My Favorite Part of The Super Bowl: The Commercials

It is no secret to the people who know me that I cannot even fake a mild understanding of football or any excitement about the sport. Yet, every year since we moved to California, I have been watching it mostly to see the Halftime Show and the ads. And this year it was just about the ads! I find fascinating to see what the different brands decide to focus on and whether the ad lands with the general public.

Last year I did the same with the Oscars, and it is quite interesting to compare and contrast the approach companies take for these events. Comparing the two audiences might help understand the tactics brands are using. Being aware of what audience you are addressing influences the message you want to drive. Interestingly the 2018 Academy Awards ceremony had the lowest audience in history in the midst of the “me too” campaign with viewers dropping to 26.5 million people. Similarly, this year’s Super Bowl drew the smallest crowd since 2008 but still bringing in over three times the audience at 98 million.

When it comes to ads, the Super Bowl ads are usually more expensive than those aired during the Oscars, but on average those Academy Awards ads can be 30 to 40 percent more expensive per user. The Oscars audience skews not just female but also well- educated and affluent with high disposable income. It also attracts a higher number of social media influencers making a better fit for certain brands targeting those higher-end consumers.

Apple who has had several ads during the Oscars including the first-ever commercial for an iPad in 2010 and then one entirely shot on an iPad in 2015 has been absent from the Super Bowl stage for thirty years, and many were wondering if this was the year for a return. But alas, Apple passed. It is interesting to me given the current stand Apple is taking on privacy that the company did not think there was an opportunity to send a message. Considering that despite all the negativity around Facebook its latest quarterly results show that daily active users grew in all geographies including the US, Apple could have read the audience well and thought it was not the right place for that message. Or it could be that this year, given the current battle between the NFL and Colin Kaepernick, was just not the right time to advertise during the game. It will be interesting to see if Apple will have an ad on Sunday the 24th and what the focus will be.

For the companies who did have an ad, it is always interesting to see what the focus is: business model, products, larger social message and this year there was certainly a mix of all the above coming from companies I consider squarely or loosely linked to tech.

The Core of the Business

Google and Amazon seemed to have chosen to highlight an aspect of their business that has become a cornerstone: AI and voice. Google had two ads one paying tribute to the military and showcasing the power of search in the context of jobs. While I appreciate the tribute to the men and women who serve, it did feel a little mercenary to boil down the message to “you can search for a job using our engine.” Maybe because of that I found the “100 billion words” commercial much more impactful. Focusing on Google’s translation service, it showcased the power of bringing people together, helping people, sharing experiences. The examples used in the commercial were highly emotional and built up to a feel-good ending that certainly put Google as an enabler of something good. This is a much less threatening positioning compared to the recent Google Duplex presented at Google’s Developer Conference that showcased where AI could take human to machine communication. While Google could have focused on other aspects of AI, like photography, I think picking communications as a way of building human connections was a great way to redeem itself from the somewhat dystopian picture painted with Duplex.

Amazon focused once again on Alexa and this time specifically on use cases that are not the best ideas: from an Echo collar that understands dog barking and converts it into dog food orders, to an Alexa enabled toothbrush that plays podcasts. Aside from being hugely entertaining, I like the subtle messages I took from the content; one, Amazon is experimenting much more with voice than what we see becoming commercially available but also that Amazon is not afraid to try and see what sticks by making it available. To counter that, though, there was in my view another message that not everything can and will be done with voice. One can sure read too much into everything so I won’t go as far as suggesting that Alexa turning the lights across the world on and off is ultimately what Amazon is envisioning for Alexa: global domination!

Current Social and Political Issues

Many believe that the Super Bowl is not the right show to push political messages and over the years we have seen most brands opt for more positive and uplifting messages, but this year three politically and socially charged ads stood out.

Hulu had a chilling ad presenting Season 3 of the Handmaid’s Tale which played on Ronald Reagan re-election advertisement “Morning in America.” You would have been sleeping at the wheel if you missed the parallel between the commercial ending with Elisabeth Moss’ voice-over saying, “Wake up, America. Morning’s over.” and the #MeToo movement and Oprah’s #TimesUp moment at the Golden Globes.

Women were also at the center of Bumble’s commercial as to be expected by the dating app that has women make the first move. While less spooky than the Hulu ad, Bumble spoke of female empowerment too with Serena Williams delivering a message of self-awareness, conviction, and purpose.

The Washington Post owned by Jeff Bezos ran an ad to pay tribute to the free press and some of the reporters that sacrificed their lives to do their job. Many reporters on social media criticized the ad as a waste of money that could have been spent instead to hire more reporters or pay existing ones better. Many, I included, however, applauded the commercial for speaking out straightforwardly against the danger of misinformation and ignorance. This commercial, more than the other two, shows how difficult it is to get it right especially when you consider the money involved to air those ads.

The Good of Tech

At last year’s Oscars, Microsoft decided to focus on AI but this Sunday for the Super Bowl, Microsoft had a great commercial showcasing how the new Xbox adaptive controller that, just like one of the kids in the ad says, allows everyone to play. True to Satya Nadella’s mantra that Microsoft’s goal is to empower everyone, the message was loud and clear: technology at its best is inclusive, not divisive. “When everybody plays, we all win” concluded the ad. Gaming certainly brings people together today more than ever as popular games like Fortnite are available on multiple platforms and allow gamers to play together no matter what device they are using. Gaming has also become an actual social experience which makes the Xbox adaptive controller even more of an enabler to communicate, part take, share, and game. While I am sure not intended by Microsoft, I could not help but think how ironic that message was in the context of the NFL and Kaepernick.

If I knew anything about football I would dare to say the commercials were much more entertaining than the game this year, but what do I know?

Could Embedded 5G/LTE Kill WiFi?

With less than three weeks to go before the big Mobile World Congress (MWC) trade show in Barcelona, Spain, there’s a lot of attention being paid to wireless technologies, particularly 5G. The next generation cellular network is expected to make a particularly big splash this year, as the first devices that incorporate the technology are expected to be on display. In addition, many are expecting to see a rash of telecom infrastructure equipment suppliers unveiling the latest components necessary to power 5G networks, telecom carriers announcing their pricing and planned rollouts of 5G services, and just about everyone else trying to make some kind of connection between what they’re offering and the new network standard.

But 5G won’t be the only wireless technology making some important debuts in Barcelona. At long last, we should also see the first client devices that incorporate the latest version of WiFi: 802.11ax, more recently dubbed WiFi 6. According to FCC documents discovered by the DroidLife website, for example, it appears Samsung’s next generation Galaxy smartphones, predicted to be announced at their upcoming pre-MWC event, will include support for the faster new WiFi standard. In addition, there are rumors of many more WiFi 6-equipped smartphones and other gadgets being introduced at this year’s MWC. Many of these new devices are expected to be powered by the recently unveiled Qualcomm Snapdragon 855 chipset, which includes built-in support for WiFi 6.

Interestingly, even though 5G and WiFi 6 are different technologies, there are a surprising number of similarities between them, at many different levels. In fact, there’s enough of them that some have wondered if one of the wireless network standards might eventually subsume or replace the other.

First, at a high level, each of the new standards contains a wireless data connection protocol that builds on previous generations and is specifically designed to increase the density of wireless networks. One of the biggest problems limiting the performance of both cellular broadband and local area wireless networks is clogged airwaves—too many people and too many devices trying to leverage a limited amount of space. It’s a classic data traffic jam.

As a result, both 5G (and many of the enhancements introduced with gigabit LTE—which AT&T is misleadingly labeling 5Ge) and WiFi 6 are using some of the same basic technical principles to help alleviate the congestion. Though there are differences in implementation between 5G and WiFi 6, both are using technologies like enhanced Multi-User MIMO (MU-MIMO), OFDMA, advanced QAM, and beam-forming to make more efficient use of the defined radio spectrums for each technology. Taken together, these enhancements should help each technology reach theoretical peak transfer rates in the high single digit gigabits per second range as well.

Just to add to the complexity, there are also a number of efforts, such as LAA (License Assisted Access) and MulteFire, which are designed to allow cellular radio signals to travel over the same, unlicensed 5GHz radio spectrum used by WiFi. Concerns have been raised that this combination of cellular and WiFi could lead to interference with WiFi operation, however. In addition, telco carriers, who exclusively license the radio spectrum they use for broadband cellular connections, have voiced concerns about losing access to what could become “private” LTE or even 5G networks.

Despite these issues, a number of wireless vendors, including Qualcomm and Intel, have discussed the potential opportunity for companies to build these kinds of private cellular networks—in essence, replacing WiFi with 5G or LTE. Though this would require all devices connecting to the network to have an integrated cellular modem—no small feat right now—the idea is that this could improve coverage across a campus environment or in a factory, and wouldn’t require any type of log-in process that you typically need with WiFi.

At the same time, some similar benefits of integrated LTE (and eventually 5G) in PCs and other devices is also starting to take hold. The ease of having a single network connection that doesn’t have to be changed or be remembered or be logged into (if you even can) no matter where you are becomes much more appealing the more you get used to the concept. Throw in the critical fact that cellular connections are considered more secure than WiFi, and you can understand why you should expect to see a lot more devices with integrated cellular broadband over the next few years.

Of course, as appealing as a single network may sound, there are still a number of critical issues that exist. First, telco carriers still have a long way to go to make this a financially attractive and realistically practical option. Yes, the “add a device for $10 more a month” model does exist for most people, but it’s not consistently available, a number of limitations often apply, and it’s still not easy to manage multiple devices on a single account. This is particularly true for companies that have thousands of employees, each of whom could easily have 4-5 different connected devices.

In addition, there are a number of attractive, lower-cost and relatively easy alternatives. Right now, WiFi signals are nearly as ubiquitous as cellular connections, and in most cases, they’re free, which is always tough to compete with. Plus, some of the enhancements for WiFi 6 will likely fix the frustrations that people often have with WiFi in dense environments (and which typically trigger the switch to a cellular broadband connection—such as at a trade show, etc.). On top of that, tethering a WiFi enabled device to a cellularly connected one is getting much easier, particularly now that Google just announced that the automatic tethering features of some ChromeOS devices are coming to most all Chromebooks and a wide range of popular Android-based smartphones.

Ultimately, 5G and WiFi 6 aren’t really competitive technologies, but complementary ones—at least for now. In fact, it will probably be difficult to find a new 5G device that doesn’t also support WiFi 6—the two technologies can work hand in hand. For most people, 5G will handle the wide-area wireless connection, and WiFi 6 will handle the local wireless connection. Eventually, however, there could certainly come a time when only one of them will be necessary.

It may seem crazy to think that WiFi could go away, especially given how pervasive it is today. But if you fully take into account the advances that 5G is expected to bring—not least of which is a huge number of small cells that can be used indoors and other places where WiFi has typically reigned—the idea may not be as far-fetched as it first appears.

Apple’s Commitment to Healthcare Breaks New Ground

In the summer of 2009, I had the privilege of hosting in my office the former CEO of a large healthcare system in the US. This person was here to share with me about some new healthcare investments he was involved with, but during my conversation with him, he shared with me about a meeting he had with Steve Jobs and some of his team earlier that year. I cannot share this person’s name as his project was private and personal but can share what he told me about his conversation at Apple.

He said that in the meeting, Jobs emphasized that he was deeply frustrated with the health care system and the amount of red tape and disconnection he observed in his quest to deal with his health problems. He then suggested that one of Apple’s future missions was to try and help deal with the healthcare bureaucracy as he called it and to make health a significant initiative for Apple in the future. This former healthcare CEO assessed that “Apple could be the company that could solve some critical problems in healthcare in the future.”

Later that year I wrote a piece in which I relayed this story and said that I felt that Apple’s commitment to health would be one of Steve Jobs’ greatest legacies. This piece was about 16 months before Steve Jobs lost his battle with pancreatic cancer. Now, ten years later, I am more convinced that Apple’s commitment to healthcare is stronger than ever. More importantly, Tim Cook and his team appear to be working overtime to make various aspects of healthcare and personal health a key mission and in the process, honor Steve Jobs’ vision of a better healthcare future. The most recent example that underlines this commitment to health comes from a partnership that Apple launched with Aetna in 2016 and now has a new app that helps their customers manage and monitor their health.

Here is the definitive section of their recent press release on this project:

“Aetna, a CVS Health (NYSE:CVS) business, announced the launch of Attain, a unique health experience designed by Aetna in collaboration with Apple. Through the use of an Apple Watch, the Attain app will provide Aetna members personalized goals, track their daily activity levels, recommend healthy actions, and ultimately reward them for taking these actions to improve their well-being. Reward opportunities include the ability for eligible users to earn their Apple Watch through their participation in the program.

This launch builds on the 2016 collaboration between Aetna and Apple in which 90 percent of participants reported a health Aetna has deep clinical experience, engaging its members across their health care needs from wellness to chronic disease. Apple consistently delivers highly personalized products in a simple yet elegant fashion that prioritizes privacy and data security and helps people live their best lives. The Attain app is the first of its kind — designed specifically to offer users a personalized experience that combines their health history with the power of the Apple Watch to help them achieve better health and well-being.”

This new program with Aetna underlines Apple’s strong commitment to keeping Jobs’ health care legacy moving forward. More importantly, it outlines a more aggressive plan for Apple to be working closely with the healthcare industry in general.

This program with Aetna could be likened to a lot of what we see other big tech companies doing when it comes to IT consulting in general. Companies that can provide hardware, software, and services are adding dedicated programs where the vendor gets more involved in the actual software customization and helps the enterprise develop tailored programs for their customers and employees.

Although Apple does not have a dedicated IT services group, this is the closest to that type of program which mirrors successful services being done already by Dell, HP, Lenovo, and IBM. But this project with Aetna shows Apple has the skills and wherewithal, even without a dedicated IT services group, to meet these kinds of needs and challenges by their customers when it is needed or makes sense.

It also puts the Apple Watch in the spotlight as an essential vehicle for Apple to impact personal healthcare. In the Aetna program, the Apple watch delivers their new Attain app that helps Aetna customers monitor their health on a highly individual and proactive basis. When I talk to healthcare related insurance companies, they tell me it is much cheaper to help a customer stay well then to have to have to cover their hospital costs when illness strikes. That is why almost all primary health care providers are jumping on the role technology can play to keep customers healthy and help them avoid disease.

I rely on the Apple Watch to manage my Diabetes. I wear the Dexcom Continuous Glucose Monitor that checks my blood sugars 24 hours a day. When I need to see what my blood sugars are I no longer have to prick my finger and instead look at my Apple Watch to see the Dexcom reading of my blood sugars. I also use it to take an ECG at least once a week to check my heart health. And of course, I use it to monitor my steps and try to get to 10,000 steps each day. What Apple has done with Aetna is probably just the beginning of many more similar projects they could undertake with healthcare providers.

Although I believe that Apple’s commitment to healthcare started with Steve Jobs’ health problems and this influenced their top leadership to find ways to make Apple more focused on health technology in general, Apple’s commitment to innovation goes well beyond their quest to honor Jobs. Tim Cook and team understand better than most tech leaders how technology could be used in new ways to keep us healthier. They encourage new apps for IOS and Apple Watch and continue to deliver hardware and developer tools that can optimize and maximize ways people can use technology to manage their quest to have healthier lives.

This partnership with Aetna can serve as a guide for how Apple works with other major healthcare industry heavyweights in the future. What they learn from these projects are bound to help Apple create even better hardware, software and services to keep their customers healthier.

Podcast: AMD, Microsoft, Apple Earnings, FaceTime Bug, Apple-Facebook-Google Spat

This week’s Tech.pinions podcast features Carolina Milanesi and Bob O’Donnell analyzing the recent earnings announcements from AMD, Microsoft and Apple, as well as discussing the implications of the group FaceTime bug Apple disclosed the week, and debating the impact of the recent spats between Apple and Facebook and Apple and Google over enterprise application certifications.

If you happen to use a podcast aggregator or want to add it to iTunes manually the feed to our podcast is: techpinions.com/feed/podcast

The Smartphone Market’s Tough Year

IDC’s preliminary data on fourth-quarter shipments prove out what we already knew to be true: The smartphone market had a down year, with total annual volumes declining 4.1% year over year to 1.4 billion units. Looking ahead, our conversations with the supply side—combined with what we know about device lifetimes continuing to extend—suggests that at a worldwide level things are likely to get worse before they get better. That said, there are still some bright spots in the market that are important to discuss, including continued growth in a few key markets.

Top Five Vendors
A look at the top five smartphone vendors shows two distinct trends: Declines from the top two vendors, and continued growth from the remaining top five. IDC estimates that for the full year Samsung shipped 292.3 million units for a market-leading share of 20.8%. That’s down 8% year over year. In second place, Apple shipped 208.8 million units for a 14.9% share and a decline of 3.2% YoY. Meanwhile, Huawei shipped 206 million units (growing 33.6% year over year), Xiaomi reached 122.6 million units (up 32.2%), and OPPO topped out at 113.1 million (up 1.3%). The rest of the market combined saw volumes decrease by 19.4% to 462 million units.

As others have noted, as the smartphone market reaches maturity it’s instructive to look back at what happened in the PC market when it peaked and then declined years ago before finally (hopefully) stabilizing today. One of the key things that happened there (and continues to happen) is market consolidation among a handful of top vendors. As you can see from the numbers, that’s happening even more rapidly in the smartphone market, where the top five commanded greater than 67% of the worldwide volumes in 2018, up from 63% a year ago. We expect this consolidation to continue in 2019.
Based on the 2019 unit volume targets we’ve seen from the supply side, we expect the bottom three vendors (or four, including number six Vivo) to continue to aggressively fight to capture more share this year. Watch for Huawei to be especially bold as it nears its goal to become the number two volume player in the world.

The China Problem and Emerging-Market Opportunities
As has been noted in a numerous earnings calls to date, the slowdown in China had a dramatically negative impact on worldwide smartphone volumes. A slowing economy, complicated by the trade war with the U.S., has only heightened the existing challenges in the smartphone market. The result was a 10% decline year over year in total smartphone volumes. Moreover, there’s little reason to believe this trend will dramatically improve in 2019, so the country is likely to be a drag on the worldwide market for the foreseeable future.

While the China market has been challenging, the top Chinese vendors have weathered the storm by increasing their domestic volumes (Huawei, OPPO, Vivo, and Xiaomi represented 78% of 2018 China volumes) and by aggressively moving into emerging markets. Many in the industry were extremely skeptical of these Chinese companies’ ability to compete and succeed against local vendors as well as an entrenched Samsung in markets such as India, Indonesia, and Vietnam. However, many have managed to thrive through brute force marketing and fast adaptation to channel and market requirements in these countries.

And there is still plenty of smartphone upside in many of these countries, as a large percentage of their installed base today continues to be feature phones. While these markets don’t support the higher ASPs of mature markets, they continue to represent a strong source of smartphone shipment volume going forward for those vendors willing to put in the time, effort, and resources needed to compete there.
A Challenging Outlook

While there are clearly some bright spots around the world, it’s not unreasonable to expect that 2019 will follow a similarly challenging trajectory for the smartphone industry. While there are some interesting new technologies inbound, including foldable phones and the first round of 5G-enabled devices, these devices are likely to carry high selling prices that will suppress their mainstream adoption for the near term. I view both technologies with a bit of apprehension. I’m concerned that carriers will confuse consumers with over-the-top 5G marketing that will lead to some early-adopter dissatisfaction with 5G in the near term, although clearly it will be a positive force in the market long term. And while I’m excited to see foldable display technology ship into the market, I’m not convinced the platforms or app ecosystems are ready to support these new products out of the gate. This too could lead to some early user frustration that could slow more mainstream adoption, although longer-term I’m excited to see what developers cook up for these form factors.

Overall, I expect the near-term narrative around the smartphone market to stay fairly negative. However, it’s important to note that this was always going to happen at some point, and with volumes topping 1.4 BILLION units in 2018, there’s no need to feel too bad for the top players in the market. The question now is how will they react? It will be very interesting to see how these vendors adjust their product portfolios, shift their marketing plans, and fine-tune their ASPs to better compete in what promises to be a much more challenging market going forward.

How Many Times Can Zuckerberg Patronize His Users?

Last Thursday evening, Facebook’s CEO, Mark Zuckerberg, published an op-ed in the Wall Street Journal in which he tried to explain “The Facts About Facebook” focusing specifically on the advertising and data privacy aspect of the business.

There is a lot I found patronizing and self-serving in what Zuckerberg wrote starting with his choice of having his piece aimed at clarifying things for the general public published behind a pay-wall. It seems to me this was more aimed at Washington than Mr. or Mrs. Smith trying to figure out where those ads for an air-fryer are coming from.

Many of the points Zuckerberg makes have been heard before either during his Washington visit in front of Congress or on his apology and commitment posts on his Facebook page. I will only touch on the ones that to me, as a Facebook user, are the most aggravating ones.

“I was not trying to build a global company”

I do not doubt for a minute, that when Zuckerberg started Facebook in his college dorm, he had no plans to turn it into a global company. I do think, however, that he wanted for it to be successful which means he knew it would need scale and because of that some thoughts on future influence might have been advisable. I also think that what Zuckerberg set out to achieve has little relevance when the reality of today is that Facebook is a global company. More importantly, Facebook is a worldwide platform with enormous influence on how people see the world and connect, and this is what Zuckerberg and its leadership team must address.

With success comes responsibility and accountability. Zuckerberg is responsible for what happens on his platform, and he must be held accountable. We heard apologies, but we have seen little evidence that the vast impact Facebook has on its users’ lives is calling its leaders to change their modus operandi.

“Everybody should have a voice and be able to connect”

Facebook is free because everybody should have a voice and a way to connect. Well, first of all, I would say that Facebook is as free as inkjet printers are cheap. You do not pay for Facebook the same way you do not pay much for inkjet printers, but boy those cartridges cost a pretty penny.

With Facebook, the currency is our data. Data that Facebook does not sell, Zuckerberg made that very clear and I am confident people understand that. But they also know that the data is at the core of Facebook’s business model and they are unclear of the extent that information is used. Zuckerberg claims that this data is a price that most of us are willing to pay to have more targeted ads. This seemed a bit of a stretch when most of the 1000 Americans consumers we, at Creative Strategies, interviewed at the time of the Cambridge Analytica incident were either very concerned (36%) or somewhat concerned (41%) about Facebook’s privacy practice.

The reality is that there are other ways to effectively target ads than to collect so much personal information about a user. Yet, switching the current model to a subscription service to rely less on advertising is too much of a gamble. Our data showed that only 2% of the panel was interested in paying and another 5% would do so if monthly payments were less than $5. And this was in the US where average income level if high compared to some of the emerging markets where Facebook is extremely popular like India or Brazil.

“Transparency, choice and control”

“You have control over what information we use to show you ads, and you can block any advertiser from reaching you.” This is the second part of Zuckerberg’s argument that I find condescending. We want better ads, but if we do not, we are in charge of the data tap and can turn it off when we want.

I find fascinating how Zuckerberg flips the accountability on us freeing himself. The fact that finding all the knobs and levers to turn to change setting is impossible coupled by the fact that an understanding of the complex business model Facebook operates are two points that never come up. I would also add that making the service free allows it to reach users who might just be not tech savvy enough to understand all the knobs and levers.

Transparency, choice, and control are all smoke and mirrors. The recent announcement of a plan to integrate the three messaging services – WhatsApp, Instagram, and Messenger – will only create more undefined boundaries despite the initial promise of an encrypted service.

Not a Charity Business

Zuckerberg concludes his op-ed with this:

“For us, technology has always been about putting power in the hands of as many people as possible. If you believe in a world where everyone gets an opportunity to use their voice and an equal chance to be heard, where anyone can start a business from scratch, then it’s important to build technology that serves everyone. That’s the world we’re building for every day, and our business model makes it possible.”

You really would think Facebook’s business model should be preserved as the best philanthropic exercise ever where equal voice and opportunity are at the core. But when both good and evil have a voice and equal opportunity, it is hard to see how things could just run smoothly. Repeating the same story over and over will not make it turn true, and users have started to show their patience is running thin.

Zuckerberg could have admitted that Facebook got too big for its own good, he could have also recognized that the leadership needed time to figure out a course of action and he could have broken things down to truly put us in the driving seat. Instead one of the first things Zuckerberg did when governments around the world started scrutinizing his business was to hire a new Head of Comms, UK politician Nick Clegg, to do damage control. Not a move that fills me with confidence on Facebook’s intention to seriously reevaluating their business model and the platform shortfalls. The recent discovery by TechCrunch that Facebook through a third part has been paying teenagers to access their phone data bypassing iOS rules by using an enterprise certificate for the VPN shows how hungry Facebook is for your data. The fact that these are teenagers is even more disturbing.

Successful IT Projects More Dependent on Culture Than Technology

Just as many people adopt resolutions at the beginning of the year in an effort to enable better versions of themselves, so too, do many business organizations. Strategic new year plans and building roadmaps for the all-important “digital transformation” that so many companies seem to be obsessed with these days are all common activities in the first few weeks of a calendar year. (Whether there’s really much to the whole digital transformation concept is a whole other question—but one we’ll save for another day.)

Given the enormous range of new IT-focused technologies that companies are trying to integrate into their organizations, or are at least evaluating, these efforts are not insignificant tasks. From building out a multi-cloud or hybrid cloud strategy, to digital workspace driven desktop strategies, to enabling an AI-powered edge computing solution, there’s no shortage of incredibly impactful new technologies that companies are hoping to leverage in their efforts to improve themselves from an efficiency, cost, and productivity point of view.

Many technology industry vendors are, of course, focused on getting their messages out about the specific approaches they take to these and many, many other IT-related issues. Their primary goal, typically, is to describe how their solutions are better than those of their competitors, either from a functionality, cost, or ease-of-use perspective.

While these approaches are understandable, they’re actually missing what’s typically the most important factor in determining whether or not a particular project will be successful: the culture inside the organization. Specifically, for most big IT-related efforts to have their intended impact, they have to be embraced by C-level management and essentially pushed down into the organization. Without that executive level buyoff, many big tech deployments never achieve what they’re really capable of—regardless of how good the particular technology or product may be.

Of course, it’s understandable why many vendors are missing, or at least not concentrating enough attention on, this critical point: they don’t (and typically can’t) control it. Yes, big tech vendors and their deployment service arms (or partners) can work to make sure that their products are installed and functioning properly, but they can’t guarantee that people within their customer’s organization are actually going to use those products. Again, it takes a consistent message from top management to ensure that investments they make in new cutting-edge technologies are really brought into the day-to-day operations of their companies.

Too often, high-level execs will, at best, give only their financial blessing to a given IT technology investment, but then walk away without ensuring that it gets thoroughly integrated. Why? Because it’s often very hard to do and very time-consuming.

If and when a lack of commitment to full integration happens, and, subsequently, the projects don’t live up to initial expectations, the technology or product itself often takes the blame. To be sure, there are certainly numerous examples of products that really don’t deliver on what a vendor promises and that can’t meet a particular organization’s unique requirements. Again, however, in many situations the fault lies not with the product or vendor who sold it, but the customer organization. While it’s common to say that the customer is never wrong, if a customer doesn’t put the necessary measures in place to ensure that a given technology was incorporated into their business processes in the way it was intended to, then they are at fault. On the other hand, products that don’t really have all the capabilities that organizations need can still succeed if they are adopted and integrated with the right kind of approach.

So, how do vendors deal with this issue? Frankly, some of it has to do with better pre-qualifications of prospective clients. Sales reps need to spend more time getting to really know and appreciate the IT and management culture of their customers and prospects. Vendors should develop simple culture tests that help them better understand whether or not the potential customer organization is equipped to really deploy their technology in the way it was intended. Inevitably, the process will lead to tremendous reductions in frustrations, as well as time and money spent (or wasted, as the case may be) for both vendors and their customers. Plus, in an era when many vendors are focused on strengthening their brands and what they stand for, avoiding situations where customers are sold the wrong (or ineffective) product can go a long way towards maintaining good will with prospective customers.

Admittedly, a lot of these ideas are much easier said than done, and there are often extenuating circumstances that can dramatically complicate the simple examples I’ve provided. However, as we start to move into some critical new approaches to computing, including AI-based efforts, extensions to cloud computing, and more, it’s essential for companies selling these advanced solutions to spend a bit more upfront time with their customers to make sure they are putting the right kind of solution into the right kind of environment. It may sound easy, but it rarely ever is.

Beware of Buying Products From Facebook Ads

If you read Facebook CEO Mark Zuckerberg’s recent op-ed in the Wall Street Journal, you know that its primary business model is to sell ads and it makes all of its revenue from this business practice. The crux of the article was trying to justify how it uses customers data and assuring that it only uses that data to make ads more personal. I won’t get into the other critical issues of data privacy, protecting customers data, etc. that are at the heart of the pushback by customers and the market regarding Facebook’s business practices at this time, but I do want to highlight what I consider another major issue that Facebook has not addressed and that is fraudulent ads.

It turns out that not all ads are equal on Facebook, and in some cases, especially ads from China, they are fake. I discovered this the hard way when I was “duped” into buying three products over the last five months in which the companies I purchased the products from took my money and ran.

The first product I bought where this happened was a CPAP cleaner. I had sleep apnea issues and was prescribed a CPAP machine to use at night to deal with this problem. If you use a CPAP machine, it needs to be cleaned and sanitized, and I saw an offer for a CPAP cleaner on Facebook that was 1/3rd of the price of the most popular brand on the market today. The ad itself was very professionally designed, and I did not even think of investigating where this product was coming from or anything about the company behind it directly. So I pulled out my credit card and bought it. Five months later I still have not received it. When I try and contact the company, they do not respond. Even worse is that they do not have a phone number or customer service number to call only what appears to be a bogus email address.

The second product I bought was a Christmas gift for a friend that was a folding workbench. I bought it in November with the promise it would get to me before Christmas. It is now almost February, and it still has not come. When it had not come by mid-December, I emailed them, and a Chinese person sent a form letter reply saying it will arrive before Christmas. It did not come before Christmas. I sent another email asking about it the week after Christmas and again got a form letter saying it was on its way. Then in January, I sent two more emails and this time they did not even respond. Of course, they had no phone number and only an email address to correspond with the company, but I am pretty sure they took my money and ran.

The two products I mentioned above were coming from Chinese companies and given that I have not received the product and they both have stopped responding to any emails asking about when I will get these products. I now have to conclude they were bogus.

The third product I bought from a Facebook Ad was a retractable ladder. I also purchased it before Christmas. One month later it still has not come. The receipt tells me little about the company although when you look up TimeForBuy who produced the ad, it says it is based in Moscow. There was an email tied to the receipt, and I have emailed them weekly and received no response at all.

The first thing I discovered when digging into this is that Facebook has no guarantee that a product will actually be legit or even delivered. When I reported this to Facebook their recommendation was to “report it to the local police.” Good luck with that. The second option is to find the original ad, and at the bottom of the product info, you tap on “seller info” section, and you will find a report button. You can report the seller, and Facebook says they will investigate it. But there were two problems with this. The first is that the first two ads I bought the product from were gone when I went back to find them. As for the third item, I did report this seller to Facebook and weeks later have not heard anything back from them. This link gives more information about how to report a seller, but it has a warning that if a “seller” blocks you, which has happened,, it gives you this link to follow. But this one takes you down a rabbit hole. Let’s say that I pretty much have given up on ever getting these products and I am now out a couple of hundred bucks.

I have heard of others who have bought products via Facebook ads and have never received the product they purchased. You can find other examples on message boards too. The fact is that Facebook is just an ad supplier and takes no responsibility for any purchase you make from their ads. Not sure people understand that if you buy something from a Facebook add, it has not been vetted and even worse, is not backed by Facebook, so you have little to no recourse if you never receive the product you bought.

if you are tempted to buy a product from a Facebook ad, remember this caveat- Buyer Beware.

Reinventing the Hearing Aid

One of the more important products in tech health has been the hearing aid. For decades, hearing aids have been around to help people with hearing problems live relatively normal lives. Most have been used to enhance hearing for millions who have had trouble hearing due to a multitude of issues. More recently, an implantable Hearing Aid from Chochlear, often referred to as a bionic ear, can even restore hearing to the deaf, although it costs between $40,000 and $100,000 but it can be life changing for some.

The one problem for those who need or want a hearing aid in the past has been the cost. Over the last four decades, prices have ranged between $2500 and up to $10,000 for a set of hearing aids. In many cases, it is recommended that they are authorized by a professional audiologist or medical doctor specializing in hearing impairment. Although this is only mandatory under FDA rules for anyone under 18.

Until recently, most used very tiny batteries that had to be changed frequently to power them. Some of the newer ones are now rechargeable but are still well over $3000. Last August, the US Government signed into law the Food and Drug Reauthorization Act that includes the “Over The Counter Hearing Aid Act” designed to provide the public greater accessibility and more affordable over-the-counter hearing aids.
Since that time many lower cost hearing aids have come to market. An excellent example of this is Zvox Voice Bud VB20 that starts at around $300. Technically it is not positioned as a hearing aid but rather a hearing amplifier. Consequently, this can even be bought on Amazon.

In the past, most hearing aids were designed just for hearing problems and hearing enhancements, but one company I spoke with at CES, Starkey Hearing, has an even grander vision for the role a hearing aid can play in a person’s life. With voice assistants and voice being used to control lights, thermostats, and other IoT devices, Starkey is building into their design much more than a hearing aid. Their Livio AI Hearing Aid, https://www.starkey.com/hearing-aids/technologies/livio-artificial-intelligence-hearing-aids besides delivering high-quality sound, has built in sensors to track body and brain health. It can even do fall detection. It features integrated sensors and Artificial Intelligence that is enhanced by tying it to a smartphone. Using their Thrive App on a mobile phone linked to the Livio AI Hearing aid, you can even get streaming of cell phone calls, TV, music, and other media. The representative I spoke with told me that eventually, it would also include support for Amazon’s Alexa, Apple’s Siri and Google’s OK Google voice assistants.

The flip side of this is that Apple’s AirPods add some of these added features minus the health tracking, fall detection, and hearing aid. I would not be surprised if health tracking will be included in the next version of their popular earphones. While using them as hearing aids may be on the roadmap, I don’t think this new version will add that feature. But what both products have in common is the idea that voice and hearing are critical to our next phase of innovation of the man-to-machine interface.

In a rather provocative interview with the Wall Street Journal, Netscape Browser inventor and VC, Mark Andreesen had this to say about Apple’s AirPods:

Q: What’s the potential in wearables?

A: I think the really big one right now is audio. Audio is on the rise, and particularly Apple with the AirPods has hit just an absolute home run. It’s one of the most deceptive things because it’s just like this little product and how important could it be? I think it’s tremendously important. Because it’s basically a voice in your ear any time, you want it. [emphasis mine]

I’ll give you just one random example. There are these new kinds of YouTube celebrities, and everybody’s wondering where do people get all this spare time to watch all these YouTube videos and listen to all these YouTube people in the tens and tens of millions. The answer is they’re at work. (audience laughs) They’ve got a Bluetooth thing in their ear, and they’ve got a hat, and it’s ten hours on the forklift. Ten hours of Joe Rogan.

The operative phrase from his comment is “a voice in your ear anytime you want it.” That voice can give you information, directions, music, entertainment, as well as serve as a way to manage devices in your home, office, and vehicles. Using AI, it will learn what you are interested in and using geotagging to deliver that info in real time as you need it.

People who need a hearing aid will potentially get this “voice in the ear” so they could also use it to control their IoT devices, health tracking, get information and use voice assistants, which extends the value of their hearing aids into new dimensions. On the other hand, for those without hearing impairments, many of the newer earbuds will become smarter and add various health features, better sound quality and I some cases even combine sound amplification.

I don’t think that hearing aids with intelligence and smart earbuds are necessarily on a collision course since the people who really need hearing assistance will always opt for something that is designed to solve serious hearing problems. However, smart hearing aids will become even more critical as a means for these folks to help them not only hear better, but it will become a crucial part of the way they navigate their digital universe.

Smart earbuds will do the same for the rest of us by becoming a vital tool for us to navigate the digital world and become an important communication medium in the man-to-machine user interface. This will become even more important when AR glasses hit the scene and voice and gestures will be the predominant way we use AR and Mixed reality applications over time.

It’s no coincidence that we see so much activity in hearing aids and earbuds where both products are tying them to a smart digital world. This is an ear to watch closely as I expect even more innovation in this space in the next 18 months.

Garmin’s Place in the Fitness Wearables Ecosystem

The fitness wearables market has been brutal of late, with more exits than entrances over the past couple of years. Apple leads in global shipments, followed by Xiaomi, Fitbit, and Huawei, with the remaining 50% of the market divided between 20+ companies. Apple’s share has risen as the category has tilted toward the ‘smartwarch’ segment. But in the fitness-oriented segment, there are really five players of note: Garmin, Polar, Suunto, Fitbit, and Apple. Garmin, Polar, and Suunto have always been very focused on the fitness segment, more recently adding ‘smartwatch’ products in order to compete more broadly, while Fitbit and Apple have added devices and features to become more competitive in the fitness part of the market.

Among these, it’s interesting to take a closer look at Garmin, which has been the market share leader in the higher end fitness part of the market. They’re the Strava of the wearables segment. They’ve held a pretty steady ~5% share of the market for some time, and are still the favored products among more serious athletes. Apple has taken some share from Fitbit, but not really from Garmin. And indications are Apple’s future emphasis will tilt in the health direction (which, while not easy, makes total sense). [Note: this commentary is focused on the fitness/wearables segment, not other Garmin product lines such as automotive, marine, etc.]

As a fitness enthusiast, I’ve spent a lot of time with devices from all the major vendors. But it’s only more recently that I’ve plunged into the Garmin ecosystem, as the owner of the Forerunner 645, one of their newer and high-ish end devices (~$400). My conclusion is that Garmin makes excellent devices that outperform the competition just enough. My advice for them is that they would be better to focus on the needs of their core market, than trying to compete more broadly in the wearables segment.

First, my quick impressions on the overall Garmin experience so far. (this is not a detailed review – the best in the biz is Ray Maker). I find that the device itself does better than most of its competition in areas that fitness folks care enough: GPS accuracy, support for multiple activities, waterproof and supports swimming, and measures a few extra fitness performance metrics that its competitors don’t (some useful, others gimmicky and not accurate). Battery life, particularly for a device that has on-board GPS, is excellent. It is in the same basic league as its competition in two areas that are now standard on most higher-end devices: wrist-based heart rate monitoring and sleep tracking. None of the major players has really nailed sleep tracking yet – what they offer is fine as a general indicator, but not accurate enough in areas such as REM sleep, time awake, and so on to be useful to a practitioner. One other point on the Forerunner is that the build quality is excellent. It feels like a premium product that will last for some time. My experience with some other products in this category is that they seem almost disposable – expect them to last 12-18 months, then it’s back to the well.

Garmin’s lack of specific support for certain popular activities is a disappointment. Common activities such as Crossfit (and numerous equivalents) can only be measured in a generic “Cardio” setting. There’s “indoor cycling”, which is too generic a category for those who do a lot of spin classes (and don’t want to get into the whole Peloton ecosystem). They have no additional metrics beyond time and heart rate for popular activities such as tennis. Even a little more transparency on how a more intense activity (say, an hour of singles compared to an hour of doubles) would affect ‘intensity minutes’ or calorie burn, would be helpful.

I also believe that Garmin’s user interface, on the device and the Garmin Connect app, can be overly complex and obtuse. The standard bearers here are Fitbit and Apple. Garmin actually has quite a bit more functionality and customization options in some areas, but the experience of figuring out what the device/app can do and how do to it is not at all intuitive. This is definitely a ‘gotta read the manual’ if one is going to take full advantage of the product. One major positive is customer support. Direct, free phone support to knowledgeable experts is the best I’ve experienced in the category. It would be reason alone for me to own a Garmin device over a Fitbit device that claims to do many of the same things.

The app ecosystem, called Connect IQ, is a mixed bag. There are some useful and terrific apps, but also a good number that are sort of incomplete or have not been updated in some time. I’d also recommend Garmin put greater effort into curation and advice with regard to apps. There’s also lot of triage to go through to see if XYZ app is supported on your particular Garmin device. And there are some oddities such as the distinction between an app and a widget, etc.

More broadly, what I’ve seen over the past 12-18 months in this category is the major OEMs trying to broaden their market by introducing new devices or features, but this has resulted in quality dilution. For example, Apple has added more fitness-oriented features to the Apple Watch Series 4, but has not really produced a good enough product to encroach into the Garmin-Polar-Suunto crowd. Conversely, Garmin has added music support to some devices, and even LTE connectivity, but the experience does not feel best-of-breed like the rest of the experience on their products.

If I were CEO of Garmin, for the fitness segment of the business, I’d focus my 3-year plan on going from 5% of the market to 10% of the market, by really owning the fitness watch/wearable category. Don’t try to match Apple or Fitbit at every pace. Focus on the fitness enthusiast/athlete segment, with the following priorities:

  • Extend leadership and be best-of-breed in areas that active people care about. GPS performance, heart rate accuracy, and battery life.
  • Continue to add and refine metrics of particular interest to the fitness/athlete segment (V02 max, etc.)
  • Add real support and metrics for certain popular activities, with specific algorithms for those sports.
  • A more curated, athlete-centric app ecosystem.
  • Work on the UI, both on the device and on the app. This has always been a Garmin weak spot. It doesn’t have to be as good as Apple’s or Fitbit’s, but it needs to be in the league, to make sure they hold onto the fitness segment of the market.
  • Don’t go down the rabbit hole of matching every last ‘smartwatch’ feature. If your base thinks your priorities are adding LTE connectivity to compete with Apple Watch, rather than improving core features and functionality, they’ll start poking around for other products.

These are ways Garmin can help build share in a segment that has been very loyal to the company over the years.

Ignoring Women is the Biggest Mistake Tech Brands Can Make

Well, ignoring women, in general, is a mistake, no matter whether you are in product planning, marketing, politics or just living with one!

Over the past few years, many marketing experts have been talking about the growing power of female consumers, and a quick search finds plenty of services aimed at upping brands’ game when it comes to selling to them.

It is estimated that in the US, women drive roughly 70-80% of consumer spending with their purchasing power and influence. They also identify themselves as the primary shoppers for their households influencing as much as 91% of purchases according to some recent studies. The vast majority of women also think that most marketing messages show a lack of understanding of what drives their purchase decision.

All of this is not news, especially if you are a woman,  but what makes it particularly relevant for tech brands today is that technology is broadening its reach into domains like home, car, beauty, education, shopping where technology will be part of a product and not necessarily be seen as one. Because of that, women will be even more likely to be the primary decision maker or a strong influencer in the purchasing process. So if tech becomes the core product differentiator either because of hardware features, or software or AI, brands better learn how to include female buyers in their thinking.

Targeting Women and Including Women in Your Audience is not the Same

It is fascinating how often tech brands will look at new geographies or adjacent segments to their core as a way to expand their revenue opportunity ignoring something as simple as addressing a part of the consumer base that just does not look like their CEO and head of engineering. Or deciding without any due diligence that a segment that has been ignored in the past should always be ignored. Sadly, female consumers fall often into either one of these categories.

Some of the companies that do not ignore the increased purchasing power women have been displaying, still believe that all it takes to planning and marketing products that speak to women is the old “paint it pink, and they will buy it.” But catering to women, I can’t believe I am writing this, takes more than a pink version of your product!

It certainly helps if your process from product conception, to design, to marketing have women involved. This tends to happen when a product is specifically targeted at women but rarely occurs in tech where, unless you are talking about a connected bra or a smart mirror, women are often an afterthought addressed with small tweaks in design (pink!) or marketing.

I spent my time at CES this year looking for tech aimed at women mostly because I wanted to see how bad it was. I have to admit I did not find much, good or bad, outside of some connection fashion, motherhood and beauty products. What was amazing to me was how pitch after pitch it was clear I was not the intended buyer. Whether I was meeting someone over a connected car concept or a connected pet gadget a man had already been given the buyer leading role, and I was merely a supporting actress if I was considered at all. At times women might be the final users but not the buyer. At the FoldiMate demo, I lost count of the times I heard “you can buy for your wife” as if there are no wives out there who have the purchasing power of buying it for themselves if they needed one.

Women First, Consumers Second

While I warn about the danger of stereotyping, some characteristics tend to be true for women in different countries, and you can see this more clearly today than you ever did thanks to social media.

Women are caregivers which means that whether they are looking after a child, a parent, a partner or a pet they are making decisions that involve others and purchasing tech is no different.

Women are also multi-taskers which means that we appreciate simplicity – not because we cannot handle complex but because we do not want to spend our energy on that if we do not need to.

Women are influencers, big influencers to other women more so than men are to men. Millennial women and Gen Zers have a growing voice in many domains including tech. Just take a look at the increasing number of female tech reporters, female gamers, but also women that are in critical roles such as teachers and educators.

Women care a lot about ethics, privacy, and security all critical topics in today’s tech world. This means that the tech product you are designing might come under higher scrutiny especially when brought into the home. It also means that who you are as a brand and what you stand for will likely play a role in the decision process.

We see good customer service not as a differentiator but as a basic requirement.

We tend to be more practical, which results in a higher appreciation for products that set realistic expectations rather than products that over promise and under deliver.

The list can go on, but you get my point that we are a complex buyer that needs proper attention and consideration. There is always a significant risk when talking about designing and marketing products for a segment whether defined by gender, age or ethnicity. Generalizations and stereotyping creeps in when you are talking about a group as a whole rather than acknowledge all the different individuals that while united by some attributes, remain different and unique. So dear tech brands, you might not always get it right, but you will undoubtedly have a higher chance to do so if you start to acknowledge that not all your buyers are bros.

XR Gaming Market Remains Challenging

For years, people touted virtual reality (VR), augmented reality (AR), mixed reality (MR), or the combined XR (extended reality) as one of the big growth opportunities for the tech market. Even now, in spite of some relatively well-known names shutting down and expectations for the market getting radically muted, there are still some holding out hope that AR/VR (or whatever form of alphabet soup you prefer) will be the “next big thing.”

A key part of the expectations for the AR/VR market was that consumers would take to the technology and, specifically, that consumer gaming would be a big hit. New data from TECHnalysis Research suggests otherwise, however, as the challenges for mixed reality gaming look to be much more difficult than many initially thought.

Based on a recently completed online survey of 2,030 gamers (defined for this study as people who said they gamed on either a PC, smartphone, tablet, or other device for at least 2 hours a week) roughly split between the US (1,017) and China (1,013), current AR and VR gaming experiences only appeal to a fraction of the overall market, particularly in the US.

First, gaming survey participants were asked to select the types of devices they own and use for gaming from a list of 17 categories, including different PC form factor and operating systems, different smartphone and gaming console platforms, and others, including AR/VR headsets. Not surprisingly, ownership and usage of AR/VR headsets was quite low in the US even among gamers—in fact, it was the smallest category of ownership at 4.2%. This is, in part, due to the fact that the AR/VR headsets category is a relatively new one compared to the others, but it also reflects the limited interest many US consumers have shown towards these devices.

Thankfully, the story was better in China, where 13% of gaming respondents said they owned a headset of some type. Even there, however, ownership levels were only ahead of Chromebooks, Nintendo gaming consoles (which used to be banned in China), Chrome-based desktops, iMacs, and Macbooks. Still, it’s clear that there’s generally more acceptance and interest in AR and VR in China than there is in the US.

In addition to low ownership, the average time spent gaming on an AR/VR headset as a percentage of overall gaming time in a typical week was less than 1% in the US and only 2.3% in China. Obviously, platforms like Android phones, Windows 10 PCs, iPhones, and others offer a much wider variety of gaming options than AR/VR headsets. As a result, these other devices consume a large percentage of the time people spend gaming. The result is that even among a dedicated gaming crowd, AR/VR gaming simply isn’t attracting the kind of attention and focus that it needs to stand out as a breakthrough application. To be fair, there are many other types of AR/VR applications available that people could be more interested in, but if strong gaming support isn’t there for the category, that could be a significant long-term challenge.

Unfortunately, the story gets a bit worse when you look at the overall experience and outlook that gamers have with AR and VR gaming, particularly in the US. Respondents were asked to describe their level of experience/satisfaction for different subcategories of AR/VR gaming—PC-based VR, smartphone-driven VR, smartphone-driven AR, and gaming-console-powered VR. As Figure 1 illustrates, there’s still a challenge in getting people to try these experiences, with an average of just under 38% of US-based gamer respondents saying that they had yet to try each of these new gaming experiences.


Fig. 1

What’s even more surprising (and potentially troublesome), however, is that in every single category, more people who had tried each of the experiences said they didn’t enjoy them than those who did. Specifically, respondents were asked if they owned a device in the subcategory and if they enjoyed the experience or not, or if they had simply tried a device in the subcategory and whether they subsequently liked it or not. The fact that the sum of the dislikes (don’t enjoy) outnumbered the likes (enjoy) clearly suggests that the industry has a long, long way to go to really have a big, positive impact among US gamers. It also highlights the fact that the technology is still very immature and clearly needs to significantly improve before it can start appealing even to a dedicated audience that’s highly predisposed to want to like it.

Again, thankfully, the story was definitely much more positive in China, as illustrated in Figure 2.


Fig. 2

The number of people who hadn’t tried the various subcategories of AR/VR was 5% lower than the US at just under 33%. But even more importantly, the exact opposite comparison exists between like and dislike numbers for those who had tried these devices in China. Every single category shows that more people enjoyed the experience than those who didn’t enjoy it, with a particularly large positive gap in both PC-based VR gaming and console-based VR gaming. Even in China, there was about ¼ of the gaming respondents who didn’t care for AR/VR gaming, but this is certainly the type of outlook that companies who are trying to target the AR/VR gaming market would like to see. Exactly why the numbers for AR/VR are so much better in China isn’t entirely clear, but it’s likely due in part to the wider range of AR/VR gaming titles available in China, as well as the generally more enthusiastic gaming community that exists there.

The overall gaming market is growing quite strongly around the world, as renewed enthusiasm for PC gaming, as well as huge growth in interest for eSports, game streaming content channels like Twitch, gaming competitions, and big budget games like Fortnite all clearly illustrate. (Future columns will highlight more specifics from the survey to support all these points.) For AR/VR, however, the gaming momentum and seemingly natural tie-in to the category hasn’t had the kind of positive impact on device sales that many expected it would.

Certainly, there are other opportunities for different types of AR/VR applications, and right now, there does seem to be some enthusiasm in the enterprise/business segment for AR/VR. While that’s certainly good news, most of these applications are small, niche types of projects that can be difficult to turn into large, scalable businesses. Without consumer gaming, the short and mid-term prospects for AR and VR products is going to be very tough, and without dramatic improvements in quality and large reductions in price, even the long-term prospects could be difficult to sustain.

Podcast: Netflix, Voice Assistants and Smart Home, Motorola Razr

This week’s Tech.pinions podcast features Carolina Milanesi and Bob O’Donnell analyzing the recent news and earnings announcements from Netflix and what it means for streaming entertainment content trends, discussing the growth in voice assistant-equipped devices and what the implications of the trend could mean for smart homes, and commenting on rumors of a revived Motorola Razr flip phone with a foldable screen.

If you happen to use a podcast aggregator or want to add it to iTunes manually the feed to our podcast is: techpinions.com/feed/podcast

HTC Continues Smart, Deliberate March Forward with VR

Virtual Reality wasn’t a blockbuster attraction at this year’s CES, but there were a handful of announcements, and some of the most important of those came from HTC. While the “next big thing” buzz around VR has worn off for most, this industry pioneer keeps putting one foot in front of the other, building out its hardware, software, and services platforms and bringing to market real-world technical advances that position it well for long-term success in this market.

Eye Tracking Comes to Vive
AT CES 2018, HTC announces the Vive Pro headset. The product, which started shipping later that year, addressed one of the key pain points that both consumer early adopters and commercial users faced with the first generation Vive: A need for more resolution. The VIve Pro’s higher resolution OLED displays drive a notably better VR experience all around, but one of the key improvements was the ability to read text. This was a critical requirement of many companies looking to utilize the Vive Pro for training scenarios. At this year’s show, HTC once again announced plans for a much-requested feature: Eye tracking via the Vive Pro Eye.

There are numerous reasons why eye-tracking in VR can help to drive a better experience, the most straightforward being a simple one to explain. By tracking where a person is looking, the system need not constantly render and re-render a full virtual reality setting; it can focus on driving the most realistic view precisely where the user is looking (a process called foveated rendering). VR apps can also use eye-tracking technology to drive next-generation interfaces, where instead of selecting menu items using the click of a button on a handheld controller, the wearer makes selections with their eyes. Yet another use for the technology is to capture real-time data about what a person is looking at inside of an immersive experience.

It’s that last use case that I found particularly interesting, especially from a commercial use case perspective. At the show, I had the opportunity to try a software demonstration from the folks at Ovation that utilizes a VR setting to help people become better public speakers. The app works on prior Vive headsets, but the eye-tracking capabilities of the Vive Pro Eye significantly improve the value of the app by collecting precise data about where you’re looking during a practice presentation. The developers scanned in real people to serve as your audience, and they are constantly shifting and moving in their seats, all staring right at you. As you work your way through the presentation, the app captures how often you look around the room, how often you make eye contact with audience members, how long you stare at the teleprompter, how often (and how randomly) you move your hands, and more.

I’ve spent quite a bit of time testing out various VR apps, and I’ve seen and tested some very clever training-based products. I found the Ovation app to be stunning in the level of detail it captured, and I could see it becoming an invaluable tool in training people to become stronger public speakers. And it’s a great demonstration of the potential for eye-tracking technologies in VR. Once again, I think HTC has listened to business VR buyers and moved to bring to market something that many will embrace.

I look forward to seeing the VivePro Eye ship in 2019, and all the new use cases it will enable in the form of new apps in the future.

Other Key Announcements
In addition to Vive Pro Eye, HTC also announced plans for a new headset, called the Vive Cosmos, support for Mozilla’s Firefox Reality browser, and the launch of a new service called Viveport Infinity. HTC wasn’t ready to talk much about Cosmos, other than to say it will be another tethered headset, so the Mozilla and Infinity announcements are more interesting to me.

The Firefox Reality browser is a new browser for headsets, and HTC has announced it will support the browser across its entire hardware lineup. Why put a Web browser in virtual reality? It’s largely about letting users access 2D Web sites without having to drop out of VR, but it’s also possible to launch into full VR Web experiences. It’s good to see Vive throwing its support behind WebVR, as it could end up being one of the key ways consumers eventually embrace VR.

HTC currently offers Viveport subscription, varying in length from 3 to 6 to 12 months, and offering players full access to a limited number of apps per month, per subscription length. The service is a good one, as it allows consumers the ability to try out new VR apps without risking the full purchase price of a VR game or experience, they may not like. With Infinity, HTC will remove the limitations, allowing players to access as many titles as they like for an as-yet-undisclosed fee.

Infinity is a smart idea and one that ultimately seems to be a win/win for both consumers and developers. And it is representative of the good work HTC continues to do to build out a sustainable VR ecosystem for itself and its partners. VR didn’t capture too many headlines at this year’s show, but many in the industry continue to put in the work necessary to make it a viable business over the long haul.

Apple’s Services Playbook

It’s hard to have a conversation around Apple that does not include Apple’s services business. Rightly so, as the services revenue for Apple is likely to be one of the largest contributions to their overall company growth as well as one of the more predictable revenue streams. In Dec of last year, I wrote an article called Apple’s Services Challenge for our subscribers to our Think.tank industry analysis service. In that article, I point out how Apple’s services business is certainly an opportunity, but it will also be a new challenge for the company.

The challenge can be summed up as Apple being required to think beyond their own hardware for services support. In Apple’s Service Challenge I wrote the following:

A point about services I think is important to make is how a consumer will often separate the money they shell out for a service from the brand that offers it. To say it another way, services are neutral. The nature of subscribing to a service has historically assumed that service is widely available where the consumer wants it. The caveat being things like cable TV service (until late) or something like satellite radio, but neither of those models has ever yielded significant scale in the wider consumer market. Services that do scale take a more horizontal/modular approach and benefit from being as widely available on all shapes of hardware. This will be true of Apple’s first-party services as well. The consumer mindset is one of “If I subscribe to Apple Music, I feel I should not be limited to just Apple hardware to get the most out of my monthly subscription.” Or said another way, consumers will find subscribing to a service a harder sell if it is not more widely available. It is simply the new expectation in the digital age and wanting content anytime, anywhere.

Services growth will require a new playbook from Apple. One that incentivizes them to embrace the hardware, like Apple Music in the case of Sonos and Amazon Echo device. Hardware + platforms like the case of Samsung, LG, and Vizio TVs (more to come I’m sure). And platforms, like the case of Android, Windows, and any other platforms that may emerge and grow to take enough share for Apple to prioritize. Apple’s embracing of third-party hardware and, in some cases, competing hardware was entirely predictable, yet it seemed to catch many off guard. This is simply the services playbook, and Apple is now required to play by some new rules to grow their business.

Where Apple’s Playbook is Unique and Differentiated
Apple has accomplished many industry firsts. No other company in the history of consumer electronics has sold, at scale, a premium computing experience. Apple sells north of ~200 million iPhones every year, at an average ASP above $700 and Apple stands alone in this feat. Apple set financial records, App Store records, and the list goes on. But ultimately, what makes all these achievements possible is Apple’s monolithic vertical integration.

While it is true, some part of their services strategy will require them to break slightly from their vertical strategy, and it will not change the overarching strategic imperative to bundle hardware, software, and services together tightly. Apple has set the bar when it comes to hardware and software integration, and if they can bring services into this equation and things like Apple Music, a future TV/video service, Siri, and other new core experiences and out-integrate the third parties then it gives their hardware and software strategy even more strength in differentiation.

Looking back at a hindsight view of Apple, most of the focus on analyzing Apple as a hardware company. While I’ve always more strongly argued Apple is a software company the reality is they are equally a hardware and a software company. Now that the services business gets a great deal of attention, people like to wonder if Apple is, or should turn into, a services company. Such logic falls into the either/or fallacy that so often plagues Apple analysis. Ultimately, Apple is not a hardware company or a software company or a services company. Their future depends on them being hardware, software, and services company with each pillar deeply intertwined and integrated together.

In this equation, Apple’s first-party services a consumer subscribes to will be available on third-party hardware and competing platforms because it is unreasonable for Apple to assume every one of their customers will ONLY own their hardware. As I outlined, consumers will separate a service like Apple Music, or an Apple TV/video solution from Apple’s total hardware and if they pay $10,$20, or even $30 for an Apple content service they will expect that on any hardware they choose such as a smart speaker or TV. But that does not mean Apple does not care about a product like HomePod or Apple TV. What it means, in simple terms, is Apple will make those products the best endpoint to consume their first party services because those services will be more deeply integrated into Apple hardware and, therefore, will be the best of the Apple experience overall. This does not mean Apple’s services won’t work well on third-party hardware, just that Apple’s goal is to make their services the best on their hardware. Ultimately, this may end up being a catalyst to make Apple’s hardware and services even better.

Where this gets quite interesting is how Apple will be competing with companies they have not directly competed with before. In content, for example, they are now competing or will be competing with Amazon, Netflix, Disney, TV networks and even movie studios. While these companies and others which will enter the fold as new competition for Apple will excel is that they are first and foremost services companies and, for the moment, said services focused companies will do this better than Apple. Apple will do hardware better than most, if not all pure-play services companies, and they will likely meet in the middle in software. Each company brings a unique element to the equation but looking forward I find many fall into the temptation to emphasize the value of services and weight them more heavily than hardware. When the reality is, consumer electronics has always been a hardware-focused business and consumers are drawn to hardware objects of desire.

For Apple, and specifically, the management team and company culture are entering a period of testing as the historically unprecedented cash machine of iPhone begins to decline slightly and quickly stabilize as a revenue stream. Apple needs to find new growth engines, and while that can certainly come in the form of new hardware products, management needs to establish a clear playbook for the services business and challenge their people to bring the Apple process to new territory.

Why Apple Could Have a 5G iPhone in the 2019 Lineup

Perhaps the biggest buzzard in the tech industry these days, besides AI, is 5G. 5G, or fifth generation cellular networks will eventually deliver 1-10 gig speeds of wireless data to smartphones, cars, smart cities, and smart devices.

5G is considered a transformational technology because it has the potential to be used in ways 1G to 4G could not be used in the past. Besides higher speeds, 5G modems could find their way into automobiles, street lights, roads, buildings, and throughout the home. It will be used in new types of business and consumer applications where a wireless connection link will be important to any device or application where connectivity is critical for it to work.

Over the last two years, the building blocks of 5G have accelerated, and in 2019 we will see pockets of 5G networks arise in the US and other parts of the world. However, the blanketing of most of the world will be at least a ten-year journey with developed countries getting 5G networks much sooner than developing countries.

This slow roll out of 5G has been causing a pause in many smartphone vendors plans as some see 2019 as not being a year in which 5G matters. For example, various rumors and reports suggest Apple will not include a 5G modem in any 2019 smartphones. While Samsung is expected to support 5G in a single high-end phone this year, they too are reportedly mostly putting 4G modems in any other smartphones they bring out in 2019.

Given that 5G will not be available worldwide for another 2-3 years at best, it does not seem important to put a 5G modem in most smartphones as early as 2019.

However, I would argue that Apple and others who create high-end and premium smartphones should have at least one 5G model in their 2019 line up for two key reasons.

First, smartphones today have a lifespan of around three years. In the past, especially with carrier subsidized deals, people upgraded every two years. With those carriers deals now a thing of the past, the average time a person has a smartphone has gone to three and even sometimes four years. That means that a smartphone they buy or upgrade to in 2019, at some point over the next 3-4 years could surely benefit from a 5G modem.

Second, for those wanting to upgrade in 2019 and want 5G as an insurance policy to make sure their phone can get 5G services over its lifespan, Apple and others who offer these 5G smartphones would have a model for these customers who have this interest and concern. For those in this category, if Apple does not have at least a 5G model to choose from, they could opt for one from Samsung or others that are expected to have at least one 5G phone in their line-up by the end of 2019. In this scenario, Apple would miss an early adopter cycle for some who would buy a 5G smartphone in 2019.

The problem for Apple at the moment is that their current modem supplier, Intel, will not have a 5G modem ready for the market until 2020. And as we learned this week from Apple COO Jeff Williams’ testimony in the FTC vs. Qualcomm trial, Qualcomm has refused to sell Apple any modems for new phones while these court battles between Qualcomm and Apple are unresolved.

My hope is for Apple’s sake, this legal tussle with Qualcomm comes to some form of resolution if not compromise over the next few months so that Apple could include a 5G modem in at least one model by the end of 2019. If not, they could miss a group of early adopters who want a 5G phone this year knowing that it will be in use for at least another three years, and would force them to buy one of the Android models that include a 5G modem instead.

Smart Home: It’s Connected Folks, not Magic!

Every year I go into CES with a list of what I hope to see, and I walk away with sore feet, some excitement and a couple of unexpected trends that have little to do with technology and a lot to do with poor marketing. And man, those trends bug me! Two years ago, it was AI washing, and this year it seems that tech companies got out of their way to portray the connected home like a magical space where everything that is connected and smart will also be self-sufficient when it comes to initiating complex business transactions. In the connected home of a not-so-distant future, appliances will order supplies like detergent, self-diagnose issues and call for a repair service and more. As I listened to the pitches and watched the beautiful videos, I could not help but think of today’s reality and how much will have to change before what those tech companies are selling becomes true.

My Reality

Here is a bit of a reality check on my home. Just before Christmas our fridge started tripping the breaker every time we used the water dispenser. We had noticed that the floor around it looked swollen and we feared a leak. My not so smart fridge had not told me anything other than that cry for help by tripping the circuit. The steps I took to solve the situation were many and not straightforward ones:

  • I first contacted my home insurance to check on coverage, but the insurance would not say anything until an assessment was made. They advised calling a repair person to establish the cause of the possible leak
  • I then yelped an appliance repair person
  • I made the appointment
  • The repair person found the fridge was leaking which meant that the insurance was not stepping in, so I had to close my claim
  • The pipe that takes water from the filter to the water dispenser was compromised, so the repair person took it out and ordered one
  • A week later the repair person came back, but the pipe that was ordered did not fit, and a new order had to be placed
  • Three days later the new and correct pipe arrived and was fitted but a second pipe was compromised
  • So, two new pipes were ordered as to be on the safe side we swapped them all out
  • Three days after that the pipes arrived and were fitted.

As you can imagine I would have welcomed AI with open arms if it meant to have my fridge functioning sooner. But the reality is that AI would have only helped to ease part of my pain.

AI Does not Account for Business Models

There is no question that self-diagnose would have helped catch my fridge issue earlier as well as order the right pipe. But the rest of the process involved was quite complex and one that would be solved more by business agreements than technology. How would my fridge know if the repair is covered by insurance? Actually, how does the fridge know I have insurance at all? Do I trust my fridge to call the best repairman for the job?

It seems to me that brands painting this idyllic picture of a home that is basically self-supporting is so far away from reality not because of the technology needed to make it happen but because all the business ties that would bring that picture to market are just not in place. Because of all this background work, but also country-specific requirements related to privacy we will also have a vision that will not be the same across markets. What a brand might be able to deliver in the US, is likely to be very different when taken to European markets or Asia.

Brands understand the need to build these alliances mostly in the e-commerce and payment space. Last year at CES, Samsung announced its partnership with Mastercard and FreshDirect and ShopRite for its Smart Hub Fridge so users can buy groceries directly from their connected fridge when they are running low on some items. Providing integrated solutions able to replicate what the Amazon Dash button does for washing powder or detergent also seems an easy enough answer for connected appliances of today.

Yet, the vision depicted by LG during their press conference was one of pure magic that required not only business relationships but also a great deal of information from the user. Another significant neglect in this idyllic portrait is to recognize that today much of the relationship consumers have with their appliances is through a third party and not directly with the brand that was purchased. Whether that relationship is with BestBuy or another Big Box Retailer or with a home appliance insurance, chances are the brand we bought is the last player we think we will ever interact with. So, the question is: would we trust it?

The Disservice of Painting the Big Picture

While painting the nirvana of the connected home is very tempting, I think that ultimately this picture does a big disservice to the opportunity the connected home has to offer. An opportunity that has a lot of value in the short term in just providing me, as the homeowner, with a lot of information. Going back to my real life example. All I needed my fridge to do was to provide me with information about the leak and the correct pipe number to purchase. That would have been a huge help in saving time and money.

While maybe not as grandiose as the picture these brands want to paint there is plenty of value that can be delivered today that will drive sales and loyalty as well as confidence in the future bigger picture. It might not be as sexy for early tech buyers, but it is certainly much more approachable to the mass market buyers.

Baby steps will also allow these brands to be ready to support customers and most importantly to make sure they are not seen as the weakest link when something does not go according to plan in a chain of events that are out of the brand’s control. I would be expected to blame brand X for a fridge that breaks down but is it fair I blame them for a poor repair service? Well if the fridge initiated that repair and I had no voice in choosing the provider, of course, it is fair. Are brands ready for the extra pain?

The Voice Assistant War: What If Nobody Wins?

One of the clearest developments that came out of 2018, and prominently on display last week in Las Vegas at CES 2019, was the rise of the embedded voice assistant. Amazon’s Alexa and Google’s Assistant were omnipresent at the show, thanks to their extremely wide range of partners and, in Google’s case, their enormous outdoor booth. Samsung’s Bixby also made a much stronger showing in a wide array of Samsung products, and was even touted as the company’s home for AI-based developments. Combine that with recent numbers from Amazon and Google about compatible device shipments, and it’s clear that voice assistants have gone mainstream.

But as large and important as the market for voice assistant-capable devices may be, there are still a great deal of uncertainties about where they could be going. At a basic level, of course, is the evolving market share battle between the leading players. Amazon is generally seen as winning the war so far, but Google has been coming on strong, plus Apple, Microsoft, and Samsung are too big to ignore, especially given how young this market still is.

The dynamics of the voice assistant are now becoming much more complex. At this year’s CES, for example, we started to see even more devices that are supporting multiple voice assistant platforms. On the one hand, this makes sense, because it’s not at all clear who, or even if, there will ever be a true voice platform winner. By allowing people to select from multiple voice assistant options, vendors are giving their customers more flexibility. But there are some potential downsides to this approach as well, because including support for multiple platforms inevitably adds more complexity and development costs (and, therefore, potential price additions) to most devices. Plus, when you scratch beneath the surface, you can find instances where switching between voice assistant platforms could even impact functionality because of varied capabilities (or lack thereof) across different platforms.

Lenovo’s clever new Smart Tab devices are an interesting example of this potential conundrum. Both the $200 M10 and $300 P10 are 10” Android tablets running the Oreo version of the OS—meaning they have the Google Assistant feature built in—but when they are put into their bundled smart dock, they default to Amazon smart display “Show Mode,” similar to the Echo Show. The Google Assistant features work when the tablets are undocked, but won’t work in the dock, because Lenovo optimized the Smart Tabs’ visual capabilities to work only with Amazon’s platform. Now, there’s certainly nothing wrong with that choice, and for the record, the Smart Tabs look to be a very attractive alternative to existing, non-mobile smart displays, but it does highlight some of the tradeoffs that vendors supporting multiple voice assistants have to make.

An even more confounding problem that consumers are likely to start facing this year is owning multiple products with different smart assistant platforms. With embedded voice assistants being built into everything from toilets to showers to home appliances—thanks to impressive (and inexpensive) semiconductor solutions from companies like Qualcomm, Intel, and others that make them easy to integrate—it’s soon going to be hard to buy home devices that don’t have some kind of voice capabilities. On tech focused devices, it makes sense to consider the particular voice platform(s) supported as a key purchase criterion. For other non-tech devices, however, the voice assistants will simply become a feature that may be a nice to have and not a make-or-break factor. The end result is that people are likely to end up with multiple different voice assistants—and that could get messy very quickly, especially if they are turned on by default (as they are likely to be).

While some people may be perfectly comfortable working across multiple voice assistants, and actually remembering which ones are enabled on which devices, most people are likely to get quickly confused in such a scenario. In fact, it could be frustrating enough that people stop using the voice assistant capabilities entirely. Of course, more tech-savvy consumers could just pick a particular platform and only enable it on the devices that support it to simplify things. Even then, however, there can be challenges if multiple devices try to respond simultaneously to a given request. Most of the major platforms are working to address the multiple device response issue as we speak, but it remains to be seen how effective it will be as more and more voice assistant-enabled devices start to make their way into people’s homes.

As we’ve seen in plenty of other device platform battles, it’s very difficult to get people to stick with a single ecosystem. For example, while Apple may tout some impressive capabilities across its range of iOS, MacOS, watchOS, and TVOS devices, there are very few people who only own Apple devices. Similarly, even though a significant percentage of US homes may own at least one Android-based device with Google Assistant support or one Alexa-based device, it’s not at all clear that means they’re only going to stick with that platform. We live in a very heterogenous device world and that heterogeneity is likely to spread over to the world of voice assistants as well, with implications that could prove to be challenging moving ahead.

There’s no doubt that voice assistant platforms are an important and increasingly impressive new technology, but let’s hope they don’t become victims of their collective success.

Podcast: CES 2019

This week’s Tech.pinions podcast features Carolina Milanesi and Bob O’Donnell analyzing the big news announcements coming out of this year’s CES trade show in Las Vegas, including developments in 8K TVs, gaming PCs, 5G, autonomous cars, robotics and more.

If you happen to use a podcast aggregator or want to add it to iTunes manually the feed to our podcast is: techpinions.com/feed/podcast

Are Apple’s Interests Diverging From Customer Needs?

While Apple has attributed the slowdown of iPhone sales to being caused by a range of business and financial issues, not included in their list is the product design itself. Yet, I think some of the design decisions made over the past few years have impacted the iPhone’s popularity. These design decisions came about from a company that paid little attention to customer preference, usually believing it knew best. That’s what happens to many companies that are successful, thinking they’re smarter than their customers, develop a level of arrogance, and misread the market.

Foremost and symbolic of this arrogance has been the removal of the headphone jack that provided no consumer benefit yet was something everyone understood. Why, customers asked, would Apple make the phone less convenient to use, abandoning a standard that most customers relied on. It required users to abandon their wired headsets, switch to Bluetooth, or use a dongle that could be lost and often cost extra.

When customers continued to complain about low capacity batteries, making it difficult to get through the day on a single charge, Apple continued to make their phones thinner and more powerful, but with no improvement to battery life. People wanted more time between charges, not thinner and more fragile phones. In fact, most worry about thinness, because they buy a protective case.
If there was any question about a user’s anxiety of depleted batteries, just look at the proliferation of battery pack sales of all sizes and shapes, some now even built into suitcases.

In fact, this obsession for thinness has become Apple’s design language and mission across all of its products, leading to a wide range of performance problems, quality issues, and even recalls. And let’s not forget an array of over-priced dongles that now adorn the walls of Apple stores and comes across as another way to grab another $50. What’s notable is removing all these ports was not even needed. Numerous PC notebooks are just as thin and light as MacBooks and have a full array of ports. It’s more likely they were removed to save a few dollars.

Apple moved to facial recognition to replace the fingerprint sign-on and verification. But it required learning a new set of gestures and replacing something that users liked and worked well. Apple did an excellent job in implementing this change, and, for some, improved the sign-on process, but they did little to prepare their customers for the transition. Like so many companies these days, they never included detailed instructions with their phones and left it to you-tubers to produce videos to explain how to use the new features.

Even today I can surprise most iPhone users by showing how they can turn their keyboard into a trackpad by holding down the space bar. Apple just assumes users are savvy enough to learn new features on their own. Another sign that they don’t think enough about their users.

Lastly, Apple has not created a coherent product line for their phones. While most companies create a good, better, best product lineup, Apple has created a new, old and older lineup to provide products at varying prices. I would question whether even the biggest Apple fan can reel off the differences between an iPhone 8 and an iPhone 7.
Apple differentiates many of their new models by processor speed, but slowness on an iPhone is mostly attributable to the wireless connection rather than the processor speed. In other words, they tout the advantages on things that matter only slightly. Frankly their lineup is a mess.

This reliance on older models to create their lineup seems to be the result of laziness and lack of product development resources, even while the company has expanded many times in size and created a huge new headquarters. That laziness is exhibited by the lack of development across their line of computers and actually exiting product categories that offer potential for innovation, such as routers and monitors. The Eero home WiFi mesh network is something you’d expect from Apple to improve their customer’s experience. What are all these people working on?

Today you need to spend close to $1000 to get the current model of the iPhone or even more when you the add more memory and buy an extended warrantee. Apple took a huge risk in increasing its pricing to compensate for lower volumes. I guess that’s not working out so well.

Yes, Apple is facing numerous problems that are not of their own making, but that’s even more of a reason why their lack of innovation, and lack of attention to customer needs is now becoming more apparent.

Setting The Ground Rules For What Qualifies As 5G

Even though some 5G services were launched during the fourth quarter of 2018, it appears that this week’s CES is serving as the unofficial start of the 5G marketing wars. After a 2-3 year hiatus of significant mobile-related activity at CES (for a time, CES was the venue for iconic device debuts), 5G is one of the big deal themes at this year’s confab. Verizon CEO Hans Vestberg delivered a keynote address (sporting a very un-Verizon-like T-shirt), and there’s been lots of attention to 5G phones, absent any significant actual product announcements.

But the real news this week has been the kickoff of what looks to be a protracted debate, played out in the media and on Twitter, of not only who has the best 5G, but what is and what is not 5G.  AT&T got this party started last year, when it launched what it called “5G Evolution” in a handful of markets. But really, this was AT&T’s marketing term for what had been referred by most in the industry as Gigabit LTE. Notwithstanding the fact that Gigabit LTE delivers performance akin to early 5G services, AT&T took some modest heat for slapping the 5G moniker on what is, in actuality, an advanced LTE service. Then, in the waning days of 2018, AT&T rather quietly launched Mobile 5G in parts of 12 cities. This very controlled market launch was to a handful of hand-picked customers (i.e. you cannot walk into a store and buy the service). Although this is actual 5G, using the company’s mmWave spectrum and 5G new radio (NR) equipped cell sites, it’s really more of a large commercial market test than a generally available service, at this point. (see the column I wrote here)

But the gloves came off this week. AT&T stirred the hornet’s nest by announcing that it would change the indicator on its phones from ‘LTE’ to ‘5G e’ in its 5G Evolution markets. Verizon responded more expensively and corporately, with a print and social media onslaught, including a full page ad in the Wall Street Journal, both taking the high road (‘what’s good for the industry and consumers’) while calling out AT&T (“we won’t take an old phone and just change the 4 in the status bar into a 5”). T-Mobile responded more characteristically, with a series of John Legere tweets, including this hysterical video.

So before things get even uglier, I recommend setting some ground rules at this early stage of 5G. There are three broad things to consider here: what can be officially called 5G; what is fair to call a 5G launch; and what the 5G experience is going to look like.

What Can Be Officially Called 5G? There are two essential components: a cell site must be equipped with 5G New Radio (5G NR), as defined by the 3GPP(!) Standards body; and the device must have a 5G modem (such Qualcomm’s X50 5G NR or Intel’s XM 8160 5G). In an ideal world, the combination would include the 5G Chipset (like the Snapdragon 855 system that Qualcomm introduced in October). A service like AT&T’s 5G+ that uses a 5G hotspot like the NETGEAR Nighthawk qualifies as 5G in under this definition. One nuance here is that Verizon’s 5G Home (the fixed wireless access it has launched in parts of 4 cities) uses a proprietary standard called 5G TF. But we expect any Verizon rollout of mobile 5G and using a 5G smartphone would employ the 3GPP version going forward.

What Can Be Fairly Deemed a 5G ‘Launch’? On December 21, 2018, AT&T announced its 5G+ service, using its 39 GHz mmWave spectrum, in 12 markets. The service itself qualifies as 5G, even though the only device available at this point is the NETGEAR Nighthawk 5G hotspot. However, I do not consider this to be a commercially available 5G service, because a customer cannot actually buy the service at this time. It’s only being made available to “selected businesses and consumers” – that is, those that AT&T selects. It’s different than Verizon’s 5G Home service, since if a home is in an area covered by Verizon’s mmWave service in the four launch cities, they can get the service.

During 2019 and into 2020 especially, it is going to be important to consider what really qualifies as an available 5G market, despite what the operator press releases tell us. My rules of thumb are:

  • It must use 5G radios and 5G chipset enabled equipment (see above)
  • It must be commercially available. In other words, if you live in an area the operator says is ‘covered’ by 5G, you can buy a 5G device (hotspot or phone) and a 5G service plan. By that definition, AT&T’s 5G+ service is not commercially available today.
  • It must cover some critical mass of a launch market. My standard here is relatively generous, but an operator cannot launch 5G on a handful of sites in a major city and call that service ‘launched’. Everyone will have their opinion here, but I think a good rule of thumb is that 5G coverage is available in at least 25% of the footprint of that market. And not total Swiss cheese, either. So, if AT&T says 5G is launched in downtown Dallas, I’d expect that 5G light to be on in a reasonable swath of the downtown core.

I call on operators to be more transparent on 5G coverage. This does not mean they have to specify exactly where or how many cell sites. But something on the order of ‘we have 30%, or 50% of downtown Atlanta covered’. Or if the guy in the store can draw a rough boundary line. It is only when some sort of metric like this is available that anyone could be reasonably advised to pay a premium price for a 5G phone and/or 5G service plan.

What Will the 5G Experience Look Like? The best 4G LTE services in the United States today, generically called Gigabit LTE, can deliver some pretty killer speeds: I’ve seen 300 Mbps and better. It’s achieved by an alphabet soup combination of carrier aggregation (up to 6 CA now!), LAA, 4×4 MIMO, and 256 QAM. AT&T, Verizon, and T-Mobile are already delivering this in many cities – each of them marketing and branding the service slightly differently. These are the markets AT&T calls ‘5G Evolution’.

Truth be told, AT&T can sort of be forgiven for wanting to put a sexier brand around these Gigabit LTE markets, because with 60 MHz of new spectrum being deployed (AWS, WCS, FirstNet) and the alphabet soup above, the speed and capacity improvements are measureable. It is very possible that Gigabit LTE services, in many instances, will be as good as or better than 5G, at least for the next couple of years. In fact, if I was advising a customer who wanted the best overall data experience, I’d tell them to choose the operator with the combination of largest Gigabit LTE footprint and best capacity situation. Who that actually is varies from one market to another at this point.

The bottom line is threefold: First, we need to have an accepted definition of what qualifies as a 5G service. Otherwise, operators, and the industry, bear the risk of turning off customers and negatively impacting 5G adoption. Second, operators should be more transparent about 5G coverage. Don’t announce a market as ‘launched’ for the sake of a press release, especially if it’s only a handful of sites and customers cannot actually buy the service. Third, we all need to understand that for the next couple of years at least, there will be overlap between the best ‘4G LTE’ experience and early 5G services. Some 4G will look like 5G, and some 5G will look like 4G. A little confusing, yes, but that’s the new reality.

Big CES Announcements are TVs and PCs

What’s old is new again, or so it seems at this year’s CES trade show in Las Vegas.

After years of gadgets, drones and other gizmos grabbing the headlines, a lot of the big announcements from this year’s show are coming from some of the oldest categories: TVs and PCs. To be sure, there are plenty of interesting (and odd—smart toilets, anyone?) products on display at this year’s CES, but there are a surprisingly large number of news announcements and important speeches from many TV and PC vendors.

Admittedly, most of the news on the TV and PC side is more evolutionary and not really breakthrough, but frankly, that’s the state of the consumer electronics industry overall these days. In addition, as with most categories, there was a great deal of discussion about the integration of AI into these “traditional” devices, demonstrating how the concept of artificial intelligence really is reaching across the entire tech industry.

The news cycle for TVs kicked off on Sunday with the surprise announcement that Apple and Samsung were working together to integrate iTunes, HomeKit and AirPlay2 (and likely its forthcoming video streaming service) directly into new Samsung TVs. It was followed the next day by somewhat similar announcements from LG, Vizio and Sony for their new TVs, with the exception of iTunes, which will remain a Samsung exclusive through this spring. Essentially, this development means that Apple is offering a software-based solution for providing access to their services and removes the need for consumers to buy an AppleTV box. (Interestingly, it also means Apple is building a Tizen—and likely soon an Android—version of iTunes.) In exchange, Apple gets access to a wide range of current smart TV customers for their video services. It’s a clear example of Apple’s evolution towards a services focus and, thankfully, highlights the company’s willingness to bring those services to devices other than those with an Apple logo.

As expected, there was a lot of announcements surrounding 8K TVs, but, of course, little content to show for it. (Heck, it’s still hard to find much 4K content—but the new Apple integration with smart TVs will include support for 4K, so that should help.) A wide range of vendors offered an enormous range of sizes for 8K, all of which promised sophisticated upscaling to work with existing 4K content. Thankfully, rather than positioning 8K as a replacement for 4K, Sony only put out 8K TVs that are 85” and larger—bigger than most all of their 4K TVs. So, for them, it’s really just an extension to their screen sizes that also happens to be 8K ready. Unfortunately, most of the other TV vendors weren’t quite as clear on their positioning of 8K vs. 4K.

Finally, though the company had already previewed it last year, LG announced that they would be shipping their roll-up OLED-based TV as a real product this year. No pricing was announced, but the 65” foldable 4K display-based device is expected to be available towards the middle or end of this year.

On the PC side, Dell, HP, Lenovo, and Samsung all unveiled their latest laptops and desktops, with a range of offerings that covers everything from low-end Chromebooks, through mainstream consumer and business-focused PCs, up through high-end gaming machines. In fact, there was a particularly strong focus on the gaming side at CES, with some impressive new offerings from several players.

Dell took the opportunity to present their new Alienware Legend design (and latest CPU and GPU offerings) for their Alienware line of products. Long an iconic, though aspirational, gaming PC brand, the latest Alienware offerings include the new Area51m, the first upgradeable notebook to use desktop CPUs (up to Intel i9) and GPUs (up to Nvidia RTX 2080). For more mainstream gamers, Dell also announced updates to their G line of notebooks (the G15 and G17), both of which offer 8th Gen Intel CPUs and Nvidia discrete GPUs. On the premium consumer side, Dell finally (!) fixed the “nosecam” in their otherwise excellent XPS13 by putting an extremely small new video camera above the screen, yet still kept the extremely small bezels.

From HP, there were several new gaming-focused devices, including the first release of a Nvidia GSync format BFGD (Big Format Graphic Display), the 65”, 1440p, $4,995 OMEN X Emperium 65 first demoed last year, as well as updates to its Omen line of gaming notebooks (Omen 15) and desktops (Omen Obelisk). HP also showed one of the first AMD-powered Chromebooks, the HP Chromebook 14 (Acer announced one as well), as well as a more upscale convertible Chromebook dubbed the Chromebook x360 14 G1. For business users, HP showed a new take on an OLED screen-based notebook (the Spectre x360 15) that promises to offer better battery life than first-gen OLED notebooks.

Lenovo showed several new additions to its Legend line of gaming-focused PCs, as well as a slew of gaming-focused accessories. On the traditional PC side, Lenovo touted some interesting AI features in its latest Yoga machines, such as the Yoga S940, including the ability to filter out ambient audio during online conference calls, and the ability to shift content to connected displays based on where you are looking, amongst others. In addition to PC updates, Lenovo continued to grow its offerings in the smart home market with the Lenovo Smart Clock, a $79 smart alarm clock with a display—somewhat similar to a mini version of their Smart Home display. Speaking of which, the company also debuted two tablet versions of their smart display, called Lenovo Smart Tabs, that let you carry the screen element around your house like a typical tablet, but then dock into a base station that offers integrated speakers and other features consistent with the standalone Smart Display. With models at $199 and $299, it’s a clever variation on the connected display category that could appeal to consumers looking for more multifunction devices.

Samsung introduced its first ever gaming laptop, the Samsung Odyssey, a further reflection of the growing interest in PC gaming. In addition, they offered new designs for their convertible Notebook 9 Pro and Pen series, the latter of which leverages the same design (and even same color) as the pen from their Note 9 series smartphones. It’s the first time Samsung has shown this level of integration between their different product lines and, hopefully, is a portent of more to come.

There was also big news that’s been announced (and some still to come) from big PC component players. AMD, in addition to securing a highly coveted CES keynote spot for CEO Lisa Su (fresh off a year where the company impressively achieved the status as the best performing stock on the S&P 500), unveiled their second-generation Ryzen mobile CPUs. Expected to be used in both ultrathin and gaming-focused devices (thanks to integrated Radeon GPU cores), the Ryzen mobile parts come in both 15W and 35W versions. AMD also debuted new 7th gen A Series CPUs, powering both the HP and Acer Chromebooks.

Intel, for its part, provided more details on 10 nm CPUs that the company plans to ship in systems by the holidays of this year. Codenamed Ice Lake, the SOC (system on chip) offers CPU architecture enhancements, significantly improved integrated Gen 11 graphics, as well as Thunderbolt 3, WiFi6, and DL Boost, for accelerating AI functions. One of the first systems to include it will be a future iteration of Dell’s XPS line. Intel also previewed the first real-world implementation of its Foveros 3D chip-stacking technology in a tiny motherboard platform codenamed Lakefield. Lakefield will incorporate the hybrid architecture SunnyCove CPU design (which features one Core CPU and four Atom CPU cores) the company first mentioned back in December at their analyst day, At their CES press conference, Intel showed more details about the SOC design, as well as a few examples of potential form factors leveraging the new platform.

Nvidia’s big news for the PC market focusing on gaming, with the debut of the $349 RTX 2060, which brings their ray-tracing capable Turing architecture technology down to mainstream price points. The company also discussed more about their GSync efforts (such as with the aforementioned HP 65” gaming display).

All told, it was an impressive display of admittedly incremental, yet still important advances in what continue to be the two largest categories in the consumer electronics world.

A CES Vet’s Guide to CES

As I head off to CES, this will be my 44th year of attending CES. I have actually attended around 50 CES shows as I also went to the Summer CES events in Chicago in the late 80’s and early 90’s too.

Given that I am a seasoned vet of CES shows, I am often asked how best to cover this show. This year there will be over 190,000 people attending CES with venues concentrated around the Las Vegas Convention Center and the Sands Convention Center. And because the show has grown so large, exhibits have expanded to at least two other major hotel conference centers in other parts of the town.

My first suggestions on how to deal with CES are practical ones.

1-Wear very comfortable shoes. Do not break in new shows at the show. Trust me, that is a bad idea. You will be walking at least 5-7 miles a day while perusing the exhibits and going to meetings. Last year I averaged 15 miles each day.

2-Carry a small container of hand sanitizer. With an expected 190,000 people spreading germs right and left, you will want to use a hand sanitizer often.

3-Carry a small bottle of water if you can and sip from it often. Las Vegas is a dry climate and you can get dehydrated very fast with all of that walking.

4-Your rooms are almost all enclosed and only getting forced dry air from the hotel’s air systems. Ask you hotel to send up a humidifier to your room. (These are always complimentary) Your sinuses and respiratory system will thank me for that recommendation.

5-While cabs area available, cab lines can be long. Plan accordingly. If you have a Uber of Lyft account, they seem to be more plentiful during CES and are often a better option. In the past, Uber and Lyft could not pick up at the Las Vegas Airport but they now have been given permits to pick up in parking garages in both terminal 1 and 3.

6-Look closely at the bus schedules that CES attendees have been sent. This is also a good option although from most hotels not near LVCC or the Sands, it could take as much as 45 minutes to get to either LVCC or the Sands from places like MGM and Mandalay Bay. For media, there are buses running between the Sands and Mandalay Bay for the press days every 30 minutes.

As for covering the show, do go through the exhibitor map and find out who you want to see and develop a strategy of how to navigate to these locations in advance. Also, factor in the issue of thousands of people clogging the aisles at any given time, which means you move very slowly through these aisles to get to any location at any venue.

CES is now a highly diversified show. While it still has a consumer electronics theme, big auto companies like Ford, Mercedes, etc are there to show off how smart their cars have become. The health industry is represented by everything thing from HMO’s who are pushing health monitoring tools to keep their customers healthy to medical device companies like OMRON, who will show off their first blood pressure watch that just got FDA approval.

The big sports companies are there showing off all types of smart technologies they are embedding in their equipment and companies who make beds are there to introduce the latest and greatest smart beds.

One particular thing CES has done in designing their current exhibit areas is that the more established and larger consumer electronic exhibits are at the LVCC. This is where Sony, Samsung, LG, Hisense, Intel, Qualcomm and dozens of the bigger brands show off their wares in giant booths. Then over at the Sands you will find Eureka Park, where a great deal of the start ups and smaller companies introduce new products and various countries like France, Germany, UK, Israel, China and others have special areas where they highlight new technologies and CE based companies they want to show off to American audiences.

I will spend two days on the exhibit floor and will spend one full day at the Sands and the other day at LVCC.

Although the show will have just about everything that is new in technology represented, there will be some major themes and one important keynotes worth noting.

Keynotes- AMD’s CEO Lisa Su will give AMD’s first keynote in the history of CES on Wednesday at 9:00 AM at the Venetian Palazzo Ballroom.

AMD is has remerged as one of the major powers in semiconductors and with their new Ryzen PC chips are on target to challenge Intel in the PC arena in new ways. Their graphics chips already dominate the dedicated gaming console market and high end PC graphic processors are used in many of the major PC gaming platforms on the market today. Ms. Su’s keynote will be an important one as she outlines their updated processor strategies and give the audience a glimpse of new things to come.

Here is a link to all of the CES Keynotes.

As for Themes of this years CES, you can expect to see a lot of new 8K TV’s introduced as this is the next big thing in televisions. Although we don’t even have a lot of 4K programming, that has not kept the TV industry from advancing their technology and preparing for the new big wave in TV design.

On reason you will see more 8K TV’s at this years show is that all of the big TV vendors are preparing for the 2020 Olympics in Tokyo Japan where much of that event will be broadcast in 8K. Sony has lead this charge as their recording and broadcast equipment will power these 8K broadcasts. Most TV vendors want to have models in place by end of 2019 so people can upgrade to 8K in time for the 2020 Olympics.

VR and AR will also be a big part of the show as new VR glasses and content will be unveiled and we should see at least two interesting AR goggle’s or glasses debuted in what could be the launch of the first AR style glasses aimed at a broad consumer market.

We will also see at least one foldable smartphone/tablet from Royole called the FlexPai. Samsung could also showcase their foldable smartphone that they debuted at their developers conference in Oct. Speaking of foldable screens, LG will reportedly show off their foldable TV screen that they gave a glimpse of at last year’s CES show.

Over at the Sands there will be dedicated areas for Fitness, Health, Robotics Drones, and IOT/Home Automation. I expect Alexa to be the star of all of these areas except robotics.

The one over used word that will permeate CES will be AI. Expect to hear it everywhere even though many who have ascribed AI in their products don’t even understand AI in depth. Never-the -less, AI will be added to all types of devices and their functions, some meaningful and others gimmicky, but AI will be every where you turn at this giant Consumer Electronics Show.

Here Come the Consumer Robots

One category of products I’ll be watching closely next week in Las Vegas at the Consumer Electronics Show (CES) is consumer robots. While the commercial/industrial robot category has been growing fast (and is a category IDC is watching closely), the consumer market has been slower to take off. I expect things to pick up over the next few years, and we’re likely to see some interesting new products unveiled for 2019 at the show. The big question is this: Are mainstream consumer ready to bring a robot into their homes?

Single-Purpose Robots
To date, the biggest category of consumer robots has been single-purpose devices. The most popular: Vacuuming robots. This category has evolved from strictly high-end products from category pioneer iRobot years ago to a wide range of lower-priced (but often less “smart”) products from a long and growing list of lesser-known vendors. Today, robot vacuums make up an ever-increasingly percentage of the vacuums sold in the world, but I’d argue they are still not a truly mainstream product. What the vacuuming robot category has done is drive interest in other single-purpose robots. In recent years the category has expanded to include a wide range of other types of products, including robots that clean pools, empty gutters, mow lawns, and more.

Two of the key new features of some of the more advanced vacuuming robots is the addition of smartphone apps and integration with some of today’s smart assistants such as Amazon Alexa and Google Assistant. The introduction of apps brought a long list of new capabilities, from scheduling jobs to viewing reports. And smart assistant integration has made it possible to initiate jobs with your voice. It’s this last piece, voice-enabled robots, that really begins to make this category interesting.

Educational Bots
Voice integration is one of the key attributes of another key consumer robot category: Educational Robots. This segment includes a wide range of products, from robots that truly aim to educate children, to devices focused on entertaining people young and old. One of the more interesting companies in this space is Anki, which has shipped several small robots into the consumer market. The company’s latest is called Vector, and he’s an engaging little fellow that responds to voice commands and can do rudimentary tasks such as tell you the weather, set a timer, take a photo, and even play Blackjack. Perhaps more importantly, Vector is a small, relatively inexpensive ($250) product that utilizes Artificial Intelligence to get smarter—and to better understand its humans—the longer it is in your house. And Anki recently enabled Alexa support, too.

AI is currently an overused buzzword in tech, but when it comes to consumer robots, it’s going to be key to the evolution of the category. One of the pioneers of consumer robots, Sony, recently re-introduced its family-focused consumer robot dog Aibo. The first Aibo shipped back in 1999 and shipped through 2006. The relaunched version for the United States costs an eye-watering $2,900 but includes a three-year subscription to Sony’s AI Cloud. Using the cloud, Aibo uploads its day-to-day experiences, and over time it builds a database of these experiences, which leads to each dog having its own unique personality and traits.

What companies such as Anki and Sony are doing is utilizing AI to create robots that move beyond educational or entertaining to something more. They’re working to create highly personalized robots that know and understand their owners, and that can provide some level of real companionship over time. Some will find this endearing, others will find it creepy, but this is clearly the direction today’s consumer robots are headed.

Consumer Interest In Robots
To date, the market has proven there is an appetite for vacuuming robots. Smart robots such as Vector and Aibo haven’t been in market long enough to prove there’s a sustainable category here, yet, but the growth of smart assistants in the home—primarily in the form of smart speakers—seems to indicate that consumers broadly are warming to the idea of voice-enabled devices in the home. As others have noted, it’s not a stretch to assume that a company such as Amazon, which has both a consumer smart assistant in Alexa as well as an existing robot division (it bought Kiva Systems in 2012), will eventually bring to market a consumer robot. The question is, when? Based on my research, the company would be wise not to rush a product into market before consumers are ready.

At IDC we recently surveyed U.S. consumers about their interest in a robot for the home. The results were mixed at best. While more than a quarter of the 1,932 respondents said they were interested in a single-purpose robot, nearly 45% of respondents said they had no interest in buying a robot for the home. Interest in smart-assistant-enabled robots, security robots, and child- and elder-care robots were all in the single digits. We didn’t specifically ask about privacy, but its likely that this is one of the key blockers for many consumer after a tumultuous year where trust around privacy has taken a beating.

We went on to ask respondents who expressed an interest in consumer robots which brands they would like to buy from if they offered a robot in the future. Amazon and Apple topped the list, followed by Google, Samsung, and iRobot. At present, only the last two offer robots.

Obviously, consumer sentiment around robots for the home is far from fully formed. That said, interest is likely to grow as more of these types of products enter the market. This year will be an important one for the category in this regard, and we’re likely to see some very interesting products announced next week. However, it’s still very early days in the consumer robot market. It’s going to take years for the category to grows into a mainstream product segment, but it should be a very interesting ride along the way.

Digging a Little Deeper into Apple Revenue Warning

What was supposed to be a slow return to work after the holidays, mostly prepping for CES, got much more exciting thanks to a letter to Investors that Apple’s CEO Tim Cook wrote on January 2 warning investors about the performance in the December ’18 quarter.

You can find the full letter here, but in essence, Tim Cook points to weaker iPhone sales in Greater China due to a more fragile economic environment, longer replacement cycles due to more carriers moving away from subsidies, the battery replacement program and higher prices driven by a weak Dollar.

After reading the letter in its entirety and listening to Cook’s NBC interview, there are a few points that I think are worth highlighting.

Greater China

The data shared on Greater China points to a mixed-bag performance for Apple rather than overall doom and gloom. iPhone sales were so weak in Greater China that they negatively impacted overall revenue. Yet the fact that other products and services performed well would indicate that the concern some expressed of a possible Apple boycott on the back of the US sanctions as yet to materialize. Growth in services revenue also suggests that the current user base in China remains engaged in the ecosystem, a behavior that we know drives loyalty.

What is happening is that a weaker economy now impacted by the sanctions is lowering consumer confidence. Many are jumping to the conclusion that Apple’s loss in China is a win for the Android ecosystem players as consumers churn. There is no question that Huawei, OnePlus, Oppo, Vivo, and Xiaomi have grown in China offering an alternative to non-local brands but this has been true for quite some time, and most of their growth has been coming from within the Android ecosystem. While current economic conditions might drive some iPhone owners to look at switching camps looking for cheaper devices, it is more likely they will delay their purchase especially if they do not “need to upgrade.”

We will know more next quarter when buying behavior during Chinese New Year will bring some clarity on whether the slow down Apple is experiencing in iPhone sales will continue and whether other brands will be impacted by the weaker consumer confidence.

Installed Base Outside of Early-Tech

Many industry commentators are blaming the current iPhone performance on Apple’s decision to increase prices of the new iPhone Xs and Xs Max compared to last year’s iPhone X. I think this might be a little too simplistic an explanation of the current environment Apple is facing.

Apple proved with the iPhone X that a high price did not deter consumers. In markets such as the US where most consumers are on installment plans the difference between the iPhone X and the iPhone Xs is a few Dollars a month. What might have played more of a role is that some iPhone X owners might not have seen the need to upgrade to the iPhone Xs especially if they were not on an annual upgrade program or the bigger size of the iPhone Xs Max was not of interest. While this is not changing the fact that replacement sales are impacted it does paint a different story for the future.

Cook’s specific mention of widening the annual upgrade program to more markets, offering installment plans options with more trade-ins and making it easier for people to transfer their data on new devices are all steps that point to wanting to nudge mainstream users to move to newer models. This is where the problem lies — those more pragmatic buyers who are satisfied with the features their current model offers. From Apple’s comments it seems that this is now a larger group than it used to be in previous years and the part that Apple underestimated. This is likely to be an industry-wide problem and Apple’s retail strength will make tackling it much easier than for any other vendors.

Considering other devices sales remained strong this quarter despite availability constraints on Apple Watch, AirPods and MacBook Air, we should also consider that some of the disposable income that in previous years might have been put towards a new iPhone might instead have been diverted towards another Apple product. Not a bad thing for Apple!

I do also wonder if the current iPhone lineup might have played a role in the lower upgrade sales as mainstream consumers are resisting some of the changes such as larger form factors, Face ID and the lack of a headphone jack. This is the first time Apple has a full portfolio of products that are two years old or less. Uncertainty around these new features coupled with the battery replacement program might have pushed potential buyers to keep their older iPhone with a new battery and renewed life. I see these as deferred sales rather than lost sales. When the time comes, it will be interesting to see if these pragmatic buyers will spend more money upgrading to the latest model and seeing it as a multi-year investment or whether they will choose an older product at a reduced price.

Hardware and Services: An Intertwined Opportunity

Don’t be too quick to criticize Apple on the new portfolio and consider how hardware and services are intertwined in Apple’s future. For Apple, it is paramount to drive users to newer models and not just because of the hardware revenue those sales generate. Newer products with the latest features make sure users can engage in new services and use features that increase stickiness to the ecosystem. This engagement is what Apple must continue to foster to be able to benefit long-term from the user base they have built.

It is very telling that at a time when Apple decided to no longer disclose iPhone sale volumes, they also decided to start sharing services gross margins. Apple made it clear they want investors to focus more on the opportunity services offer to the company long term. If you think about this opportunity, there are no other smartphone vendors other than Google that can say their users are generating revenue for them even when they are not buying new products. So, while lower iPhone sales are certainly something to be concerned about Apple continues to show there is an upside in other product categories and services.

Apple vs. Other Smartphone Vendors

This final point is possibly the most important one to keep in mind when we compare Apple to other smartphone vendors. Apple’s revenue while highly dependent on iPhone over the years does not end with the iPhone. While it is true that no other single product has done for Apple as much as the iPhone, the product offering as an aggregate still puts Apple ahead of all other vendors who might be selling higher volumes but have no direct way to monetize from their users once the sale has occurred. The only exception being Xiaomi, but with the caveat that its monetization helps recuperate the initial loss on hardware. All other Android vendors are mostly working to drive value to Google rather than themselves.

Even Samsung, a brand that offers a much broader range of products, even broader than Apple, is still struggling to benefit from the user base to drive not just services revenue but also cross-device stickiness.

Apple’s strong reliance on iPhone revenue makes it hard to not see Apple as a smartphone vendor but measuring its future opportunity only on iPhone sales is shortsighted.