Category: Analysis

Android v. iOS Part 2: Profits

RECAP

Yesterday we looked at Android and iOS mobile operating system market share. Today we look at mobile operating system profit and profit share.

ANDROID HAS WON THE MARKET SHARE BATTLE BUT…

On the strength of market share alone, TechCrunch has (and many others have) declared Android the inevitable victor of the mobile operating system wars.

“The latest numbers are in: Android is on top, followed by iOS in a distant second. There is no denying Android’s dominance anymore. There is no way even the most rabid Apple fanboy can deny that iOS is in second place now. Android is winning.” – Android Is Winning

However, a funny thing happened on the way to the Android victory parade — they forgot to bring along the industry’s profits.

…IOS HAS WON THE PROFIT WAR

“However beautiful the strategy, you should occasionally look at the results.” – Winston Churchill

— Apple made 77% of the entire mobile industry’s profits in the second quarter of 2012. (Source) The Android operating system may be outselling the iPhone 4 to 1, but Apple’s iOS operating system is out profiting not just Android but the entire mobile industry 3 to 1.

— iOS second quarter 2012 revenue was approximately $28 billion.

— iPhone revenue in it’s five years of existence is over $150 billion. (Source)

— iPhone, by itself, is worth more than all of Microsoft. (Source)

— Apple’s stock has soared in comparison with Google’s stock since the launch of the iPhone. (Source) In fact, Apple is now worth one Exxon more than Google. (Source)

— Not only has iOS made Apple the most valuable publicly traded company in the world, (Source) but if the iPhone were split off as its own company, it is probable that it would be, all by itself, the most profitable public company in the world. (Source)

SOME QUESTIONS

— If Android has won, then why does Apple have all of the profits?

— If Android has won, then what exactly have they won?

— Which is more important, market share or profit share?

— Isn’t profit literally the bottom line in business?

MYOPIC MARKET-SHARE MADNESS

Market share is a means, not an end. Profit is the end for which market share was meant. Without profit, market share is meaningless.

Honestly, what is up with our fixation on market share? This simply isn’t that hard. Ask any business person whether they’d rather have market share or profit share – whether they’d rather sell more product or make more money – and they would, without hesitation, take the latter every single time.

Every CEO knows this. Every business owner knows this. Every entrepreneur knows this. Every mom working out of her home knows this. Every guy working out of his garage knows this. Every teen working out of his mom’s basement knows this. Heck, even the kid down at the corner selling Kool-Aid off of a folding table knows this. Ask that kid if they would rather sell more Kool-Aid or make more money and, “duh”, they’d say “make more money.”

But hire that kid to work for Google or write for TechCrunch or provide analysis of the tech industry and boom! They lose their minds. They reverse themselves and declare market share all important and profit share a mere side show. It’s as if these pundits were metaphorically drinking the market share Kool-Aid.

IS THERE MORE TO THE STORY?

If this were any other industry, the analysis end here. In no other industry does anyone seriously contend that market share is more important than profit share. However, this isn’t any other industry. This is computing and this isn’t just the sales of goods and services. Android and iOS are platforms and this is a platform war.

Clearly iOS is winning – in the short run. But in a platform war, is market share more important than profit share? Does market share lead to platform dominance, which eventually leads to industry wide dominance, which eventually leads to profits? Tomorrow, we’ll take a look at those questions and more.

Coming Tomorrow: Android v. iOS Part 3: Network Effect

Android v. iOS Part 1: Market Share
Android v. iOS Part 3: Network Effect

NBC and the Olympics: Why Cord-cutting Will Be Slow and Hard

NBC Olympics logoNBC’s exclusive U.S. coverage of the the 2012 London Olympic Games has not, to say the very least, been a hit in the tech world. Twitter has been buzzing since last Friday about NBC’s delayed showing of major events, endless commercials, insufferable commentary, cheerleading for U.S. athletes, mawkishness, sentimentality, and a hundred other sins. All of it is true, and all of it has marked coverage of every Olympics I can remember.

There are two important things new. One is the ubiquity of social media, which have grown tremendously since the 2008 Beijing games. Twitter, Facebook, and the rest give us a global water cooler where we can we can grumble and complain to anyone who will listen. The other  is the ubiquitous availability of streaming media on our phones, tablets, PCs, game consoles, and just about anything else with or connected to a screen.

The  combination has created a strange sense of entitlement among many of the tech savvy. who seems to feel it has a right to watch the Olympics live wherever  and whenever they want. The problem is that for all the quasi-governmental, nationalistic trappings of the games, the International Olympic Committee is a private organization to which NBC Universal, another private organization, has paid a grade deal of money for the rights to televise the games in the U.S. For reasons well explained by The Atlantic‘s Megan Garber, NBC’s economic interests lie with the status quo, and are likely to for some time to come. This bodes ill for those who are counting on the internet to disrupt the way television content is delivered.

First, no one has a right to anything other than over-the-air content broadcast by local stations. Some local stations offer streaming, but it’s only of their own content, mainly news, because that is all they own the rights to. Networks offer selected shows, either on their own sites or through service such as Hulu.com, but what they offer and when they make it available is entirely up to them. That is why calls for a Federal Communications Commission investigation of NBC’s delayed and mangled streaming of the Olympic opening ceremony were nothing more than venting.

The situation is not going to change as long as those who control the content don’t see cord-cutters, who who would rely exclusively on over-the-top delivery on the internet, as a major economic threat to their very lucrative relationship with cable and satellite operators on the one hand and content owners, such as studios and sports leagues, on the other. That is why they are taking only baby steps to stream their content, and why Olympic streamcasts and services such as HBO Go are available only to people who are already cable subscribers. (Of course, NBC’s relationship to cable is more than close; NBC Universal is owned by Comcast.)

Furthermore, the distribution of content is tied up in a maze of contractual agreements. ESPN, for example, has contracts with Major League Baseball, the National Football League, the National Basketball Assn., the NCAA, and the College Football Assn., among others, and each specifies just how the content may be distributed. These contracts will evolve, but slowly.

One thing that is absolutely clear is no matter what alternative means for delivering content are developed, you are going to pay for the good stuff. Like newspapers, television content distributors have not found an internet advertising model that works anywhere near as well as traditional broadcast or cable. In the future, you may be able to subscribe via the internet, but you are still going to pay.

I pay a lot of money for my Verizon FiOS video service and don;t really watch very much television. I sympathize with those who only want to watch Game of Thrones but are unwilling to pay for a cable subscriptions plus an HBO premium just to get the one show they really want to see. I don’t know that HBO will ever sell subscriptions to individual shows–it doesn’t suit their business model well. But I’m sure the time will come when you will be able to subscribe to HBO without going through a cable company.It’s just going to take a while, and that is more likely to be measured in years than months.

Maybe by 2016, we’ll be able to subscribe to live feeds of the Rio de Janeiro Olympics (Rio is just one hour ahead of Eastern time, so there’s not much of an excuse for delays.) I certainly hope so. But for the time being, we all need some patience.

 

Microsoft Office 2013’s Biggest Risk Could be its Visual Design

Microsoft Office has been the staple of productivity for years, particularly for businesses. Therefore, whenever big changes happen to the product, it’s a big deal. Literally millions of IT departments and users shoulder the burden to learn every new version in hopes of squeaking out every ounce of corporate productivity. Microsoft’s latest version is in preview, out for testing millions of current and some potential users, too. There has been a lot written about the risks on potential pricing and its cloud-first method, but I believe the biggest risk is in its visual design, which looks more like a free Google product than a rich app buyers pay $399 for.

clip_image002Whether the industry accepts it or not, Apple is leading the latest design wave as measured by what looks premium. Physically, Apple design is all about minimalism with brushed aluminum, blacks, whites and sweeping angles with as few connectors and buttons as possible. The software design language is connected to the hardware language as that same brushed aluminum and minimalism is brought to OSX and apps like Mail and Calendar. Some apps take on a style of real world objects like Contacts, Notes, Pages, Find Friends, Newsstand and Photo Booth with elements of paper, leather, wood and even fabric. I cannot say I am a huge fan of the real-life designs, but it hasn’t stopped me or millions from buying Apple products. Microsoft’s Metro is distinctly different.

Metro design is a sharp departure from Windows 7 and also very different from Apple. Being different is a good thing as long as it attracts who you are targeting. Metro is direct touch, air gesture and speech control first, mouse and keyboard second. It focuses on the content by adding a ton of white space, 90 degree angles, and multiple, bright colors. There are no ties to real-life metaphors in color, shape, or texture. Like many, I like Metro for phones, tablets and even the XBOX. Now Office, in Office  2013 adopts the Metro design, a sharp departure from Office 2010. After using Office 2013 for a week, this is unfortunately where my Metro design admiration stops. The interesting part is that I thought it looked fine in screen shots, but as I used it on my 23” display for a week, it felt lifeless and drab. It was hard to even sit in front of and use for a few hours and I believe many other users will have this challenge as well.

I must point out that the industry has lived through many Office design changes, and there has always been a lot of uproar.  This is nothing new.  Remember when the ribbon first came out?  Many said that would be the thing that drove people to the alternatives which didn’t happen.  I think this case could very well be different as many alternatives exist, primarily Apple and Google and with such a drastic design departure, users will need to relearn or become comfortable with something new.  At no time has Apple’s and Google’s office tools been such a viable alternative.  I do not bring bias into this conversation as I have been a committed Office user since its existence.  In fact, I bend over backwards to use it in that I pay a monthly fee to Google just so I can sync my Google contacts and calendar to Outlook.  Based on the design changes and the alternatives, I am considering the switch and am looking at Apple and Google right now.  While mine and other’s purchase criteria incorporate more than just design, I think it is vital as it’s what you will be staring at eight hours a day.

The Google Apps for Business design language is more similar to Office 2013 than to Office 2010. It is minimal and very blocky with few shadows and lines.  In some ways, it’s more minimal than even Office 2013 that still sports the full ribbon.

Apple’s Mail and Calendar are more like Office 2013, with depth and shadows but with a very minimal ribbon or header and has seamless connections to Google Mail and Calendar without a monthly fee.

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So what does this mean to the success of Office 2013?  I believe Microsoft’s risk in enterprise is primarily with Google Apps for Business, but until Google can develop more robust spreadsheet scripting, increase presentation design  sophistication, and implement a more robust offline capabilities, it won’t make too big a dent in white collar professionals.  Employees who just need mail and calendar, Google is a big risk.  At $499-349 retail price, why would IT even think of doing this? And look at the Google design…. looks so similar now with Office 2013.  For small businesses, I believe Apple is the big risk to Microsoft Office 2013.  Included with every Mac, a user gets a full-fledged and robust email and calendar program and can users buy decent spreadsheet, presentation and word processors for  $19.99 a piece.  add to that they’re already  synced with iCloud and have optimized apps for the iPhone and iPad. Like me, users with Apple can also eliminate the monthly fee I pay for the Google Connector for Outlook.

It is a good time for consumers and businesses as even more choices are available than ever.  Now that the design has changed so much, now is the time to explore your options.

The New Mac Ads: If Tech Companies Were Cruise Lines

There has been a real kerfuffle caused by the new Mac Ads.

Some people dislike them. Others hate, hate, hate them.

On the other hand, some people like them…or, at least, they tolerate them.

MAC OWNERS AND MAC HATERS ARE NOT THE TARGET AUDIENCE

I agree with those, those and those who point out that these ads are not addressed to current Mac owners. They’re addressed to POTENTIAL Mac owners.

And the message being sent is so simple that it’s simply being misunderstood.

THE RETAIL STORE’S REASON FOR BEING

Here is Ron Johnson, former head of Apple’s Retail Stores, On Lessons Learned From Apple About Gaining An Edge As A Retail Brand:

“For example,” Johnson explained, “Apple has always offered the most easy out-of-the-box user experience, but we noticed there was a gap between buying and using. People were intimidated by even the easiest product set-up. So we said, if we can set up a product for them in the ten minutes before they left the store and they started using it and falling in love with it, it would be transformational. It was an insight that made the Apple store relevant.”

“(T)here was a gap between buying and using. People were intimidated…if we can set up a product for them…it would be transformational.”

Words for every business to live by. Words that Apple DOES live by.

IF TECH COMPANIES WERE CRUISE LINES

If tech companies ran Cruise Lines, most would invite you to ride on their world class cruise liners, help you pack your bags, give you a free limo ride to the docks, provide you with a lovely and delightful cruise…

…and then make you row ashore when you arrived at your destination.

Apple seems to get it. Instead of giving you a dinghy, a paddle and a hale and hearty farewell, they build a bridge between their products and their customer’s destinations. And as you’re crossing that bridge, Apple has their “geniuses” at the ready – there to encourage you, lend a helping hand, and cheer you on.

And that’s a good thing. A very good thing indeed.

HSA Foundation: for Show or for Real?

I recently spent a few days at AMD’s Fusion Developer Summit in Seattle, Washington.  Among many of the announcements was one to introduce the HSA Foundation, an organization  currently including AMD, ARM,  Imagination, MediaTek, and Texas Instruments.  The HSA Foundation was announced to “make it easy to program for parallel computing.”  That sounds a bit like an oxymoron as parallel programming has been the realm of “ninja programmers” according to Adobe’s Chief Software Architect, Tom Malloy at AMD’s event.  Given today’s parallel programming challenge, lots of work needs to be done to make this happen, and in the case of the companies above, it comes in the form of a foundation.  I spent over 20 years planning, developing, and marketing products and when you first hear the word “foundation” or “consortium” it conjures up visions of very long and bureaucratic meetings where little gets done and there is a lot of infighting.  The fact is, some foundations are like that but some are extremely effective   like the Linux Foundation. So which path will the HSA Foundation go down?  Let’s drill in.

The Parallel/GPU Challenge

The first thing I must point out is that if CPUs and GPUs keep increasing compute performance at their current pace, the GPU will continue to maintain a raw compute performance advantage over the CPU, so it is very important that the theoretical performance is turned into a real advantage.  The first thing we must do is distinguish is between serial and parallel processing.  Don’t take these as absolutes, as both CPUs and GPUs can both run serially and in parallel.  Generally speaking, CPUs do a better job on serial, out of order code, and GPUs do a better job on parallel, in-order code.   I know there are 100’s of dependencies but work with me here.  This is why GPUs do so much better on games and CPUs do so well on things like pattern matching. The reality is, few tasks just use the CPU and few just use the GPU; both are required to work together and at the same level to get the parallel processing gains.  By working at the same level I mean getting the same access to memory, unlike today where the CPU really dictates who gets what and when.  A related problem today is that coding for the GPU is very difficult, given the state of the languages and tools.  The other challenge is the numbers of programmers who can write GPU versus CPU code.  According to IDC, over 10M CPU coders exist compared to 100K GPU coders.  Adobe calls GPU coders  “ninja” developers because it is just so difficult, even with tools like OpenCL and CUDA given they are such low level languages.  That’s OK for markets like HPC (high performance computing) and workstations, but not for making tablet, phone and PC applications that could use development environments such as the Android SDK or even Apple’s XCode.  Net-net there are many challenges for a typical programmer to code an GPU-accelerated app for a phone, tablet, or a PC.

End User Problem/Opportunity

Without the need to solve an end user or business problem, any foundation is dead in the water.  Today NVIDIA  is using CUDA (C, C++, C#,), OpenCL, and OpenACC and AMD supports OpenCL to solve the most complex industrial workloads in existence.  As an example, NVIDIA simulated at their GTC developer conference what the galaxy would look like 3.8B years in the future.  Intel is using MIC, or Many Integrated Cores to tackle these huge tasks.  These technologies are for high-performance computing, not for phones, tablets or PCs. The HSA Foundation is focused on solving the next generation problems and uncovering opportunities in areas like the natural user interface with a multi-modal voice, touch and gesture inputs, bio-metric recognition for multi-modal security, augmented reality and managing all of the visual content at work and at home.  ARM also talked on-stage and in the Q&A about the power-savings they believed they could attain from a shared memory, parallel compute architecture, which surprised me.  Considering ARM powers almost 100% of today’s smartphones and tablets around the world, I want to highlight what they said.  Programming for these levels of apps at low power and enabling 100’s of thousands of programmers ultimately requires very simple tools which don’t exist today to create these apps.

The HSA Foundation Solution

The HSA Foundation goal, as stated above, was to “make it easy to program for parallel computing.” What does this mean?  The HSA Foundation will agree on hardware and software standards.  That’s unique in that most initiatives are just focused on the hardware or the software.  The goal of the foundation is to literally bend the hardware to fit the software.  On the hardware side this first means agreement on the hardware architectural definition of the shared memory architecture between CPU and GPU.  This is required for the CPU and GPU to be at the same level and not be restricted by buses today like PCI Express.  The second version of that memory specification can be found here.  The software architecture spec and the programmer reference manual are still in the working group.  Ultimately, simple development environments like the Google Android SDK, Apple’s XCode and Microsoft’s Visual Studio would need to holistically support this to get the support of the more mainstream, non-ninja programmer.  This will be a multi-year effort and will need to be measured on a quarterly basis to really see the progress the foundation is making.

Foundations are Tricky

The HSA Foundation will encounter issues every other foundation encounters at one time in its life.  First is the challenge of founding members changing their minds or getting goal-misaligned.  This happens a lot where someone who joins stops buying into the premise of the group or staunchly believes it isn’t valuable anymore.  Typically that member stops contributing but could even become a drag on the initiative and needs to be voted off.  The good news is that today, AMD, ARM, TI, MediaTek and Imagination have a need as they all need to accelerate parallel processing.  The founding members need to make this work for their future businesses to be as successful as they would like. Second challenge is the foundation is missing key players in GPUs.  NVIDIA is the discrete GPU PC and GPU-compute market share leader, Intel is the PC integrated GPU market share leader, and Qualcomm is the smartphone GPU market share leader.  How far can the HSA Foundation get without them?  This will ultimately be up to guys like Microsoft, Google and Apple with their development environments.  One wild-card here is SOC companies with standard ARM licenses.  To get agreement on a shared memory architecture, the CPU portion of ARM SOC would need to be HSA-compliant too, which means that every standard ARM license derived product would be HSA-compliant.  If you had an ARM architecture license like Qualcomm has then it wouldn’t need to be HSA-compliant.  The third challenge is speed.  Committees are guaranteed to be slower than a partnership between two companies and obviously slower than one company.  I will be looking for quarterly updates on specifications, standards and tools.

For Show or for Real?

The HSA Foundation is definitely for real and formed to make a real difference.  The hardware is planned to be literally bent to fit the software, and that’s unique.  The founding members have a business and technical need, solving the problem means solving huge end user and business problems so there is demand, and the problem will be difficult to solve without many companies agreeing on an approach.  I believe over time, the foundation will need to get partial or full support from Intel, NVIDIA, and/or Qualcomm to make this initiative as successful as it will need to be to accelerate the benefits of parallel processing on the GPU.

 

 

Was Winning on SOPA Bad for Tech?

I’ve spent a very interesting day at the Tech Policy Summit in Napa, but based on what I’ve heard, I’m beginning to think that the industry’s quick victory in killing the Stop Online Piracy Act this spring may be a long-term impediment to the industry’s agenda in Washington.

The problem is a lack of understanding of why tech won on SOPA or a sense that it was, in many ways, shooting fish in a barrel. The backers of SOPA made ridiculous mistakes. The bill was taken up after a single House committee hearing from which opponents of the bill were effectively excluded (one witness from Google was used as a sacrificial lamb.) Judiciary Chairman Lamar Smith (R-Tex.) did not really understand his own bill and tried to force it through on a fast track, a move that served only to roil the opposition. On the opponents quickly seized on a line of attack that the bill would “break the internet.” This wasn ‘t exactly true, but supporters generally lacked the technical expertise to refute it.

These conditions will be very difficult to recreate. And getting things  you want passed is orders of magnitude harder than stopping things you oppose. It is going to take sustained struggle, not a SOPA-like quick hit, to win passage of important agenda items such as visa reform.

It’s entirely understandable that entrepreneurs are quickly disgusted by the stupidity and partisan pettiness of Washington politics. But their opponents have long since learned to put up with it, day in and day out. Until the leaders of tech can such it up for the long strugggle, they are going to wait a long time for another SOPA victory.

Why Apple is Wrong About Convertibles

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

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

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

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

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

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

DISH Hopper: What Goes Around Comes Around

Satellite TV operator DISH Network got a lot of attention when it announced its new Hopper DVR with a feature that “can automatically skip commercials in primetime TV – ABC, CBS, FOX and NBC in HD. Only on the Hopper. Only from DISH.”

Photo of Replay 4000
The Replay 4000 DVR from 2002.

A cool feature, but hardly new. When ReplayTV introduced the first DVR in 1999, it included a 30-second skip-forward button, a revolutionary idea at the time. (Replay was the brainchild of Anthony Wood, who went on to found Roku.) Three years later, Replay, by then owned by SonicBLUE, introduced the Replay 4000. The new DVR included the ability to skip commercials automatically as well as a feature that allowed sharing of recorded programs with other Replay owners over the internet.

As I wrote at the time, this was viewed with great alarm by Hollywood, and the studios predictably rose up and crushed SonicBLUE, which had a fatal penchant for provoking legal challenges. But Replay, which launched a bit before the more successful TiVo, played an important part in revolutionizing how we watch television.

 

Verizon, LTE, and the iPhone’s Future

At PCmag.com, Sascha Segan argues that Verizon Wireless may be pushing customers toward Android phones rather than the iPhone because it so badly needs to move customers from its overburdened 3G data network to its new and lightly used LTE network. This explains why Verizon is pushing Apple very hard to include LTE in the next iPhone, expected this fall.

Verizon hasn’t been shy about its preferences. It banished the iPhone from its booth at the Consumer Electronics Show because it was displaying only LTE models and I expect it to do the same at the CTIA Wireless show next week.

I argued back in March that Apple should leave LTE out of the iPhone for now because the iPhone does not badly need faster data and the LTE still imposes an unhappy battery life/processing power/size tradeoff. I suspect that reflects the thinking at Apple, which has never been very happy on the bleeding edge of technology.

But I’m not sure that even mighty Apple can resist the pressure it is getting from the most important carrier in its most important market. We’ll know in the fall.

Immersive Social Games Bringing Families Together

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

My Personal Experience

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

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

The Country of Wizard101

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

Trinity University Research Study

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

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

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

Jedi Lessons at Hogwarts

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

Second KingsIsle Cross-Gen Game This Week

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

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

Conclusion

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

Yahoo!: Tactics Masquerading as Strategy

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

My Personal Yahoo! History

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

Being the 800 lb Gorilla Difficult

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

Yahoo!’s Six Points of “Strategy”

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

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

Where Does Yahoo! Intend to Win?

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

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

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

Yahoo! Next Steps

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

Antitrust: Apple Could Lose by Winning

A Cnet analysis by Declan McCullagh and Greg Sandoval of the antitrust suit against Apple and several book publishers concludes that the case against Apple seems particularly weak. But it rather curiously begins by citing the ultimate failure of previous antitrust suits against IBM and Microsoft.

iSooks screen shotI am hardly an antitrust expert and have no real feelings for the ins and outs of this peculiar case (in which Amazon.com is the elephant in the room.) But the IBM and Microsoft cases should serve as cautionary tales because both had profound effects on the companies that had little to do with the legal outcomes.

The IBM case, which involved the bundling of software with mainframe computers, was brought by the Johnson Administration three days before Richard Nixon took office. It dragged on until Ronald Reagan has been in the White House for a year, by which time conditions in the industry were radically different from when the case was filed. In the end, the government made a total botch of the trial and facing almost certain defeat, decided to drop the case (this is greatly oversimplified, but the detailed history isn’t important here.) But the victory was devastating for IBM. Twelve years of  litigation were an enormous distraction in a time of rapid technological and business change. IBM management because cautious and over-lawyered, constantly looking over its shoulder–a condition that persisted for years after the case ended. The antitrust case  was almost certainly a major cause of the serious decline of IBM in the late 1980s and early 90s.

The Microsoft history is similar, though the case only lasted four years. Unlike IBM, Microsoft lost big in the trial phase, but had the proposed remedy–a breakup of the company–rejected on appeal. Before a new judge could come up with an alternative remedy, the year-old George W. Bush administration settled on terms very favorable to Microsoft. Arguably, the settlement itself has had almost no effect on Microsoft. But the  suit had a major impact on the company. As in the IBM case, legal concerns distracted the company’s management at a time of critical change in the industry. There is also some evidence that unhappiness with the legal proceedings hastend Bill Gates’ departure as CEO. Microsoft  escaped from the suit on favorable terms, but the prosecution caused Microsoft lasting damage.

There’s one piece of good news  for Apple in the current case. Both the IBM and Microsoft suits cut to the heart of their business–how IBM sold mainframes and associated software, how Microsoft licensed Windows. Selling books is not central to Apple’s business and the company probably views the case as more of an annoyance than an existential threat. Still, apple might do well to do what it can to make the problem go away as quickly as possible. Spending time wrestling with the government is not the best way to stay on top of an always fluid industry.

 

 

Apple Will Sell Exactly 169,652,000 iPads in 2016

Need a lesson in the difference between precision and accuracy? Head over to the Gartner web site for the latest predictions of tablet sales over the next four years. With precision down to the nearest thousand–and I suspect that only space requirements kept the last three digits out of the forecast–Gartner purports to tell us how the market will grown and how it will be divided (table below).

Table 1
Worldwide Sales of Media Tablets to End Users by OS (Thousands of Units)

 OS

2011

2012

2013

2016

iOS

39,998

72,988

99,553

169,652

Android

17,292

37,878

61,684

137,657

Microsoft

0

4,863

14,547

43,648

QNX

807

2,643

6,036

17,836

Other Operating Systems

1,919

510

637

464

Total Market

60,017

118,883

182,457

369,258

Source: Gartner (April 2012)

Many years ago when I was an editor, I needed an estimate of the GDP of the People’s Republic of China. I called the CIA–the best source for such information in those days–and  was given an estimate of something like 8,546,789,000. I asked the analyst how many of those digits were significant. “Maybe the first,” he said.

These Gartner numbers, and similar ones put out by IDC, are ridiculous, made more so by phony precision. A year ago, Gartner forecast the industry would sell 69,780,000 tablets in 2011, an estimate that proved 15% too high based on the new numbers. Last year’s sales were supposed to include 3.9 million BlackBerry PlayBooks; 807,000 were sold (listed as QNX in the table) and even that estimate strikes me as high. Missing from this year’s table are the 4.2 million TouchPads that HP was supposed to sell this year.

Fish gotta swim and analysts gotta publish estimates. But it’s really time for this embarrassing silliness to stop.

Facebook is for Old People

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

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

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

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

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

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

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

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

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

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

Apple’s iPad Trademark Is Not in Danger

Coke adWhen I was an editor, I used to regularly receive form letters from corporate lawyers complaining about the use of “xerox” to describe copying or, my favorite, “realtor” rather than “Realtor®.” I threw them away, and never heard anything further. The game was simple: Companies that own value trademarks must defend their claims of exclusive use, and these letters, meant to be ignored, were part of the process.

So I was a bit startled by a silly Associated Press story suggesting that Apple might be in danger of losing its iPad trademark as people come to use “iPad” as a generic term for a tablet. This is not going to happen. For one thing, people don’t seem to be using iPad as a generic term for a tablet. They call iPads iPads, Kindles Kindles, and Nooks Nooks. There isn’t much reason to call anything else anything. (The same seems to be true for iPods after 10 years. Usually when people take about an iPod, they are referring to a an Apple product.)

About the only way to lose a trademark is to fail to make an effort to defend it. Company’s with very valuable trademarks go to great lengths to defend them. Coca-Cola® is known to send inspector to a restaurants where they order a Coke® and send it back to a lab to make sure It’s The Real Thing (trademark #78339744). Disney has gone after amateur Winnie-the-Pooh® sewing patterns not out of insane greed but because of a need to show vigilance. It is very rare these days for a company to lose a trademark to generic use; Wikipedia has a list of them and the most recent case seems to involve the yo-yo, in 1965.

Apple has earned a reputation  as a ferocious defender of its intellectual property. It’s not about to lose iPad, iPhone, iMac, or i-anything else.

Why Microsoft Is Whipping Apple in TV

Farhad Manjoo at Slate has a good piece today on how Microsoft is already delivering many of the expected features of the tech world’s favorite unicorn, the Apple television. The combination of the Xbox and the Kinect sensor, together with a rich array of video services available through Xbox Live, provides a voice- and gesture-controlled user interface for your TV.

Photo of Xbox and Kinect
Xbox and Kinect (iStockPhoto)

Xbox Live today offers a considerably richer array of video services than the current Apple TV set top box, and that is not likely to change quickly, no matter what sort of integrated hardware Apple comes up with. This competition isn’t about hardware. It’s about securing the availability of content in the Byzantine world of of content owners and distributors. Here, Microsoft is miles ahead of Apple and likely to remain so.

In Hollywood, big, bad Microsoft is viewed as something of an honest broker, a company that is prepared to work with the content owners rather than steal their business. Apple is viewed as the company that destroyed the music business and the company that gobbles up all the profits of any business it enters.

Microsoft, in fact, has been courting Hollywood for years. It worked closely with cable and satellite TV distributors on IPTV technology. Going back to the mid-1990s, its designed its Media Center software to be respectful of content owners. None of these overtures turned into particularly successful businesses, but they left Microsoft well-positioned for the future.

A crucial area where Microsoft is ahead of Apple is in delivering  cable content to TVs via the internet. It has deals with Verizon FiOS and, as of this week, Comcast Xfinity, to deliver select cable channels via Xbox Live. Subscribers to some cable or satellite services, including FiOS and DirecTV, can get HBO Go on their Xboxes. (The question of who can get what content is still way too complicated, but is slowly being worked out.)

The key is that studios and distributors view Microsoft as an enabler rather than a competitor and disruptor. And that could allow Microsoft to remain way ahead of A[[le for some time to come in the competition that matters–the fight for content.

 

Windows 8 Desktop on ARM Decision Driven by Phones and Consoles

There has been a lot written about the possibility of Microsoft not supporting the Windows 8 Desktop environment on the ARM architecture. If true, this could impact Microsoft, ARM and ARM’s licensees and Texas Instruments, NVIDIA, and Qualcomm are in the best position to challenge the high end of the ARM stack and are publicly supported by Microsoft.  One question that hasn’t been explored is, why would Microsoft even consider something like this? It’s actually quite simple and makes a lot of sense the position they’re in; it’s all about risk-return and the future of phones and living room consoles.

The Threat to Microsoft

The real short and mid term threat isn’t from Macs stealing significant Windows share from Microsoft, it’s all about the Apple iPad and iOS.  It could also be a little about Android, but so far, Android has only seen tablet success in platforms that are little risk to a PC, like the Amazon Kindle Fire.  Market-wise, the short term threat is about consumer, too, not business.  Businesses work in terms of years, not months. The reality is that while long term, the phone could disrupt the business PC, short term it won’t impact where Microsoft makes their profits today. Businesses, short term, won’t buy three devices for their employees and therefore tablets will most likely get squeezed there.  Business employees first need a PC, then a smart phone, and maybe a few a tablet.  There could be exceptions, of course, primarily in verticals like healthcare, retail and transportation.

What About Convertibles?

One wild-card are business convertibles.  Windows 8 has the best chance here given Microsoft’s ownership on business and if you assume Intel or AMD can deliver custom SOCs with low enough power envelopes, thermal solutions and proper packaging for thin designs.  Thinking here is that if business wants a convertible, they’ll also want Windows 8 Desktop and more than likely backward compatibility, something only X86 can provide.  So net-net, Microsoft is covered here if Intel and AMD can deliver.

Focus is Consumer and Metro Apps

So the focus for Microsoft then is clearly consumer tablets, and Microsoft needs a ton of developers writing high quality, Metro apps to compete in the space.  Metro is clearly the primary Windows 8 tablet interface and Desktop is secondary, as it’s an app.  Developers don’t have money or time to burn so most likely they will have to choose between writing a Metro app or rewriting or recompiling their desktop to work with ARM and X86 (Intel and AMD) desktop. It’s not just about development; it’s as expensive for devs to test and validate, too.  Many cases it’s more expensive to test and validate than it is to actually develop the app.  Strategically, it then could make sense for Microsoft to push development of the Metro apps and possibly by eliminating the Desktop on ARM option, makes the dev’s decision easier.

Strategically, It’s About Phones and the Living Room in the Endimage

Windows 8, Windows Phone 7, and XBOX development environments are currently related but not identical.  I would expect down the road we will see an environment that for most apps that don’t need to closely touch the hardware, you write once and deploy onto a Microsoft phone, tablet, PC and XBOX.  The unifier here is Metro, so getting developers on Metro is vitally important.

If Microsoft needed to improve the chances developers will swarm to Metro and do it by taking a risk by limiting variables, let’s say by eliminating ARM desktop support, it makes perfect sense.

Of Course Amazon Kindle Fire Cannibalizes the Apple iPad

One way I test and gauge insights is to engage in and monitor social media.  It’s certainly not the only way, but it is one of many ways.  One very interesting discussion I am monitoring is the Amazon Kindle Fire versus Apple iPad.  There are definitely two camps that exist and not a lot in-between.  So what will really happen between these two tablets?

Different Target Markets, BUTimage

One thing everyone needs to realize is that there are many different kinds of consumers with very different needs, wants, drivers, and checkbooks.  Sure, our friends and family kind of seem like us, but that’s because its human nature to surround ourselves with people similar to ourselves.  We may think that we are a lot different from our friends, but statistically, we are very similar.  Let me give you just one example….. According to the U.S. Census bureau, the median household income in 2010 was pegged at $49,445.  Do you make a lot more… a lot less?  You get the idea.

As it relates to the iPad, there are consumers who would have stretched up to buy a $499 iPad 2 who will, instead, buy the $199 Fire.

Different Needs, BUT

The Fire and the iPad are also architected to address different needs, but that doesn’t necessarily dictate exactly what a consumer will do with it.  Tech.pinions colleague Tim Bajarin nailed it when imagehe talked about the differences in content creation and consumption on the iPad versus Kindle.  One thing to be careful with however, is what we mean exactly by content creation.  Is creating an email content creation?  Is cropping a photo content creation?  I happen to think it is and I believe that those who buy a Kindle will, in fact, be creating emails and cropping photos.  Why, because it’s the best available device they have to do that with at that moment.

Here’s the analogy, and it’s a personal one.  My teenagers don’t own a tablet, and therefore they watch videos and read books on their iPhones.  It’s the best device they have at the moment, even though it would be a much more enjoyable experience on the iPad.  Problem is, Dad (me) is too cheap to buy another one.   Those who have a Kindle will be creating light content because it’s the best device they have at that moment.

It Won’t Matter This Holiday Season

In the end, none of this discussion is relevant this holiday selling season.  Based on information from my contacts, both Apple and Amazon have been conservative in their production forecasts.  Apple doesn’t want to get stuck with potential inventory before their next iPad and Amazon took a cautious tone given it’s a new product and they barely break even on the gross margin side with an untested video and music upside content model.

Net-net, for the holidays, both will sell out and we won’t be able to see who will be the finest cannibal.  BUT after the holidays, when inventories are adjusted and there isn’t a line for either, if Apple either doesn’t adjust their pricing, introduce a lite-iPad, a 7″ iPad, or a new kind of subsidized business model, they will lose out in volume to the new class of 7” tablets, not only from Amazon, but also from Barnes and Noble.

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Hello, Tech.pinions

I am pleased to announce that, as one element of building a new high tech industry analyst firm, I will be joining Techpinions as a part of the columnist team and as partner. It is an honor to work with Tim Bajarin, Ben Bajarin, Stephen Wildstrom, Peter Lewis and many of the awesome contributors.

What I Believe
I believe that we, the tech industry, have the largest opportunity in front of us that has ever existed. The intersection of the biowatch, phone, tablet, computer, home appliances, living room electronics, automobiles and the multiple apps, networks and data centers that connect them, will just be the start of a revolution. We will move from where we are now into a “complete” cloud computing model which, after many years, will then morph its way into an ambient computing model. By ambient, I mean all around us, in the background, and automatic.

 

To interact in this environment, end users will utilize advanced and natural HCI techniques like speech and air gestures in addition to traditional touch, mouse and keyboard. Sure, there are interim steps in the future models, but one must envision where the puck will be before skating there. There are many uncertainties, but what is certain is the amount of power and control end users have.

What to Expect From Me at Tech.pinions
As an industry analyst, I will be analyzing interconnected ecosystems and for some, advising them on how to best address those future market shifts. One of the vehicles I will be using to publicly communicate my views on the emerging “complete” cloud and ambient computing spaces will be through Tech.pinions. While not exclusive to Tech.pinions, it will be a key communication vehicle. Analysis and opinions will span end usage models and behavior, technologies, and business models that shape the technology future.

It’s About the Conversation
Our industry’s learning and insight model has fundamentally changed now that there is a structured way to garner the insights of millions of individuals via social media. I would like there to be a conversation around these opinions at Techpinions, too. You can either comment here, or you can reach me at Twitter, Google Plus, or LinkedIn.

Stay Tuned
This is just one of many announcements I will be making between now and CES as I build a up a technology analyst practice. I look forward to getting your direct, honest, insightful, and non-politically correct input as we move forward.

You can find Patrick’s full bio here.

Was Android a Big Mistake for Google?

By many standards, Android is a huge success. It has become the top-selling smartphone operating system and is on a growth path to increase its dominance. But there is a significant question of whether it has done any good for its owner, Google.

Google bought Android in 2005 from its founder, Andy Rubin, for an undisclosed price. Google, as is its wont, never explained the rationale for the purchase. And because the software is free to device makers, it has not made any money for Google directly.

The general thinking in the industry has been that the Google services bundled on Android devices would create enough additional revenue to make Android a paying proposition. Only Google knows the extent to which this is working and they aren’t saying. But I suspect that the incremental revenue generated by Android, including sales at the Android Market, have not been huge contributors to Google’s bottom line. Tablets would seem to present a lot more monetization opportunities than handsets just because of the extra screen real estate, but Android tablets have been dismal sellers. I’m sure the iPad, with default Google search and Google maps, is generating orders of magnitude more revenue than all the Android tablets combined.

Meanwhile, Android is making money for Microsoft. Microsoft asserts that Android violates a number of its patents and has been signing up phone manufacturers, most recently Samsung, to deals that require them to pay royalties on each handset for a license to the Microsoft intellectual property. The needs to obtain patents to defend Android against infringement claims by Microsoft and Apple was  a significant factor in Google’s proposed purchase of Motorola Mobility. And Google could face a substantial judgment in litigation in which Oracle claims Android infringes on Java language patents that Oracle acquired when it bought Sun Microsystems.

The bottom line is that Android is a big headache for Google without much evidence of a clear offsetting payoff. And now, Amazon has come along and helped itself, perfectly legally, to the Android source code and created a customized version of the software without so much as a by-your-leave from Google. The software will power the new Kindle Fire, which could easily become the dominant Android tablet when it goes on sale in November.

Android has been good for consumers and good for phone makers. Whether it has been good for Google is very much an open question.

 

Industry Collaboration Could Speed Next Generation of Chips

Photo of Intel wafer

At a time when the federal government can’t seem to agree with itself that today is Wednesday, it’s a good thing to see New York State  get together with the largest chip makers to spur the next generation of chipmaking. And it’s even better to see that the state’s contribution is an investment in the State University of New York rather than unproductive tax incentives.

Under the deal, an industry consortium of Intel, IBM, Globalfoundries (the former manufacturing arm of AMD), Samsung Electronics, and Taiwan Semiconductor Manufacturing Co., will work together to develop processes for making 22- and 14-nanometer chips on 450 mm wafers. The current generation of advanced chips have 32nm components and are made on 300 mm (about 12 inches) wafers.

In general, moving to smaller components increases capability while reducing power consumption. Manufacturing on larger wafers increases the efficiency of the fabrication process. But new processes are extremely expensive to develop, so sharing the burden among the leading semiconductor manufacturers makes sense.

IBM and Intel will invest $4.4 billion in the project, including the opening of an Intel headquarters in Albany. The state will invest $400 million in the College for Nanoscale and Science Engineering at SUNY Albany.

New York is not usually thought of as a leader in semiconductors. But IBM operates its major chip fabrication facility at East Fishkill while Globalfoundries is building a major new fab in Canandaigua.

The move to 450 mm wafers will have huge implications for the semiconductor and manufacturing-equipment industries over the next several years. Moving to chips with smaller components can often be accomplished through modifications of existing equipment, but larger wafers require wholesale replacement of chipmaking machinery. The last major change, from 200 to 300 mm, took place about a decade ago.

 

 

DEMO Deja Vu

At the TechCrunch Disrupt conference this week, entrepreneurs Peter Thiel and Max Levchin made a splash by declaring the state of innovations as being somewhere “between dire straits and dead.” I think they are fundamentally wrong, but that’s a hard case to make at the opening session of the DEMOfall conference today.

DEMOfall iconThe 14 products demonstrated all seemed relatively worthy. In fact, that may be what was wrong. Each one seemed like it had a chance to succeed, largely because they mostly sounded like minor variations on familiar themes. What was missing, so far at least, was the goofy,off-the-wall nature of the products that have made past DEMO conferences so interesting.

The product that struck as most interesting was LiveLoop, a plugin that adds real-time collaboration to Microsoft Office. When the most intriguing thing is an Office add-on, it’s hard to believe you are in a hotbed of innovation. (I also found Upverter, a cloud-based collaborative circuit design tool intriguing, but I don’t know enough about circuit design to assess it.)

But I don’t think the lack of excitement is symptomatic of a basic failure in innovation. It’s more that we are just at an odd place in the cycle. I think, for example, that experimentation and development that is going on with big data, sensor networks and other new methods of data collection, and deep analytics is going to lead to deeper understanding of our world and products we can barely imagine today. But this area of innovation has not net reached to point where it is producing consumer-facing products. That is going to take at least a couple more years.

Meanwhile at DEMO, I am looking forward to I-TOMB.net–The World Virtual Cemetery, a product that might take me back to DEMO’s goofy glory days.

 

 

America Invents: A Step Toward Patent Reform

Patent office logoThe America Invents Act, now awaiting President Obama’s signature, will not solve the most serious problems of the U.S. patent system, especially the ugly mess of vague and dubious software patents. But it is a welcome step on the long road to reform.

The most notable  change in the law is a new criterion for awarding patents: To win U.S. patents, inventors had to prove they were the first to come up with the idea. The new law, following the practice of most of the rest of the world, will now award a contested patent to the first party to file for it. This may be a rough sort of justice and could prompt some premature patent filings, but it eliminates one of the most contentious and costly elements of patent litigation. And as engineers and inventors adapt to the new regime, it could ease some of the lab record-keeping and paperwork now deemed necessary to prove primacy of invention in a patent dispute.

The new law also streamlines the patent application process and simplifies fees. New procedures should mean that the U.S. Patent & Trademark Office gets to keep more of the fees it collects and stronger financing could lead to the hiring of more and better patent examiners.

But the mere fact that the bill passed the Senate 89-8 reflects the fact that the most controversial issues were left on the table. The only real opposition came from some supports of small business and independent inventors, who felt the measure tilted too far in favor of big companies. Among the issues that will have to wait for another day–or case-by-case resolution by courts–is clarification of just what sort of software innovations or business processes are patentable.

 

How To Fix the A&T/T-Mobile Deal

Sascha Segan, the phone guru at PCMag.com, has an interesting suggestion on  how AT&T might salvage its challenged purchase of T-Mobile USA. Divesting 25% of the company wouldn’t satisfy Justice Dept. antitrusters, but a binding promise to open its network to competitive mobile virtual network operators (MVNOs) just might. Read Segan’s full post here.

Obscure Attack Threatens Privacy, e-Commerce

An attack on a Dutch company in the obscure–to most of us–business of issuing digital certificates poses a serious challenge to secure web communications. No, you shouldn’t stop using Amazon.com or Gmail, but the attack opens another front in the never-ending war that threatens the security of the internet. The tale is a bit complicated, but I’ll try to make it simple. (And thanks to Swa Frantzen of the SANS Internet Storm Center for his detailed analysis of the incident.)

Since the early days of the the secure hypertext transfer protocol (https) has been used to lock down communications between browsers and web servers. Its use is indicated by the letters “https” in the URL, often a locked browser icon, and sometimes the use of green text in the address bar (screen shot above shows Google’s Chrome browser connected to a secure site.)

Https depends on something called a digital certificate that is supposed to do two things. First, your browser checks the certificate for proof that the server it is connecting to is what it claims to be, that is, it asks the server to present a digital ID card proving that it really is mail.google.com. Second, the certificate includes a key that is used to set up encryption of the traffic between the server and the browser.

All of this, obviously, depends on the integrity of the certificate. Some time in the past–just when is not certain yet–unknown parties breached the system of DigiNotar, a Dutch certificate authority. The attackers issued a number of fake certificates in July. On July 19, DigNotar discovered the attack an revoked a number of certificates. However at least one, for google.com, was missed. This fake certificate was used to connect users, mostly in Iran, to a fake Google site.

All of this had little immediate effect on anyone outside Iran. Microsoft, Mozilla, and Google updated their browsers so that they will no longer automatically trust any certificate issued by DigiNotar (the situation with Safari on Macs is more complicated.) This is a problem for DigiNotar and its legitimate customers, but is the best way to protect everyone else.

Furthermore, the fake certificates were only a problem if users were also directed to a fake site. This required a separate attack on the internet’s domain name system (DNS) to replace the legitimate addresses of Google servers with fake ones. That is why the attack only affected users of Iranian DNS services. (There’s only speculation at this point on why Iran,  but one possibility is that the attack was designed to allow the country’s security services to read what users thought were secure, encrypted communications with gmail and other Google services.)

Still, this is another serious warning shot telling us that major improvements are needed in internet security. Attacks redirecting traffic to fake web sites, either by compromising DNS servers or through a technique known as DNS cache poisoning, are not rare. When combined with undetected fake certificates, they have the potential to be devastating.

One obvious area for improvement is the certificate authority infrastructure. As it exists, the certificate authority is what engineers call a single point of failure. Compromise it and the entire security system, which ultimately runs on trust, fails. In particular, a speedy investigation is needed into how the audit trhat followed DigiNotar’s discovery of the breach failed to find the fake Google certificate.