Tag: apple

Why Apple Will be #1 in 2012

A couple of weeks ago, market research firm Canalys made a significant prediction that by the end of 2012, Apple would be the number 1 PC vendor in the world. To get to this number, they recognized the iPad as a personal computer and pointed out that if you include iPad’s, Apple would be the #1 PC vendor as well as #1 mobile computer vendor in the market by the end of next year.

Although this prediction came from a respectable research firm, this same line of thinking was given even greater weight last week when HP’s CEO, Meg Whitman, told French reporters, when asked about the Canalys report, that she too believed that Apple is on track to replace HP as the #1 PC vendor in the world, although she hoped that HP would retake this position in 2013.

For the last 10 years, Apple has been all of the OEM’s worst nightmare. They became #1 in portable music players, and then became the #1 handset maker. And with the iPad they emerged as the #1 tablet maker. Now these OEM’s have to put up with the reality that Apple is on track to become the #1 PC vendor as well. And there is something else that Apple does that really irks them too. The fact that while they are having to live with margins of about 5-8% on almost all of their products sold, Apple is making margins well above 25% on everything they sell.

There is some controversy in the market research world about this idea of adding iPads into the overall mix of computers sold since most PC market researchers put tablets in their own category and do not count them as a PC. But that is very old line thinking and if Meg Whitman is counting them as part of the way HP judges PC market share, then the researchers who count PCs in general will need to adjust their thinking on this also.

But Whitman’s comment that they can overtake Apple in 2013 is an interesting one. For one thing, I suspect she is hoping that by that year, their ultrabook will be a big hit and help bring their market share back up in laptops. Also, I am sure she is counting on their Windows 8 tablet to be a big seller in 2013 and that they can create a branded Windows 8 tablet that businesses and consumers want. I believe this is a good goal, but one that may not be realistic.

Keep in mind, Apple’s mantra is to stay two years ahead of their competition at all times. What this means is that they are not standing still. Although we don’t know what is in the iPad 3, I have no doubt that it too will help extend their lead in tablets well into 2013. By 2013, when the first generation of Windows 8 tablets are just hitting stride, Apple will introduce the iPad 4 (or 3S) and could have significantly lower prices by then.

We are hearing that Microsoft’s fee for Windows 8 tablet version could be as high as $68. If that is true, right off the top the BOM costs of Windows 8 tablets will most likely force prices higher than Apple’s low-end iPad is today. And if Apple starts lowering their prices in 2013 as I suspect they will, Windows 8 tablets would be at premium pricing.

Also, while Microsoft and Intel and their partners are excited about ultrabooks, their current pricing is too high for consumers. The good news is that by the end of 2012, we could see some really solid ultrabooks as low as $599 (without SSDs). But the bad news is they don’t know what Apple has up their sleeves with their MacBook Air line for Q4 2012. While Apple will never try to beat the competition at pricing, they still could lower their Air prices significantly and market it to consumers as getting more bang-for-the-buck by then.

And even if Android tablets start gaining market share in consumer markets in the future, most of them are coming from non-PC vendors. The major PC vendors are winding down their Android tablet programs and all the big guys will be backing Windows 8 by the end of 2012. They must hope that Windows 8 tablet is a hit for this to give them any market share boost over Apple.

That means that all of the PC vendors will most likely lose ground to Apple next year, and knowing Apple, once they get to the top of the PC market share mountain, they just may have enough new products in their upcoming arsenal to keep them there for some time. If this happens, the big PC companies may have to get used to playing second banana to Apple in this new role of #1 PC vendor, something that they would never have dreamed would happen.

Gaming AMD’s 2012 Strategy

AMD intends to pursue “growth opportunities” in low-powered devices, emerging markets and Internet-based businesses.

There’s an awful lot of mis-guided analysis wafting about regarding AMD’s new strategic direction, which the company says it will make public in February. This piece is to help you (and me) sort through the facts and the opportunities. I last took a look at AMD’s strategies earlier this year, available here.

Starting With the Facts

  • AMD is a fabless semiconductor company since 2009. The company depends on GlobalFoundries and soon Taiwan Semiconductor to actually fabricate its chips;
  • In its latest quarter, AMD had net income of about $100 million on $1.7 billion in revenue. Subsequently, the company announced a restructuring that seeks to cut costs by $118 million in 2012, largely through a reduction in force of about ten percent;
  • AMD has about a 20% market share in the PC market, which Intel says is growing north of 20% this year, largely in emerging markets;
  • AMD’s products compete most successfully against rival Intel in the low- to mid-range PC categories, but 2011 PC processors have underwhelmed reviewers, especially in performance as compared to comparable Intel products;
  • AMD has less than a 10% market share in the server market of about 250,000 units, which grew 7.6% last quarter according to Gartner Group;
  • AMD’s graphics division competes with nVidia in the discrete graphics chip business, which is growing in profitable commercial applications like high-performance supercomputing and declining in the core PC business as Intel’s integrated graphics is now “good enough” for mainstream buyers;
  • AMD has no significant expertise in phone and tablet chip design, especially the multi-function “systems on a chip (SOCs)” that make up all of today’s hot sellers.

What Will AMD CEO Rory Read’s Strategy Be?

I have no insider information and no crystal ball. But my eyebrows were seriously raised this morning in perplexity to see several headlines such as “AMD to give up competing with Intel on X86“, which led to “AMD struggling to reinvent itself” in the hometown Mercury News. I will stipulate that AMD is indeed struggling to reinvent itself, as the public process has taken most of 2011. The board of directors itself seems unclear on direction. That said, here is my score card on reinvention opportunities in descending order of attractiveness:

  1. Servers —  For not much more work than a desktop high-end Bulldozer microprocessor, AMD makes Opteron 6100 server processors. Hundreds or thousands more revenue dollars per chip at correspondingly higher margins. AMD has a tiny market share, but keeps a foot in the door at the major server OEMs. The company has been late and underdelivered to its OEMs recently. But the problem is execution, not computer science.
  2. Desktop and Notebook PCs — AMD is in this market and the volumes are huge. AMD needs volume to amortize its R&D and fab preparation costs for each generation of products. Twenty percent of a 400 million chip 2011 market is 80 million units! While faster, more competitive chips would help gain market share from Intel, AMD has to execute profitably in the PC space to survive. I see no role for AMD that does not include PCs — unless we are talking about a much smaller, specialized AMD.
  3. Graphics Processors (GPUs) — ATI products are neck-and-neck with nVidia in the discrete graphics card space. But nVidia has done a great job of late creating a high-performance computing market that consumes tens of thousands of commercial-grade (e.g., high price) graphics cards. Intel is about to jump into the HPC space with Knight’s Corner, a many-X86-core chip. Meanwhile, AMD needs the graphics talent onboard to drive innovation in its Fusion processors that marry a processor and graphics on one chip. So, I don’t see an AMD without a graphics component, but neither do I see huge profit pools either.
  4. Getting Out of the X86 Business — If you’re reading along and thinking you might short AMD stock, this is the reason not to: the only legally sanctioned software-compatible competition to X86 inventor Intel. If AMD decides to get out of making X86 chips, it better have a sound strategy in mind and the ability to execute. But be assured that the investment bankers and hedge funds would be flailing elbows to buy the piece of AMD that allows them to mint, er, process X86 chips. So, I describe this option as “sell off the family jewels”, and am not enthralled with the prospects for success in using those funds to generate $6.8 billion in profitable revenue or better to replace today’s X86 business.
  5. Entering the ARM Smartphone and Tablet Market— A sure path to Chapter 11. Remember, AMD no longer makes the chips it designs, so it lacks any fab margin to use elsewhere in the business. It starts against well-experienced ARM processor designers including Apple, Qualcomm, Samsung, and TI … and even nVidia. Most ARM licensees take an off-the-shelf design from ARM that is tweaked and married to input-output to create an SOC design, that then competes for space at one of the handful of global fab companies. AMD has absolutely no special sauce to win in the ARM SOC kitchen.To win, AMD would have to execute flawlessly in its maiden start (see execution problems above), gain credibility, nail down 100+ design wins for its second generation, and outrace the largest and most experienced companies in the digital consumer products arena. Oh, and don’t forget volume, profitability, and especially cash flow. It can’t be done. Or if it can be done, the risks are at heart-attack levels.

“AMD intends to pursue “growth opportunities” in low-powered devices, emerging markets and Internet-based businesses.” One way to read that ambiguous sentence by AMD is a strategy that includes:

  • Tablets and netbooks running X86 Windows 8;
  • Emerging geographic markets, chasing Intel for the next billion Internet users in places like Brazil, China, and even Africa. Here, AMD’s traditional value play resonates;
  • Internet-based businesses such as lots of profitable servers in the cloud. Tier 4 datacenters for Amazon, Apple, Facebook, Google, and Microsoft are a small but off-the-charts growing market.

So, let’s get together in February and see how the strategy chips fall. Or post a comment on your game plan for AMD.

The Real Reason Google Released an iOS Gmail App

Last week, Google re-released their much maligned iOS Gmail application. It includes a few features over and above the photostandard iOS email app, but nothing that is really exciting the wide swath of users if “number of stars” is any indicator. To boot, many have argued that the Gmail app actually removes features from standard iOS email platform. So the question is why did Google really launch Gmail application for iOS?  There’s a lot here beneath the surface.

Gmail App for iOS

Gmail for iOS adds the following functionality over the standard iOS email client:

  • Ability to see one entire thread on one screen
  • “Important” and “everything” distinctions similar to the Gmail.com website
  • Report SPAM
  • Full message text search
  • Labels
  • Visual addressing.  See the addressee’s avatar.

Net-net this brings it more in-line with the full desktop client.  One could say it detracts from the experience:

  • Tiny, unreadable text size depending on email source
  • Lose fast access to other email clients like Yahoo or Exchange
  • Slow initialization unless already opened

 

It’s About a Entry Point to Other Google Services

Sure, Google will improve and tweek the experience to improve the app, but why did they develop it in the first place?  First, imageit’s about Google services and getting user to them from an iOS environment……. and advertisements. Think about this… what are the four most likely places Google could derive revenue from.  And when I ask that, I mean the first entry into the revenue stream or the starting point:

  • Search
  • Maps
  • Email
  • Social media

 

Once a user reaches this entry point, then Google can “cross-sell” them into:

  • Shopping
  • Books
  • Videos
  • Music

 

It’s About Micro-Segment Profile Development

Most importantly, mail provides one of the riches data sets from which to build ad profiles.  Google indexes every email you send and receive and from it builds micro-profiles about you. The better the profile, the better the ad targeting, the IMG_0899higher the CPM and CPC.  All of this means more money for Google.  If users get lured away from Gmail, Google loses this.

Wrestling For Inside Control

Google is already the leader in search and maps and has the preferred placement on iOS, but Gmail is just one of a line listing of mail options. This becomes a problem for Google in that now Apple and iOS become the control point for users. Furthermore, what happens if users get more comfortable with iOS mail and even worse, iCloud email? None of these is good for Google and Google will keep wrestling with Apple until they can get the inside edge.

Tis’ the Season of the iPad

Nielsen released the findings of a U.S. Survey where they were hoping to discern what electronics products will be hot for the 2011 holidays. Among kids, not terribly surprising, was the iPad atop the list for kids aged 6-12 ranking an all time high with 44% naming the iPad as their most desired product for holiday 2011. To quote the Nielsen study:

Consistent with U.S. kids’ 2010 wish lists, the Apple iPad is the most desired consumer electronic among kids ages 6-12 for holiday 2011. In fact, the iPad increases its stronghold, with nearly half (44%) of kids expressing interest in the product, up from 31 percent in 2010. Two other popular Apple devices – iPod Touch (30%) and iPhone (27%) – round out kids’ top three, with computers and other tablet brands each appealing to a quarter of younger consumers.

I would like to point out how significant the reality is that our kids are growing up using tablets and more importantly touch computing platforms. This fundamentally sets the stage for the massive shift in computing we are anticipating over the next 5+ years.

What is interesting as well in this category is that Apple owns the top three categories in this age group, a significant change over the same survey last year. Again young US consumers, and I would argue in other parts of the world as well, Apple is gaining as a desired brand. I’ve stated how important brand is to the long term life of a customer more then a few times and the significance of this for Apple can not be overlooked by competitors.

Also and perhaps the most significant statistic in this age group is how the desire for a computer has moved down. More on that shortly.

Looking at the 13 years and older demographic Nielsen found:

Among consumers ages 13 and older, appeal for the iPad (24%) has also broadened relative to last year (18%), and exceeds that of computers (18%), 2010’s top item. Further, it appears the iPad has successfully paved the way for other tablet offerings, as a notable 17 percent of adults/teens also express interest in non-Apple tablets.

What is surprising is that for the first time in this US demographic the iPad has overtaken the computer as the most desired holiday item. I know there is a hot debate about whether the iPad, or tablets in general, are the computers of the future. I tend to believe they are but regardless of who is right, for the time being, the iPad is a more desired product than PCs. Again that may not always be the case but the reality is that it is right now.

This is significant because I believe that tablets will extend the life of notebooks in consumers lives giving them less of a reason to urgently upgrade older notebook technology. This is significant because if I am right it will throw off the anticipated refresh rate of notebooks and desktops in consumer markets.

From an industry standpoint the tough reality many have to start thinking about is the very real possibility that tablets may very well be replacing notebooks.

Of Course Amazon Kindle Fire Cannibalizes the Apple iPad

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

Different Target Markets, BUTimage

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

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

Different Needs, BUT

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

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

It Won’t Matter This Holiday Season

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

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

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Apple Is Becoming the New IBM

“No one ever got fired for buying an IBM.”

That phrase was popular when IBM, in conjunction with Microsoft, was becoming the standard business workstation in the mid-to-late 80’s. Deciding to purchase products from the industry leader was the safe bet, the one with the least risk. This was the underlying psychology of corporate IT buyers and it served them well for many years.

In our conversations with consumers, we find a similar sentiment toward Apple products. Consumers who are purchasing smartphones or tablets for the first time are tending to go with Apple because they are the safe bet in their minds. Other companies may have competitive products with price or feature advantages, but often come with greater risks.

Many consumers we interview have heard mixed feedback or negative stories from Android customers about devices acting up after 6-8 months, containing buggy apps or malware, and getting terrible customer support from their carrier or manufacturer. The reverse is true for first time smartphone and tablet consumers who note the overwhelming amount of positive feedback they hear from people who own iPhones and/or iPads.

It is essential to understand that consumers are very savvy, they do actually shop around, and do research both online and with friends and family. When they constantly hear positive stories and how much those they know love their iPhones, it becomes pretty hard to not go with the safe bet. The decision is even easier now that the iPhone is on all the major US carriers besides T-mobile and rapidly becoming available on all major carriers world-wide.

It is also important to know that when we do consumer interviews and analyze consumer buying habits we are not interested in “early adopters.” Early adopters are predictable and don’t always represent the mass consumer market. We focus more on those who are not in the tech elite, but are practical and desire technology without the hassle of having to manage technology.

This is fundamentally why I believe the analogy of IBM being the safe bet for business rings true with consumers and Apple for the time being. As I stated in my Dear Industry piece last week, this market will evolve and mature quite quickly. I do not expect any one single platform or piece of hardware to control the majority of market share. However, for the time being, a very large portion of consumers are choosing Apple products. The iPhone is the single best-selling phone on the market by far. The iPad is forecast to continue to control over 70% of tablet market share in 2012 and still hold healthy market share in 2013.

Both the smartphone category and the tablet category are in a growth phase. The global smartphone category is projected to grow at 49.2% over the next 5 years and tablets are projected to grow at 200% in 2012. When you look at the numbers and the expansive and rapidly growing TAM for these products going forward you do not need to be the market leader by any means to still sell a significant amount of devices. This is why we need a more informed conversation on market share and include profit share as a part of that discussion.

For many consumers, I am willing to bet, their first smartphone and their first tablet will be an iPhone and a iPad … and for the same reason that an IBM was the business user’s first computer: it’s the safer bet.

Lastly to further make my point, have you ever seen an Apple retail store anywhere close to empty?

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The Kindle Fire and Nook Tablet Will Not Slow the iPad

Philip Elmer-DeWitt reported on the Fortune blog about data released suggesting the potential impact of the Kindle Fire on iPad sales. The data originated from ChangeWave and points out several key findings from their survey of “early adopter types.”

  • 5% of those surveyed said they had pre-ordered or were very likely to buy Amazon’s new Kindle Fire, exceeding the 4% who said they were very likely to buy the original iPad in 2010.
  • 26% of those 5% said they would delay or put on hold the purchase of a new iPad.

    •  
    I have to question the FUD this data is causing for a number of reasons. First of all the survey was conducted with early adopters (early adopter types actually whatever that is). Early adopters are not the mass market and nor do they represent the mass market. Early adopters shop for technology with a very different mindset than mass market consumers. Because of that it is hard to use data only taken by early adopters.

    Taking the data one step further only 5% surveyed said they pre-ordered or were likely to buy the Kindle Fire. If we do the math, 5% of the 2,600 early adopters types they surveyed means 130 people out of 2,600 said they pre-ordered or were very likely to buy the Kindle Fire. Keep in mind these are early adopters and I’m guessing most if not all of those 2,600 surveyed owned iPads.

    Now 26% of the 130 (5%) said they would delay or put on hold the purchase of a NEW iPad. That means 33.8 people of the 2,600 early adopters surveyed said they would delay or put on hold the purchase of a NEW iPad. When we look at the data under that lens the headlines becomes less ominous for the iPad.

    Now I do expect both the Kindle Fire and the Nook Tablet to do well. However, the fundamental difference is that those two products are competing with each other rather than with the iPad.

    Brooke Crothers at CNET provided research from eDataSource that stated preorders of the Kindle Fire were tracking to exceed one million. I have seen a number of credible reports forecasting Amazon to sell 4 million Fire tablets during the quarter. Most recently the DigiTimes today reported that Amazon has upped their orders to 5 Million due to demand.

    Both those numbers are plausible but the point needs to be made that those customers are either early adopters or customers who were in the market for a Kindle in the first place. I have a hard time believing that mainstream consumers (not early adopters) who were strongly considering an iPad have changed their mind and now going with the Kindle Fire or Nook Tablet.

    IDC’s forecasts for readers in 2011 are 16.2 million, I actually believe that is low, this category is still hot with a lot of consumers. My point, however, is that those consumers in the market for ereaders like the Kindle and the Nook are not in the market for iPad’s, yet at least.
    I’ll end my take on this data with this. Brooke also quoted a separate report today from Rodman & Renshaw’s Ashok Kumar claiming that iPad momentum is slowing. Asok stated:

    “Our checks indicate that production volumes have been scaled back due to moderating sell-through. We estimate that iPad volumes in the current quarter will be 12-13 million units, down from previous estimates of 14-15 million.”

    I think he is wrong but even if he isn’t that would still be more iPads in a quarter than Apple has sold before still putting them over 30 million iPad’s sold in calendar, not fiscal, 2011. That’s still a lot of iPads.

    [VIA Fortune, CNET]

    A Digital Insider Scoffs at Townshend

    As an industry insider – on way more than one level – it’s hard to take Pete Townshend’s comments as anything more than another great artist railing at the system.  Look, in the end, we all have to admit that the system is broken.  That’s one thing that Townshend got right in that interview.  After that?  Well, it’s all up for debate.  But the fact that the debate was called to the floor again, that’s a good thing.

    Let’s look at what he probably got wrong.  Apple is not the villain here.  In fact, probably the opposite.  Apple is responsible for 75% of all LEGAL music downloads.  And there’s no way that this makes them a vampire.  It makes them a hero, of sorts.  By creating a closed system, where one download went to ONE machine, Apple stopped the bleeding of way more than royalties. It addressed a cultural shift that it was OKAY to steal music.  “Sharing.”  So there’s something else that Townshend got right in that interview.  Stealing and sharing are not the same thing – and the mere idea that music should be free is an utter insult to the millions of people who give their lives to create it.

    I should disclose here that I was part of Apple way back when and helped launch digital music before it broke wide open, but my 13+ years in digital consultancy have certainly shown me every side of this equation (and argument).

    Whether or not music should be free has gone where it belongs. It’s gone to artist-controlled DIY.  DIY creation and DIY distribution. The indie artists have unlocked the code.  Give away great material to build a tribe, and get that tribe to adore you.  They’ll show up with the money, for sure, but only after the love affair has begun.

    Here’s the other problem with Pete’s point of view – it assumes that Apple controls the digital distribution industry, and quite simply, it does not.  In the world of Spotify and MusicShark and locker systems, Apple is only one giant float in the parade.  Let’s clarify, they may even be leading the parade, but after a brief initial claim to the universe, way back when, they’re far from alone.  Having said that, it’s obvious that the consumer, overall, loves Apple.  Quite simply, in the words of futurist Gerd Leonhard, it’s easy.  It’s a plug and go solution.  It meets busy consumers where they want to be met, and serving the consumer IS the end game on the business side of music (and anything digital).

    The artistic side?  Producing great content and hiring mentors to aide and abet that?  I wish I could ask Townshend why that is at all iTunes’ responsibility.  That is a model that we see fading at every label, sadly (& that’s me wearing my hat as a former A&R exec at one of the majors).  From this insider’s viewpoint, however, it will fade, but not die.  There is a space for grooming artists, from a label’s point of view – otherwise we end up with the music industry’s version of Yentl for every project.  (The same Editor, Producer, Writer and Actress, if you needed me to spell out that comparison.)  Without label support, bands have limited objectivity of their work, at best.  But we KNOW what percentage of artists get signed.  So this new world of digital DIY is an amazing opportunity for artist AND consumer. Which brings us to Townshend’s issue with gatekeepers – one that social media and DIY will summarily trump, given enough time. Spaces like iLIke and Facebook will level the playing field.

    Finally, it’s NOT Apple’s job to bridge the gap between labels and DIY. They are, like it or not, a retailer.  Why should they be expected to fix what’s broken in music?  The business model for direct sales/acquisition of recorded music in the traditional sense is collapsing.

    But with all of the GREAT minds in the digital and music space, of course we’ll find a new model.  Music does far more than soothe the savage breast, it is the most vital language of unification.  Ask the millions of Chinese listening to Gaga or Beiber – or just look at the worldwide recognition of Mozart.  Or the global domination of Idol.

    Yes, there are definitely parts of the foundation with cracks, or worse, but I have full confidence from my life experience of consulting with the industry leaders and artists, that we’ll find a new and more powerful model to propel us forward. Until then, in the immortal words of Sonny and Cher, the beat goes on.

    Kelli Richards
    CEO
    The All Access Group, LLC

     

    When Siri Becomes A Member of the Family

    Siri is much more than just a useful feature for Apple’s iPhone 4S. Siri is also incredibly strategic for Apple. I have written quite a bit on the subject of how software platforms become sticky. The point I continually emphasize is that we who study the industry need to understand “ecosystems” more than products. What I mean by that is that consumers, when they buy technology products, are moving from a product buying mentality to an ecosystem buying mentality – they just don’t know it yet.

    Products by themselves are not sticky and have very little consumer loyalty. In terms of products, brand or lowest price is what keeps consumers coming back. But as we transition from personal to personalized computing, consumers will stay loyal to ecosystems more than simply brand or product, even though those play into the ecosystem. Think of these products as screens which allow consumers to tap into a rich ecosystem driven by software and services.

    As I evaluate products, platforms, and companies’ strategies, I am looking for things that invite consumers into an ecosystem and then encourage ecosystem loyalty. This is essentially the root of differentiation going forward.

    If we look at the platform as the basis for an ecosystem, then right now the companies with ecosystems are Apple, Microsoft, Google (with Android) and RIM. Some ecosystems are more fleshed-out than others, but as a baseline those are the four — for now.

    The key to any of these companies’ long-term success is to continue developing innovations that keep consumers loyal to their ecosystem. When this happens, consumers are less likely to switch from one platform to another. For example, consumers who have invested time, money, and energy in Apple’s ecosystem are less likely to jump to Android for their next phone due to the high cost and inconvenience of switching.

    This is why I think Siri is so incredibly strategic for Apple. Siri in my opinion is the first step in moving computing from personal to personalized — something that happens when your personal electronics learn and understand things about you without you having to personalize it yourself.

    When you use Siri, even though it is in beta and in a very early stage of its life-cycle, you observe how it learns and remembers certain key things about you. Inevitably over time as Siri learns more about you and hits her groove as a true personal assistant, this feature will keep you loyal to Apple’s ecosystem.

    Credit: AP
    Imagine if over the period of a year or two, Siri has developed into a true personal assistant adding value all the way through task automation, discovery of places and events based on personal preference, geo-location assistance and more. After all the time you have spent living with Siri, who is learning quite a bit about you in order to be valuable, would you really fire her and go buy a different smart phone just because it is cheaper?

    I don’t know a single executive with a personal assistant (who they often consider as a member of their family) who would fire that assistant just because he or she can find another one who’s cheaper. Rather, when you find a good assistant you hold on to them and stay loyal.

    In fact, ask any executive what they hate most about hiring a new assistant and they will tell you it is the initial training process.

    The same will be true with Siri as the technology evolves and gets better and even more useful. The amount of hours put into training Siri to understand critical elements of your life, preferences, habits and more would require quite an undertaking and a headache to simply start over with another device, assuming another device has such a feature of course.

    This is why Siri is strategic for Apple. Siri is another piece of the Apple ecosystem that will command consumer loyalty. This is why Apple competitors should be concerned. The more people Apple gets into their ecosystem, the less likely they will consider competitors’ products year in and year out.

    Ecosystem loyalty will be the battleground of the future and companies who do not build a healthy ecosystem that drives consumer loyalty will be in for an uphill battle.

    The iOS and Android Mobile Web Disparity

    There are two interesting data points released that I think is worth asking some questions. The first comes from Net Applications and it plots out mobile web browsing OS share by platform. The full chart is below.

    What strikes me in this chart is the clearly dominant iOS platform when it comes to mobile web browsing over all platforms. It needs to be pointed out that Net Applications is tracking iPhone, iPad, and iPod touch but also all Android phones and tablets. We know there are now well more than 250 million iOS devices in the market so there is a clear lead in volume over Android. However, at the same time we know that Android is growing explosively fast. Even with the Android explosive growth it seems that Android customers are still not nearly as heavy web browsers as iOS consumers.

    One other point on the Net Applications chart is that since it does contain iPad, and we know iPad is rapidly climbing the charts with web browsing share on its own, then we need to also look at a similar chart without iPad. That is exactly what StatCounter provides us with.

    In the chart below we see a picture of web browsing OS share with only hand-held devices, so not including tablets.

    This shows a very close picture of iOS to Android hand-held only browser share but still showing iOS in the lead. Still interesting that iPhone and iPod touch account for more web browsing than all Android smartphones in the market. So again it appears that even with hand-held devices iOS consumers browse the web more than Android consumers.

    I have a few observations.

    First iOS is a superior web browsing experience. Having used both platforms quite a bit I can attest to this fact that the web browsing experience on iOS is better than on Android.

    Android consumers are using more apps than browsing the web. This has come back true from many of our Android consumer interviews. They use more of the native apps for search, Facebook, Twitter, etc and conveyed to us that general web browsing is less of a use case for them. This again will vary between power user and average consumer, but still true in a general sense.

    iPad is poised to become one of the most dominant web browsing platforms. I have not been shy in proclaiming how touch computing and the tablet form factor is the computer for the future. I’ve also stated that in my opinion web browsing is better on a tablet than on a PC. When we look at the Net Applications chart, which includes iPad, we see how wide the gap with iOS is when the iPad is counted in mobile web browsing. This is an incredibly significant trend and one that should concern Google.

    Overall all Google still gets a serious chunk of revenue from iOS devices when it comes to mobile search. The fact that in iOS 5 consumer can change their search engine preference should concern Google greatly.

    Every company in mobile search needs to understand this data. It demonstrates how tablets are not only more than a fad but how important they are to the mobile web of the future.

    [Other Good Articles VIA BGR, Fortune, SlashGear,GigaOM]

    Apple is Still the #1 Smartphone Vendor

    There has been quite a bit of interesting media and headlines this last week pointing to data related to Samsung’s latest earnings and smartphone shipments. Many are making the claim that Samsung is now the number one smartphone vendor by volume. However, when we dig deeper into the numbers we find a different story.

    First (something that shockingly needs to be continually pointed out), the numbers released in Samsung’s earnings of 27.8 million smart phones shipped is product shipped into the channel not sold to consumers. In reality the carriers stores are Samsung’s customers since their goal is to sell phones to carriers who then try to sell them to consumers. This is called having a channel strategy, something Apple does very differently due to their rather large retail presence. Another differentiating point regarding numbers is that Apple actually releases the number of products sold to consumers where many other companies do not.

    Second, the statement that Samsung is the largest “shipper” of smartphones can only apply to Samsung’s Q3 for 2011 not per annum. Apple still sells annually more smartphones than any other manufacturer.

    It is tough to say exactly how many smartphones Samsung “shipped” into channel in 2011 to-date since they did not disclose smartphone shipment data in their Q2 earnings. That being said I’ve seen credible attempts to break down estimates and the most logical number I have found for “shipments” into channel from Samsung thus far in 2011 is 50.2 million. In that same period (since January of 2011) Apple SOLD 56.09 iPhones. This is why I am confident Apple is still the number one smartphone vendor. One last point here, we believe Apple will SELL north of 25 million iPhone’s (conservatively) in this upcoming holiday quarter.

    We need to be much wiser if we are going to make headlines with market share claims. I understand to many market share is a big deal but I don’t believe it is as big a deal as people make it out to be.

    Henry Blodget of Business Insider makes a point that I disagree with. In his column on why Apple should be worried about this Samsung data he states:

    As the history of the tech industry has demonstrated again and again, technology platform markets tend to standardize around a single dominant platform. Although several different platforms can co-exist while a market is developing, eventually a clear leader emerges. And as it does, the leader’s power and “network effects” grow, while the leverage of the smaller platforms diminishes.

    I don’t disagree that Henry’s observation is true, I simply don’t believe it will be true in the future. The flaw in this observation is that it is only true when a new product, technology or market begins and moves to maturity. As a market matures, it is true that a standard emerges. This standard helps drive the market to maturity. Once the market matures however it becomes saturated with many variations and departures from the standard.

    For Henry’s statement to have absolute truth we would need to look farther back than just the technology industry to ALL consumer products. If we do that we find that what I pointed out is always true. Once a market matures it fragments and thus there is no longer a dominant market leader. Study consumer packaged goods, automobiles, consumer appliances and more and you will find this to be true.

    This is why I am confident that Apple, Android and most likely Windows Phone will all compete for market mobile share but there will be no dominant leader like there was when Microsoft had 98% Windows share. That future will not happen, as all three platforms will co-exist and each have chunks of the market to themselves.

    Smartphones are 5% of global handset shipments world-wide. If we think that this game is anywhere close to being over we would be deceiving ourselves. We have a long journey ahead and one hopefully filled with tremendous competition, because when that happens consumers always win.

    What It Will Take for Apple to Crack TV

    Steve Jobs posthumously set off a new round of speculation about that perennial object of desire, the Apple television, by telling biographer Walter Isaacson: “I’d like to create an integrated television set that is completely easy to use. It would be seamlessly synced with all of your devices and with iCloud. No longer would users have to fiddle with complex remotes for DVD players and cable channels. It will have the simplest user interface you could imagine. I finally cracked it.”

    Old TV with Apple logoThere’s no question that TVs and their rapidly multiplying set top boxes need a vastly simplified user interface and good reason to believe that Apple might be the company to deliver it. The problem is that if the UI were really the problem, it probably would have been solved by now. The real, and much, much harder problem is cracking the business models that control how TV content is delivered.

    The failure, at least so far, of Google TV illustrates the challenge. Google set out to solve the two problems that have plagued efforts to fix television. First, you must find a way to bring together the horribly fragmented offerings of TV and movie content on the web. There’s a lot of content out there, from Hulu to Netflix  to Amazon.com to iTunes to networks’ own sites. But no one site or service offers all the content a viewer might want, so a good user experience requires pulling many sources together. Second, live TV is still important for many things, especially sports, and is likely to continue to be so for a long time to come. So you need a way to integrate a live, and for practical purposes, that means a cable, feed.

    Google tried to solve the first problem with the best tool it has, using search to discover web video and to try to bring it together into a common interface. Building great UIs isn’t Google’s strength, but its real problem was that content owners sabotaged the effort from the beginning. The content owners, from Hollywood studios to networks to sports leagues, live in an immensely profitable symbiosis with cable distributors. The owners and distributors have become reconciled to the idea of seeing the content on computers, tablets, and handsets, but will do everything in their power to keep it off TVs other than through their own fragmented, paid services, such as Hulu+. So they blocked Google TV’s access to these services.

    The problem of integrating a live cable feed is even uglier. Google tried to solve the problem by the ugly kludge of have the Google TV box control the cable set top box, which most of the time has to be done by emulating an infrared remote control. A slightly better, but much more complex and expensive solution is to turn a third-party box into a cable STB by using CableCARDs and Tru2way software. There is every indication that the cable operators will drag their feet on allowing third parties to integrate live feeds for as long as possible.

    Jobs’s cryptic remark to Isaacson gives us no clue about whether he solved these problems, but it seems unlikely. No matter how brilliant Apple is, these issues cannot be resolved unilaterally; the content owners have to be aboard. And Hollywood is, if anything, more suspicious and afraid of Apple than it is of Google.

    Boosters of the Apple television idea argue that Apple went up against both the music industry and the wireless carriers and revolutionized their businesses. In the case of music, Apple went after an industry whose business model was being destroyed by massive file sharing and which, in the end, had little to lose by trying things Apple’s way.

    The iPhone-carrier story is more complex. It is easy to forget that Apple initially tried to revolutionize the business by selling the original iPhone without a carrier subsidy and had to back down in the face of carrier resistance. It’s true that Apple has beaten the carriers on issues such as handset branding, but it has not changed their fundamental business model and no longer seems much interested in trying to.

    The studio-sports league-cable complex promises to be a more formidable opponent than either music companies or carriers. For now, at least they have the high cards. Maybe some day Apple (or Microsoft, or Google) will look like a more attractive partner to content owners than the cable companies are. But that day seems several years away at the earliest. And until it does, TV will be a very hard nut for Apple or anyone else to crack.

     

     

     

    Why Google and Microsoft Hate Siri

    As I watched Andy Rubin’s interview at the WSJ D Asia conference I became highly intrigued by the comments he made about Apple’s Siri. Rubin told Walt Mossberg “ I don’t believe your phone should be an assistant…Your phone is a tool for communicating,” he said, “You shouldn’t be communicating with the phone; you should be communicating with somebody on the other side of the phone.” (

    Here is a link to the interview if you haven’t seen it.

    And then Microsoft’s Andy Lees, when questioned about Siri said it “isn’t super useful.” At the same time, he noted that Windows Phone 7 has a degree of voice interactivity in the way it connects to Bing, and thus harnesses “the full power of the internet, rather than a certain subset.”

    What are these two guys smoking? They both seem to miss the fact that Apple has just introduced voice as a major user interface and that its use of voice coupled with AI on a consumer product like the iPhone is going to change the way consumers think about man-machine interfaces in the future. I wrote about its impact on future UI’s last week and believe that it is just the start of something big.

    I have two theories about their response. One is based on jealously and one that is future driven, based on what Siri really will become very soon and its ultimate threat to their businesses. The first has to do with the fact that both companies have had major voice UI technology in the works in their labs for a long time. In the case of Microsoft I was first shown some of their voice research back in 1992. In Google’s case people in the know have told me that they have had a similar project in development for over 7 years. And in both cases they are way–way behind Apple–especially in Siri’s AI capabilities and speech comprehension technology.

    Interestingly, for even Apple it has taken a long time to get their voice technology working correctly. In fact, in the early 1990’s, I spent some time with Kaifu Li when he was at Apple working on a speech and voice recognition technology called Plain Talk. At the time, he was considered one of the major minds on this subject and when, after a short stint at Silicon Graphics, he joined Microsoft, one of his key projects was working on speech technology for them. Of course, if you know about Kaifu Li, you know that he left Microsoft to go to Google and was the subject of a major lawsuit between Microsoft and Google because Microsoft thought he would disclose to Google too much of what Microsoft was doing when he joined Google.

    Microsoft and Google, especially since they had the mind of Kaifu Li working on various projects while he was at these companies, cannot be too pleased that Apple was the one to actually harness voice and speech comprehension ahead of them since both have been working on similar technologies for quite some time. You can bet that if they were the one’s announcing a breakthrough voice technology they would be touting it as loud as possible. Instead they are downplaying it and to be honest, making real fools of themselves and their companies in the process.

    But the real reason these two companies hate Siri is because of what it will become in the very near future. In case you haven’t noticed it yet, Siri’s voice technology is actually a front to some major databases, such as Yelp, Wolfram Alpha and Siri’s own very broad database. But what it is really doing is serving as the entry point for searching these databases. So, I can ask Siri to find me the closest pizza joint and it quickly links me to Yelp, then to Google maps. On the surface this might look good for Google and Yelp since it ties them to these third-party sites that get the advertising revenue from this search. But what if Apple owned their own restaurant recommendation service and mapping system? They could divert all of these ad revenues to themselves. Here is an obvious prediction then if that is the case. How long do you think it is before Apple buys Yelp or Open Table and MapQuest or a similar available mapping service?

    How about searching for autos? Ask Siri where the closest BMW dealers are. It comes back and shows you the three or four BMW dealers within a 25 mile radius on a Google Map. But what if it could also tie you to Edmund’s database and instantly give you ratings of their cars, and dealers running specials? Or perhaps you are looking for an apartment in Hoboken? Ask Siri about available apartments in Hoboken and someday it could perhaps link you to Apartment Finder and while they might not need to own this database, Apartment finder would be Siri’s preferred first site to “search” for apartments and Apple would get a share in ad revenue from these searches.

    Indeed, it is pretty clear to me that Apple has just scratched the surface of the role Siri will play for them in driving future revenue. At the moment, we are enamored with its ability to enhance the man-machine interface. But that is just the start. Siri is actually on track to become the first point of entrance to “search” engines of all types tied to major databases throughout the world. And it will become the gatekeeper to all types of searches and in the end control what search engine it goes to for its answers.

    For this to work for Apple, they need to start acquiring or at least developing tighter revenue related partnerships with existing databases for all types of products and services. And then make Google or Bing the search engine of last resort for Siri to use if can’t find it in its own or its partner’s databases at Apple’s disposal. Oh yeah, and tie all of these searches to their own ad engine and drive as much of Siri’s “search” to one’s they have a revenue share deal with or own.

    Yes, Siri is an important product for enhancing our user interface with the iPhone. But Siri is in its infancy. When it grows up, it will be the front end to all types of searches conducted on iPhones, iPads, Mac’s and even Apple TV. And, if I were Google or Microsoft, perhaps I too would be playing down the impact of Siri since they know full well that it is not just a threat to their product platforms, but to their core businesses of search as well. In fact, they should be quaking in their boots since Apple is taking aim at their cash cow search businesses with their technology and could very well impact their fortunes dramatically in the future.

    For Apple’s investors, the call for them to start paying dividends on their cash hoard is too short-sighted. Instead, they should be encouraging Apple to start buying up as many databases and services they can and begin the process of entrenching Siri’s role as the first line of offense when searching for a product and service and get the search ad revenue from this for themselves. I believe that if they do this, they could probably add another $3-$5 billion in quarterly revenue to their already healthy business model within three years, as search becomes another profit center for Apple.

    So, don’t think of Siri as just a voice UI. Rather, think of it as the gatekeeper to natural language searching of diverse databases and search engines that Apple will link to an ad model that I believe will eventually make Apple the third major search company in the world someday.

    How iCloud is Like Amazon’s WhisperSync

    One of the interesting features I am picking up on iCloud is not the usual data syncing but how some apps are integrating iCloud. A good example of this is with games that are built to support iCloud.

    Games or apps in general that are built or updated to support iCloud bring with them the ability to know where the consumers last usage point was and let them pick up where they left off on other devices.

    This is a feature similar to Amazon’s WhisperSync with e-books, also a feature built into iBooks now, that lets you pick up where you left off of any book on whichever device you choose.

    Clearly there is a great deal of value to the consumer to be able to use the same app on multiple devices and always be able to pick up where they left off. Some apps, like games for example, this is more practical for but I expect developers to find more creative ways to use iCloud app syncing in the future.

    What is strategic about this for Apple is that this feature begins to become more valuable the more iOS devices you have.

    If all I had was my iPhone then I would never be in a position to use the app on any device but my iPhone. Therefore, the need for apps to sync my last position isn’t all that necessary. This feature becomes more valuable, as does iCloud, the more iOS devices I own. The more possible devices I have in my personal ecosystem the more something like iCloud becomes valuable.

    The game experience has been extremely useful and for the time being has encouraged me to play more games knowing I can pick up where I left off on another iOS device. This is the case in many times where as I play a game on iPhone and then when I get home I want to play the game on my iPad.

    I can see value in this with music and perhaps video also. Suppose I was watching a TV show at Starbucks on my iPhone, because it was the only screen I had with me, then when I get home I want to pick it up where I left off on my iPad. I can see a great deal of value in that experience.

    Given that iOS and iCloud are so new, I imagine that over time we will see these experiences get better and more comprehensive.

    In many ways we are just scratching the surface with the personal cloud concept and I am excited to see where it goes.

    Android and iOS: Two Very Different Philosophies

    In this column, I in no way intend to say one of these platforms is superior to the other. I simply want to explore how they both represent completely different approaches to software and user experiences.

    We have to start with a fundamental agreement that we live in a free world and support a free market. In this world consumer choice is the most powerful market driver. Competition brings choice and choice is very good.

    Therefore, consumers are free to choose whatever products in hardware, software, and services they so desire. Companies compete in an attempt to create features that appeal to consumer segments, interests, and preferences. Certain features in hardware, software, and services will appeal differently to different people. There is nothing wrong with that, as I said it is very good.

    The Android Philosophy
    At this point we must point out that Google is a services company. It is for this reason that we should expect a different hardware and software philosophy. As I continually point out in our analysis of Android for clients, Google is a services company and all hardware and software is to Google is simply a front-end to access their services.

    Android was created for the primary reason to help consumers access Google’s services on non-PC devices. Hardware for Google is just the physical object needed to run the software that is designed to access Google’s services.

    Google starts with a services mindset and philosophy then works backwards on how best to make those services as broadly accessible as possible.

    Google is also an engineering company and engineering companies historically struggle with making innovations accessible to tech lay-people.

    With all of that context, what Google has done with Android is impressive. Those who get excited about technology for technology sake get very excited about Android. Google and Android engineers regularly show some very visionary and perhaps “ahead-of-their-time-technologies.”

    This is not to say that tech lay-people can’t use Android. Many do, however, I would argue that those who have a tendency to tinker, customize, and tweak their hardware themselves, get the most excited about Android.

    Android’s challenge is to take many of these forward thinking things like, face recognition, fully customizable UI, flexible widgets, Android Beam (features found in Ice Cream Sandwich), etc, easier and compelling for every day people to use.

    The iOS Philosophy
    Apple on the other hand is a software company, who also cares deeply about making their own hardware. Apple is on the cusp of adding robust services to their ecosystem but unlike Google they approach everything as a hardware and software company not a services company. Services to Apple are a means where to Google services is the ends.

    To Apple, making innovations accessible to the masses is the underlying theme of all their hardware, software and now services philosophies. This is why they may not always be first with certain features but it is clear that if they don’t offer something the market wants out of the gate they will certainly add it and make it simple to use.

    Apple’s target with their products is those to whom technology is mostly foreign. Meaning not a core and central part of their every day lives. This is why when they release new products they only focus on certain features. The features they focus on solve tangible and every day needs and strike emotional chords with consumers.

    For example, when they launched the iPhone 4, they could have touted any number of features, instead they just demoed FaceTime and that was enough. It spoke for itself and showed consumers the value of the latest feature.

    Apple’s goal is to make technologists out of people who never cared about technology before. Their desire is to provide these consumers with sophisticated solutions that are extremely simple to use. I can’t stress how difficult this is but it is something Apple does extremely well.

    As I stated in the beginning, these two approaches represent just that–two different approaches. To each his own is the critical point I want to make.

    I am in the privileged position to get to provide opinion and analysis on all the platforms on the market. To some consumers where I influence buying cycles, like friends and family, I am comfortable recommending Android devices; to others, I recommend iOS.

    Where this really gets interesting is with the generations who grow up with technology, some call them “Digital Natives.” I watch my kids, for instance, who are perfectly comfortable jumping back and forth between my iOS and my Android devices.

    This next generation will grow up incredibly technical and tech savvy. Because of that, their demands and expectation of next generation personal computers will far exceed anything we can imagine today.

    [thumbsup group_id=”3485″ display=”both” orderby=”date” order=”ASC” show_group_title=”0″ show_group_desc=”0″ show_item_desc=”0″ show_item_title=”1″ ]

    How Apple Won the Mobile War

    HP LX 95
    The HP 95 LX

    I have been following handheld computing products for about as long as they have existed, going back to such forgotten products as the Hewlett-Packard 95 LX and the Psion Series 5. In 20 years of effort, only three products truly caught the popular imagination: The Palm PDA, the BlackBerry, and the iPhone. And of these, only iPhone became a true mass market success.

    Why? In the early days, especially, these products faced impossible technological hurdles. Miniaturization was still in a fairly primitive state,  so the devices were saddled with seriously inadequate processing power. Displays were awful–low-resolution, low-contrast LCD screens. And wireless connectivity was nonexistant.

    But designers managed to make a bad situation worse by trying to make devices do too much. The HP 95 LX and its successors were actually tiny MS-DOS computers; their ability to run Lotus 1-2-3 was a key selling point. But only a relative handful of people, mostly engineers, had any desire for such a product and it attracted an enthusiastic, but tiny, market. Numerous other devices came along in the mid- to late-1990s in an assortment of sizes and form-factors: the Apple Newton MessagePad, the Casio Zoomer, the IBM/BellSouth Simon (perhaps the first smartphone), the AT&T EO, the Motorola Envoy. All tried to do too much with too little, and all failed miserably.

    Palm P{ilot photo
    The original Palm

    The first device the break the paradigm was the original Palm Pilot of 1996. Its designer, Jeff Hawkins, had a Jobsian focus on the user experience; during development, he dropped any functions that he felt were too complicated and he swore that Palm users would never see an error message on their screens.

    The Palm didn’t try to do much; essentially it maintained contacts and calendar in sync with your computer and took input through a modified handwriting called Graffiti. But it worked vastly better than anything else at the time and was a hit. It was also, by way of the Handspring Treo, the direct ancestor of the modern smartphone, though its only means of communication was to a PC over a cable. (My review of the original Palm Pilot.)

    The first BlackBerry, in 1999, was also a very specific solution to a specific problem: mobile email. Early BlackBerries  had no voice capability. They were built on pager technology and the first model was called the RIM Inter@ctive Pager 950–the BlackBerry name came along a bit later.  The name is something of a giveaway; RIM came out of the pager industry and the 950 was conceived as a vastly improved pager.

    Instead of having to know a special pager number, send a page, and wait for the recipient to call back, the BlackBerry let you send an ordinary email and reach the recipient anywhere, any time.  A tiny but surprisingly functional keyboard, much better than those on the primitive “two-way pagers” of the time, allowed replies.And like the Palm, it also synchronized contacts and calendar with a computer. (Read my review of the original 950.)

    BlackBerry 950 photo
    The BlackBerry 950

    The BlackBerry was not an instant success. It started to catch on in a big way once RIM created the service that provided a secure link to corporate mail systems and enterprises started deploying the devices in large numbers. And, of course, the popularity grew once it gained voice capability. Like the Palm, the BlackBerry caught on because it served a real need and concentrated on doing one thing really well.

    Throughout the late 90s and early 00s, there was a continuing effort to build handheld computers. Microsoft and partners such as Compaq, Hewlett-Packard, and Toshiba, struggled mightily to cram something resembling Windows into a handheld product, but its PocketPCs, with their miniaturized Windows desktops, left users cold. It was only when Windows Mobile imitated the much simpler design of the Palm Treo that it achieved some modest success.

    Apple, after the failure of the Newton, avoided handheld computing in favor of creating a new market for the iPod. In typical Apple fashion, it let others get beat up and learned from their mistakes. By the time Apple came out with the iPhone in 2007, the world had changed again. The amount of processing power you could cram into a small device had grown tremendously. Big, high-resolution, touch-screen displays were economical. And wireless networks were ubiquitous.

    But like its few successful predecessors, the iPhone didn’t try to do too much, at least not all at once. The original iPhone was a limited device. There was no app store and no apps other than the ones Apple provided. Despite the widespread availability of 3G wireless networks, the phone was limited to 2G. And the battery struggled to get through a day of normal use. But it was an  instant hit because it did what it did well, without compromise, and in a way that delighted users. A year later, the iPhone 3G remedied the most glaring defects of the original, the App Store let a million apps bloom, and people finally had a full-fledged computer that fit in a pocket.

    Strangely enough, the rest of the industry was pathetically slow to respond to the iPhone. Microsoft stuck by Windows Mobile, not seeming to realize that the iPhone’s design had rendered its Windows-derived user interface as obsolete as punch cards. RIM, too, saw no need for fundamental change even as the iPhone began to steal away its core corporate market. Only Google, with no history in the business, rose to the challenge with Android. Android is good enough, and has an attractive enough business model, to make it the only real remaining challenger to Apple. But even it has yet to prove that it can do any better than remain a beat behind the iPhone.

    The Era of Personal Computing

    I have adopted a philosophy in my analysis over the past few years where I distinguish between personal computing and personalized computing.

    In a post a few months ago, I wrote about these differences and pointed out that because of the differences in personal and personalized computing the Post PC Era will happen in two different stages.

    The first stage is personalized computing. In this era, the one we are currently in, all of our personal computing devices are personalized by us. What I mean by this is we take the time to personalize the devices with our personal content, apps, preferences, interests, etc. In reality, however, how personal are these devices? They don’t actually know anything about us we just simply use them to get jobs done. We customize them and they contain our personal content but they really aren’t that personal.

    However in this next phase, the era of personal computing, things may actually get very interesting. In this era our devices will actually start to learn things about us and in the process become truly personal. Our most personal devices will learn our interests, schedule, preferences, habits, personality, etc. I know it sounds a bit scary but that is where we will inevitably end up.

    I believe Apple’s latest feature–Siri–demonstrates this future reality of personal computing. As Tim pointed out in his article yesterday, Siri and the underlying artificial intelligence engine, will learn key things about our unique tastes, interests, and more and over time become even more useful as a personal assistant.

    What is absolutely central for this personal computing era to become reality is we have to allow our devices to get to know us. Perhaps more specifically we have to trust our devices or the underlying company providing us the personal computing experience.

    John Gruber points this very point out in a post with some comments from Ed Wrenbeck, former lead developer of Siri.

    In an interview with VectorForm Labs Ed Wrenbeck states:

    “For Siri to be really effective, it has to learn a great deal about the user. If it knows where you work and where you live and what kind of places you like to go, it can really start to tailor itself as it becomes an expert on you. This requires a great deal of trust in the institution collecting this data. Siri didn’t have this, but Apple has earned a very high level of trust from its customers.”

    In the era of personal computing we will get beyond personalizing our devices and instead enter the era where they truly become personal to us because of their ability to know, learn, and be trained about who we are and our unique interests and needs.

    There are many great examples of this in Sci-Fi movies and novels but perhaps my favorite, because it is fresh, is how Tony Stark interacted with Jarvis in the Iron Man movies. Jarvis is what Tony Stark named his personal computer and as you can tell from his interactions in the movie, Jarvis knew quite a bit of the intimate details of Tony Stark.

    Jarvis was a personal computer, one that took on an entirely new way to be useful because of the artificial intelligence that was built on top of incredible computing power.

    Of course, this all sounds extremely futuristic but it will be the basis of what takes us from having to manually personalize our devices, to a future where our devices truly become personal and indispensable parts of our lives.

    Why Siri is Strategic for Apple

    Now that I have had some time to work with the new iPhone, and especially the new Siri Voice technology, I have been able to form a couple of opinions about this products market impact.

    As I mentioned in a previous post, from a big picture stand point, Apple’s use of voice and speech as a form of input marks the third time Apple has influenced the market when it comes to UI design and navigation. The first time they did it with the mouse and its integration into the Mac, and then with touch by making it the key input for the iPhone. Now comes voice, which I believe will usher in the era of voice input and will start to dramatically impact the future of man-machine interface.

    While voice input is a significant part of Siri’s feature set within the new iPhone 4S, it is its AI and speech comprehension technology that really makes it unique. More importantly, the more I use it the more it gets to know who I am, where I live, what I like, who I am related to and the more info it gets on me, the better it gets as well. For example, with in a few searches for Italian restaurants it now knows that this is a type of ethnic cuisine I like and remembers that. So, the next time ask it to find me an Italian restaurant, it becomes more accurate in its recommendations. It now knows my home address and office address and I can give it commands that play off these locations. For example, I can say,“remind me to call my wife when I get to the office” and as I walk into the door of my office complex it reminds me to call her.

    There are hundreds of ways that, once it begins to learn more about me, it can be quite useful and helpful. And as Apple has said, they will continue to link it to more powerful databases over time, giving it even greater reach to the information that I might need in my daily life. That linked with its continuing ability to learn about me makes Siri perhaps the stickiest application I have ever used. In the short time I have used it, it has become almost indispensable in a couple of areas.

    First, I now mostly speak my tweets and messages instead of typing them in. Second, I use it to input short emails as well. Having the Siri microphone integrated into the keyboard makes it so simple to use and this is now my first line for data entry.

    But the third way I use it is related to my business. As a market researcher, I have to do a lot of percentage comparisons when I look at various numbers. Over the years I have become pretty good at working out this math in my mind, but this method is not very precise. I normally come within one-to-three points of the correct answer and in a lot of cases that may be all I need for our predictions since these are based on known data and are informed projections. And in the past if I wanted precise percentages I would bring out the old calculator. But now when I want this number I just ask Siri and she does not guess. Her answers are always exact–and fast.

    The other thing it does extremely well is deal with appointments. I just tell it to schedule an appointment and it is done. And if there is a conflict it tells me that as well. Think of it as a smart personal assistant.

    BTW, this is not Apple’s first stab at this voice, speech AI concept. In fact, they pretty highlighted it in their Knowledge Navigator multimedia video they did in 1989. In this video it shows a professor interacting with a computer asking it questions and getting direct answers from it in ways that Siri does now. Ironically, this video and futuristic thinking was the brainchild of former CEO John Scully and former Apple Fellow Alan Kay, one of the most futuristic thinkers we have in the world today. But at the time, the technology was not there to do what was projected in the Knowledge Navigator. Even more impressive is the fact that while the Knowledge Navigator was apparently connected to a very large computer, Siri is being done in a pocket computer.

    Now, as Siri develops a strong database about me and my likes and dislikes, it is quickly becoming indispensable as a mobile assistant. I suspect that the more Siri and I become closer and it gets to know me better, I am going to be highly unlikely to use something else by another platform. Thus, the stickiness. Something that makes it very likely that I will stay within the Apple ecosystem as long as they continue to innovate and make Siri smarter and even more useful.

    iOS Morphing Into a Desktop OS?

    imageDuring the Apple WWDC, I was really struck at just how many features were added into iOS 5 and just how few new features had been added to Lion. Don’t get me wrong here, I like Lion a lot but after using many of the 250 new features, few altered how or what someone can do with a computer or already to with a tablet. The one exception was AirDrop, which makes peer-to-peer sharing easier. Also, many of the iOS features seemed like desktop features, and the new Lion features appeared to make it look more like iOS features. Let’s take a look.

    New Desktop-Like Features in iOS 5

    • Tabbed Browsing: I remember some apologists explaining away the lack of tabbed browsing with the iPad 1. Now Safari has tabs…. on its 9.7″ display.
    • Basic Photo Editing: No longer an add-on app like my favorite, Photogene, photo enhancements are available right inside the Photos app. Users can use auto-enhance, remove red eye and even crop photos.
    • Reading List: Previously available on the Mac, the iOS Safari browser has the Reading list, a place to save articles you wish to read later.
    • Mail Features: Now users can edit email text, add or delete email folders, and even search all the email text, not just the subject line for topics. All of this in the new Mail.
    • Calendar Features: Like on Lion, users can drag time bars to set meeting time, can view attachments inside the calendar app and even share calendars.
    • Mirroring: Via a cable to wirelessly through an Apple TV 2, see on a monitor or TV exactly what is on the iPad 2 or iPhone 4s.
    • Improved Task Switching: With new “multitasking” gestures, users no longer need to click the home button to return to the home screen or switch between apps. They use a four-finger left-to-right gesture to switch tasks and what I call the “claw” to go to the home screen.

    New iOS-Like Features in Lion

    New Gestures: Every iOS user is familiar with finger scrolling, tap to zoom, pinch to zoom and swipe to navigate. Now this is available on a Lion Mac.

    • image
    • Full Screen Apps: By design, every iOS is full screen. Now Lion has this capability.
    • App Store: Required since the first iPhone, now ships with Lion.
    • Launchpad: This is Lion’s fancy name for iOSs Home Screen. A bunch of app icons.
    • Mail Improvements: Yes, even desktop Mail is getting more like iOS. In this case, adding full height message panes.

    image

    So What? Why Should we Care?

    So what does this mean, if anything? It is too early to tell, but it could signal a few alternative scenarios:

    • Unity of UI? By uniting many of the UI elements across phone, tablet and computer, quite possibly it could make switching between iPhone, iPad and Mac easier. Also, as advanced HCI techniques like voice and air gesture emerge, do input techniques get even closer? Can one metaphor work across three different sized devices?
    • Easier Switch to Mac from Windows? The logic here says, even if you were brought up on a Windows PC, if you can use an iPhone or iPad, you can use a Mac.
    • Modularity? I’ve always believed that a modular approach could work well in certain regions and consumer segments, but only if the OS and apps morphed with it. For example, a tablet with a desktop metaphor makes no more sense that a desktop with a tablet metaphor. What if they could morph based on the state but keep some unifying elements? For instance, my tablet is a tablet when it’s not docked. When docked it acts more like you would expect with keyboard and mouse. They two experiences would be unified visually and with gestures so that they didn’t look like two different planets, but two different neighborhoods in the same city.
    • Desktop OS Dead or Changing Dramatically? What is a desktop OS now? If a desktop OS is a slow-booting, energy-consuming, keyboard-mouse only, complex system, then Microsoft is killing it with Windows 8 next year anyways, so no impact.
    • Simplicity Dead? If phone and tablet OSs are becoming more like desktop OSs, is that good for simplicity? Or are desktop operating systems getting more like phone and tablet operating systems? How do you mask the complexity and still be able to do a lot?

    Where We Go From Here

    We will all get a front row seat next year to see how users react to one interface on three platforms. Windows 8 will test this next year and Metro UI will be on phones, tablets and PCs. The only caveat here is the Windows 8 desktop app for traditional desktop which will server as a release valve for angst and a bridge to the future. Whatever the future holds, it will be interesting.

    iTunes and Consumer Share of Wallet

    I recently read an interesting article in the Harvard Business Review which proposed a theory that consumers give more share of their wallet (money) to brands they rank highly.

    The premise of the article was that companies need to focus more on their brand identity in the minds of consumers if they want to command more share of consumers wallets.

    I’ve had a similar theory but it wasn’t related to brand loyalty, although that makes sense, but more directly tied to a brands ability to be sticky.

    Granted, I am looking at this as it relates to the technology industry where the HBR article was focusing more broadly.

    From a technology industry perspective, companies who have more sticky solutions have a higher chance of maintaining or growing consumer share of wallet.

    To test my theory I researched and then plotted out my own annual spending in iTunes. I figured I was as good a test as any since I have used iTunes since the beginning in 2003. And I believe Apple has created one of the more sticky ecosystems on the market.

    Take a look at the chart below which we will call exhibit A.
     

     
    If you notice my annual spending in iTunes either stayed steady or grew on an annual basis. As Apple introduced more products into their ecosystem both in terms of hardware, new forms of media, and then apps, my iTunes spending went up significantly.

    Once I was committed to the Apple ecosystem and as Apple provided me with more value as a part of that ecosystem; they continued to get a steady share of my wallet.

    There are some essential points to understand as a part of this theory. First of all, I may very well spend more than most people in iTunes but I would still argue that annual iTunes spends would stay steady or grow the longer a consumer is in the Apple ecosystem.

    Second, the more products or “touch points” in that ecosystem either owned by a consumer, or by a family, contributes to the ecosystem loyalty as well as the overall opportunities to spend money.

    Of course brand is important and plays a role but perhaps not quite as much as the HBR article points out–or at least not as much in realm of tech.

    For example, if brand was directly tied to share of wallet then Google or Microsoft for that matter would have a larger share of wallet. I use those brands as an example because they are both ranked on the top 10 list of brands, both ahead of Apple according to InterBrand.

    I would argue, more important than brand in the mind of consumers is brand trust when it comes to share of wallet–especially in tech.

    The most important observation about this theory of brand loyalty equalling share of wallet in my test is that the obvious first step is to get consumers into the brand ecosystem so that brand can compete for share of wallet.

    In retail for example the common saying is “the first step is to get the consumer in the door.”

    For Apple they got consumers in the door with the iPod,then iPhone, iPad etc. This strategy continues as they offer more products at attractive price points which continue to get consumers into Apple’s door and more importantly into Apple’s ecosystem.

    Amazon has a similar strategy with the Kindle and now the Kindle Fire. These products, or screens, are the things that get consumers into the door and into the Amazon ecosystem. Amazon wants to provide as many touch points as possible for consumers to utilize their retail services.

    Similar to my iTunes spend history I would be willing to bet that folks who examine their Amazon history find a similar pattern. Namely that the longer you are committed to that service the more your annual spending goes up.

    In both my examples Amazon and Apple have a strong share of consumer wallet. Companies like Google and Facebook and others who want to drive commerce are having a harder time–even though they have strong brand rank in the minds of consumers. This is because they lack consumer trust.

    Companies who want to own a larger share of wallet need to create compelling products that get consumers into their door. Continue to create a trusted brand experience with their products, offer a vast array of products or services, is a sound strategy to keep consumers loyal to their ecosystems.

    “PC Free” in iOS 5 Doesn’t Mean “Free from PCs” (or Macs)

    There’s a new feature in iOS 5 that’s called “PC Free”.  While the definition is very specific, it conjures up a lot of images I would guess, specifically getting rid of the PC and Mac. So exactly what parts of the PC and Mac is it removing?

    “PC Free” is about removing the PC for a few tasks that are frankly awful parts of the iOS experience and primarily administrative. Here is how it’s described on the iOS 5 landing page:

     

    image“Independence for all iOS devices. With iOS 5, you no longer need a computer to own an iPad, iPhone, or iPod touch. Activate and set up your device wirelessly, right out of the box. Download free iOS software updates directly on your device. Do more with your apps — like editing your photos or adding new email folders — on your device, without the need for a Mac or PC. And back up and restore your device automatically using iCloud”.

    It sounds promising, the promise of getting rid of that nasty horrible PC or Mac. :-).  Can you really dump your Mac or Windows PC?

    I asked a few people in my family and at work what they liked doing on their PC and didn’t do on their tablet.  Here’s why they said they couldn’t ditch their PC or Mac to (UPDATED):

    • Text chat with someone on Google Chat at the same time as you are looking at FaceBook.
    • Quickly create a somewhat complex spreadsheet or presentation.  You really need a mouse to do this productively and iOS doesn’t support mice with Keynote or Numbers.
    • Download a file from multiple web sites in the background as you do something in the foreground.  There are a few exceptions with some apps, but certainly cannot be done in the iOS browser.
    • Compress a big file and email it.  Zipping or Rarring a file, attaching it, then emailing it.
    • Watch 1080p video. iPad has “768P” display for lack of a better term.  Yes, a user can watch 1080P on the iPad 2 on an extra display like an HDTV.
    • Importing HD video into the iPad that wasn’t taken on an iPhone or another iPad.  I am not aware of HD source video that’s shot to iOS specs.  I’ve had to reconvert gobs of videos on my PC to play on the iPhone or iPad.
    • Storing all your pictures. I am talking the multiple gigabytes of years and years of pictures. Alternatively you can rent iCloud space.
    • Store your entire music collection beyond iPads storage.
    • Store lots of personal videos.
    • “Perfect” personal video you’ve downloaded or shot with a camcorder that’s shaky, dark, etc.  Things that software like VReveal can do.
    • Face tagging. You’ll need iPhoto, Picasa, or Windows Live Photo Gallery for this.
    • Display different content on one display and different display on another.  There are a few exceptions, very few.
    • Any web site that uses Flash for navigation, like my local Mexican restaurant.
    • Print. I know, iOS says it can print. Have you gotten it to reliably print?  I didn’t think so. You think people don’t need printers anymore?  Tell my teenagers science and English teacher that.

    OK, so you get the point here.  PC Free means you don’t need a PC to do some very basic and fundamental things. If you do need to do something the very basics, you will still need a PC or Mac.

    iCloud is Awesome Yet Incomplete

    After release to developers at Apple’s WWDC, the Apple iCloud is available to all consumers today with access to iOS 5 and updated iTunes.  In many ways, it is incredible that millions will have access to the consumer power of the cloud.  It’s very integrated into the experience, but then again, it’s not as complete or comprehensive when compared to the best-in-breed cloud apps and services available today.  Will that make a difference in consumer acceptance?  Let’s see.

    icloud

    What Makes a Great Cloud Experience?

    A few applications define by example what a great cloud app or service can provide.  To a consumer, this will change over time and will also be dependent of their comfort and knowledge.   Some sites that are ahead of the cloud service game are Evernote, Amazon Kindle, and Netflix.  What makes these great examples of consumer cloud offer?   While very different in terms of usage, they share similar variables that in aggregate make them awesome:

    • Cross Platform: Windows, OSX, iOS, Android and the web.  Kindle and Netlix are even available on special-purpose devices like the Kindle and Roku.  Consumers can buy into the service and not worry about the platform going away.
    • Continuous Computing: Continuous computing means a few different things. On content consumption, the next device picks up exactly where the last device left off. On Netflix, if I am halfway through a movie on my iPad I can pickup at the same spot on my Roku. When I pick up another Kindle device, it asks me whether I want to go to the latest bookmark.
    • Sync: While a step back from continuous computing, it does assure that the same files are on the same system. On Evernote, every change I make is in synch when I open up the next device.
    • Continuous Improvement: Monthly and even weekly updates to add features and functionality.
    • Compatible and Data Integrity: Even with all these updates, the data keeps its integrity.  If the service has a question about which version is the master, it asks me.  Evernote will tell me that I have a duplicate entry and lets me pick the version or content I want.

    iCloud: Cross Platform

    As we all know, Apple by design works in its own “walled garden” but that doesn’t mean its completely closed off.  You cannot get iCloud-enabled apps like Pages, Numbers, Keynote or iBooks for Windows or Android.   Even worse, you cannot get to your photos and PhotoStream on any mobile device other than iOS.  To be fair, users can get access to Photo Stream on a Windows PC , but users should at least be allowed access to their own photos over the web if they want. Users can access iWork compatible documents on all “modern” browsers by going to iCloud.com and downloading files.  Windows users then need to drag and drop the updated file inside the web-based iCloud.com to update the file. – Grade D

    iCloud: Sync

    iCloud will automatically  “sync” photos (Photo Stream), purchased music and TV shows (iTunes), apps, letters (Pages), spreadsheets (Numbers), and presentations (Keynote), Reading Lists and Bookmarks (Safari), reminders (Reminders), calendar (Calendar), email (Mail), notes (Notes), and contacts (Contacts).

    There are some major exceptions.  iWork documents will not auto sync with the Windows “Documents” folder, as I think users would expect.  Sugarsync and Drobbox will automatically sync documents with Windows and any other file type with Windows.  Also, personal videos and commercial movies do not sync on any iCloud platform which I don’t fully understand.  Maybe its a concern with storage on iOS devices or storage and throughput  in the iCloud.  – Grade B

    iCloud: Continuous Computing

    Within iOS phones and tablets, users can start right where they left off for TV shows (Videos) , games (Games Center) and book bookmarks (iBooks).  These are real awesome capabilities especially for those where it’s hard to know where you left off.

    imageiCloud will not save the “state” for playing music (Music), playing movies (Videos), or web pages (Safari).  Add the PC and Mac into the continuous computing arena and iCloud experience starts to degrade for most all use cases for a variety of reasons.  iOS games don’t run or sync on a Mac or PC and on Windows  platforms iWork isn’t available.  Consumers over time will expect continuous computing on every usage model on every platform, the way Evernote does it today.   – Grade C

    iCloud: Continuous Improvement

    I cannot definitively answer this question as it will emerge over time, but I must extrapolate from what I have seen from previous drops of Apple software. Apple software app drops, with iOS in particular, have been consistent, very often, and very solid code. – Grade A

    iCloud: Compatible and Data Integrity

    So far so good, even on difficult to manage applications like word processing, spreadsheets, and presentations.  I make a one line change to a document without going back to “Documents” inside iOS and web Pages, the one line changed on every other system. – Grade A

    What, not Straight A’s and Does it Matter?

    Apple has never needed to achieve a 4.0 in everything to be successful.  Getting all A’s in the core segment of users and building useful solutions that just work has been the Apple hallmark.  The first iPhone proved this and the iPhone 4s will prove this again as everyone else offers 4G but Apple doesn’t have to. A good fallback to Continuous Computing in good Sync, and I believe that as long as Apple still allows other services with better cloud capabilities into their walled garden, it won’t be an issue now. Over time, I believe Apple will fill in the gaps in iCloud and that have fully thought through where they could add the most value and that’s what they hit first.  Your move, Google, Amazon and Microsoft.

    The 30 Percent Solution

     

    Blogs are unforgiving. The entire world can see that I expected the highlight of Apple’s iPhone 5 introduction last week to be a kumbaya love fest between Apple and Facebook. Facebook is number one in mobile social media apps. Apple is number one in smartphones and tablets. Yet even after 18 months, there was no official Facebook app for the iPad.

    So, other than the fact that there was no iPhone 5, and that no one at the Apple event even mentioned Facebook, let alone invited Mark Zuckerberg up on stage, my blog post was … well, pretty much in English.

    But today, Facebook finally announced its Facebook app for iPhone and iPad.

    According to the blogosphere, the hangup was caused by “negotiations” over who would be allowed to make money from apps sold by developers through the Facebook platform on the iPad. (You know, the developers who sell apps like Angry Birds, Hipstamatic, FarmVille,  weather, etc.)

    Apple’s standard deal is: We take 30 percent, bitch.

    Thirty percent on all paid apps, on all in-app purchases, and on subscriptions.

    (Google has a variant on this revenue model for its own developer ecosystem: We take 30 percent but we’re not evil, bitch.)

    Facebook sees that Apple and Google are rolling in clover, so it tells Apple it wants to create a separate revenue platform for mobile apps called Facebook Credits, and it wants to build it into Facebook apps that run on the iPhone and the iPad, which would bypass the Apple 30 Percent Bitch system and send that money directly to Facebook.  Negotiations must have gone something like this:

    Apple: ”You know what we think of Facebook? We own the operating system and you don’t, and just to make that point absolutely clear we’re choosing Twitter over Facebook as the social layer of the iOS 5 operating system. We have more than 200 million registered users on the iTunes store and we have their credit card numbers, and we make buying apps completely smooth and painless and frictionless, and Facebook doesn’t.”

    Facebook: “Oh yeah? Well, in that case, we’ll develop our app for HP’s new TouchPad. How do you like them apples?”

    Apple: [30-day pause] “And how did that work out for you?”

    Facebook: “Never mind. But we still have the most popular social platform in the universe, with 750 million users, and the only third-party Facebook apps you’ve got now on the iPhone and iPad basically suck. Even so, more than 250 million people use Facebook on a mobile device today.”

    Someday I'll be remembered for this.

    Apple: “True, but don’t forget, we have ‘Ping.’”

    So it appears they have reached a compromise: Apple gets 30 percent, bitch, on all Facebook for iPhone and Facebook for iPad apps developed for the iOS operating system. Developers who want to create apps for Facebook on the Web, in HTML5, must use Facebook’s virtual currency, Credits.

    Folks, what we have here are the latest salvos of a global war to create a new type of currency for online transactions, one that will rival cash and credit cards. Microsoft wants to be a player. PayPal (a division of eBay) wants to be a player. All of the mobile phone companies want to be players. When I walk down University Avenue in Palo Alto to get a cup of coffee, I pass what seems like 50 online payment startups that want to be players. The market for mobile apps and virtual goods sold through social networks and app stores is huge, and hundreds of millions of people are already opening their virtual wallets.

    The Apple-Google-Facebook mobile app revenue models appears to be evolving along the Mastercard, Visa, American Express models. Developers who want to sell apps or virtual goods online can choose to whom they want to pay, except that the bites are larger by an order of magnitude. Apple wants 30 percent, Google wants 30 percent, and now Facebook wants 30 percent.

    Aside: Will you trust Facebook Credits as your medium for buying things online? Google Wallet? A couple of months ago the marketing and advertising firm Ogilvy & Mather commissioned a survey on which brands consumers would trust with their money. It looked like this:

     


     

    Anyway, I’m so glad that Apple and Facebook have decided, at last, to “friend” one another. I wonder how long they’ll stay friends?

    I think this is going to be a very interesting battleground. But hey, I’ve been wrong before.

     

    Nuance Exec on iPhone 4S, Siri, and the Future of Speech

    Though the iPhone 4S appears nearly identical to the current iPhone 4, it is, as my colleague Tim Bajarin points out a revolutionary device because of its voice-based Siri interface. For the past 20 years, we humans have learned to point and click, but this has never been a natural way to interact with our environment. Touch and speech, on the other hand, have been around since we were living in caves.

    Photo of Vald Sejnoha
    Nuance CTO Vlad Sejnoha

    “Speech is no longer an add-on,” says Vladimir Sejnoha, chief technical officer of Nuance, probably the world’s leading speech technology company. “It is a fundamental building block when designing the next generation of user interfaces.”

    Sejnoha is faithful to the code of omerta that Apple imposes on its vendors. Although Nuance has supplied technology both to Apple and to Siri before its 2010 acquisition by Apple, he declined to discuss Nuance’s role in the iPhone 4S: “We have a great relationship with Apple. We license technology to them for a number of products. I am not able to go into greater detail. But we are very excited by what they have done. It’s a huge validation of the maturity of the speech market.”

    But Sejnoha made no effort to hide his enthusiasm for the Siri approach. “It allows you to find functionality or content that is not even visible,” he says. “It provides a new dimension to smartphone interfaces, which have been sophisticated but shrunken-down desktop metaphors.”

    It’s has been a long, hard slog for speech to become a core user interface technology. It took a good thirty years, from the late 60s to the late 90s for speech recognition—the ability to turn spoken words into text—to become practical. “Speech recognition is not completely solved,” says Sejnoha. “We have made great strides over the generations and the environment has changed in our favor. We now have connected systems that can send data through the clouds and update the speech models on devices.”

    Recognition alone is a necessary but hardly sufficient tool for building a speech interface. For years, speech input systems have let users do little—sometimes nothing—more than speak menu commands. This made speech very useful in situations were hands-free operation was desirable or necessary, but left speech as a poor second choice where point-and-click or touch controls were available.

    The big change embodied by Siri is the marriage of speech recognition with advanced natural language processing. The artificial intelligence, which required both advances in the underlying algorithms and leaps in processing power both on mobile devices and the servers that share the workload, allows software to understand not just words but the intentions behind them. “Set up an appointment with Scott Forstall for 3 pm next Wednesday” requires a program to integrate calendar, contact list, and email apps, create and send and invitation, and come back with an appropriate spoken response.

    Sejnoha sees Siri in the iPhone as just a beginning.  “Lots of handset OEMs are working on it,” he says. “There is a deep need for differentiation in Andoid and Apple will only light a fire under that. Our model is to work closely with customers and build unique systems tailored to their visions.” And while a speech interface can drive search, it can also become an alternative to it: “One consequence of using natural language in the user interface is direct access to information. We can figure out what you are looking for and take you directly there. You don’t always have to go through a traditional search portal. It will change some business models.”

    Nor do the opportunities stop at handsets. “Speech is a big theme for in-car apps because that is a hands busy, eyes busy environment,” Sejnoha says. “All the automotive OEMs are working on next-generation connected systems. The industry is undergoing revolutionary change.”

    The health care market is another hot spot.  “Natural language is taking center stage in health care,” Sejnoha says. “We are mining data and using the results to populate electronic health records.” Nuance recently signed a deal with IBM to provide technology for a speech front-end to the health care implementation of its Watson question-answering system.

    The key to the next breakthroughs in speech technology, Sejnoha says,  is making effective use of the vast amount of  speech data that now exists, a challenge that has also attracted Nuance competitors Google and Microsoft. “Most algorithms use machine learning and are very data-hungry,” he says. “No one knows yet what to do with tens of thousands of hours of speech data. The race to do that is one. We are doing fundamental research and have a relationship with IBM Research as well. It requires a broad array of techniques to model speech in a robust way and to learn the long tail statistically and the build techniques that can benefit from large amounts of data. It’s a very exciting time.”

     

     

    Why We Witnessed History at the iPhone 4S Launch

    While some people were disappointed that Apple did not introduce the iPhone 5, most pretty much missed the significance of the event and the fact that they were witnessing history.

    In 1984, when Steve Jobs introduced the Mac, he did something quite historic. He introduced the Mac’s graphical user interface. But he actually topped himself with the introduction of another technology-the mouse. In essence, he introduced the next user input device that has been at the heart of personal computing for nearly two decades.

    What’s interesting about this is that he did not invent the GUI. That came from Xerox Parc. And he did not invent the mouse. Douglas Engelbart invented the mouse. But by marrying them to his OS he reinvented the GUI and OS and gave us a completely new way to deliver the man-machine interface through the mouse. Until that time all computer input was done by textual typing.

    Then, in 2007, with the introduction of the iPhone, Jobs and team did it again. He created the touch user interface and this time married it to his iOS. He did not invent touch computing. That technology has been around for 20 years via pen input or minimally within desktop touch UI’s such as those used in HP’s Touchsmart desktops. But he integrated it within iOS and gave the world a completely new way to interact with small, handheld computers. With the new touch gestures part of their laptop trackpad designs, they have even extended it to their core Mac portable computing platform as well. In essence, Jobs second UI act was to bring touch UI’s to mainstream computing.

    Now, with the introduction of SIRI, integrated into iOS and a core part of the new iPhone OS, he and the Apple team have given to the world what we will look back on and realize is the next major user input technology-Voice and Speech. As reader Hari Seldon points out, the real breakthrough we will come to realize is in Siri’s “applied artificial intelligence.” It is its speech comprehension that will be its greatest advancement.

    Again, he did not invent this technology. But Apple’s genius is to keep trying to make the man-machine interface easier to use and with each form, be it the mouse, touch, or voice, Apple has been the main company to popularize these new inputs and thus help advance the overall way man communicates with machines.

    I have personally witnessed all three of these historical technology introductions. When the Mac was introduced in 1984, I was sitting third row center at the Foothill Community College’s auditorium. Then in 2007, I was at Moscone West, fourth row Center when Jobs and team introduced the iPhone with its touch UI. And most recently, I was at their campus auditorium, Building 4 of Infinite Loop, 5th row center, when Tim Cook and his team introduced the iPhone 4S and the new Siri Voice and Speech interface, making this their third major contribution to the advancements of computer input. (I make a habit of remembering exactly where I am when I watch history being made.)

    Now here is another interesting point. Although Apple has had this touch UI in place and integrated in to iOS since 2007 and the Mac OS X since last year, only now is the Windows world starting to get serious about integrating touch into their phone and computer operating systems. Although Apple will continue to advance their various touch UI’s, they can rightfully say-been, there, done, that.

    It is time to take it up a notch and for them their next user input mountain to scale will be the use of voice and speech as part of their future man-machine interface. It may start with iOS but like touch, I expect this UI to be in the Mac in short time as well.

    Yes folks, for those of us at the iPhone 4S launch we witnessed history being made. Unfortunately, for a lot of people in at that event, they missed it.

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