The Terrible Tablet Tsunami and the Future of Computing

IDC just issued a press release updating their expectations for tablet shipments. Here are their numbers, year by year:

2010: 19.5 million tablet shipments.
2011: 69.6 million tablet shipments.
2012: 107.4 million estimated tablet shipments.
2016: 222.1 million estimated tablet shipments.

When looking at the above numbers, you need to keep two things in mind:

1) These numbers DO NOT include the anticipated shipments of Windows RT and Windows 8 tablets. If Microsoft has its way, that’s a lot of missing tablets. Further, IDC expects the coming Windows tablet shipments to be ADDITIVE to their existing tablet estimates.

2) IDC has consistently UNDERESTIMATED the number of tablet shipments in each of its previous forecasts. By a lot.

For example, in March 2012 – just three months ago – IDC increased their estimates of tablet shipments in 2012 by 21% from 87.7 million units to the 106.1 million units. That still wasn’t enough of an upward adjustment and three months later IDC had to tweak their totals from 106.1 million to 107.4 million.

Further, if you look at the current growth in tablet shipments and compare it with IDC’s predicted 222.1 tablet shipments in 2016, you can see that their estimated growth rates are far below current levels and conservative in the extreme.

What does this all mean? It means that if desktop shipments continue to stay flat or modestly decline as they have for the past several years, then tablet shipments will be on a par with desktop shipments within the next 4 years.

The implications are industry shattering.

First, he who makes the most tablets makes the most growth.

Second, only platforms that are able to sustain significant market share in tablets will remain viable in personal computing in the long run. The first implication is self-explanatory. The second may require some justification.

Three Categories of Computing. Today, there are three distinct categories of computing: smart phones, tablets and desktops (including notebooks). Some consumers own devices in only one category, some own devices in two categories and some consumers own devices in all three. The trend is definitely toward multi-category computing ownership.

If you’re going to buy devices that span multiple categories, it only makes sense to buy devices that run on the same or a compatible platform. In other words, if your platform doesn’t support phones, tablets and desktops, then your platform is going to become marginalized.

I don’t hear analysts, pundits or commentators talking about this much and I don’t know why. Platforms are “sticky” – they have high retention rates. Multiple device platforms are like glue. Once you own two or more devices on one platform you’re very unlikely to every leave that platform. The company or companies that work well across all three computing categories will dominate personal computing for the next five to ten years.

APPLE: Right now, only Apple has a multi-category solution in place. Apple’s mobile operating system (iOS) runs on both its phones and its tablets and Apple is working hard to make the transition between their mobile OS and their desktop OS (OS X) as familiar and as comfortable as is possible.

Apple not only has a lead in creating solutions for all three computing categories but they are working hard to extend that lead as well. Last Fall, Apple announced that they would synchronize their mobile and their desktop operating system updates and put them on an annual schedule. This commitment to parallel development makes it much easier for Apple to move their two operating systems in lock step.

With iCloud binding their phones, tablets and desktops together in a seamless whole, Apple is well positioned for the multi-category computing market that lies ahead.

MICROSOFT: Currently, Microsoft has a big problem and an even bigger proposed solution. Right now, Microsoft dominates the desktop, has minuscule share in phones and no share at all in tablets. That’s a big problem.

Their big solution? This Fall Microsoft intends to introduce Windows RT tablets, Windows 8 tablets and, perhaps, even an ebook reader. Microsoft is currently well behind Apple but they intend to provide a solution that spans and ties together all three computing categories. And they plan to do it in a hurry.

Can they make it happen? Unknown. We’ll have to wait and see. If they don’t, they are in deep, deep trouble, at least so far as personal computing goes. If Microsoft’s tablet solutions are only as popular as their phone solutions have been thus far, then those who seek a multi-category computing solution will soon learn to look elsewhere.

Microsoft has its work cut out for it but if they can gain acceptable market share numbers in the tablet sector (which will presumably translate over to the phone sector, as well) then they are well positioned to create the type of ecosystem that makes multi-category computing such a joy. Microsoft has flaws like any company, but ecosystem is not one of them. If Microsoft can just get back in the game, they can play the multi-category computing game as well, or better, than anyone.

ANDROID: So wither Android? Right now Android dominates overall smart phone sales. But just as Microsoft is currently stranded on the desktop, Android is currently stranded on phones. Their struggles with tablets have been well documented and they’re not even trying to provide an Android solution on Desktops (Chrome, yes. Android, no.) If you want a single platform to support your multiple category devices, Android is currently the last place you’re likely to turn.

Can Android turn things around? Of course they can. Google has committed to putting more resources into Google Play (I still don’t understand why they re-branded Google Marketplace as Google play – Google Play is an awful name) and they’ve promised us a tablet “of the highest quality” this summer. But promises are only promises, nothing more. Just as Microsoft has to prove that they can field a successful tablet product, Google has to do the same. And while Microsoft has a proven track record in building strong and vibrant ecosystems, Google seems to struggle in this oh-so-crucial facet of the multi-category computing game.

Conclusion: Right now, Windows dominates desktops, Android dominates smart phone sales and Apple dominates the cross-category solutions. But rapidly growing tablet sales may not only be the key to computing growth, it may also be the key to the future of all three categories of personal computing.

As tablet sales grow, not only will Apple’s share of the computing market grow but the current positions of the big three operating systems will necessarily shift as well. Like a monstrous game of Jenga, as the pieces move in and out of place, there will be a titanic shift in power as someone, or several someones, find themselves unable to satisfy the desires of a demanding consumer base.

Apple’s place in the new world order seems assured. But as Google and Microsoft fight to gain tablet share, the one who fails to become relevant where they are weakest, will also risk becoming irrelevant where they are currently strongest, as well.

The future is uncertain, but one thing is for certain. If you like tech, the next 18 months are going to fascinating to watch.

The One Thing I Want to See from Microsoft

I have been following the news coming out of Microsoft’s TechEd conference closely. I was scheduled to attend the event but family circumstances altered my plan. There are a host of things that are of interest to me regarding Windows 8. Not everything I am interested in will be addressed until much closer to launch but it has been interesting to see the major messages around their next major software release at their TechEd conference.

The more I study the trends in the industry the more I am convinced that Microsoft’s future depends on them becoming a hardware agnostic software company. Throughout most of Microsoft’s history, all their major innovations and value have been strictly limited to companies who license their software platform Windows. This worked in a Windows dominated world but with the role of smartphones, tablets, and even shifting tides in notebooks / desktops, it is clearly no longer a Windows dominated world. I don’t personally believe we will see a Windows dominated world again the way we did as the computing industry was maturing.

Related: Why History Won’t Repeat Itself

If this is true then the market will support a multitude of software platforms. Which means for a company like Microsoft the key strategy should be to innovate through software for all hardware platforms.

The first obvious move could mean to bring Office to platforms like iOS, Android, and perhaps RIM IF they make a comeback. Reports have come out about Office for iPad and I hope they are true. Microsoft is committed to Office and it would be wise for them to re-envision office for every software platform. When Microsoft began taking the Mac and OS X seriously they brought office to the Mac in a relevant way and did not just port the Windows version. I believe they should do the same thing for iOS, Android, and perhaps Blackberry 10 if it gains traction.

But the thing I would really like to see from Microsoft is something new. Something not Windows and something not Office for personal computing. Microsoft’s innovations have revolved around Windows and Office but I wonder what is beyond. I’d like to see new software, for the new personal computing era, created by Microsoft.

Take for example Apple’s iLife suite of software. It blows my mind that Microsoft has not felt compelled to solve the problem of ease of use for digital media creation and management. I know Microsoft has relied on partners in this area like Adobe, ArcSoft, Pinnacle, etc., but given how key this experience is to consumers I would have thought it was important enough for Microsoft to control the way Apple does.

Even if the area of creativity is not of huge interest to Microsoft I would like to see them create new software or apps that is unique and fresh for their ecosystem and beyond. Windows and Office have been pillars for Microsoft but I am not convinced they are the only legs they have to stand on going forward. I appreciate their efforts to re-think user interfaces for the next era but I still want to see more. I also wonder if just re-imaging a user interface is enough in todays world.

We are entering a new era of computing where we will face new problems which will present new opportunities to solve through software. Which brings me to the one thing I am desperately interested to see from Microsoft. Vision.

Why We Started Tech.pinions

June 13, 2012 marks the one-year anniversary of our site, Tech.pinions. In light of its anniversary, I thought I would share why we felt compelled to attempt something different within the public tech media forum, namely to start a website dedicated primarily to opinion editorial and long form columns.

One of the primary functions of my job as an industry analyst is to study the industry at large and attempt to make insightful observations about all of its happenings. Besides meeting with as many technology companies as my time allows, I find reading quite a bit of tech journalism to be helpful. The problem I found was that much online technology journalism is focused more on information than insight. Tech journalism at its best tells stories and covers informative facts and is genuinely more informative than insightful. There is nothing wrong with this model and I find it particularly helpful in my line of work.

However, what I desire to read is a wide range of informed and insightful opinions on key industry topics. What I have found in my 12 years as an analyst is that insightful perspectives in the form of opinion columns were much harder to find than informative content. I believe both have a role in shaping this industry’s future, and our goal with Tech.pinions is to provide a place where interested readers can find a wide range of opinions, that we hope share key insights and perspectives, on a wide range of subjects related to the technology industry.

Our goal is to accomplish this vision in a number of ways. The first is to be highly selective in the opinions we allow to be published. We seek out a wide range of opinions from individuals who have a history of credibility and a reputation in this industry. We seek out authors who are professional industry observers, experts in their field, company executives, and many other kinds of insightful individuals. The casual reader may not know who the author is, but oftentimes industry insiders will know the author. Because of this we found it important to include the bio of the author on every post so readers can easily see who the person is and what their background is. I personally find this very important when reading content on the Internet in order to know if the author is credible and should be trusted for their opinions, insights, and perspectives.

One other point on this first goal should be made clear. Opinions are not facts. The opinions we publish are based on expert experiences, insights, and data, but the point remains that opinions are just that–people’s opinions. Because of that we fully expect healthy and respectful disagreement from time to time. We only ask that the dialogue be respectful because in the end, everyone is entitled to their own opinion and most importantly, the beautiful thing about opinions is that they open the door to disagreement. We hold our writers to a high bar with their content and we intend to hold our commenters to a high bar as well. So when we disagree, let’s agree to disagree.

Secondly, our goal is insight and perspective, not breaking or reporting news. You will not come to Tech.pinions to find breaking or timely reporting of news. Rather you can come to Tech.pinions to find insightful perspective from trusted industry sources about the news or tech industry landscape. We may not cover every bit of news or industry angle, but what we do cover we hope to provide fresh and unique insights about.

Third, our content will come largely in the form of columns. I personally love reading longer form content from trusted industry sources. It is simply much harder to find a collection of this content since many outlets favor news over editorial. We strive to do the reverse and make editorials and columns our priority rather than trying to break news. Though we do from time to time comment on what others have written, you will find no regurgitating of other blogs’ content; rather all our content is 100% original.

Our mission will remain to provide original insights and fresh perspectives on all things related to tech. And we hope that more than anything, Tech.pinions is a contribution to the technology industry at large where intelligent conversations can live.

Does Apple Love PCs More Than Microsoft?

Does Apple, the post-PC company, have more faith in the future of PCs, than Microsoft?

Photo of Mac Book Pro
Mac Book Pro 15 with Retina Display

The idea may seem a stretch, seeing how Apple’s business is now dominated by iPhones and iPads, but it may well be true. Microsoft very much depends on the PC for its future, but it doesn’t seem to be serving its PC users well

Much of the analysis of Apple’s Worldwide  Developer Conference announcements has focused on the impact on Google. Dumping Google Maps from the iPhone and enhancing Siri search definitely pose some challenges for the search giant. But the larger near term impact may well be on Microsoft, as it struggles to hang onto its PC business while gaining traction in the elusive phone and tablet markets. Microsoft was having a hard enough time catching up with where Apple has been, but Apple, of course, is not standing still.

It’s significant that the new features of iOS 6.0 and OS X Mountain Lion, while impressive, are not earth-shaking. In the past five years, Apple has built a comprehensive infrastructure that ties all of its products together. This effort, while still evolving, has achieved considerable maturity, which is why we should expect that changes will be incremental. The lack of new features that knock your socks off may disappoint ardent fans and the markets, but it’s really a sign of how far Apple has come.

Keeping things separate. Microsoft maintains its dominance of the enterprise back office, but is struggling everywhere else against an upstart it though it had vanquished nearly 20 years ago. In the consumer space, it is betting pretty much everything on on Windows 8, I’ve made no secret of my belief that Microsoft’s decision to go with a common software platform for traditional PCs and tablets is a mistake. As Ryan Block of GDGT tweeted, there are a lot of former PC tasks now routinely handled by tablets, but “for the tasks that remain, computers are as important than ever. The user base isn’t contracting so much as the use cases are clarifying.”

Apple raised the stakes at WWDC as it revealed the refined features of Mountain Lion and iOS 6.0. Where Microsoft is merging the desktop with the tablet, Apple is continuing to converge the two. The difference is critical and, I believe, all in Apple’s favor. Apple is adding iOS-like features to OS X when they make sense. So Mountain Lion gets reminders, notifications, and messages. But it retains its distinctive look and feel and an environment that is optimized for the sorts of complicated tasks for which users will continue to rely on traditional PC hardware. In particular, the multi-windowed Mac desktop is retained along with the traditional icons, menus, and pointers. And while Apple has made it possible to manipulate the user interface through touchpad gestures, it shows no inclination to move to touch screens on either iMacs or MacBooks.

Microsoft, by contrast, is forcing Windows 8 users to deal with a Metro UI that seems to be optimized for tablets and touch screens. Metro apps are designed to run full screen, with some very limited screen sharing possible on larger displays. Metro actually looks like a very nice tablet UI, superior in some ways to both iOS and Android. But it find the Consumer Preview painful on a laptop. Even if you spend most of your time working in traditional Desktop apps, which continue to work in multiple windows as always, you are forced to put up with a jarring switch to Metro for some critical tasks. Metro apps feel like they waste an awful lot of space on a 13″ laptop and  are truly ridiculous on a 27″ desktop display. (Microsoft’s developers used to be criticized, only half in jest, for thinking that everyone worked, like them, with dual 30″ monitors. Now they seem to think that everyone works on a 10″ tablet.) I suspect that most serious PC users are going to want to stick with Windows 7 for as long as they can; it will be interesting to see if Microsoft will allow a downgrade option on new consumer systems.

Microsoft has made some progress integrating Windows, Windows Phone, and Xbox and Windows 8 will push the process along. But again, Microsoft has not yet caught up to Apple even as the competition takes the next leap ahead. iCloud still has a ways to go and iTunes is a hairball, but you can  wake me when Windows matches the magic of PhotoStream.

Then there’s hardware. Spurred mainly by Intel, Microsoft’s OEM hardware partners are finally beginning to catch up with the notebook revolution set off by the Mac Book Air. But Apple, of course, is not going to sit still. The 15″ Retina Display MacBook Pro (a product that desperately needs a better name) is not likely to be a huge seller. Its starting price of $2,199 is two to three times that of a typical Windows notebook and it tops out at a staggering $3,700. But it sets a new standard an definitely shows the direction laptops will be taking.

In a typical Apple move, it dispenses with an optical drive, long thought to be an essential in a 15″ professional notebook. It is a third of an inch thinner an 1.3 pounds lighter than Hewlett-Packard’s Envy 15. Its most important feature is a 2,880×1,800 pixel display; Windows competitors top out at 1,920×1,080, less than half the pixel density. And make no mistake about it: Apple will be pushing Retina displays throughout the MacBook line. They are expensive, but they justify charging prices that generate fat margins and let Apple capture a vastly disproportionate share of PC profits. And, have been proven with the new iPad, they produce a far superior user experience simply by making everything more legible. In the year or so since Intel introduced the Ultrabook concept, Windows machines are arguably losing ground to the company that supposedly wants to kill the PC.

Microsoft was caught seriously off-guard by the iPad and was right to shift massive resources into tablets when it became clear that the post-PC phenomenon was real. But PCs remain a very important part of the ecosystem, and right now, it’s not clear that Microsoft cares as much about them as Apple does.

Afterthought:  If this report from VR-zone is correct and Microsoft plans to charge manufacturers $85 or so for each copy of the tablet version of Windows, it is going to be almost impossible for these devices to come to market at a competitive price. I hope it is wrong, because if true–and Microsoft has not responded to the report–it will leave Microsoft with an OS optimized for tablets no one will want

 

The Apple Promise To Their Customers

I don’t normally put out an article about another article I have written but for this particular one I wanted to share it. In my weekly column for the tech section of TIME.com I wrote about what I am calling The Apple Promise to Their Customers. The line of thinking which I think is interesting is how Apple is now on an annual cadence for software releases on all their hardware. Each year Apple customers will get new features and new functionality. This is a powerful value proposition.

Here is the article give it a read and I would love to hear any thoughts.

Why Only Apple Can Promise A Better Experience To Customers Every Year

What I want to acknowledge is that some new features Apple brings out exist on other devices. Many can look at one single feature, like Maps for example, and point out that it is not new. I have heard this for years from heavy supporters of other platforms when Apple fans sing the praises of new features that have existed elsewhere for years.

This thinking misses the point because the fact that one single feature exists on another device is irrelevant to the customer who does not have that device. For an iPhone customer the fact that Android has had turn-by-turn navigation for years is an interesting but useless fact. The customer who bought an iPhone most likely knew those features existed on other devices but still choose the iPhone for a host of other reasons. The features and functions that led a consumer to choose an iPhone over other devices were probably less about one or two features but about the whole experience and package. This is why it is significant that Apple every year brings new features and even existing features to their customer base. A feature like turn-by-turn navigation may not have been important enough for a feature for a consumer to not buy an iPhone but now that it is there it sure is nice to have.

It is important to get beyond a feature by feature mindset. It is the combination of many features that make up the total experience with a device. Just because one device may have a feature the iPhone doesn’t, does not mean that device can stack up to the total experience of the iPhone. And some may argue the reverse and that is fine because my point is that it is less about a singular feature and more about many little features working together for the whole experience. If we want to debate devices lets do it on the grounds of the experience not the features.

Second, and I didn’t point this out in my TIME column, let’s not get stuck on mobile with this annual cadence. Apple is now on a yearly cadence with OSX to add new features and functionality to Mac hardware. This is not something we can say of other companies (and I am including service packs in this statement.) Consumers of Mac hardware (and there are a lot and growing fast) can be assured their hardware will get new features and functionality every single year. That is tough to find outside of the Apple ecosystem.

Sorry for writing an article about another article but I wanted to add some additional context.

Here is the link again to my TIME column.

Why Only Apple Can Promise A Better Experience To Customers Every Year

The Most Amazing Notebook Yet

It is possible that for many tech industry enthusiasts and followers that by my title alone you know what product I am talking about. In case you don’t know I am talking about Apple’s newest hardware innovation released today at their annual WWDC. This product is the MacBook Pro with Retina Display.

Apple pushed the envelope in engineering design for size and weight for a 15′ notebook. The new design alone would have been enough to impress but Apple didn’t stop there and added what is the best display on a notebook I have ever seen.

When I first saw the MacBook Pro with Retina Display, I had a similar experience to when I saw the Retina Display on the new iPad. I simply couldn’t stop looking at it. With the Retina Display on iPad, Apple set a new bar with the visual experience on a tablet. They have now done it again and set a new bar for a display on a notebook.

It is significant that this display innovation on a notebook comes to the MacBook pro line. Creative professionals are among the group that Apple has always had loyalty with. And it is with this group who tends to value performance more than mobility. The customer for the MacBook Pro wants performance in a portable package but doesn’t desire the tradeoffs in performance that need to be made for the ultra-portability offered in the MacBook Air.

Apple has delivered to this audience not only an extremely thin and light machine with all the performance for a creative professional but they added to it a display they will truly appreciate. Creative professionals look at things like graphics, animation, video, pictures, etc., all day and desire extremely high resolution monitors in order to do their work more efficiently. Many in this segment use a notebook or a desktop paired with an external monitor that is capable of higher resolution than can be offered on a notebook. With the MacBook Pro with Retina Display, creative professionals can now take that high resolution display that they need for their work with them.

I am confident that this new MacBook Pro with Retina Display will draw attention and turn heads. The whole notebook is an impressive piece of work. I am also confident that those in the market for a performance machine will seriously consider this new MacBook Pro. There is however, something perhaps even more interesting that may arise.

With the arrival of the Retina Display on iPhone and iPad, we saw a dearth of new software get created that took example of this new higher resolution display. I assume the same will happen now with the emergence of the MacBook Pro with Retina Display.

It is no coincidence that Apple released this new product at their annual developer conference. It is the third party developer community who contribute such value to the Apple ecosystem. I can only imagine the next generation of software experiences that will be created with what is clearly becoming Apple’s high resolution revolution.

My guess is this is also just the beginning. I think anyone who believes that Apple is not innovating in Mac hardware would be incorrect. Like the first generation MacBook Air, I believe Apple will bring these innovations downstream again to more notebooks over time. Again keep pressure on the competition and continuing to make some of the best engineered notebooks on the market.

The Apple Ecosystem Just Got Stronger

Apple today at their World Wide Developers Conference released a number of things that have made their ecosystem even stronger. I am of the opinion that one of the best ways to analyze computing platforms is to look at them as ecosystems. When consumers purchase a personal computer like a desktop, notebook, tablet or smartphone, whether they know it or not they are investing into an ecosystem.

Related Column: It’s All About Ecosystems

Not too long ago computing platforms were islands unto themselves. Each product stood on its own and wasn’t connected to other devices in a meaningful way. But now that consumers are purchasing more and more computing products they began to demand that their devices begin to work seamlessly together for a more fulfilling experience. This demand has led to the birth of more holistic computing ecosystems. And interestingly software companies who offer platform software for desktops / notebooks, tablets, and smartphones are the companies building the most robust ecosystems on the market and right now only Apple and Microsoft fit that bill. Today Apple with the release of new and updated Mac hardware and software and the release of their newest mobile operating system iOS 6 just strengthened their ecosystem all together.

It all revolves around iCloud

Tim Cook said something that made perfect sense to an Apple observer like me. He said that iCloud isn’t just a product, it’s a strategy for the next decade. With that fundamental point in mind it becomes easy to see why Apple is integrating so iCloud into the core of their OSX and iOS software. iCloud is the glue that holds all of Apple’s hardware and software together. Take for example some simple features they have added with the newest Safari.

It may seem small but this little thing is just the tip of the iceberg when it comes to the value of Apple’s ecosystem. Imagine you use a notebook, tablet, and smartphone regularly. In the usage of all three of those products it would seem logical that you would browse the web frequently on each of them. Now what if you where on the couch looking for a recipe and you wanted to view that very same recipe on your tablet or smartphone. Most people would either have to re-search for that recipe on the other device or you could email yourself the link. With the latest version of Safari for OSX Mountain Lion every single web page you have open as a tab is available to you on any of your OSX or iOS devices. So if I want to look at a web page I have open on my Mac from my iPad, I simply click the new iCloud tabs button on the top of Safari and all the same tabs open on my Mac are available for me on my iPad or iPhone.

This seems like something small but it is extremely useful and demonstrates the value of iCloud integration across hardware and software to create a consistent and useful experience. This is just one of many new features and advancements Apple is making through software to better delight their customers by solving current and future problems.

The Vertical Advantage

The tight integration of software innovations with specific hardware innovations all around a service like iCloud is easier when you control all the moving parts. I have emphasized this time and time again but it is this fundamental point that gives Apple such an advantage. The Apple ecosystem has no external variables. Apple doesn’t need the support of hardware or software partners in order to advance their ecosystem. This point can not be stressed enough.

It is because of this vertical advantage that Apple can annually release a unified launch of new hardware and new software all designed to work better together. And it is this better together that creates the fundamentals of the Apple ecosystem, which just got stronger.

Making The Devices We Know and Love Better

The last key point about the strength of the Apple ecosystem is that with this latest software for Mac, iPhone, and iPad, Apple has made the experience even better. I would contend that many of the devices we know and love have become even more useful. Now many may argue that some of the new features released are available on other devices or platforms. That is all fine and good for customers of other platforms but the bottom line is I and hundreds of millions of other people have invested in Apple’s ecosystem when it comes to my personal computing needs. So for me the fact that Apple has developed new features to make my experience with their hardware even better is most welcomed.

At the end of the day it is those features that add to our experience, make these products easier to use, and more importantly make using these products in our daily lives that much better. It is the small things like being able to ignore an incoming call with a text message or reminder to call the person back is extremely useful. The improved maps and elegant navigation is also a welcomed additional improvement. Perhaps the biggest improvement of all is the major upgrade to Siri.

All of these things and more are focused on one singular thing, making the devices we know and love better and more useful. Apple is continuing to make their hardware more functional every year. I am not sure it is possible to say that any other company is delivering their customer base new and improved features and functionality to all their hardware on an annual basis.

This is just one more thing adding to the already strong Apple ecosystem and it will be very interesting to see how the competition responds.

Following Up: Equal Access To Television

At a panel on wireless spectrum that I moderated yesterday at the Tech Policy Summit in Napa, I raised the idea of repurposing the 294 MHz* of spectrum devoted to over-the-air television for wireless data. Larry Irving, former Assistant Secretary of Commerce for the National Telecommunications & Information Administration raised a very valid point: While only 10% to 20% of Americans rely primarily on OTA television, their number is disproportionately concentrated among minorities,  the elderly, and the poor and ending free broadcasts would adversely affect these groups.

I agree. But I also believe that the benefits of freeing this huge chunk of prime spectrum  would be so great that we can find a way to solve, and pay for, the problem. It’s not a great model for a bunch of reasons, but we do have precedent in telephone service. For years, a tax on telephone service has gone into the Universal Service Fund, used to subsidize rural phone service (this is now being repurposed for internet access.)  And regulators required landline operators to maintain low-cost, minimal “lifeline” phone service for the poor. Both of these approaches had serious flaws; for example, USF ended up subsidizing service to rich folks’ vacation homes. But they can be made to work.

Rural service remains a big issue. Cable TV actually began life as a rural solution for people who lived too far from broadcast towers to get a reliable signal, but today rural residents are often left behind. Satellite can be a good solution, but only for those with an unobstructed view of the southern sky. Again, the resources created by the reuse of TV spectrum can be used partly to solve the rural TV problem and the much more serious (in my opinion) problem of rural internet access.

*–In the original post, I said 200 MHz. I am indebted to Rebecca Hanson of the Federal Communications Commission, a participant in my TPS panel,  for the correction.

Why We Need More Specialty Tech Retail

Big box tech retail had its time but for certain types of technology I am convinced there is a better way to sell. I am convinced this is the case because big box retail simply offers too much choice. The real opportunity ahead is to provide better curation of that choice.

I am an avid and highly competitive tennis player. When I buy tennis equipment I buy the good stuff. More often than not the equipment I need is not found in a big box sports retailer. Rather it is found in specialty stores where the store owner is highly curating what products are carried in the store and more importantly highly knowledgable of all the goods. This is just one of example of many advantages of more specialty retail outlets and in every case it is generally the same–better products and better service.

From a technology standpoint I want to look at a couple examples.

Home Audio and Visual

Magnolia Hi-Fi was a purely specialty show room and retail outlet for high quality home AV products. You could go to Magnolia and experience the best in home CE for both the mid and high end. Magnolia never carried the cheapest home CE products but they carried the best in the categories they chose.

During the time of the CE industries transition from analog broadcast to digital broadcast and HDTV, these stores saw quite a bit of foot traffic and drove sales. There were several reasons for this.

The first was that people were hungry to learn about HDTV and all the different nuances of HDTV’s at the time. Magnolia carried a relatively limited line of HDTV’s in their outlets so it made the learning process a bit easier to take in but they also staffed very intelligent staff who clearly explained the products, their benefits, and the technology.

During the same time if you went into a Wal-Mart or Best Buy, you were confronted with too many options and SKU variables, too many screens plastered right next to each other, and staff that had a general knowledge of the products at best but couldn’t explain specifics. All of that together left consumers with too much information to process and often leaving the store less confident about buying a new TV than before.

What Magnolia did for the market while it was still being born was key. They curated choice and helped consumers feel confident and knowledgeable about their purchase. This is simply something big box retail can not do.

What About Computers

Apple, I believe, is setting the example of how computers may be sold in the future. This is why I believe Microsoft is getting serious about putting retail stores in many of the same areas as Apple stores. My observation of this move is that retail stores for computing may be more about ecosystems than anything else going forward. Let me explain that.

Apple is vertically integrated and will sell hardware and software all for their proprietary ecosystem. Microsoft’s ecosystem is not proprietary since they don’t make computers. Because of that they need partners like Acer, Dell, HP, Lenovo, etc., who may not open their own stores all over the world. However, Microsoft may and sell all those partners hardware through their stores, which all cater to the Microsoft ecosystem. In a Microsoft store the singular point is the Microsoft ecosystem rather than any one vendor. The difference in Microsoft’s licensable platform vs Apple’s vertical integration is the fundamental point that makes these different channel strategies a reality.

The benefit of this model is that you know where to go depending on whose ecosystem you have invested in. If I am an Apple customer, I can go to an Apple store and find many products, curated on my behalf, to meet my needs when it comes to the Apple ecosystem. Microsoft’s channel strategy will be the same, although it will carry competing brands, the point remains that they are all related to the Microsoft ecosystem.

You can argue that a big box retailer can accomplish this with a store within a store mentality. But, I would disagree, on the premise of sheer floor space. A retailer like Best Buy views inventory in terms of how much they can put on shelves since they have space to fill. A smaller retailer has very little space and must be highly selective due to their lack of space. The result is more curation rather than less.

I have long used Barry Schwartz’s book The Paradox of Choice as a reference for this thinking. The primary point remains in consumer psychology that too much choice is overwhelming. Many of the points of this book validate the fundamental reasons why Magnolia Hi-Fi and Apple stores are successful. Consumers want choice but rather than throw every possible choice under the sun at them, it is better to give them choice of a select list of products which are curated by the retailer. This is again a strategy which can only be employed by smaller retailers.

To go forward in this model retailers will need to accept the “if I don’t have it someone else does” mentality. Because a specialty retailer will have to be selective, they simply can’t carry anything. This strategy has its benefits which I pointed out above and will work for many things but it also has its negatives. The primary negative being what if no store has what I want? This may be where online comes into play.

If your specialty retailers don’t have the precise product mix then perhaps online will fill the void. To use my tennis example, I prefer a very specific type of replaceable over grip. My preference in this matter is different than the mainstream so not many specialty stores carry it. So I order in online in bulk, wait a few days, but have my needs satisfied.

I am not sure if big box retailers have much of a future. I think they have their place for certain types of goods, but I have my doubts when it comes to computing goods. I, for one, think the current big box retailing experience is pretty poor and for many of the goods I would buy in a Best Buy, I have moved to purchase online.

Simply put my experience is far more superior in specialty retail over big box retail when it comes to the things I care most about. It is this fundamental point that leads me to believe that computers (i.e desktops, notebooks, smartphones, tablets) are better sold in specialty locations rather than a try-to-please-everyone-and-end-up-pleasing-no-one-big-box-retailer.

Apple’s Television

People have been talking about an Apple television for the last couple of years, but nobody knows for sure if the company will actually make one or not. I wouldn’t count Apple out of that market.

I’ve long held that Apple will enter markets that it feels it can make a significant impact. Those don’t have to be brand new markets, but areas that Apple feels it can improve on the current products and make a profit. The last decade of Apple product releases illustrates this point.

The iPod music player certainly wasn’t a new product category, but Apple took a poorly designed product that had limited storage space and changed the market forever. The iPod is iconic and it helped turn Apple around, as well as paving the way for the future.

Everyone had to have an iPod. For years it was one of the most sought after products in the consumer space. Apple changed it, innovated it with a variety of technologies and rode the wave.

They did the exact same thing with the iPhone years later. An industry that hadn’t changed in years was ripe for the taking. While pundits and entrenched manufacturers scoffed at Apple’s attempt to change the industry, they did it and haven’t looked back.

Walk into any wireless carrier or look at any manufacturer’s Web site and Apple’s influence can be seen in almost every smartphone on the market today. Copying Apple’s success has almost become a sport for some companies.

Of course, the latest product to achieve market-changing levels is the iPad. The tablet market has been around for a decade or more with little success, but Apple changed all of that. With a new design, new software and a focus on the customer, Apple redefined what can be done with a tablet.

The iPad fits into our lifestyle. It changes with us, but it doesn’t require that we make changes in order to use it.

That’s the type of challenge Apple faces in the television market or any other market it enters. Apple will try to solve the current problems, while advancing what consumers can do. The home entertainment market needs to be shaken up and it will take a company that isn’t afraid to change the status quo to do it.

Some people think Apple will release a television with new menus or Siri integration. I don’t believe they are thinking big enough. If Apple enters that market they will disrupt it and change it forever.

It’s Time To Kill Off Broadcast TV

No TVIt’s time to take over-the-air television out and shoot it.

You may have noticed that there’s a war over wireless airwaves. Electromagnetic spectrum is a finite resource and those that have want to keep, but many who have also want more. The pressure is particularly intense to expand the spectrum available for mobile data.

I’m going to sidestep the arguments about just how quickly the demand for wireless data is growing and whether carriers’ claims of a looming crisis are real or a ploy designed to lock up bandwidth and freeze out competitors. One way or another we’re going to need more spectrum over time and the question is where it is going to come from.

All the usable spectrum that exists is assigned to someone and all of it is jealously guarded. A great deal of it is controlled by government and we don’t know how, or even if, some of it is used. But prying it loose will be very, very difficult.

The richest block of spectrum available is being used for over-the-air television broadcasts.  The more than 200 MHz of prime bandwidth assigned to broadcast TV should and be put to a better use.

A half-measure is now underway to recover unused bits of the TV spectrum. Congress last year authorized “incentive auctions,” in which licensees can voluntarily give up unused spectrum and share in the proceeds when the government auctions it off for mobile data use. Even though broadcasters are being allowed to sell something they don’t actually own–channels were originally given to licensees to act as stewards of the “public convenience and necessity”—they have shown no great enthusiasm for the process. It’s far from clear how much spectrum will be freed through the process.

One thing we do know is that it is going to take a very long time. TV channels are assigned in 6 MHz slices and to make the freed spectrum more useful for data, the plan is to “repack” the surviving channels to create bigger contiguous blocks of bandwidth to be sold. But this means that some channels will have to be reassigned to new frequencies, a tedious business. The National Assn. of Broadcasters has never been very enthusiastic about the incentive auctions and is doing its best to delay the process.

Then whole process is too much trouble for too little gain. The better question is why we are dedicating any  spectrum to over-the-air TV. The fact is that relatively few people watch it. While there is some dispute over the numbers, it appears that about three-quarters  of Americans get their television primarily or exclusively by cable or satellite, whether as traditional scheduled programming or content delivered over-the-top on the internet. Cable or satellite service is available to virtually all of U.S. households, and the relatively few exceptions are most likely out of broadcast range as well. Dedicating so much bandwidth to serve and ever-shrinking audience seems foolish.

Unfortunately, I don’t think we’ll see the end will come for over-the-air TV any time in the foreseeable future. The deck is too heavily stacked against it. Broadcasters, of course, hate the idea and they remain very powerful in Washington, less because of their campaign contributions than because they control the free exposure on local TV that candidates for Congress depend on. The Federal Communications Commission doesn’t like the idea either because without over-the-air broadcasts the commission would effectively lose all power to regulate television, and regulators do like to regulate. Some will object that free television is a basic right that must be preserved. If so, it is a right that fewer and fewer people seem to care about. If we decide as a matter of public policy that free or very low cost TV should be provided for the poor, it would not be hard to devise something like the (increasingly pointless) lifeline basic landline telephone service. The government could easily afford to pay for it out of the many billions of dollars that auctioning TV spectru would yield.

You need not be a very astute observer of th Washington scene to know that the fact that something should happen is no reason whatever to believe that it will. Still reusing all that underused TV spectrum is something worth dreaming about.

 

 

Google, Quickoffice and Productivity Beyond X86

In an interesting move today, just weeks before Google I/O, Google has announced via their blog that they have acquired Quickoffice, a productivity suite of software, and team. This move has a number of interesting implications.

First and foremost I believe this move again signals Google’s intent to go vertical. Acquiring Quickoffice certainly gives them a differentiator for their own hardware when it comes to productivity software, should they choose to use it that way. Of course on the surface and in the short term I would expect them to bundle this productivity suite on all Android devices. This move on the outset is designed to go right after Windows on ARM (Windows RT) and the inclusion of Microsoft Office on all Windows RT devices out of the gate.

This move is largely focused on tablets. It is no industry secret that Google is in the weakest position when it comes to tablets. The iPad has continued to dominate, and most likely will for the foreseeable future, but the lack of industry confidence in Android tablets has been astounding. In fact many analysts, our firm included, have more optimism for Windows 8 based tablets which are not even in the market yet over Android tablets which have been in the market for 2 years. It is not everyday that professional forecasters and industry observers will give an advantage to an unproven and unreleased platform, yet that is exactly what has happened. This again just re-enforces the lack of confidence in Android tablets to break into the mass market.

Google will obviously seek to change all of this with their acquisition of Quickoffice. This demonstrates, to this analyst at least, that Google may be starting to understand tablets and that tablets are a viable platform for productivity. I have been of the opinion that Google had not been interested in tablet productivity and in particular tablets (or Android for that matter) in a business setting. Most of Google’s moves and posture toward this market has been focused on consumers. Just look at the renaming of their store as an example. The Google Play Store doesn’t make me think I should go purchase productivity software or applications.

The other interesting observation I would throw out is that the myth that X86 (or Intel and AMD Silicon) is the platform of choice for productivity is certainly busted. I believe I could make an extremely strong case of this point simply doing an analysis of the iPad but with Microsoft Office on Windows RT and now Quickoffice as a standard for Android, we certainly have enough evidence that ARM platforms will be fully sufficient not only computing platforms but productivity platforms.

Touch Computing and The Re-Birth of the Software Industry

It seems like you can’t go anywhere in Silicon Valley without hearing about someone who’s making an app. Apps are all the rage these days and software engineering is one of the hottest jobs all over the world. But in the not too distant past, there wasn’t this much excitement around software.

In fact, I have heard from many executives who have been around a while that the excitement around software and apps today reminds them of the same excitement around software when personal computers were first gaining steam.

Although there are some similarities between the industry today and the PC software industry when it was first getting started, the excitement around software today is taking place on an entirely different kind of computer. The excitement around software today is entirely focused on touch computers like smartphones and tablets.

Smartphones are contributing and are the device that began this new app economy but tablets are where the next real software innovations will be focused on in my opinion. I say this because I am a big believer in the tablets ability to take significant time away from the traditional PC. Our research indicates that consumers are comfortable doing the vast majority of tasks they used traditional PCs for in the past on their tablet. Because of that point we feel the tablet represents one of the most exciting platforms which will lead a new software revolution.

Starting Over

I think a strong case could be made that much of the focus of the software industry over the past few decades has been on professionals and the workplace. In my opinion, only in the last five years have we had what I would consider a pure, mature consumer market. The maturity of the consumer market for personal computers is the foundation that has led to the rebirth of the software industry. If the first phase of the software industry was focused largely on businesses, then the next phase will be largely based on consumers.

Although we can articulate what is happening by proclaiming that the software industry is being reborn, in all actuality it’s starting over. The first software phase was all about creating software for desktops and then eventually laptop computers. Both were driven primarily by mouse and keyboard input mechanisms. The software generating all the excitement today is fully around touch as an input mechanism. Given the drastic differences between touch computing and mouse and keyboard computing, software developers are reinventing or at the very least re-imagining their software around touch computing. It is this reinventing and re-imagining of the software industry — brought about by touch computing — that leads me to believe it’s almost like it’s starting over more than it’s being reborn.

New Hardware Is Driving New Software

This rebirth of the software industry is being driven primarily because of new hardware that’s selling like hotcakes to the masses. Although it’s easy to get excited about all the shiny new smartphone and tablet hardware, it’s important to remember that hardware is only as good as the software it runs. I could own the most amazing and elegant piece of hardware, but if it runs poor software, it’s no better than a paperweight.

When I speak with software developers who are driving this new phase of software, they’re largely focused on the iPad and the iPhone. These two platforms are giving software developers valuable experience in gaining expertise, making the next generation of touch software much more personal. This is important because new platforms incorporating touch are on the horizon based on Windows 8.

Windows 8 presents a radical departure from the normal desktop/notebook operating system that Microsoft usually churns out. Windows 8 will be the first OS to combine a touch-based operating system (called Metro) with a mouse-and-keyboard operating system and a familiar Windows interface. These two experiences combined together will lead to a new generation of notebooks, desktops, and tablet-notebook hybrids, all with touch interfaces.

Regardless of your opinion about Microsoft’s approach with Windows 8, the reality is that over the next few years, touch computing is coming to a wide range of laptops and desktops.

What’s Next?

That’s a great question, and my answer may surprise you. I believe the next big software craze will be around television. I know it may seem crazy to think about running apps on your TV, but that’s what I think is next. Google is already going down this path with Google TV, letting software developers make apps for the big screen; Samsung is also doing this with its line of Smart TVs. And there’s speculation that Apple has big plans for the TV industry — if that’s true, I believe apps will be a part of the strategy.

Even though there are products on the market that let you run apps on your TV, those developers have yet to re-imagine their apps on the big screen. Just as software developers are having to re-imagine their software for touch computing, they will have to do the same thing for the TV.

We live in extremely exciting times and things will get even more exciting. I firmly believe we will see more fascinating innovations centered around personal computing hardware and software over the next 10 years than we ever saw in the past 30 years of the PC of the industry, and I’m glad that we’ll get a chance to observe them firsthand.

The Case for More Choice in the iPhone Line of Products

There is much to be said for Apple’s current iPhone and iPad strategy being very focused and very limited in terms of product line diversity. Of course you can make the argument that Apple already offers a line of products being the 3GS, iPhone 4, and the iPhone 4S. What I want to explore is why I think it makes sense, or will make sense in the future, for Apple to offer a more comprehensive lineup of current generation iPhones.

There used to be a time 10+ years ago when I was in the minority of computing users who used, loved, and passionately defended my usage of Apple products. Back in the day being an Apple consumer made you feel like you were going against the flow, like you were unique. I used to show up to Industry Analyst meetings or go into the press room of events (before the time of bloggers) and be the only one with a Mac. Now it seems everywhere you go you see as many Mac’s as Windows products and in some locations, businesses, departments, etc., Windows client hardware is entirely extinct.

To be honest I sometimes miss those days where I feel like I was in the computing minority. Where I had the feeling like I had discovered a secret that no one else knew about and I was better off because of it. I know those days are gone and there is simply no going back. I am also extremely happy that millions upon millions of new consumers are coming into the Apple ecosystem and discovering the secret we Apple loyalists have knows for years. But like I said, I still miss those days when I was in the minority. I know there are folks out there who can relate to this.

I have racked my brain on how some glimpse of those days can exist again and the only thing I have come up with is a more robust line of products. Perhaps ones for the super high end, ones for the middle and ones for the low end. Again I see this as similar to cars where a brand like Mercedes-Benz would have their luxury lines that only few would dare go after and aspire to acquire. But Mercedes-Benz also has lines like their E-Class which is more middle of the road when it comes to their price points and the C-Class for entry level customers. The key to the Mercedes brand and the C-Class is that it isn’t the cheapest car on the road in its class but there are those who will aspire to pay a little more because of the Mercedes brand and experience.

I could see Apple doing something like this where they have some designs that truly push the envelope in design and engineering and cater this iPhone and or iPad to the upper end of the customer class. This line could cater to those who want to be in the minority and use these products as status symbols. I am fully aware of the vanity I am promoting but again I am thinking out loud here.

This would ultimately offer existing and new Apple customers slightly more choice than currently available. I know this goes up against conventional wisdom of a simplified line of products but I believe the simplified line works best when a market is maturing but more choice is desirable once a market is mature. The market for smartphones is still maturing as many consumers are still experiencing their first or second smartphone. Consumers needs to be on at least purchase number three or four before their tastes are refined and they start knowing what they want, why they want it, and shopping with those specific needs, wants, and desire in mind. It is when consumers reach this point that I feel they would desire more variation in form and function related to the iPhone.

The key however is to vary the design not the experience or the software. I am simply advocating for some variation in hardware design related to a specific line. It will be key that the software experience remain consistent while the hardware design be free to appeal to different tastes of consumers. This is not uncommon in other Apple products where they offer different screen sizes, colors as in the iPod Nano and Shuffle, and even varying capabilities.

In fact if you think of the progression of products from the first iPod all the way up to today you would find that the varying degree of choice started off limited but then expanded as the market matured. In fact the iPod from 2001 to date, is the example I hope Apple continues to follow. Even as there was no competition and Apple utterly dominated the portable MP3 market, they continued to innovate, differentiate, and never became complacent but rather continued to make the best products year after year–again, all without any competition. (Thanks John Kirk for mentioning this to me)

This is why I think the case can be made for Apple to offer more choice in the current generation iPhone lineup–if not now in the near future. Perhaps it will have something to do with market maturity or even perhaps designing products for people like me who just want something different from the masses. But in my opinion, offering designs that cater to unique segments needs, wants, and desires will be key for Apple to continue to satisfy their customer base.

Dear Apple: Please Keep the iPhone Locked Down

Image of iPhone with padlockEver since Apple introduced the iPhone, first with no third-party apps allowed then permitting apps only under Apple’s strict supervision, there has been hand-wringing in some quarters of the tech world about how Apple’s locked-down mentality would stifle freedom and innovation. The latest blast  against “Apple’s Crystal Prison”comes from the Electronic Frontier Foundation:

While Apple’s products have many virtues, they are marred by an ugly set of restrictions on what users and programmers can do with them. This is most especially true of iOS, though other Apple products sometimes suffer in the same way. In this article we will delve into the kinds of restrictions that Apple, phone companies, and Microsoft have been imposing on mobile computers; the excuses these companies make when they impose these restrictions; the dangers this is creating for open innovation; why Apple in particular should lead the way in fixing this mess. We also propose a bill of rights that need to be secured for people who are purchasing smartphones and other pocket computers.

Fortunately, there’s no reason to believe that Apple is listening to the siren song of openness coming from places like EFF, the Free Software Foundation, Harvard’s Berkman Center, and the Software Freedom Law Center. Completely open systems would give opportunities for anyone with programming skill to get into the guts of any device and see what he or she could do with it. It’s possible that some wonderful things might result. But this same openness clears a pathway for the malicious or the merely incompetent. I don’t care if people want to mess up their own systems, but I don’t want their badly written or downright evil software corrupting mine.

The importance of user experience. By maintaining rigid control over just what software can be loaded onto an iPhone or iPad, Apple has created one of the best user experiences ever. An app that I download from the iTunes App Store may be good, bad, or indifferent in terms of its functionality or its usefulness to me. But I can be confident that it is not going to make a mess of my phone or tablet. And if it does something it shouldn’t, like upload my entire address book without permission, I can be reasonably confident it will be fixed quickly. I don’t have this confidence about any other phone, tablet, or PC except perhaps the fading BlackBerry and the struggling Windows Phone, which have lock-down policies of their own.

For people who really want to mess with their iPhones, they can always jailbreak them and live with the consequences, including a loss of warranty protection. Apple has tried to stop jailbreaking, but has generally been unsuccessful. For the rest of us, the overwhelming majority, we are happy to accept Apple’s restrictions  as the price of increased security and usability. I hate giving up freedom for an illusion of security, but Apple, unlike the Department of Homeland Security, seems to be delivering the real thing.

Misunderstood Gatekeeper. The same folks complaining about the lockdown of iOS are also fretting about new policies for Mac software. But here they seem to be willfully misunderstanding what Apple is doing. Apple recognizes that a Mac is a very different beast than an iOS device and that the sort of restrictions it imposes on iPhones and iPads simply won’t work on Macs. The new Gatekeeper for OS X Mountain Lion does no prevent any user software from being installed. In its default configuration, it will warn against apps that are not digitally signed by a registered Apple developer, but users can easily override the caution and install what they want. Other settings restrict installation only to apps from the Mac App Store, which are approved by Apple and which must obey  new rules requiring sandboxing of apps, or, at the other extreme, allow the installation of anything without objection.

EFF concedes that “fortunately, it will be possible to turn this off in Mountain Lion and install apps from anywhere you want,” but adds, “Apple is continuing down the dangerous road of making their products less open.” Failing to produce evidence of this, EFF’s Micah Lee falls back on hypotheticals: “OS X software authors will find themselves subject to the whims of Apple HQ. What would Mozilla do if Apple refused to authorize Firefox for OS X Mountain Lion, in the same way that Apple refuses to allow a true version of Firefox for the iPhone? Watch half their Mac market share disappear?”

EFF closes with a “Bill of Rights for Mobile Computer Owners.” It’s a strange manifesto, focusing on issues that very, very few users care about, such as the freedom to install the Linux operating system on the phone of your choice. Considering how few people have chosen to install Linux on PCs, where it actually works reasonably well,  this doesn’t seem like a burning issue for most folks. There is nothing in the call about security or ease of use, issues that actually driver users’ choices. This has been a huge blind spot of the free and open software movement for years. And until they take usability seriously, they will be pushed further to the fringes of the tech world and more and more of what we do goes mobile.

 

 

Why Google is Creating Their Own Tablet

It is pretty well known now that Google is about to release a Google branded tablet. Sources tell us that it was designed by Asus and made by Quanta. Most expect it to be shown at Google I/O the last week of June and in the market sometime in July.

At first glance, the fact that Google will now be going head-to-head with their partners seems like a bad idea. Google has worked hard to convince partners to back Android and to date, in smartphones and tablets they have had many vendors commit to Android. And partners have taken Google at their word that they would not compete with them if they license Android and help make it successful.

There are a lot of reasons for the lack of Android success in tablets, some related to Google’s missteps in their designs and releases of Android for tablets, but no one can deny Apple’s great iOS and sleek designs that continue to give them an edge over competitive tablets based on Android. And at the vendor level, most Android tablet vendor’s products have paled in comparison to Apple’s iPad in both sleekness in design and marketing execution.

Also, Android in tablets has forked a couple of times already. While Android is the OS of Amazon’s Kindle, it has been optimized and customized to Amazon’s needs and is not considered a pure open and extended version of Android. And Barnes and Noble’s Nook has followed a similar path with their tablet. At the same time, vendors like Samsung, HTC and others have added their own UI and extra features to Android to make it their own.

While this may be good for the vendors, it does not necessarily mean it is good for Google. Yes, most conform to some of Google’s guidelines and include the Google search engine as well as connections to ads. But in some cases, especially the one from Amazon, they are much more interested in driving commerce and ads through their program then adhere to any of Google’s ads and commerce links that benefit Google.

I believe that once Google began to realize they were losing control of Android within the tablet market, they decided that they needed to have a vendor that would adhere to all of Google’s conventions no matter what they were and become the true “poster” child for Android tablets.

And who could do this better than Google themselves. In this scenario, Google would control the integration of the Android OS, the overall design of the tablet itself and all of the ads and eCommerce links tied to a tablet so they would have full control over it. And, they could drive its marketing, distribution and even the customer service needed to make a true Android tablet successful.

The operative word here is “true” Android tablet. Up to now, most Android tablets were true Android tablets only in the sense that they used Android at its core. But as you may know, fragmentation within the Android OS world has been rampant and this has had an impact on Android’s ultimate success in tablets. But Google wants to correct this and insure that Android can be very successful in tablets as well as smartphones.

In the end, they would be basically following in Apple’s footsteps. Although Google professes blind allegiance to an Open Source program, the fact remains that the most successful company in the tech world today turns its back on that model. Apple’s success comes through their control of the hardware, OS and applications eco systems that allow them to deliver complete solutions to their customers. And if Google creates their own Google branded tablet that is tied to its purest version of Android and linked to its own services and apps, this sets them up to finally have an Android tablet that will be truly competitive with the iPad.

I don’t know if Google would have moved in this direction had it not been for Amazon’s decision to use Android and make it the heart of an Amazon “closed” commerce loop. I suspect that when Android was created Google pretty much expected people to follow their program to a “T”. Silly Google.

Apparently Google has decided that it is time to take control of Android in tablets and do their own version that is tied tightly to their own business model. And if their partners get angry with them, then so be it.

One more thing- Although most expect that Google’s tablet will be priced at $199 and go head to head with Amazon’s Kindle, I would not be surprised if they actually go to school on Amazon and do some type of subsidization of their own with this product. We believe Amazon Kindle’s BOM cost is between $209 and $217. The difference in cost to consumer vs BOM is made up through some form of subsidization tied to what people buy on their Kindle’s Fire.

But I would not be surprised if Google matches fire with fire (pun intended) and prices their Google branded tablet at $179 and ties their subsidization to add revenue gained through purchases via their Google branded tablet. If so, this would have a disruptive effect on any Android tablet partners and could also force Amazon to be even more aggressive with their subsidization pricing on future Kindle Fire’s.

Why Google Should Fear Facebook

I have written quite a bit about my doubts of Facebook’s long term value. And amidst all the recent news about their IPO woes it seems like investors are skeptical as well. Last week I wrote an article highlighting my thoughts on why I am skeptical about Facebook’s long term value. Today I would like to explore a scenario that is the flip side of the argument I laid out last week. In this scenario Google should be very worried about Facebook–if they are not already.

Maybe this is weird but I have debates in my head where I argue many sides of a point or hypothesis while I am building my analysis. Even though I may have a conviction that a scenario goes a certain way, I believe it is important to examine all sides. My overall skepticism with Facebook’s business model, and value, is based on the assumption that their advertising business model and other potential revenue streams is limited to Facebook–their only asset to date.

There is no question that Facebook is gathering a database of extremely detailed profiles of Facebook users. The assumption has been that they would use that detailed user profile to match advertisers up with the right consumers as those folks use the Facebook service. As I pointed out last week, the reason consumers use the Facebook service is different from other services or content they consume where advertising actually works. Advertising works well when the ads are related to the content being consumed. With that in mind, if Facebook was to create an advertising network similar to what Google does with AdSense they could potentially take a big chunk of Google’s business.

One Ad Network to Rule Them All

Google has built their ad network by linking advertising up with related searches. This makes a great deal of sense and works quite well. Google uses services like Gmail, Android, Picassa, etc., to try and gain more information about people so they can sell more targeted ads. However for Google to come even close to knowing intimate details about me and my life, I would need to use all of their services. Something that it is not common for many consumers. However for Facebook to know all the intimate details of me and my life, I only need to use Facebook. Therefore, Google basis most of its targeted advertising value by knowing what was searched but Facebook can base its targeted advertising by knowing more about the searcher.

If Facebook created a service like Google’s AdSense they could extend their extremely targeted advertising strategy beyond the walls of Facebook. Given that many websites which require you to log in to sign up for a service, give consumers the option of logging in with Facebook, there are a myriad of ways Facebook can leverage their consumer profiles with all their online partners.

Extending value to advertisers and brands beyond the walls of Facebook is key to Facebook’s value in my opinion. This model could be completely disruptive to not only Google but the vast majority of advertising networks.

The Broader Opportunity

Even if Facebook employed this strategy, displacing something like AdSense is no easy task yet the upside is significant in my opinion. On Monday, Tim explored whether Facebook’s best days are over or ahead. He pointed out that the trend of vertical social networks is one we are watching quite closely. Whether it is publishing sites or communities based around specific interests, we believe those are the places where targeted advertising can thrive and return value. Facebook either needs to figure out who to create these niche communities within the walls of Facebook or do what I propose and give those sites access to their ad network.

What makes this strategy so interesting is that if it were done right, Facebook as a service could exist solely to collect key data needed for advertisers. If Facebook could have success building an ad network and monetizing it primarily with partners then potentially Facebook itself could be advertising free. Ads on Facebook right now clutter and detract from the experience which brings me there in the first place ( I also believe they are useless in their current form). I truly believe that if Facebook is reserved to only make money within the walls of Facebook, that they will make compromises that will seriously detract from the Facebook experience and drive consumers away. However, if they can make money outside the walls of Facebook then they have a chance of creating better experiences and keeping loyal Facebook communities.

Lastly, the broader opportunity becomes even more interesting as we think about mobile and emerging platforms like the television. My point that Facebook may very well know more about me than any other company pitching advertisers becomes interesting with mobile advertising and even my future experiences with TV. If TV networks can partner with Facebook for example they could begin to deliver some of the most valuable advertising in the form of rich media due to the amount of information they know about me. Which if you think about what ads I see today on TV, in print, online, etc., it becomes clear very little is known about me.

Facebook, in my opinion, is the only company today who is in a position to completely change the advertising realm across a range of mediums. However, it depends on them thinking bigger than themselves and the destination they built.

Apple’s iPad will be dominant until…

Watching the professional industry watchers speculate on how long Apple’s iPad will dominate its market segment is kind of funny. Will it be 2012, 2013, no it’s going to be 2015 and then they will fall, right?

iPad screen imageThe funny part is that nobody knows for sure what’s going to happen, but the pronouncements of Apple’s pending demise are delivered with the confidence of someone that has seen into the future. That is of course, until the sales numbers prove them wrong — then another date of demise is announced a couple of years further into the future, and the cycle seems to endlessly repeat itself.

At some point you have to be correct, right?

Just like when the iPhone was first released, many people didn’t think the iPad would be successful. When it was, everyone started to look at when the competitors would topple Apple’s seemingly unsurmountable market lead.

Maybe the RIM PlayBook (Yes, that’s a joke), or one of the many Android tablets that hit the market every other week. So far, nothing has even come close.

There are two things that prognosticators seem to neglect when forecasting Apple’s demise.

First, In order for Apple to fail so badly in the tablet market, they would need to stop innovating completely. If Apple released the same iPad, with no new hardware or software features for two years, they could be overtaken in the market.

However, that’s not what Apple does. They innovate yearly on either hardware, software or both. Innovation is not just about changing the look and feel of a product, it’s about continuing to offer customers solutions to problems. Complex lifestyle problems that continue to evolve require a company that is able to predict what we will need.

Apple has a proven track record in doing this. Macs, iPhones, iPods, iPads and even its many software apps are glimpses into how Apple thinks, not just with design, but also functionality.

The second thing that people count on is that Apple’s competitors will stop trying to copy Apple’s success and make a move to surpass the iPad. Recent history suggests that none of Apple’s competitors are willing to do this.

The industry right now is fighting for second place and they seem content to do that for the foreseeable future. That’s not necessarily a bad thing for them — selling millions of tablets still makes them and the shareholders are happy.

However, settling for second place doesn’t make you innovative. It doesn’t make you a company that consumers want to support. It makes you a company that understands that you don’t have the innovations and design to do it on your own.

Apple’s competitors are afraid to step too far away from the iPad because they want consumers to think of them as a competitor. If their tablet doesn’t look and feel like an iPad, they risk losing sales. That goes against their main goal of making money.

Apple’s design and functionality goals are to make the best products to help its users solve a problem. If they succeed at doing that, the money will follow. Don’t get me wrong, Apple expects its products to be big hits, as every company does, but they go about it in the right way.

The next time you see a forecast of Apple losing its dominance in a market, ask yourself what the competitors are doing to differentiate themselves from Apple. That answer is all you need to know.

Will CableWi-Fi Make Public Wi-Fi Work? We Can Only Hope

Wi-Fi symbol and cable company logosThe leading cable companies in the U.S. are banding together to set up 50,000 Wi-Fi hot spots. Any subscriber to one cable providers will be able to use the others’ services; for example, a Time-Warner Cable customer in New York, where the service, called CableWi-Fi, is set to launch, will be able to log on to to a Cablevision hot spot. This is great news for consumer. Maybe.

Unfortunately, I heard about the cable companies’ plans while traveling to New York on Amtrak’s Acela. The Acela and other Amtrak Northwest Corridor boast free Wi-Fi, but it is generally so bad that I usually turn it off to force my iPhone and iPad to use cellular connections. Otherwise, they can spin forever just trying to check for mail or load tweets. Mobile devices are generally designed to use Wi-Fi when available, but they aren’t smart enough to figure out when the access point isn’t really connected to anything downstream and they just keep futilely trying unless you turn Wi-Fi off.

Amtrak has an excuse for its horrible Wi-Fi; trains rely on flaky, low-bandwidth  wireless connections that many passengers will try to share. But Wi-Fi service almost as miserable is all to common.  Free Wi-Fi connections are almost guaranteed to be awful, especially if the hot spot location is busy, and even paid service, such as absurdly overpriced hotel connections (the more expensive the hotel, the more you pay), if often nearly unusable.

The biggest problem is that it is  to set up a hot spot, but not so cheap to run one. A consumer grade access point/router can cost well under $100 and even a carrier grade Cisco access point goes for under $1,000. The problem is that you need a way to connect your hot spot to the internet, and this connection, known in the trade as the backhaul, is where the cost starts mounting up. Even my terrible Actiontec wireless router, supplied by Verizon, regularly delivers 20 megabit per second downloads, but that’s because it’s connected to FiOS fiber and there are almost never more than two of us using it at once. Have 100 people sharing a 2 Mb DSL connection and you begin to see the problem.

Inadequate backhaul is probably the biggest reason for the disappointing performance of public
Wi-Fi. Paid sites, such as those amalgamated by Boingo,  tend to do better, but even there you’ll find tremendous variance in performance. It doesn’t strike me as good business for vendors to promise free Wi-Fi and then deliver a terrible experience. Let’s hope the cable companies provide backhaul over their own speedy DOCSIS networks, but there is no guarantee they will, especially if the hot spot locations are not passed by cable service.

Another open question is how easy it will be to connect with these hot spots. The cable companies have made it clear that this is a service for paid subscribers, so they will need a way to authenticate logins. This can be a real pain for users, since the username and password information generally must be entered manually on a mobile device every time you connect (and often, reconnect, when your connection is mysteriously dropped.)

A new standard called Hotspot 2.0 (also known as PassPoint and IEEE 802.11c) could make these connections much easier, at least with devices that implement it in either hardware or software. These devices would authenticate themselves to a hot spot without any manual intervention by the users. The cable companies, however, have not indicated whether they will be using this technology.

If the cable companies do this right, it could greatly enhance their ability to deploy their existing services to their existing customers wirelessly while avoiding the difficulties imposed by wireless carriers’ data caps. But unless is it well thought out an executive, CableWi-Fi will just be another chapter in the long saga of public Wi-Fi disappointments.

 

 

 

 

 

 

Why Apple is Wrong About Convertibles

On Apple’s last earnings call, CEO Tim Cook responded to a question on Windows 8 convertibles by saying, “You can converge a toaster and a refrigerator, but those aren’t going to be pleasing to the user.” At first glance, this makes total sense, and from the company that brought us iPod, iPhone and iPad, this has wisdom. But as we peel back the onion and dig deeper, I do not believe Apple is correct in their assessment. As I wrote here, I have long-believed that convertibles would be popular in 2013 and I still believe convertibles will be a thriving future market, albeit not as large as notebooks or tablets.

Mashups between two devices are rarely successful, particularly in mature markets like PCs. I have researched, planned and delivered 100’s of products in my career, and very rarely have I seen two purpose-built products combined to create something real good. The problem becomes that by combining two products, the result becomes good for no one. The primary reason this becomes the case is that you have to make tradeoffs to make the combined product. By combining most products, you are sub-optimizing the separate product and what they uniquely deliver to their target markets. Convertibles have that possibility, but if designed appropriately as I outlined previously, this won’t happen.

Cars give us a few examples to work from. As the car industry matures, we see more and more specialization. There are now sedans, coupes, mini-vans, SUVs, mini-sedans, sports cars, trucks, truck-hybrids, etc. Specialization is the sure sign of a mature market as consumer’s tastes have gotten to a point where they know exactly what they want and the industry can profitably support the proliferation of models. Industry support is a very important in the industry must be able to afford all this proliferation. The auto industry supports this through common parts that are shared like chassis, engines, and electronics.

What does this have to do with convertibles? Ask yourself this question: If my SUV could perform like a Cayman Porsche, would I like it? Of course you would; it is called a Porsche Cayenne. The problem is, you could pay up to $100,000 for it. Want your sedan to drive like a Cayman? Just get a Porsche Panamera. The problem, again, is that is around $95,000. The expense isn’t just about the brand. Porsche invested real R&D and provides the expensive technology to make these “convertibles” perform well.

There are similarities and differences between the Porsche Panamera and Windows 8 convertibles:

  • Price: Buyers will only need to spend an extra $100-200 more than a tablet to get a convertible. Many will make that choice to have the best of both worlds. The average U.S. car is around $33,000 while the Panamera is around $100,000, three times the average. One argument Apple could have is that if future, full-featured tablets become $299, the added price could be too much to pay for the added convertible functionality.
  • Low “Sacrifice Differential”: This is Apple’s strongest point, as in many mashups, combining two products results in something that isn’t good for any usage model. “Fixed” designs will need to be less than 13mm thick and the “flexible” designs (ie Transformer Prime) need to be less than 18mm thick with keyboard. Otherwise, the convertibles will be too thick to serve as a decent tablet at 13mm or thicker than an Ultrabook over 18mm.
  • Transformation capabilities: Convertible form factors like the Transformer Prime can convert into a “notebook” with an add-on peripheral, but cars cannot. I wish there were a 30-second add on kit that could turn my Yukon into a 911 Porsche but there isn’t. Related to PC convertibles, if you have ever used the Asus Transformer Prime, you know what I am talking about. It is one of the thinnest tablets, and when paired with its keyboard, is only 19mm thick. One of the great features of the Prime is that the keyboard provides an extra 40-50% battery life boost that actually adds utility. Windows 8 for the first time supports the lean-forward and lean-back usage models. As a tablet, the users uses it with Metro. As a “notebook” clamshell form factor, the users can use Metro and then use Windows 8 Desktop with the trackpad and keyboard. This has never existed before and Apple doesn’t have this capability in iOS or OSX.
I do believe that convertibles ultimately will have space in the market as they serve to eliminate, for some users and usage models, redundancy of having two devices. OEMs must be particularly careful in how thick they make them. The original iPad was around 10mm and that was pushing some of the boundaries, particularly with reading books. The thicker the designs, the less desriable they become as they will not make a very good tablet. Flexible designs like today’s Asus Transformer Prime, when connected with Windows 8, could be a lethal market combination as it combines a thin tablet and a keyboard when you want it. Gauging by how much shelf-space is devoted to iPad keyboards, I must conclude that consumers are snatching these up in high volume.
I believe Apple is wrong about convertibles, but on the positive side, Apple’s warning gave the entire industry pause for thought. Interestingly, it provided the opposite effect of what I believe Apple intended, which was to freeze the market. Instead, it indicated that Apple was not going to do it, which motivated more OEMs to build, given they wouldn’t have to worry about Apple. While the volumes for convertibles won’t be as large as tablets or notebooks, I do believe they have a place in the market in the mid-term.

Are Facebook’s Best Days Over or Ahead?

With Facebook’s public offering over, its time to ask the question of whether Facebook’s best days are over or are there any other scenarios that could boost their earning potential and actually let them grow revenue. To date, they have mostly used ads and special partnerships to monetize their connections to 900 million people around the world and that has allowed them to earn serious money in the process.

My friend Michael Miller wrote a great piece at PC Mag entitled “Facebook’s not so secret weapon-Infrastructure” and explains how Facebook’s servers are based on the Open Compute project for efficient data centers. At its core, Facebook has one of the best and most responsive data centers available that can be quickly customized and optimized for new products and services, which I consider a major asset and one that could be much more proactive in delivering new products and services in real time.

We already know that Facebook is a place for making connections with friends and family and in a broader sense, lets us connect to companies, products and services as well. But I think there are at least three other major products and services they could offer that could extend their growth substantially and enhance their revenue potential.

The first would be to follow an important trend in social networking called vertical networks, or linking people of like minds together and make it easier to connect with people vertically within Facebook. To a degree they have that now with Facebook groups but it is not designed to really target vertical markets. Our research is showing that there is a real demand for dedicated vertical social networks tied specifically to interests. For example, a social networking site truly optimized for pilots. Facebook does have a group called “Pilot Connect Social Network” within Facebook but it is poorly laid out and somewhat difficult to follow. But what if they really took aim at hundreds of like-minded subjects and created a very rich social network that is elegantly designed and easy to make connections. This would allow them to provide even more targeted ads, and because it would be part of Facebook as a whole, it could also cross reference any topic or ad that might be relevant to this audience such as hotels near small airports, etc.

I love scuba diving and there are many sites about scuba diving, but no single social network around this subject that really appeals to me. But what if Facebook gave me dedicated scuba diving group or scuba network that is very rich in content and well designed that I really want to go to every day to see what’s new. I buy scuba diving magazines to read about diving resorts and get tips, but I also love the ads in there that are really aimed at me. This includes ads about new equipment, diving resorts, etc. At the moment, Facebook does not really provide a rich network for like minds and if done right, this could be a major growth opportunity for them.

The second thing I think they could do that could really enhance their long-term growth is to become the social network for applications. Mark Zuckerberg has alluded to this but the basic idea would to become the social link between existing apps and multiple users. A good example of this is in multi-player games. Most games today are designed for single user play. But what if any game I have could be played with my friends across town or around the world. Or what if I have an app like a photo sharing app? If Facebook could be the social link between different photo apps, it could be used to do innovative things that blend images and video into a multi-app, multi-user environment. Or what if Facebook becomes the social networking glue between existing sites for diabetics? While they could create a richer internal Facebook network for diabetics, if they were also the social link between dozens of other diabetic sites, the content for the diabetic consumer becomes even richer.

But the third area that they could mine is through extending their ad network beyond the walls of Facebook. Facebook is building a detailed user profile of each Facebook user. One of the more interesting things Facebook could do is to extend that demographic profile to build an advertising network similar to Google AdSense. If they could partner with other top tier sites and extend their demographic database and targeted ad-matching network to other websites outside of the Facebook experience, they could seriously threaten Google’s dominance in this area. Google only knows what people are searching for whereas Facebook knows quite a bit about the searcher. The latter is much more valuable in matching the right ads with the right user and Facebook may be one of the only companies out there currently who can deliver this across the web.

While Facebook already has a rich framework to use to continue to connect people together around their social network, it is clear to me that they still have a lot of room to grow and expand and monetize new services. I don’t believe that Facebook’s best days are over. Indeed, I think that they have climbed some pretty big mountains to get where they are today, but I suspect that they have even more mountains to climb and could use what they already have to build on and continue to grow the company significantly in the future. The key word for this growth will be to continue to innovate and execute and I believe if they do the things mentioned above, along with others I am sure they have in the works, the company could become even more powerful and profitable in the future.

3 Columns Skeptical of Facebook’s Long Term Value

In light of Facebook IPO day, I thought I would share three key columns I wrote about Facebook. I remain skeptical of Facebook’s long term value. Specifically the business model and sustainable value to those they depend on to make money. Facebook, like Google, is a company where people are the product. The big difference in my mind between those two companies is that Google has quite a bit of proprietary IP around solving a problem–search. Facebook may have some enabling technology, may or may not actually be a sustainable social platform, but is the problem they are solving one that is defendable?

If the answer is yes then how do we explain the massive migration from MySpace to Facebook? Yes Myspace did not innovate and did not develop solutions that cater to a larger demographic. Facebook did a great job expanding their value from college students only to a wider audience. That being said what is stopping someone from coming up with a better idea, or a better way to stay in touch, than what Facebook has? Is the problem they are solving really that hard to solve?

The first column I wrote almost a year ago for TIME looks at this subject of whether Facebook can go the way of Myspace. I encourage you to read it as the first of the three columns I wrote. It will give you a timeline of my thoughts, how they evolved, and the overall case I make against the long-term value of Facebook.

Could What Happened to Myspace Happen to Facebook?

I decided to revisit this topic just earlier this year, again for TIME, where I explore if Facebook has peaked and we are now witnessing the beginning of the end. This particular article is by and large the most read piece of content I have ever written. It could picked up by other major outlets like CNN, the AP, and a few others. And if you take a look at the comments you can see how heated the debate gets. My overall point was that if you look at users of Facebook who have been on the service for a length of time they tend to see their usage decrease. We can call this Facebook fatigue but the initial thrill of discovery weans and the service becomes more management than discovery. Discovery, in my opinion, is one of the stickiest psychological aspects of any online service. Think about why you spend time browsing in a mall, or electronics story, or Amazon, or an App store? It is largely due to the thrill of discovery or the hopes to find something new of value.

This is the same experience for a new Facebook user. It is the thrill of connecting with old friends, colleagues, or classmates that engaged us in the beginning with Facebook. Seeing what loved ones from a far are up to, finding new friends or interests. But then there comes a point where that initial thrill of discovery weans and the service can become overloaded with information you don’t care about or are not as interested in any longer. Things like this are the root of my concern of Facebook over the long haul.

Is This The Beginning of the End for Facebook?

My most recent column, which we ran here on Tech.pinions, was on why I wouldn’t invest in Facebook. My overall reasoning is built upon my above two points and columns. That if consumers, the longer they use the services, are not as engaged with Facebook then the value to an advertiser goes down.

Recently news surfaced that GM was stopping advertising on Facebook due to the ads not paying off or delivering the ROI they expected. This was predictable and not surprising based on the arguments I have offered. When you think about why ads work on TV, print, and other forms of offline media, it is because the audience is either engaged and captive, or highly segmented, or both. Think about why ads work in Men’s Fitness for example, a service I subscribe to. I am interested in fitness, exercise, etc., and nearly 90% of the ads I see in this magazine are relevant to the subject matter of the captive audience. The same is true with TV shows and a range of other mediums where advertising has been historically successful.

In all of those mediums where advertising pays off, there is a captive audience, engaged with content directly related to the theme of the ads. This is not true of Facebook. If the content I am engaged with is that of friends and family then how exactly do advertisers match their content up with me in a relevant way? Facebook has to hope that I share my interests, likes, dis-likes, etc., in order to get a detailed information about me as possible in order to help link advertisers up with me based on my interest. The only problem is that the thematic content related to sports, fitness, hobbies, interests, etc., is not the reason I go back to Facebook. It is simply to stay in touch with friends and family.

The psychology of what has made ads useful in other targeted content mediums does not translate to Facebook. It is because of that point that I struggle with Facebook’s business model.

Why I wouldn’t invest in Facebook

In the column above I point out why I think more vertical social networks, ones that cater their content, services, and engagement around specific things, have more of a chance at being successful. Social networks for car lovers, food lovers, fashion fanatics, fitness, health, mothers of kids of all ages, etc., provide more valuable content and lead to a more captive and segmented audience. It is in these environments that an online social platform can thrive.

Maybe Facebook will figure out whom to segment its social platform even further in order to drive more engagement around specific subjects. I think this will be very difficult for a general-purpose social network to accomplish but perhaps they will figure it out.

For now I will remain skeptical and observe as more vertical social networks arise and become more valuable to advertisers.

Our Future Smart World

One of the things our firm does for our clients in the technology industry is help them think about the future. This one thing alone is one my favorite things about doing trend forecasting, future scenario planning, and analysis. In fact, many of my absolute favorite types of conversations are ones that include extensive use of words like someday and in the future. However, it comes with a downside. Spending quite a bit of time envisioning the future leads can often lead to disappointing experiences with technology in the present. Mostly because we dream big about all the possibilities with technology and how smart technology will continue to solve problems and make our lives better. This happens to a degree today but not to the extent we envision. It all comes down to dreaming about what is possible with technology and realizing we are no where near having our smart devices fulfill their potential.

I see so much more potential for smartphones, smart TV’s, the smart home, smart health, traditional computing products, game consoles, cloud services, etc., than exists today. However, for some reason tablets are the category exciting me the most and not disappointing me. I can only conclude the only reason why that is the case is because tablets are so new and still in the process of defining their roles in the lives of consumers.

Smart Devices Aren’t Really Smart–Yet

This perhaps is one of the things that frustrates me the most. I know we are pushing these devices to their computing limits today but I know truly smart devices are not too far off. My point on this topic is that today devices we call smart contain no real artificial or adaptive intelligence. The only reason my smartphone or tablet may be different than yours is because I put the time in to personalize it. I don’t go buy a new smart device, let it learn about it me, and then have the device customize the experience for my unique uses. For it to be smart, in most cases I have to add the intelligence to make it smart. Someday this will be the case.

To illustrate this point I would like to use App stores as an example. You and I may use our smartphone in entirely different ways. A smartphone can represent a number of different things to a number of different consumers. Take Apple’s app store for example. If two consumers open the app store and look at the featured section for example, they will see exactly the same thing. Yet how these two consumers use this phone may be polar opposites; they see the same static information. The only time this changes is via search and perhaps Apple’s Genius suggestions ( which I have never found useful for my own needs.)

If my smartphone was actually smart when I went “app store shopping” I would be presented with a fresh and dynamic view of applications based on the things I have primarily been using my phone for lately. This would be a fresh personalized app shopping experience that could change on a daily, weekly, or monthly time frame depending on the things I have been doing the most lately with my phone. Or perhaps even change with the seasons. When Football season starts, my smart device would know I like football and specifically the 49ers. I would like to see whats new in software for Football experiences like games, news, and more.

Of course one may say that this is the point of search. I agree, however search is best, in my opinion, when you have a general idea what you are looking for. It is less useful when you have a vague idea or no idea and are in a browsing mode. I do this quite a bit as I just open the app store to do some general browsing. I would love a more customized app store experience based on my unique uses with my smart device. It is these kinds of adaptive and dynamic experiences with smart devices that are unique to my personal habits and needs that I am looking forward to with the next generation of smart technology.

What it will really boils down to is that our smart devices will move from being useful to also being helpful. That, I feel is the root, of the artificial intelligence element of the smart device future. A world where smart technology is helpful as well as useful is a vision I can get behind. And by helpful I mean able to anticipate the user needs and preferences and offer up assistance based on context and situation.

Right now we are in the stage where our personal computing is more personalized by me than dynamically customized by the devices intelligence in order to become truly personal. In the future I assume the ideal scenario will be where both exist. There will be times where I want the assistance of the device to customize or anticipate my needs, wants, and desires in any situation, and other times where I want to spend the time to customize it myself.

Many things, from more advanced semiconductors, better predictive software and artificial intelligence, and cloud technology need to come together to make this future a reality. As I survey the landscape today we still have a long way to go before this vision of the future is realized, and I can’t wait until this happens.

Affordable UltraBooks are Coming But They aren’t UltraBooks

There are looming PC wars coming and it isn’t between Macs and Windows based notebooks. If you follow this industry you know that Intel is seeking to rejuvenate the notebook market. They are doing this by putting quite a bit of marketing weight behind the term UltraBook. To spur development in this category, Intel is putting some very specific hardware specifications around the term that OEMs like Dell, HP, Acer, etc., must conform to if they want their notebook to be called an UltraBook and take advantage of Intel’s marketing dollars for UltraBooks. Obviously every OEM is making UltraBooks.

The challenge as I see it for UltraBooks is that many of the first ones at launch and perhaps those that follow will be priced more in the premium price range rather than value. Many of the early UltraBooks we will see will be $699 and above although a few may get lower and many will skew higher as well. What our consumer data from our own research and consumer interviews is telling us is that Apple has about a $250 grace price point. Consumers know Apple’s Macbook Pro and MacBook Air lines are not the cheapest products on the market. For MacBook intenders, any comparable product must be at least $250 less than a comparable MacBook product to fully sway a consumer when price comes into play. But as I have pointed out before price is becoming less and less of an issue in mature markets.

Although we expect UltraBooks to continue to drop in price there is a sub-category of notebooks emerging which may be even more interesting.

If It Looks Like an UltraBook…

Intel wants to own the UltraBook category. They are investing a lot of money around the term. However, there is a strict set of requirements notebook OEMs must abide by if they want to use the term. If there is one thing I have learned in my 12 years of being an industry analyst it is that OEMs don’t generally like being told what they can and can’t do with their hardware designs. Every OEM wants to take advantage of the thin and light designs driving UltraBooks but they may want to vary the CPU capabilities, and what if they want to use an non-Intel chip for a design that looks exactly like an UltraBook? The answer is they can’t call it an UltraBook.

Earlier in the week AMD launched a very impressive 2nd-Generation A-Series APU, codenamed “Trinity.” Many OEMs have strong relationships with AMD and will most likely use these chips in their lineup of notebooks. So how do OEMs cover their bases by making non-Intel UltraBooks? Well, HP recently launched a new term called SleekBooks. We call this category Ultrathins and we expect many Ultrathins to enter the market well below the price of UltraBooks. And that is what makes this so interesting.

While Intel is going out and spending millions of dollars marketing the UltraBook term, it will indirectly benefit a range of competing platforms. Ultrathins will look nearly identical to UltraBooks with the only minor configurations or specifications, that many consumers may not even notice. The bottom line is that consumers will walk into retail and see UltraBooks, SleekBooks, and perhaps more terms on the way, and with all of these options consumers may very well go with price and walk with with something other than an UltraBook. Perhaps even not knowing they didn’t purchase an UltraBook.

Now, on the surface it may seem as though Intel may not like this scenario. But realistically Intel simply wanted to rejuvenate the notebook category. I believe their marketing of UltraBooks is going to do just that. Even though it may very well help their competitors chipsets and even to a degree help Apple.

I have a feeling there is a large chunk of consumers who are due for a notebook upgrade. The iPad has, for some, served as a sufficient supplement to their existing notebook making it easier to delay the purchase of a new notebook. Whether it is UltraBooks or these new thin and lights that will look and smell like UltraBooks but be priced quite a bit lower, we expect at least a short term positive jump the overall notebook category over the next few years.

Mac Momentum

This is one of the more interesting things to watch. Mac sales are growing at incredible rates. It seems each quarter Apple is selling more Macs than ever before. I was recently in an Apple store with a newly renovated training center. When I walked into the store I assumed the training tables would be filled with people learning how to use their iPads. Instead every table and every consumer at that table was learning how to use the new Mac they just purchased.

If Ultrathins that are very thin, light, and powerful hit the market below the $599 price like we think may happen, it could provide a serious jump start to the notebook category. And at $599 or lower the prices of quality notebooks will be significantly less than an entry level MacBook Air, which may be a key in slowing down Apple’s momentum with Macs.

The Notebook form factor is facing important times as consumers are faced with new questions about computing and their own computing preferences due to the iPad. Consumers are asking new questions about their own computing needs and looking more intently for specific solutions–especially those shopping for new notebooks.

This is exciting and challenging for many in the notebook ecosystem.

NVIDIA GeForce Grid: Killing off Game Consoles?

Yesterday, NVIDIA launched VGX and the GeForce Grid, which, among many things, could render future game consoles obsolete.  This may sound very far-fetched right now, but as I dig into the details of the capability of the GeForce Grid and map that against consumer future needs, unless future consoles can demonstrably deliver something unique and different, they will just be an unnecessary expense and a hassle to the end consumer.

Problems with Cloud Gaming Today

Services exist today for cloud gaming like OnLive and Gaikai.  They have received a lot of press, but it’s uncertain if their business models and experiences would exist years from now if they stay with their current approaches and implementations.

Scalability is one issue.  Services need to directly match one cloud game session with one graphics card, so if you have 1,000 gamers, you need 1,000 graphics cards.  You can just imagine the challenges in scaling that experience out to millions of users.  You would need millions of graphics cards, which in a data center environment doesn’t make a lot of sense logistically or financially.

Latency is another issue.  Cloud game services need to maintain severs 100s of miles away to maintain an appropriate latency in game-play.  Latency is the lag time between when a user does something and they get a response. Imagine if there were a one second delay between the time you pull the trigger in Battlefield 3 and the time which something happens.  This would render the cloud game absolutely unplayable. Latency in social media apps like Facebook is acceptable, but not with games. Having to provide “edge servers” close to end users like the industry does today is completely unproductive as you cannot leverage these same servers during off-times and it’s difficult to even leverage servers across different time zones.  Therefore, servers are sitting around idle with nothing to do. This places another immense financial burden on the cloud game provider.  NVIDIA and their partners are attempting to solve these problems.

Nvidia VGX and the GeForce Grid

NVIDIA, with VGX and the GeForce Grid is attempting to solve the scalability and latency problems associated with today’s cloud gaming services like Gaikai and OnLive.  NVIDIA VGX are the technologies addressing the current virtual display issues and the GeForce Grid is the specific implementation to attack issues in cloud gaming.  They are addressing the problems with two very distinct, but related technologies: GPU virtualization and low latency remote display.

Virtualization of the GPU enables more than one user to share the resources of a graphics card.  Therefore, the one to one ratio between user gaming sessions and graphics card goes away.  With NVDIA VGX, multiple users can share a single, monster-sized graphics card.  This provides much better scalability for the cloud game data center and correspondingly reduces costs and increases flexibility.

Lower latency remote displays enable a significant improvement in the speed at which the remote image is sent to the end client device.  In this cloud gaming scenario, the gaming frames are actually converted into an H.264 movie and sent to the user.  NVIDIA has enabled improvements in the process by eliminating many steps in the process.  The frame of the game no longer needs to touch the CPU or main memory and is encoded directly on the NVIDIA VGX card and sent directly over PCI Express to the network card.  By bypassing many of the previous components and removing steps, this speeds up the process immensely.  This delivers a few benefits.  First, all things equal, it can deliver a much faster experience to the gamer that they never experienced before.  The experience just feels more like it is happening locally.  Combined with GPU virtualization, the reduced latency also enables cloud gaming data centers to be located farther away from users, which increases data center utilization and efficiency.  It also enables entire geographies to be served that could never be served before as “edge servers” can be consolidated.

Wither Future Game Consoles?

If NVIDIA and its partners can execute on the technology and the experience, it would essentially enable any device that could currently playback YouTube video well to be a virtual game device. Gamers could play any game, any time, and immediately.  What kinds of devices do that today?  They are all around us.  They are smartphones, Smart TVs, and even tablets.  There’s no loading games off of a disc, no downloading 500MB onto a PC; its just pick the game and play.  Once the gamer is done playing on the TV, they can just take their tablet and pick up in their bedroom where they left off.

This kind of usage model is quite common when you think of it.  Many consumer books, movies and even music in this same way, so why not games?  For many consumers, convenience trumps quality and that’s one of the issues I can see with future consoles.  There is no doubt that the visual detail and user interfaces will be much more sophisticated than cloud gaming. As I look to how well the iPod did with its “inferior” music quality, consumers chose convenience over quality.  Look at Netflix on a phone or tablet.  Consumers can get much higher quality on the local cable service, but a growing number of consumers choose convenience over quality.

Device makers and service providers who don’t see any monetization currently off of games today will very aggressively adopt this approach.  TV makers, for instance, see no revenue from any game played on their devices.  Gaikai, as an example, is cutting deals with TV manufacturers like LG to provide this service built into every Smart TV in the future.  Telcos and cable companies are also very motivated to tap into the huge gaming revenue stream.

I believe that consoles will adopt cloud gaming capabilities in addition to physical media or they will be viewed as lacking the features gamers want.  I also believe that cloud gaming will seriously cannibalize future game consoles.  Many who would have purchased a new game console if cloud gaming with NVIDIA VGX and GeForce Grid had not existed will not buy game consoles.  With that premise, it begs the question if future game consoles have a bright future.  If game console makers don’t do something aggressive, their future is looking dim.

If you would like a deeper dive on NVIDIA VGX and the GeForce Grid, you can download my whitepaper here.