Podcast: AMD Earnings, Congressional Hearings, Amazon, Apple, Facebook and Google Earnings

This week’s Techpinions podcast features Ben Bajarin and Bob O’Donnell analyzing the quarterly financial results from AMD and what they say about the semiconductor industry overall, discussing the congressional anti-trust hearings with major tech CEOs, and chatting about the earnings from those same companies as well.

What if Twitter Died?

Scrolling through my Twitter feed, I had an interesting thought the other day. What if Twitter just didn’t exist anymore?

Given all the recent troubles the company’s been going through, it’s no longer a completely unreasonable scenario.

Yet, for many in the tech industry, I have to imagine that borders on the unthinkable. Not because the practical realities of the business fading aren’t a possibility, but because so much of their lives are caught up in the Twittersphere. For some, it would almost be like losing a leg—or worse. I mean, there are people and, indeed, entire companies whose very existence and value seems to be directly tied to their level of influence on Twitter—and not much else.

To its credit, Twitter has managed to create more than just another social network. The micro-blogging service has morphed into something many people seem to have nearly built their life around. But for all of its attraction and pull, it can also be an incredibly addictive time suck that regularly draws people into minutes (or even hours) of distractions. Sometimes leading to useful discoveries but more often than not, feeling like a waste of time.

To be fair, Twitter is an extremely valuable service for discovering news in real time, finding out what people have to say, and, as a writer, promoting what I and my friends and colleagues have written or participated in to a wider audience.

But nearly ten years in, the service has also become a shouting gallery for “traditional” celebrities and a lot of people in the tech industry who somehow believe Twitter has made them celebrities.

Harsh? Sure. Reality? I think so.

In fact, this seems to be one of the fundamental problems of Twitter. It’s appealing to Hollywood, TV, music and sports celebrities as a means to interact more intimately with their fans and share the kinds of details they’d never provide to traditional celebrity media. It’s appealing to the tech industry as a mouthpiece for those who want to determine the course of what is or isn’t important. The digital taste-setters, so to speak.

But for mainstream business and consumer users? Not so much. Arguably, this is the biggest problem with Twitter—it can’t seem to stretch beyond its celebrity, celebrity follower, and tech roots. If you aren’t into celebrities or the tech industry, Twitter just isn’t that appealing, especially given all the other options for online social interactions.[pullquote]If you aren’t into celebrities or the tech industry, Twitter just isn’t that appealing, especially given all the other options for online social interactions.”[/pullquote]

Despite these points, I think the navel gazing value of Twitter to the tech industry is so high, I seriously doubt they’ll let Twitter actually die. Someone with enough money and enough self-interest will likely make sure that, no matter what, Twitter will continue in some shape or form. Eventually, it’s value may start to fade, as some have already started to argue, but at least the Twittersphere will have a few years to adapt and find new alternatives.

The fundamental challenge is a publishing service that’s essentially based on self-promotion, self-aggrandizement, and self-importance at some point is going to run into the wall of indifference. Not everyone cares to read about what the self-elected are all doing all the time.

Real time publishing, real time interactions, and real time discovery are all incredibly important capabilities, especially in today’s split second society. But there is an increasingly wide range of alternatives for people to leverage and it’s not entirely clear to me that Twitter has all the tools it needs to weather the current climate.

As a reasonably long time, regular user of Twitter, I would be sad to see it go, but that doesn’t mean I can’t imagine life without it. I can and, increasingly, it seems many others are starting to see that potential too.

Panic Inside Apple and Cheers for Satya

The blogosphere has suddenly discovered the incredible array of products, tools and services Microsoft has long possessed. Better late than never, I suppose. Fact is, their realization of the obvious is in large part due to the accessible dynamism and well-regarded tech cred of Microsoft’s new CEO, Satya Nadella.

Nadella’s hire makes for a great story on many levels. I will get to those in time. The more important story however, is the potential trouble brewing inside Apple.

Yes, Apple is the richest tech company in the world. Its laptops, smartphones and tablets are the established market leaders. But as we learned last week, from still another Apple-Samsung court case, Apple is clearly in the throes of that great ontological concern sure to stricken all those with immense wealth and power: Who am I? 

The very question could prove debilitating.

Since being named CEO, Nadella has rallied the troops, made the necessary overtures to developers, appeased the critics, silenced the doubters and taken rather bold, once unthinkable actions to ensure Microsoft has a prosperous future in mobile, in the cloud, in homes and businesses, on Apple, the web, and the Internet of Things. Not a bad two months.

The talk about Apple? There’s still no large display iPhone and the iPhone 5c is still unwanted.

All Our Yesterdays

Thanks to Apple’s ongoing “holy war” against Google — and the court documents that are now public — we learned last week what we already suspected:

  1. Samsung’s ads attacking Apple users are particularly powerful.
  2. The market for smartphones costing less than $300 is growing like mad — and this greatly concerns Apple.
  3. The market for smartphones with displays larger than the iPhone 5 and 5s is growing like mad — and this greatly concerns Apple.


We learned something else, however. Something I had not previously considered — there is dissension among the upper ranks of Apple.

Apple is struggling to understand the bounds between margins and market share and how best to maintain the profit stranglehold its iPhone franchise has on the industry.

If Apple doesn’t know, this game just got really interesting.

Guess what? Apple doesn’t know.

The iPhone 5c has made that painfully clear.

With iPhone sales growth rapidly decelerating, SVP Phil Schiller is rightly worried “customers want what we don’t have.”

What Apple doesn’t have of course, is two things: an iPhone under $300 and an iPhone with a larger Lumia 1520-like display — the two areas where most of the smartphone growth is coming from.

Expect a larger display iPhone this year.

The low cost iPhone was supposed to be here already: the iPhone 5c.

Someone at Apple clearly blinked.

Given Phil Schiller’s exhortations for a low cost device, my suspicion is Schiller is now on the opposite side of Jony Ive and possibly even Tim Cook. Given the early growing pains of iCloud, perhaps Eddy Cue also was opposed to a low cost iPhone. They really needed to have decided all that before launching 5c.

Tomorrow and Tomorrow and Tomorrow

The iPhone 5c was meant to be the “low cost” iPhone but has failed at this one job. It’s almost comically overpriced. I’m now convinced internal divisions, corporate concerns over margins, branding and sourcing all forced Apple to blink and price the 5c far higher than it ever should have been.

As I wrote in a previous Insiders post (subscription required):

Apple’s iPhone 5c has been a striking failure, however, selling far fewer devices than Apple expected, likely dampening overall iPhone sales, and, if well-placed rumors are correct, very soon to be no longer of this world.

It all began, of course, with so much promise. The iPhone 5c — aka the “cheap iPhone” — was, we were convinced, going to be the aggressively priced new iPhone, ready to dismantle Android throughout the developing world, possibly beyond. It would (quickly) add tens of millions, ultimately hundreds of millions of new users into the Apple/iOS ecosystem.

Based on the court documents we saw last week, which make clear many inside Apple understood the pressing threat from the low end, such a low priced device was commissioned. Only…Apple doesn’t do low end.

But it must.

But Apple doesn’t do low end.

The end result: a failed product, at least. Given Apple’s strengths, that’s easy to recover from. If there are splits within Apple’s executive ranks, however, that could prove a lasting harm.

The iPhone 5c should not exist unless it’s priced at about $300 or so. The forces within Apple demanding such a device obviously clashed with the forces that demanded margins — and brand equity — trump new users.

I confess I find this fascinating.

I find it even more intriguing now that the giant, bloated, aging Microsoft has been rather stunningly re-energized.

In my earlier Insiders post on the iPhone 5c, I was troubled with the question, ‘why’. Why did the 5c happen and how?

Explain this: A 16gig 5c retails for $549. A 16gig 5s retails for $649. Why?

For that extra $100, the iPhone 5s buyer receives the following additional hardware, services and benefits:

  • A7
  • M7
  • TouchID sensor
  • Lighter weight
  • True Tone flash and larger 8 MP sensor
  • Slo-mo video
  • Enhanced imaging features

I stated then Apple had foolishly devalued its hardware by making a mere $100 price differential between iPhone 5s and iPhone 5c:

The most egregious, most confounding failure of the 5c, and the one I think will haunt Apple, is that the 5c effectively declares to all the world that one or all iPhones are radically overpriced. I am at a loss to understand how Apple allowed this to happen.

Now I know. Internal divisions. The 5c is a fine product, one explicitly designed to bring millions more into the iOS ecosystem. Only, the counter-forces decided another piece of beautiful, functional Apple hardware could not be priced with other ‘mid-tier’ devices.

That’s just not Apple.

Full Of Sound And Fury

The iPhone still accounts for the majority of the Apple’s revenues. The focus then is on building out the iPhone base, maximizing its profit potential, surrounding it with more and more devices, services and accessories to ensure lock-in. This is Tim Cook’s wheelhouse.

You can brand Cook as not being a ‘product guy’ like Steve Jobs, or not a true techie like Satya Nadella, but there is probably no one better suited for growing Apple and the iPhone business.

iphone revenues

With Cook in charge, and given his keen ability to scale manufacturing and optimize profits, expect the iPhone to be the center of the Apple universe for years to come, probably through at least this decade.

Apple wearables will require the iPhone. CarPlay will require the iPhone. New Apple accessories will be optimized for the iPhone. iBeacons will work best with the iPhone. New forms of peer-to-peer and point-to-point sharing, via the iPhone, will be rolled out over the months and years.

This is all very wise.

But I confess the failure of Apple to deliver a low cost iPhone, when so many obviously want one, when its top execs understand the potential for one, does make me question Cook’s ability to guide Apple toward the post-iPhone revolution.

Unfair? Perhaps. Even if I’m right, given I expect iPhones — smartphones, in general — to be our primary mode of computing and connectivity through this decade, Apple likely won’t feel the least bit of pain.

We are, after all, still well into the evolutionary phase of smartphone and tablet computing. This year’s iPhone, this year’s iPad, will be better than last year’s. Next year’s will be better still. And so on and so on. But a revolutionary new product? One that can live outside of the iPhone or iTunes sphere? Do not expect any such breakthrough product or service anytime in the near future from Apple. Apple is on a very direct course, set by Tim Cook, with its mission being to ensure the iPhone continues to print money. A low cost iPhone would have threatened the vision Cook holds for Apple’s future. It’s a vision I believe is almost guaranteed to succeed yet also highly predictable.

At Microsoft meanwhile, everything is in flux.

Which brings me back to Satya Nadella. He has the benefit of knowing his core moneymakers are nearing the end of their life. Tim Cook is not yet aware of such horrors.

When that day does come, I cannot say if he will still be the best person to lead Apple.

Instagram Video More a Threat to TV and Camcorders than Vine

Last week, Facebook announced Instagram Video, giving users the ability to take 15 second videos, add special effects and share with their friends. Instagram Video is nearly a feature-by-feature copy of Vine and has been reported to be negatively impacting Vine already. I believe, though, that Instagram Video’s biggest impact will be more on TV viewing and Camcorders than Vine.

If you haven’t used Vine or Instagram Video, it’s hard to explain why it is so addictive. For producers, it’s all about creativity, having fun, capturing “news”, showing off and getting “likes”. Let me use my daughters as an example on the production side. When they go to their friend’s house, what do they do? They are making videos, 8 hours at a time. It reminds me a bit of traditional photo Instagram, but much more intense and time consuming.

The most interesting video capture observation is “gamification”. Neither Vine nor Instagram Video support importing videos, meaning you have to capture the video you want in real-time. There is only minimal video editing in Instagram where you can delete the last video segment taken. What this leads to is the aspect of “challenge”, which I believe makes taking videos all that more addictive. The most interesting features in both programs are the use of filters and image stabilization to make videos look better or artistic.

As I said in the intro, I believe the more interesting discussion isn’t about Vine versus Instagram Video, but about how this increases the acceleration of the demise of the consumer camcorder. Camcorders are great for taking videos of graduations, weddings, baby births and sports events, but that’s about it. Editing consumer videos have been a total nightmare on a PC up until the last few years, which isn’t lost on the general consumer. The video quality and storage is higher on a camcorder than a phone, but then again, so is the picture quality of a discrete point and shoot camera. It’s the same logic here. Both Instagram and Vine give us yet another reason to ditch the camcorder. Let’s talk about viewing videos.

On the viewing side, the behavior is different than on the capture and edit side. It looks and feels more like channel surfing or wading through a Facebook stream. This audience is much, much larger and includes many who don’t enjoy making and editing the videos themselves, but would rather just watch and maybe “Like” or comment on a video. My daughters like to call them “stalkers”.

What makes viewing so addictive is that it is just so personal and has so much depth. Pictures and text are nice, but videos add motion and audio, adding a deeper layer of meaning. This is in part why you now see comedians, indie film makers and novice newscasters flocking to the new media platform. In a sense, the medium becomes real-time reality TV.

The most interesting playback feature is just how quickly videos start playing. Compared to other forms of video, it feels instant, but in reality, there is a small delay. This has a huge effect on just how much this positively adds to the experience. You see, our brains multiply time, meaning that milliseconds feel like seconds. Consumer packaged food makers know this well. This is why consumers will pay 30% more for packaged food that can be opened one second faster.

Like the impact video capture and edit on Vine and Instagram Video had on camcorders, I believe viewing videos has an impact on watching TV. The logic is simple- the more time we are consuming videos, the less time we have the TV switched on. For super-connected homes this has been the case with the trade-off between all forms of social media, smartphones and tablets. Those connected homes are spending less time on the TV and more time on their phones, tablets and PCs. As the content improves and more people are producing even more videos, more people will want to tune into the services to make sure they don’t miss anything.

What’s to put a potential damper on the viewing? Too many ads. I don’t think it’s a coincidence that Instagram Video chose the 15 second ad length for their videos. It makes it all that easier to slot in an ad that was produced for TV, which come in 15 second increments.

Net-net, the competitive angle of Vine and Instagram Video is interesting, I believe the genre impact to other mediums and devices is more important. The new Instagram Video harms camcorders and TV viewing a lot more than it does Vine.

Leaving the iPhone

I have used the iPhone since the 3G as my primary phone and have enjoyed my experience very much.  It was, quite frankly, ahead of its time in almost every conceivable way.  It “felt” better, had more apps, better apps, great camera and a built-in iPod.  Better in every way until now.  I am strongly considering leaving the iPhone in favor of either Android or Windows Phone and I want to tell you why. Interestingly, since I’ve had my iPhone, I have also carried an Android and Windows Phone so I could make weekly if not daily experience comparisons.  Things have changed and it could be time to move on.  I am not saying I dislike iOS or the iPhone- I do, it’s just that it just feels too restrictive and not as so far ahead as it once was.

“Feel” is Good Enough

With Android’s “Butter” introduced at this year’s Google I/O, the feel is nearly as good as iOS.  That says a lot, because as far reaching as the first Android phone, I could feel a major difference.  When I mean “feel”, it is the responsiveness that the phone has when you touch it, primarily the swipes, and the responsiveness to those swipes.  As for Windows Phone, it has always felt good and responsive to touches and swipes.

Key Apps Cross-Platform Apps Nearly as Good

There was a recent time when the newest apps were only available on the iPhone.  I don’t know if I am just becoming more settled (read:old) with my apps, but my front page apps have remained constant for a couple of years.  As those apps became available on Android, there was the quality conversation.  Those first Android apps were, well, ugly.  My front-page apps like Evernote for Android and Windows Phone are still ugly but they don’t keep me from doing my job or having less fun.  There is much less of a time delay or quality delta between Android and iOS apps than there ever was before.

Sharing Content Still Difficult

Let me just say up front that I am not the typical consumer as it comes to sharing information on social media networks.  I share a lot and I do it on a lot of networks.  Apple has been very particular in how it wants to allow you to share from the point of content.  Let’s look at sharing a news article.

On my iPhone from Safari, when I get to the page I want to share socially, I have two choices, Twitter and Facebook.  When I do share with those networks, a beautiful clipping emerges and there is space to say some things about it.  The problem is, none of the contextual info shows up like the website and the article name or author. That means I need to type in the article title.  This is a pain.  Alternatively on Windows Phone and Android, I have as many networks to share to as I subscribe to, and in my case this takes Twitter and Facebook and adds LinkedIn, Google+, and Pinterest. More times than not, it will take the article title and place it in the “share” as content.

I can still share that news article on LinkedIn, Google+, and Pinterest on my iPhone, but I need to copy the URL of the article, open the LinkedIn, Google+, and Pinterest  apps, paste the URL into the three apps, add the titles, then my own content, then post.  This is a whole lot of time I just don’t have.

Speech to Text and Control

I drive nearly two hours a day as I have three kids who are very active in sports.  One of my daughters is involved in club volleyball, basketball, equestrian, and cheer, all at the same time.  So my wife and I are in the car a lot.  Therefore, I need speech to text and speech command and control to actually work well.

Research shows that in general, consumers are happy with Siri doing very basic things like voice dialing.  My personal research has shown that Siri does not work very well at all under many circumstances.  With me, it is flaky and rarely works well.  When it does work well, it is like Siri is a different person.  I just don’t understand the massive variability.  We have good networks in Austin, I am originally from the Midwest which is considered at least by news agencies as having no accent, and I use the highest quality microphones.

Android speech capabilities are nothing short of incredible, but it takes the right phone.  The Motorola Razr I is one of the best as it accurately does speech to text over speakerphone at an unscientific 95% hit rate.  I talk, it types. With Google Now on my Samsung Nexus 3, it adds natural language to get very specific data points, very similar to Siri.  All in all, Siri is more sophisticated on paper, but does not work for me at all.  It is unfortunate, because Siri was the reason I bought the 4s.

Microsoft has been disappointing on this front so far given they have been doing speech control for around 15 years and the fact the Xbox works so well in a challenging acoustic and compute environment.

Newer or Different Technology

Apple actually has been ahead with its technologies and doesn’t get enough credit for it.  Apple has been ahead at times technologically on displays, SOCs, home sharing (AirPlay) and cameras. They have chosen not to lead technologically at times on wireless speed, WLAN speed, PAN, pen interaction, external storage, modularity, and notifications. I have been OK trading off newer or different technology for the better “feel”, better apps, better camras and iOS reliability, but with Android caught up in many areas and with Windows Phone on the move, it’s a more complex decision now.

Let’s take NFC as an example.  I was very skeptical about NFC for a myriad of reasons, particularly around NFC payments… that was until ISIS came to Austin.  I’m in my local Jamba Juice, and there it is, ISIS payments accepted.  At that point, I wanted it as I routinely forget my wallet and when I do remember, my debit cards get used so much it rarely scans correctly. I want NFC as a backup.  The Samsung commercials are funny and I do like playing around with sharing pictures and web pages over NFC, but that’s not driving my demand for NFC, it’s the potential for NFC payments in my city.

Where to Next, Android or Windows Phone?

First of all, I have not decided 100% to leave my iPhone.  Over the holidays, I will start trying out different phones and let you know about my experiences.  As a tech analyst, I will be separating my personal experiences and what I think the homogeneous consumer “market” will think as I am not a typical consumer.  I am much more technical, live a more digital and connected life, and am older than the median versus the “average” consumer.  Most interestingly, four years ago I didn’t think I would even be considering something else as my primary phone, and must give credit to Google, Microsoft, Samsung, HTC, Motorola, for their continued advancements.


Immersive Social Games Bringing Families Together

The big discussion on social games recently is centered around games like Farmville and companies like Zynga, whose recent IPO generated a lot of attention. I see a much more interesting phenomenon taking place where new, cross-generational and immersive social games are bringing families like mine closer together. It’s an interesting phenomenon that goes back to family baseball and Monopoly. KingsIsle Entertainment, developer for the successful Wizard101 game launched Pirate101 this week. This is the second in cross-generational and social game which puts an exclamation point on the growth and value these kinds of games provide to families, including mine.

My Personal Experience

My son, his five cousins, his uncles and I all play KingsIsle’s Wizard101 MMO game. Most times my son plays and initiates a conference call. Sometimes he even uses Skype. Did I mention he was ten years old too? I really enjoy Wizard101’s ability to cater to my needs as well as my son’s. The characters and situations even harken back to 70’s comedies I grew up on. There are typically two levels to the dialogue, one for adults and one for my son. The game is deep, and according to KingsIsle, there are about 30 hours of spoken audio and hundreds of hours of gameplay in the main quest lines alone.

My son talks to me about Wizard101 at least twice a day about new levels, characters, spells, minions, and even new houses and furniture. He is fully vested. It’s even to the point where I pay him his weekly allowance in Wizard101’s virtual currency called crowns. Is my and my son’s story unique and different? Maybe fanatical but not unique when you look at the numbers.

The Country of Wizard101

My son is not alone in his fanaticism for the game. Wizard101 has 25M registered users, which, if it were a country, would be larger than population of Australia or replace Texas as the second largest state in the US. That is a large reach. Frequency is impressive, too with 14M monthly unique visitors to Wizard101. That’s larger than Sony Online Entertainment’s Freerealms.com, Nickelodeon’s nick.com, EA.com and popcam.com. According to KingsIsle, users have racked up 22.3B minutes of gameplay and have acquired 2B items in their quests. Independent research gives us an insight into why the game is so popular.

Trinity University Research Study

Trinity University surveyed 30,000 Wizard101 players last year and came back with some very interesting results. The study hasn’t been officially released, but I wanted to share a few things I thought were most interesting:

  • 60% of responding children play Wizard101 with other family members. One-third of those children play with their parents or grandparents.
  • 68% of responding adults play Wizard101 with other family members. Approximately two-thirds of those adults play with their children or grandchildren.

KingsIsle gets feedback all the time from its players about how families are experiencing the game together. Players tell stories about grandparents playing with their grandchildren, distant relatives playing with each other, Dads playing with their kids on business trips. There are also stories of older gamers finally finding a sense of community they had always longed for. Gaming can be more than just about having fun, it can be about the core of relationships and life

Jedi Lessons at Hogwarts

The research-based fact that kids and adults can enjoy the same kind of entertainment together makes a lot of sense when you think about it. Look at some of the biggest entertainment phenomenons of our time and it starts to gel. Cross-generational movies music and games are big. Look at Star Wars, Harry Potter, and most of the Pixar movies. Kids, adults and families all enjoy and watch these movies together as the content pleases different generations. KingsIsle isn’t done at Wizard101. There’s more.

Second KingsIsle Cross-Gen Game This Week

KingsIsle announced a new cross generational MMO game this week, called Pirate101. It’s all about pirate adventures and while similar in some ways to Wizard101, it’s quite different, too. I got early access to Pirate 101 and played with my son. He took right to the controls and I enjoyed it even more as the combat is more mature and quite frankly I enjoy the better visual effects. OK, I also enjoyed flying pirate ships around space too.

The game is more mature, but not too mature, to keep my son in the game as he gets older. Pirate101 will be a winner in the Moorhead household and I’m sure in the marketplace as it takes the winning Wizard101 formula and adds more mature themes and gameplay.


Social games are huge in numbers right now, but cross generational games that are very social could be even bigger. I have personally seen it, the reach and usage stats show it, and research tells us why this is the case. The new Pirate101 will tell all of us just how big it can actually get. Between now and then, I will continue to pay my son’s allowance with crowns!

Yahoo!: Tactics Masquerading as Strategy

Last week on Yahoo!’s earnings call, CEO Scott Thompson outlined six points the company would pursue to return the company to a proper focus. When I looked at the list, they all made sense as operational principles or even action items. The big problem is that unfortunately, operating principles or action items aren’t a strategy, and this does not bode well for employees, stockholders, advertisers and even end users. The best strategies are set in the context of a strong mission and vision, neither which Yahoo! has communicated to anyone.

My Personal Yahoo! History

I remember telling a colleague that I invested my entire life into Yahoo!. I had Yahoo! Mail, had all my contacts, my calendar, read all my news through My Yahoo, all my notes in Notepad, and even got weather and movie times from them. I would even start at My Yahoo! for search as My Yahoo! was the first place I started in the morning. Now, I start my day at Pulse News on a tablet or phone over coffee, listen to podcasts while taking my kids to school then then go to Twitter and Facebook for “cultivated” news. I rarely go to a Yahoo! property with the exception to check out stock prices on Yahoo Finance. I’m not alone as Yahoo users have fled to Google for search and mail, Facebook and Twitter for social media, and vertical, specialized sites like Instagram, Pinterest, Foodspotting, and Goba. It all makes sense, though, the story of a big company’s downfall.

Being the 800 lb Gorilla Difficult

Being the largest kid on the block is great at times. I know; I worked for AT&T and Compaq at their peaks. I worked for companies who created and took markets. It was fun as I worked for the more entrepreneurial divisions. I saw IBM in the late 80’s and early 90’s almost left for dead before they became untouchable as they appear at least today. Then there’s AOL who keeps fading farther into the background, buying content brands that are full of conflict. The jury is out on Microsoft and Google if they have already peaked or can move to where they are perceived as the leader. Net-net, being the 800 lb gorilla isn’t an easy thing because of three primary reasons. First, large, successful companies when they get large, become slower and bureaucratic. The inventors are replaced by people who are great at process and but light on vision. Secondly, these companies are concerned more with playing defense and protecting their ground and less out about winning in new markets. Third, these companies face the innovator’s dilemma, where they incrementally improve their services as opposed to investing in disruptive exploration. It’s hard being the 800 lb gorilla. So how does Yahoo! intend to deal with this?

Yahoo!’s Six Points of “Strategy”

On the Q1 2012 earnings call, Yahoo! CEO outlined six “essential elements of [the] plan.” This was after layoffs and after a reorganization. Most companies let strategy dictate organization, but I don’t believe that’s not the case here. Here are the six strategy elements verbatim:

  1. consolidating technology platforms and shutting down on transitioning roughly 50 properties that don’t contribute meaningfully to engagement of revenue
  2. defining our core media connections and commerce businesses, including News, Finance, Sports, Entertainment, Mail and a handful of others. Those properties that generate the majority of our engagement and revenue.
  3. moving engineers into our commerce businesses to put them closer to our user and dedicating some of our best and brightest Yahoo!s to meaningful innovation in those core businesses.
  4. accelerating the deployment of the platforms and technologies we’ve built to make each of our properties more scalable, nimble and flexible, and therefore, less costly and time consuming to run.
  5. making better use of Yahoo!’s vast data to personalize user experiences and dramatically improve advertiser ROI.
  6. refocusing our R&D on Owned and Operated properties and stopping development of a number of initiatives, including platforms for outside publishers and theoretical science that were outside of our core.
These are great tactics and action items but don’t provide any insights into what matter first and foremost.

Where Does Yahoo! Intend to Win?

The tactics above are great in the context of a solid mission, vision and objectives, but Yahoo!’s says nothing about where it wants to win. You see, getting every Yahoo! employee working in a single direction is the right thing to do, but what if it’s the wrong direction? This would be catastrophic and at least what I see communicated this is exactly where Yahoo! is headed. The first question is, “where does Yahoo! want to win that is uniquely valuable to consumers and to advertisers?” That piece is a mystery for Yahoo!. Yahoo! needs to lean into something, and they have a lot of choices as they are still in the large growth segment:

  • local
  • deals
  • mobile
  • social
  • photos
  • living room
  • specialized verticals

I’m not advocating for any one of these at this moment, but Yahoo! needs to choose something, anything, to get the remaining 12,000 employees focused on. I won’t be enough presumptive to say Yahoo! doesn’t have a strategy floating around on the Executive Staff’s desks, but it certainly isn’t being communicated to stakeholders who need it.

Yahoo! Next Steps

Yahoo! needs to regroup after the last few weeks and in the next few months, decide where they want to win,communicate this broadly, then create a supporting strategy, then organize to deliver on that strategy. The last month has been nothing but triage, and if they need to quickly reorganize again to support a real strategy, most of the few weeks will have been a waste of time for the employees. Yahoo! has two paths they can go as a former 800 lb gorilla; the Apple/IBM way or the Excite/DEC way. I’d like to see Yahoo! make a comeback for more than the nostalgia; I’d like to see a Yahoo! comeback to inspire everyone in the industry that comebacks can happen and employees and key leaders can make it happen. That’s good for everyone. Who doesn’t love a comeback?

Facebook is for Old People

FACEBOOK IS STUPID AND FOR OLD PEOPLE“, my 12 year old daughter texted me yesterday after FaceBook offered to purchase Instagram. If you have teenage or pre-teen girls or boys, this demonstrative behavior isn’t anything new. What I didn’t fully understand at the time is what a firestorm the acquisition set off in the community. Of deeper and longer-term significance, however, was the spotlight my daughter’s text to me shined upon the newest and most natural trend in social media; verticalization or specialization, which will reshape social media as we know it today.

As I probed to better understand what my daughter meant and how she felt by her text to me, she explained that with Facebook owning Instagram, it would ruin its entire purpose. Probing further, she feared that Facebook, because it’s for “old people”, would “change Instagram.” Taking this offline, she explained a few fears. For her, Instagram is a world for her and her friends in her grade that was protected from Facebook gawkers and lurkers. Her thinking was that by Facebook owning Instagram, those gawkers and lurkers would invade her and her young friend’s world. Mark Zuckerberg promises a standalone Instagram, but will, of course, import all the pictures in their context and metadata, to be monetized like everything else is in the Facebook network. My daughter wasn’t alone in her fears.

Like Mathew Ingram reported in GigaOM, many other people, including grown adults, were airing their grievances. Many even retweeted my daughter’s text in a sign of protest. As of right now, the text had been viewed on Twitpic over 71,000 times and was retweeted over 3,200 times. While the protesters probably represented small but vocal minority, they certainly were a passionate and diverse group. All of this passion highlights a theme I’ve been researching for a few months, the verticalization of social media.

Over an extended period of time, all markets go vertical or specialize, all the way to the point where the market cannot support any more divisions. Sometimes the segmentation is too gray and not demonstrable enough to support the business model. Look at TV channels, cars, tooth paste, and shampoo. They have all segmented beyond belief if you been alive long enough to see it from the beginnings. Cars are a good example. At one point, there were very few different types of cars consumers would want to buy and that manufactures offered. Now it seems that every brand has sedans, coupes, mini-vans, station wagons, SUVs, “minis”, sports cars, trucks, hybrids, etc. TV sport is another good example of specializtion. When I gew up, I could only watch sports on one of four network TV stations at very regimented times of the day. Now, from Austin’s Time Warner Cable, I can get access to over 50 different sports channels whenever I want, 24 hours a day. I see the same situation playing out with social media.

Socal media is now starting to mature, fragment and specialize. Facebook, for now, are many people’s “home base”, but as in life, all people have to leave home sometimes. That’s exactly what people started doing with a few sites like these:

  • Pinterest– Lifestlye social interactions around the “beautiful things you find on the web”.
  • GetGlue– Entertainment social interaction around what people are watching on TV, at the movies, playing, reading or listening to.
  • Foodspotting– Food social interaction between people who like to eat out and show off what they’re eating.
  • Goba-Face to face social interaction by bringing people together in the real world.

There are hundreds more services like these that cater to narrower slices of social interaction, but it’s not all rosy in the specialized social media world.

There are gating factors all markets need to overcome to move to specialization. For cars, it was a market large enough to warrant specialization plus the “sharing” of key parts like engines and chassis. For social media to specalize, it needed a home base, like Facebook, to provide login, authentication and open APIs to cross-post content and opinions.

Facebook has enabled the growth of these specialized social media sites. It’s a good thing they did, or Google would have done it and Facebook may not had nearly the lead they have today. This doesn’t mean Facebook will continue to leave its door open forever, though. Another potential growth-inhibiting factor is obvious; the number of active users and friends. There has to at least be enough users and friends to warrant going there in the first place. This is killer #1, but is facilitated by Facebook’s APIs. With today’s UIs and interaction models, I believe that consumers can really only tolerate one major social media “hub” like Facebook then one, maybe two specialized social media sites that are somewhat connected back to the home base. This could change over time due to aggregation work like Microsoft does with its “People” apps, but for now it’s a reality that there’s only so many sites we can handle. The final growth inhibitor is linked to the first. If you cannot gain scale, then you won’t be large enough to make enough money to stay in business. Most social media experiences who pass gate #1 fail gate #2.

Can we learn anything from a pre-teen girl’s reaction to a $100B company purchasing a tiny company with less than 15 employees for $1B? I hope so. I know I did. Consumers are very picky and if we offer them thin enough social media slices with enough mass to be considered a community, they like it. We only have to look at Instagram and Pinterest’s fast growing bases of active users as evidence that this is only the beginning of the social media specialization revolution. What does this mean for Facebook? Facebook needs to be the best “home base” it can be, integrating and facilitating traffic between smaller, specialized social media services. While Facebook has trumped Google many times in the last few years, they should get the YouTube playbook from them to show them how to do a branded integration the right way.