It's pretty clear most forecasts, with some notable exceptions of course, suck. The entire endeavor is flawed. When predicting the future, most assume it will resemble the present and develop in a straight line. That doesn't always happen. (See Obama.) This is particularly true when it comes to industry forecasting. Internet research firms make a pretty penny peddling consulting services. One of their marketing strategies for the real dough of advising clients is to put out "industry forecasts." Reporters dutifully write stories with blaring headlines of giddy growth in mobile, seach, social media, whatever. These have long struck me as ridiculous. You're going to tell me what's going to happen in video advertising five years from now? What do they use a crystal ball? I recently asked an analyst about whether this stuff was just pure B.S. He claimed the forecasts are "directionally accurate." How accurate? "About 20 percent." Today I wondered how eMarketer could with a straight face forecast search ad spending in 2013. In the words of Lon Cohen:
The problem: these figures are used by companies to justify strategies to investors and the press. Yet nobody asks whether they're valid. For fun, I decided to hunt down an Internet ad forecast from years ago to see how the gurus did. Sure enough, Jupiter projected in August 1999 robust Internet ad growth, enough to reach $11.5 billion in 2003. Guess where it ended up? $7.3 billion, according to the IAB. That's not 20 percent off, it's 57 percent wrong. Jupiter assumed the past would keep repeating itself. It didn't factor in the structural weakness of the online bubble, along with the aftereffects of a recession exacerbated by a terrorist attack. Maybe it's not research firms' fault for not knowing the future, but it's everyone's fault who puts much stock in these forecasts, even "directionally."