Five tech industry predictions for 2012

The past year in technology was pretty wild.

The really big Internet IPO returned and the massive venture capital funding bubble inflated, which seems difficult considering that the venture capital industry is far smaller than it was three years ago. But look at some of the crazy valuations on revenue-less photo-sharing startups like Color and Path. And there is clearly another bubble inflating in the cloud computing sector, with every company that uses a distributed architecture now calling itself a “cloud company.” So what does 2012 have in store? Here are my predictions.

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1. Social media will lose its sizzle.

It’s already happening in fact, as growth of social media usage has begun to slow for upstarts such as FourSquare and stalwarts such as Facebook alike. Silicon Valley has been obsessed with social media, and investors have funded hundreds of “me too” startups to the tune of billions of dollars. There are social networks for pet owners, all manner of marginal Twitter apps, a ridiculous number of mobile photo-sharing apps, hundreds of apps targeting social media analytics and on and on and on.

Just as location-based applications became a “feature” rather than the “big thing,” social media will live on and become an integral part of what we do. But the party’s over for investors and startups in this space. The big growth is behind us. Revenues from social media have not lived up to the promises, and the vast majority of those thousands of startups are either dying or on the ropes. It’s time to jump on the next bandwagon, folks.

2. The bubble will pop for the current crop of tech IPOs.

LinkedIn and Zynga will probably lose more than half their value. LinkedIn is a great company, but even its current valuation of $6 billion is hard to justify. Zynga’s valuation is based more on hype than business reality. Groupon will probably lose most of its value as well because of the inability of the company to actually make a real operating profit that doesn’t require odd accounting gyrations.

But we’ll see another bubble of inflated IPOs coming in the form of the next generation of social game companies, newfangled B2B technology players (if Salesforce.com CEO Marc Benioff doesn’t buy them all first), and cloud computing companies. And there is little doubt that Facebook will be the IPO of the year — but likely at a lower valuation than is being speculated.

3. An explosion of the tablet market driven by sub-$100 tablets.

The Kindle Fire made waves with its $199 tablet, but we will probably see a new generation of Android-powered tablets that are priced at $100 or below. Tablet manufacturers don’t have the financial incentive to make these too cheap because profits shrink along with price. Once these devices get in the $100 range, carriers may subsidize them as a way to get customers to buy data plans — just like they have done for years with smartphones. Or tablet manufacturers may offer these devices with internet service bundled for as little as $10-15 per month.

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For sophisticated consumers, these cheap tablets will seem rudimentary. But there are many new markets that will embrace these devices. And they enable a quantum leap for education systems, communications and information sharing in the developing world. India’s $35 tablet is already a reality. The current version (pictured), produced by Montreal-based DataWind is underpowered and clunky, but the next versions will be very usable. Imagine the price pressure DataWind will put on the lower end (meaning everyone but Apple) of the U.S. market if it releases the Aakash tablet in the United States.

4. Voice recognition goes mainstream.

Former Apple CEO and chairman Steve Jobs revolutionized user interaction by popularizing the Windows interface and mouse. With SIRI, he did his magic once again. SIRI is light-years better at handling complex requests than anything on a smartphone to date — and is getting better with each software update. Apple will embed this technology in new devices such as the Apple TV, in future versions of iPads and iMacs. It will probably open the interfaces to other applications and set off the voice revolution.

The type of voice command capabilities that we saw on “Star Trek” will start to become the reality.

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5. “Cloudburst” shakes the tech industry.

Cloud computing is advancing faster than our ability to secure systems. Companies are rapidly moving their most critical data and information from file cabinets and secured servers to shared servers on the Web. Cloud computing provides significant cost savings and operational advantages. But it also unleashes a Pandora’s box of security concerns.

We’ve already seen cloud break-ins originating from China. And a number of legitimate Internet companies have suffered when the FBI confiscated a shared server in a cloud hosting facility that also hosted rogue applications. One major security breach could throw cold water over the entire industry and slow down the corporate adoption that is expected to drive cloud growth this year and for many years to come.

No doubt the tech world is in for another roller coaster ride—which will be a lot of fun.

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Washington Post columnist Vivek Wadhwa is a visiting scholar at the School of Information at UC-Berkeley, director of research for the Center for Entrepreneurship and Research Commercialization at the Pratt School of Engineering at Duke University, and senior research associate for the Labor and Worklife Program at Harvard Law School.

Full disclosure: Washington Post Co. Chairman and chief executive Donald E. Graham is a member of Facebook’s board of directors.

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This story originally appeared on Www.washingtonpost.com. Copyright 2011