While this is a global trend, the advent of new
media in Chinese consumers' lives will continue
to squeeze the traditional TV industry and
grab market share. We believe that TV will be
secondary to the smartphone in the next 24
months, with mobile content being the catalyst
for this transformative shift.
It is no secret that mobile is king in China. Increasingly cheaper smartphones
and a rising middle class have enabled mobile to become central to Chinese
consumer activity. Whether shopping with Alibaba or JD.com, travelling with
Didi or Ofo, or using mobile media platforms, we believe that consumers' time
spent on mobile devices in China will be very similar to TV usage in 2018,
and will exceed it within a couple years.
Sources: 1. Emarketer, WeChat users and penetration in China, 2016-2021 (millions, % of mobile phone messaging app users and %
of smartphone users); 2. Npr, In China, a cashless trend is taking hold with mobile payments; 3. China Channel, 2017 WeChat user
behavior report; 4. Bloomberg, Alibaba's singles' day goes global with record $25 billion in sales; 5. Emarketer, Competition heats up
in China's mobile video sector
*EMarketer, Digital overtakes traditional media in China, but TV consumption holds strong
TV vs. mobile usage in China (minutes)*
2012
162
66
2013
162
90
2014
161
105
2015
160
116
2016
159
124
2017
158
133
Mobile
TV
TRANSLATION
Technology Takes Hold
18
PREDICTION 4
Sources: 1. Barak Turovsky, Ten years of Google Translate; 2. We Are Social Special Report, Digital in 2017: global overview
As is increasingly the case in the technology
industry, proof of concept by early innovators
is followed by a technology giant entering the
market to produce a better product, with large
cash reserves to solidify its position. Google's
Pixel Buds will put significant pressure on early
entrants, while Bragi's Dash Pro earbuds and
Waverly Labs' Pilot headphones are also
making waves. All of these players will propel
a revolutionary software into the mainstream,
and transform the way we converse with each
other in different languages.
The most recent Google Translate statistics from
mid-2016 showed roughly 500 million people
use translation software.(1) Although many of us
have been using this for years, most can agree
that the translations supplied were not awe-
inspiring. This is all changing as machine learning
technology improves to contextualize sentences,
either spoken or written, and provide a much
more meaningful output than the often-literal
translations we received in the past.
Using neural networking, computers harness
huge data sets to understand not just the
words being translated, but grammar rules,
and exceptions to these rules, helping provide
a more natural translation. It is by no means
perfect, and current technology is limited when
topic specific jargon is used, but it will advance
to a point of widespread utility. Being able
to translate entire conversations in real time
opens huge possibilities that will affect industries
ranging from education to humanitarian aid,
travel to tourism and beyond.
Imagine working for an international
organization responding to a natural disaster
in a country whose language you do not
speak. Building trust and connections with
the population that you are trying to help is
incredibly difficult on its own, more so if also
dealing with a language barrier. Once this is
eliminated, the logistical challenges of such an
exercise become easier, and more lives can
be positively affected. The possibilities are truly
limitless and as the technology is perfected we
will all benefit in our daily lives.
With the backing of influential technology
companies, leveraging ground-breaking neural
network machine learning, as well as 4.9 billion
mobile users, expect language translation to
grow rapidly in 2018 and beyond.(2)
Machine learning has left language translation on the cusp of an explosion
in user adoption. While Google throws its weight behind earphones that
translate language in real time, widespread activity in this technology leads
us to believe that in 2018 over one billion people will use language
translation tools on desktop, mobile and headphones.
500m
used Google
Translate in
2016
4.9bn
potential mobile
translate users
19
GP BULLHOUND TECHNOLOGY PREDICTIONS 2018
COMPANIES TO WATCH
OVER AND OUT
Email
20
PREDICTION 5
75%
workers greatly
value teamwork
43%
of Fortune 100
use Slack
21
GP BULLHOUND TECHNOLOGY PREDICTIONS 2018
Slack has pulled off one of the most difficult
transitions in tech from hype to traction, to
the fundamental transformation of an entire
industry. Slack isn't just beating email, it is
beating their much larger competitors. It has
grown to six million daily active users and
provides 50,000 businesses with internal
communication tools. Its users spend 2 hours
actively using the tool, and have it open for
ten hours a day.(1) As the enterprise market
wakes up to the utility of these tools, email
usage will drop significantly.
Growth in email usage is projected to slow
to 1.7% in the US in 2018.(2) We think this figure
is optimistic, and expect a decline very
soon. Workplace by Facebook, its answer
to enterprise messaging and networking,
launched in October, Google already has G
Suite, and Microsoft is rolling out Teams as part
of Office 365. Facebook alone has already
signed up 14,000 businesses including Starbucks
and Walmart, which employ a combined 2.4m
people, and we expect them to accelerate
the rate of change and adoption.(3) Add to this
the rumor that Amazon is looking to enter the
collaboration and messaging market and you
have all the largest technology companies in
the world betting on messaging.
Not as often discussed, but no less important
is the rise of project management platforms.
These are software tools built to help teams
work on specific projects in the most efficient
way possible. Companies like Asana or Trello
provide time tracking, resource planning,
project allocation to streamline processes and
remove ineffective uses of internal and external
email. The potential value of this market was
reflected in Atlassian's acquisition of Trello this
year to build out its collaboration technologies.
Similarly, Asana has raised a total of $90m since
foundation and Slack has now raised a total of
$788m in further demonstrations of the growth
potential of this market.
Often appearing an outdated annoyance,
email marketing is still a large proportion of
sent emails. Questions about the efficiency of
this tactic means that email usage will suffer
dramatically. From 2016 to 2017, average email
monthly send rates dropped from 9.8 to 8.1, and
while engagement increased marginally, email
marketing has been overtaken as an effective
marketing tool.(4)
Though not the flashiest topic in tech right now,
we believe this is a transformational time in
enterprise communications. With the irresistible
rise of mobile, increasingly mainstream project
management software, and collaboration tools
like Workplace, email will see a decline in the US
beyond 2018.
2018 will represent the year that use of email will cease to grow and
begin to decline in the US. This decline will be caused by the rapid rise
of communication tools like Slack and Messenger, the entrance of dominant
and cash-rich tech giants, and an increasingly common understanding
that email marketing is largely inefficient and insufficient.
Sources: 1. Forbes, Slack passes 6 million daily users and opens up channels to multi-company use; 2. Statista, E-mail usage growth in
the United States from 2013 to 2019; 3. TechCrunch, Workplace, Facebook's entreprise edition, snaps up Walmart as a customer;
4. SendGrid, 2017 Global Email Benchmark Report
COMPANIES TO WATCH
INTERNATIONAL LABOR
Arbitrage Flourishes
22
PREDICTION 6
COMPANIES TO WATCH
23
GP BULLHOUND TECHNOLOGY PREDICTIONS 2018
INTERNATIONAL LABOR
Arbitrage Flourishes
Yet the market is now turning on this notion
as the cost of living in these tech hubs has
skyrocketed. The Bay Area has now become
the most expensive city in the US, with average
one-bedroom apartments reaching up to over
$3,600 per month.(1) Salaries have also ballooned
in the area as competition for technical talent
from large public and highly valued private
companies has increased: in 2016, the average
salary for a software engineer in the Bay Area
was $134k (not including competitive equity
incentive packages),(2) compared to just
$71k in the UK.(3) This has made Silicon Valley
a particularly tough environment for small
technology companies, putting pressure on
them to hire talent they often can't afford or
being forced to risk sourcing second tier talent
which might eventually be poached by the lure
of high flying IPO candidates.
But the trend is now beginning to change:
startups lacking resources will now most certainly
begin to distribute their technical teams to
lower cost cities, both in the US and abroad.
The development of cloud collaboration tools in
the areas of video and chat has made it much
easier to build distributed organizations. For a
generation that is completely in tune with social
and digital communications, working together
while being apart has never been so easy:
Slack, Zoom and Asana are just a few of the
next generation collaboration tools increasingly
prevalent in startups.
These tools allow companies to harness the
advantages of these up and coming tech
hubs. Smaller cities have higher living standards
while still maintaining reduced company costs
due to lower salaries and lower operating
costs. Competition is also not as fierce, leading
to higher employee retention. We are now
beginning to see talent leave tech hubs and
successful startups rapidly growing in cities
that were previously not known for their tech
ecosystems. As talent spreads, more and more
cities are closing in on the talent gap every year.
Many successful companies have thrived on a
distributed organization model, including Neo4J,
UserZoom, Ecovadis, Prezi, and last but not least,
Github - a company founded and run by four
individuals who lived in separate cities from the
very beginning. Many of these companies have
latched onto the potential of maintaining a
footprint and go-to-market strategy in a major
tech hub, while also lowering their burn rate
to a much more modest level than their peers
by spreading their tech teams around the
world. With many players in the venture capital
community now promoting this concept within
their portfolio companies, tech talent is set to
continue spreading around the world.
The old paradigm of centralizing a tech startup in established tech ecosystems
is evolving. Access to capital, talent, and professional services brought many
companies to leading technology hubs like Silicon Valley, Shenzhen, Berlin,
Tel Aviv, London and Stockholm, seeking these network effects.
Sources: 1. Rent Jungle; 2. Hired, 2017 State of Global Tech Salaries; 3. Stack Overflow, Developer Survey Results 2017
* Tracxn, Enterprise Collaboration Software Report, November 2016
Funding Amount ($m)
Number of rounds
2010
2014
2013
2012
2015
2016
2011
2009
2008
0
120
60
180
0
1000
500
2000
1500
252
249
431
807
641
895
1880
1080
1180
68
69
83
98
138
168
141
133
102
Number of rounds and total funding in
global enterprise collaboration software market*
EXPERT VIEW
24
GP BULLHOUND TECHNOLOGY PREDICTIONS 2018
25
EXPERT VIEW
Utpal Bhatt
VP Global Marketing, Neo4j
Neo4j was founded in Europe in 2007: having
moved our headquarters to the United States in
2011, we now operate both in Silicon Valley and
on the European continent, where most of our
engineering operations are still based.
From a perception standpoint, being in Silicon
Valley is crucial. The Valley remains at the
forefront of tech developments, and companies
in the area flourish on the environment of
innovation and the ecosystem that it provides.
It is in fact by moving that we first managed to
acquire our current COO Lars Nordwall, a senior
Silicon Valley executive.
The Valley also attracts influencers and investors,
providing businesses with the tools they need to
reach a wider audience and push the business
forward. It is simply the ease of interaction and
the ability to have a face-to-face meeting with
these critical people that has enabled us to
grow to the point we are at right now.
However, talent in Silicon Valley can quickly
run low: one of the key challenges in our early
days in the US was attracting and retaining top
technical talent. For smaller start-ups, having
employers like Facebook, Google, Amazon and
Microsoft competing for talent makes it hard to
recruit. Competition has driven salaries higher
and higher, making the Valley one of the most
expensive locations for tech companies to be
based in and increasingly tough for smaller
companies to thrive in.
These developments have allowed other tech
hubs around the world to flourish. In North
America alone, the New York area and Boston
are great examples of this but also newer and
rapidly growing hubs such as Austin, Portland
and Toronto.
Europe is next on the list: as the tech scene on
the continent grows, European countries will be
an increasing source of tech opportunity. Having
Neo4j's engineering team based out of Europe
has allowed us to hire a wealth of talent. Our
experts have acquired qualifications ranging from
Masters to PhDs, and we now have some of the
best graph minds in the industry working for us,
making our technology a leading platform for
businesses around the world.
But 2018 is set to bring uncertainty for many:
wider political issues such as Brexit or Donald
Trump's election could have an impact on how
and where businesses source talent. Talks
on immigration and visa applications will incur
additional scrutiny both in the US and the UK,
which could make talent sourcing even more
competitive.
As developments continue in the tech sector, it
will be essential for businesses to hire talent that
is ready to embrace and adapt to innovation.
Not only will GDPR change the way businesses
can access data, but the rise of AI will disrupt
the way they handle it. The technology is set to
help organizations extract value from data and
leverage it for competitive advantage it will be
essential for businesses to source and train their
workforce to embrace the developments that
will shape 2018.
While Silicon Valley is a springboard for companies to expand and grow,
Europe remains a leading hub for tech talent. By adopting a dual model
with headquarters in Silicon Valley and operations in Europe Neo4j has
harnessed the potential of tech talent across the world and placed itself at
the forefront of developments in graph technology.
26
PREDICTION 7
COMPANIES TO WATCH
THE UNLIKELY COMEBACK
Of the Software Suite
27
GP BULLHOUND TECHNOLOGY PREDICTIONS 2018
In the days when on-premise solutions were
the norm, integration across cloud vendors
required painstaking custom integrations. In
the current software environment, integration
between cloud platforms has changed
immensely, allowing companies to integrate
diverse applications with ease.
The migration to the cloud has also created
a vast increase in the number of vendors by
enabling companies to choose best-of-breed
solutions and essentially plug-and-play through
the use of APIs. The average medium size
enterprise often now has a vendor list of over
100 cloud applications. Over the past several
years, we have watched this dynamic develop
with additional new entrants specializing in
functionally focused solutions such as Zendesk
in customer service, Hootsuite in social media
marketing, and Expensify in HR.
In 2018, while best-of-breed solutions will still be
prevalent for leading SaaS companies, we will
see an increase in IT spend to large platforms
and suites over point solutions. In an attempt
to reign in their ever-increasing vendor list and
increase visibility on their data and excess costs,
decision makers are no longer delegating the
IT buying process. In the recent past, software
sales cycles have shortened and C-level
decision makers have been less involved due
to the lower risk nature of SaaS models. This has
created a lack of visibility into their vendor lists.
Often to their surprise, they realize the number
of vendors is much more than expected and
there is a lack of efficiency in terms of license
utilization and bargaining power from mass
license purchases. The equilibrium has shifted
where the costs of a best-of-breed approach
can, in many cases, now outweigh the benefits.
The promise of specialized functionality within
each business unit has created unintended
complexity to the overall IT strategy and now
there is a movement to more centralized
planning.
Two particular sub-sectors where we are
seeing a movement to platforms and suites
are: human resources and marketing software.
Dominant players - Adobe, Oracle, Salesforce,
SAP and Workday - are in a position of strength
compared to their competitors as suite offerings
in their markets require less integration and the
procurement of the software is much more
transparent. In addition, the suites have
become very price competitive as a result
of their scale.
Ultimately, we believe the winners in the
space will be the software suites as seamless
procurement, integration and competitive
pricing will weigh into the decisions of IT spend.
Moreover, the suites will increase their market
share dominance through acquiring targeted
products, as we have seen in Cisco's acquisition
of Jasper, Salesforce's purchase of Steelbrick
and Hootsuite's acquisition of AdEspresso.
Historically, enterprise software was a concentrated industry dominated by
large players, with the likes of IBM, Microsoft, Oracle and SAP offering broad
and horizontal software solutions. The growth and adoption of on-demand
cloud computing has enabled an increasingly fragmented market of point
solutions, cluttering the market for enterprise users.
$85bn
cloud software
revenue in
2016*
$200bn
cloud software
revenue in
2021*
18.5%
projected
CAGR*
Source for data: * IDC Market Analysis Perspective: Worldwide SaaS and Cloud Software, 2017
INDUSTRY
4.0
28
PREDICTION 8
COMPANIES TO WATCH
29
GP BULLHOUND TECHNOLOGY PREDICTIONS 2018
INDUSTRY
4.0
Manufacturing improvements since the 1990s
have been minimal and the manufacturing
industry has been largely left behind in the
data boom. Aging factories, increased
capital expenditures and harsh profit margins
have inhibited any ability to invest in digital
transformation. Manufacturing is said to be at
the very early stages of this transformation but its
potential is now much clearer and companies
are hiring to develop smart factories.
The benefits to manufacturers in going digital
are expected to be substantial. In 2018, we will
see a transformation of the traditional industrial
manufacturing plant to a smart factory powered
by the internet of things (IoT), big data analytics,
artificial intelligence, and advanced robotics.
The potential gain in overall productivity is
significant and smart factories are expected
to create a sevenfold increase in overall
productivity by 2022.(1)
Historically, operating efficiency in
manufacturing has come through specialization,
scale, and repetitive task robots. The factory of
the future will not achieve efficiency by scale,
but through dynamic robotics and technology.
Advanced robots will perform tasks far beyond
the repetitive tasks of robotics today. Data and
connectivity will enable advanced robotics
to communicate with each other and lead
to directions for assembly being made at the
product level rather than a central hub. This
points to a future where the cost to produce
customized items will be on par with the cost of
mass production.
Accenture has coined this opportunity "Industry
X.0" and the implications are big. Industry X.0
intends to transform the entire supply chain from
"top floor to show-floor" through the use of data
and advanced technologies. The end result is a
dramatic increase in quality and productivity.
Consulting agencies have made significant
acquisitions to act on this trend and we expect
this to continue in 2018. For example, Accenture
acquired Cimation, providing industrial IoT
consulting company specializing in process
automation and The Boston Consulting Group
acquired Inverto, specializing in supply chain
optimization and procurement. Consultants
are expecting that many industrial companies
will require their expertise as they transform the
factories of old into efficient, automated, data-
driven smart factories.
We are in the midst of a fourth industrial revolution. Technology has finally
made its way to manufacturing and it plans to completely transform the
industrial sector as we know it. While the first industrial revolution was powered
by steam, the second was fuelled by the division of labor, and the third driven by
electronics, today's revolution is driven by connected machinery.
Sources: 1. Capgemini Smart Factories: How can manufacturers realize the potential of digital industrial revolution
* Capgemini Smart Factories: How can manufacturers realize the potential of digital industrial revolution
Manufacturer distribution according to smart factory investments globally*
Both Greenfield & Brownfield
Brownfield
<$500m
6%
7%
20%
$250m-$500m
5%
6%
18%
$100m-$250m
5%
7%
18%
$50m-$100m
4%
6%
16%
>$50m
5%
11%
28%
Greenfield
Yet to be decided
6%
5%
4%
1%
5%
1%
6%
7%
56%
More than half of global manufacturers analyzed have invested $100m+ in smart factories
EXPERT VIEW
30
GP BULLHOUND TECHNOLOGY PREDICTIONS 2018
31
EXPERT VIEW
Aidan Quilligan
Global Lead Industry X.0, Accenture
At Accenture, we have termed this revolution
as Industry X.0 to explain how businesses
need to engage in a continuous process of
innovation in order to survive and thrive amid
this transformation. There is no single formula
or masterplan for how you go about the scale
of this disruption: it is a constant succession of
moves and pivots and initiatives.
When taking steps to automate manufacturing,
it is important to acknowledge we are dealing
with the fundamentals of industry. Innovating
manufacturing and production is arguably the
most important and complicated change
that will take place in the modern economy.
While automating processes in finance systems
can also go wrong, imagine the consequences
of having nuclear generators shut down
following a computer fault.
That said, the potential of automating the
manufacturing industry is huge. Suites of
software products from tech leaders such as
Siemens, Dassault Systmes, PTC and many
others are emerging that will and are already
helping to build the foundations of Industry
X.0. By overlaying these with an industrial
internet of things, businesses will be able to
harness new data to unlock new levels of
efficiency ("below the line") that were previously
trapped in machines and sensors. Moreover,
this data and intelligence will enable new
"above the line" service offerings that were
previously inconceivable, so new revenue
streams are emerging to drive superior business
performance.
Workers will also find their tasks changing
alongside technological developments the
production of aircraft at Airbus is a clear
example of this. The company has now been
working alongside Accenture to develop an
augmented reality solution for the following
step within their production process: Workers
fitting the seats have a headset showing them
exactly where to bolt the seats in real time,
based on the configuration of the aircraft they
are fitting. Historically, this has always been a
challenging task, as any mistake often didn't
even get noticed until the workers got further
along the work. The productivity improvement
brought by this augmented reality solution has
been dramatic and production has dropped to
zero defects the potential of similar solutions for
other businesses will allow productivity numbers
to soar.
However, it will be important for businesses in
the manufacturing and production industry to
understand the horizontal and cross-functional
nature of digital transformation in order to fully
embrace it. Adopting digital skills will require a
significant shift in mindset in order to achieve a
fusion between the skills workers already have
and the understanding of how the company
will work in the new digital world. Either of those
in isolation is not sufficient, and getting the
right combination of both is the most important
challenge businesses will face.
Through a combination of all actors in the
industrial sector, digital transformation in
manufacturing and in wider industry will
transform this vital sector of the modern
economy. It is the combination of firms like
Accenture, manufacturers/OEMs, big tech
firms and start-ups, that will together shape the
industrial world of tomorrow.
2018 will see digitalisation and machine learning transform industrial
production. Widely known as the fourth industrial revolution, digital
transformation and the rise of connected, intelligent systems is set to have a
seismic effect on all industries. Manufacturers and industrialists that adapt and
invest in developing technologies will win out.
PREDICTION 9
COMPANIES TO WATCH
32
REGULATORS RULE ON
Boom and Bust of ICOs
33
GP BULLHOUND TECHNOLOGY PREDICTIONS 2018
Sources: 1. CB Insights: Blockchain Investment Trends in Review; 2. SEC.gov; 3. CB Insights: Blockchain Investment Trends in Review
Similar to an initial public offering, an ICO
enables a company to raise capital from a
range of investors, but rather than issuing equity
the company issues "tokens" or a representation
of a tradeable asset or utility. To the dismay of
many investors, regulators and lawyers alike,
ICOs create a regulatory gray area allowing a
company to raise capital with little registration
paperwork and without passing any control
of the company onto investors. The rise in
popularity of ICOs over the last 24 months has
placed pressure on regulators. More than 250
ICOs have taken place since 2016, growing at
a much faster clip than traditional equity deals
and dollars.(1)
It is clear that ICOs will become the financing
method of choice for blockchain startups, but
why do ICOs enjoy regulatory freedom when
other financing sources do not? The gray area
for the United States is whether or not a "token"
offering meets the criteria of a security and is
therefore subject to U.S. federal securities law.
Token offerings serve as a utility or access to a
future service rather than an economic windfall
and therein lies the regulatory gray area.
In the SEC's review of DAO Tokens, the tokens
met the definition of a security and were
required to register the offer.(2) However, the
SEC failed to take a stance on all ICOs, and
depending on how the offer is marketed an ICO
can still get around federal regulation. In other
markets, there have been different measures
taken to protect non-accredited investors.
For example, China and Korea banned ICOs
completely.
Private capital is now flowing into blockchain
companies at an unprecedented rate, raising
more than $2bn in 2017 and raising well above
historical averages in early stage rounds.(3) It
is our view that an influx of capital combined
with loose regulations has created a bubble
that will ultimately experience a shock during
the upcoming year. In 2018, we expect to see
definitive guidelines and regulations on ICOs
from regulatory agencies that take a much
stronger view.
Nonetheless, we will continue to see successful
ICOs regardless of regulation. Further, we
continue to believe distributed ledger
technologies will proliferate as the capital
raised today will continue to drive innovation.
While cautious on the current state of
cryptocurrencies, we remain staunch supporters
of using blockchain-like technology for
distributed, robust, independent, non-centralized
information systems and historic data holders.
The recent boom in capital allocated to blockchain is a direct result
of an innovative capital raising method known as an Initial Coin
Offering ("ICO"). As with any new technology, regulators are playing
catch-up, particularly due to the scale of capital being poured into
these relatively unknown fundraising schemes.
$2bn
raised by ICO
in 2017
250
ICOs since
2016
$230m
Value of
Tezos ICO
AUGMENTED REALITY
Adapts for Adoption
34
PREDICTION 10
COMPANIES TO WATCH
1.89bn
Smartphones
by 2021
2.1bn
Invested in AR/
VR in 2017
11
AR/VR startups
have raised
$100m+
35
GP BULLHOUND TECHNOLOGY PREDICTIONS 2018
Phone sales have recently plateaued at around
2bn units and are expected to grow at a
modest 1% CAGR through 2021.(1) Many handset
manufacturers are looking at augmented reality
as a catalyst for growth. Manufacturers have
tended to pass their rising component costs
onto consumers, but are looking to the future
as margins compress in an increasingly price
competitive market.
An example of this is the introduction of depth-
sensing camera handsets in parallel with
augmented reality software development
kits, namely ARCore by Google and ARkit by
Apple. These software development kits use
smartphone cameras to map and understand
the surrounding world and enable users to
overlay digital information on the physical world.
Smartphones are driving widespread consumer
adoption with all day battery life and
network connectivity. Crucially, an emerging
developer ecosystem is proving vital to the
rise of augmented reality. Computer vision
and machine learning technologies are
also advancing to ensure that 2018 will be a
breakthrough year for augmented reality.
Mark Zuckerberg recently stated that "the
phone is probably going to be the mainstream
consumer platform that a lot of these AR
features first become mainstream rather than a
glasses form factor that people will wear on their
face".(2) To date, this opinion has proved correct
and many market researchers are reversing
their stance on VR vs. AR. While many previously
predicted that VR would be the primary market
driver, many now believe AR will be the key
catalyst taking the lion's share of the near-term
market opportunity.
This has led many leaders in VR to exit their
operations due to the slow developing pace
of the market, with examples including Nokia
shutting down the development of its Ozo
VR camera and CCP games closing of their
VR studio. In contrast, augmented reality
technology has harnessed smartphone
hardware to accelerate consumer adoption
and we are now seeing mobile phones
specifically manufactured to enable advanced
augmented reality applications, such as with the
recent launch of the iPhoneX.
Huge strides in the computing power of smartphones has enabled
augmented reality to break down the barriers between the physical and
digital world. The transformation of the cognitive ability of mobile phones,
along with their display, sensor, and power technologies will lead to the
rapid consumer adoption of augmented reality in 2018.
Sources: 1. CCS Insight Mobile Phone Forecast; 2. Facebook Q2 2016 earnings call
* Digi-Capital, Augmented/Virtual Reality Report Q4 2017
Global AR/VR Revenue*
Mobile AR
Smartglasses
Premium VR
Mobile VR
2016
2017
2018
2019
2020
2020
2018: Mobile AR = 4.8x Smartglasses &
1.3x Premium VR & 1.5x Mobile VR
2021: Mobile AR = 3.9x Smartglasses &
4.8x Premium VR & 9.6x Mobile VR
EXPERT VIEW
36
GP BULLHOUND TECHNOLOGY PREDICTIONS 2018
37
EXPERT VIEW
Martin Herdina
CEO, Wikitude
At Wikitude, we enable augmented reality by
developing tools and offering tech platforms
that allow our customers to create their own
universal AR experiences. Augmented reality
has long been on the cusp of becoming
mainstream technology, yet a lack of
awareness and understanding has often held
it back from widespread adoption.
The launch of Apple's ARKit and Google's
ARCore will now educate consumers and
allow hundreds of creators around the world
to design AR experiences. From an enterprise
perspective, software giants such as SAP,
Oracle or Cisco entering the industry also
provides critical infrastructure required to
manage and deliver successful AR services.
It is important to keep in mind that AR does
not solve a problem on its own, and has to
be embedded in a wider ecosystem in order
to fully develop. 2018 will continue to see this
augmented reality ecosystem grow, with the
creation of supporting technologies that will
allow AR to reach its full potential.
Augmented reality has already made its first
steps into the workplace and its revolutionary
impact will accelerate over the next year.
AR can, for example, be used for remote
maintenance, enabling engineers to view and
understand a problem at a distance, reducing
costs and driving efficiency. AR has also
begun to have a significant impact on retail.
Walmart is one of the leaders in this area, using
augmented reality in both stock management
and online shopping. Ultimately, augmented
reality will show its worth through creating a more
engaging and simpler experience in day to
day tasks.
Yet different markets will see the technology
develop in different ways. Europe is particularly
focused on the way AR can improve workplace
efficiency, whereas the US is leading the way
in social media with the likes of Facebook
and Snapchat as prime examples of this. Asian
firms in turn look to these European and North
American pioneers to push their own capabilities
in AR forward.
This shift in the industry will lead to a race
for talent. Here, Europe is a vital player: the
best universities for these technical fields are
European, from King's College London and Trinity
College Dublin in the UK to ETH in Switzerland
and the Technical University of Graz in Austria.
Many leaders in the sector are also originally
European, such as Andreas Wendel, an Austrian
by birth and Google's computer vision lead
for its self-driving car. This pipeline of talent will
be critical to developing the global ecosystem
required for AR to thrive.
While adoption, awareness, and acceptance
of augmented reality will accelerate in 2018,
it will take time for the technology to reach its
full potential. It remains a disruptive technology
that requires a significant change in approach,
investment, and talent. The biggest challenge
of the next few years will, therefore, be how,
and when, this disruption will settle down and
become an essential part of our day to day lives.
2018 will be the year of augmented reality: with tech giants such as Apple
and Google entering the stage, the AR landscape is set to rapidly grow.
The technology is set to scale from an emerging innovation to a fundamental
technology for businesses around the world. In ten years' time, AR will be
just as mainstream as smartphones are today.
METHODOLOGY
METHODOLOGY
AUTHORS
PER ROMAN
Managing Partner
JONATHAN CANTWELL
Director
MATTHEW FINEGOLD
Analyst
PIERCE LEWIS-OAKES
Analyst
This report was compiled through the expert insights of GP
Bullhound's worldwide team alongside detailed analysis of
investment trends in the global technology sector in recent years.
It is intended to provide our predictions for growth, investment,
and impact in the digital economy in 2018. Each year, we provide
a transparent assessment of our predictions from the previous
report to maintain a high level of scrutiny on our own research.
ALEC DAFFERNER
Partner
38
GP BULLHOUND TECHNOLOGY PREDICTIONS 2018
39
THE GP BULLHOUND TEAM
Vice President
JAVED HUQ
CLAUDIO ALVAREZ
Director
GRAEME BAYLEY
Partner & Group CFO
JOFFREY EZERZER
Analyst
ALEXIS SCORER
Director
ADAM PAGE
Analyst
JAIME SENDAGORTA DIAZ
Associate
BEN PRADE
Senior Advisor
MANISH MADHVANI
Managing Partner
ALEC DAFFERNER
Partner
JOHANNES KERMARK
Vice President
CHRIS GRAVES
Director
JOAKIM DAL
Investment Manager
KARL BLOMSTERWALL
Analyst
CHRISTOPH GRUNEWALD
Analyst
LINDA NORDMARK
Finance Manager
STAFFAN INGEBORN
Non-Executive Director
JULIAN RIEDLBAUER
Partner
Director
PER LINDTORP
FELIX BRATELL
Analyst
PIERCE LEWIS-OAKES
Analyst
SIMON MIREMADI
Associate
IMAN CRISBY
Vice President, Marketing
CHRISTIAN LAGERLING
Co-Founder & Senior Advisor
Partner
ANDRE SHORTELL
MARK SEBBA
Non-Executive Director
SEBASTIAN MARKOWSKY
Director
RAVI GHEDIA
Vice President
JACOB LOVENSKIOLD
Analyst
CHRIS PARK
Associate
CARL ELFVING
Analyst
LORD CLIVE HOLLICK
Senior Advisor
HUGH CAMPBELL
Managing Partner
GUILLAUME BONNETON
Partner
ALESSANDRO CASARTELLI
Director
DAVE NISH
Technology Manager
PAUL GAILLARD
Analyst
JOY SIOUFI
Vice President
NIKOLAS WESTPHAL
Director
REDA BEN LARBI
Analyst
SIR MARTIN SMITH
Chairman
SVEN RAEYMAEKERS
Partner
NICK HORROCKS
Director
KYLE BOOYSENS
Analyst
MAX BERNARD
Vice President
OKAN INALTAY
Analyst
ANN GREVELIUS
Senior Advisor
MARVIN MAERZ
Associate
JONATHAN CANTWELL
Director
ROBERT AHLDIN
Partner
MATTHEW FINEGOLD
Analyst
OLOF RUSTNER
Vice President
DIPAM PATEL
Associate
CARL WESSBERG
Director
ED PRIOR
Analyst
CECILIA ROMAN
Senior Advisor
PER ROMAN
Managing Partner
SIMON NICHOLLS
Partner
ELENA BOCHAROVA
Analyst
OSKAR HERDLAND
Director, Equity Capital Markets
ALON KUPERMAN
Principal
FRAENZE GADE
Vice President, Events
HAMPUS HELLERMARK
Analyst
MATHILDE JAKOBSSON
Event Manager
40
ABOUT US
OUR MARQUEE
CREDENTIALS
MERGERS & ACQUISITIONS
We act as a trusted adviser to many of Europe's
leading technology companies in competitive
international sale and acquisition processes. The
firm has completed over 120 M&A transactions
to date with a total value of over $3.8bn.
CAPITAL TRANSACTIONS
We have advised companies and their owners
on more than 125 capital related transactions
including venture capital, growth capital,
acquisition funding, secondary block trades and
Initial Public Offerings. The firm has raised over
$1.7bn of financing for European technology
companies to date.
INVESTMENTS
Through our investment team, we provide investors
with access to the most ambitious privately-held
technology and media companies in Europe. We
currently manage three closed-end funds and our
Limited Partners include institutions, family offices
and entrepreneurs.
EVENTS & RESEARCH
Our events and speaking activities bring together
thousands of Europe's leading digital entrepreneurs
and technology investors throughout the year. Our
thought-leading research is read by thousands of
decision-makers globally and is regularly cited in
leading newspapers and publications.
ABOUT US
GP Bullhound
GP Bullhound is a leading technology advisory and investment firm, providing
transaction advice and capital to the best entrepreneurs and founders in Europe
and beyond. Founded in 1999, the firm today has offices in London, San
Francisco, Stockholm, Berlin, Manchester, Paris, Hong Kong and Madrid.
ESSENCE
Sold to
WPP
13TH LAB
Sold to
FACEBOOK
SEQUENCE
Sold to
SALESFORCE
RIGHTWARE
Sold to
THUNDERSOFT
INNOGAMES
Sale of
equity stake
MODERN
TIMES GROUP
ICOMERA
Sold to
ENGIE INEO
SEENE
Sold to
SNAPCHAT
AUTOTRADER SA
Sold to
OLX/NASPERS
GP BULLHOUND TECHNOLOGY PREDICTIONS 2018
41
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