It seems Spotify has raised a ~$1 billion round of debt financing. Whether this move is because the investments needed to compete with Apple are significant or a fundamentally different issue is not known. However, one of the main reasons I think Spotify will struggle long-term is because, similar to other companies we have analyzed like GoPro or Fitbit, they are a one product company. They have no real shot at services besides music subscriptions and Apple has a bigger war chest and a more direct relationship with their customers. Similarly on Android, Google is unlikely to stand still and YouTube could ideally be the right outlet for them to succeed long-term with their YouTube music subscription.
Spotify may have the unsavory role of being the early leader but falling short to players who have patient capital and larger ecosystems. Music, video, TV, and other subscription services are likely to be bundled into the OS layer as a services option. Following a similar saying that all great standalone features/software get bundled into the OS. Perhaps the same will be true with services.
AT&T Embraces Cyanogen
The Information has a great scoop that AT&T (link behind a paywall) is looking to make a Cyanogen based Android device:
AT&T has recently discussed selling a smartphone powered by an alternative version of Android, the operating system developed by Google, according to one person with direct knowledge and one person briefed about the talks. If the proposed phone sells, it could weaken Google’s control of Android in the U.S. and set back its efforts to be more competitive with Apple by creating a consistent experience across all Android phones.
What I articulated here about Cyanogen is the role it plays in giving services providers a way to tie their services more closely to an open-“ish” platform like Android. When it comes to services which are not Google’s, the agreements on using a Google-certified version of Android are pretty tight. Cyanogen has opened this door to service companies to do more custom work but also use some of Google’s core services like Maps and Play Store.
It makes perfect sense that carriers jump on Cyanogen, particularly those in emerging markets, where there is little to no money to be made on hardware. We are already seeing carriers in emerging markets use Cyanogen and bundle storage or payment or financial services and use that as a way to generate more revenue per user. How AT&T may use this could be more tied to custom devices like a tablet for their TV service or even an attempt to go after lower tiers of the market with low-cost devices but tied to a services story.
Whatever the case, this move is interesting, especially in light of the rumors that Google is looking to close Android more. We may hear or see shades of this at their developer event in May.
Microsoft and the Bot Era
One of the more interesting things I took away from the Build keynote yesterday was Microsoft’s story around bots, or the conversational interface which Jan Dawson wrote about today. In spending some time thinking about this, I do feel Microsoft is onto something and that something exists in other markets, like China, where AI bots are already in use as front ends to business services.
An interesting app called Operator, which you can try for free, provides a glimpse of this type of a service but does so with a human assistant vs. an artificial one (a bot). You can pull up the operator messaging app and say “I need to order flowers for Valentine’s Day” and the person on the other end will do all the work and help you select, pay, and order the flowers to be delivered. This UI layer, as a customer service front end, makes a great deal of sense. Conversational user interfaces are clearly a step in the direction of the future but many kinks need to be worked out.
Putting on my hat from a Microsoft perspective, I believe Microsoft is trying to drive the tools to create these bots more than trying to get people onto their messaging platform, in this case, Skype. Imagine that business uses Microsoft’s tools to create their bots but these bots can be interacted with from any messaging app you choose that supports the integration. So I can use iMessage or Facebook Messenger or WhatsApp and text “@United I need to book a flight to New York.” I am not chatting with the United bot to help me get what I need. The essential layer here is some kind of standards for bot language. This will simply go nowhere if the United bot only works on certain messaging apps and not others or United has to develop different bots to work on different platforms.
Who will create, manage, and monitor these standards will be a key question but, if Microsoft is right and bots are a new layer of the internet interaction model then, similarly to web languages, there will need to be standards and I believe this will happen. Microsoft wants to be relevant in the tools and services space for bots and allow that to go cross-platform and be software agnostic.
This concept is real and will be key to watch. I also expect both Google and Apple to talk more about the idea of personal assistants at each of their developer events. Many questions remain, but I’m optimistic on this concept and the value it can deliver to the mass market.
