Winners and Losers in Consumer Tech This Holiday Season

One of the things we like to do every year about this time is asking consumers in the US what technology products are on their list this holiday season. In a broad consumer survey, we conduct we explore purchase intent for smartphones, TVs, PCs and tablets, and wearables/smartwatches. Outside of those core categories we also ask questions around smart speakers, virtual reality, game consoles, and connected/smart home. A full analysis of this research is available to our clients, but I want to share a few insights on a few key areas where we see big changes in this years survey over last years.

While consumer purchase intent may not guarantee those planning to purchase the product they indicated follow through, it is still helpful to understand what consumers are planning to buy as of right now. In a follow-up study we do in the new year, we find out what consumers did buy, along with what they changed their mind on and why.

The Almighty Smartphone

Smartphone flat-ish YoY, Apple still commanding the lions share of purchase intent. Consistent with our fall smartphone survey, the iPhone X is a significant reason driving purchase intent and having three current generation iPhones with iPhone X, iPhone 8 Plus, and iPhone 8, has increased Apple’s overall share of iPhone purchase mix with these three devices commanding 73% of the purchase intent of all iPhone upgraders planning to buy an iPhone before the end of the year.

The last standout observation around smartphones is one where this category differs significantly from all the others we track. Smartphone purchases are the least influenced by Black Friday, Cyber Monday, and Christmas/New Years sales or promotions. This shows us how un-commoditized the smartphone market remains compared to other categories which are much more price sensitive and more highly influenced by deals and promotions.

An OLED Holiday

Overall TV purchase intent is down slightly YoY in our survey. There has been speculation that the rising price of products like smartphones and other core computing devices could impact holiday sales of other categories. This could be a reason, but it could also be that consumers still don’t see the need to upgrade to OLED or 4k yet at this point in time.

Of all the brands we tracked, Samsung, LG, and Sony have the highest intent. Sony is up in interest with the second highest brand of purchase intent, and LG TVs fell to third place. A noteworthy brand that has been gaining steam is TCL. It appears TCL is gaining share on Vizio as they sell sized TVs and specifications to Vizio often at several hundred dollars less. Their strategic deal with Roku also helps with consumer perception since they may not have heard of TCL but have heard of Roku. Partnering gives the appeal that TCL is a solid brand since Roku trusts them enough to do a deal with them.

Consumer interest Intent to buy OLED is up 400% YoY and more consumers looking to strengthen the overall trend of buying a bigger TV than the one they currently have. Bigger TVs, Smart TV, 4k TV, and OLED were the key technology motivations driving TV purchase intent this holiday season.

Fitness Trackers and Smart Watches

There were some noticeable changes to the fitness tracker and smartwatch category. Not only has purchase intent for the category jumped 22% YoY in our survey, but the market is also shifting toward Apple’s favor.

The last few years, Fitbit has remained a strong competitor regarding purchase intention share among consumers. In last years survey, we observed Fitbit had 20% of the market intent, Samsung had 13%, and Apple Watch 22% with 31% of consumers still researching to decide on which product is right for them.

This year’s survey revealed Apple Watch models have 44% of the intention to buy share of the wearable category. Fitbit products were up slightly YoY to 22% of the categories purchase intent, and Samsung was down to below 10%. One big change was this year only 14% of consumers intending to buy a fitness tracker or smartwatch were still doing research. Suggesting consumers are more educated about the category and what they are looking for this year over last year.

No doubt, the increased portfolio of the Apple Watch lineup is helping Apple in this category as the more robust lineup is helping them take share against competitors as consumers have a range of options, and price points, to choose from.

Tablets Replacing Notebooks a Key Observation

Looking at the PC and Tablet category YoY, our survey indicates interest in buying a new PC or tablet may be weaker this year than the holiday 2016 cycle. However, a few big changes occurred around specific brands.

The single biggest standout metric was around Apple’s 12.9” iPad Pro. Intent to purchase the largest iPad Pro model jumped 60% YoY. Along those lines, Microsoft Surface also jumped in purchase intention with the Surface Pro 5 jumping 40% YoY over the Surface Pro 4 from last year’s study. When we explored some of the reasons why consumers were leaning toward these two products, it is clear the YoY increase is because consumers realize these devices are capable enough to replace their PCs and like the more tablet form factor over traditional notebook clamshells.

Another standout observation with the PC/Tablet category is average selling prices are likely to rise. Last year 62% of consumers were looking to spend $500 or less on their PC or tablet purchase during the holiday period. This year only 41% of consumers are looking to spend $500 or less and 59% looking to spend more than $500.

Smart Speakers Still Hot

Black Friday deals for smart speakers continued to keep the category hot. From checks with retailers, it was clear that Amazon Echo devices and Google Home Mini all flew off retailers shelves at prices between $29-$70. While deals on these products added fuel to overall heat of the category, our survey revealed higher purchase intent overall for smart speakers even before these Black Friday deals took place.

Intent to buy a smart speaker product with an integrated voice assistant jumped 114% in our survey YoY. While this category is benefitting from a larger assortment of options, it still seems the basic smart speaker offerings are still the most popular. More consumers intended to buy a basic Amazon Echo, Echo Dot, or Google Home Mini, than the more sophisticated smart speakers including a screen or higher quality audio features.

This dynamic suggests a few dynamics around this category. Firstly, many consumers are still getting their first smart speaker and starting with an entry level product makes the most sense, and has less risk, as they figure out what they like and where these products add value. The lower priced smart speaker products will likely serve as the gateway for consumers to start adding more capable ones once they figure out how it fits into their home life. Second, for those consumers who already have one or more smart speakers, these low-priced deals make an attractive way for them to add more smart speakers to other rooms of their house. Lastly, it could also suggest the category is becoming commoditized. There could be some truth to this point, but we will need another year or two to see where the average selling price settles. That said, I do think the ASP is going to settle at a price that is much lower than what others may believe.

Those are a few of the key takeaways we observed in this year’s survey versus last years. It will be interesting to compare these observations with our follow up survey seeing if consumers purchased what they planned or if things changed along the way.

Apple Switchers and a Secure Ecosystem

Apple Switchers and a secure ecosystem.

At Creative Strategies, we recently did a report that showed about 30% of Android users who do not have an iPhone are thinking of switching over to an iPhone.

This should not be a surprise given that Apple, in their last two earnings call’s, has stated that they see a rise in switchers every quarter.
Data from other researchers also confirm this trend.

The latest Consumer Intelligence Research Partners data for the April to June quarter showed that Apple was attracting more Android switchers than at any time in the past 12 months.

The good news for Apple is that relative to earlier quarters, they attracted a higher percentage of iPhone buyers from Android phones. In the past three quarters before the June 2017 quarter, Android owners had represented 14% to 17% of iPhone buyers. With lengthening upgrade cycles and a growing percentage of owners with the most recently released models, continued platform switching will be important to the success of the next iPhones.

Apple even has the campaign to answer the question of why someone should switch to Apple iPhones over Android phones.

Head over to the iPhone tab on Apple.com, and you’ll see a new box in the middle of the page. Called “Why Switch,” it declares that “Life is easier on the iPhone,” and offers ten questions potential switchers might be asking:

[ Further reading: Everything you need to know about iOS 11 ]

1. Will it be easy to switch?
2. Is the camera as good as they say?
3. Why is the iPhone so fast?
4. Will iPhone be easy to use?
5. How does iPhone help protect my personal information?
6. What makes Messages so great?
7. Can I get help from a real person?
8. Can I switch at an Apple Store?
9. What about the environment?
10. Will I love my iPhone?

This interest in switching comes at a time when Samsung and Google both have stellar smartphones that are equal to and in some ways, have even a few better features than Apple’s newest iPhone models. The interest in Apple’s iPhone line of smartphones is getting greater interest these days from the Android crowd.

Our research on this suggests that there are four main reasons for Android users to seriously consider the move over the iPhone and Apple’s eco system of products and services.

The first reason is an age-old one and focuses on Android’s basic security. Googles have so many versions of Android out there and until only recently started updating their current versions on a more regular basis. But in many reports, basic Android versions, even one’s using specialized software from dedicated vendors, is shown to being the most vulnerable mobile OS and in many ways insecure. Samsung appears to have done the best job with their extra layer of security software via KNOX, which has helped them gain traction in enterprise and business accounts, although Apple’s iPhone still dominates the smartphone market for business at almost all levels.

The second reason is perhaps the most important one, and that is Apple’s overall ecosystem continues to get better and is becoming a real draw for Android users. The OS fragmentation within Google’s Android ecosystems still makes it difficult to manage all of a users content seamlessly across other Android devices. And, when we look at switchers and ask about why they want to switch, the reason of interest also includes Apple’s security because Apple has, at the technical level, the tightest controls over their apps and ecosystem so that they are more secure than what is available within the Android environment.

Some consider Apple’s approach as a closed system, and for many Android users and non-iPhone users, this is a reason for them not going over to Apple products. But we continue to see the public looking at Apple’s closed system as a protected environment that keeps out false apps, services, and outside intruders and in that context, Apple’s ecosystems are looked at in a very positive light. This seems to be a highly cherished part of Apple’s world as users are becoming even more afraid of hackers, identity thefts, and all sorts of nefarious threats facing them these days. To them, Apple provides a “safe harbor” to digitally live their lives out, which I believe is why we are seeing such a high interest in switching.

The other thing we keep hearing from those looking at switching is the fact that Apple’s continuity system, the feature that keeps all of your Apple passwords, settings, pictures and video always in sync across all Apple devices is of very high interest to them. Yes, within Google and Android they have simmer features, but in my experience, they don’t work as well as those within the Apple ecosystem when it comes to seamless synchronization and integration within Apple’s protected ecosystem.

The fourth thing in our estimation that is the big differentiator is Apple’s store, Genius bars and overall customer service and support. I recently had a serious issue with Android on a high-end smartphone and trying to get answers from Google, or even vendor support to solve this problem was like pulling teeth. Ben and I have written in the past about Apple’s stores giving Apple a huge advantage over their smartphone competitors, and this is not going to change.

Microsoft has done a good job with their retail stores that sell Windows laptops and desktops, but they also provide classes and customer service when it comes to Windows-based devices.

As we go into this holiday season, our research suggests that Apple will continue to draw strong interest from Android users and could accelerate the pace of switchers in the new year. Apple is well aware of the opportunity they have in moving more and more people over to Apple products, and like the page, they have for switchers shows, they are becoming even more adept and aggressive in trying to lure them over to the Apple ecosystem.

Should Our Love Affair With Digital Really be Over?

Over the weekend, I read this story arguing that our love affair with digital was over. Although I see some of the trends David Sax is outlining, I am not certain they can all be blamed on our growing distrust of technology. More importantly, I do not think technology per se is to blame here, we are!

The article brings up many negative effects of technology on our lives: stress, jobs loss, impact on human interactions. But when you think about it, it is not technology in itself to be at fault but rather how we use it.

Technology is not the Answer to Everything. We just like to think so!

Over the past few years, I think three major things occurred that impacted our use of technology. First, innovation happened at a pace that we had not really experienced before. Second, because of the lowering price of technology, a much broader number of people were exposed, either directly or indirectly, to such innovations. Finally, technology has also become more “human-friendly” making it easier for people to embrace it.

The problem with having so much technology at our disposal is that we started to think technology could solve any problem and could be the answer to everything. Education is a very good example. Many schools added gadgets of different kinds, but teachers did not change how they teach. They simply substituted paper with screens. Others added gadgets and apps but mostly to replicate what the teacher used to do, just maybe a tad more personal.  The answer to more engaged, smarter, ready-for-life kids is to first look at how we teach and then look at how technology can help us deliver. We should not turn to technology first.

While we might be concerned about AI taking over our jobs we should recognize the many opportunities technology has enabled over the past few years. Apps and services that reached millions of people overnight as well as start-up incubators and a maker fair movement that allowed talent to stay where it was born while still accessing an international stage.

Sometimes, we also rely on technology out of convenience, after all, technology is supposed to make our life easier. There might be different ways to perform a task involving different levels of technology, but convenience drives us. This is fine when convenience meets effectiveness and drives the highest results, but it is less so when convenience is driven by laziness. The choice is on us not on the technology that is available.

The Limitations of Analog

Some of the technological changes we are undergoing are certainly scary especially if you are easily impressionable by movies like “Her”!  When it comes to this analog revival, however, I don’t believe that some of the rediscovered love for books or vinyl is necessarily a rejection of technology. The revival of books has a lot to do with the increased popularity of local bookstores where customers feel they are supporting a local business, they build a relationship with the people who work there and get more personal recommendations. In a way, this is no different than the growing popularity of local, independent coffee shops.

Is the love for vinyl really about technology and sound or a broader statement about what music as an industry used to be? The other side of the coin though, is that technology empowered artists that might have never had the means to become a worldwide success – the UK band Glass Animals is a good example.

As far as human interaction, it certainly does not have to disappear because of technology. While there might be some of us that have become more comfortable chatting on messenger than in real life, many still enjoy grabbing a coffee or a beer with friends. Not having access to technology, however, would make social interactions impossible for many people. The classic video chat ad that shows grandparents and grandkids is a reality at our house, as my mom lives in Italy and we only see her once a year. Technology is how we remain part of each other’s lives, in a much vibrant way than old phone calls allowed us to do.

Technology is also what allows people with disabilities to have richer social interactions and more widely live a fuller life. Think how 3D printing is revolutionizing prosthetics or how support for voice over allows visually impaired people to read or see through the description given to them.

Turning Our Love Affair into a Happy Marriage

I do realize that talking about turning our love affair into a happy marriage only shows I have been in a relationship for a long time! But I do think this is the key. That passion and excitement resulting in sleepless nights, stomach butterflies, lack of appetite that spark the start of many relationships turn into a more “sustainable” set of feelings that does not make it less “love” but maybe allow us to get a bit more in control of our life and the relationship itself. I feel the same is true with technology.

After being swept off our feet by what smartphones enabled: always on, an app and service culture, social media, we need to regain some control. We need to pace ourselves, find some “me time”.  Such balance can be reached in different ways, either by embracing analog again or actually using more tech. At the core, however, such balance will only be possible if we understand that we are in control and not controlled by the technology that surrounds us. We have the power to unplug!

‘New Retail’

With the StitchFix IPO recently, I’ve noticed a re-emerging narrative around the ‘new retail’ theme. StitchFix falls under this new retail theme, as I’d argue does Dollar Shave club (purchased by Gillette), Bonobos (purchased by WalMart), and Trunk Club (purchased by Nordstrom). You have probably seen many ads on Facebook as well for companies in any of these spaces trying to build a brand around this new retail theme.

The Internet has allowed for these types of companies, who can use the Internet (mostly Facebook) to acquire new customers, build a brand, and offer more personalized and differentiated services to customers. For a number of the companies mentioned to have success, it must signal a pain point in traditional retail that is not meeting customers, and mostly younger customers needs. The opportunity is real, but I’m not sure we have yet solved the retail problem.

Online and Offline
It seems clear that a new retail strategy will have to include offline experiences, combined with online experiences, and a deep level of personalization. While many companies are heavily investing in one or two of those vectors, there aren’t any focusing on all three holistically. Understandably, the personalization angle has been tricky, and companies like Trunk Club and StitchFix try to solve this with human curation. The human curation part of this equation can likely be solved by a fashion-focused artificial intelligence. But seeing, trying on, feeling the fabric, etc., are all things we can’t do online but are yet strong purchase drivers which can only take place in a store. This is why physical retail isn’t going away; it will simply have to evolve to more personalized experiences and services.

It is also important to understand the evolving role technology is playing in shopping/commerce and how that needs to fit into the new retail equation. Here are some key points to consider:

  • Over half of consumers in the US now start their purchase journey from a mobile device. This point refers to when they are exploring but not yet made up their mind on what to buy.

  • Search engines and consumer reviews are the core of product research
  • Video is becoming a key driver of influence in the purchase journey. Consumers are now rating a video review, or a more in-depth product video as a higher influence to complete a purchase. This demonstrates how technology and more immersive media perhaps like augmented reality or virtual reality can be used to further influence the transaction.
  • Free delivery is the largest factor that increases purchase transaction, and it ranks higher than same day, or next day offerings. People would rather have free delivery than pay extra to have it faster.

These evolving dynamics point out why a hybrid retail experience between online and offline will be necessary, with technology being the thing that brings the two together for a more personalized experience. Technology plays a central role in online retail experiences, yet technology plays almost no role in offline retail experiences. Bridging this gap is what will be at the core of a holistic new retail strategy.

Becoming Tech Companies
One of the best ways to understand how technology could disrupt industries where consumer-facing technology was not as prevalent is to understand that every consumer-facing business will be forced to become tech company or they will be disrupted by one. So retailers need to become tech companies, or they will be disrupted by Amazon or one of these brands/retailers that start online then start moving offline.

You may not know this but most of those ‘new retail’ brands trying to sell shoes, customized clothing or accessories boxes, beauty products, etc., are all funded by VCs whose central thesis is that many of these old retailers can not become tech companies, and thus these brands that start tech first and then expand into physical retail will eat traditional retailers.

There is truth to their thesis that older more traditional retailers will be challenged to become tech companies, which is why many have purchased companies in the new retail category, however, I would not discount them either since they know technology and re-inventing the retail experience is central to fighting disruption. The question in my mind is whether or not they can move fast enough, not whether they can do it.

With the arrival now of augmented reality, and computing vision/machine learning a tool retailers can use, I feel we may be on the cusp of some new and innovative experiences in retail and commerce. Warby Parker’s app using Apple’s ARKit to scan your face and match you with specific glasses that fit your face is an early example loaded with potential.

Consumers love shopping, but often hate it at the same time because it is frustrating. My wife’s shops online a great deal because we simply don’t have time to shop for clothes very often. Her best description of the experience is that it is like a disappointing Christmas. You get all excited about getting the present (the package) only to realize you have to return or exchange it. I feel her pain, as do many others. Once we can fix the frustration of retail and online retail, then we will see the S-curve growth of e-commerce we are all waiting for.

The Ridesharing Business Conundrum

One of the most widely praised concepts to emerge from the tech industry over the last several years is ridesharing, particularly through the services of companies such as Uber and Lyft. Not only is having the ability to request a ride and have it promptly show up nearly wherever you are a great service that millions now enjoy, it is also a textbook example of how the disruption of a traditional industry—in this case, the roughly century-old taxi business—can enable new types of business opportunities that couldn’t exist before.

As great a concept as ridesharing may be, however, there are increasing signs of strain on the business model that ridesharing companies use, particularly regarding costs and technology timeframes.

Before digging into these concerns, it’s important to remember the extent of influence that ridesharing has had on the tech industry overall. In fact, ridesharing’s enablement of the big picture concept of “transportation as a service”—where people can forego the purchase and ongoing maintenance of an automobile, and request rides whenever and wherever they need them—arguably has led to an enormous range of “as a service” offerings, most of which seem to suggest they’re the “Uber of something.” Of course, with regard to ridesharing specifically, arguably, some urban dwellers have lived this way for decades, and simply used taxis to get from place to place. With ridesharing apps and services, however, the process is significantly easier for a much wider group of people and—for now at least—much less expensive.

Part of the reason for the lower prices is the significantly different business models and expense structures between taxi companies and ridesharing companies. Because drivers for ridesharing companies aren’t employees, and therefore aren’t entitled to regular salaries, benefits and other costs associated with personnel, the overhead costs for them are significantly lower than they would be in other businesses. Throw in the fact that these drivers are using their own cars, and the physical asset-related expenses of most ride-sharing companies are almost zero. Traditional taxi companies, on the other hand, typically have to cover all of these types of expenses.

Recent legal challenges to Uber in London (and potentially much more of Europe), however, clearly highlight a potential flaw in the “gig economy” independent contractor business model upon which ridesharing companies are so dependent (and which they created). If European laws are changed to force companies to officially hire these contractors, the costs to ridesharing companies could skyrocket. Plus, it’s not inconceivable that changes in one region could quickly migrate to other regions, causing a much larger impact than a single legal requirement might first suggest.

Ironically, part of the problem is that these ridesharing services are a victim of their own success. So many people have become so dependent on driving for these services—either full-time or significant part-time efforts—that the ridesharing companies are seen as providing significant amounts of income to a large and growing group of individuals. The longer that process continues, the more dependent drivers will become on these ridesharing companies, and the more likely that employment with these entities starts to become a political issue with even more far-reaching ramifications.

In theory, of course, this latter problem was never supposed to happen. Built into the business model of the ridesharing companies was an “inevitable” evolution to a fleet of self-driving cars that wouldn’t require any drivers. The drivers were only ever meant to be a temporary solution until the “real model” of an on-demand pool of autonomous cars was available. The problem is, the timeframe to reach truly autonomous cars looks to be lengthening. Despite some of the frothier media commentary to the contrary, it’s becoming increasingly clear that the technical, logistical, regulatory, insurance, and even ethical hurdles that still face fully autonomous vehicles are extremely high. As a result, it could be well into the 2020s before the key technological and legal conditions are in place to make fully autonomous vehicles a mainstream reality. We’ll see plenty of experiments before then, but as soon as the seemingly inevitable first serious accident involving an autonomous car occurs—regardless of where the true fault lies—the process will once again slow.

The challenge with this timeframe is that it means the amount of people and the amount of income that will be impacted as ridesharing companies start to move away from human drivers and towards autonomous fleets is going to be enormous. The nightmare scenario for these companies is that the transition from an independent driver model to one based on an autonomous fleet lasts so long that legislators end up feeling the need to step in. Large numbers of their constituents could end up being impacted by such a transition, leading to demands for political action, all of which could slow down the transition even further.

This is why I expect we’ll see a number of announcements similar to the recent Uber-Volvo arrangement about autonomous car partnerships. Certainly, the fact that Uber is working with a major car manufacturer like Volvo on autonomous cars is important, but it’s arguably also an effort to get people thinking about the transition to autonomous vehicles much sooner than is realistically possible. By driving the discussion towards the next stage in the ridesharing industry’s business model evolution, the announcement deflects attention away from what could be more pressing business model challenges in the near term.

There’s no question that ridesharing is a tremendously useful and, for many, essential addition to the range of service offerings that tech companies provide. But as the industry matures, there could end up being a number of unintended consequences stemming from ridesharing’s once revolutionary business model. Any combination of these consequences could force people to re-evaluate what the industry’s long-term opportunity may really be.

Apple’s Remarkable Customer Base

Last week I participated in the UBS global technology conference where I talked broadly about Apple but also had some fascinating conversations with many of Apple’s key investors. In the course of these Apple focused conversations, many where I was sharing quite a bit of our recent research, a theme stood out to me that is worth exploring. This theme centers around Apple’s user base but focuses more on how subtle yet significant behavior changes happen within Apple’s customer base which we don’t see around other products.

A Remarkable Customer Base
Anyone paying close attention to the broader analysis will know that Apple continues to gather the most profitable group of consumers around their ecosystem. It is no secret that Apple’s customers are the most valuable group of customers ever assembled in mass around one ecosystem. Amazon, Target, Microsoft, all app developers, even Google itself, will all admit their customers who own Apple hardware are their most profitable by a large margin.

Services providers will tell you that customer coming to them from an Apple device are more profitable by a significant ratio of ones coming to them from Android. In fact, according to our data, an Apple customer is three times more likely to be a subscriber to a specific service than a non-Apple customer.

But we discovered a fascinating nuance about Apple customers that remains fundamentally underappreciated. Through a series of studies we did over the last year, we confirmed that customer behavior changes once a person joins the Apple ecosystem. As a customer comes from Android over to iOS, they end up spending more money in the iOS ecosystem than they did in Android. Similarly, the longer this customer remains in the Apple ecosystem, the more then end up spending in year three or four is more than the amount the spent in year one.

I learned another interesting insight from talking with specific investors at the UBS summit which added to this angle. Some investors, who do or have internal research departments, also found that while an Apple customer may be more likely to spend money in and around Apple’s ecosystem, thus being a high-value customer to Apple, they don’t necessarily mean high-value customer to other companies or ecosystems.

I can’t share the full details of their data, but it correlates to Apple customers being valuable and spending money on Apple’s ecosystem, but that high-value customer profile doesn’t always translate to other ecosystems. For example, an Apple customer may be a high-value customer in Apple’s ecosystem, but that same customer may not be as highly valuable in Amazon’s ecosystem.

This point added some fascinating nuance to this discussion that changed my thinking and helped me realize it is not Apple’s base that is remarkable.

Remarkable Products (or product experiences) Make Remarkable Customers
I used to think Apple just had customers who in general had higher disposable income and thus made them more likely to spend money and thus be more profitable as a customer base. That is true of a small chunk of Apple’s base but not the vast majority of their customer profiles. As a whole, Apple customers tend to act like more profitable customers and be more willing to spend money, even if that is not a characteristic they employ in other places and ecosystems.

Which leads me to conclude there is something about the overall Apple product experience that lends itself to a behavior change toward more valuable customers. My friend Horace Dediu of Asymco was also participating in this UBS event, and he and I got to talking about this observation. He made an excellent parallel to high-end retail stores. Whether it is Nordstrom, Harrod’s, Tiffany, Burberry, etc., it is the environment, the fit and polish, the customer service, it is the entire experience that can turn a customer who normally does not spend high-end dollars anywhere else to act as a high-end customer when they go into these stores.

This seems an apt parallel, but I’d add another that may be more mainstream than some of the retail outlets I explained. The example that nails it to me is Disneyland. I say this because you know at Disneyland/Disneyworld gathers the widest range of demographics to their parks yet when people are there they act differently than they would on a normal basis. They may spend more money sure, but they also maybe act more like kids, more free-spirited, more relaxed, and a host of other things. Essentially, the environment and experience Disney provides create a behavior change among customers that seem only to be exhibited when they are in the Disney experience.

My main point here to take away, is simply that an environment, when done right and designed a certain way, can create a set of experiences that make these customers stand out as remarkable, or highly valuable, when in reality it is not anything special about this customer but rather the products themselves that are special.

This viewpoint clears up a lot of questions for me, as it did for many investors I spoke with when you look deeper at the Apple customer base. For a category like Apple’s services, for example, the upside is not because Apple simply has high-value customers but rather that Apple creates an environment where they act like high-value customers. This insight means these customers will continue to engage in Apple’s services, and the services of third parties to which Apple gets a cut, simply because Apple creates an environment that causes consumers to feel as though they are getting more value from these services.

What I outlined here is more than just anecdotal data but empirical and measurable examples where an environment is unique and thus makes consumers look more valuable while in certain situations even though as a whole they are not specifically “high-value” customers, which many associate as high-net-worth.

This is truly where Apple has a unique advantage that keeps deepening and building as they focus on the totality of the customer experience around their hardware, software, and services in ways many other companies do not.

How Tech Can Help Worried Parents

If you’re a parent, you’ve probably been put in the frustrating position of competing with your child’s phone for attention – and losing. Intermittent silences, grunts or one-word responses, fast-typing fingers – all telltale signs that he or she has found something more interesting than you. It’s often not even a close contest.

An article in The Atlantic drew attention to the dangers of unlimited smartphone use by teenagers – and smartphones are pervasive, as 80 percent of households now own at least one smartphone, according to Consumer Technology Association research. Since smartphones became ubiquitous about ten years ago, the time our teens spend with friends and on dates has dropped dramatically, while loneliness, lack of sleep and mental health issues have risen sharply.

Most adults are not digital natives. We’re new to the benefits – and challenges – of anytime/anywhere connectivity. Many of us have failed to set effective boundaries and are just as distracted as our children. To be the role models our children deserve, we must create a healthy household culture, including how and when we use technology. Our grandparents did this with pinball games and Pong, and our parents did it with Pac-Man and Minesweeper. We can also set limits.

First, that means insisting that conversations and relationships are a top priority. Practically, this will look different for each family. Some might find it useful to create a tech-free zone in their house or car, where no phones, tablets or laptops are allowed. Instead, play car games or listen to audiobooks. Others might set a limited amount of screen time a day, using parental control apps to set time limits. Whatever rules or boundaries you create, the goal is the same: reconnecting with your kids by temporarily disconnecting from your devices. My wife and I ban all electronics but eBooks in our children’s bedroom and limit our nine year old’s phone usage to an older phone that can only operate using Wi-Fi.

But creating a healthy household tech culture isn’t just about controlling the potentially negative aspects of tech devices. We should find new ways technology can lead our children to healthier, happier lives. Wearables, for instance, partner with devices and allow kids to track their health and physical fitness, and better train for their favorite sports. They’ll know how to monitor their wellness and watch for signs of oncoming illness – and they’ll be able to give doctors more precise information about their symptoms.

Wearables can even help parents of autistic children predict and prepare for episode triggers. Reveal, a wearable designed for kids with autism, closely tracks the signs of mood shifts and lets parents know when their children are on the verge of sensory overload. In the future, this type of device could be used to help kids with anxiety, cerebral palsy and other health issues.

Digital devices can also be used to foster our children’s creativity and expose them to new ideas. It used to be that a small group of big TV networks decided what our kids would watch – but thanks to the internet and tech enabling content creation by all kinds of artists, kids now have a nearly endless array of options. You probably haven’t heard of that band your teen is listening to – but then again, neither has half of his or her friends. And many of these options come from unknown global artists and creators, instead of just the entertainment giants.

Smartphones and tablets let kids connect, create and collaborate. Social platforms allow them to share their work and find likeminded peers who share similar interests. Twenty years ago, if you were the one kid in the neighborhood who liked to make movies, you’d be all alone in your hobby. But thanks to today’s digital devices, you can find other young directors to share ideas and techniques.

And connected tech can help parents keep their children safer. Location apps, for instance, offer parents an unprecedented amount of child supervision. Ceaseless questions like “Where are you going?” and “What are you doing?” disappear when parents can simply check their phones and see where their kids are. We can also track our kids’ digital whereabouts – the sites they visit, the content they watch – through parental control apps and software, preventing kids from inadvertently wandering to unsafe or unsavory corners of the internet.

It’s easy to get worried or frustrated when you try to have a conversation with your child and all you get is a dismissive glance and curt response. But remember: technology is a tool that can be used for good or bad, in excess or in moderation.

Before we start wringing our hands over technology’s influence on the next generation, we need to take a hard look at our own tech habits. One teen in The Atlantic piece said of her own generation, “I think we like our phones more than we like actual people.” What about the rest of us? Are we using technology creatively and actively, or are we passively and idly letting our technology use us?

With tech, as with all other innovative tools, it’s up to us to figure out how, when and where best to use them – and then show our children how it’s done.

Podcast: Tesla Semi and Roadster, Apple HomePod Delay, Black Friday Trends

This week’s Tech.pinions podcast features Carolina Milanesi and Bob O’Donnell discussing Tesla’s new Semi electric truck, their new Roadster sports car, Apple’s delay of their HomePod smart speaker, and expected Black Friday tech device shopping trends.

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

The Four Tiers of Global Wireless Services

As we head into the latter part of this decade, it appears that the ‘digital divide’, which has historically referred to the haves and have-nots of broadband, is hitting wireless services, as well. This theme has crystallized in my mind over the past week, having been part of three important wireless-related events: The Telecom Infrastructure Project Summit, spearheaded by Facebook; the Qualcomm/T-Mobile launch of Gigabit LTE; and an industry analyst day hosted by leading infrastructure vendor Ericsson, which focused mainly on 5G and IoT.

It looks to me like the world is separating into four ‘tiers’ of wireless service. In Tier 1, you have the United States & Canada, Japan, South Korea, and, increasingly, China. These countries have 70% plus of their customers already on 4G LTE, and are rapidly moving along the LTE Advanced path toward Gigabit LTE. They are also likely to be among the first to deploy initial 5G services. A healthy (but not unhealthy) level of competition, and high income correlate here, not only with regard to wireless service spend but also on the most advanced handsets that take advantage of the best LTE has to offer.

Then there’s Europe, which has fallen a step behind. A decade ago, if you traveled to Europe, you’d marvel at how good wireless coverage was in comparison to the U.S. But Europe has lagged on the depth and breadth of LTE deployment. This has been a huge change from the 3G era, where many European countries were among the leaders. There are a multitude of reasons, but chief among them are a somewhat stagnant economy, overheated competition that has depressed spend (and as a consequence, capex), and where the epicenters of wireless innovation shifted from Europe to the U.S. and Asia. Actually, like an airplane circa 2017, Europe has more like two classes of economy: basic economy (some countries, and many areas outside cities), where good LTE services are still lacking; and premium economy, where 4G is closer to the top tier.

Tier 3 is where the fastest subscriber growth is. But it’s easy to forget that with our $1,000 smartphones and hype around LTE Advanced and 5G, many countries are just getting to 3G. Take Africa: Only 50% of the continent has access to 3G coverage, and whereas we have phased out 2G here, it is critical for voice on that continent. In fact, most of the deployment in Africa over the next 5-10 years will be 3G (because 4G remains too expensive). In India, 69% of the population is still on 2G, although that is changing, and rapidly.  Similar story in Latin America, but slower pace of change. Getting mobile connectivity to folks in these areas is critical, since wireless is likely to be their primary form of Internet access for the foreseeable future.

Expanding and improving connectivity to these regions is the major focus of the Telecom Infrastructure Project (TIP). Spearheaded by Facebook but now consisting of some 500 members, the objective of TIP is to connect the next 1-2 billion people at much lower cost than your typical $150,000 base station, using develop an open, software defined network platform. Although still in its early stages with respect to deployments, TIP will at least push, if not disrupt, the incumbents. If TIP is successful with the new LTE OneCell, it might accelerate Tier 3 countries’  upgrade or leapfrog to 4G.

In addition to disruptive infrastructure, innovative business models are needed. One oft-cited example is more of a partnership arrangement with operators, where revenue sharing arrangements could help fund projects. Then there’s Reliance Jio, which has disrupted the Indian market by focusing on alternative revenue streams, rather than trying to finance a build of hundreds of thousands of cell sites on the back of sub $5 per month ARPU.

Finally, there’s the ‘connecting the unconnected’ tier. This is still the intractable segment of the market, where a lot of effort is being expended but no viable, scalable connectivity solution yet exists. Developing cheap base stations doesn’t solve all the problems here. The main challenge is power and backhaul. The lack of a reliable power grid, inaccessible roads, issues of on-site equipment theft, and even the lack of commercial/network data makes planning difficult. It will take something different to get to the “last 1-2 billion”. Google Loon, OneWeb’s planned satellite service, and other ‘airborne’ solutions are all possibilities, but it will still be several years before we know whether these are viable options, at scale, and can deliver the sort of speed and capacity that will be at least in the ballpark of 21s century infrastructure.

So, four themes from “telecom infrastructure week”: 1) the rich will get richer, as 5G will be driven by the already haves; 2) China will play a much bigger role in 5G innovation that it did in 4G—in infrastructure, chipsets, IoT deployments, and even driving global spectrum bands; 3) getting connectivity to the next 1-2 billion subs in Africa, Asia, and Latin America will have to be done in a dramatically less expensive fashion; and 4) reaching the ‘last 1-2 billion’ remains a yet unsolved challenge.

News You might have missed: November, 17, 2017

 

Pixel Buds Reviews are in and They aren’t Very Kind

The Pixel Buds were announced together with the Pixel 2 in early October at an event in San Francisco.  The Pixel Buds are a wireless set of earbuds with a circular design and a cord to wear behind the neck for extra security when not using them. They feature gesture controls, for music, phone calls, or adjust volume and of course activate the built-in Google Assistant. All for $159.

Via tomsguide 

  • I will let you read through the reviews to get the details, but there are two points that are shared in most of what I read: reviewers had higher expectations and at the current price there are better alternatives in the market.
  • Of course, these two points are tightly linked!
  • First, let me say, that I have only tested the Pixel Buds at the launch event, but I have not used them enough to share my review here. What I want to focus on are a couple of aspects that I believe Google needs to consider as it gets more into the hardware business.
  • Expectations were high because reviewers want more from Google than a general device that has access to Google services can get. This is particularly true for Google Assistant, which is now made available in other headphones. Why choose Google if I don’t get a better experience or a better price?
  • I also think that the outstanding Google Translation demo that was given at the event contributed to setting high expectations. The demo on stage was flawless. It delivered the promise of communicating with people speaking another language as if they were speaking ours. That promise, however, was offered as a reality. A reality that from my demo, a few moments after the on-stage demo, was yet to be delivered.
  • There is nothing wrong in showing a promise of a technology or experience you are working on, but the lack of clarity on what it would feel like to use that technology today only set you up for failure, in my humble opinion.
  • The capability of Google Translate is not at fault here. That part does work very well. I use it all the time with Google Home and I start to have some concerns about the fact that my mom and my husband will be able to actually understand each other when she comes to visit!
  • What is missing with Pixel Buds is the magic that was delivered on stage. And people want that magic, especially from Google.
  • Deciding what to keep to your own hardware and what to have run on others’ will also be a tricky balance and not just for Google. Amazon has to make similar decisions too when it comes to Alexa.
  • Time to market also plays a role in setting expectations. With Pixel Buds hitting the market after Apple AirPods, Samsung’s Gear IconX, Jabra Elite Sport, and BeatsX there is a lot to compare out there both in price and capabilities.

Apple’s Diversity Chief leaves

Denise Young Smith, Apple’s diversity chief is leaving Apple after only six months in the current position. She will be replaced by Christie Smith who comes from serving as principal at Deloitte for 17 years where she focused on talent management, organizational design, inclusion, diversity and people solutions. At Apple, she’ll report to Apple VP for People Deidre O’Brien. Young Smith will assume a role as executive in residence at Cornell Tech starting in January 2018.

Via TechChrunch

  • According to the timeline outlined in the TechCrunch article, Young Smith’s departure has nothing to do with the remarks she made in Colombia during a panel: “Diversity is the human experience. I get a little bit frustrated when diversity or the term diversity is tagged to the people of color, or the women or the LGBT….there can be 12 white, blue-eyed, blonde men in a room and they’re going to be diverse too because they’re going to bring a different life experience and life perspective to the conversation.”
  • Comments that she apologized for a week after the event.
  • Whether or not her departure was moved forward because of that statement is quite irrelevant. What I think matters is to understand that Young Smith might have been a successful head of worldwide human resources for the previous three years and a long time Apple employee. Yet, in order to be an advocate for diversity at a moment when the tech world is highly scrutinized requires different skills including the ability to effectively communicate the company’s mission in public.
  • The first and last report under Young Smith as a diversity chief. As the report runs from July 2016 to July 2017, one might believe it would be unfair to think she could have had any influence on the numbers. Yet, would that not be her responsibility as head of human resources?
  • The numbers in the report showed steady but moderate improvement: 68% of Apple remains male and 54% white (only two percentage points less than in 2016) 13% Hispanic (up one percentage point), 9% black (no change), 21% Asian (up two percentage points), 3% multiracial (up one percentage point) and 1% other (no change).
  • While diversity was on the agenda when Young Smith was head of HR, the pressure of having these numbers rapidly change would have been much higher in her current position. Unfortunately, there is no quick fix for the diversity problem tech is facing and I am sure Young Smith was well aware of that. Of course I am entirely speculating here but I am struggling with making sense of why she would be entrusted with this role if she had shared with Apple her intention of moving on from the company this early into the assigment.

Motorola’s Insta-Share Printer Mod

This week, Motorola announced a new Mod in collaboration with Polaroid that basically doubles your Moto Z into a photo printer. The Mod uses Polaroid’s Zink inkless paper system and delivers 2×3-inch adhesive photos. You can take Polaroid pictures adding filters and borders and print them right sway or you can access your Facebook, Instagram and Google Photos to print those. The Insta-Share Printer Moto Mod is available at Verizon – exclusively at least for a limited time – and will set you back $200.

Via engadget

  • I have to give it to Motorola for coming up with new Mods compared to LG who also tried to deliver a modular approach to its LG G5 not really pursuing the experiment much further than the initial removable battery.
  • That said, Mods like the Insta-Share Printer will have a limited appeal given the price of the Mod itself and in this case, the $9 for 20 sheets of paper it will require.
  • This year we have seen quite a bit of nostalgia in mobile from the Nokia 3310 to the Blackberry Keyone, and I could have certainly seen the Insta-Print Mod fit into this category had the price been $99
  • The other possible target I see is Gen Z users but mostly if Moto decided to bundle Moto Z and the Insta-Share Printer for the holidays
  • Longterm, Mods could be a decent additive revenue for Motorola, but more needs to be done to reinvigorate the overall portfolio.

Some Thoughts on the State of the Tech Market

I’m in a contemplative mood this week, as this is my final column for Techpinions, and as such I thought I’d share a few big picture thoughts on the state of the tech market in late 2017. It strikes me that from a consumer perspective, in many ways we’ve never had it so good, but at the same time there are new threats and concerns which are also unprecedented. We will therefore be tempted to seek regulatory remedies and limits on the power of tech companies and technology, and while some of these may be worth pursuing, there’s also a danger that we politicize technology and undermine progress even as we seek to protect consumers and startups.

We’ve Never Had it so Good

First off, I’d argue that as consumers of personal technology we’ve never had it so good – the devices we have access to are unprecedented in both their raw power and in their specific capabilities, from cameras to connectivity to displays and audio. And the key thing here is that no single manufacturer either dominates sales or has far and away the best devices: one of the best things about the current state of the market is that consumers have a number of great options in key categories from smartphones to PCs to tablets and TVs. On the smartphone front, Apple and Samsung make the most and arguably the best premium smartphones, but new players like Google and Essential are creating promising new entrants, while the old guard including LG and others continue to produce interesting devices too. On key features like cameras, Apple, Samsung, Google and others all have great performance and it’s mostly a matter of personal preference rather than objectivity which is best.

In the smartphone market in particular, it’s also notable that consumers don’t have to spend the $700-plus that’s now required to buy a top-of-the-line smartphone in order to have a great experience. There are less powerful but still serviceable smartphones available at nearly every price point from $50 to $800, making this technology available to consumers throughout the world and thereby transforming lives and economies. All of this is also true in other categories like tablets and PCs, though low-end PCs still tend to prove the maxim that you get what you pay for more than other categories of consumer hardware.

Technology is an Enormous Force for Good

That last point is worth expanding upon: not only is our technology great, but it has done great good in the world, connecting people with each other and other resources as never before, opening up a world of information and content to anyone, anywhere, on the device of their choosing. The Internet has both allowed even the smallest publisher to reach massive audiences and allowed tiny interest groups to find comradeship across the globe. Technology is connecting families, giving opportunity to poor and otherwise marginalized populations, including the disabled and ethnic minorities.

But It Has Also Created Worrying Side Effects

None of that is to say that technology has created unalloyed good in the world. Many of the same enablers that have permitted innovation, positive communication, community building, and more to flourish have also fed conspirators of various stripes, trolls, and other bad actors and their ability to do nefarious work. Platforms designed to allow people to connect in positive ways have also enabled the spread of misinformation, harassment and abuse, and more recently even meddling in elections. It’s clear that we’re only beginning to discover the scope and potential of some of the negative effects of technology in our lives.

Meanwhile, tech as an industry is characterized by other unpleasant characteristics, notably a lack of diversity and a tendency to downplay or ignore the potential of new technologies for evil as well as good. Too often Silicon Valley demonstrates its lack of diversity in its lack of understanding of how its inventions will impact marginalized populations or even the population as a whole. Its self belief is one of its greatest strengths but also one of its greatest weaknesses. I’ve also pointed out that, with few exceptions, the largest companies in the industry are dominant and threaten to continue to squeeze out innovators.

Regulation is a Tempting Solution

In light of all this, voices from both sides of the political spectrum in the US and beyond are calling more loudly for regulation of big tech companies, whether on antitrust, content, advertising transparency, or other grounds. Some of these calls have obvious merit, and would bring the tech industry in line with older industries that provide similar functions. But my biggest worries with tech regulation are always that those writing the laws have an imperfect understanding of the market and that the process is so slow as to be ineffective in dealing with real problems while often creating unintended consequences. I’m also increasingly aware that in some of these debates a key constituency – media – has an inherent conflict of interest because it’s threatened by some of the very platforms it covers.

I’m hoping that we don’t see knee-jerk, often politically-motivated calls for regulation resulting in laws that would limit the ability of companies to innovate while not really solving the underlying problems. I have little faith that the current US political leadership will get anything meaningful done here without screwing it up, while the bigger threat to US tech currently comes from the EU and its efforts to punish big US tech companies for underpaying taxes and squeezing out local competitors.

A Promising Future

I’m inherently an optimist, and that optimism extends to the tech industry and the role of technology in our lives. I’m not naive enough to think that all the issues will merely go away, but on balance I think the positive benefits will be greater than the drawbacks, and humanity as a whole will continue to benefit enormously from the advances that will be made, especially in areas like healthcare, where consumer tech companies are just starting to scratch the surface of what’s possible. AI and machine learning bring their own threats and downsides, but I tend to think the more apocalyptic voices here are off the mark, while there could be significant benefits from smarter technology in our lives too.

Google’s Long HARDware Road

Google is the new kid on the block with smartphones, but they are being treated like an established player. Their sales of the Pixel 1 and likely sales of Pixel 2/XL are likely to be very small, maybe 5m units total in 2018, but because they are Google, they are being taken seriously. While I completely agree Google should not be graded on a curve, and many media outlets are slowly waking up to this reality, I am willing to give them the benefit of the doubt for at least the next few years.

Why should we give them the benefit of the doubt? Well making hardware is hard. Microsoft made a decent product with their first Surface, but it took them until generation 3/4 of the Surface before it became a great product. The Pixel 1 was decent, and the 2/XL is better, but I know Google is playing the long game here and knowing this product will not be mainstream anytime soon, they have a little bit of time to get things right. But there are an awful lot of things they need to work out before any reasonable person would recommend a Pixel to a loved one.

I have experienced a number of these issues first hand, so I want to talk about my observations buying, and using a Pixel 2 XL since last week.

The Purchase
There are a few observations about purchasing a Pixel through Google’s online store worth pointing out. The purchase process was fine, a few too many steps for my liking but I easily picked the Pixel 2 XL and checked out. The pain didn’t begin until about the time my product was ready to ship.

I got a notice from Google that my Pixel 2 XL had been shipped and the delivery date would be November 2th; it was October 31st when I got this email. November 2nd rolled around, and nothing came, so I decided to look at the tracking number to see if the delivery date had changed. Google’s tracking software showing the package delivery time said the package should have arrived. However, upon clicking the link, I was taken to OnTrac’s website and saw that the package had still not been received to be shipped out.

My first thought was one about OnTrac. While there may be nothing inherently wrong with OnTrac, despite a few issues I’ve had before, as a consumer I felt Google was cutting corners using OnTrac instead of FedEx or UPS. Right or wrong that was thought that crossed my mind. If I’m not alone then by not using a service like UPS or FedEx Google may cause consumers to concern and worry about their package being delivered safely and on time. But the fault here was not OnTrac’s it was Google’s.

As soon as I saw OnTrac had not received the package from Google yet, I called OnTrac to understand what was happening. I quickly was patched into a customer service rep, and they explained to me that Google printed the shipping label on the 2nd and confirmed they had not yet received the package from Google to get it on a truck and out for delivery. So it was time to contact Google.

I went through the steps to contact Google customer support. It had been a while since I last had an experience with Google support, so I was a bit concerned because those didn’t go so well. As luck would have it, a customer support representative came into the online chat within two minutes.

I explained what was happening and the customer support agent started looking into it. After about 25 min I was told they would need to check with a specialist and the process will take 24 hours before I get an email with an update. 24 hours later, no email, no update. I got onto Google’s customer support chat again and was again told a specialist was needed and it would take 24 hours. Next day, no email, no update. Checked OnTrac, still nothing from Google.

I gave up and figured it would just get here when it gets here. This was not going to be my primary phone, so I was fine being patient, even if minorly irritated. The Pixel 2 XL showed up five days later. IF I had been super excited to order this phone and couldn’t wait to get it, I would have been extremely angry at the whole situation. I asked around on Twitter and found this was common with those who ordered Pixel’s, cases, and Daydream headsets, that they commonly missed the delivery window. Not a good experience for Google’s current customers wanting these products who tend to be fans and techies who love Google/Android.

And to make an observation, Apple has been shipping iPhone X orders in advance of their estimated shipping dates to the surprise and delight of their customers and Google is missing delivering windows by days and weeks in some cases.

Device in Hand

The Pixel hardware is pretty great regarding design and fits and finish. I liked how it felt in hand and, the OLED screen was great. I had no issues that others had with the OLED screen. But the camera is really what I wanted to test since so many reviewers were remarking on how it was better than the iPhone 8 Plus and iPhone X. I’ll be doing a separate post analyzing the camera between the iPhone X, Pixel 2XL, and Galaxy Note 8 shortly.

I got the Pixel 2 XL set up and went right to the camera. I took a few portrait’s using the rear-facing camera for some tests then moved right into testing the front-facing selfies. I took around 10, and the portrait feature was never applied to any of my photos. I talked to a few friends who had Pixel 2s to make sure I was doing things right, and I was. Nothing I did could get the portrait selfies to work.

After some searching on Google, I found a article on Android Authority addressing this issue and saying I needed to update the camera app but had to use the link in the article because the app isn’t actually in the Play Store. Shocking.

So I clicked the link, updated the camera app, and now portrait selfie mode was working. Google didn’t ship me a device with the most recent camera app on it, which contained the more anticipated feature most people would get most excited about. Furthermore, I had to dig into the interwebs to find a solution, which was entirely non-obvious, just to get the feature working. How many normals would do that? Not many.

Concluding Observations
These are two examples of things that just can’t happen when you ship a mainstream piece of hardware. Nor can the larger display issues and other hardware problems that have led most review sites to no longer recommend the Pixel. That being said, There are some things Google can build on.

The camera is very good. In the post where I’ll compare cameras, you will see that the iPhone rear-facing portrait photos are better than Google’s but Google front-facing selfie portraits are better than the iPhone X. What’s more interesting to me over the long-haul for Google is how they can seemingly update their camera technology via a software update thanks to machine learning. So, to make a point, an element about Google’s camera with the Pixel 2 that is interesting is how they can further upgrade it or add new features via software instead of hardware. The camera can get better through software which would allow Google to be quite nimble in adding features faster or catching up to Apple faster through hardware.

Software enhancements to the camera is an area I wish we could see Apple do more. A software or app update to the camera, like making portrait lightning mode work better, or fixing a problem I keep having with portrait selfies where it says subject too bright because of how much light is coming off the subject making portrait mode selfies not work. Little things like this, if they could be fixed via software updates, not entirely new hardware or even OS updates would allow Apple to add new features quickly to the camera. Continually updating the camera to get better without new hardware would be highly attractive to the market.

Lastly, using both the Pixel 2 XL and the iPhone X makes Apple’s custom silicon efforts stand out. If you have used Android for any length of time, you know techies have criticized its lack of smooth scrolling for years. Recent years it has gotten much better, but I was surprised using the Pixel 2 XL, running Qualcomm’s latest and greatest, how there were still jitters when you scroll. Scrolling down websites, Twitter, Facebook, Instagram, etc., all still had visually apparent jitters and was not buttery smooth (official technical term) like the iPhone.

All in all, if I were forced to use another smartphone other than iPhone, I’d pick the Google Pixel 2 XL. Mostly because I have always favored the cleanest version of Android and the only Android smartphones I liked using were Google Nexus devices using stock Android. I like the design, and the camera is really good, and will only get better. But Google has a long hard road to go down with hardware, and if they can’t fix some of the basic issues I addressed then I have no hope Pixel brand will ever go mainstream.

How Apple May Be Thinking About AR Glasses

On numerous occasions, Apple CEO Tim Cook has stated that he is extremely excited about AR and believes it will usher in a new era in mobile computing. I have done many interviews on Cook’s comments with media and industry folks about Apple’s overall optimism about AR and I tell them that I believe Apple is moving in a very calculated manner when it comes to how their AR strategy plays out.

One big lesson we learned from Google Glasses is that you don’t just bring out a new technology like glasses without doing a lot of prep work in advance. Google Glasses was targeted at consumers and was a disaster that has tainted their position in this space since they were introduced.

I have always maintained that any new technology gets started at the high end and vertical segments of a market where it is flushed out and can find companies and customers who are willing to pay the early high prices because it meets a specific need. That should have been Google Glasses target market with their first generation of glasses. Only now, three years later, are they doing a new version of Google Glasses that are just targeted at vertical markets. How successful they will be is hard to tell as many other major glasses and goggle makers have been doing glasses for vertical markets for over 20 years and still less then 1-million of these are sold worldwide each year.

I believe Apple understands this market very well and knows that doing AR glasses now and even in the next two years would be folly without many years of getting people use to AR on their smartphones before even suggesting that there is another way to deliver AR that could be more optimal for any AR experience. Indeed, What Apple has done and continued to do so well is to enhance their hardware as they have with the iPhone X so that developers can create AR apps using the new cameras and sensors built into Apple’s top of the line smartphone.

While the optimal AR experience will be on an iPhone X, they have made AR apps work with iPhone 5’s and up. The heart of their strategy lies in the idea that with AR on the iPhone, they can introduce mainstream users to AR and use the iPhone as a way to make AR easily understandable to consumers and give them cool apps that are imaginative and useful for everyday activities.

A good example is of course the IKEA app that lets you place furniture in a blank room through their AR app on the iPhone and iPad so a person can virtually see how it would look in any room. Or the various ones that use AR to see the exact image of your face and then tells you the size of the glasses you should order online. You can keep track of new AR apps here.

Think of the next few years leading up to 2020 as the evangelistic period for Apple to get all of their users use to and engaged in AR apps on the iPhone and make these apps indispensable to them over this period. During this time we will see Apple enhance AR Kit, bring more AR technology to at least two new models of iPhones created during that period so that when they do introduce their AR glasses most likely in 2020, it will just be a natural evolution of their user interfaces.

From the time Steve Jobs introduced the Mac, Apple has been on the leading edge of user interfaces. With the Mac they gave us the graphical user interface and a mouse. With the iPhone they gave us touch screens, gestures, and most recently voice and Touch ID and Face ID as new elements of their user interface design and progress.

I believe from a hardware standpoint Apple could deliver glasses as early as 2019 but I don’t see that in the design plan. Rather, they are not here to beat anyone to market with AR glasses. Indeed, I suspect many AR glasses will come out from competitors between now and 2020. Instead, Apple will play to the big long-term win and only bring them to market when they are certain that their customers will be ready for what will be for most a radical addition to the Apple experience.

In the chart below, you see how the VC community has already decided that AR is where they should invest in a big way. Although VR came to market much earlier even they understand that VR will have its greatest impact in vertical markets and AR is the technology that will eventually have the biggest impact on the market.

Tim Cook and his team have a grand plan to make AR the heart of their future products and user interfaces. It is easy to see that using the plan I suggested above how they could achieve a strong position in AR and make it a mainstream technology in the next decade. That is why when you hear Tim Cook talk about AR, he does it with such confidence. He knows that if they do this right they could dominate this space and change mobile computing again in ways Steve Jobs perhaps did not even dream about when he was still here with us.

Apple’s Content Distribution Dilemma

Apple is serious about content. You just need to look back at the past year to see not just their ambition but also it’s investment in this space.

Back in June, Apple went on a hiring spree. First, with the former head of Amazon’s Fire TV business D. Twerdhal and then, with Jamie Erlicht and Zack Van Amburg, two Sony Pictures executives hired to oversee all aspects of video programming and reporting to Eddy Cue.

In August, the Wall Street Journal reported that Apple was planning on spending roughly $1 billion to procure and produce original content over the next twelve months. So far, this year, Apple produced two original series “Planet of the Apps” and “Carpool Karaoke” which were only received mildly.

In October, news broke that Apple had struck a deal with Steven Spielberg for the updated version of the Amazing Stories series. According to the WSJ report, Spielberg will be producing ten episodes of the original series with a budget of $5 million a pop.

Finally, just last week, Apple was said to have ordered a yet to be titled morning show drama series which will be executive produced by Jennifer Aniston and Reese Witherspoon. The series is written and executive produced by Emmy-nominated Jay Carson (“House of Cards”) and CNN reporter Brian Stelter will consult on the project drawing from his book  “Top of the Morning: Inside the Cutthroat World of Morning TV.”

When I saw the news about this last show, I jokingly asked on Twitter where I could watch it. This to me is a serious question Apple must address as it plans to create more content.

Reaching a Broader Base than Apple TV can offer

If Apple is planning to spend $1 billion in content, surely the hope is to reach as broad a base as they can. Apple has been trying to find the right formula for its “TV Hobby” for some time now.

It first focused on Apps, but the magic that apps brought to the iPhone and iPad failed to materialize with Apple TV.  Apple then turned its attention to “fixing TV” by improving content access by enabling single sign-on. The issue with that is that TV providers like Comcast are also focusing on making it easier for users to find their content and they market features such as voice control quite heavily. Digital Assistants like Alexa and Google Assistant are also getting in the game.

While Apple has not shared Apple TV sales numbers for a while, it is reasonable to expect that even with the latest update that brought 4K support, Apple is still not seeing the numbers that would guarantee a broad enough audience.

This would explain why the first attempts of produced content were distributed via Apple Music rather than Apple TV. iPhones and iPads offer Apple a much broader base for its content. Making the content part of the subscription is also, of course, a good way to reward subscribers. However, I don’t think this would be a viable long-term solution for Apple. Apple must decide whether it is serious about TV in the home – especially as the little box doubles as a connected home hub – or if it is serious about creating content and competing with Amazon, Hulu, and Netflix. While the two are not mutually exclusive, Apple could also decide to create a new service that is not tied to Apple TV. iTunes is too tired as a brand to help Apple in its endeavor, and Apple Music should be about music. Also as costs increase, Apple could not just roll this new content into the current Apple Music subscription. Of course, as consumers have choices being able to offer an all-inclusive subscription for video and music at a competitive price could be a differentiator for Apple, at least over some of its competitors.

Access to the Right Content….

Aside from producing its own content, Apple has also been in talks with Hollywood studios to get earlier access to movies to be distributed at a premium price on iTunes. So far, studios received stiff resistance from theaters due to the significant loss they would be the money that we all spend on popcorn and other concessions more so than the number of paying customers for the movies themselves.

For the studios, the biggest problem would be to guarantee that the content could not be easily pirated. Although, earlier wider availability might lower in-theater piracy. While iTunes encrypts video, one could always record the movie from an external device such as a phone. Screening Room, a new service that Napster’s founder Sean Parker is trying to create that also allow for early viewing of movies still in theater used a watermark which, while not deterring piracy, makes it trackable and therefore punishable.

For consumers, a rental price of between $25 and $50 per movie would still represent a very competitive price compared to what a movie outing usually costs. The service would also speak to changing consumers’ behaviors. Larger, high-definition TVs are dropping in price making that home-theater experience a reality for more and more consumers. At the same time, the theater experience has not improved in a way that many consumers would consider proportional with the price hikes for 3D and Imax. It only takes going to a couple of popular movies to see that the longer line is usually for the regular screening rather than the 3D or Imax screening.

….and a New Ways to Consume Content

Content consumption is also changing. AR and VR open up opportunities to experience content in a different, more immersive way. Tim Cook has been very vocal with his believes that AR offers a much broader opportunity than VR and I tend to agree with him. Yet, I do believe that VR offers a great opportunity to deliver a premium content consumption experience as well as new content altogether.  Anything from a behind the scenes tour of a movie, to a meet a greet the stars. VR also plays well with music and sports by providing access to concerts and events. Apple’s attempt to engage users with artists through Apple Music was not very successful but who would say no to having their favorite artist perform for them in their living room?

With rumors around a possible set of Apple Glasses, I can see Apple offering this as a premium service for the home.

With the Apple Glasses a couple of years away, Apple needs to decide if the pool of consumers interested in such content today is big enough to start thinking about Mac support for VR. While the number of Mac users is a drop in the ocean compared to Windows, they represent a much more profitable target for content providers and developers, one that should not be overlooked.

The Big Shift to Transportation as a Service

There are some interesting discussions happening, some public but many behind closed doors, about the automotive industries role within the broad category of the ride-sharing economy and autonomous fleets. You may not connect the dots to draw parallels between the ride-sharing economy and autonomy, but they are more closely related than many realize.

The big picture question is centered on exploring the future of car ownership. For those companies like Uber, Lyft, Didi, and Ola Cabs, their bigger future rides on convincing consumers that owning a car costs more than using a ride-sharing service. It seems quite difficult to imagine, especially in many Western regions, but this is the big debate going on in the automotive industry. To dig into this deeper, let’s look some important topline statistics.

Ride-sharing only makes up ~.5% of rides in the US and a much smaller part of the global automotive landscape of ~3 billion rides a day. Interestingly, the average ride length in India (as shared by Ola cabs) is 45 min. This has everything to do with the landscape in India and the lower individual car ownership rates as taxi’s, and ride-sharing services are a form of mass transit. Contrast that with the average ride time of ~10 minutes in the US, and we see a different picture of the job a ride-sharing service fills for a customer.

I highlight these specific statistics because, at the moment, many of these companies are still subsidizing the cost of these rides with their massive amount of investment funding to get scale. The key point is: rides today do not cost as much as they should, or potentially will in the future. One interesting part of the discussion for ride-sharing services has been if they can monetize that customer with some form of advertising as an example. If you have a captive customer for anywhere from 10-45 minutes sitting in a car, then it makes sense that ads will play a role in keeping costs down. These ads can’t be the same boring text or print ads but maybe more interactive media, someday perhaps the windows will be interactive displays, etc. You can imagine why Google may be interested in this space given that angle. This is likely inevitable as a way to keep ride-sharing costs down but will also lead to further tiers of service by these companies. Uber has UberBlack which is designed to be a more high-end commuting experience, but even it has struggled as late. However, as some consumers may be willing to pay more not to have their commute ride show them ads, there will likely also develop a tier that wants a more luxury/personalized experienced from their preferred ride-sharing service.

For example, someday well into the future, a car (likely autonomous) will come pick me up and know that I like certain kinds of music, or talk radio, the car lit a certain way, the temperature a certain way, the seats a certain way, and a host of other personalized travel accommodations. As technology continues to invade the automotive industry, these kinds of highly personalized smart transportation services become possible. This will allow companies to have a tier for those who mainly want to save costs and in return will tolerate ads and those who want a more premium commuting experience.

What the above point underscores is how, in some way, transportation will evolve to be more of a service than it is today. The big question is what are the automotive companies role in all of this shift. There have been discussions that companies like Uber, Lyft, Ola, etc., are in danger because a car company could just create these services themselves. The problem with this argument is that it would require a massive investment to build such a service that it would be very difficult for public car companies to convince investors this is a smart move that will reap a return on investment. These car companies know that as transportation moves from a service, and perhaps fundamentally away from individual ownership, that they have to be more involved at the services layer if they are to survive.

This is where the platform play that Google is taking with Waymo could be interesting. Google could be the solution that car manufacturers could use to compete with ride-sharing companies and create services of their own. The other thing car companies can do is partner with ride-sharing companies and work to create shared incentives and shared upside on the services layer. Of course, they could also buy one of them, but again the scrutiny a public company goes under from public shareholders could again prove problematic if they tried to acquire one of them.

Tesla remains one of the more interesting companies to watch here because they seem well positioned to create an autonomous fleet geared specifically for ride-sharing and transportation as a service type of a model. Tesla’s efforts to bring to market an autonomous semi-truck that will try to take share of the market as delivery of goods evolves into an automated service model.

In many discussions, I’ve had around this space the biggest thing that stands out is how badly many want to disrupt or transform automotive because of the sheer size of the industry which is roughly ~17 trillion dollars. It is big and feels like it is ripe for disruption, or is building toward that tension, and it is an industry that has largely been underpenetrated by tech conglomerates. While still exceptionally early days, it seems clear the industry has a long road of innovation still needed, but the writing is on the wall on how technology will shift the automotive industry toward transportation as a service.

Liberal Arts and Tech

The tech industry’s lack of diversity and mind-numbing sea of sameness when it comes to opinions are, unfortunately, now widely recognized. But there is a subtler, and lesser-known limitation in tech that, I believe, is also having a devastating influence on the industry: the lack of liberal arts graduates.

As the proud graduate of a quintessential liberal arts program—Notre Dame’s Program of Liberal Studies, which combines literature, philosophy, theology, natural sciences, history and more into a Renaissance-style general education via a study of the “great books” of both Western and Eastern civilizations—I’m unquestionably biased in my perspective. Nevertheless, it’s becoming increasingly clear that the lack of intelligent reflection, discussion, and debate on why and for what purpose technologies are being developed and applied in tech industry products and services needs to be addressed. Even an ethnographically diverse set of engineers and other tech-focused individuals can’t always see, nor understand, some of the challenges that today’s tech products are bringing to the fore.

On the other hand, while no two liberal arts programs are the same, the one consistent thread across them is that they teach people to think critically, ask these essential why questions, and work through the implications and longer-term impact of ideas and concepts, particularly as they relate to people. Applying these kinds of human-centric principles to tech could make a profoundly important impact.

Consider, for example, where social media has brought us as a society. From a scientific and programming perspective, it’s clearly impressive to be able to not only link billions of people around the world and let them communicate with one another, but to use advanced computer science to create algorithms that can continuously feed each one of us with the kind of information that specifically interests each one of us (in theory, at least).

However, a liberal arts major familiar with works like Alexis de Tocqueville’s “Democracy in America,” John Mill’s “On Liberty” essay, or even the work of ancient Greek historians, might have been able to recognize much sooner the potential for the “tyranny of the majority” or other disconcerting sociological phenomena that are embedded into the very nature of today’s social media platforms. While seemingly democratic at a superficial level, a system in which the lack of structure means that all voices carry equal weight, and yet popularity, not experience or intelligence, actually drives influence, is clearly in need of more refinement and thought than it was first given.

Beyond these more philosophical debates, there are an increasing number of very practical concerns around the ethical application of technology in fields ranging from medicine to transportation to basic data analysis. Toss in the mind-numbing array of questions that arise from technologies like artificial intelligence (AI) and machine learning, and it’s clear that there’s a lot more discussion that needs to happen around how technologies get applied, rather than just how to build them.

Given the already enormous impact that technology has in our present lives and the inevitable increases that will occur, there needs to be more thoughtful analyses about the roles technology can and should play. It’s also important to recognize that the kinds of exciting technological developments that we have now (and will have much more of in the future) affect all people—not just the types who are currently doing much of the development work. That’s why it’s so critical to increase the diversity of opinions, experiences, and perspectives of people working to bring this technological future to life.

The greater the variety of voices—not only from a gender, race and ethnographic perspective, but an educational one as well—the more balanced, successful and long-lasting the choir of “future creators” will be.

Shifting Dynamics in the US Wireless Market

As I’ve mentioned before, one of the markets I follow closely is the US wireless market, with a focus on the four largest network operators. These operators continue to be by far the largest channel for smartphone sales in the US, and what I’ll share today is a mix of insights on the wireless market itself and the implications for the smartphone market. The data I’m sharing here comes from a much larger data set I maintain on the market, and the charts are also part of the quarterly wireless deck in my decks subscription service.

T-Mobile Continues to Win in Phones

Phones continue to make up by far the largest single chunk of the wireless market, for all the talk about an exploding IoT industry, so we’ll start there. The postpaid model continues to dominate phone subscriptions in the US, and T-Mobile continues to lead the market in growth there, as it has for the last several years:

T-Mobile has added the most postpaid phone subscribers of any US operator for the last four years straight, with Verizon the only operator really giving it a run for its money. Verizon’s growth, though, dropped precipitously during 2016 and Q1 2017 as Sprint and T-Mobile pushed unlimited offerings and Verizon and AT&T resisted that trend. Since reintroducing unlimited offerings at the end of Q1, Verizon has recovered well. Interestingly, AT&T hasn’t recovered nearly as well, and has continued to see shrinkage in its postpaid phone base for the last two-plus years. Sprint saw a big recovery starting in 2013, and has now plateaued around the middle of the market.

T-Mobile Also Sells More Than Its Fair Share of Smartphones

One of the other interesting outgrowths of T-Mobile’s growth leadership is that it punches well above its weight in phone sales. The three main drivers are its outsize share of new postpaid subscribers, strong performance in the prepaid segment, and the higher device upgrade rate among its base, as shown below:

As you can see, here too AT&T comes in last, and by a significant margin, with T-Mobile first for most quarters, though pipped by Sprint in Q3. That disparity and the mismatch in phone subscriber growth translate into a dramatically different share of smartphone sales versus installed base, given that T-Mobile and Sprint are still much smaller in terms of subscribers than Verizon and AT&T:

As you can see, although Verizon has over a third of smartphone subscribers in this group, it sells just 28% of the smartphones, while AT&T’s mismatch is even bigger at 30% to 22%. T-Mobile, meanwhile, sells sells the most smartphones of any of the four, off the back of just a 21% share of the market, and Sprint’s sales share is also well above its base share. All of this means that, if you’re a smartphone vendor, you shouldn’t be swayed by each operator’s share of the smartphone base as much as by its share of sales, which might be considerably higher or lower.

Smartphone Sales Overall are Down Due to Longer Upgrade Cycles

Beyond the competitive dynamics, the other big thing to note from a smartphone perspective is that upgrade rates continue to lengthen. In the chart below, I’ve averaged out the upgrade rate from one of the charts above to create a single number for the four major operators, and I’ve also added in total postpaid smartphone sales for each quarter. As you can see, there’s a strong correlation between the two:

Both are trending downwards, as people hang onto their phones for longer, and therefore buy fewer new phones each year. There are still spikes in sales in Q4 of each year, but the spikes have been getting lower. Those spikes are, of course, driven in part by Christmas present buying, but also to a great extent by new device launches towards the end of the year, notably new iPhones going on sale in late September. The 2014 “super-cycle” driven by Apple’s first large-screen phones drove by far the biggest Q4 of sales ever, and it’s quite likely that we’ll see the first meaningful growth in several years this quarter with the launch of the iPhone X.

But the overall trend will continue to be downward, driven by both that slowing upgrade cycle and by the fact that there are fewer and fewer new smartphone customers to be had – the industry added just 9 million new postpaid smartphone subscribers in the past year, versus 19 million three years earlier. That, in turn, means the market will be more competitive and closer to zero-sum, with any gains by individual vendors necessarily coming at the expense of others. In that context, we’re going to continue to see the push up-market by those vendors with credibility in the super-premium smartphone space, mostly Apple and Samsung, while other vendors are forced to fight for the mid-market.

A Peek at Peak Apple

On November 2, 2017, Professor Mohanbir Sawhwney (hereinafter, “the Professor”) penned the provocatively titled “The iPhone X Is the Beginning of the End for Apple“. (All quotes are from the article unless otherwise identified.)

No surprise, right? Pretty much everything is the “End for Apple”.

Years people have doubted Apple: 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 ~ Neil Cybart (@neilcybart) 11/7/17, 6:58 PM

But let’s be fair. The title of an article is often clickbait that is not representative of the article’s contents. So, is that the case here?

Nope.

Have we reached peak phone?

I would argue that we are indeed standing on the summit of peak “phone as hardware….”

Yowza. That’s quite a claim. Let’s take a look at the Professor’s reasoning. (I’ve added numbers to the sections on “Theory” and “The Next Vector” for added clarity)

 

1. Theory

1.1 To understand the future of phones, it helps to look at the history of…innovation.

1.2 Innovation in technology product categories tends to proceed along a specific dimension—a “vector of differentiation.”

1.2 Players pursue innovation along a vector of differentiation until the vector runs out of steam.

1.4 This happens for two reasons: limits to innovation along the vector of focus and the ability of competitors to catch up with market leaders.

1.5 (W)hen vectors of differentiation shift, … the focus of innovation shifts to a different vector and new market leaders emerge, … incumbents often get left behind and market leaders tend to fall by the wayside.

 

2. The Next Vector

2.1 Now, the vector of differentiation is shifting yet again, away from hardware altogether.

2.2 Sheets of glass are simply no longer the most fertile ground for innovation.

2.3 We are on the verge of a major shift in the phone and device space, from hardware as the focus to artificial intelligence (AI) and AI-based software and agents.

2.4 This means nothing short of redefinition of the personal electronics that matter most to us.

2.5 The shifting vector of differentiation to AI and agents does not bode well for Apple.

Well, of course, this “does not bode well for Apple” because nothing ever bodes well for Apple.

 

3. AI Leaders

In the brave new world of AI, Google and Amazon have the clear edge over Apple.

Oh brother, here we go.

Amazon is making rapid progress along this vector of differentiation, as are Google (with its TensorFlow open-source platform for AI apps) and even Microsoft.

In other words, everybody’s making progress in AI. Except for Apple. Because, you know. They’re Apple.

 

4. Nitpicking

I have some nits to pick with the Professor’s underlying premises. Have Smartphones really stagnated? Even if AI is the future, are we sure what that future will look like? And are we sure that the AI future is upon us here and now or is it still, you know, in the future? And what makes the Professor think that moving ahead toward AI necessarily means leaving hardware behind?

Inquiring minds want to know.

 

5. Predictions About the Future

Predictions are hard, especially ones about the future. ~ not Yogi Berra

The thing is, we can know the broad outlines of the future without having any inkling about what the specific details of that future are going to be.

— Everybody knew that cars were the future, but while everyone else was trying to make a better car, Ford made a better assembly line.

— Everybody knew that personal computers were the future, but while everyone else was trying to make a better computer, Microsoft made a better operating system.

— Everybody knew that mobile computing was the future, but while everyone else was trying to make better phones and tablets, Apple made a phone that was a tablet.

 

 

6. The Race

If the age of AI is upon us, where is the assembly line of AI? Or the Windows 95 of AI? Or the iPhone of AI?

Saying the age of AI is upon us is like saying that the age of mobile was upon us when Microsoft introduced their first tablet in 2000 or when RIM introduced their iconic Blackberry phone in 2002.

The mistake we commonly make is to talk about who is “ahead”. But like Microsoft with the tablet and RIM with the phone, it doesn’t matter how far “ahead” one is if they’re running in the wrong race. Microsoft, RIM, Nokia — even Palm — were ahead of Apple in the mobile phone race. Apple wasn’t even in the running. But Apple reset the game by starting a new race — the smartphone race. And in the smartphone race, Apple obtained an insurmountable lead while the incumbent mobile phone leaders were left helplessly behind, in part because Apple got there first, but just as importantly because the mobile phone incumbents didn’t know the new race had begun or didn’t know the new race was important or didn’t even know where the starting line was.

 

7. The Ladder

If the ladder is not leaning against the right wall, every step we take just gets us to the wrong place faster. ~ Stephen R. Covey

I hope you’ll forgive me, but let me use one more metaphor to drive home this point because I think it’s important.

It doesn’t matter most how high you climb the ladder of success. What matters most is whether your ladder is leaning against the right wall. In mobile technology, Microsoft, RIM, etc. were at the top of their respective ladders. But with the smartphone, Apple leaned their ladder against the right wall.

Google, Amazon, Microsoft may or may not be “ahead” in AI. But that only matters if they’ve placed their AI ladder against the right wall.

 

8. From Hardware

One of the Professor’s most baffling assertions is that the dawn of AI must necessarily coincide with the sunset of hardware. The following quotes from his article exemplify this attitude (numbers and emphasis added):

8.1 “(T)he vector of differentiation is shifting yet again, away from hardware altogether.”

8.2 “We are on the verge of a major shift in the phone and device space, from hardware as the focus to artificial intelligence (AI) and AI-based software and agents.”

8.3 “(W)e shift from hardware-based innovation to differentiation around AI-driven technologies.”

8.4 “Apple is falling behind in the AI race, as it remains a hardware company at its core and it has not embraced the open-source and collaborative approach that Google and Amazon are pioneering in AI.”

 

9. Premise Refuted

The proposition that a move toward AI is a move away from hardware is refuted right within the article itself. Note how even as the Professor praises Amazon and Google for their AI prowess and their AI promise, he does so by referring — at least in part — to how their HARDWARE will use AI. (Again, the added emphasis is mine.)

The advent of Amazon’s skill store and similar innovations speak to the need to create an AI-rich ecosystem where hardware, software, and third-party contributors work in concert to enhance consumer experience across life domains.

Consider Google’s Pixel 2 phone: Driven by AI-based technology, it offers unprecedented photo-enhancement features and deeper hardware-software integration.

As it happens,  Ben Thompson — who was a student of the Professor’s — was thinking along the same lines as I. (Great minds, and all that.)

“The presumption is that the usage of Technology B necessitates no longer using Technology A; it follows, then, that once Technology B becomes more important, Technology A is doomed.”

“In fact, though, most paradigm shifts are layered on top of what came before. The Internet was used on PCs, social networks are used alongside search engines. … In other words, there is no reason to expect that the arrival of artificial intelligence means that people will no longer care about what smartphone they use.”

Ben Thompson’s entire article on this matter is well worth a read. You can find it here.

 

10. Premise Disputed

Let’s re-review the Professor’s basic chain of logic (using my words, not his):

— Apple is a hardware company; and

— AI is the future; therefore

— The move from hardware to AI will leave a hardware maker, like Apple, in its wake.

As I’ve already pointed out, the chain of logic is flawed because the move toward AI is not a move away from hardware.

Furthermore, did you notice anything else odd about the Professor’s assertions? His argument is founded upon the premise that Apple is a hardware company. But what industry expert worth their salt would describe Apple as “a hardware company”?

Apple is not just a maker of hardware like, say, HTC, or LG. Apple makes the whole widget. They make both the hardware and software; both the phone and the operating system; both the iPhone and the iOS. What makes Apple unique is that they are a provider of integrated solutions.

Why does that matter? Why does it matter that Apple makes both the hardware and the software? It matters because saying AI is unrelated to hardware makes little sense. But saying AI is unrelated to software makes no sense whatsoever.

The Professor, I think, has it exactly backward. He thinks that AI is going to somehow be independent of phones, and therefore companies like Apple are going to suffer. But isn’t if far more likely that devices like the iPhone are going to be the platform that AI builds upon?

 

11. Apple AI

Next-generation devices will use AI and deep learning to recognize our voices, faces, and emotions. – (the Professor)

We don’t have to wait until the next generation of devices to use AI for those purposes. Apple does most of those things already.

It seems to me that the Professor did not look carefully at the iPhone X before he wrote his article. He’s not only ignoring the phone’s future possibilities, he’s also ignoring its present capabilities. Apple is baking AI right into their chip design. And Apple uses AI, for example, to allow Face ID to adjust to changes in one’s face over time. The iPhone X is chock full of AI.

I can’t fathom the idea that Apple is behind in AI. Its devices are packed it with it. ~ Joshua Gans‏, @joshgans

 

12. Apple AR

As AI-driven phones like Google’s Pixel 2 and virtual agents like Amazon Echo proliferate, smart devices that understand and interact with us and offer a virtual and/or augmented reality will become a larger part of our environment. Today’s smartphones will likely recede into the background.

I think the Professor has gotten this backward too. Where he see’s stagnation in iPhone innovation, I see the potential for dynamic growth.

The Professor bemoans the fact that Apple is falling behind in AR. Maybe I’m missing something here (I’m not) but it seems to me that with the iPhone 8 and, in particular, with the iPhone X, that — far from falling behind — Apple has taken a substantial lead in the practical implementation of AR. They and they alone have the hardware and the software chops necessary to create AR that actually works for millions upon millions of people, right now, today. What’s more, Apple’s already substantial lead in implementing AR in already existing products may be about to become much, much bigger.

In 2007, Apple introduced the iPhone to the world. But it wasn’t until 2008 — with the addition of the App Store — that the iPhone’s full potential was revealed. It was then that the iPhone went from a being a proprietary device, made only by Apple, to becoming a platform, available to all. And that changed everything because a platform allows one to harness the abilities of others. And not only do those others create things for you without getting paid by you, you actually get to charge them a percentage of their profits for the privilege of doing so!

From the beginning, the iPhone was a blank canvas. But the APIs necessary for developers to create apps was the paint. The App store invited the most creative minds in tech to create things that Apple could never, themselves, have imagined. And Developers accepted the invitation with enthusiasm and proceeded with gusto.

That was 2008. This is 2017. And in 2017 Apple may — at least in part — have replicated the miracle of the App store, all over again. With the App Store, Apple created a  canvas for Apps. Today, Apple has created a new canvas suitable for the creation of AR. And there are literally tens of thousands of developers who are focusing their efforts on painting the next Mona Lisa of AR

Just as an example of what is already possible, Warby Parker is using face mapping on the iPhone to provide glasses recommendations.

And here are some “Mindblowing examples” of AR made while ARKit was still in beta.

And, as the following headline attests, Animoji Karaoke is a thing.

Animoji karaoke is the new iPhone X feature taking over the internet ~ Evening Standard

It’s hard to believe that Apple will not, in future iterations of the iPhone, use the front-facing camera to extend one’s ability to turn animate objects into Anamojis. And the possibilities there seem, well, endless.

And the thing is, we simply do not know — and can not know — what the new AR platform may produce. When Apple introduced the App store in 2008, we could not imagine an Uber or an Airbnb or a million other apps that would soon be created and sold in the App Store. Similarly, now that Apple has introduced AR to the phone, we simply can not possibly imagine the uses developers may make of it. It’s like trying to imagine the unimaginable.

That’s the beauty of a platform. And Apple — and only Apple — is currently in a position to make that all happen.

This isn’t the end for the iPhone as the Professor contends. It may, in fact, be a new beginning. We’re about to see the start of a new wave of third-party developer creativity. And perhaps that wave will swell into a tidal wave of innovation.

 

13. Apple Glasses

I would argue that we are indeed standing on the summit of peak “phone as hardware”: While Apple’s newest iPhone offers some impressive hardware features, it does not represent the beginning of the next 10 years of the smartphone, as Apple claims.

Sheets of glass are simply no longer the most fertile ground for innovation.

While the Professor bemoans the fact that Apple is a mere hardware shop, he ignores the fact that there is no one better positioned to move from phones to glasses than is Apple. And as the following two articles attest, Apple may well be preparing to make that exact move.

Apple to Ramp Up Work on Augmented Reality Headset ~ Mark Gurman, November 8, 2017

Apple, Inc.’s Augmented Reality Glasses Could Be Closer Than You Think ~ Evan Niu, CFA, The Motley Fool

The Professor contends that iPhones are going to be mooted by the next “vector of innovation” and Apple is going to suffer for it. But for all we know, Apple glasses may be the next “vector of innovation” and Apple may own it in the same way they currently own the smartphone revolution.

Turns out that “sheets of glass” may still be fertile ground for innovation. And far from being relegated to a maker of legacy products, as the Professor contends, Apple may well be on the verge of a second renaissance.

 

14. Conclusion

When it comes to the demise of the iPhone, we can but recall Mark Twain’s reaction upon reading his own, somewhat premature, obituary.

The reports of my death are greatly exaggerated.

Podcast: Snap, Intel, AMD, Qualcomm, Broadcom, ARM, Twitter 280

This week’s Tech.pinions podcast features Jan Dawson and Bob O’Donnell discussing the challenges facing Snap, multiple developments in the semiconductor industry, including the Intel/AMD collaboration, the introduction of ARM-based server chips from Qualcomm, and the potential purchase of Qualcomm by Broadcom, and finally a discussion of Twitter’s 280-character tweets.

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

News You might have missed: Week of November 10, 2017

The Mixed Week of Twitter: 280 characters and the Blue Checkmark

This was a pretty busy week for Twitter and not always for the right reasons. First, the social platform turned the trial run that gave few users 280 characters for the tweets into the new characters limit norm. The exceptions are Twitter users tweeting in Japanese, Korean, and Chinese who remain at the 140 characters limit for now.

On Thursday, Twitter announced that it is pausing all account verifications after it received pushback for verifying Jason Kessler, the organizer of the white supremacist rally in Charlottesville. According to Twitter, its verification process is meant to “authenticate identify and voice” but is today interpreted as”an endorsement or an indicator of importance.” This has, however, not been always the case as some controversial accounts such as Julian Assange did not achieve the status and others like Milo Yiannopolous were stripped of it.

Via CNet

Via TechCrunch

–    I explained before that while we might think 140 characters are plenty, there are languages other than English that have much longer words and a more complex sentence structure which could benefit from longer tweets.

–    Over time, Twitter had already changed some of the rules which indirectly helped longer Tweets like lifting the limit for direct messages, as well as not counting photos, videos and replied to other as part of the characters.

–    While over the past few days we have seen many users play with the 280 characters I do believe the novelty will wear off and people will use it when they need to other than going out of their way to compose longer tweets.

–    At the end of the day, while you are allowed to compose longer tweets, it does not mean that your followers are willing to read them!

–    Twitter says that the checkmark is not an endorsement but basically a validation that you are the one you say you are. This is particularly useful for people who have a public profile. So, if you follow this explanation, Jason Kessler, who, whether we like it or not, has a public voice, was authenticated as being who he is. The problem as I see it is that there are many other Twitter users who have an impact with what they say on social media and who are still waiting for the blue checkmark. This is what angered some people.

–    The more important aspect of the checkmark, however, is that, despite what Twitter says, having a checkmark makes you “legit” and it has become a badge of honor of sort which is why there was disappointment in this particular decision.

–    There are bigger issues I have talked about when it comes to Twitter, and this just adds to it, but it seems to me that they are all rooted in a set of regulations that are either unclear or not implemented as they should. As Twitter continues to self-assess why growth is hard to come by this is a good starting point.

Canalys’ 3Q17 Smartphone Market Share Numbers

Canalys published its quarterly smartphone market share numbers showing Apple in second place after Samsung with 46.7 and 82.8 million units respectively. Huawei remained at number three with 39.1 million units. It also said that the iPhone 7 was the world’s best-shipping smartphone with 13 million units. The Apple’s iPhone 8 did not make the top five as the two models accounted for 11.8 million units. This compares to the 14 million units reached by the iPhone 7 and 7 Plus in their first quarter last year. The iPhone 8 Plus out-shipped the iPhone 8  according to Canalys, accounting for 6.3 million units.

Via 9TO5Mac 

–    I am not going to comment on the validity of the numbers as I know these are estimates of sell in and we have yet to have enough data points from other sources to triangulate all the information.

–    I want however try to help our readers make sense of the many sensationalistic headlines we have seen thus far covering these numbers.

–    First, Canalys tracks sell-in numbers not sell-through so talking about sales is WRONG. These are shipments numbers which means they are not yet units that made it to a buyer. They have simply left Apple’s warehouses (so Apple counted the revenue they generated) and are in the channel somewhere.

–    I have done market share for many many years, and it is not an easy job. If you are tracking sell-in, you depend on manufacturers’ feedback and channel’s feedback. If you are tracking sales you depend on the channel, you validate through sell-in and you survey buyers to project those numbers to the population. None of these methods is perfect, but if you are doing your job right the result is good enough

–    I read some comments that pointed out how the statement on iPhone 7 out-shipping 8 negated Tim Cook’s statement during Apple’s earnings call that the iPhone 8 became the best-selling model. It actually does not. As one talks about shipments and the other refers to sales. Remember that the iPhone 8 and 8 Plus were selling for one week in the quarter. So, even if Apple had to prep the channel for the new models it is unlikely that they had more than half the quarter in the channel. Production is also still ramping up for the new models. So it is expected that the iPhone 7 and 7 Plus would out-ship the new iPhone 8 and 8 Plus in the quarter.

–    Let’s now talk about the iPhone 8 Plus out-shipping, the smaller sibling. Apple was unprepared when the 6 Plus started to be more popular than the 6 and had to ramp up production to address demand. Apple learned from this, and last year there were no issues with the iPhone 7 Plus supply meeting demand. It became clear with the 6 Plus that buyers were not just seeing a larger screen but a hero device in this larger model. This was even more true with the 7 Plus that came to market with a better camera.  It seems to me pretty logical then that Apple would expect the iPhone 8 Plus to be in higher demand than the 8 this year because of a potential upgrade from the iPhone 7 and 7 Plus and the strong base of the 6 Plus. People buying in the first week of availability will also more likely skew towards the Plus model. While this should earn Apple a good pat on the back for planning, it is certainly not worth it of a headline.

–    I do expect sales of the iPhone 8 and 8 Plus to be more balanced than their predecessors but I am not sure if the iPhone 8 Plus will outsell the 8, yet.

Semiconductor Frenemies

One of the more important underlying trends in the technology industry is one that most people are not following very closely. It has to do with the massive consolidation of the semiconductor industry. For years I have been writing about how this consolidation is in inevitable. It is being driven by the massive expansion of technology into industries that were not technology driven before. Things like healthcare, industrial, all forms of consumer products, and many other industry verticals. These companies, who know all of a sudden have to become technology companies, do not know how to manage a complicated supply chain around components and sensors all compromising of semiconductor industry goods. These companies are more interested in going to one vendor to get the brains they need to put in their products and don’t want to manage many vendors as was the norm. So it makes sense that if a company chooses Qualcomm or Intel, for example, for their main brain that they also hope to get the other sensors and chipsets they need from Intel or Qualcomm as well. This subtle, yet very powerful, nuance is driving the massive consolidation we see in the semiconductor industry.

However, while still more consolidation will come, we are seeing semiconductor companies partner with would be competitors now as well. A great example of this is Intel now collaborating with AMD on graphics in an attempt to stop the march Nvidia has been making against Intel in some markets. The thought that Intel and AMD would have collaborated at any point a few years ago would have seemed crazy since they are, for the most part, fierce rivals. AMD’s only upside in nearly every market they compete is to take share from Intel. There is a deep void in Intel’s portfolio around graphics, and nearly every interesting new trend in technology (like machine learning and computer vision) is all happening in GPUs. In that light, and the reality that Nvidia would never collaborate with Intel, it makes sense that AMD and Intel collaborate.

That is not to say Intel will not still compete directly with AMD in many ways, however, in certain instances this partnership makes sense.

These new dynamics of the global semiconductor industry are changing the landscape drastically. Whether it is consolidation by acquisition or competitors becoming frenemies this trend will no doubt continue. Although, there is one new wrinkle that dropped this week worth pointing out.

Avago/Broadcom and Buying Qualcomm
I’ve written extensively about the opportunities and challenges facing Qualcomm for many years. A host of semiconductor industry dynamics have given rise to real threats to Qualcomm’s dominance which they have fended off fairly well, but mountain-sized challenges remain, particularly as both mobile silicon and network technology reach the top of their S-curves. However, no challenge facing Qualcomm means imminent death for the company as we know as would the acquisition by Avago/Broadcom.

Avago/Broadcom’s intentions seem pure. Their hypothesis is to create the worlds largest semiconductor company, which in theory should only increase the dominance of both companies. Fun fact, 98% of global internet traffic both WLAN and WiFi travel through a Qualcomm or Avago/Broadcom part. The issue here is layered. Firstly, I’m quite familiar with the Avago culture, having seen many friends at Broadcom go through it an ultimately leave. Avago is run more like a cut-throat business than an innovation center. Both Broadcom and Qualcomm push the limits of innovation and Avago looks to commoditize those innovations as a key focus. I fear that if this deal goes through it would lead to the destruction of innovatoin at Qualcomm, many top engineers would leave (just like what happened at Broadcom), and worst case scenario they sell off parts of Qualcomm they don’t think are profitable and only focus on licensing and royalties. In nearly every scenario I can think of this deal would be a disaster for not just Qualcomm but all the technology companies that depend on Qualcomm innovations to compete in the marketplace.

I do hope this deal gets rejected by share holders and does not go to a proxy where Qualcomm’s activist shareholders could be a wild card. In reality, Qualcomm needs to be the company out buying companion parts, and Avago/Broadcom is not a good fit amidst the many other options the company has. Especially, if they can complete the NXP acquisition.

The Next Moves to Come
You may have seen the news that Marvell is in talks to buy Cavium, which would increase the consolidation again in the market. Others I’m watching are Lattice Semiconductor, who makes some FPGA parts (and other things) that are becoming more critical to AI and Machine Learning. Xilinx is another I’m watching, again because of their FPGA solutions.

Many companies are at play as well as we watch big technology companies who don’t make their own silicon, start to verticalize and design more core components themselves, following Apple’s lead. I expect Google, Microsoft, and Amazon to name a few, to start to get more aggressive designing specific chipsets that help them differentiate and compete more aggressively. Because of that, they will be in need of both IP and talent to bring in-house.

Ultimately, and I will write a separate post on this, I believe we are entering the golden age of the semiconductor industry. We can argue the first era created the companies we have to do, but all of them were just focused on one thing, Moore’s Law. Now that Moore’s Law has slowed down, or died in some folks opinion, the reality is semi companies are now innovating in new ways that are bringing forth a much more interesting era of computing around Machine Learning and AI. These two things combined require radically new approaches to designing silicon and require still a breakthrough or two before AI/ML can become a true reality.

More on the true golden age of semiconductors at a later date.

Snapchat’s Strategic Failure

This week’s Snap Inc earnings call was an indictment of the strategy pursued by the company in regard to both its core Snapchat app and its Spectacles hardware. The company has failed to drive two of the three major metrics that are key to success in the space, and it reversed its long-standing strategic stances on several key topics during a single earnings call. Having resisted calls for change for months, it appears Snap is now trying to change everything at once.

The Multiplier Key to Ad-Based App Growth

There’s a simple formula which is key to growing revenues for any ad-based online or app company:

user growth x engagement growth x rising ad prices

That’s the formula that’s served Facebook so enormously well over the last few years, and it’s also the one which Twitter and others have failed to implement effectively, with Snapchat seemingly the latest company to do so. Snapchat is executing on just one of these adequately – growing engagement and time spent – though it doesn’t consistently report the metrics needed to measure that progress over time. We do know that at the time Snap filed for its IPO, its users spent an average of 25-30 minutes per day in its app, and that number has grown since, but we don’t have any sense of the longer-term trajectory here.

On the other two metrics – user growth and rising ad prices – Snap has fallen woefully short. The user growth it saw in early 2016 was clearly something of a temporary phenomenon rather than a reliable predictor of future growth rates, though the company argued otherwise in its S-1 and clearly expected stronger growth than it’s actually seen since its IPO. Instead, what we’ve got is Twitter-like incrementalism rather than the strong growth that should characterize a social app in its prime:

The line across the chart hits at 10 million users per quarter, a milestone the company beat three times in late 2015 and early 2016, but hasn’t crossed again since, with the most recent quarter at just half that pace. That kind of user growth clearly isn’t going to get Snapchat where it needs to be from a revenue perspective.

Turning to prices per ad, we have no way to measure those directly, but it’s abundantly clear that they’ve been falling rather than rising as Snapchat has introduced programmatic ad buying. That change has lowered the entry point for advertising on Snapchat by three orders of magnitude, per management’s earnings call commentary, and demonstrated in the process that Snapchat’s earlier fixed rate cards were priced vastly above what supply and demand would have dictated. Now that advertisers have a choice in the matter, they’re paying vastly less, largely because there’s so little competition to fill those ad slots.

As such, instead of rapid user growth and rising engagement being multiplied by rising ad prices, Snap has seen revenues grow anemically, with average revenue per user in the US very low at around $2, and outside the US vanishingly small at under 50 cents in Europe and just 30 cents in the rest of the world. That won’t turn Snap into the kind of advertising powerhouse it clearly wants to be, and something needs to change.

The Dam Breaks

All of this has been fairly clear to those of us watching the company with keen eyes from the outside for some time – indeed, I pointed out the terrible timing of Snap’s IPO back in February, citing already apparent slow user growth. And yet within Snap there’s been a resistance to change, which I can only assume has its roots in CEO Evan Spiegel’s conviction that he’s a product genius. He’s been reported to resist data-based approaches to product management, instead favoring his own instincts, which have undeniably created a phenomenon but don’t seem to be serving Snap as well recently.

Now, it appears that the dam has finally broken, and rather than subtly embracing some of the changes that have been called for, Snap appears to be doing a 180 on almost every aspect of its strategy:

 

  • Design – Snapchat has long been criticized for its unfriendly UI, while Snap’s management has defended it as part of its unique value proposition and argued that those who don’t get it aren’t its target users. Now, it appears poised for a major redesign, likely along the lines described here.
  • Creators and celebrities – Snapchat has famously eschewed the courtship of creators and celebrities common to nearly every other big social platform, arguing that its organic tools were enough to attract and retain them. There’s been evidence for some time that this attitude was leading it to lose share among these groups (and their followers) to Instagram and other platforms. Now it appears that it will belatedly embrace them, though I’d argue it may well be too late for that.
  • Curation/AI – Snapchat has also resisted the pull of AI-based curation of content, instead serving up a relatively small but relatively universal set of content to users in particular geographies, as a result of which it’s lacked the diversity of content and personalization found in other apps. It now appears ready to embrace this strategy too, though it acknowledges the risks inherent in moving away from the relatively confined form of content sharing it’s focused on to date.
  • Pursuing other demographics – Snapchat had for a long time prioritized its iOS apps because that’s where it saw the highest user engagement, something it acknowledged in its S-1 filing. It has belatedly embraced Android, and after months of small tweaks to its Android app is now apparently working on an overhauled version that should fix some of the issues it’s had until now. It’s also trying to broaden the scope of its audience beyond the teenaged and young adult audiences it’s dominated in the past, but that also brings inherent risks as it invites the parents of its current users into what’s felt like an intimate and separate space.
  • Spectacles – Snapchat launched its first hardware product late last year, seemingly out of nowhere, with a clever marketing strategy that focused on artificial scarcity. However, management seemed to completely misinterpret the early sales of the device and ordered way too many units, leading to a write-down of inventory that’s twice the size of its revenue from Spectacles in its first three quarters on sale. This feels like yet another example of gut winning out over data.

The big question is whether any or all of this will actually help to turn around the two metrics where Snap is currently failing, without damaging the one metric – engagement – where it’s been succeeding. I’m certainly skeptical, especially in the context of ongoing inroads by Instagram and others into Snapchat’s once unique mindshare among younger people. The biggest risk is that Snapchat damages the current user experience as it pursues these new features and the users they’re designed to attract, eroding its core strategic advantage: its penetration of its core demographic.

Gen Z, FaceTime, and Virtual Presence

Raising kids in the Generation Z demographic is an eye-opening experience on many fronts. The biggest being their approach to technology. While it is true computers, and the smartphone, in particular, is completely changing the paradigm for learning, and entertaining for this demographic the one area that has peaked my interest most has been their new paradigm for communication.

This generation has not known a time where instantaneous real-time communication in multiple mediums has not been an option. They can call, text, send video messages, and hop on a video conference anytime and anywhere. I have two daughters, one 14 and one 12, and when they both got smartphones, and many of their friends did as well, it was interesting to me that texting followed closely by video conferencing (FaceTime) was their preferred communication methods. They did not, and still do not hold the phone up to their ear to talk very often if at all. The standard phone call is being killed off by this generation.

While it is hard to survey in quantity this generation, we decided to ping a small group in our panel and ask those with kids under 18 about their kid’s usage of FaceTime (or another video conference method, even though most kids in the US are iPhone users). These are the stats we compiled after hearing from well over 200 individuals with kids under the age of 18 in their household.

  1. 28% of kids under 18 video conference daily
  2. 25% video conf at least once a week

If you look at the total, over half of Gen Z is weekly video conferencing. My girls do this if not every day, at least every other day. But what is fascinating is how they don’t use FaceTiming with a friend the same way we talked on the phone to friends, or love interests, etc. As I passed by my 14-year-olds room a few days ago, I heard her laughing and talking to one of her friends. I knocked, and she let me come, and she was sitting on her bed doing homework on her iPad. I asked who she was talking to since she was talking and acting as if a friend was literally in her room with her sitting on her bed, and she said she was FaceTiming with her friend Gigi. Her smartphone was propped up on her nightstand, and sure enough, there was Gigi waving to me and saying hello. This went on for at least two hours. And what was very interesting was for long stretches of those two hours they didn’t even talk. They just sat there and did their homework with each other over FaceTime often happy to just be in each other’s virtual presence.

Similarly, my 12-year old daughter was working on a class project with her partner over FaceTime. She was sitting on her desk using her Chromebook, and her classmate was propped up next to her on her smartphone, and they were collaborating on their project via Google docs and over FaceTime. The interactions were just like they were sitting in a library or something using resources together, gathering research material and overall interacting as if they were in the same room together. Because in their mind they truly were in the same room together.

We asked folks in our panel what sorts of observations they could make about how their kids use video to talk or hang out. We heard things like “they use it a lot for homework.” Or “very common to spend long periods of time with someone they are dating via FaceTime.” But the most common theme that stood out was parents making the same observation I did above that kids spend unusually long periods of time FaceTiming and often aren’t always talking. Just being in the presence of a friend or love interest virtually as if they were in the same room.

This together even though apart behavior is relatively new with this generation. Millenials grew up more with texting as a driving force of real-time communications, and now it is real-time video at the fingertips of Gen Z. In fact, even in our studies of millennials in the workplace, they rank video conferencing as their third most used option when collaborating virtually. Where I’d argue Gen Z will eventually have it as their number one medium to use to collaborate virtually.

To a degree, distance and the proliferation and availability of FaceTiming is a driving influence for this demographic. I remember when I grew up my best friend lived across the street. If you are above a certain age, the reality is you probably had close friends within walking or bike riding distance. Meaning you were able to spend time with them in person regularly and easily. The world has changed, and most kids don’t have their best friends in proximity to them. They can’t drive, and their parents are often too busy to get them to see their friends as often as they like. This is the job video conferencing is hired to do by kids today. Let them hang out with their friends and be in their presence even though they can’t be together in person.

These observations have implications for the future of technology and communications. Obviously, once these kids get to college or the workplace, their virtual preferences for collaboration will need to be met. Perhaps they will be the generation that fully adopts telepresence technologies or virtual reality as a way to be together even if they are far apart.

From a parenting standpoint, this is fascinating and puts us parents in somewhat of uncharted waters as well. New rules and regulations will have to be in place while also recognizing this is a regular part of their social and educational workflow. Gen Z will likely change paradigms at school, work, and play given their desire for rich visual communications experiences.

Face ID: when not unlocking your iPhone X builds Your Confidence

The iPhone X has now been in the hands of reviewers for just over a week and in the hands of real-life customers for a bit less than that. A lot is different, but the focus of many early reviews was Face ID, the most significant change of all. In a way, Face ID is the “mother of all changes” for iPhone X. Because Face ID replaced Touch ID, the UI on iPhone X has been redesigned with new gestures that let you navigate the content on your phone effortlessly although those gestures are still somewhat foreign to users.

Some of the reviewers tried to spoof the iPhone X using hats, scarves, sunglasses even masks and twins with some of the commentary turning negative if Face ID failed to work under those circumstances.

I am as blind as a bat, and I usually wear contact lenses, but in the evening or when I travel I do wear glasses. Like many women, I also wear makeup and wear my hair in different ways. Looking different is a real life thing for me so figuring out if Face ID worked in all of those occasions was not just an interesting experiment, it was a necessity. Face ID worked better than I expected. My expectation was what it would fail in a similar way that Windows Hello had been doing on my PCs before I could train it every time I was wearing glasses by having the camera re-scan my face. But Face ID needed no training.

If you watched the excellent video that The Verge posted, you see the amount of technology that is involved in making an identification every time you engage with Face ID to unlock your iPhone X.

Failure to Authenticate is by Design

There was one time when Face ID did not work for me. It was the morning after getting the iPhone X when I woke up in a dark bedroom and like always do I reached out and grabbed the phone that was sitting on the bedside table. The room was dark, I had no makeup on, my hair was a mess, and I was squinting adjusting to the brightness of the screen. Face ID did not authenticate me and why should it?

Husband joke aside, why would we expect something different from Apple’s technology that we do from any other ID service? Look at what most governments require as a suitable picture for a passport:

  • Your head must face the camera directly with full face in view.
  • You must have a neutral facial expression or a natural smile, with both eyes open.
  • Taken in clothing normally worn on a daily basis
  • You cannot wear glasses.
  • You cannot wear a hat or head covering.
  • You cannot wear headphones or wireless hands-free devices.

Face ID works by taking a mathematical model of your face and checking it against the original scan of your face that you registered for Face ID on your new iPhone X. Thanks to the TrueDepth camera this is not just a flat image but a depth mapping of the face and all the features that make it up. It also uses Attention Awareness, which means it uses your eyes too so that if you are not looking at the screen, your iPhone X stays locked.

When you understand how the technology works you know why Face ID should not unlock your phone if you have a scarf covering half of your face or glasses that prevent Face ID from seeing your eyes, or even if you try to use it when you first wake up in the morning, and your face is half buried in a pillow. If you think about it, this is not very different from how Touch ID works. If your finger was wet or too cold or you had a cut, Touch ID would not authenticate because your fingerprint would be different from the one you registered when you set it up.

We also know that for some changes, you can train Face ID. Say, for instance, that you start wearing glasses or you start growing a beard, or you change your haircut, for all those things you can train Face ID. As every time you enter your pin code after Face ID does not unlock your phone, you are telling the neural networks that it was indeed you who just tried to use Face ID to unlock your phone. This explains why twins who share their passwords might be able to open the other sibling’s phone. This way of training compared to Windows Hello, where I need to go into settings and rescan my face, also underlines the machine learning aspect of Face ID.

So, while Face ID’s refusal to let us into our own phone might be an inconvenience, it is absolutely how I would want it to work to feel confident that my phone remains secure.

Building Trust for the Future

Building trust around Face ID is paramount for Apple. First, because they took away Touch ID when nobody asked. We were all very happy about how Touch ID worked and more importantly we all knew and trusted it was secure. Second, gaining trust now is vital to building a foundation for the future.

It is reasonable to think that, as the technology matures and costs are coming down, Face ID could trickle down in the iPhone portfolio. Maybe not all the way, as for now, at least, some people are just not comfortable with it. It is also natural to expect Face ID to be added to the iPad Pro so it would gain more screen real-estate without making the overall device larger. I also see some interesting use cases with Attention Awareness when it comes to page scrolling or app switching that Apple might want to explore on iPad. The same can be said, of course, about the Mac where I personally would love to be able to use Face ID to log in and bring up a specific setup or user. I know that Apple will always prefer if we all had individual devices but some larger and more expensive devices are shared in the home and Face ID could become not just the way into the device but also a personalization tool.

I also do wonder about use cases in the home where Face ID and voice could work together to provide added layers of security to access certain things from the front door to content on your TV. A long way away? Maybe. But what really matters is that whenever the technology is ready for us, we are ready to embrace it because we trust it and this is precisely what Apple is working on right now with Face ID on the iPhone X.

Can Social Media Combat Fake News?

Last week Google, Twitter and Facebook’s lawyers and executives faced Senate and House Hearings about the Russian Interference in our last election. Legislators put these companies through the ringer as they showed actual ads bought but Russian operatives that represented false news stories that intended to influence and sway the last presidential election. These legislators asked hard questions and wanted real answers from these social media representatives about how they will go about making sure this does not happen again in the upcoming 2018 mid-term elections.

While these company representatives said they were on top of the problem and shared how they were going to tweak their algorithms and take other measures to try and catch these false ads before they even make it to their sites, I got the impression from the hearing’s that these lawmakers were not convinced Google, Facebook and Twitter really had a handle on this and could deliver. Even worse for them, Sen Diane Feinstein scolded them for not catching this sooner and said that she does not believe that they understand the damage they have done to America’s democratic process. Also, while these companies may have felt they passed the test from these hearings, I think they will come under even greater governmental scrutiny in the next year and am not ruling out that they may all be deemed a media company and come under some regulations before the next election.

The day after the hearings, Apple CEO Tim Cook tweeted out that the issues are not just the Russian Interference but also the problem of Fake News in general. More specifically, the fake news created by normal citizens to push their personal beliefs or agenda or fake news based even on something interesting that someone might want to share with their friends.

In an interview with NBC He stated “”I don’t believe that the big issue is ads from a foreign government. I believe that’s like .1 percent of the issue,” Cook told NBC Nightly News anchor Lester Holt in an exclusive interview that aired Wednesday night.The bigger issue is that some of these tools are used to divide people, to manipulate people, to get fake news to people in broad numbers, and so, to influence their thinking,” Cook said. “And this, to me, is the No. 1 through 10 issue.”

I myself got caught up on sharing a fake news story during California’s heavy rains earlier this year. Someone posted a picture of that massive bridge collapse near Big Sur and the picture they showed was interesting and disturbing and I thought it was newsworthy. However, a really good friend of mine saw what I posted and quickly corrected me by saying that this was a picture of a bridge closure at a different area from 3 years back. I immediacy deleted my Facebook post and then sought out the real story about what was a serious road closure but the picture was completely different and much less dramatic.

On another occasion, I posted a political story that I thought was worth discussing but quickly found out it was a fake story and pulled it down immediately. However, I was duped as I suspect many people are, especially if the story or post comes from someone they know and/or respect. What troubled me once this happened to me twice was how easy it is for someone to share a fake news story and it being spread by a person they know and trust.

Remember that parlor game Gossip? I played it often when I was young. The idea is to whisper something to a person in a circle and see if the original message would be the same when it is shared by the last person in the circle. Very seldom was the original message the same once it got around the circle and shared by the last person in the link. This is not to say that social media is necessarily a gossip machine, but it’s clear it has become more of a gossip medium than just a pure vehicle for people to share there life stories and interests with their friends.

The other issue about fake news is the fact that there are image tools that make it easy to create fake images and tie them to a story. The one most used are Adobe’s Photoshop. I once took a serious photography class and was taught how to use Photoshop to alter, in this case, my photo. I have to admit that when I was done, I looked younger and much thinner and was tempted to save that image. However it was a fake image, and although I liked what I saw, I deleted it.

More than once I have fallen for a fake picture that used photoshop and been tempted to share it with friends. But given what happened with that fake bridge photo I mentioned above, I now take extra measures to check out my stories source before ever posting anything on social media.

While I do think that Facebook, Google, and Twitter will find ways to flush out false political ads over time, I am less convinced that they will ever be able to stop fake news. This is especially difficult to do if it is created by ordinary people for whatever reason and then shared by trusted friends who get duped based on any form of personal interest or persuasions.