Tag: analysis

VCs On The Wrong Side In The Smartphone Wars

Think of how much better your life is now you have an iPhone or one of its many virtuous progeny…iPad, Android, apps, mobile-optimized games, content and services. Do you want to go back to before smartphones, before tablets? Unlikely. Yet many VCs do. Hence their self-interested handwringing over the alleged slow death of the mobile web.

Do not be fooled. The web is thriving.

The real issue? VCs fear the easy money days of amassing their fortunes atop publicly financed, freely available platforms is long gone. Now they are faced with the daunting prospect of either building their investments inside the thriving iOS or Android ecosystems, both of which demand their fair share of any booty, or figuring out ways to route around these two clever giants.  

This is very unlikely to happen. 

iPhone, Android, native apps and today’s infinitely scalable private platforms continue to deliver benefit after benefit to users around the world.

A Tax On Venture Capitalists

Chris Dixon of Andreessen Horowitz (A16Z) bemoaned the declining state of the “web” last week, squarely blaming iPhone, App Store and all it has wrought.

What wins mobile, wins the Internet. Right now, apps are winning and the web is losing. Moreover, there are signs that it will only get worse.

Worse for whom? Not me. Likely, not you. Worse, perhaps for a venture capitalist. Just like the original incarnation of the web was worse for music companies and newspapers.

Dixon continues:

Resources are going to app development over web development. As the mobile web UX further deteriorates, the momentum toward apps will only increase.

Resources following users is not a problem. Moreover, Dixon appears to hold a rather limited view of the web. As John Gruber noted last week:

We shouldn’t think of “the web” as only what renders in web browsers. We should think of the web as anything transmitted using HTTP and HTTPS. Apps and websites are peers, not competitors. They’re all just clients to the same services.

The fact is, the “mobile web UX” has not deteriorated. Instead, the web has evolved, as it always has, and new platforms have constructed a thriving business that, for now, better support the needs of the billions of mobile web users. This should be lauded! Indeed, omit the nebulous term ‘app’ and the fact is web services, software and computing functions have never been more robust, more capable, more discrete, more accessible, more affordable. These are all good. I’m surprised any venture capitalist would bemoan this state of affairs.

Let’s not reduce the web to only those parts that VCs can exploit for maximum gain.

More money is presently flowing to Apple’s iOS ecosystem and Google’s Android ecosystem because that’s where the users are. That these two great private companies have their own platforms, their own gateways — and demand payment for access — has actually helped extend the power of the web.

My suspicion, of course, is VCs do not fear a deteriorating web UX, but are instead upset today’s brave new web limits their potential gains. Don’t believe me? More from Dixon’s post:

Google and Apple control what apps are allowed to exist, how apps are built, what apps get promoted, and charge a 30% tax on revenues.

Ponder that. A venture capitalist is decrying a sustainable business as little more than a “tax” on revenues. Again, whose revenues? Apple and Google have each created a marketplace that only a few years ago did not exist. These now serve billions of people. This is a net good, even if it’s not ideal for today’s web VCs.

Shortly after Dixon’s column, venture capitalist Fred Wilson similarly lamented the “mobile downturn”:

It has gotten harder, not easier, to innovate on the Internet with the smartphone emerging as the platform of choice vs the desktop browser.

Wrong! Innovation has never been easier, never been faster, cheaper, more accessible. Time for VCs to accept this new world.

Before the iPhone, before the App Store, the ‘open web’ offered a massive resource VCs happily plundered: the public switched telephone network. The costs of this public infrastructure was borne by carriers, the government and each of us. VCs piggybacked their investments upon this infrastructure, which carried them to unfathomable wealth.

Those days are gone. They will not return, no matter how hard VCs press for a change.

A Boon For Users

If the VCs really want to alter today’s mobile reality, they are welcome to risk their sizable funds toward technologies and services that improve the non-app web or completely disrupt the current state of affairs. After all, despite their assertions, the web has not been shut down or corralled. It’s still there, availing itself to all.

Build something better. That’s my challenge to them.

Do they have it in them? Consider this final lament from Fred Wilson’s post:

So (VC) Brian (Watson) pulled out his iPhone and I pulled out my Android and we took at trip through the top 200 apps on our respective app stores. And there were mighty few venture backed businesses that were started in the past three years on those lists.

This matters not one whit for users.

It just may be, thanks to the iPhone, Android and the new mobile web, the future big money in tech will have to be earned the old fashioned way: brick by brick; through building an actual sustainable profit-generating business, from scratch. Now that would be disruptive. 

How Is It Possible That Google Is So Bad At What It Should Be Great At?

Mark Zuckerberg cooly plunked down $19 large last week for a SMS-like app that most Americans had never used, probably never will. The move was labelled bold, brilliant, strategic. Zuckerberg branded a badass, a visionary, the next Steve Jobs. I suspect had Zuckerberg offered, say, a mere $5 billion, the echo chamber would have suggested he foolishly overpaid.

One particularly interesting aspect about Facebook’s WhatsApp acquisition, beyond the fact that it generates roughly 0.001 the revenues of Apple’s iTunes group, is that it’s ad-free, unlike seemingly everything else in our expansive digital world. Which begs the question: how will Facebook ever make back that $19 billion?

A better question: how has Google already made so many billions from advertising? Or, better still: who are all these people making Google so much money by clicking on Google ads?

Maybe WhatsApp and Zuckerberg are ahead of the curve. After all, do you ever click on an ad? Ever? Do you know anyone who does? Haven’t you long since trained your mind, your eyes, to not even see the ads? Don’t you count down the seconds until you can SKIP AD on YouTube?

An interstitial takes control of your screen and you immediately click it shut. For those ads that make you watch before you can access your desired content, you sheepishly, guiltily, countdown a second or two, hoping the site owner can make a penny, then click again to get to the actual site. It’s only after shutting down your computer do you realize there were pop-under ads, which you hastily close. You open several tabs in your browser, then frantically search for the one tab where some automatic ad is playing, annoying you to no end.

It’s worse than spam.

This is how we fund the Internet? Still? Perhaps WhatsApp, should it ever come close to returning its investment, will lead us toward some grand new method of funding our digital lives.

Even if Google ads are better than every other ad network — a debatable position — the fact is that almost every single Google-based ad is of zero relevance to my life, an assault on my eyes and ears, a clear barrier to what I actually want. Yet the company continues to generate billions in profits off this digital flotsam.

How?

Is it you? Who are the people still viewing these ads? Who are clicking on these ads? And how is it even remotely possible that after 15 years of gathering every scrap of information about everything I do online, plus many of my activities off-line, that Google ads are still so wildly untargeted to every single thing about me?

I buy a plane ticket to Atlanta, say, and for the following week after that I’m shown offers for plane tickets to Atlanta. They’re worse than the colleague who discovers you just bought a car and tells you he could have got you a deal.

I fly to Atlanta, dine out, meet colleagues, conduct business, take in a few sights, return home. Go online. Where I’m then inundated with display ads, served by Google, for things to do in Atlanta. This lasts for days, at least.

While writing this article — fact — I was blasted with Google ads advertising Google ads.

What more of ourselves — our personal information, our likes, our shares, our time, our attention, our eyes, our ears — can we give so that Google et al finally get digital advertising to be merely remotely useful to us? Google knows us, our location, our friendships, our searches. They know our intent, allegedly, yet ad after ad after interminable ad is rarely anything more than digital trash.

Last week — true story — I searched for an app that might help me find and pay for parking in San Francisco, for that day only. Gmail now insists on showing me ads for “parking deals.” This all seems rather inexcusable. All that money, all those brains, all those machines, a billion smartphones, a billion plus web users, and nearing the mid-point of the second decade of the 21st century and Google advertising doesn’t understand that I needed that parking spot last week despite my explicit intent.

How can a company worth over $400 billion, that inspires so much awe and fear not only in Silicon Valley but in China, Europe and beyond, be so bad at what it should be great at?

To be fair, when I go to Google.com to search for a very specific item, the topper most ad and the first five or so non-ad results are usually, though not always, sufficient for my needs. As for Gmail and YouTube, ads there are so consistently irrelevant as to be comical — some sort of meta-joke the Google singularity squad are playing at our expense, I imagine.

Maybe getting advertising right is like finding the cure for cancer. The more money we spend, the more time and resources we devote, the more we realize just how far away we are from the end goal.

I haven’t seen much of an improvement in ads now that most of America and a good portion of the world has migrated to smartphones. These devices know where we are. They know what we are doing, what we are searching for, what we are seeking on a map, what we are texting our friends, where we are checking in to — yet I am at a loss to recall even a single instance when a tiny Google-served ad at the bottom of my smartphone screen was even remotely worthy of clicking on.

What is Google doing with all our information?

Forget for just this moment any privacy implications surrounding what Google does and instead think of this: someone else, a complete stranger, has full access to your photo library, your entire search history, your movements and locations throughout the day, everyday, a record of all your app purchases, book downloads, pirated television programs. Don’t you think they would have a near-100% better idea of what you’re interested in than Google does?

Almost never right but at scale has magically made Google king of the Internet.

When I search on Google Maps on my desktop — the smartphone screen is too small for this — and when using a generic term, such as pizza, that ad, to be fair, is typically semi-relevant, though has yet to ever be my first choice. That’s the very best I can say about Google’s ads.

Nonetheless, in 2013, Google had an astounding $60 billion in revenues and a profit of just under $13 billion. They had a per-employee profit of $270,000.

I have no answers for this.

I do my best to stay abreast of high-tech, including, grudgingly so, ad tech. Not just pop-ups, pop-unders, banner ads, etc., but the actual technologies and platforms powering these. There is contextual advertising, native advertising, search ads, mobile search advertising, platforms that enable spot-buys in near real-time, technologies that seek to integrate our interests, our location, our friendships across all our screens, all in the hopes of offering better, higher-margin ads. I follow how Google is aggressively pushing Google+ to ensure that all the various services of theirs we use, Gmail and search, maps and more, can all be linked back to us, individually. That Google is making less per ad on mobile than on desktop is a topic I’ve become quite familiar with. I read that Yahoo is trying desperately to re-take control over its search and advertising functions.

But the big question remains: how is it these all work so very badly?

Somebody, anybody, please disrupt this industry.

Is this why Larry Page is spending so much money on Nest, on robots, driverless cars, Internet balloons, fiber and so much more — he knows the whole web advertising ecosphere is ultimately doomed? It can never be right enough, timely enough, personal enough to make any appreciable difference in our lives? Unfair? Ask yourself: Did anyone really believe even for a moment that digital advertising would be so bad come 2014?

Despite my keen awareness of the breadth and scale of the global Internet I am simply amazed each and every quarter to re-discover that so many people around the world are clicking on ads. Yet Google’s earning statement confirm just this. Google even continues to lead the industry in limiting ad fraud. The company recently purchased Spider.io, a start-up that seeks to limit fraudulent clicks. Per Google:

Advertising helps fund the digital world we love today — inspiring videos, informative websites, entertaining apps and services that connect us with friends around the world. But this vibrant ecosystem only flourishes if marketers can buy media online with the confidence that their ads are reaching real people.

Sounds well and good, but such acquisitions mostly only fuel my suspicions that digital advertising is a convoluted, confusing and inexplicable mess, the web equivalent of America’s healthcare system. Probably why at times, and despite how super-rich Google has become, I confess I think of digital ads as a con, a grift pulled not just on content creators, but on us users as well. We are bombarded with ads, companies base their business plan upon ad revenue dreams, ads litter nearly every public website on the planet, and yet in almost every single case and for nearly everyone I know they are a nuisance, an eyesore, almost always irrelevant, rarely of value, and quite possibly a calculated means of ensuring no other business models can thrive on the web.

Information wants to be monetized. Ads are middling succor. Funding the Internet went down the wrong path many years ago and we attempt to right it now simply by throwing in still more ads. Our shared loss.

Perhaps I should say nothing. Fact is, thanks to those billions of clicks and the billions of ad dollars they generate, we now have YouTube, the best search ever, free and accessible maps, a mobile operating system ready to power the world, even Gmail is probably still the best email service for most people. Nonetheless, I can’t help but take note that this is the year 2014 and we are still buried in meaningless, useless, annoying advertising and it doesn’t seem like it’s getting better, despite everything Google, Yahoo, Facebook and others have tried.  Perhaps our best minds, our brightest engineers, should focus their talents elsewhere. 

The Death Of iPhone. The Death Of Android. The Rebirth Of Facebook.

Well, that was a heckuva week.

Google sells Motorola for billions less than they paid for it. Apple sells millions fewer iPhones than nearly everyone expected, then directs guidance lower. Facebook becomes a mobile first company, for real this time. Amazon investors prove they don’t quite have unlimited patience. Yahoo remains last decade’s news. Microsoft probably has a new CEO, one with zero connection to Nokia. Oh, and they now make better commercials than Apple.

Anything else?

What we learned from last week’s machinations is that everything we think we know about the smartphone wars is completely, utterly false — or  worse, meaningless. Barely a fortnight ago, on this very site, I told you: “The smartphone wars are not over.” Nothing has been settled, least not the future. After last week’s fun-bumpy-tweet-filled ride, does anyone still dispute this?

Know this: The current market for smartphones, and all they are subsuming, transforming, re-making, inspiring — which is in fact all of the things — is itself under threat, betrayed by its own relentless innovation and rapid success. Yet, far too many analysts and bloggers stubbornly cling to the fiction that somehow, smartphones can alter every market they touch while continuing on a merry upward slope unscathed by their own destructive deeds.

The most basic assumptions about this market are nothing more than faith-based analyst alchemy.

Time now to kill the dominant fictions in the smartphone wars.

The Death of iPhone

Fiction: Apple owns the high-end of the smartphone market.   

If you are making assumptions re iPhone (or Android) sales growth based on an imaginary perceived share of a market that is already on the cusp of disrupting itself, then you are making faith-based decisions. It’s that simple.

As I wrote months before last week’s earnings announcement, if Steve Jobs was alive he would never approve the iPhone 5c. The 5c is a rare self-inflicted wound, the elevation of profits over values. Only, that is not the cause of Apple’s weakness in their iPhone business. The trouble is the smartphone market itself, which I am beginning to suspect does not actually exist. Bear with me.

The persistent belief among analysts that  as much as 90% of the current mobile phone market (nearly 5 billion users) will transition to smartphones is a religious ideal, nothing more. Repeat after me: There is no total addressable market (TAM) for smartphones. The very concept is a fiction. Indeed, we may already be within months of Peak iPhone, a year or two from Peak Smartphone. For billions of people, voice, robust SMS/MMS services, and perhaps some form of digital identity is more than they will ever need. What can Apple provide them? Even at, say, $300, nearly everyone on this planet cannot afford and will never need an iPhone.

It gets worse.

I carry my smartphone with me all the time and use it for far more than I can list here. For the majority of that time, however, I don’t actually need a “smartphone”. What I really need is something like a credit card-sized piece of glass that supports rare but necessary voice calling, possibly video calling, can display a virtual keyboard for texting, and includes a mag-stripe (and/or chip) for payments. Create this and the smartphone market is gone, reduced to the equivalent of the dusty home desktop PC. Given the rapidity of innovation in this market, I should reasonably expect to have my (truly) smart card by no later than mid 2016. No iPhone necessary — in barely two years.

Tim Cook must know this. This is likely one reason why Apple stockpiles so much cash. When you’re dependent upon a single product line, iPhone, for about 60% of your revenue, and that market may vanish in a few years, then your focus necessarily shifts to maximizing profits of that product line and funneling those profits into entirely new offerings.

Apple doesn’t release many new products. I suspect that is about to change in a very big way. Expect to see several new products and product lines from the company over the next year alone. Some designed for nothing more than padding iPhone margins. Others, desperately in search of that next big thing.

The Death of Android

Fiction: Android is unassailable

Google cut itself free from the anchor that was Motorola. They strong-armed Samsung into more closely following the sanctioned Google Android playbook. Wise moves.

I sense fear.

Yes, Android dominates smartphone market share. Look closer. What many call ‘Google-free’ Android, AOSP, now garners a solid second place — and is growing at a rate much faster than ‘real’ Android.

smartphone OS

AOSP is the “open-source software stack for a wide array of mobile devices with different form factors.” It can power Amazon’s Kindle line, or smartphones made for use in China, for example, where Google search, map, Play and other services are not terribly popular and not welcome by the government.

Does this matter?

Absolutely. Google no doubt believes that AOSP is a necessary sacrifice. It’s availability ensures the rapid spread of the  “Android” template and prevents iPhone or Windows Phone, for example, from garnering another new user. It seeds the future for ‘real’ Android — and it is hoped, heavy usage of those most profitable Google services. Except, this is false.

The fact is, the rapid, global embrace of smartphones has altered the entire value proposition of web search and web services — Google’s bread and butter. AOSP may presently be little more than Android without the Google, but it could ultimately become a fully-fledged ecosystem alternative in its own right, one that directly competes against Google on everything that matters to them, and not just in China, but in Japan, South Korea, Brazil, USA, everywhere.

Thus, while I suspect last week’s moves by Google signal the company’s preparations to launch an assault on the Chinese market, it may already be too late. The world’s biggest market for data and smartphones can do just fine without Google. Which means: everyone can.

It gets worse.

Extremely popular mobile services may now have a vested interest in supporting AOSP’s growth. Popular social messaging apps such as Line, WeChat or WhatsApp no doubt noticed that Google made its Hangouts service the default messaging app for Android Kitkat. They won’t sit still for such bullying. What’s to stop them from integrating their service and AOSP and offering a low-end smartphone in the developing world?

In the short-term, perhaps none of this happens. In fact, I expect Google to best Apple as the world’s most valuable tech company, possibly within a few weeks. Save the celebrations. Google’s value arises strictly from it’s ability to capture more of our habits, more of our actions, and monetize them across a near-endless supply of strangers and brands. What we are learning, however, is that despite the rapid spread of Android in all its forms, there are effective alternatives to Google services across every smartphone platform — even its own. Little wonder, then, that Google is moving quickly into moonshots, driverless cars, the connected home, consumer hardware, health and more. Such moves are driven by fear, even if they are shrouded in boilerplate Silicon Valley boasting.

The Rebirth of Facebook

Fiction: Unbundling Will Kill Facebook

Like that persistent meme that teens are abandoning Facebook, the idea that Facebook is being unbundled to death — via messaging apps, social picture apps, Christian dating sites and the like — is simply false. Facebook is benefitting from the unbundling trend.

In fact, after badly stumbling on mobile, after the laughable dung heap that was Facebook Home, the brief marriage to HTML5, and the spats with Apple and Google, Facebook is doing better than ever. More than half its revenues now comes via mobile — no smartphone OS necessary.

This is in large part because the company is embracing the unbundling strategy, shrewdly leveraging its billion users and their extant Facebook identity and eagerness to share everything. That some people want to share only some aspects of their lives with only some others at some times and places, via text or image or video, is fine — every 1 and every 0 feeds the growing Facebook engine.

Let a thousand apps bloom. Facebook will be there.

Barely a year ago, analysts were convinced Facebook was doomed given its utter dependence upon iOS and Android. Now, a case can be made that smartphones, once thought as the device to bring the developing world into the global sphere of the Internet, is already on the cusp of being disrupted. In this new world, it is Facebook (and our Facebook ID) that will connect us all to one another.

The Dogs of War

What I think last week’s official numbers and clever machinations reveal is that the “smartphone” market, which most still believe is a pitched battle between iOS profit share and Android market share, is, in fact, merely the initial wave in a coming tsunami, one that will deliver highly personal, nearly ubiquitous and ever-engaging computing and connectivity to all who want it and nearly all who do not, and in forms we have yet to imagine. Hardware profits and OS marketshare, be damned.

The smartphone itself may be no more than a fleeting, ten-year-blip in computing history. There will be no 30th anniversary for the iPhone. Android will betray its maker. Owning your own smartphone ecosystem does not matter. Everything is in flux. My verse is the destruction of everything — and the great tech companies of our day happily, foolishly oblige.

As Jim Morrison said, “no one here gets out alive.”

Surprise! Apple Execs Use The Mac Anniversary To Dis Microsoft.

When Apple executives speak to the press, pay attention. They may dodge. They may fail to disclose some facts, overemphasize others. But, and this is critical, Apple executives who speak on the record always reveal what they are thinking.

Surprise. Apple executives think a great deal about Microsoft.

Mostly, they think Microsoft has got it completely wrong. In this case, however, I hope it is Apple that is proven wrong.

Last week, Macworld scored a very rare interview with key Apple executives. The men spoke on the occasion of the Mac’s 30th anniversary. That the Mac (in its many forms) is thirty is a truly laudable achievement. For so long, the Mac was marginalized. So much so, in fact, that Steve Jobs had no choice but to turn to the iPod. No more. Today, Mac survives and by the great metric of profits, even thrives.

Which is why I find it so odd that in granting their interview, the Apple executives spoke so little about the Mac’s rather inspiring tale and instead directed jab after jab toward Microsoft’s unified OS strategy.

This, dear reader, is what we call a tell.

Hardware Trumps All Else

From Macworld’s brief interview, consider the many times Apple execs suggest that the current Windows strategy is all wrong:

“It’s obvious and easy enough to slap a touchscreen on a piece of hardware, but is that a good experience? We believe, no.”

“We don’t waste time thinking, ‘But it should be one [interface]!’ How do you make these [operating systems] merge together?’ What a waste of energy that would be.”

“To say [OS X and iOS] should be the same, independent of their purpose? Let’s just converge, for the sake of convergence? [It’s] absolutely a non goal ”

“You don’t want to say the Mac became less good at being a Mac because someone tried to turn it into iOS.”

“There’s a natural form factor that drives the optimal experience for each of those things. And I think what we are focused on is delivering the tailored, optimal experience for those kinds of ways that you work, without trying to take a one-size-fits-all solution to it.”

Tim Cook appeared on ABC in large part to talk about the Mac at 30. The company created a splashy new landing page at Apple.com to celebrate thirty years of Macintosh. Apple execs spoke to the press as part of the Mac’s celebration. Yet, Apple’s conversation continues to come back to that central theme: Microsoft is doing it wrong.

What gives?

Partly, it’s because no matter how rich Apple is now, old grudges never fully heal. It’s also representative of the fact that, at least in part, Apple is smart enough to let sales direct strategy. Consider that for the last quarter, Apple will sell about 50 million iPhones, 25 million iPads, and probably less than 5 million Macs. There is simply no incentive for the company to even suggest a Mac OSX – iOS convergence.

I hope they are wrong.

Many Modes. Many Devices. One Interface.

Surface tabletI want my various “computers” — defined here as at least my smartphone, tablet, desktop, laptop, wearable watch, television and even car dashboard — to essentially operate as similarly as possible, preferably with a unified user interface and application set across all.

Yes, my many computers are for different tasks and will be used at different times, in different settings. I will want to use a keyboard and mouse for some activities, touch for others, my voice for still others. That said, I want all my devices to have a UI that looks and feels and functions similarly. Even more, I want a singular user experience across all devices and across all modes of interaction. Thus, Mac knows my touch and my voice exactly as iPhone. My iPad screen and Mac screen are essentially swappable.

It’s troubling to me that the world’s biggest computer company can’t seem to make this work. When I hear Apple execs mocking Microsoft’s UI strategy I think it’s an opportunity lost.

Apple Limitations

Apple has survived and prospered because of its rather profound understanding of the opportunities presented by its own limitations. Whereas Google is almost infinitely scalable, there are hard limits on what Apple can do. Thus, their relentless multi-decade focus on maximizing the potential of a fully integrated hardware-software-services ecosystem. The result is the world’s best smartphone, best tablet, best laptop.

It’s no longer enough. As data shifts to the cloud, hardware becomes increasingly de-constructed. Desktop, laptop, smartphone, tablet, an assortment of wearables, connected cars, connected homes and on and on. I want the very best of each of these. I also want each of these to operate with the same essential template.

Perhaps I can’t have that, now now, maybe not ever. But it bothers me that it is Apple which seems so determined to accept multiple OSes across multiple form factors. Here’s a case, frankly, where I hope Microsoft wins.

Is Yahoo Even Worth Trying To Save?

Is there any reason to save Yahoo? I say no. 

What does Yahoo do? What is Yahoo for? What is Yahoo great at? What is Yahoo even good at? 

Yahoo does not have the best technology, nor the best content. Yahoo does not have the best users, nor the most. Yahoo is close to irrelevant on mobile — the future of computing — and has flubbed every effort to be social.

Yahoo is the Detroit of web properties. Once big, once thriving, it helped create a future it can never be part of. It’s only hope, in my view, is to whither away, quickly, so maybe a few worthy pieces can find life in the wild.

While the tech blogosphere was in a tizzy last week, some outraged, most envious over the firing and massive golden parachute that Yahoo’s Henrique de Castro received, they missed the larger story: de Castro was not the “dead man walking.”  Yahoo is the dead man walking. Gleeful rubbernecking by industry watchers won’t change the company’s fortunes.

Outraged that Yahoo dropped so much on an executive who failed at his job? Surprised that Yahoo paid so much for Tumblr? The desperate always pay too much. de Castro and Tumblr’s David Karp are, I suspect, only the first of many scavengers who will feast on Yahoo’s bones.  Indeed, there may be no better purpose for this company, sadly, than for the fortunate pleasure of a few lucky ones to fatten themselves up as they tear apart the company’s bloated flesh, devouring its cash and resources till all is gone. This makes Marissa Mayer’s reputed strategy of buying talent — at premium prices — tragically comical in its utter wrongness. Throwing good money atop bad, in tech, especially, is always a waste.

I am surprised, frankly, that this isn’t the prevailing view. Industry website TechCrunch recently stated:

Yahoo is a company remade. Under the guidance of Mayer, it has refocused its product vision, purchased talent at a rapid rate, and expanded its native content efforts.

Vision? Talent? Native content? For whom? Can you recall the last time you used Yahoo? Your colleagues? Spouse? Children? Parents? Is Yahoo where you would recommend anyone go to for breaking news, tech news, weather, apps, cloud services — for anything other than your sister wanting to check her horoscope?

Pop quiz!

What do you think of the person with a @yahoo.com email address?

Second question: do you know anyone who uses their Yahoo ID for any external site, app, or service?

Think of computing, the cloud, the web, apps, smartphones, tablets, PCs. You spend hours with these every single day. They are your work, your play, your means of connecting. You don’t want to be without them, not under any circumstance. Probably none of this activity, however, involves Yahoo. Yahoo is AOL without the dial tone.

Yet, despite this, Yahoo ($YHOO) has more than doubled in the past year.

$YHOO

Do not be fooled. This run-up is almost entirely due to Yahoo’s rather fortuitous stake in Alibaba (and Yahoo Japan). Yahoo’s present valuation is about $40 billion. Analysts estimate that Yahoo’s stake in Alibaba is worth about $36 billion, maybe more. Meaning, Yahoo as the world understands it is worth $4 billion.

Think of that. Yahoo mail, weather, finance…Flickr, Katie Couric, fantasy sports, David Pogue, display advertising…and every other Yahoo service and property — oh, and Tumblr — is worth no more than one SnapChat, and less than half a Dropbox. To spend any of the Alibaba largesse to re-remake or re-rebuild Yahoo is a vainglorious waste.

Yahoo is of such irrelevance, I am still not sure I should even write this column.

It’s not just that the various parts of Yahoo are so meaningless to so many, it’s that their sum is worth so much less. The fact is that everything Yahoo once did at least well and everything it has promised to do going forward is done far better by one or more capable companies. For free. Yahoo has been unbundled to death. It will never get put back together again.

Why choose Yahoo over Facebook, Twitter, Skype. Android? Google Search, Maps, Now? iOS. Siri. Pandora. YouTube. LinkedIn. Roku. Netflix. Foursqare. Yelp. Those digital stickers. Huffington Post. The list of what Yahoo should have been and now can never be is frightfully long.

The company doesn’t even have the benefit of control over its destiny. It is run by techies yet dependent upon the vagaries and cold calculus of Madison Avenue. It gets worse. Last month, Yahoo was forced to reveal its rather shocking reliance upon Microsoft:

Yahoo has revealed in a US Securities & Exchange Commission filing that nearly one-third of its revenue last quarter — 31% — came from its search deal with Microsoft, according to a Bloomberg report. That’s far higher than the “more than 10%” figure Yahoo previously acknowledged.

It gets still worse. Per Bloomberg: “Yahoo’s share of the U.S. digital-advertising market is estimated to shrink to 5 percent in 2015 from 5.8 percent last year, while Google and Facebook both may expand their shares, to 42 percent and 9 percent next year respectively.”

Their irrelevance is accelerating.

Yahoo’s mission is focused, perhaps laudable:

Yahoo is focused on making the world’s daily habits inspiring and entertaining – whether you’re searching the web, emailing friends, sharing photos with family, or simply checking the weather, sports scores or stock quotes.

Except, this simply is not realistic given Yahoo’s limited mobile-social-local strengths. Shut it down, sell it off. Once the Titanic has hit the iceberg, all that remains is to ensure as many get to safety as possible. 

Last week, Mayer emailed employees regarding the firing of Mr. de Castro. Her very first line:

The beginning of a new year always provides time for reflection.

Reflection is not necessary. Yahoo’s time has come.

Understand. I absolutely do not wish ill of anyone associated with Yahoo, certainly not the 12,000+ presently employed by the company. A native Detroiter, I witnessed first-hand what happens to people, to communities, when companies go under. In this instance, however, I believe Yahoo cannot be resuscitated. The longer the delay, the more the vultures will tear at the flesh, till even the very few parts worth saving are no more.

Apple To Dominate The Wearable Devices Market

I have written much about “wearables” — wearable computing devices such as the Nike FuelBand, Fitbit Force and Google Glass. Wearables are set to invade consumer markets, healthcare, logistics and other industries, delivering a combination of personalized data, real-time notifications, and analysis of various human outputs, all stylishly wrapped inside the explicit promise of empowerment, enhancement and efficiency.

Whether these devices will actually improve personal fitness, lead to a healthier society, make for better-performing professional athletes, dramatically increase worker productivity, or even systematically violate our privacy are all questions I’ve explored.

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One question not explored: who will dominate the bourgeoning wearables revolution?

The answer seems obvious: Apple.

Apple’s design skills, highly integrated ecosystem, apps market, retail footprint, customer support staff, computing prowess, touch-based OS and global manufacturing scale are peerless — and every one of these are critical for success in the wearables market.

Indeed, I have a hard time conjuring scenarios under which Apple will not crush the competition in wearables. For the moment, I can envision only three, and none I put much faith in:

1. Wearables Are Not Real Computers

Though unlikely, I can at least imagine Apple Inc, with its finite resources and very obvious talents in building high-end personal computing devices, simply abdicating the wearables market.

Tim Cook and company may decide to continue their focus on “real” computers — smartphones and tablets — and cede wearables and sensors to others. Then, as wearables, their apps and services all become so popular and so pervasive in our lives that they eclipse today’s computing market, Apple is relegated to the margins.

Given Cook’s poaching of key people from Nike, Burberry and elsewhere, this scenario seems extremely unlikely. Much more likely is my earlier Techpinions prediction: that Apple rolls out a line of premium-priced computing jewelry.

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In fact, I think most analysts are missing the big story from Apple’s recent signing with China Mobile. It’s less about the number of new iPhones Apple will sell — let’s not play the smartphone market share game now, after all. Rather, it’s that a nation of a billion plus people, hundreds of millions of whom are transitioning into middle class, may ravenously desire beautiful, simple, and highly functional jewelry, watches, sensors and other wearables. Apple can provide all of these.

2. Apple Mistimes The Market

The “Apple copies” meme is partly true, at least on the surface. Apple works on a great many technologies, gadgets, form factors. However, the company typically does not release these until they believe both the product and the market are  ready, oftentimes long after competitors have their product collecting dust on retail shelves.

Apple may have a grand solution ready in, say, Q2 2015, only to lose out if wearables explode in popularity in early 2014.

Or, the market may radically veer onto a path Apple has no response to, and no strength to bear. After all, the accepted trajectory of such devices is that they become nothing more than computerized ‘tattoos’ placed on the skin, or tiny capsules we swallow. Perhaps a biotech company will ultimately prevail in the wearables market, or some uber-geeky Maori entrepreneur revolutionizes our very notion of a computer. As we well know, the best laid plans of giant tech companies are often complete failures.

3. Tim Cook Is Steve Ballmer

holo-next-generation-wearable-computer8

My final scenario, and the one I think most likely — though still unlikely — is that Tim Cook is the Apple incarnation of Microsoft’s Steve Ballmer. Baller delivered massive profits, global scale, and as Microsoft grew to unwieldy heights, Ballmer somehow kept the trains running on time. Innovation, however, was suffocated.

It may be that the path of the wearable computing market usurps the need for high-margin iPhones and iPads. In response, Cook might hamper Apple’s long-term potential by attempting to corral the wearables market inside the high walls of Apple’s highly profitable iOS ecosystem. Just like Ballmer attempted to force everything through Windows and Office, this also will fail.

Similarly, for all the potential of Apple computers in the enterprise, Apple can’t seem to pull away from the high-margin, high-profit, easy-money consumer market. Perhaps wearables revolutionize the enterprise, just as smartphones upended it, and Apple has no adequate response. Cue the return of Microsoft.

Lastly, I suppose Apple could also simply whiff on wearables entirely, the way Microsoft, for example, struck out on touch screens. All possible, all unlikely.

The Next Evolution of Apple

The competition should be wary. When I examine Apple’s talent, skill set, ponder its brand, analyze its active customer base, assess its growing retail operation, test the integration of its many products, proprietary technologies and devices, it is  difficult for me to see how the company fails to win the wearables computing market.

Though Samsung beat them to market, and their Galaxy Gear ad is sublime, long-term I see no company that can bring to the wearables market what Apple already has. Namely, the chips, the design chops, the OS, the integration across devices, the commitment to intuitive function, voice and touch controls, cloud support, media partnerships, carrier relationships, broad appeal across borders and demographics, battery expertise, AirDrop, their own video chat service, the best designed notifications service, the list goes on.

The scale of each new computing revolution is far bigger, far richer, spreads far wider than the one that came before. I expect this with wearables. These will eclipse smartphones and tablets, just as those devices eclipsed “PCs.” Thus, if I am right, Apple is about to get much, much bigger.

2013 Winners And Losers In Tech

We track, analyze and oftentimes promote technology because of its overarching, mostly positive impact on our own lives and throughout the world. It’s many disparate parts, incorporating intellectual property and global manufacturing, hardware and software, content and creativity, when brought together at exactly the right time, in exactly the right way can be both uplifting and magical.

While we may not fully understand all the long-term ramifications of what our technology has wrought, we can know its winners and losers. In 2013, much like the harsh, unblinking truth at the final whistle of some great sporting clash, knowing who won and who lost was surprisingly rather easy to discern.

Winners

Amazon

There wasn’t even a close second.

Hardware, content, search, real-time pricing algorithms, personalization and a near-infinitely scalable platform. There is no more high tech company than Amazon. Yes, $AMZN has (only) gone up this year. If Jeff Bezos is to be believed, and the evidence certainly suggests so, then the company is just getting started. Amazon is the low-price leader in retail, a behemoth in cloud services, the first place most of us think to visit when we think about buying anything — and the unmatched leader in big ideas.

Google Glass is so Spring 2013. All anyone is talking about now are Amazon delivery drones. Amazon is more than talk, of course. It took Amazon to offer live, personal (“Mayday”) support for every new Kindle tablet user. Did Apple, king of the locked-down, high-margin, customer-focused hardware-based ecosystem, even consider such an audacious idea?

Amazon, not Silicon Valley, is the new home of really big ideas. Amazon embodies a scope of business, a level of execution, and a breathless vision that I don’t think even Google can match. They won 2013.

Twitter

A highly successful IPO, a highly engaged user base, the new home for breaking news, the place we share our most joyful moments, greatest tragedies, and idle thoughts.  Apple execs say damn near nothing outside of highly staged events. Yet both Tim Cook and Phil Schiller tweet often.

Tablets

What, exactly, is the purpose of a tablet? No one seems to know. I cover the industry and typically recommend them only to grandparents and toddlers.  Microsoft finds the tablet so utterly confounding — despite 10+ years of effort — that they can still only envision such a device with a keyboard attached. The numbers do not lie, however. At least, not in 2013. Tablets are everywhere. Per IDC, 220 million tablets moved just this year alone.

Team iOS 7

iOS 7 is audacious, shocking, beautiful as a European runway model, and just as brittle.

If you were part of the team that developed iOS 7, congratulations. The iOS 7 adoption rate is already nearing 75%. With around 500 million iOS devices in use, that’s 375 million devices running with your OS — about triple the latest Windows operating system.

iOS should fuel Apple for at least another generation, and iOS 7 points the way forward.

Gaming and Gamers

A new Playstation, a new Xbox, and a new chip (A7) powering Apple iOS devices make 2013 the best time ever to be a gamer. Add in social media gaming, a billion smartphone users, and ‘computer games’ are now as ubiquitous as Miley Cyrus gifs.

Female Tech Execs

I believe Marissa Mayer’s strategy, such as I can divine, consigns Yahoo to a permanently middling presence in our lives. Much content, some personalization, cloud-scale, new acquisitions and several new mobile apps all point toward nothing more than news, views and reviews of the sort our parents now get from morning TV talk shows. Doesn’t matter. The market has spoken and the money people obviously like what Mayer is doing.

Meanwhile, Meg Whitman is righting the busted ship that is HP and Sheryl Sandberg is making the day-to-day adult decisions at Facebook. Since Tim Cook is determined to transform Apple into a “casual luxury” brand, I can absolutely believe the rumors that Apple’s next CEO will be Burberry’s Angela Ahrendts. That’s quite a line-up.

Road Warriors

All praise the glories of the market. In-flight WiFi became possible, then practical, then profitable, then widespread, and then the government — surprise — changed the rules. Now we can keep our electronic devices turned on, legally, throughout our entire flight. Self-interest mixed with technology is a powerful combination.

Google Lawyers

What a year! Google lawyers fought off Oracle, got a judge to agree that digitizing and making “out of print” books freely available was a public service, signed a sweetheart deal with the FTC, despite a monopoly position in search which they have frequently abused, and the late Steve Jobs’ thermonuclear war on Android has not slowed down the world’s most popular OS even in the slightest. I’m assuming there will be quite the cash bonus from Larry Page to his merry band of lawyers.

Considered: Kickstarter, Pinterest, iTunes (seriously), iPhone 5s, and the ‘smartphone’. 

Losers

Computing technology is deeply personal yet seeks to connect us with everyone and everything. It can eradicate the worst parts of our past, re-invent our very notions of the future and captivate our present. Oftentimes, however, it flops worse than a petulant soccer player on a losing team. This year’s biggest losers in tech:

Facebook Home

Facebook Home was such an utter, abject, laughable failure that you probably already forgot that it ever existed. I suspect that the mysterious illness that prevented Google’s Larry Page from talking for so many months stemmed from his laughing hysterically when he first saw Facebook Home.

Steve Ballmer

I believe no non-founder ever gave more of himself, his talents, his passions, his sleepless nights, as Steve Ballmer gave to Microsoft. Ballmer helped Microsoft become so big that it — literally — scared governments and sent the mighty Steve Jobs, fortuitously, scurrying off as far away from “personal computers” as he possibly could.

Nonetheless…Microsoft’s stock has done better since Ballmer announced his “resignation” then it did during the decade he actually ran the company. Worse, much worse, and nearly inconceivable, is that there are over a billion smartphones in use plus hundreds of millions of tablets and nearly everyone has absolutely no Microsoft software inside.

For all I admire about Ballmer, and I admire much, the company’s failure in mobile computing is, in my opinion, a far more devastating capitulation than Time Warner buying AOL at the absolute top of the market.

Smartwatches

Samsung’s Galaxy Gear commercial is glorious. The watch itself is Kanye-cool. Only, no one bought one because there is no need for one. The year of the smartwatch was anything but. Galaxy Gear flopped. Apple’s iWatch never appeared. The Pebble watch was essentially a high-margin toy purchased by Silicon Valley insiders. Not wanted, not needed.

Google Maps

Every quarter, as Google reports anew the latest Motorola loss, we are presented with yet another reminder that Google’s purchase of Motorola was a profound strategic mistake.

I don’t think it’s their biggest. Rather, that would be Google’s decision to consign iOS users with an inferior version of Google Maps — for years. That led to Apple’s decision to offer its own mapping service. As Charles Arthur notes, Google Maps has already lost tens of millions of iPhone users — possibly Google Inc’s most lucrative customer base. Hubris.

Siri

Apple’s existence now spans across five decades. In all that time has the company ever promoted a device or a service as prominently, as consistently and as aggressively that has gone so utterly unused as Siri? Siri is now more than two years old and still doesn’t work as it should. Worse, even if it did we would still rarely use it.

Skeuomorphism

We all learned what this word meant when Apple killed it off. It was time.

The Third Mobile Platform

As of this moment, smartphones now sell about a billion units a year. This massive, industry-shifting market belongs almost entirely to two platforms: Android and iOS. Symbian is dead. BlackBerry is at death’s door. There is effectively no Tizen, no Firefox OS in actual use, no Ubuntu and nearly no Windows Phone.

Has the industry consolidated this quickly, despite being this big, this global? As much as I believe there is room for a thriving Windows Phone ecosystem, the market itself, in every region and across every demographic, tells us that iOS and Android are enough for nearly everyone. Perhaps 2014 will surprise us.

Considered: Obamacare website, PCs, privacy, BlackBerry, the “cheap” iPhone, and RSS.

Smartphones Are Transforming Retail Not With Technology But With Messy Humanity

I believe a profound transformation in retail is now underway, one set to equal the changes in buying and selling formed during the modern industrial age. Only, it’s not what you think.

It started with Apple, which launched the smartphone wars. With smartphone in hand, we can now assess competitor price, global availability, level of service, and overall quality of any product anywhere on the globe, even while browsing inside a small store on the very edge of the farthest reaches of our planet.

For today’s retailers, it gets worse.

Amazon has constructed a platform that enables it to sell virtually any item at a lesser price than any competitor anywhere, with all necessary adjustments on price and availability made in real-time.

With Google, we can know everything around us and can locate exactly what we want, whether down the street or on another continent. There are no boundaries, no safe places.

With social media, we are always in contact with family, friends, followers and all manner of experts. Meaning, we need never pay more than the absolute best price available. We never need to choose the wrong product for our unique needs — nor be persuaded by crafty or misleading sales entreaties.

Thanks to smartphone payments apps we have our requisite coupons and loyalty points always at the ready. We can also now instantly send (digital) cash to another person’s mobile device, bypassing all manner of legal and non-legal intermediaries.

Retail — the entire shopping, buying, paying, servicing, researching, promoting ecosystem — is being de-constructed by smartphones, social media, location data and the cloud, with power flowing outward to every potential buyer.

This is only the beginning.

[pullquote]Values equal profits.[/pullquote]

The more profound change, and one that industry analysts seem utterly blind to, is that the very same technologies which enable shoppers to receive the best price, the best service, the best value, will similarly guarantee that their money itself generates maximum impact.

For every $100 you spend, would you prefer that most of it, if possible, stayed within your community? If you could choose between having your next $100 go to retailers that support your child’s school, your neighborhood, your political and social views versus to a faceless corporation of undetermined origin and values, would you? I suspect the answer is a resounding yes and I believe our technologies are rapidly leading us toward this new reality.

When able to easily determine and demand the very best price and the very best product, what comes next is to make sure we spend our (limited) dollars in a manner that fosters and extends our political, social and community goals to optimum levels. Retailers will have to adjust to this new world. Their new reality is thus:

Values equal profits.

We can now get anything, anytime, anywhere and at the very best price available. How then to choose? Simple. We choose Brand X and Retailer Y because the product’s origin, its composition, the people who make it, those who sell it, those who service it, all support a world and a future that most closely aligns with our own.

Seen in this light, smartphones and the mobile web are not merely upending retail and relationships, fostering new services and business models, they are transforming the very notion of retail. No longer will it be about profits first. Rather, values first, then profits.

We can already see the beginnings of this change, of course. Fair trade coffee, handmade crafts, and restaurants that emphasize “local” as much as the food itself. These are merely brief flashes of what’s to come. I predict that within a decade, maybe less, values will be a primary driver behind most consumer sales in the developed world.

Note: I do not mean “values” as practiced in the traditional (20th century) marketing sense. Apple, for example, does a masterful job promoting their values — aspiration, liberation, creation. These are, however, feel-good values designed to please everyone. This will no longer be sufficient. In a world when we can easily find equivalents and get them at the absolute best price, values will become the prime differentiator. No doubt, the values of some retailers will be highly offensive to many. This will not slow this new reality down.

Indeed, with so much information readily available, it may soon no longer even be  possible to make a purchase decision without knowing the values of a product or the political leanings of its sellers. With instant price comparisons, location-aware search, real-time data streams, constant connectivity to friends, family, followers, spiritual advisors, political leaders and product experts, the act of purchasing based on values becomes not just possible but commonplace, probably even expected. In the near future, you don’t merely check in to a place to tell your friends where you are, you check in to make a declaration of who you are — and you can do so with every purchase.

Retail will become less about profit and more about a larger social purpose. To promote particular religious or social views, gun rights, a greener planet, transgender equality, Christian fundamentalist practices, polygamy, animal welfare; the options are as expansive as humanity itself.

Yes, it can get messy. It will get messy. Humanity is messy. Despite such messiness, I believe this trend is inevitable — and ultimately far more liberating. I also expect this new reality, in fits and starts, to be absolutely embraced. Very soon we will have a difficult time comprehending 20th century retail.

We have spent our whole lives focused on price, quality and convenience. We won that war. Anything, anywhere, at anytime and at the best price is now the base level expectation. Deeply personal, values-based shopping comes next, enabled, ironically so, by mass market computing technologies and globe-spanning social media platforms.

We are only now entering a era where we can search and find shops that match our values for whatever we want. We are only now able to instantly declare our purchases to all our friends and followers, telling them and the entire world in semi-permanent digital ink who we are and what we believe in with the very money we spend.

Values will drive sales. Values will drive profits. Values cannot be matched by Amazon, Google or any global conglomerate.

Image courtesy of The Guardian 

Three Key Takeaways From Apple’s Fall Unveiling

When Apple introduced their new products today, it left little doubt that they are in an evolutionary period of their product cycles.

Yes, the new iPad Air is a great design, thinner, lighter and more powerful but still pretty much in the same basic form factor. The new iPad Mini now has the Retina display, a technology that has been in MacBooks and the iPad for some time but is a welcome upgrade to this popular tablet. They also now have Apple’s 64-bit A7 chip, making them the fastest tablets available this fall.

The MacBook Pro 15-inch breaks new ground by using Intel’s latest Crystalwell chips, the most powerful and energy efficient mobile processor on the market. The extended graphics in this model give it new powers that will make Apple’s high end customers drool.

The 13-inch MacBook Pro gets the newest Intel Haswell chip, which means both new laptops will get better battery life and still deliver very powerful solutions to business and consumers.

And OS X Mavericks, with its 200 new features and offered as a free upgrade to all Mac customers will be a big hit. With it being free there is no reason for anyone with a Mac to not upgrade and give themselves the immense power that OS X Maverick can deliver to them.

There were some strategic ommisions too. Neither tablet had Apple’s new fingerprint security technology inside although I suspect that this is more due to the fact that all of their fingerprint modules are going into iPhone 5S and getting enough units to use in their tablets was not an option yet.

Some had thought they would also do a special keyboard cover/case but I never thought that that would happen. The key reason is that there are dozens of those on the market already and unless they could do one that was spectacularly innovative, sleek and unique, they would not enter this space. Rather they would put more time and energy in advancing the technology and capabilities of the iPad and MacBook Pro’s this time around.

I also saw three very nuanced yet extremely strategic things shown at the event that are really worth noting.

1-Giving the new iPad the Air designation.

I don’t think this is an accident. More and more people are using the iPad like a laptop when they attach a keyboard to them. I use my iPad with the Logitech keyboard cover all the time and for all intents and purposes this has been my convertible or 2-in-1 like those now showing up on the Windows platform. While Apple has not embraced this convertible or 2-in-1 idea, it is clear to me they understand the potential of a product like this and could easily create their own unique branded version of this concept in the future. Giving the iPad the Air designation could set this up in the mind of consumers and business users by getting them to think of the iPad Air more like a laptop in the sense that it can be used for productivity as well as consumption. This leads to the second point worth noting.

2-The iPads now have PC class processors in them.

Putting their A7 64-bit processor in the iPads can also be seen as strategic. While both tablets are still skewed towards consumption, the new iPad Air, like the other larger iPads, will be of greater interest to business and IT given their faster speeds and overall upgraded performance. This could be a big deal when it comes to IT purchases. While refreshing tablets has been rapid compared to laptops, the upper end tablets with LTE and 64 gigs of memory are pricey and are now looked at for longer life cycles in the enterprise. With the fastest processor and the great software that will be written for 64-bit IOS 7, the new iPad Air will be even more attractive to IT directors that want to future proof their tablet purchases. Even with the lower system memory, the 64-bit processor will be viewed by business users much more positively than the current crop of 32-bit processors in all other tablets being considered by IT today. At the very least it will get Apple even more attention in these markets and help them grow the iPad business in the enterprise.

3-Software was almost more important than the hardware announcements

OS X upgrade is free. Updated apps like Garageband, Pages, Keynote, Numbers and many more Apple suite products are now free. And many of the apps look and act exactly the same and are synched in the iCloud identically so that users can’t even tell if they are using a Mac app or a IOS app unless they look down and see what device their are using. All of these push Apple’s software prowess into the forefront and give them an even greater edge over Android and Windows 8.1 especially when it comes to tablets. Don’t underestimate how important the software announcements made today are to Apple’s over competitive position. This is a big deal for them and their competitors.

While some people will be disappointed that these products are evolutionary, not revolutionary, keep in mind that Apple does advance products as part of their upgrade cycle and this is a key year for that. However, given the rumors that they are working on an iWatch, a new Apple TV and perhaps one other disruptive product I am hearing might be in the works, I suspect that 2014 will be an even more interesting year for Apple.

The Simple Shocking Failures of Microsoft Google Facebook Apple And Silicon Valley

Silicon Valley companies love to remind us they are on a mission to change the world. Perhaps, although I confess I’m slightly suspicious given their obvious relentless pursuit of funding, acquisitions, getting acquired, going public, and generating piles of cash.

And because so many things they offer us — things that really ought to work, every time, anytime, no questions asked — fail so miserably. This list, it seems, is endless.

Email gets a pass. Siri is so thoroughly ineffectual and so utterly counter to its advertising that I’m not even going to include it here. Wouldn’t be fair. Same with the industry’s tragic dependence upon advertising, which now litters nearly every real, physical, virtual and digital space any of us might occupy. But there’s far more than these, of course. My smartphone ought to know how I feel, right this moment. After all, what contains more data on me, about me, historical and present, than my smartphone? Know how I feel and play a song to match my mood, for example. That would be awesome. Only, that’s asking for too much, I suspect. I mean, has Apple’s “genius” service ever worked for anyone, ever? I’ve received better music and movie recommendations from my mother — and she neither listens to music nor watches movies.

There may be unknowable failures, of course. Perhaps with Google and Amazon giving us so much for free in return for using their service, we are creating a future America that believes everything should be offered at no price, or that profit is unnecessary to sustain a business, or that we are all entitled to something, anything, without ever paying for it. That’s a potential massive dependency failure. Only, I am merely concerned with the obvious failures. Those instances where some lone wolf at each of these companies should not have even had to point it out because it ought to have been so obvious to everyone involved.

Why is it that practically every single smartphone ever built can’t seem to recognize that the WiFi it is connected to isn’t actually connected to the Internet — so switch over to cellular, already! In a world where I can tweet from a jet 30,000 feet above the ground, this should not ever happen.

Any site that demands I first log-in using Facebook is a failure — and an affront to decency. Imagine any physical retail store doing the same.  Similarly, any site that allows us to log-in using our Facebook credentials should not ever receive more than confirmation of our identity. Our location, contacts, friendships and long history on Facebook should not ever be handed over without our explicit and ongoing consent.

Too often, Instagram videos fail to play on my iPhone. On my Mac, Twitter Vine videos fail more often than they work. I’ve stopped clicking on Vine links, in fact.

Printing from an iPhone or iPad is a joke.

Windows 8 — and I promise you, I am no Microsoft hater — is so inexplicably, almost painfully user-unfriendly that, and I am serious here, every other thing Microsoft has done right, and every other thing they have achieved, and despite all their money, and ignoring the ascendency of iOS and Android and the rise of iPad in the workplace, the breadth and scale of of the Windows 8 OS failure is such that it could literally take down the entire company.  Microsoft could absolutely afford to be years behind in the smartphone wars and could absolutely drop billions and billions more on online services and go through a succession of just terrible post-Ballmer CEOs and could be outright hostile to the consumer market — if such a thing exists — and  they could still dominate the enterprise for at least another generation. Except…Windows 8 is so shockingly hard to use, so determinedly strategy over function that I now believe it’s a very real possibility that Bing will be worth more than Windows before this decade is out. I say this absolutely as someone who wants this great American company to thrive — and as someone who fully believes that Microsoft’s singular UI strategy and flat “live tiles” design is still the right one. As someone who cares, I cannot emphasize this enough: fix it.

It’s a failure for my hometown that Amazon somehow gets away with selling billions of dollars of goods without charging its customers sales tax.

It’s a failure that I can’t have my “smartphone” ignore every single call that does not include the number and person (or business) calling.

Has Eddie Cue every actually used iMessages? Or Maps?

When Jony Ive flies from San Francisco to London, at what point does his iPhone batter fail him? For me, it’s much too soon.

In return for a never-ending wave of our most personal information, Google promises us instant, usable search results. Yet when I enter “Brian S Hall” I am instantly offered 286 million results. That is a stupid failure.

That the entire tech sector has done next to nothing to make it so we don’t all have to pay near-criminal prices to HP and Canon for printer ink is a massive failure.

Similarly, it remains far too hard to move the pictures from my smartphone onto my computer(s) and to the cloud, and back again, and share them with exactly who I want. Probably every single user on the planet wants this, deserves this, and still can’t have it. Fail.

How is all this possible? Is it because for too many of the indicted companies, they believe that historic marketshare is an excuse? Or that free equals just good enough? Or that they will eventually get to it? Yet Google thinks I might get inside their driverless car?

With all the data Google collects on us — who we are, where we go, what we search, what we buy, going back forever — how is it that the only predictive service they can offer is Google Now? Which is little more than the weather and local bus schedule.

Why does Facebook insist on curating my newsfeed despite my repeated requests to give me everything, most recent to least, in order, every single time? If Mark Zuckerberg can’t trust me with that gushing flow of information, perhaps I shouldn’t trust him with the drip drip drip of my personal data.

It’s the second decade of the twenty-first century and far too much that comes out of Silicon Valley is broken. This makes me suspect everything they say and do. Yes, obviously, I want world peace, an end to hunger, longevity, joy and prosperity. But until the industry can get the tiny features of our most popular technological products actually working properly, those will have to wait.

If Jeff Bezos Is Serious About An Amazon Phone He Better Take Out His Wallet

Over the past several weeks, rumors of an “Amazon Phone” have become more persistent, if no more credible. The rumors stick, of course, because Amazon has years of experience designing, developing, selling (and I assume servicing) personal mobile computing devices — the Kindle line of eReaders and tablets. In addition, Amazon operates its own Android app store, has a very successful cloud infrastructure platform, and manages one of the larger direct-to-consumer smartphone channels. Add to this the company’s robust digital media ecosystem — books, music, movies and more — and it’s easy to understand why so many believe Amazon can and will make its own smartphone.

There’s only one problem: every time we might use an “Amazon smartphone” we most certainly are (via their cloud, apps, payments platform, rumored smartphone sensors and integrated services) visiting Amazon.

And Jeff Bezos has taught us that every time we visit Amazon we should demand and we should receive a whole host of free goodies. This alters the entire Amazon smartphone equation.

Free Free Free!

A famous Bezos quote is “there are two kinds of companies, those that work to try to charge more and those that work to charge less. We will be the second.”

I won’t call Bezos a liar, the quote is accurate. Only, it’s not complete. Bezos and Amazon often do charge less than the competition. They are like WalMart in this regard. Where they are different, however, is in making that (slightly) lower price even more appealing by throwing in a feast of freebies.

Amazon Prime, for example, is damn near a steal for my family — just on shipping costs alone. There’s also the many free streaming movies we get for being Prime “subscribers.” We get free books on Kindle, free Android apps, free cloud storage for our many digital belongings and much more. Then there’s all the sales taxes we’ve saved by choosing Amazon instead of buying local. I shudder to add those up.

The modus operandi of Amazon isn’t “cheap” or “low price.” Rather, it’s using other people’s money — including some from Wall Street — to subsidize the company’s most favored customers.

I am happily one of Amazon’s most favored customers.

But I have no intention of getting an Amazon smartphone, however. Not unless Bezos hands me a great deal more freebies than ever before.

All Amazon All The Time

Matthew Panzarino of TechCrunch recently provided details on the rumored Amazon smartphone(s).

Amazon is planning two devices, the first of which is the previously rumored ‘expensive’ version with a 3D user interface, eye tracking and more.

Another feature said to be planned for the device, but not yet locked for release, is an image recognition feature that lets users take a shot of any real-world object and match it to an Amazon product for purchase.

Count me as highly skeptical on any of this. An actual value-enhancing 3D screen — before Samsung, Apple, Sony, LG or Motorola? Eye tracking and image recognition that really works? From the company that is primarily a web commerce and services concern?

Worse, the company suggests they may charge us for their smartphone! Recall, Amazon publicly told AllThingsD: “we have no plans to offer a phone this year, and if we were to launch a phone in the future, it would not be free.”

If it’s not free, what could be the actual selling point? Better hardware? Better software? Better ecosystem? That seems extremely unlikely. Lower prices? Between iTunes and App Store pricing and Google giveaways, how much lower could Amazon go?

Answer: they’d have to start paying us to use the device.

It’s the opposite of free!

This is not so far-fetched.

The Opposite of Free

Smartphones are profoundly altering commerce. We use them to buy, to research what to buy, to see what is available to buy — at this moment, at this exact location, and from whom. We use our smartphones to complete the purchase, to make the payment, to store our coupons, to ask our friends for recommendations.

Amazon wants badly to capture and monetize as much of this action, and as many of these steps, as theoretically possible. Give Bezos his due for thinking in such grand terms.

Everything Google does, for example, is to get us to provide more of our personal information, which they can then monetize. Everything Amazon does is to get us to make more of our purchases through them. An Amazon smartphone would no doubt be designed for just that.

Which, from a user’s standpoint, sounds absolutely dreadful.

An Amazon smartphone could only work if Amazon paid us to use it.

Amazon is a Tiger. Jeff Bezos the Tail.

In a recent piece in BusinessWeek, Bezos and Amazon are reverentially lauded:

Today, as it nears its 20th anniversary, it’s the Everything Store, a company with around $75 billion in annual revenue, a $140 billion market value, and few if any discernible limits to its growth.

I’m less sure of that last bit. Admittedly, I use Amazon regularly. The reasons are clear:

  1. the sales process extracts only minimal pain
  2. the products are available within only a few days
  3. the prices are reliably low
  4. all the free stuff the company throws in with every purchase

Just one of those goes away, however, and I will look elsewhere — possibly even make my purchases elsewhere. Which means there is at least one very obvious limit on Amazon’s growth: if the rubes who are subsidizing Amazon’s most favored customers ever rebel, us most favored customers just might go elsewhere.

I can’t say when or if that will happen. But, I can say that if the Amazon smartphone is not free, as Amazon says, then it will have to compete with other devices. I simply do not believe Amazon can win on a level playing field.

I could be wrong. There may well be an Amazon smartphone on the horizon. It may turn out to be great. Time will tell.

But I am certain of this: Jeff Bezos better be ready to pull out his wallet if he’s serious about entering the smartphone wars. I will make him pay a fortune for my business. I suspect we all will.

Martha Stewart vs Mark Zuckerberg. Seniors vs Silicon Valley.

Help! My iPad’s fallen and it can’t get up!

Much mirth ensued across both Twitter and tech blogs last week when the very entrepreneurial — and very senior — Martha Stewart broke her iPad. Perhaps she only has herself to blame considering the series of naive tweets she unleashed upon her followers, including:

No, Martha. There is no magic button — yet — that alerts Apple that your iPad is broken. Nor does Apple — yet — offer a service where they come to your home and repair or replace your device, not even for the very wealthy. Except, that is not the real story here. Rather, it is this:

Is Silicon Valley really so blind to the computing revolution taking place right in front of their eyes?

I suspect the answer is yes.

The evolution of computing is very clear on this: it starts with a few than spreads to the many, with each new computing revolution touching exponentially more lives: mainframes to minis to PCs to, now, smartphones and tablets. The market for these latest personal computing devices is literally in the billions of users. These billions of users include potentially a billion senior citizens.

Silicon Valley, however, appears utterly blind, even disrespectful to this market; to its size, its wealth and to the fact that it is growing faster than any other demographic, at least in the developed world. Mocking older people’s inability to “google” or to “turn on the Internet” or effectively service their iPad limits us to the incredible opportunities just around the corner.

The Valley’s notorious cult of youth is the most obvious telltale sign.

Consider Mark Zuckerberg, CEO and founder of Facebook, who said a few years ago: “I want to stress the importance of being young and technical. Young people are just smarter. Why are most chess masters under 30?”

In the Valley, youthful smarts trumps all, apparently, and all flows from that.

Now the head of a publicly traded company, Zuckerberg no doubt still believes his youthful words. As the New York Times noted, the median age of workers at Facebook is a mere 28. This is not uncommon.

The seven companies with the youngest workers, ranked from youngest to highest in median age, were Epic Games (26); Facebook (28); Zynga (28); Google (29); and AOL, Blizzard Entertainment, InfoSys, and Monster.com (all 30). According to the Bureau of Labor Statistics, only shoe stores and restaurants have workers with a median age less than 30.

Ask yourself: if a tech company had a median age of, say, 60, would you believe it could effectively build devices and services optimized for twenty-somethings? Yet all of Silicon Valley is absolutely convinced of the reverse.

That Zuckerberg and other leaders in Silicon Valley clearly favor young over old is obvious in so many ways. This shows up not just in the age of their workers. Their ongoing lobbying efforts with FWD.US, for example, are  part of a multi-pronged effort to bring talented — young — workers into the US. Perhaps this is wise, possibly even necessary. But shouldn’t such efforts come after they have thoroughly proven their willingness and their ability to hire and train older workers?

Unfair? I don’t think so. The stated mission of FWD.US is “to promote policies to keep the United States and its citizens competitive in a global economy—including comprehensive immigration reform and education reform.”

Given the median age at the many tech companies supporting FWD.US, I confess I find it difficult to accept that their leaders care all that much about keeping the citizenry competitive. Forty year olds can’t learn to work for Facebook?

Which brings me back to my larger point: can today’s youth-obsessed tech companies effectively build products and services optimized for people of advanced age? Is Silicon Valley about to cede this giant market to others?

The demographic that will experience the biggest growth over the next decade — by a vast margin —  is seniors. In the US, there are already over 40 million seniors — age 65 or older. Many of today’s seniors, including my parents, are only just now using their first-ever computing device. Almost certainly they can benefit from new form factors, new modes of input, new ways of thinking about UI.

Regrettably, the Valley appears convinced that its devices, such as iPads, and its platforms, including Twitter and Facebook, are magically optimized for all, just as they believe twenty-five-year-olds make for the very best workers. Such a blind spot will no doubt create opportunities for others, elsewhere.

Consider the latest offering via the very creative Jeff Bezos, CEO of Amazon. The company’s new Kindle Fire HDX now includes “Mayday” — a one-click service that instantly connects the user to live person-to-person video chat. According to Bezos, this will “revolutionize tech support.” This may not be a hollow boast:

With a single tap, an Amazon expert will appear on your Fire HDX and can co-pilot you through any feature by drawing on your screen, walking you through how to do something yourself, or doing it for you—whatever works best.

Did anyone in Silicon Valley even contemplate such a thing?

Isn’t this the land of bold ideas and audacious, daring new creations?

I am not calling on Silicon Valley tech companies to build devices and services explicitly for senior citizens. I am asking for far less than that. I am urging the region, filled with some of the world’s best and brightest, to understand that by expanding their worldview — and ridding themselves of their bias of working with and alongside old people — they might understand and then capture a market possibly far larger than any they are in now. All while helping to empower millions as never before.

Windows Phone And Android Hate

“Bitterness is like cancer. It eats upon the host. But anger is like fire. It burns it all clean.” 
― Maya Angelou

I want Windows Phone to succeed. More than that, I want Android to fail. I hate Android.

There, I said it. Yes, I am a market analyst, detached, and I have absolutely no stake in the success or failure, rise or fall, of either Microsoft or Google, $MSFT or $GOOG, or Apple, for that matter. I simply do not like Android. I refuse to hide this fact.

I think Android is a pale, poorly executed imitation of Apple’s iOS. I have real concerns about the ethics of Google’s ex-CEO as he simultaneously served on Apple’s board. Google’s scale and de facto search monopoly allow it to undercut competition and stifle innovation in local-mobile services. That’s no good. I can’t stand the way they use terms like “open” the way fast food chains label yesterday’s hamburgers as “fresh.”

Nor can I ignore their duplicitous stance on patents.

Most of all, I am suspicious of Google Android’s business model, which is built upon the capture, store, sift and sell of an ever-increasing amount of my increasingly personal information, all of which is then bundled and sold off to countless unknown people and businesses.

With Google search, Google Maps, Google Android, Google Wallet, Google Play, Google Chrome and Google+, Google knows where we are, what we are buying, who we are with, what led us to that purchase — and has documentary evidence of it.

Forever.

I don’t want this.

As everything goes digital and as everything digital collapses inside the shimmering smartphone screen, I see no justification for anyone cheering on Android.

I am not fueled by animus, however. I want the new Microsoft – Nokia to succeed because the world benefits if Windows Phone becomes a viable third alternative to iPhone and Android.

A Great Disturbance In The Force 

Yes, I think Apple currently makes the best smartphone and operates the best smartphone platform. But, for sundry reasons Apple will not and cannot stop the global spread of Android. Should Apple release, as is widely expected, a low-cost global iPhone “C”, and if rumors of deals with DoCoMo and China Mobile are all true, it’s still likely that the very best Apple will achieve — ever — is well under 30% of the global smartphone market. Likely, 25% is their ceiling. I don’t want Google to own 75% of the smartphone market as I believe this would be harmful to innovation and a long-term threat to personal privacy norms.

Where Apple will not succeed, Microsoft now can. Pushing Ballmer aside and acquiring Nokia suggests an acceptance of the new world they must now compete in. No, it will not be easy to take on Android. It is unlikely they will succeed. Still, the company that once seemed like the Evil Empire is now more like an aging Annakin Skywalker — and our last, best hope to slay the Emperor.

There are many arrows in Microsoft’s quiver: Windows 8 + Nokia design + Skype + Bing + Office + Outlook + Nokia imaging + Windows Media — plus security and server tools for businesses of all sizes. Microsoft with Nokia also has the necessary global footprint.  Taking on Android is not a suicide mission.

The Circle Is Now Complete

The greatest barrier to success, however, is that Microsoft remains of a world that no longer exists. Smartphones represent a transformative shift in computing – like mainframes to Minis and Minis to PCs. Companies optimized for PCs are, I believe, more likely as not to fail in this new age. Of course, Google is also optimized for PCs. That’s where nearly all its revenues come from, still.

Nokia, however, is optimized for mobile if not quite for this new age of smartphones. Moreover, they possess still another strength that Google does not: the user is also the customer.

This is critical — and little understood by most mobile industry pundits. Smartphones are with us all the time. They are in our hand when we awake and when we fall asleep.  They are our most personal objects, containing our most private data, and the thing we touch more even than our own children. Carriers and IT units may be major channels for smartphone sales but unlike with PCs, the user will be the ultimate arbiter. These devices are simply too personal to allow others to decide what we choose.

Nokia possesses yet another strength, and one not well understood in the United States. The company truly knows how to make quality devices at amazingly low prices.

Nokia-Asha-311

The pre-Microsoft Nokia lent me various “Asha” phones to test: the dual-SIM Asha 310, and the cute, colorful and long-lasting Asha 501. I also tested the  Nokia 105 feature phone. I was legitimately struck by the functionality and usability of each of these phones, particularly on a per-dollar basis. I would not buy any of them — which means I cannot recommend them. That said, these phones can be had for $25 – $100, a truly amazing feat of engineering, design and manufacturing. In many parts of the world, most do not have the luxury of turning their back on a sub-$100 device like I can.

Analysts that confidently predict Android will forever dominate the smartphone wars on cost alone have likely never used a very-low-cost Nokia device. Similarly, those analysts that are convinced that Android will win because Google offers its services and applications for free badly under-estimate the value of functionality, reliability and security that is built into Microsoft’s software.

The Force Is Strong With This One

Microsoft and Nokia can deliver this to the world:

Low-cost, secure, functional smartphones that seamlessly integrate across multiple devices (e.g. smartphones, PCs and game console), that satisfy end users and businesses alike, that can incorporate Yammer, Skype, Xbox, Outlook and Office, and which provide a hedge against the overwhelming force that is Google Android. That is a powerful combination.

Admittedly, the numbers at present are not terribly good, as this recent Kantar market survey reveals.

screen-shot-2013-09-02-at-10-17-10

Despite its current meager share, the Windows Phone platform is growing. Moreover, the smartphone market itself is only in its early days. Analysts who suggest otherwise are dead wrong. The vast majority of the world does not have a smartphone yet — though almost certainly will within the next few years. In addition, smartphones are becoming more used and more useful for all  users with every passing day — for work, school, play, home, life. “Free” and ad-driven business models like Android may ultimately fail to satisfy the requirements users demand for these truly critical devices. What is critical in your life that you don’t expect to pay for?

I Sense Something. A Presence I’ve Not Felt Since…

When Microsoft effectively acquired Nokia, the company made no secret of their intent:

To accelerate its share and profits in phones. To create a first-rate Microsoft phone experience for its users. To prevent Google and Apple from foreclosing app innovation, integration, distribution and economics.

I am hoping they succeed. It is within them to do so. Their fatal flaw, it seems to me, is do they have enough faith in themselves to do what is right, to achieve what I contend is possible, and build for the future, not the present? After all, the reason Ballmer was so successful and yet ultimately failed is that he chased the easy money, valued Windows profits above all else, and refused to acknowledge the potential for complete market disruption.

Nokia is likewise guilty of this. In a recent interview, Frank Nuovo — once the Jony Ive of Nokia — told the Australian Financial Review that Apple, not Nokia, re-invented the mobile market despite Nokia’s massive head start, because “all of our user testing pointed to the fact that no-one wanted touch phones.”

And yet now all of us have one.

The world can change, and quickly.

As can you. It’s time to let go of your anger. All has been burned clean. Begun the Smartphone War has. Microsoft is now on our side. May the force be with them.

With Help From Silicon Valley, America To Dominate The 21st Century

America will dominate the 21st century – economically and culturally – thanks to our dominance in technology.

Mobile technologies, supplemented by social connectivity, integrated with real-time data, enhanced by location-aware services and all supported by infinitely scalable yet highly personalized digital platforms will determine our future. These meta-offerings, delivering growth-spurring anytime, anywhere connectivity to all people and things, are each led by uniquely American businesses.

Apple makes the very best mobile computing devices in the world. Facebook and Twitter connect us all. Google delivers timely, personalized, location-specific data to anyone, for free. The best business software, for companies of all sizes, is developed by Microsoft. There are many other examples, of course, and in virtually every case, an American company and American innovation has the lead. Second-place isn’t even close.

Nearly as important, funding for critical and continuous innovation, everything from Big Banks and crowdfunding, to venture capital, philanthropy and small business loans, are American strengths. America’s universities – public and private – are the best in the world. These centers are the catalysts of innovation.

No nation offers immigrants more opportunity for success. No nation is more secure. Our well runs deep.

Nearly Unlimited Potential

We do not rule all areas of technology, of course. America is just one of several leaders in biotech. That said, American-led businesses and research labs are aggressively targeting rather extraordinary opportunities to extend life, explore the mind, and re-construct severely damaged bodies. Expect America to be the premier leader in biotech very soon.

In the area of green technology, America is lacking. This despite the billions thrown at this potentially vital industry. On the plus side, however, given our massive reserves of oil, coal and natural gas, America’s own energy future is secure. There are extremely few developed economies that can say the same.

America’s strengths are so many and so vast, in fact, that it will be hard to not dominate the 21st century.

Unfortunately, there are two obvious, pressing issues that limit our nation’s future and impede individual joy and prosperity. They are our schools and our safety net, both of which are constructed for an America that no longer exists.

Failing Grades

Our public schools, those K12, government-run institutions nearly all of us attended, are in embarrassingly bad shape. In larger cities, especially, they are a near-invisible tragedy. I offer no magic bullet, merely an admonition: the current model of government-funded, union-led, community-based schools is clearly failing our children.

Given this, we should welcome as much change, innovation and disruption in K12 education as we do in Silicon Valley. Yes, this will likely significantly minimize the power of government-employed unions. If this matters to you, my only suggestion is that you think of the nation and the nation’s children first.

Opportunity Not Inequality

The other national failing is the very real potential of continuous technological change to leave many of our citizens in a semi-permanent economic prison. Understand: I am not speaking of inequality, but misery. Fighting to stop inequality is too often an angry, jealous battle to bring down those at the top. Forget that Larry Ellison owns an island or that Google’s founders have their own private jets to travel in – or that your neighbors are better off than you. Inequality is not the issue. Not providing adequate education, medical care and opportunities to positively contribute to society and achieve prosperity are the real failings we must address.

In retail, for example, America’s Amazon.com and WalMart are global leaders. Their innovations create numerous savings which puts money in our pockets everyday. They also place many out of work and force many more into jobs at barely livable wages. It is a national responsibility to correct this.

Again, I cannot divine any singular path toward resolving this. Therefore, I urge those who fear the power of the government to instead open themselves up to possible innovative solutions which are led partly or even exclusively by government. Yes, funded by taxpayers. This may be the only way to ensure health, education and opportunity for all.

Admittedly, government solutions too often transform into vampires, never dying, feeding off others, caring only about themselves. This is a risk I nonetheless think we should take.

The Silicon Valley – Washington, DC Nexus of Power

America will lead the 21st century, just as we did the 20th. We have the best and the most of the stuff required to retain our current lofty status, and build upon it. Our people and smarts and money and technology – led by Silicon Valley – will usher the world into a new age of abundance, connectivity, innovation and sharing.

Our attention must now focus on ensuring the benefits of each of these flow justly to all our citizens.

It is not surprising that a new nexus of power, linking Silicon Valley and Washington, DC is quickly forming. One has the money, the other has the power.

This new nexus will become as important, as integrated, as accepted and as fruitful as the ties that bound New York and Washington, DC in the prior century. Let us welcome this transformative shift in power and money and values.

Let us also keep vigilant. It’s okay to have more. It’s not okay to leave our fellow Americans behind.

Image courtesy of Flickr.

Marissa Mayer Neuters The Cowboy Coder

“All the speed he took, all the turns he’d taken and the corners he’d cut in Night City, and still he’d see the matrix in his sleep, bright lattices of logic unfolding across that colorless void…” 
–Neuromancer (William Gibson)

I suspect we are on the cusp of a transformation in how engineers and computer programmers are hired, valued, rewarded, promoted. The line was drawn when Yahoo CEO Marissa Mayer effectively killed off telecommuting. With this, she also dispatched the last of the cowboy coders from the Valley.

The cowboy coder has long been the stuff of pop culture mythos: vain, skilled, belligerent, cool. The dark character-artifice presented in film, books and television. Machines rule our lives, everyone’s lives, excepting, we were told, these Silicon Valley cyber-riders who expertly manipulate the algorithmic levers of the world’s digitized power centers.

Supremely valuable to the company he deigned to work for, far superior than the prototypical office “drones” who showed up dutifully for work every morning, the cowboy coder lived by his own rules, his own creed, his exceptional talents.

Thanks to Mayer, he is no more.

Cowboy Coders Dethroned

Without making headlines, coding prowess – long the princely, priestly lifeblood of Silicon Valley – was dethroned.

Here’s Mayer in February:

To become the absolute best place to work, communication and collaboration will be important, so we need to be working side-by-side. That is why it is critical that we are all present in our offices. Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people, and impromptu team meetings. (emphasis mine)

Translation: Meatspace trumps cyberspace.

Here’s Mayer in April:

People are more productive when they’re alone, but they’re more collaborative and innovative when they’re together. Some of the best ideas come from pulling two different ideas together.” (emphasis mine)

Translation: Conversation trumps coding.

Connections Equal Profits

Power and value now flow not from coding but from creating and enabling connections. Connections equal profits. To create deeper, lasting, more profitable connections with customers requires deeper, more meaningful connections amongst the workers.

Cowboys are loners – and they do not play well with others.

Make no mistake, this phenomenon is not restricted to Yahoo, nor to female CEOs. Recall that the big Facebook-Waze merger was scuttled because Facebook wanted Waze’s people – it’s coding talent – to relocate to Facebook headquarters. Translation: The Valley’s most valued social media company understands that far-flung coding greatness cannot equal the value that arises via physical proximity.

Earlier this month, Steve Ballmer made it similarly clear in his Microsoft re-org that collaboration trumps all:

Collaborative doesn’t just mean “easy to get along with.” Collaboration means the ability to coordinate effectively, within and among teams, to get results, build better products faster, and drive customer and shareholder value.

669px-The.Matrix.glmatrix.2

In-person, cross-company interactions that arise from an army of lesser skilled but far more sociable programmers trumps world-class coding.

Which begs the question: how should coders be valued? Who is “best”? Who achieves “most”? What skills are critical? Who gets promoted? It’s still too early to know. I suggest, however, that we look to the iPhone for guidance.

iPhone Changes Everything

The iPhone changed mobile and mobile changes everything.

Consider that last quarter Apple sold 50 million personal computers. Only 4 million were Macs. The remaining 46 million were iPhones and iPads – mobile computers.

Mobile now rules the computing landscape, and unlike their desktop predecessors, mobile “PC” applications are not optimized for intensive processing, use or focus. Rather, they are constructed, rail by rail, across very distinct tracks – all of which are required for success:

  1. Mobile
  2. Location-aware
  3. Social-collaborative
  4. Touch-based
  5. Cloud-connected
  6. Rapid (“bursty”) use
  7. Native code
  8. Highly visual presentation
  9. Entertaining
  10. Personalized

In this new age of computing, an application can only succeed by effectively traversing multiple domains, multiple stakeholders, disparate content sources, and numerous touchpoints. Think: Yahoo’s mobile applications team working with Apple, licensing content from Weather.com, integrating Yahoo’s user database information with Facebook and Twitter APIs, and coordinating this with Flickr, all just to create the new, free Yahoo weather app for iPhone.

Those who expertly develop, sustain and integrate relationships across the pillars will be well rewarded. Horizontal trumps vertical.

The cowboy coder, working alone, magically conjuring his binary alchemy, a master of a single application or system, is now more of a cost center, inhibiting the development of the far more valuable horizontal connections that determine success.

Coding Is Relationships

It’s time to consign the detritus of the cowboy coder to the dustbin of history. Moving forward, personal (mobile) computing must deliver social, visual, delightful, real-time, collaborative experiences.

For good or bad, coding has gone uptown. Everything is digitized and everyone has a computer. The new “best” coders now arrive for work each morning from inside comfy, anointed busses. From their gleaming office they eat the finest foods, they wear a badge and their cube has a number, well-earned. The products and services they build are for everyone to use.

Laudable – but boring.

The cowboy coder is dead. It’s time for a new programming hero to step forward.

Images courtesy of Wikimedia. 

Apple, Diversity, and Why It Succeeds

Quite possibly, the single most important action undertaken by Tim Cook as CEO of Apple was when he fired Scott Forstall – so often referred to as “the next Steve Jobs.” There were likely many reasons for Cook’s move, but the overarching one is well-documented: Cook demands collaboration and Forstall was not known to share the glory nor the information. Cook would have none of it. He wants the company free of politics, fully focused on its mission, everyone working together.

Apple shows us again and again that to do the very best work, to make the very best products, to create something out of  nothing that magically appeals to everyone requires great people with a singular cause, a focused leadership, and unwavering faith in what they are doing.

Does this make Apple anti-diversity?

Absolutely not.

Tim Cook has said that the only pictures in his office are of Robert F. Kennedy,  a man who preached the benefits of diversity, and Dr. Martin Luther King – a man who helped change America’s views on so much, including how we value people who are different from ourselves.

Nonetheless, it seems current efforts to promote diversity within tech companies are doomed to failure. The companies that succeed in Silicon Valley are typically highly focused, comprised of people of highly similar backgrounds and educations – all focused on a singular mission.

The last great Silicon Valley success story, Facebook, came straight out of a Harvard dorm – chock full of well-to-do white males. It’s nearly impossible to be less representative of American society than that. Yet Facebook has a billion users around the world.

There are good reasons why so many of us believe there are societal benefits to diversity and inclusion, of course. Everyone of us benefits – culturally and economically – when everyone’s talents, creativity and dreams are afforded the opportunities to be fully realized.

But such larger social benefits fail to pass the results test when it comes to individual company success. Making Apple more “diverse” will not make it better. Walk into any Apple Store right now and see young and old, black and white, male and female all testing, using – coveting – the company’s many amazing devices. Apple’s success proves that mission and focus – not diversity – are what drives corporate greatness.

No, this does not mean we should not have nor promote diversity. Rather, we must acknowledge that change needs to come from outside. Efforts to promote computer programming for girls, for example, or to bring more people of color into STEM fields – these are worthy. Trying to enforce diversity policies inside a company is simply not the way to go.

Could Apple really do better if the picture below looked more representative of American society? That is a difficult case to make.

Apple Executive Leadership Team
Apple Executive Leadership Team

Apple is the world’s richest tech company. It has amassed the most cash. It makes the very best smartphone, tablet and laptop in the world. It is the global leader in personal computing. The company has over half a billion users and is growing, particularly in developing markets.

Would it be any more so if Apple’s leadership was, say, half women and/or 25% people of color? Would their products be any better? More appealing?

If you want a diverse workforce in Silicon Valley, and no doubt many of us do, then complaining about VCs not funding enough women, for example, of fretting that big tech companies aren’t hiring enough people of color will likely continue to fall on deaf ears.

Silicon Valley can absolutely adapt to change. That change, however, needs to come from the outside – and be data-driven.

We need to make more of those men and women who can propel Apple and Silicon Valley to continued greatness. That will – of necessity – demand a more diverse hiring pool to choose from. It’s simply wrong, however, to look to Apple HR, for example, or Sand Hill Road, to construct this path. That is not their mission.

The Dividing Line Between Human and Replicant Already Happened

In the film, Iron Man 3, the good guys encase themselves in tech. The bad guys put the tech inside their bodies. This is telling. Hollywood – and most of America – remains oddly uncomfortable with the notion of technology which “alters” our self – even as it alters everything we see, hear and touch.

No surprise, then, that Tony Stark, the man inside the Iron Man suit, fires off witty bombs in the vain hope it will ease his mental suffering rather than taking a pill – blue, red or otherwise – to help resolve his constant panic attacks.

This idea that the tech we place inside us is to be feared, unlike all the tech swirling outside of us, is a dated and dying relic of our fading, twentieth-century upbringing.

We are all already replicants.

Wikipedia defines “replicant” as “a bioengineered or biorobotic being created in the film Blade Runner. (Replicants) are virtually identical to an adult human, but have superior strength, agility, and variable intelligence depending on the model. Because of their physical similarity to humans, a replicant must be detected by its lack of emotional responses and empathy to questions posed in a Voight-Kampff test.”

What test could we use today to detect a replicant? Should we? Probably, it’s too late to discern. Rather than optimizing artificial intelligence tests, we may ultimately need to design tests to determine what is really real – assuming our future technology affords us one “true” sanctioned reality.

I suspect that many of us fear technology which goes inside us because we deeply fear that this changes, possibly forever, who we are, how we think, what we can do, what we believe, how we feel, even if only a little. As the world changes ever-faster, we cling to the idea that somehow we – our being, our self, our consciousness – can forever remain the same.

This is a false belief.

The truth is more frightening and far more awesome. Very soon, we will refuse to deny ourselves – all of us – the clear and present self-altering benefits and protections of advancing technology even while, as in our fiction, we cling to a idealized notion of the purity of who we are.

I believe I can prove this.

We are already live-tweeting (and vining) brain surgery. Anyone can witness a man’s brain being altered – or “repaired.” Highly technical work on human brains is about to become as commonplace as the work done on our hearts. Only this time, we will watch – making it radically more accessible.

Kaiba Gionfriddo, nearly 2 years old, is alive because doctors at the University of Michigan used a 3D printer to create a airway splint so that he can breathe. As the physical went digital, now, the digital – restricted only by our imagination – becomes physical.

Young Grady Hoffman was confined to an isolation room for two months. The child used a telepresence robot to interact with the outside world – which included his parents and siblings. How much of that child’s being was contained within the robot? 5%? 50%? How much a mere 5 years from now?

Should this young boy from South Africa be denied having a hand crafted for him by a 3D printer? Of course not. Should he not be allowed to pitch on his Little League baseball team even if the hand offers him some advantage? What if he goes pro?

These headphones monitor brainwaves then play songs to match the person’s mood. What better knowledge graph or recommendation engine could there be? On what day will Google Glass offer this capability – and make it worth our while to serve up exactly the right content in exchange for the stunningly personal data they can mine?

Children are alive, and we are entertained, by altering our bodies and having our brainwaves probed. Given that we cannot prevent our brainwaves from escaping our “being,” today’s brain monitoring headphones will probably lead to tomorrow’s grocery store Muzak – mundanely and algorithmically sending specific songs into our head – and ours alone – to entice us to spend more money in the toiletries aisle. How is this any different than commanding to a “replicant” to mop the floors?

Publicly funded scientists in the United States are actively working on fully restoring memories – such as those lost to the ravages of Alzheimer’s.

In people whose brains have suffered damage from Alzheimer’s, stroke, or injury, disrupted neuronal networks often prevent long-term memories from forming. For more than two decades, Dr. Berger has designed silicon chips to mimic the signal processing that those neurons do when they’re functioning properly—the work that allows us to recall experiences and knowledge for more than a minute. Ultimately, Berger wants to restore the ability to create long-term memories by implanting chips like these in the brain.

The path to success in this, which almost no one objects to, obviously opens up the potential for creating or altering memories. A memory, after all, is nothing but a series of electrical impulses. Tweak one or tweak them all – they have been changed. The fact is, the technology to alter and to create memories is a given. All that’s left now is to figure out how cheaply and massively scalable such technology is.

Everything about us – who we are, who we believe we are – is already altered by technology. Today’s baby-steps are next decade’s global disruption to our very notions of life, living and humanity.

Deliberate, publicly-sanctioned alterations to the human mind is the final frontier – and the future has arrived. UC Berkeley scientists are working to protect computing systems by having your brain activity serve as a identifier – your personalized access code, as it were. The few people who actually read William Gibson’s Neuromancer thirty years ago likely never really believed they would be alive to experience such a blurred physical-cyber existence.

In fact, we may have already surpassed this fiction. Researchers at the ATR Computational Neuroscience Laboratories in Kyoto are using bulk computing power to monitor an individual’s MRI scans to determine what that person is dreaming. Know what a person hears, perceives, dreams – and feels – is to know that someone or some external force can alter each of these. Won’t each of us embed technology within ourselves just to prevent this?

Soon, we will consume technology if for no other reason to retain our sense of self, not lose it.

We are a society that fears the potential ill effects – and possible amorality – of consuming drugs like ecstasy while at the same time idly accepting shockingly advancing changes to who we are as human beings. We need to face the truth: we are on the cusp of technologically altering our self to maintain our self.

Apple iWatch vs Google Glasses and the Next UI Battle

iStock_000021284452XSmallRumors of the Apple iWatch continue to sprout. Google Glasses will soon be for sale. The “Internet of Things” and wearable computers are quickly transitioning from the realm of science fiction into our everyday reality. Very soon, sensors throughout our homes, on our pets and possibly inside our bodies, all monitored or even controlled by our smartphone, will be the norm. Imagine now if these were ad-subsidized devices, like Android or Kindle, offering no escape from the latest marketing pitch or sponsored social media update. Is this a tolerable future?

While many analysts doubt the ability of Apple to maintain its margins in the face of stiff competition from the likes of Google and Amazon, companies that sell hardware at cost and make it up on advertising and ‘content’, I think the opposite is true: We are on the cusp of a world where personal computing hardware will become increasingly more important and more profitable. This favors Apple. Moreover, as hardware and computing become increasingly smaller and more personal, the Google business model, which fully relies upon advertising, may simply become too intrusive to tolerate.

Tim Cook recently said Apple is not a hardware company. With iTunes and iCloud, retail, services and accessories revenue, Cook is technically correct. Nonetheless, Apple makes most of its revenues directly from hardware. Google CEO Larry Page prefers talking about “moonshots” and driving “10X” changes in our thinking. He doubtless understands, however, that his company makes nearly all its money – and has from the beginning – on advertising. Following the money helps us not only to properly value these companies, but serves as a lens into their future. I suspect we will quickly witness fundamental differences in the design philosophy and user experience from the new wearable computing products coming out of Apple and Google.

The next design battle will almost certainly not be about “skeuomorphism” versus “flat design”. Rather, monetizing hardware, the Apple way, versus monetizing data and advertising, the Google way, will set the stage for this next great battle.

Advertising

As hardware becomes ever-more integrated with our physical self, will we dare rely on lesser hardware that is subsidized by advertising? Maybe. While many may reflexively assume that advertising is always bad, this need not be the case. The promise of Google is that it will provide us with the right information at the right time in the right format for the right device. In some cases, this may be an ad. The problem, of course, is that to succeed with such a mission, every user must hand over to Google an exponentially larger set of personal data, more personal than ever before: where we are, who we are with, what we are doing, how high is our blood pressure, how sad is our mood, how many calories in that muffin we weren’t supposed to eat. When will this become too much?

Intrusion

Advertising is not merely built upon data collection. It also requires interruption – what I call the “intrusive business model”. I think the most potentially intractable problem that Google faces in its quest to create connected, personal hardware devices, one that Apple is liberated from, is the fundamentally intrusive nature of its business model. We may all “search” for information, but that does not necessarily mean we want to be bombarded with ads. Ads are already everywhere, it seems; within our (free) apps and games, on Google maps, scattered across web pages, inside YouTube videos, and more and more on the Google search page. Where does this end?

I don’t want my Google Glasses, for example, to pop up ads right in my eye, nor have a commercial play some catchy jingle into the sensor I keep in my ear. I don’t want my iWatch clone, for example, to vibrate every time it thinks I might be interested in some deal or datapoint – when in fact, it’s really because the sender – the intruder – is making money off stealing my attention. As computing becomes increasingly more personal, there is a very real chance that Google’s business model becomes increasingly more intrusive.

Apple is almost the exact opposite of intrusive. What is iPad but a beautiful pane of glass that we operate with the touch of a finger. Complexity vanishes. We are free from intrusion. This is the case for Apple software as well. Consider that both iOS and Mac OS place the focus squarely on, well, focus – and not on multitasking, alerts, notifications and other intrusive messaging forms.

Presentation

There is an obvious tension here, and it may favor Google. With Apple products, when you want data, you swipe the screen, for example, or beckon Siri. Consider Android versus iPhone differences. Notifications, reminders, alerts, home screen messages and the like are all much more readily presented and visible with Android. Apple’s model favors waiting for the user to seek and request data. For advertising, I absolutely favor the Apple way. But not all data is advertising. In many instances, we want immediate ‘glanceability’ for real-time information. Sometimes, when the data is truly what we need, we want to be intruded upon. I want my maps app to tell me that the road ahead is jammed – even if I am on the telephone. Or, as in the case of a Fitbit bracelet, for example, I may ultimately want to be reminded over and over again to do my exercise for the day. This form of data intrusion favors Google.

The question for Google, though, is can they truly intrude upon our personal space only when we really want or need the intrusion? For a company that has made all its money over the years by flashing advertisement upon advertisement across every one of our screens, I have serious doubts.

Through patent filings, we know that Apple has been working on wearable computing devices for at least several years. Such devices can continuously record our heart rate, monitor our environment, potentially know us better than our friends and doctors. As our devices learn more and more about us, know more of our likes, habits – and needs – there will be a great debate on when and why to ‘intrude’ upon the user. Google plasters extraneous information across all their products and services because their business model demands this. Crossing that ‘intrusive’ line will likely become too enticing for them, I suspect, pushing more and more users to Apple and its “expensive” hardware. Apple, however, needs to understand that sometimes, in some cases, intrusion is good.

Upside Down Analysis

These thoughts via Business Insider:

According to estimates from Canaccord Genuity, Samsung has shot further ahead of the pack as the world’s largest smartphone manufacturer, shipping 56.3 million units in the third quarter.

Apple’s consolation is that it still takes a larger share of industry profits, despite shipping approximately half as many units as Samsung.

Today’s analysis of the mobile industry makes my head hurt because it is analysis turned on its head. In business, profits are not the consolation prize. Profits are the ONLY prize.

Sheesh.

The Terrible Tablet Tsunami and the Future of Computing

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

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

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

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

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

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

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

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

The implications are industry shattering.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Why Google Should Fear Facebook

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

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

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

One Ad Network to Rule Them All

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

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

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

The Broader Opportunity

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

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

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

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

Dear Industry: Focus on Profit Share Not Market Share

The interest in the tech media world around market share is fascinating. Each quarter reports come out, for the quarter only, pointing out different vendor and software platform market share for things like tablets and smartphones. As interesting as it is to look at market share of hardware and software platforms, it is more interesting and relevant to look at profit share–a metric I think is more important.

Apple is perhaps the best example in this metric as a recent statistic points out. Asymco shared that in the smartphone segment Apple obtained 73% of operating profits, Samsung 26% and HTC 1% while everyone else lost money. Apple continually captures significant profit share of the markets they compete in, and to Apple profit share is more important than market share.

A common thread of thought in the tech industry, which I believe seriously lacks perspective, is that industry history will repeat itself to the degree that a platform will have the majority share of a market for a long period of time. What I truly believe many are waiting for or looking to happen is for the “open platform” like Google or Windows will rise to dominate the market since open should always win–a premise I reject. If anything I would place my bet on the closed system in a pure mature consumer market.

In my last Dear Industry column I pointed out many reasons why I don’t believe history will repeat itself. My whole argument is based on other consumer goods in other mature markets where there is simply not a dominant market share leader. Again this is true because consumer preference drives segmentation in mature markets.

If you look at other companies in mature or post mature markets like consumer goods or automobiles, you find that each of them focus more on operating efficiency in order to maximize profit share. Of course they would love to see their market share increase dramatically but in post mature markets consumers are driven by personal preferences. Consumers driven by personal preference know what they want and why they want it. Because of preference driven choices, market share shifts simply don’t happen often due to preferences being established. Think Coke and Pepsi, or Mercedes and BMW, or Nike and Adidas.

There are, of course, a number of differences between the computing market and consumer goods. But there is something about consumer markets that I think is interesting that may shed light on how to focus on profit share over market share.

A Deeper Look at Consumer Preference

What is interesting about consumer preference is that it is largely subjective. Although their preferences become refined over time that refinement often comes from subjective perceptions rather than objective ones.

To what extent subjective refinements around personal preference take place over time as consumers shop for computing products is yet to be determined. However, as the market for products like smartphones and tablets matures; I have a hunch that many early perceptions and experiences happening currently with technology products will shape future consumer preference.

On that point, a common foundation shaping consumer preference is the experience they have with a brand, product, or service. If consumers have a poor experience with a brand, product, or service, it becomes increasingly difficult to win them back. The importance of first impressions with consumers can not be overstated.

Understanding consumer preference is a key to understanding how to focus on profit share.

Create Features of Value

The second key point to drive better profit share is to focus on creating features consumer segments find valuable. If you look at any mature product strategy striving for profit share you find that the strategy is to maintain price but layer on features with each new product generation.

The key to that specific product strategy within a segment is to identify value and anticipate future value through research and development. Companies that do that well continually introduce new features that the market segments they are focusing on find valuable. Creating features of value is one of the better strategies to maintain a desired price within a segment and to avoid a race to the bottom.

Specifically in regards to the computing segment it is important to create products that do things better than other products on the market. Right now I am seeing a number of smartphone vendors start do this around the camera. The HTC One X for example is touting several features specific to the camera that is differentiated from the pack. For this strategy to work a “better” camera needs to be perceived as a feature of value that is important enough to sway consumers.

In an increasingly segmenting market feature centric products and product experiences are key to sustainable differentiation. When this strategy is employed it creates a better foundation to focus more on profit share of a specific segment.

Of course operating efficiency is key as well to drive better profit share. But both of the above points of understanding consumer markets and focusing on creating valuable products and experiences will shape operating decisions all the way down to the supply chain.

A strong argument can be made that by focusing on profit share by creating valuable features and experiences could lead to better market share. My overall point is that the right way to approach strategic product and roadmap decisions is to focus more on strategies that drive profit rather than market share.

Companies that employ a market share only strategy run the risk of gaining no market share and making no money.