Why you shouldn't believe analysts' predictions, evah

Sweet Nothings Whispered for a Fee

 

Analysis firms are paid  by companies to make predictions, who use the predictions to promote themselves, internally and externally. It is a virtuous-vicious circle: when we hear a company boasting that their business opportunity is $X billions by 2017 -- whether 3D printer sales, cloud transactions, or market share -- they paid a firm to come up with the Too-Good-To-Be-True-sounding number.

Naturally, the analysis firms have no way of knowing what iPad-like events will distort the furutre market, rendering their predictions as a fail. So, word of advice: ignore those numbers, 'cause they ain't gonna happen for any reason at all.

How bad are the predictions? Tomi Ahonen writes about mobile phones. He used to be with Nokia, but now is on his own, giving speeches and writing a blog at http://communities-dominate.blogs.com. 

This week, he listed predictions made by analysis firms in 2012 about the smartphone market in 2015 (and a few other years), and then compared them with the real outcome. The predictions were made for a mere three years into the future. (Word of warning: he likes to boast about how much he boasts about how accurate his predictions are. I am guessing he picked the worst of a bad lot of predictions by competitors.) Anyhow, here is his list and I quote him:

• In 2012 iHS iSupply promised us Windows Phone would zoom up to 15% market share [by 2015] (reality? stayed at 3%. 5-fold error).
  
  
• Gartner in 2012 promised that Windows Phone would pass iOS to become second biggest smartphone OS in 2015. Apple has 15%, Microsoft has 3%, that's a 5-fold error. 
  
  
• In 2011, [Pyramid] promised the world that Windows Phone would grow past Android by 2013 (which tells us a lot about who must have been paying Pyramid for this garbage)... For the record, in 2013, Android sold 767 million units of smartphones and Windows Phone managed 33 million. That error is as far as I know the biggest error in any forecast in mobile ever made, at 2,200 percent, in a very short term forecast period covering only 2 years! 
  
  
• Abi forecasted in 2012 that smartphone unit sales would pass dumbphones in four years in 2016 (reality was the very next year 2013, so error was 4x).
  
  
• In 2012 Ovum told us iPhone would grow global market share and reach 27% by 2017. Well it didn't grow; it's been falling and is now at 15%. Maybe Ovum turns out still correct, but highly unlikely. As it now stands, they are off 80%.
  
  
• Credit Suisse told us in 2012 that global smartphone sales would hit the 1B[illion] level in 2015 (reality this year will be 1.5B, so an error of 50%).
  
  
• Forrester told us in 2012 that smartphone apps would be worth 56 Billion dollars [by] this year 2015 (reality will be about half).
  
  
• Research & Markets forecasted in 2012 that the global smartphone market would be worth 218 Billion dollars this year 2015. Reality is nearly twice that at about $400B (so error of say 83%).
  
  
• In 2012 Morgan Stanley forecasted for us that Nokia would sell 80 million smartphones in 2013. They sold 30.5 million (error 162%).
  
  
• IDC in 2012 promised us that year 2016 would see Android OS pass Windows [desktop operating system] on all new digital devices sold. It actually happened the next year 2013 (so it was an error by a factor of 4). 

 Mr Ahonen concludes:

It's not easy being in the forecasting business, we all get it wrong from time to time, and sometimes we make big booboos.

But most of my 'peers' do not bother to come back and remind you about how their past forecasts were, nor to try to examine why that forecast went wrong. 

 To me, the really interesting fail regards smartphone apps. Whereas analysts underestimated the Android sales explosion, the sales of apps were greatly overestimated.  

You can read the full blog posting at http://communities-dominate.blogs.com/brands/2015/04/reviewing-my-last-4-year-forecast-blog-3-years-in-from-2012.html

 

 

Comments

[TonyT]

On app sales: does that include in-app purchases? I suspect, especially on Android, there's a tendency to make the apps free and make money on in-app purchases.

[ExNokian]

Actually it is funny that Tomi has in his track record even WORSE forecast than the one he calls "the biggest error in any forecast in mobile ever made":
https://dominiescommunicate.wordpress.com/2016/03/18/tomi-ahonen-scores-the-least-accurate-forecast-ever-made-off-by-over-seven-thousand-percent/
Not that he would have been very accurate in the past either. Please check the "forecasts" category in the blog. Year after year he was clueless on Android, clueless on iPhone.