CES 2013 Report

The Consumer Electronics Show (CES) this year attracted about 153K attendees (flat compared to last year) and had 3000 exhibitors (about a 15% increase over last year).  Building from last year’s trend, this year CES was dominated by mobility and wireless Internet connectivity solutions.  My focus continues to be on the implications of these themes on the consumerization of the enterprise and the monetization of the Internet.

Themes

• Mobility.  Walking the floor I was struck by how much PCs had been displaced by tablets and smartphones.  The tablets and smartphones introduced far outstripped the PC variants that were introduced.  Eventhough manufacturers introduced a spate of Windows 8 PCs, mobile devices took the center stage in manufacturers’ booths while PCs (laptops, ultrabooks) were given less prominent positions.  Microsoft was absent from CES for the first time but I don’t think that this was the reason for the lack of PC display prominence.  It's just that the world is moving irreversibly towards tablets and smartphones of various sizes.  CES didn’t include any “big” mobile device introduction.  We saw a continuing evolution in terms of what the mobile devices can do.  The mobile device market is maturing, particularly in the US and parts of Asia, so the manufacturers don’t expect to see revenue growth just through additional device shipments.  Instead the growth will come from the increasing value of the applications and content found in each smart device. From the discussions I had with IT executives I expect a continued trend for BYOD and CYOD (Choose Your Own Device, from choices offered by corporate IT).  The content offered in the various devices being demonstrated is not yet driving replacement or upgrade cycles. I saw an improving trend on the use of mobile devices to monitor health and fitness.  It was reported that 50% of US online consumers are now using a single- or multi-sensor devices to monitor their health and fitness.  This represents a continued opportunity to collect and correlate data and combine with other health-related data; though this is not happening yet mostly because of closed interfaces rather than privacy concerns.

• Connected TV.  TV manufacturers introduced the first models of Ultra HD TV sets (or 4K as is also called).  While the resolution is significantly better than HDTV, everybody I spoke to admitted that the US consumers and corporations are not ready for a TV upgrade cycle and mentioned the failure of 3D TV as an example.  Many believe that Ultra HD will have the same fate, at least in the short term.  In addition, there is a lack of content for these new TVs.  However, the improved Internet connectivity offered by new TVs (not only the high end ones) is of greater interest, particularly to advertisers.  The improved connectivity enables these sets to offer richer interactions with mobile devices such as tablets and smartphones which, particularly younger consumers appreciate, and provide Internet style ad targeting of the consumer.  Remember that during 2012 mobile advertising proved particularly successful.  It will be interesting to determine how older TV sets can be retrofitted to offer this improved connectivity.  I imagine that TV manufacturers will need to start componentizing their systems and offer a connectivity box that is separate from the monitor, rather than cramming everything on the same chassis, as it is done today.  CE manufacturers will also need to develop publicly available APIs and more open systems.  This again runs counter to the current trend of creating closed ecosystems.

• Ad agencies and brands. In all the years I’ve been coming to CES I’ve never seen as many representatives from ad agencies and brands in attendance.  In addition to being a rather unique opportunity for meetings because of its size and diversity of attendees, ad agency executives and brand representatives attended the show in order to better understand consumer technology trends particularly around the wireless and multi-screen world and its implications to multi-channel marketing and targeting.  I saw many agencies giving tours of the show floor to their clients and I’m sure they used the opportunity for meetings with their clients.  I certainly took the opportunity to meet with several ad agency and brand executives.

Investment Implications

1. While manufactureres introduced several mobile devices running Windows 8, CES 2013 showed once again that Android and iOS remain the two dominant mobile platforms.  However, the variability among the versions of Android available in the market, the proprietary extensions created by each manufacturer and the lack of well-defined and robust APIs will continue to present problems for application development, integration and security.  HTML5 is not having yet the type of impact I was expecting.  The mobilization of enterprise applications, i.e., connecting enterprise applications to mobile front-ends, will remain a problem for the next couple of years and present investment opportunities.
2. The incorporation of tablets, and smartphones into business processes will further accelerate the enterprise’s cloud adoption for the provision of content and services, e.g., applications, storage, training, etc.  We expect to see major enterprise initiatives particularly around mobile commerce and multi-channel marketing and will continue to look for opportunities.
3. Connected TVs and the deeper integration between TV sets, tablets and smartphones, will lead to online advertising emerging as the primary way for monetizing content and applications. 
4. The human-to-machine and machine-to-machine interactions that result from the increasing device connectivity will result in larger, more complex, and shorter “half-life” data sets (big data) that will need require increasingly sophisticated analytics.

Related articles

CES 2013: The Year the "Connected Home" Becomes a Reality?

What We Learned at CES and What Brands Have to Know - Day 2 Recap

This Year You Don't Have To Work at Microsoft to Get Steven Sinofsky's Take on CES