Where We Are Now — 2017 In Review
A year-end reflection on the biggest headlines and market trends of 2017
We’re nearing the end of the year, which means it’s time to take a look back on the year and examine how the market trends we predicted in our 2017 Outlook report played out over the course of the past 12 months.
Consumer interfaces continued to evolve as voice interface and AR interface both saw significant adoption growth over the past year. This trend of unbundling smartphone components (such as the camera, microphone, etc.) and integrating them into other gadgets matters for brand marketers because the advanced interfaces alter the way consumers interact with digital devices and create new ways for brands to reach their audience.
On the voice side, smart speakers are taking U.S. households by storm. 32% of U.S. households have a voice-controlled smart speaker product, according to a survey from ThinkNow Research, with over 60 million people in the U.S. now using voice-enabled assistants on a monthly basis. Among the top products, Amazon Echo continues to lead the pack, taking up nearly 70% of the U.S. smart speaker market as of October. 22 million Amazon Echo are estimated to be sold in 2017, according to a Forrester Research forecast.
Both Amazon and Google made efforts to diversify their smart speaker lineups, introducing new products such as the Echo Show, Echo Look, as well as the Google Home Max and Mimi. Both companies also refreshed their flagship smart speaker with new designs and functional improvements. Amazon even started rolling out to 28 new countries across Europe and South America, after landing in Germany, Japan, and Canada earlier this year. With the holiday shopping still underway as low-end smart speakers like the Echo Dot and Google Home Mimi dipping below $30, we expect many new smart-speaker customers to come online in 2018.
This year also marked a true breakout year for augmented reality (AR), especially mobile AR. While Pokemon GO already gave mainstream users a taste of AR’s potential in gaming the year prior, this year saw the debut of several mobile AR platforms from Apple’s ARKit, Google’s ARCore, to Facebook’s AR Studio and Camera Effects platform, all of which make it easier for developers to create AR experience to engage with mobile users. Even Snapchat, a pioneer in mobile AR, finally opened the floodgate to allow people to create AR lenses with the launch of Lens Studio on Thursday. All together, AR-compatible hardware could deliver an installed base of over 400 million users by 2021. Already, we are seeing brands such as IKEA and BMW making good use of it to enrich their mobile experiences.
The developments in mobile AR neatly dovetail the rise of the camera as a platform. iPhone X and iOS 11 brought facial recognition and native QR code support to Apple users, while Google Lens and Pinterest Lens enabled visual search on select handsets to put the camera front and center in the mobile experience. Of course, not everything can be a big success. For example, Snapchat’s camera-embedded sunglasses, Spectacles, failed to take off due to an inefficient roll-out strategy and limited use cases. With hundreds of thousands of Spectacles unsold, this miss is estimated to have cost the company $40 million.
The release of Apple Watch Series 3 with cellular connectivity has the potential to put wearables back on the map, as it finally becomes fully functional when independent of an iPhone. Demand for Apple Watch Series 3 with cellular was stronger than expected, taking over 80% of the preorder for Apple Watches, and supply-chain report predicts 20% growth in its shipments in 2018. As wearable devices continue to come into their own and expand their use cases, user adoption should continue to pick up as well. Gartner’s latest report predicts sales revenue of wearable devices will hit $30.5 billion in 2017, a 16.7% increase over last year.
- The Rise of Interactive Visual Culture & What It Means for Brands
- Apple’s ARKit vs. Google’s ARCore: What Brands Need to Know
With more and more media channels getting online and going over-the-top, most of them become global-reaching instead of regionally focused, thanks to the openness and borderless nature of the internet in most parts of the world. Global culture refers to the audience aggregated by those emerging digital platforms. It’s a trend that has been developing for years, but one that has really coming into focus in 2017 as more apps, and platforms, and streaming services becoming media channels that marketers can tap to reach either a mass audience or a targeted, niche demographic on a global scale.
Even mainland China, a region largely cut off from accessing the global platforms, is not immune to the forces of global culture. The incident of Gigi Hadid — a high-profile Victoria’s Secret model who got banned from entering China for the lingerie brand’s fashion show in Shanghai following a fierce online backlash against her racially insensitive mimicry of Asians earlier this year– stands out as a perfect example of the amplifying influence of global platforms and the consequences of brands failing to realize their global-reaching scale.
In 2017, esports continues to grow at an impressive rate and has successfully crossed over into mainstream media channels. The Rocket League Championship Serie stood out among this year’s plethora of esports event with about 1.4 million hours of viewership for its S4 World Championship event. Another popular online game Overwatch amassed over 35 million players worldwide as the game’s publisher Activision make it easier for traditional advertisers to spend on esports. On the digital media side, Hulu made its entry into esports with a exclusive content deal with ESL for 4 gaming shows, while Facebook signed on as exclusive livestream partner for Paladins Premier League. Esports have grown at such a head-turning rate that traditional sports leagues such as the NBA, the MLB, and the NFL have all started or doubled down investing in esports teams this year.
Then there is the breakout hit of HQ Live, a live trivia game app that has become a viral sensation among iPhone users in recent months. Twice a day, around 350k players log on to participate in one or two rounds of trivia game that consists of 12 questions, each one more arcane and esoteric than the last, hoping to win the bragging rights and share a portion of the prize money with other winners. Although only available in English, with a majority of the questions focuses on western pop culture, the app is available globally, meaning that anyone in the world could participate. In the coming years, we expect to see more types of live games to pop up and aggregate massive user attention in real time.
Netflix continued to internationalize television as it ramped up its global content production. Dozens of regional-specific shows are developed and found an global audience thanks to its global-reach service. “Narcos” swept both U.S. and Latin America, and UK-based “Black Mirror” is a hit throughout the English-speaking world. Even some foreign-language shows, such as Dark from Germany and 3% from Brazil, are gaining traction among U.S. audience.
Partially inspired by Netflix’s continuing success with the global audience, Disney also announced that it will launch two OTT streaming services in 2018 to carry the entertainment and sports content it owns, while should further diminish the global release windows and further boost the global culture. Buying Fox’s TV and movie assets will also bring a huge boon to the international appeal of its upcoming streaming service. Brands will need to contend with this new global-as-default reality of media distribution and consumption.
How to apply advances in machine learning and artificial intelligence to optimize marketing campaigns and enhance customer experience has been a hot topic in our industry throughout 2017, and the discussion is only likely to intensify in the years to come as AI-powered solutions continue to infiltrate every aspect of consumers’ daily lives. This year’s advances in those augmented intelligence tools mainly manifested in four domains — cloud computing services, maturing voice assistants, autonomous vehicles, and the iPhone X.
First up, AI-powered cloud services are making it easier-than-ever for brands to incorporate machine learning solutions into their enterprise operations and customer experiences. The set of new cloud-based machine learning tools that Amazon introduced at its AWS re:Invent two weeks ago is a good example of the kind of AI tools that brands can incorporate today to upgrade the backend of their websites and apps so as to provide a more customized experience for their customers. Hotels.com is currently using Translate to power automated translations of customer reviews for the site’s listings around the world and improve customer experience via localization.
The advances in AI also mean major improvements to the voice assistants powering the aforementioned voice interfaces. Alexa and Google Assistant both received significant updates that enabled voice identification for multi-user support, payment support for completing transactions via voice, and better conversational skills at large. Alexa, in particular, received backend updates that leverage deeper contextual learning to help Alexa better understand contexts (such as which Echo device it is operating on) and differentiate its answers accordingly. Siri is poised to receive a significant update as Apple confirms its acquisition of the music-recognition app Shazam.
Developments in driverless cars throughout the year also highlighted the growing application of AI, specifically machine learning and computer vision. As of today, a total of 53 cities in the world are piloting autonomous vehicles programs. 14 of them are in the US, with 16 more US cities preparing to launch similar programs, according to The Global Atlas of Autonomous Vehicles in Cities, a joint effort between Bloomberg Philanthropies and the Aspen Institute, Lyft is offering rides in self-driving car in Boston and SF, while Uber’s fleet of self-driving cars in Pittsburgh back on the road after an accident is resolved. With many automakers aiming to roll out market-ready autonomous vehicles by 2020, the AI-powered self-driving software will quickly improve with the increasing number of road tests in the coming years.
Last but certainly not least, the release of iPhone X, which carries Apple’s first “AI-chip” marked the first time that AI is built into the mobile hardware. A neural engine, part of Apple’s A11 Bionic chip blends AI-smarts with iPhone X to power FaceID’s facial recognition, image-processing, as well as improving Siri performance. According to analysts at Rosenblatt, Apple reportedly sold 6 million iPhone X units over Black Friday weekend, out of a total of 15 million iPhones sold. As our smartphones get smarter and more intuitive, so should the overall mobile experience.
A recent survey conducted by Salesforce Research found that 51% of marketing leaders are already using AI, with more than a quarter planning to pilot it in the next two years. For brands that are still on the fence about whether to incorporate machine learning and AI solutions into your business, 2017 has responded with a resounding “yes.”
The brick-and-mortar retail industry has had a tough year, with a record number of stores closing and mounting disruption from tech-savvy ecommerce competitors. While not a trend that we highlighted in this year’s Outlook report, this is very much a result of the Boundless Retail trend that we highlighted in our 2015 Outlook. Thanks to the growing influence of ecommerce, rising shopper expectations are outpacing retailer’s investments in revamping the in-store experience. When 53% of millennial consumers say they are “better connected” and able to find information more quickly than retail associates, it is no wonder that they would prefer to spend their money on digital channels.
The biggest retail news of the year is clearly Amazon’s 13.7 billion acquisition of Whole Foods, which sent the entire U.S. grocery industry into a tailspin. Buying Whole Foods instantly gives Amazon access to the premium grocery customers they have been chasing after and the mass scale it needs to run its grocery business as a modularized service. It is no wonder that many retailers are feeling the pressure from Amazon and resorting to their own acquisitions, such as Walmart buying menswear brand Bonobos and CVS acquiring health insurer Aetna for $69 billion, as well as pulling their vendors off Amazon Web Services.
Looking ahead, retail will continue to go through a rough transition period as shopper behavior continues to shift. Omnichannel retail concepts and services such as mobile payments, in-store pickup, dynamic shelf displays, and same-day delivery are catching on among retailers. As more and more shoppers start to choose to shop online and on their mobile devices, retailers will have to continue to explore new store formats and experiment with digital tools in order to differentiate their in-store experiences and win back customers.
- Updates On Boundless Retail: From Omni-Channel To Customer-Centric
- Updates on Boundless Retail: Diversified Shopping Experiences As Differentiator
As we close the book on 2017, it is clear that this year has seen tremendous lift-off for mobile AR, voice interfaces, global-reaching media channels, and AI-powered software services, each with their own significant implications for brands and advertisers. As the Lab continues to keep a close eye on the development of all things related to consumer technology and media futures, we expect to see more amazing advances in the coming year. Please remember to check back in January for our coverage of the 2018 CES from Las Vegas, and enjoy your holiday break!