Predictions

You can't be a curious analyst without coming up with a few bold predictions based on what you've seen. Please take any prediction here with a grain of salt. We’re just having some fun and exploring different ways the future might work out.

That said, here are some predictions derived from our work:

1. DIGITAL PAYMENT NETWORKS CAN’T KEEP CHARGING 1990’S PRICES FOR A 2020’S SOLUTION

Digital payments have grown at such a rate that they account for 53.1% of all consumer expenditure in the United States. Their size now outweighs the regulatory scrutiny, which probably came at a time when they were a much smaller part of the market. 

A core value proposition of these digital payment networks that drove their pricing is the fraud protection and security they provide. However, this service should become cheaper as volumes increase. There is more data available to train algorithms, transaction sizes have decreased and debit cards (where the maximum loss is the account balance) have been growing in share.

All of these factors should place downwards pressure on fees, let alone the economies of scale from processing more volume through the network. Yet average fees have proven remarkably resilient for the digital payment networks.

Bold prediction: The average fee taken by digital payment networks decreases over the next 15-years as transaction volumes continue to grow from $28.5 trillion in 2024 to $70.4 trillion in 2038.

2. ALPHABET WON’T BE ABLE TO HOLD BACK NEW PRODUCTS AND BUSINESS UNITS FOREVER

We forecast that digital advertising growth slows dramatically in the 2035-40 period. However, we're not concerned for the near term prospects of companies built on digital advertising revenue as the market will add more spend in the next 15-years than its current market size.

We forecast the digital advertising market will grow from $552.6 billion in 2024 to $1.4 trillion in 2040. Because the denominator has become so large while there will be lots of absolute ($) growth, the relative (%) growth rate will slow down.

The next CEO of Google/Alphabet will want to maintain the highest possible overall relative growth rate as the relative growth rate from digital advertising tapers off. We believe that will mean they will finally have the motivation to launch new products in the transportation and healthcare fields.

Bold prediction: Alphabet will finally launch large new business units in the transportation and/or healthcare industries starting in the early 2030’s.