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Made By Google Is More Like Amazon Than Apple

This week was finally Pixel week. Over the past couple of months, we have seen teasers from Made by Google Team as well as leaks and even a Best Buy Canada early release of what the Pixel 4 was meant to be. We also had some details on the Pixel Book Go, the Nest Wi-Fi, and the new Pixel Buds. What was missing, though, was how the Made by Google team was going to frame its story around these products.

I said before that how a company talks and introduces its products are as important as the products themselves when it comes to understanding the vision and the goals of the business. This week’s launch was no different. While some industry watchers criticized the presentation for coming across as choppy, I thought it followed a similar format to the Google i/o main keynote. Product people come on stage to tell their story, talk about their creation, and highlight those aspects they think are a differentiator. I appreciated the attempt to move away from a specs sheet focus and provide more information on the thought process behind the devices and features as well as addressing hot areas such as sustainability and privacy.

Made by Google’s Chief, Rich Osterloh, framed the context around the new devices, but also how the team thinks about the role these devices should play in the users’ life. As he talked about ambient computing and helpful technology, it was impossible not to draw parallels to how Amazon positioned its devices just a few weeks ago.

The devices are not the final product; the technology in them is. From cloud to chipsets to Google Assistant and Soli, the technology that users access is what was on stage in New York.

Helpful Technology and Ambient Computing

Rick Osterloh stressed multiple times how the hardware the team is building focuses on being helpful. The message should sound familiar as the helpful technology tagline was used by Sundar Pichai at Google i/o. If technology is helpful, it will be pervasive in our lives, and privacy will matter more. Of course, if the technology is helpful, we come to rely on it, which creates higher brand loyalty. Helpfulness also drives customer loyalty because the perceived value of the device or service is higher. So far, there has not been any talk about paid services, but I find this emphasis on helpful tech very interesting. I do wonder if framing tech in such a way opens up options for Google to switch some of its services or features to a paid model. This revenue opportunity might also include the prospect of selling their Titan M chip to partners, especially for those who want their products to be Android Enterprise Recommended.

Privacy will also matter when the devices we use disappear and computing powers services and experiences all around us. Google wants the technology to work in such a way that when everything is perfect, the devices disappear. Interestingly this is similar to how Surface’s lead Panos Panay talks about his devices and how they keep you in the flow. It might seem odd that a hardware brand would want its devices to disappear, but if you use any technology, you know you don’t necessarily need to touch or look at a device to get a level of benefit that makes you love it. It is even easier to understand that when the device encapsulates values that are software and services driven and come from the same company.

A Focused Hardware Approach

And so, as much as Pixel 4 might be the iPhone 11 Pro competitor and Pixel Buds 2 might be Made by Google’s take on Air Pods, I cannot help but think that Made by Google’s goals are way more similar to Amazon than Apple. They might play in the same segments as Apple does, and avoiding the comparisons is impossible, but the measure of their success will not be market share but rather the continued adoption of and increased reliance on Google Assistant and the services that are powered by it.

One aspect where Google and Amazon might differ in approach is in the number of devices they decide to bring to market. It is quite apparent, though, why this is the case.

First, investment and leverage. Google has had a somewhat tricky road to hardware. We all remember how much the negative Motorola numbers impacted earnings, so the investment is much more thoughtful now. It is clear Made by Google wants to get to consumers where they get the highest return either on service engagement or cloud. It also means that Made by Google might try and leverage their devices more like they did with the new Nest Wi-Fi and the Google Assistant and smart hub integration. The partner ecosystem can also help Made by Google find those segments where there is value and those where there isn’t. The first smart display product with Google Assistant was brought to market by Lenovo. Following the positive reception of the category, we saw Made by Google launch the Google Home Hub line.

The second factor that makes a difference is, of course, Pixel. The Made by Google phone allows Google Assistant to be with the user all the time. This means, for instance, that no car dedicated device is needed to get to the users while the commute from the office to home. Amazon’s lack of phones means that they need to deliver compelling devices for those situations where users would turn to the phone by default.

No doubt in my mind that being in hardware, software, and services business for Google, Apple, Amazon, and Microsoft makes perfect sense. You just need to stop looking at the hardware as a stand-alone revenue generator and consider the impact it has on driving overall business revenue.

Why the EU decision about Google does not change the future for an Amazon Phone

Last week the European Commission fined Google five billion dollars for breaching the E.U competition rules. Among other things, the European Commissioner for Competition Margrethe Vestager claimed that Google helped kill off competing OS forks that were developed, including Amazon’s Fire OS for smartphones. According to Vestager, Google told handset makers they couldn’t sell any devices running other such forks if they wanted full access to services like the Google Play store on their other Android devices.

The EU press release stated:

“In doing so, Google has also closed off an important channel for competitors to introduce apps and services, in particular, general search services, which could be pre-installed on Android forks… Therefore, Google’s conduct has had a direct impact on users, denying them access to further innovation and smart mobile devices based on alternative versions of the Android operating system. In other words, as a result of this practice, it was Google — and not users, app developers, and the market — that effectively determined which operating systems could prosper.”

Fire OS did not kill the Fire Phone

It is easy to blame the lack of success of the Fire Phone on Google, but the truth is that, while the ability to leverage the Google Play Store could have helped, there was more about the phone that made it a hard sell. The price point and many of the features were aiming at higher-end and experienced users. Yet, the lack of brand share in the smartphone market, lack of apps and limited channel availability made it hard to appeal to a target audience that was already taken by either iOS or Android.

We also need to remember that Amazon introduced the Fire Phone back in 2014 when its brand in the device segment was nowhere near as strong as it is today thanks to its Echo line. Of course, the Kindle e-readers were very successful, but there was skepticism on whether or not Amazon could take its brand and expertise to other tech products. So much so that, back then, the Fire Tablets were still called Kindle, a name that was dropped a few months after the Fire Phone’s announcement.

For both smartphones and tablets, apps were more important than anything else, which is why the inability of Amazon to take advantage of the Google App Store certainly contributed to the premature demise of the Fire Phone. Developers were far too busy with iOS and Android to spend further time developing for Fire OS when the opportunity was uncertain.

Content vs. Apps

As both the smartphone and the tablet market matured, apps and content started to have a much more balanced role to play in driving user engagement. This was undoubtedly something Amazon was expecting and counting on as a revenue opportunity when it thought of the Fire Phone and Fire Tablets. Amazon music and video services had been in place for quite some time by the time the Fire Phone was introduced, but the streaming portion of such services only started after. There is no question that much of the value Fire Tablet users get from those devices comes from the content that Amazon makes available on them. Content that Amazon can leverage across Fire TV and their Echo products too.

The Challenge of taking Alexa Outside the Home

Since Google was fined, some have hypothesized that if indeed the EU’s decision holds, Amazon might have another go at the smartphone market. A lot has certainly changed in Amazon’s favor for a reboot of that smartphone attempt. But other challenges arise.

Alexa is, of course, the one to benefit the most from an Amazon attempt at launching its own smartphone. Alexa on other smartphones has not been as successful as it would be with a much tighter integration between hardware and software.

Other Amazon’s services have little to gain from a dedicated Amazon smartphone in my view. This is mostly because the Amazon, Kindle, Video apps all work very well on other devices and are much less dependent on being a “default” option on an optimized OS. Volume is value when you are making your money through content and services and not hardware.

Alexa becoming the one and only assistant on a phone might, however, not bring as much return to Amazon as some might think. I believe that while our dependence on Alexa is grown in the home and so is our level of satisfaction, our expectations for what we want Alexa to deliver outside the home might raise the bar too high. Alexa knows enough about us in the home to be useful but does not really know as much as Google and Apple know about us overall. Being the default agent on the phone would not change that as most of what makes other assistants more knowledgeable are the services and the apps we use from mail to navigation to search.

Considering the challenges of the smartphone market as well as the need for a regionally-tailored approach – Amazon’s worldwide offering is not as comprehensive as it is in the US – there is a much stronger short-term opportunity for Amazon that does not even have to wait for Google to lose its appeal to the EU decision. Amazon must change the perception users have today of the Alexa app on a smartphone.

The Alexa app must shift from a command center to an engagement center. As a user, I only go to the app to troubleshoot or add and manage a skill. While Amazon added texting and calling options, I don’t think these have proven to be very popular with users leaving Alexa pretty much isolated from our day to day outside the home.

Amazon should start thinking more about how Alexa can be useful to us when we are out and about. Can Alexa be our home away from home? The increased and improved focus on the app and a couple of strategic partnerships with vendors would provide a good enough return to Amazon in a market, the smartphone market, which as critical as it has been for the past ten years should not be the focus of tomorrow.

As Tech in Education Matures, it calls for more than Hardware

Our kids might not remember what schools were like before so many started focusing on STEM, and coding. Most schools had a computer room but technology, or computer science, was very much a subject rather than a tool to use throughout the school day. We can argue whether or not technology made things better or worse but that deserves a totally separate discussion. Like it did in the enterprise market, since its launch in 2010, the iPad started making its way into education bringing technology into classrooms. It did not take long for the first one to one iPad school to get established.

The first Chromebooks hit the market in 2011 but it was not until 2013 that they started to make a considerable impact in K-12 education and they have been growing ever since across American schools and mostly at the expense of Apple.

When the iPad was first brought into the classroom it was done in schools where, by and large, budget was not an issue and teachers were empowered to invest time in finding the best way to use technology to reinvent and energize teaching. It was really about rethinking how to teach and connect with students. As technology became more pervasive, schools discovered that it was not just about teaching but it was also about managing the classroom. This is what Google was able to capitalize on. Yes, schools turn to Chromebooks because the hardware is cheaper but also because the total cost of ownership when it comes to deployment, management, and teacher’s involvement is much lower.

A very Different Approach

When analyzing a go to market strategy I always point to how the “why” of the approach rests on the core strength of the brand in question. In this case, Apple’s strength is in the ecosystem and its weakness is in the cloud. For Google the opposite is true. So it makes sense that Apple built its education strategy around the ecosystem of developers that jumped at the opportunity to sell into the education market. Google, in the meantime, built on its cloud strength to enable a device that could be easily shared and managed as well as strong collaborative tools in their G Suite for Education.

I am focusing on Apple and Google as Microsoft’s efforts into K-12 are more recent at least outside of the administration and into the classroom. Yet, even with Microsoft, the approach fits their strength which is Office first and then cloud.

There is no right or wrong in the approach but there is more or less scalable and that is linked to total cost of ownership and it starts with hardware. While it would be belittling to Google’s effort to say they are winning in education because Chromebooks are cheap it is fair to say that they get in the door because of that and from there the conversation is certainly easier.

Three Areas that Would Help Apple Grow Share in Education

Apple just announced an education event in Chicago for March 27 and, as you know, I am wiser than trying to predict what they will and will not do. That said, there are three areas that I would like Apple to address when it comes to their education offering: hardware pricing, an improved productivity and collaboration suite and a bigger focus on managing the classroom.

Hardware Pricing

Apple already cut the price of the 9.7” iPad to $329 in March last year but even with education discounts, there is still a considerable gap with Chromebooks. Of course, I do not expect Apple to ever reach the below $200 that we see with some Chromebooks but I do think the prices still need to be lowered considering most schools also have to consider the cost of rugged cases, storage carts, and styluses on top of the iPad itself.

Considering the design of the invite, I do wonder if there might be some bundling of Pencil as, of course, this will be a great tool across the board from writing to arts. This would, in turn, imply that Pencil support would be expanded outside the Pro family, which is something that makes perfect sense given its popularity.

For higher education, I would also expect an updated MacBook Air at a very competitive price. A sub $900 MacBook would certainly put pressure on Windows manufacturers as well as make it harder to justify a PixelBook, Google’s second attempt to show Chromebooks don’t all have to be lower end hardware.

Improved Productivity and Collaboration Suite

Apple giving up on iWork in favor of Microsoft Office 365 might be ok with people like me (AKA older users!) who have grown up using Office for the most part of their career. But Gen Z and Millennials live and breathe G Suite. While Google has been platform agnostic when it comes to consumer tools, I very much doubt they will support education skews on other devices as deeply as they do on Chromebooks.

This opens up an opportunity for Apple to create a productivity suite that competes with G Suite. Of course, this will require a bigger investment in iCloud as Apple will need to push collaboration to the next level. iMessage is such a powerful workflow tool for many that I am surprised that Apple has yet to integrate it into the Classroom tools.

iWork, which could do with a different name altogether, should be the toolset the next generation wants to work with no more so than the Mac has been the computer students wanted to have when they went off to college and then to work.

Lastly, given the recent focus on families, I would like to see how Apple can better address parents who are often left out of the classroom physically and digitally. G Suite is great for kids to log in and do their homework or projects from any device they have at home, but parents are not necessarily included in that loop. Thinking about how better serve parents will certainly help Apple to be more top of mind in family choices.

Classroom Management Tools

In 2016, Apple released Classroom which allows for automatic connectivity across iPads and helps to manage iPads in schools that are not 1 to 1 by allowing the teacher to log students into the most recent iPad they used. Classroom also allows teachers to launch apps, websites or books and push such content to students locking their device on a specific view.

With the release of iOS 11.3 it also seems that Apple has developed a framework called ClassKit that aims to help developers of educational apps to create student evaluation features like questionnaires that they can fill in and then automatically send to their teacher. It also seems that there will be a “kiosk mode” so that the students will not be able to access anything else on the device while they are undergoing the test. These are features that Chromebooks already make available which I am sure will be welcomed by educators using iPads.

It appears that with the addition to ClassKit, Apple will check many boxes in a feature by feature showdown with Google.

Aside from not talking about their education offer as much as they should, I fear that Apple comes across more as a DIY solution. While this allows for flexibility for every teacher and allows them to pick best of breed apps for their specific classroom needs it can feel as quite a daunting task compared to Google. Of course, now that Chromebooks support Android there is a choice of apps there as well but the core of what Google brings to schools is nicely wrapped up into their G Suite for education and most teachers do not even look past that.

I am sure if you ask any school, aside from budget, time is the one other thing they will tell you they do not have enough of. As Chromebooks get more and more established in education the biggest issue Apple will face is having schools consider a change. The advantage Google had here was cost. For Apple to have schools make a switch convenience and ease of use should be the key. Freeing up teachers time from administrative tasks and empowering them to teach is a great selling point.

The Real Threat to Apple: The Invisible Device

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The Business Model of Never Growing Up

The very mortal Larry Page and the rapidly aging Ray Kurzweil, in their mad, sad dash to live forever, will fail in this utterly futile, mostly human effort at denying the inevitable, at fighting that greatest of fleshly trappings, that soul wrenching but unalterable truth which reveals the eternal equality of us all.

We are all going to die.

Soon.

It is what it is.

Billions of years ago, literally, dying stars sent tiny pieces of themselves hurtling through space. A few trillion of those pieces, maybe more, reached Earth, falling unseen like manna from heaven. Fewer still, as if touched by (a) God, made it inside every one of us.

For what purpose, exactly?

We may never know. Till then, there’s money to be made. Lots of money. And it seems to me that by design or not, and unable to conquer death, Silicon Valley has instead embraced the business model of never growing up.

Mock if you wish but this is certainly more rational then what Larry Page and Sergey Brin are doing, spending untold amounts of Google money on “tackling aging” through a series of pricey ventures. The super-smart Calico is just one:

[Google-funded] Calico is a research and development company whose mission is to harness advanced technologies to increase our understanding of the biology that controls lifespan.

And of course it will fail. Or worse. We could wind up with this horrid “singularity” vision as espoused by Google’s Kurzweil, where computers and AI progress to a point where humans can radically alter their minds and bodies — and anyone else’s — or ‘upload’ the equivalent of our consciousness into a thinking machine that allows each of us, you and me, to effectively live forever.

What a bleak existence.

It is what you feel, see, hear, taste, who you live with, your stumbles and successes, a good joke and a big slice of birthday cake that make you who you are and all of these, every single bit, will be irrelevant to the ‘you’ inside a computer.

Each moment you go inside a computer, you die just a little bit. Till there’s nothing left.

The futile Kurzweilian effort helps explain why, outside of Google, so much brainpower and money are flowing not in fighting mortality but instead in empowering us all with the illusion of never growing up.

What is Twitter but a mode for all of us, like some recent college graduate, to espouse to everyone, every single thing we think and feel the moment we think it or feel it? Isn’t all social media in fact optimized for talking without ever listening?

Selfies celebrate the self, obviously. Why think beyond our corporeal form, at this moment, in this place? Let us glorify the now — with the self at the center, fixed for all digital eternity.

Is Uber, with its $40 billion valuation, anything other than a way for all of us, like teenagers, to never have to own a car yet always have someone there, exactly then, to take us wherever we want to go?

Gamification is the dream of liberating ourselves from the drudgery of even a moment of the kind of work “adults” must engage in.

Wearables literally transform the profoundness of computing into me, me, me!

Augmented reality seems intent on transmuting the real world, with all its imperfections, into a multi-player amusement that keeps us entertained, as if we are forever children, forever awaiting delight.

Not ready to settle down? Just need a couch to crash on? AirBNB has you covered.

Here’s a tablet! Never be bored, never feel alone — and free yourself from the fears of change, time and mortality.

Is this why Silicon Valley seems to have become so ageist? Do tech companies fear that should they hire anyone over 40 — the horrors! — then every other staffer will be forced to acknowledge their own mortality? To see exactly what awaits them?

I do not expect Silicon Valley to embrace death. But I do hope the Valley evolves to where it’s ready to fully leverage its brains and its wealth on very adult problems, many of which may never be fun but all of which are necessary should we desire a better future for everyone, however long it may last.

Understanding the Global Mobile Web

In the latest mobile focused podcast with Benedict Evans and myself, we touched on a theme that needs more fleshing out. That of a future only possible because of mobile computers/smartphones. When I detail the mobile first world in articles, presentations, and reports, what I highlight is not only the impact but the necessity of mobile to move computing forward. The PC in the shape of a notebook or desktop took computers as far as those shapes would allow. There are very few new users for PCs of that design. The PC in the shape of a tablet can take computing even farther, particularly in business environments, and that form factor gets a PC into the hands of more people. The PC in the shape of the smartphone, however, brings computing to everyone. Perhaps more importantly, the smartphone can bring the internet to everyone. More revolution will come from the PC in the shape of a smartphone than from any previous computing product in history. It is because of this, we will see countless opportunities emerge and it is a future only possible because of mobile.

The smartphone opens the door to new possibilities because it is the first time the technology industry is accessible to everyone. In fact, over the next decade or so, we will watch smartphones become a commodity. Estimates are, by 2020, quality, powerful smartphones could cost $10. The mobile web is already bigger than the desktop web and, in a few years, the mobile web will dwarf the desktop web. It is a cold hard fact, the future of the Internet is mobile. This reality brings out some interesting implications.

Global Mobile Web Browsing

There was a debate last year around the disparity between iOS web browsing and Android web browsing. It seemed a conundrum — Android had 2x the user base but much less of the global browsing share. As you see from this chart from NetMarketShare, only recently has Android overtaken iOS in global web browsing share, and it is still very close.

When we include Android AOSP and Google’s Android, there are well more than double the active devices compared to iOS. But why did it take so long? There are many theories but there is one in particular I find insightful and adds a bit of needed clarity to the global mobile web discussion.

The bulk of Android’s growth and market share is in the lower tiers of smartphone price bands. My estimates put premium Android price tiers at roughly 15% of the global Android installed base. Meaning much of Android’s installed base globally consists of non-premium/lower price tier smartphone users. This explained quite a bit of the global web browsing paradox. Apple has a significant installed base of premium users, larger than Google’s premium users, and those customers spend more time browsing the web and consuming internet data. As I started researching the mobile web in emerging markets, it became clear one of the factors for this disparity was, because of Apple’s premium customer base, this audience could afford to liberally browse the web. Where much of Android’s installed base, having to deal with pricey and slow internet connection times, and no wi-fi at home, could not.

This insight becomes even more clear when we look at this chart from Jana.com showing the number of hours of minimum wage work required to pay for the average data plan.

Due to the infrastructure challenges in many of these markets, consumers are very aware of not only how much data they are using, but also the size of the application they are downloading. This is a fascinating quote from a post from LightSpeed Venture Partners, an investment firm focused on India.

So, what is an ideal app size, especially in markets like India with challenged infrastructure?

The ideal size is 10-15MB globally. Idea size for an app for tier 2/3 countries (like India) is below 5MB. 500MB+ is a non-starter. At 50MB+ the conversion rates fall off dramatically. On Android and iOS, conversion rates dip by 50% in tier 1 nations for non-game apps above 50MB. In tier 2 and tier 3 nations, conversion rates dip by 50% for games above 15MB.

It is becoming clear the high cost of data plans in many emerging markets are influencing how they use the mobile web and the apps they use and download.

The Light Web

Understanding this leads me to consider the role web apps may play in these markets. There is a web app called Zomato, which is sort of like Yelp for India. Zomato is a great example of a light application that is useful via a web app in those regions where light applications are necessary. It is true native apps are still dominant in these markets, however, we are still dealing with only the top 30-40% of the global mobile audience that has a smartphone and a data plan. As we extend that reach into the broader 60-70%, a healthy portion of those customers will be even more sensitive to the costs of data and size of applications they consume.

This is why the “light web” is a reality for the next billion users. Whether by lighter/more efficient native apps or, as I believe, web apps, the light web is better positioned for the next billion. Interestingly, even Uber has a robust web app. It is possible the powerful cloud and light, thin client computing paradigm is destined for emerging markets.

It is clear, thanks to PCs in the shape of a smartphone and the inevitable inclusion of robust sensors in these devices even at low prices, that we are heading to a fascinating future not only made possible because of mobile devices but empowered by them. This future will pose great challenges to many incumbents but even greater opportunities for the innovators.

Technological Patriotism

Technology is breaking down barriers throughout the world. Conversely, a form of technological nationalism has taken hold, limiting tech’s rise. Expect such nationalist fervor to become more widespread, more virulent, probably more unfair.

Technology is the new oil. It’s vital to our lives, our economy, our personal wealth, our national interests. As such, governments believe it is right to be intimately intertwined in the development, use, purchase, promotion and spread of technology.

Government inquiries, embargoes, regulatory barriers and tax disputes with technology companies will become commonplace. Fighting (and/or championing) such affairs will become a standard course of business for tech firms, much like complying with accounting standards are today. VCs, start-ups and well established high tech companies will need to fundamentally reconstruct their focus. I say this all without judgment.

That most of the world’s largest, richest tech companies are American — Apple, Microsoft, Google, Facebook, Amazon, Cisco — makes this new world order that much more combustible.

Should Five Percent Appear Too Small

Big technology companies are sitting atop sizable piles of money. Many governments believe they are owed their rightful share of these piles. The European Union (EU) alleges Apple is concealing taxes duly owed on sales and profits generated throughout Europe. Their allegations rest almost entirely upon the obvious:

“Multinational corporations have a financial incentive when allocating profit to the different companies of the corporate group to allocate as much profit as possible to low tax jurisdictions and as little profit as possible to high tax jurisdictions.”

Examine Apple’s European org chart. What does it appear optimized for? If successful, the EU’s action could cost Apple billions. That is why, when Tim Cook told the US Senate “we pay all the taxes we owe — every single dollar,” he is no doubt being 100% accurate and equally irrelevant.

Tax battles are costly for tech firms, but just one fight of many. Regulatory barriers can similarly limit the full and beneficent spread of the world’s most liberating technologies. As famed tech investor Peter Thiel recently remarked:

“It probably would be better for Europe to find ways to be more innovative, rather than ways to regulate.”

This sentiment was echoed by uber-VC Marc Andreessen, an aggressive proponent of Bitcoin, a cryptocurrency that could, in theory, disrupt a core government function and major policy lever:

‘‘The problem with building a new product or service in the existing financial industry is that tens of thousands of pages of legislation and thousands of lobbyists are going to come down on you very quickly. We needed a new technology to have the wedge to be able to enter the market, to be able to justify all the work to rebuild the system.

With bitcoin, we now think we have that wedge.”

Neelie Kroes, the EU’s digital chief, has made it abundantly clear government is not so willing to rebuild its systems:

“I do wonder how many more Valley companies have to get slapped before the rest of them realize it’s time to start investing in better relations with the EU.”

Expect such “investments” to become commonplace. Likewise, add Amazon to that list of companies who apparently need to be “slapped”:

The European Commission is poised to launch a formal in-depth probe into its serious concerns over improper state aid, dragging Amazon into a multi-pronged clampdown on sweetheart tax deals that has already ensnared Apple in Ireland and Starbucks in the Netherlands.

To absolutely no one’s surprise, Amazon has declared it pays “all applicable taxes in every jurisdiction that it operates within.” As with Apple, the accuracy of this statement is borderline meaningless.

Prediction: numerous governments will alter their tax rules simply to prevent other governments from getting a larger share of any Big Tech monies available. To wit: Why let Europe get a (theoretical) cut of Apple’s bounty when that money could be put to better use in America? Or Brazil? Or China?

Here, There And Everywhere

Tax disputes are certainly not the only concern for tech companies. Just this year:

The Chinese government (blocked) virtually all access to Google websites, instead of just imposing 90-second delays when banned search terms were used. Experts initially interpreted the move as a security precaution ahead of the 25th anniversary of the Tiananmen Square crackdown on June 4. But the block has largely remained in place ever since.

This latest move and previous actions by China have significantly impacted Google’s long term potential inside the world’s largest Internet market. Not surprisingly, China’s own Baidu has a 90% share of search — and not because users prefer its results to Google’s.

Despite Baidu’s ubiquity, many users are finding it to be a poor replacement—especially students, academics, researchers, and technicians who need to rapidly find reliable information online.

It’s not only Google that faces such barriers. Twitter and Facebook are both “filtered” in China. Nor is the problem confined only to American technology companies.

Two popular messaging services owned by South Korean companies, Line and Kakao Talk, were abruptly blocked this summer (by China), as were other applications like Didi, Talk Box and Vower.

Nor is hardware spared. Despite its stellar reputation for security, China’s CCTV ran a report earlier this year suggesting Apple’s iPhone location tracking could put state secrets at risk. If true, China obviously has no choice but to take swift, decisive action.

Government entanglements can take many forms. For example, Apple was caught off guard last month when regulators did not provide the requisite approvals for the company to begin legally selling its new iPhones in China. This despite Tim Cook’s many visits to the country, Apple’s sizeable third party workforce there, and the fact Apple and its partners had readied a major advertising push, believing they had done everything necessary to satisfy the various interested parties. Not so, apparently.

Surprise! Regulators have now proffered their assent, in large part due to Apple’s latest assurances that the American government cannot “backdoor” access iPhone data and obtain any of those China state secrets as noted above.

Rules are rules. The costs required to successfully navigate such rules may not always fall the way prices of technology always seems to fall. Nor may such rules prove as leveling. As Bloomberg recently reported, myriad new government rules in China are likely to benefit local companies, such as Xiaomi.

Moreover, now that users in China can legally purchase iPhone 6, it may cost them more than anticipated. China’s government recently decreed that China Mobile, the world’s largest carrier, must reduce phone subsidies. The effect of such actions are obvious.

“High-end flagship phones will suffer the most from the regulation due to their prohibitive prices in the China market without subsidies.”

“Samsung and Apple, as the two major high-end flagship phone makers, have the most to lose.”

A Day In The Life

Brazil has demanded Apple delete the Secret app from iPhone. Russia recently seized Bitcoin mining equipment at its border with China. Several US states have taken legal action against Uber and Lyft. The EU wants Google, Facebook and Twitter to help it combat what they view as online extremism — and what others view as free speech. The lesson, once again: Tech company interactions with governments will become the norm. Simply put, because tech touches everything.

No matter what you think of Europol‘s veracity, when Europe’s cybercrime unit writes the following, it necessitates a reasoned, continued and very likely financial response from well-heeled technology companies eager to profit from the Internet of Things:

With more objects being connected to the Internet and the creation of new types of critical infrastructure, we can expect to see (more) targeted attacks on existing and emerging infrastructures, including new forms of blackmailing and extortion schemes (e.g. ransomware for smart cars or smart homes), data theft, physical injury and possible death, and new types of botnets.

Death and botnets are always scary. Fighting them is no doubt expensive.

Technology’s promise carries with it parallel strands of fear, always. Consider how smartphones and social media have deepened our understanding of events around the world, such as the recent protests in Hong Kong. Now consider not everyone is pleased by this.

Tim Cook has spoken publicly about civil liberties. Is it fair to ask him — and Apple Inc — to choose a side in this latest skirmish? Is it fair to ask the same of Twitter? Many will.

You Say You Want A Revolution

I suspect you want me to say these many government interventions are dubious, the product of terminally greedy tax collectors, frightened regulators, and entrenched forces hoping to kill off outland competition.

I won’t. Mostly because such sentiments are not relevant.

The many reasons for these many government actions will grow in number, kind and intensity as technology continues to destabilize and disrupt industry after industry. You must understand: There is no bigger industry than government.

Tech is money. Money is power. All three are quickly spreading around the world and most of us want, at minimum, our perceived fair share. Do understand, however, that what’s right and what’s wrong are just two sides to this proverbial Rubik’s Cube.

Freedom is not a zero sum game. Not all believe the same is true for money and power. This is true everywhere. The really big disruption won’t just be of the established order, but of human nature.

Microsoft and Google’s platform problems

Microsoft and Google appear to be moving in different directions when it comes to their platforms and first party hardware, as I’ve written about before. However, in some respects they’re fighting the very same battle when it comes to platforms — they’re struggling to set apart their services on platforms increasingly controlled by others.

Microsoft: winning on competitors’ platforms

Microsoft is moving towards a model where it provides its services without preference on third party platforms and away from its historical model of preferring its own Windows-based platforms. Just this week, Microsoft released a version of OneNote that works on Android Wear smartwatches as well as on iOS. Perhaps the most striking example of the new attitude toward third party platforms was the release of Office on the iPad a few months back.

However refreshing as this change may be, Microsoft is, in many of these areas, going to be competing head-on against the companies on whose platforms it seeks to establish itself. OneNote goes up against Google’s own Keep note taking service on Android, and Office on iPad goes up against Apple’s own iWork. Microsoft may not feel too threatened by either of these products, since its own versions are arguably much more fully featured, but there are other important considerations.

First, Microsoft’s core products and services are increasingly competing against free products which provide much of the same functionality, as the chart below shows (the business model framework may be familiar to some readers from this previous piece):

In short, where Microsoft seeks to charge for Office, Windows or other products, Apple and Google give them away for free (albeit for different reasons: Apple as a way to add value to the purchase of one of its devices, Google to generate data, ad revenue or a channel to sell its other products). For this reason alone, Microsoft faces an uphill battle in selling many of its third party products, especially on platforms controlled by its major competitors. OneNote is an interesting exception: arguably one of Microsoft’s most compelling products, it’s available for free outside of the classic Office bundles.

Second, Apple in particular and Google to a lesser extent favor first party products and services through deeper integration into the operating system. In other words, though OneNote may reside as an app on iOS, it will never be integrated into the core functions of an iPhone in the way that Apple’s own Reminders app is. Though Google’s Chrome is available on iOS, it can never be set as the user default browser. And so on. Apple’s and Google’s apps will always come preinstalled on their operating systems while Microsoft’s will never be, and that further disadvantages Microsoft as it seeks to compete.

Third, Google and Apple have increasingly broad ecosystems of devices running their respective platforms. Apple, with about eight hundred million devices running iOS and OS X and Google with well over a billion devices running Android (and to a much lesser extent Chrome OS), compared with about 1.25 billion Windows PCs in the world and a much smaller number of Windows Phones. Whereas Microsoft’s installed base of devices once dwarfed all others’, that’s simply no longer the case, and both Google and Apple have arguably been better at seeding users with their core products and services running on those devices than Microsoft has been. Almost all the services Microsoft offers on third party products are add-ons on its own devices too, rather than coming built-in. As such, Google and Apple are better able to create and stimulate demand for these products and services than Microsoft, especially on a cross-device basis.

In short, if Microsoft is to compete effectively on a third party basis, its services on competing platforms have to be so good they can overcome the price/business model disadvantage, the lack of integration, and its far smaller mobile device installed base. As of right now, Microsoft simply doesn’t seem to have any products or services that can do that successfully and this should be a key area of investment. In the meantime, it’s being successful largely with products it’s unable to monetize from most users, such as OneNote and Skype.

Google: regaining control over its own platform

Google’s problem is similar but different. It – nominally at least – owns a platform in the form of Android. But it’s a platform it’s increasingly lost control of, in two ways:

Full Android licensees such as Samsung have overlaid so much of their own stuff on top of stock Android that Google’s services and the core of the operating system are buried
The AOSP version of Android is so heavily used both by third party forks like Amazon’s Fire devices and by Chinese vendors in particular who have built their own service stack on top of it.

Google competes both on the platform it owns, though has lost control off, and on third party platforms (mostly iOS, to date). But it suffers to the same extent as Microsoft when it comes to its lack of integration on iOS, where its apps are popular but will never be as tightly woven into the core experience as Apple’s equivalents. At the same time, Apple has been slowly removing Google in a variety of ways from its products. This has a very public and obvious side – the removal of the YouTube and Google Maps apps from iOS – and a less public and obvious side: using Bing as the default search engine behind both Siri and the new Spotlight features.

At the same time, many of Google’s core services are duplicated by its own OEM licensees and to an extent carriers too, even on Android. It’s not uncommon to use an Android phone which features three different pre-installed apps for video, one each from Google, the OEM and the carrier, and the same goes for many other features too. Although certain core Google services like search, email and maps are already well established, it’s that much harder for Google to establish new services to the same degree when Android devices are so heavily customized by both OEMs and carriers.

For all these reasons, Google has now started to reassert its control over Android in a variety of ways. This was a major theme at its I/O developers’ conference (though it never said so explicitly). Android One is an attempt to get stock Android back in the game in emerging markets, while Android Wear, Android Auto and Android TV offer non-customizable versions of Android for three new domains. It’s as if Google has realized its mistake and is retaking control as much as it can, step by step.

Apple continues to be different

Though Google and Microsoft share some of the same challenges, Apple continues to stand out in this regard. It controls its own platform from top to bottom, and doesn’t seek to compete on third party platforms. The only software it does provide on third party platforms (these days, essentially iTunes) is intended to add value to its own devices, not compete on its own merits. As both Google and Microsoft struggle to compete on platforms they don’t control in the pursuit of massive global markets, Apple continues to pursue its target niches with a very different model.

I Was Wrong And The iPhone 5c Is Still A Failure

The best way to defeat the iPhone is to create a superior alternative to the app ecosystem. With widgets, notifications, continuity and inter-app processes in iOS 8, Apple did just that. Woe to Android, Windows Phone and anyone who hopes to see Apple falter this decade.

Unless, of course, I’m completely wrong.

Perhaps there’s some amazing technology out there waiting to leapfrog iPhone. Perhaps the new iWatch and iPhablet and all the various Kits and Plays fail to entice. Maybe Tim Cook and Angela Ahrendts succeed in transforming Apple into a luxury brand, turning the iPhone into a “Veblen good” and moving the company from high margin computing to higher margin fashion.

This seems unlikely. Nonetheless, on the cusp of the big Apple launch event, I am thinking not of new products, but of past ones, and not only of successes, but failures. When I labeled the iPhone 5c a “failure,” readers did not hesitate to emphatically declare I was wrong.

Wrong.

The iPhone 5c was a failure both in terms of sales and for how it diminished Apple’s image as an innovator. I may never have been so right as when I declared the 5c a failure. Expect it to be erased from Apple Stores before this year is out.

The 5c will not be the last Apple flop. I suspect the primary value of any iWatch, at least in the first few years, will be to show people you have an iWatch.

Carry That Weight

I understand if you vehemently disagree with my assertions. Tomorrow brings us new products but will not necessarily end any long standing debates. For example, despite the adoption of Chromebooks and the gutting of the great LA Public Schools iPad experiment, I steadfastly believe in the merits of my plan to give an iPad to every child in America. Similarly, regardless of what every other tech writer is saying, and no matter what Apple introduces tomorrow, I still think NFC is a waste of Apple’s talent and our time.

Going on public record can be daunting. Certainly, it is filled with missteps. Here are two minor predictions I have for tomorrow’s event:

Apple will offer universal content search and a single log-in across apps for its Apple TV
The company will launch consumer-grade, home-optimized iBeacons

Now a big one:

The weeks-long stream of “leaks” is well orchestrated and not at all coincidental. Apple plans to reveal a great many products tomorrow but few will ‘wow’ and several are almost fully dependent upon multiple partners. CarPlay and iPhone payments may be great — but these will take time and usage and third party vendors to make successful. As the ecosystem expands, Apple has less control. This forces them to talk up the product whereas in the past, the product spoke for itself.

We will know shortly if I am right.

Some predictions take longer, however, and are not as clear-cut. My very first Techpinions column, from February 18, 2013, focused on — believe it or not — the Apple iWatch. I wrote:

Very soon, sensors throughout our homes, on our pets and possibly inside our bodies, all monitored or even controlled by our smartphone, will be the norm. Imagine now if these were ad-subsidized devices, like Android or Kindle, offering no escape from the latest marketing pitch or sponsored social media update. Is this a tolerable future?

I know. Brilliant.

But a paragraph later I followed up with:

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

Incorrect.

Nearly 2 years later, this was a battle that never happened. The market has embraced both models, not chosen one over the other. Perhaps, as wearables and smart homes become more common place over the next many years, this will change. That’s a rather weak prediction, however.

Here’s a bold one. From March 18, 2013:

As the blogosphere pronounces ‘Apple is Doomed’ at every turn, I can’t help but thinking we have it wrong. Apple will have its ups and downs, no doubt. It’s just, the more I follow Apple, the more I study Steve Jobs, the more I suspect that, while he could not live forever, Jobs absolutely believed his creation, Apple, could. Literally.

Am I right or wrong?

Fixing A Hole

Confession: sometimes I secretly blame you for when I am wrong. In “iOS 7 Game Changers,” I spoke glowingly of AirDrop:

I predict AirDrop will have a paradigm-shifting impact on content sharing – which means it should have a paradigm-shifting impact on social sharing sites, particularly Instagram, Facebook, YouTube and LinkedIn.

Hundreds of millions of iPhones with simple, real time, on-the-spot sharing, all thanks to AirDrop. Big transformative things were supposed to happen. I really believed what I said. So why do almost none of you use this “paradigm-shifting” feature? (Because it’s not necessary, that’s why. I did not think it through at the time.)

Of course, some outrageous ideas may yet come true. Just over a year ago I recommended Apple:

Integrate iCloud, fingerprint technology, and an open API. Touch any connected screen and it instantly re-calibrates itself to our preferred, personalized settings, ST:TNG-like. In this way, Apple becomes the company that manages every screen in our life, everywhere, all the time.

I think this is a near certainty within the next 10 years.

Oddly enough, it’s the stuff that seems patently obvious where I get the most pushback. Following last year’s big Apple iPhone launch event, I stated:

Asking Apple to go down market is like asking Microsoft to no longer charge for software. It runs counter to their history, their strategy, their culture and skill set, their strengths, their leadership and how they recruit, reward and incentivize their staff.

…and took a great deal of flak for that.

I contend it was true then and more so now. That even the most expert Apple analysts refuse to accept this makes it no less correct. The 5c was a mildly painful reminder the company cannot go down market. That Apple is moving further up market is no surprise to me.

Getting Better All The Time

I think I have maintained a reasonably high average for prognostication. For example, fully nine months before the actual Amazon Fire Phone was released, I explicitly stated here that:

An Amazon smartphone would be focused on getting us to shop more — from Amazon
The widely reported “3D” screen technology would be a bust
No Amazon Phone could possibly hope to compete with other devices unless it was completely free, which I seriously doubted would happen

You’re welcome.

Unfortunately, there are those predictions that are quickly proven wrong. Just two months ago I wrote:

Given Android’s headstart in wearables, it’s hard to see Apple winning any wearable app wars. Given the limitations of its market reach, it’s similarly difficult to see Apple winning the “smart home” market without buying its way in.

What was I possibly thinking? With Mac, iOS and HomeKit — and a premium user base — there may be no company with a bigger head start here than Apple.

Apple will reveal much tomorrow. I predict this will be a once-a-decade event, with a stunning array of new products, services and partnerships. However, despite all the talk, all the tweets, all the analysis, we will not know the full impact of the company’s efforts for years to come.

Who Apple, Google and Microsoft Should Acquire Next

On Tuesday night, TechCrunch’s Alex Wilhelm asked on Twitter:

If you were Microsoft/Google/Apple what company would you buy?

— Alex Wilhelm (@alex) August 27, 2014

It was late and I fired off a quick response but I thought it was a question interesting enough to be worth thinking and writing about here in more depth. So, for today’s column, I’m going to spend some time asking which companies Apple, Google and Microsoft should consider acquiring. As a bonus, I’m also going to include Amazon, which of course has just announced a major acquisition. I’ve deliberately been mutually exclusive in my recommendations, but the fact is a number of these companies would be a reasonable fit for several of the potential acquirers, since they’re all to some extent targeting the same opportunities, albeit in different ways.

Apple

Until the Beats purchase, Apple’s acquisition strategy was so predictable, you already knew the official comment the company would put out as a result: “Apple buys smaller technology companies from time to time, and we generally do not discuss our purpose or plans.” Apple has focused almost entirely on acquiring smaller technology companies and typically shuts down the products while building some of the functionality into future Apple products. But the Beats acquisition either changed all that or was a one-off anomaly. I suspect most of Apple’s acquisitions going forward will be more along the lines of its past acquisition than the Beats acquisition, but it might still make sense for Apple to buy something bigger “from time to time” as the company might put it.

Bose

This is a bit of a cheat because it’s so similar to Beats, but it’s also different in important ways. Bose is the headphone brand many people thought Apple should have bought because it’s a much better fit with Apple’s core product values: a premium, high end, high quality product that’s well respected and has a brand cachet among the same sort of people likely to buy Apple products. I think it’s possible Apple may use Beats and the technology it licenses to build premium headphones under its own brand and, as such, it may not be necessary to buy Bose to achieve this. But with Bose, it would acquire an existing known brand which would nicely complement the Beats brand.

Broadcom’s baseband business

This is also a bit of a cheat, because it’s not apparently for sale anymore, as the company is planning to wind it down. But it seemed an obvious fit at the time when it was for sale, because it’s well aligned with Apple’s strategy of steadily owning more and more of the components in its devices, and it would provide useful leverage against existing suppliers. It appears Apple is investing in this area organically already, and acquiring this business would have given that effort a big boost. For now, though, it appears as though Apple will continue to pursue this strategy internally rather than through an acquisition.

Yelp

Apple Maps has come a very long way since the early awful reviews. I use it regularly to get from point A to point B and it’s absolutely fine for navigation purposes. But where Apple Maps falls short is its point of information (PoI) database – i.e. the set of information it has about stores, restaurants, and other businesses in any given area. I regularly find Apple Maps is unable to find the nearest location for a particular franchise or company when Google Maps finds it without any problems. This is Apple Maps’ single biggest weakness today, at least in the US, and it should invest in fixing it. Apple currently buys this data from third parties like Yelp, but it has little control over the quality of that data as a mere licensee. Acquiring Yelp would allow Apple to control the data and use it as the foundation for a more aggressive effort to build an extensive, up-to-date PoI database to help power Apple Maps.

Google’s acquisitions have been much less predictable than Apple’s, both in their scale and scope. It’s acquired companies as diverse as YouTube, Picasa, Dodgeball, Keyhole, Android, DoubleClick, GrandCentral, Motorola Mobility, Nest, Skybox and Zync Render. There is almost nothing all these companies have in common and some of its acquisitions have been pretty sizable. But given its current focus areas and the domains Google is likely to invest in next, it’s still possible to identify some possible opportunities.

Spotify

This was the one company I listed in my response to Alex Wilhelm’s tweet, and it’s an obvious one. To the extent Google is serious about getting into the music subscription business, it could acquire a lot of market share and a strong existing brand in the form of Spotify. Some people questioned why Apple pursued Beats instead of Spotify, but I think the reality is Apple didn’t want the baggage of millions of users across iOS, Android, Windows Phone and the web to support, and it was partly attracted by Beats’ relatively small base. Google, on the other hand, works on a massive scale, and already operates one of the other most popular music streaming services in the form of YouTube. While Google Play Music has been somewhat successful, it’s limited in terms of the countries where it’s available and is far from a leading brand. Spotify would quickly leapfrog it into a top two position in digital music.

Jawbone, Fitbit or Withings

Google has already shown that it’s willing to acquire to establish a position in one of the three key new domains in consumer technology: home automation. But in the other two (the connected car and wearables) its efforts have largely focused, so far, on extending Android. However, there are a number of companies which have established a strong position in wearables from a fitness and health tracking perspective and which Google could potentially snap up. Jawbone, Fitbit and Withings are three obvious examples (and Withings in particular is doing interesting things in the smartwatch space). Any of these companies could give Google the sort of jump start in wearables Nest has given it in the smart home market and could be a core to wrap around other acquisitions, as Nest has become a vehicle for purchases such as Dropcam.

As Google and Amazon increasingly square off against each other across a number of areas, Google has been investing in various retail and commerce-related initiatives. But almost all of these so far have been organic and tied to existing Google properties. Pinterest would fill an interesting gap in two different parts of Google’s business: a channel for commerce and a social network. Google+ has largely failed as a social network on a grand scale (though it’s arguably succeeded in various niches), but Pinterest has massive appeal among a segment of the population. It sits quite a long way down on ComScore’s list of top mobile apps by unique visitors (number 20, just above eBay and below Snapchat and Netflix), but comes in the top 10 by time spent among users over 24. Pinterest also has enormous potential to drive commerce activity, which could help reinforce some of Google’s other commerce-related activities.

Square

Square is, depending on who you believe, either expanding rapidly or struggling mightily. But it’s establishing itself as one of only two or three players that’s starting to build a presence in the local retail space. Amazon’s now entered that space organically with Local Register, but Google’s various efforts in mobile payments have so far failed, largely due to lack of carrier support. Acquiring Square would tackle the market from a different perspective but also potentially give Google a local footprint which could be used to re-launch Google Wallet in future.

Microsoft

Microsoft has made one big acquisition recently, in the form of Nokia’s devices business, but it’s clear Satya Nadella thinks less of that business than Steve Ballmer did (and may well have opposed the acquisition at the time). Other larger acquisitions in the past have included Danger, aQuantive, Skype and Visio. But Microsoft is in transition, both culturally and strategically, and it’s not yet clear what the new focus areas for acquisitions might be. However, there are a few areas where Microsoft could use some help.

Here

I’m not going to focus on the wisdom or otherwise of acquiring Nokia’s devices business, but where I think the board made its biggest mistake was not acquiring the Here location and mapping business from Nokia when it bought the mobile phone arm. There are only three meaningful mapping businesses in the world today, and they’re owned by Google, Apple and Nokia. Only two of these companies own major computing platforms, and the third major computing platform company is conspicuous by its absence. Having licensed maps content from Here for several years for use in Windows Phone, and since Nokia devices have used it for much longer, it was perfectly logical for Microsoft to acquire this business. But the board balked at the time and so Microsoft is left licensing one of the core elements of its platforms instead of owning it outright. It could still fix this.

Foursquare

Along similar lines, Foursquare has begun providing PoI data to Microsoft for use in Bing Maps and Cortana but, as with Apple’s relationship with Yelp, there’s a lack of control and ownership. Unfortunately, Here’s mapping data suffers from the same PoI weakness as Apple’s Maps product, especially in the US, and Foursquare would be helpful both in filling gaps and as a foundation for building a much better, more comprehensive database. Given Microsoft’s existing relationship with Foursquare both as a licensee and an investor, an acquisition would be straightforward and a good fit.

Everpix assets or Picturelife

One of the main selling points on Microsoft’s Lumia devices is the cameras, and yet neither Nokia nor Microsoft has ever provided a great way to store, manage and share these pictures. OneDrive is a storage option which should be increasingly integrated into the process of capturing and storing photos, but it suffers from the same fundamental limitations as other storage services: once you put pictures in, it’s almost impossible to find, manage and organize the pictures afterwards without heavy manual intervention. Everpix, before its demise, was one of a handful of services which promised to help with this task, and I always thought Nokia should have snapped it up. Picturelife is a similar service, though not as good, and there are others out there with similar capabilities. Such an acquisition could help set Microsoft’s photo management capabilities apart and would be a great strategic fit with the Lumia devices’ emphasis on photography.

Amazon

Amazon has obviously just announced a major acquisition in the form of Twitch, and perhaps its appetite for other big purchases might be limited at present. But as I’ve written elsewhere, there are several possible motivations for the Twitch acquisition, among them an extension into new categories within Media and a pursuit of the broader advertising opportunity. There are a number of other acquisitions which might fit into this strategy, as well as Amazon’s broader e-commerce ambitions.

Hulu

Hulu has been on the block and then off again, and at present is theoretically not for sale. But it would be a great complement to Amazon’s existing position in digital video, which is mostly focused on catalog content rather than new shows. Hulu is the only service that brings fresh content from several of the biggest US broadcasters on both an ad-funded and subscription basis, and both models are a good fit with Amazon’s new approach to media. Video advertising is an important area of expansion for Amazon and subscription content services are a business model Amazon appears to be pursuing too. It would also make Amazon a stronger competitor to Netflix, which currently dominates the US video streaming business.

Pandora

Pandora is by far the top online music service by usage in the US, second only to Facebook’s apps among all age groups in the ComScore data by usage, and in the top five by unique users, with only Facebook and Google products ahead of it. And yet it’s perennially unprofitable, because of the high content costs. With revenues and costs under a billion dollars a year, Pandora is the kind of business Amazon could swallow relatively easily, while turning it into an important part of its growing digital media offerings. And it would do for Amazon what a Spotify acquisition would do for Google: immediately vault it from an also-ran proposition to a market leader in digital music, at least in the US, which is still by far Amazon’s most important market.

Etsy or Shopify

Amazon dominates the traditional e-commerce space in the US and certain other markets, but there’s a lot more to online buying than traditional retail. Etsy and Shopify are two companies which target adjacent spaces in a way that would be a good complement to Amazon’s current business. The obvious risk here is these companies have sprung up in part as an alternative to Amazon, and their users may not be all that happy about an Amazon acquisition. But either would help Amazon to expand into new areas within e-commerce (and m-commerce).

Deeper Dive on Android vs iOS Web Usage

This article is exclusively for subscribers to the Think.Tank.

Mobile Focused Podcast: Less Expensive iPhones, and the Globalization of Tech

I’m happy to announce that I am rolling up my podcast with Andreessen Horowitz partner Benedict Evans into the Tech.pinions podcast as well. We will shoot to release these discussions between us every few weeks, midweek.

Ben Bajarin and Benedict Evans discuss what a low-cost iPhone could mean for Apple and explore the global and regional differences of iOS an Android.

Click here to subscribe in iTunes.

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

Posts Mentioned:

Benedict Evans – Note on Cheap iPhones

Ben Bajarin – The Regionalization of the Smartphone Market

Jan Chipchase – Connectivity is not binary, the network is never neutral

The Major Industry Battle Brewing Between Samsung vs Google

Over the last five years, Samsung has become a behemoth in the tech marketplace. Their smartphones dominate the tech landscape and their profits have been relatively good until recently, considering the fact they still make most of their money on hardware. However, as we have seen in the PC market, a hardware only business model is not sustainable. Indeed, as smartphones become more and more commoditized, Samsung’s profits margins will soon be squeezed — especially by competitors like Xaomi who is eating their lunch in China.

While they are one of the most vertically integrated companies in the tech arena and can leverage this to help margins to some degree, I am convinced that, unless they take control of their entire destiny, they are just going to become like any of the PC companies who have been beholden to Microsoft and Windows and have seen their margins shrink consistently as PCs became commoditized. “Google and Android” replace “Microsoft and Windows” in this scenario and at the moment, Samsung is just a front end to deliver more and more customers to Google to get their ads, services and products via Samsung devices. Given the fact 50% of Android devices are Samsung branded, and Samsung’s cut of any related profits is the same as even tiny companies who also back Android, if I were Samsung I would be really pissed I’m making Google richer while at the same time, jeopardizing my future earnings potential if I continue to back Android.

To Android or Not to Android?

It is clear to me Samsung sees this and is rethinking their relationship with Google and their support for Android. At their recent developers conference, they showed off their own mobile OS that uses Tizen at its core and have even started paying developers to write apps for Tizen. At first glance it seems the focus on Tizen seems to be for the Asian market but don’t let that deceive you. I think there is something bigger in the works with Tizen.

Here is what Samsung is up against if they continue down an Android path as is.

First, they just make Google wealthier and continue to deliver customers to Google instead of to themselves. Yes, Android has served them well so far, but as long as Google owns the OS, Samsung is beholden to Google and is just a slave to them. Second, they drive revenue to Google, revenue that could be all theirs if they owned the customers. Third, they will continue to face margin pressure as hardware based profits shrink. As I mentioned above, our analysis suggests Samsung’s margins, even on their upper end products, could be reduced to around 10%-15% as even high end smartphones become more commoditized.

There is a reason Samsung copies and steals from Apple as the court in San Jose has already proven during the recent trials in California. They look at Apple’s ownership of their ecosystem and lust after it in a big way. Apple is mostly insulated from very low margin pressure since they not only make money from hardware but also from apps, products and services. They can do so since they own their OS and ecosystem and control their destiny across the board. Put more directly, Apple gets all of the profits from hardware, software, ads and services while, in Samsung’s case, Google gets most of the ad revenue, app sales profits and services sales.

The irony to all of this is Samsung is the one who has made Android successful — yet Google will not share the wealth with Samsung any more than they do with other Android licensees. Samsung has to be steaming at this predicament and looking for a way out. However, they have a dilemma and are boxed into a corner in the short term. While they can and will modify Android as far as they can without losing the store certification, the apps on Android that are both legitimate and illegitimate (the later being important in China) is too vast for them to abandon. Not being able to run android.apk apps would be suicide for anyone in the short term. Their developer environment is still based on Android so it seems they are trying to create a para-platform on top of Android that still uses the store but gets custom apps created for them in their ecosystem.

However, even in this scenario, where they can add some customization, they are still pouring money into Google’s coffers, leading them down a path where a hardware only play could hurt them big time in the future. Keep in mind, all OEMs backing Android are getting the same OS and, while hardware may differ, the OS is identical. It becomes harder and harder to differentiate with Google in control of the OS and related products and services. And Google’s new Android One program basically takes the cost out of the hardware and makes it possible for small companies to enter the market and go right after Samsung’s low end business in emerging markets.

So what could Samsung do to extricate themselves from the powerful hold Google has over them? Some industry folks I talk to think that Samsung could just fork Android the same way Amazon has done with their Fire OS. But even with Amazon’s clout, there are still not as many apps available on the Fire OS as there are in the Google Play Store and staying with Android even in a forked mode could be confusing for Samsung’s customers in the long run.

I think the real thing Samsung is working towards is to get away from Android completely sometime over the next three to five years and take complete control over their future. This is where I think their backing of Tizen becomes interesting and potentially important. Although Tizen has not attracted a lot of app support to date, if Samsung got behind it and was able to prove to the market they will continue to innovate around Tizen and keep delivering hundreds of millions of smartphones and tablets annually under their brand, they could attract serious software developers to the Tizen platform. Remember, they have 50% of the Android market today. If Samsung could show they would continue to be the #1 leader in smartphones even with Tizen, software developers would be crazy not to back Samsung’s Tizen strategy.

I don’t believe Google will let Samsung dump them without a battle. In fact, the recent fights between the two are becoming more public as it is becoming clear Samsung is no longer in love with Google.

I don’t think Google will adjust the revenue share for Samsung since, in doing, so they would probably have to have similar terms for other big Android vendors and that would really impact Google’s earning abilities. But they could be creative in trying to keep Samsung in the Android fold as well as putting a lot of pressure on them in ways we can’t even imagine at the moment. What Google wants, Google mostly gets.

In the long run, Android is a dead end for Samsung. As stated above, their relationship with Google is not that much different than what other PC OEMs have with Microsoft today and look what that has done to them in the commoditized age of PCs. I have no doubt even high end smartphones will become commoditized in a similar manner. If Samsung does not find ways to gain more control and deliver their own apps and services to enhance their overall profitability, they will, excuse the pun, become marginalized.

The Smartphone Is Not Merging With the PC

Behold the pot, bathtub and swimming pool. They all contain water. They are the same. ~ Horace Dediu (@asymco)

On July 9, 2014, Walt Mossberg published an article entitled: “How the PC Is Merging With the Smartphone.”

(I)n the past month, it has become clear that a serious effort has begun to merge the smartphone and the PC. ~ Walt Mossberg

To “merge” means:

merge |mərj| verb “combine or cause to combine to form a single entity”

[pullquote]Writing is easy. All you have to do is cross out the wrong words. ~ Mark Twain[/pullquote]

I respectfully, but vehemently, disagree with Mr. Mossberg’s observation that the smartphone and the PC are merging. Not only aren’t they merging but they — and their underlying design philosophies — are diverging.

Starting Far Apart

Apple, Google and Microsoft are three of the largest players in personal computing. However, their design philosophies start from very different places.

Apple, Google, and Microsoft each offer all three things: devices, services, and platforms. But each has a different starting point. With Apple it’s the device. With Microsoft it’s the platform. With Google it’s the services. ~ John Gruber

Apple, Google and Microsoft not only start from different places, they are also headed in three very different directions.

Moving Further Apart

Google wants you signed into Google services on all your devices, from phones to tablets to PCs. ~ John Gruber

Google may well be offering one experience at the services layer, but that is not the same as merging the smartphone and the PC and it is not at all the same as what Apple and Microsoft are doing.

Microsoft wants you to run Windows on all your devices, from phones to tablets to PCs. ~ John Gruber

Microsoft may well WANT to run a single Windows operating system on all of your devices, but so far their efforts to create one operating system that runs on phones, tablets, and desktops has actually caused Windows to splinter into three operating systems: one for the phone (Windows Phone 8); one for the tablet (Metro) and one for the desktop (Windows 8). Calling them all by one name does not make them all one thing.

[pullquote]There is nothing so useless as doing efficiently that which should not be done at all. ~ Peter Drucker[/pullquote]

Further, while Microsoft may well be attempting to merge the tablet and the PC at the hardware layer 1) that is not the same as merging the smartphone and the PC; 2) the paltry sales numbers for their 2-in-1 devices weigh against, not for, the proposition that merging is the way of the future; and 3) Microsoft’s efforts are not at all the same as what Apple and Google are doing.

Apple wants you to buy iPhones, iPads, and Macs. ~ John Gruber

Apple is not merging anywhere — not at the services layer, not at the operating system layer, and most especially not at the hardware layer.

(Apple chief of design, Jony) Ive demands that the hardware be true to itself—its purpose, its materials, the way it looks, and the way it feels. ~ John Siracusa

Not only aren’t iPhones and Macs merging, but Apple’s continuity features allow Apple to draw bright lines between their phone, their tablet and and their desktop offerings.

Apple’s vision is about harnessing the uniqueness of each device rather than converging them ~ Ben Bajarin (@BenBajarin)

Further, what Apple is doing is not at all the same as what Google and Microsoft are doing.

Whatever This Is, It’s Not Merging

A gardener uses a trowel when he gardens and a shovel when he digs. He doesn’t think, “Hey, the trowel and the shovel are merging because they both dig holes!”
A homeowner uses a watering can to water the flowers in her home and a hose to water the flowers on her porch. She doesn’t think, “Hey, the watering can and the hose are merging because they both water flowers!”
A restaurant employee washes the floor with water from a bucket and washes dishes with water in a sink. He doesn’t think, “Hey, the bucket and the sink are merging because they both do washing!”

Semantics

The beginning of wisdom is a definition of terms. ~ Socrates

Is this just a question of semantics? Well, even if it was, semantics matters. Semantics is: “The branch of linguistics and logic concerned with meaning.”

A definition is the enclosing a wilderness of idea within a wall of words. ~ Samuel Butler

However, this isn’t just semantics. This is a distinction with a difference.

The difference between the right word and the almost right word is the difference between lightning and a lightning bug. ~ Mark Twain

Nothing Is Merging

[pullquote]You cannot step into the same river twice. ~ Heraclitus[/pullquote]

Apple is improving the workflow between its devices. Workflow is, by definition, a flow. Saying that workflow is “merging” is like saying that a river is a lake. The improved workflow between Apple’s devices allows those devices to be true to themselves and to grow ever more distinct, one from the other. At Apple, the smartphone and the PC are not merging.

Google is improving its services. It wants you to think of phones, tablets and PCs as portals used to peer into the Cloud — the Google Cloud that is — where all your content and apps, reside. Google may not care which portal you use, but they have no interest in merging those portals. At Google, the smartphone and the PC are not merging.

[pullquote]Facts do not cease to exist because they are ignored. ~ Aldous Huxley[/pullquote]

Microsoft is improving nothing. They are forcing the merger of the tablet and the PC because their Windows’ business model demands it. They have not learned — or more likely, they refuse to acknowledge — that the mouse driven user input suitable for the desktop is unsuitable for, and incompatible with, the touch driven user input of the tablet. At Microsoft, the smartphone and the PC are not merging.

Caption: Leaked image of the Microsoft Windows 8.1 Pro Surface Axe/Razor 2-in-1 Hybrid Shaving Combo Device.

Diverging

Microsoft’s muddled personal computing design is going nowhere, but the design philosophies of Google and Apple are unique and they are rapidly diverging, rather than merging.

Normally, in mature markets, products grow closer and closer to one another as each competitor borrows the best ideas of the other and incorporates them into their own product or service. That has happened with Mac and Windows over the past thirty years and with iOS, Android and Windows Phone over the past seven years. However, Apple and Google are now rapidly moving in opposite directions.

Apple is pushing all of the value down into their devices. Google is pushing all the value up into their services. This is going to have dramatic, long-term, consequences.

Google will almost certainly excel wherever machine learning matters most: maps, voice translation, predictive services and who knows what else.

Apple will almost certainly excel at any task that requires rich applications and with any entity or institution (education, business, government) that inhabits the “long tail” of app creation (i.e., specialized or proprietary apps) and demands robust security and privacy.

Suggesting that the smartphone is merging with the PC obscures this reality. It implies that the overall approaches of Apple, Google and Microsoft are drawing closer together when, in fact, they are not.

Henry Ford said:

The competitor to be feared is one who never bothers about you at all, but goes on making his own business better all the time.

I get the feeling that both Google AND Apple fit into this category of business. Each feels that they know best and each is moving on without much regard for the what the other is doing. Focusing on merging is a distraction. What we need to be focusing on is what is emerging from these two great titans of tech.

Woof

A dog goes into a newspaper to place an advertisement.

“What do you want your ad to say?” asks the newspaper clerk.

“Woof Woof Woof. Woof Woof Woof. Woof Woof Woof,” says the dog.

The newspaper clerk adds up the words and says, “Okay, that’s nine words. We charge the same for up to ten words. You could add another ‘woof’ for no extra money.”

The dog says, “But that wouldn’t make any sense.”

Walt Mossberg is not just a good tech writer, he’s one of the very best there is. However, on this one occasion, I believe he added one “woof” too many.

Decoding Page And Brin

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Life Liberty And Pursued By Google

If we do not have a right to be forgotten on the Internet then we have no right to privacy. None. We cannot allow Google and Wikipedia’s Jimmy Wales to strip us of this basic protection.

It appears, however, that is their intent.

Last month, in a freedom-fighting shot heard round the Internet, the European Court of Justice ruled people have a “right to be forgotten.” The Court stated every private citizen within 32 European Union nations can demand Google (and other search engines) remove links about them which are “inadequate, irrelevant or no longer relevant.”

This decision is freedom.

Let’s say you defaulted on a car loan 20 years ago, your first year out of college. Should that be the first thing that pops up under your name when anyone, anywhere, anytime, maybe forever, types your name into Google? Must you forever be branded?

Thanks to the EU’s ruling, you can now have the link removed. The link — not the data, not the facts, not the source. The facts have not been changed. The document Google’s link has pointed to, a local newspaper article, say, or possibly an old legal filing, still remain in existence. But, you can no longer be unduly punished by Google’s unforgiving, unforgetting algorithms.

We need a “right to be forgotten” in the United States!

Indeed, while credit agencies must — by law — wipe clear their data on us from many years ago, the far larger, far richer, far more encircling Google faces no such restrictions. A small, local newspaper may have written a blurb about students unable to pay back their student loans in a timely manner. In 1998. And your name was included. Google enables the world to instantly know this about you, years and even decades later.

You’ve long since made good, of course. You satisfied your debts. Yet every future employer that types your name into Google sees that information, possibly at the very top of the page. Fair? Of course not. Must we private citizens be so powerless against Big Data collections? Technology is supposed to be empowering — and not just for a giant corporation, but for individuals, all of us. That’s the promise of technology, after all.

Google thinks different.

Soon after the ruling, Google Chairman Eric Schmidt stated “the balance that was struck [between a person’s right to be forgotten and the public’s right to know] was wrong.”

Curiously, it is Mr. Schmidt who is leading the company’s efforts to implement the court’s decision. Following the court’s ruling, Google appointed an “advisory board,” because, as the company stated:

“The court’s ruling requires Google to make difficult judgments about an individual’s right to be forgotten and the public’s right to know. We’re creating an expert advisory committee to take a thorough look at these issues.”

Spoiler alert: Google’s “advisory committee” is stocked with ringers. These include Google chairman Eric Schmidt, Google’s lead attorney, David Drummond, and Wikipedia’s Jimmy Wales.

I confess I don’t know the views of all seven members on the Google-appointed committee. But I do know some. Eric Schmidt, for example, has offered numerous public statements on the issue of privacy, often going up to, maybe even beyond the creepy line. Here’s just one example:

“If you have something that you don’t want anyone to know, maybe you shouldn’t be doing it in the first place.”

Google’s chief lawyer David Drummond called the Court’s decision “disappointing”and stating it “went too far.”

Your laws, Europe, are impeding Google’s grand plans.

However, it is Jimmy Wales, founder of Wikipedia, and a rather curious selection to Google’s advisory committee, who has waged the most vigorous and public opposition to this ruling. I interviewed Jimmy Wales for TechHive. He told me the court’s decision is censorship, plain and simple.

It absolutely is censorship and no one serious has any doubts about that at all. As a simple test, ask yourself whether this would be possible in the U.S. without a repeal or modification of the First Amendment—it would not.

Jimmy Wales is profoundly wrong.

The First Amendment was instituted to protect individuals. Yes, it is a right against the government, not private business. Still, his suggestion that empowering citizens to limit the lasting personal harm from Google’s algorithms is the equivalent of repealing the First Amendment is disheartening.

We have laws that limit pornography. We have laws that limit how long credit bureaus may keep their data. We have laws regarding copyright and content distribution. Our society benefits from these. Empowering individuals to have non-relevant or no longer relevant links about them removed from Google will not require a repeal or modification of our first amendment. Indeed, knowing search engines can’t hold onto or link to our private data forever may foster more speech and greater diversity.

Wales, however, takes the hard line stance, conferring all rights to Google while leaving individuals relatively powerless:

Google goes to an enormous amount of effort to write software to express editorial judgment about which links are displayed—that’s freedom of expression.

What we may not do, if we are respecting freedom of expression, is use the force of law to suppress a link to content that is legally published and true.

In Wales’ world, a single slip up, captured by Google’s globe-spanning servers, and you are forever branded.

The police must (now) receive a search warrant before tracking our movements by cell phone or cell tower. Credit agencies can’t hold onto tax lien data after a decade. Google, however, is timeless — no matter how damaging.

It gets worse.

Till now, we’ve had the power to decide whether to hand over our privacy or not. Our private data, our searches, our online purchases, the web pages we viewed were recorded by Google, that data then analyzed and sold, often in aggregated form. In return, we received various benefits such as free search and maps. Perhaps we got a raw deal, handing over far too much in exchange for meager gain. But, it was a deal nonetheless, a choice we all made. Now however, even this lopsided quid pro quo is vanishing. We are being captured without consent, and without ever striking a bargain.

I can avoid Google.com. I can route around Google fiber. I can attempt to escape Google’s servers and Google’s relentless bots, though it’s nearly impossible. How can I avoid Google satellites, Google balloons, or Google drones? These can spot us, soon identify us, link that data to time and geolocation, upload it to their servers, in near-real time, then let anyone, anywhere, forever, know the moment I simply walked outside my front door.

And when I got into my car.

And when I got out.

And where I drove and how fast and where I stopped.

An entire dossier available on me of nearly every moment of every day, available to anyone, anywhere, simply because I stepped off my front porch. You, as well.

Yet Wales and company offer us no power to limit this.

Understand, I am not opposed to these truly amazing technologies, far from it. They are connecting people across the world, enabling the sharing of content, changing views of life and geography. They are empowering. But they cannot be allowed to strip us of our liberty.

When Google purchased Skybox Imaging, a satellite company, Skybox stated:

We’ve built and launched the world’s smallest high-resolution imaging satellite, which collects beautiful and useful images and video every day.

Amen. This type of bold vision, and the execution that made it real, are laudable. Such efforts can aid humanity — not just in America, of course, but all around the world. Mapping our world has, despite many awful instances, helped people advance. This does not, however, give Google — or any company or group of companies — the legal right to capture and sell me, especially when I offered no consent in any form.

The FCC’s decision to allow commercial drone videography can absolutely make our lives better. But Google should not have the right to allow its drones to record me, my time and place, then make that information available to all (or to whom it chooses) without my explicit and ongoing consent, and without a means to have the data stripped from its servers.

This is basic.

Yet, per Jimmy Wales, I have no legal right to say no, no legal right to demand Google erase that data.

How utterly disempowering.

It gets even worse.

The EU Court said Google can refuse to remove non-relevant and harmful links if they remain in the public interest. Google seized on this opening:

The company can reject a takedown request if it thinks the information is in the “public interest” – a definition that will include information about private individuals that others have a valid interest in knowing.

By leveraging this rather amorphous “public interest” baseline, I fear Google will attempt to achieve its global business ends by pitting me against you. This cannot be tolerated.

Rights must rest with the individual, not a company, not a “public.”

It may be in the “public interest” to know when I, a private citizen, walk outside my door, or when I step into a public restroom, or when I do not drive my Prius at optimum MPG. Such data could aid public transit systems, for example, or help the government craft better driver training standards. But an individual has had his privacy stolen, has been disempowered. Rights that do not rest with the individual are no rights at all.

Am I to be made powerless? Are you?

Why must we have no legal recourse, none at all, to have harmful and unnecessary information about us removed? That Google would appoint people so opposed to this basic freedom of privacy is deeply troubling.

Many in the tech community argue for a technological solution. A technological cloaking device, for example, that (virtually) hides us from Google, Facebook, drones, bots, satellites and the like.

No!

We should not be forced into a technological arms race. It may offer temporary protection but it is not liberty.

Google’s vision is clear, their disparate businesses all possessing a common idea: to connect everything and everyone. That is astoundingly audacious. No one else is attempting this. Google are to be praised for their daring, their mission, their execution. They have earned billions of dollars over the years and much respect. But Google has no right to deny us our privacy. They have no right to take from us. We must not allow this.

Jimmy Wales is wrong — and his view of the future is a limiting one, disempowering people, placing algorithms and web bots above humanity. Don’t let this happen.

Note: I have asked Google for comment on the ruling and asked them also to comment on how they selected members of the advisory committee. Should they respond, I will update this column.

Note: My discussions with Jimmy Wales are here and here (via Twitter).

Apple’s New Strategy Is Their Old Strategy, Only More So

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Has iPhone Lost The Best Value Crown?

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The One Where Brian Is Wrong About Everything

Please allow me to introduce myself…

You likely don’t care and would not believe the volume of blog posts, research reports, technical writings and analyst studies I sift through on a daily basis.

This is necessary both to stay informed and to re-evaluate my opinions as new facts emerge. I refuse to let my initial reactions to the latest rumors cement my long term perspective. Though I consider my views well-informed, reasoned and likely to be proven true in the due course of time, my peers disagree.

For your reading pleasure, below are opinions I hold that currently run counter to conventional wisdom.

Who’s side are you on?

Sympathy For The Devil

Unlike all of Silicon Valley, it seems, I applaud the EU’s ruling that affirms an individual’s “right to be forgotten.” I expect this ruling to become the global norm by the end of the decade. Technology should be empowering and liberating. Of course, I should be able to require Google, Facebook et al to obliterate any digital data on me they possess. Everyone should.

I consider Apple’s iMessage – SMS “bug” to be a sure sign of corporate hubris. The absolute worst trait any large company can have is hubris.

I love that Microsoft is sticking to its vision despite the doomsayers. Surface Pro 3 is meant to be both iPad and MacBook. Comparing it to just one device is skating to where the puck never was.

Yet, industry analysts seem universally opposed to the very idea of the Surface. They are wrong. The market for paid software licenses is, to quote Bob Dylan, rapidly fading. Microsoft should not even consider reigniting the licensing ecosystem of its glory days. Such a strategy will fail, miserably. iOS, OS X, Android, Chrome and Linux are now good enough and are cheaper and readily available. Microsoft must create its own devices for a bold new world even as its OEMs fall to pieces. The Surface Pro 3 has the potential to become the device we all really crave: both a tablet and a laptop.

Someone — anyone — says the word ‘grok’ and my brain instantly screams: poseur! I cannot turn this off. I refuse to believe this is wrong.

This recent New York Times piece that glowingly praises a smartphone app, backed by VCs, that sends under-employed Americans on a mad scurry to fetch groceries for harried tech warriors is, I suspect, that singular article we will all point to ten years from now as the glaring, obvious symbol of the last bubble.

Think about an iPhone 6. Go on. If it’s not a larger form factor, why do you even care? Odds are very high you don’t. I have to assume Apple knows this. No iPhone phablet this year and iPhone’s market share will plummet.

I can’t fault a Samsung lawyer for calling Apple “jihadists” considering the Steve Jobs “holy war” email.

But Then My Homework Was Never Quite Like This

Your assignment, dear reader, is to map the decision-making tree that led the Microsoft Corporation to offer the Surface keyboard as a separate item. I bet you fail. It is inexplicable.

Fitbit hires design icon Tory Burch. Intel partners with Barneys. Apple hires Burberry’s Angela Ahrendts. Rumors say Apple is dangling billions in front of cultural trendsetters Jimmy Iovine and Dr Dre. I think this is wise. Fashion boasts, fashion beguiles, fashion demands. Value and quality speak softly. It’s a big, noisy world out there.

Get a drone with a camera. Link it to your Oculus Rift glasses. Experience the world about you in profoundly new and different ways. Now, stream and share all you see and hear — on Facebook, of course. That’s Zuckerberg’s strategy.

One app, one task, one screen is a core value of iOS. If the new iPad allows two apps running on a screen, as rumors suggest, then we immediately know two things: 1) Apple is legitimately nervous about both Samsung and Surface, and 2) Apple intends to launch an assault on the enterprise. Smart and smarter.

I have serious doubts Tesla can ever build a car the 95% can afford.

We are all rock stars with our cool mobile phones.

Still Crazy After All These Years

The Samsung Galaxy Gear 2 is pretty. It’s also quite functional — provided you own a Samsung Galaxy. I think the bad reviews are all wrong.

I think a co-branded Mickey Mouse “iWatch” would be awesome.

Within ten years, schools and HR departments will have us wear Oculus Rift or a similar device to experience how others feel, think, and react differently to the very same people, words and actions.

The GoPro IPO, the rise of wearables, the Internet of Things, the budding Maker ecosystem. Hardware is eating the world, not software.

The best part of an iPhone phablet is it will create radically new experiences and app types. This Opera graphic reveals that phablet use is starkly different from smartphone and tablet use. No, I do not believe this is primarily driven by current phablet demographics. Rather, form factor.

I predict by 2017, apps will be made first for China for iPhone. Then for iPhone for America. Then Android. Then iPad. Then AOSP. Then Windows Phone. Then X or other.

Rhymin and Stealin

Dollar for dollar, there may be no better value in smartphones than the Lumia 630. And if I’m wrong, it’s because the Lumia 520, available for about $70, may be an even better value still. The Moto X and Moto E may prove me wrong yet again. Amazing, amazing technological evolution.

In 1997, Microsoft loaned Apple $150 million. Apple now has 1000X that just in cash. Also, one of these men is on the cusp of being a billionaire. No one saw either of those coming. We were all wrong.

Apple hardware is beautiful, understated, austere. Beats hardware is big, bold, gaudy. I have to believe an Apple – Beats acquisition horrifies Jony Ive.

It’s hard to overstate how much Google must fear Facebook. Facebook has over 1 billion users, mostly on mobile. Hundreds of millions voluntarily give Facebook highly personal information about themselves every single day, sometimes multiple times per day. This is not the same as unknowingly handing over select personal information to Google bots. By the decade’s end, search will be nothing more than a ‘signal’ for Facebook’s massive knowledge engine.

The other day, Yahoo flashed a pop-up on my screen asking me if I wanted to make Yahoo my default search engine. This made me laugh.

I believe Yahoo is on the cusp of what could be its worst-run, costliest period ever — and that, dear reader, is saying something. In her tenure as Yahoo CEO, Marissa Mayer has proven without a doubt her greatest strength is spending money. Sadly, her signal weakness is getting a return on said spending. If you are an investor, it’s time to storm the gates, else those Alibaba lotto winnings will be gone — fast.

Am I wrong? Share your thoughts.

The Genius Of Steve Jobs Or Why Google And Facebook Must Make Big Bets

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Market Share Metaphysics

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Rebuttal: Why Android Wear Is Not the Beginning of the Wearable Devices Era

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Why Bitcoin Still Does Not Matter

You can buy Bitcoin today, swap your next mortgage payment for this aggressively hyped “cryptocurrency,” lose it all to crime, fraud or incompetence, no questions asked. Yet you are still legally barred from even participating in crowdfunded investments of fully vetted Bitcoin start-ups.

Clearly, something is wrong.

Marc Andreessen and his A16Z venture capital group have regularly taken to Twitter to preach the Bitcoin gospel. Andreessen is such a believer in the expansive financial power of Bitcoin he intends to significantly increase his firm’s $50 million investment in the Bitcoin ecosystem — hinting he may invest upwards of hundreds of millions over the next few years:

Like the Internet, Bitcoin will emerge as an accepted technology, Mr. Andreessen argues, as it becomes more regulated and consumers and businesses become more comfortable with the idea of digital currencies.

Want to ride the Bitcoin start-up wave? Sorry, you can’t. The government considers you a lowly “non-accredited” person. Meaning, you cannot put any of your money into any venture capital fund or into any of its portfolio companies. You cannot even participate in a equity “crowdfunding” service, the kind that pools small fund amounts from dozens, potentially thousands of investors, eager to be part of the next big thing.

No matter how much you believe in Bitcoin, no matter how fully you believe in Andreessen et al, as a non-accredited person you won’t be able to legally invest in any of their well-promoted start-ups; at least, not during these heady land rush days. Your only hope is to buy a Bitcoin and pray for the best.

The early financing game continues to route around you.

Fair? Surprisingly, many think so, even those who have directly benefitted from the web’s otherwise open nature.

Tech news blogger site, GigaOm, which has received millions from venture capital, recently editorialized that preventing the “crowd” — that’s you and me — from investing just like venture capitalists is actually a good thing:

Full-blown crowdfunding — which allows anybody to buy shares in any company on the internet — has attracted hype, but it’s still not here. There are good reasons for that.

I disagree.

I believe the short history of the Internet reveals empowering individuals ultimately creates more new net value. Disruption works. There is nothing more disruptive than access to money — and the more you have, the greater the access. Being able to invest in start-ups from the start can do just that.

We can vote, own a gun, volunteer to serve in the military, run for public office, purchase Bitcoin, post intimate photos of our junk on social media. Yet we are still prevented by law from getting in on the ground floor.

This makes no sense.

Tens of millions have already been lost on Bitcoin, still more on day trading. Gambling is legal, much of it state-sponsored. There remains a plethora of “no money down” mortgage options that surround us. Given these high-risk, middling-reward options available, why then is the government still preventing us from investing in the high-risk high-reward field we know so well? Few understand the value of Snapchat, or Airbnb, or some amazing new smartphone beacon technology as keenly as we, yet still we are denied the opportunity to partake in the wealth-creating, sanctified pursuit that is venture capital.

In the valley of disruption, the biggest disruption of all eludes us.

The Crowd Is Kept Waiting

I would, right now, hand Marc Andreesson my spare $1,000 and have him place it in any A16Z fund, or directly into a Bitcoin-specific investment, such as their $25+ million investment in Bitcoin “wallet” Coinbase.

Even though I think Bitcoin itself is toxic.

I want in. I want in now. I know there is ample room.

According to the National Venture Capital Association (NVCA), there are approximately 450 venture capital firms in the US (based on available 2010 data). VC firms are managing $177 billion in committed capital. The average fund size (again, for 2010) was $149 million, with about 2,750 companies receiving funds — 1,000 received funding for the first time.

I believe I can do better than most of these sanctioned venture capitalists, at least in web tech — if given the chance.

You, like me, read up on this industry daily. We work in this industry, and have for many years. We know the CEOs, the investors, the products, the markets, the technologies, the dreamers. We understand the potential and respect the risks. But still we are kept on the outside, looking in. This is not merely denying our abilities, it is denying our potential to further empower this great country.

Again, from the NVCA:

Venture capital is a catalyst for job creation, innovation, technology advancement, international competitiveness and increased tax revenues.

If venture capital achieves all that now, imagine how much more good can be accomplished when you and I and everyone we know can directly add our monies and our smarts to the industry, right from the start. Question: Why haven’t the venture capital firms fought for empowering the crowd as eagerly as they have hyped the still suspect ‘currency’ they expect the crowd to use?

The Wisdom of the Government

I am an expert in technology, not investing. This has not prevented me, however, from leasing a car, mortgaging a house, buying stock in numerous companies, some with share prices hovering around $1. I am now ready to invest in start-ups. I know this industry and I know what can work. Regrettably, the government still won’t let me.

For the government, it’s still a rich man’s game. The only way you can contribute money to a venture capital fund (or even to a equity crowdfunding platform), is if the US government labels you an “accredited investor.” To earn this lofty designation, you must…

“…have a net worth of at least one million US dollars, not including the value of (your) primary residence or have income at least $200,000 each year for the last two years or $300,000 together with (your) spouse if married and have the expectation to make the same amount this year.”

Anything less, and you are callously labeled “non-accredited.” It breaks down like this: If you’re not riding the Google Bus, you probably don’t qualify. Doesn’t seem fair, I know.

This could all change, however, and perhaps quite soon.

The 2012 Jumpstart Our Business Startups (JOBS) Act altered many of the rules for funding start-ups. Title III of the JOBS Act could potentially allow those of us who are non-accredited to finally invest in start-ups, just like ‘real’ venture capitalists, should the SEC give the ok.

Be warned. There are several caveats to the rules changes the SEC is pondering:

Most notably, the government appears to still remain highly suspicious of the “equity model” of crowdfunding. (Kickstarter-like models, with no money on the line, are acceptable.)

The SEC appears set to require that any start-up seeking to raise money via equity crowdfunding will only be able to raise up to $1 million every 12 months. In addition, there will be rather arduous disclosure requirements that will cost start-ups dearly — money they obviously do not have. Worse, the very act of going through the crowdfunding disclosure process will likely brand any such start-up as unworthy to (ever) be invested in by Big Venture Capital, which can review the start-up’s unique assets behind closed doors. Thus, those with the most promising of ideas or technologies will remain incentivized to bypass the crowd. (Again, that’s you and me.)

In addition, we “non-accredited” investors will only be able to invest about 5% and no more than 10% of our income or assets.

Despite all this, the gate is rattling.

The SEC has apparently finished listening to comments on crowdfunding. Now, they are mulling exactly what to do. Perhaps it’s my techno-optimism, but unlike many financial analysts I fully expect the SEC to do the right thing. Once they do, once they allow the likes of you and me to invest in start-ups, expect a massive sea change.

It Don’t Take A Weatherman

I am no pollyanna. I’m quite certain clubby insiders will wish to remain clubby. The very best VCs will continue to grow their massive funds from institutional investors, not folks like you and me. Fraud will not magically disappear despite the vigilant buzz of the crowd picking through every document a crowdfunded start-up lays bare. The “magic the gathering” Bitcoin ‘bank’ painfully proved to far too many unfortunates that fraud and failure remain part of the human condition, even at the farthest reaches of the technology galaxy.

But we will finally have our shot.

Yes, we know venture capital is risky, even in small amounts. Is it any more risky than buying $10,000 in Mt Gox Bitcoins? Is it any more risky than flipping houses? We understand, as the Wall Street Journal states, that “over 60% of high-tech start-ups…failed to return any capital, and just 7 percent were essentially jackpots, generating returns of five times or more.” So be it. True equity crowdfunding will finally offer me a shot to invest at the start — just like blogging came along and enabled me to become a professional writer.

In fact, I have already registered with the “equity crowdfunding” site Startup Valley. No, they can’t legally allow me in, not yet. I am also registered at the crowd funding portal RockthePost. Still waiting there as well. That’s all right. My money is patient.

Who Will Be My Venture Capitalist While I Cannot?

It strikes me as both odd and extremely unfair that anyone in America can, with a bit of effort, buy Bitcoin. They can spend their life savings on it, in fact, and lose everything, and do so with almost no real recourse. Yet, for nearly all of us, including those of us who track this industry so closely, we cannot invest in any of the start-ups that are explicitly focused on growing the Bitcoin ecosystem!

Look, don’t touch. Buy, don’t own. So much for the belief in the wisdom of the crowd.

Sure, you can go on Kickstarter right now and “invest” in, say, that new Veronica Mars movie. If the producer generates enough, you might earn a free download of the final product. As for a financial stake? Forget about it.

We are being played. Worse — we are kept from playing. Still.

Billions in venture capital will be invested in the US this year alone. How much of it are you a part of? Zero, no doubt. You’re kept on the outside looking in, even in Silicon Valley — the land of the great disruptor.

Check out some of the top VC-backed tech companies. You know these intimately. You use their products. You have followed them from the beginning, contributed to their success. Yet you are unable to garner any potential windfalls when they go public.

The first start-up to receive venture financing was Fairchild Semiconductor — in 1959. That was 55 years ago. It’s been a long, long wait to allow all adult Americans to be part of this extraordinarily cozy, massively wealthy, highly influential sector we glorify so dearly. I am confident it will happen very soon.

No more…Brian S Hall. Writer.

Soon…Brian S Hall. Writer. Venture Capitalist.

As it should be.

Better For The World? Apple Or Google?

This article is exclusively for subscribers to the Think.Tank.

Why I Fear Apple CarPlay

I am excited by Apple CarPlay. But mostly terrified.

Excited, because I love constant, unbroken access to my phone, music, apps, maps, search, contacts, tweets, email — everything on my smartphone, in fact.

Terrified, because I have significant doubts that CarPlay will make driving safer, as Apple suggests. In fact, I fear it will do exactly the opposite.

Not for me, of course, I’m an excellent driver. Rather, for you and the millions of others out there traveling on the same roads as me. I have doubts that your use of Siri and iTunes and Maps and texting and calling and, ultimately, Yelp and Twitter and Facebook and everything else you will want to do will make you a safer driver.

Confession: I probably have more faith in Apple than in any other company on the planet to provide the simplest, most intuitive, least distracting interface between smartphone — and everything that it contains — and car. But there are significant caveats.

How safe can these solutions be? Ever? Tech companies and car companies certainly want us to believe they are safe. Google said nearly the same thing as Apple last year when it announced the Open Automotive Alliance: “making technology in the car safer, more seamless and more intuitive for everyone.”

I am not convinced.

I believe the following:

The more apps, information, content, and data at our fingertips, the more tools at our disposal — that are in NO WAY related to the act of driving – the more our focus on driving is diminished. This reduces safety.

I fear a fundamental Apple strength could come back to harm us. To wit: The hallmark of Apple products is not that they are intuitive, rather that they are enticing. Watch an iPhone user. They can’t seem to stop themselves, ever, from checking, tweeting, texting, calling, looking, reading, listening, scanning, scrolling.

Now put that into a car.

Yes, I know CarPlay is by Apple and Apple has four decades of experience creating amazing hardware and intuitive operating systems. There are two obvious roadblocks:

Apple has extraordinarily little say in any car’s actual hardware
The entirety of Apple’s existence has been on focusing our (full) attention onto its screens

I don’t want your focus to be on the screen! You are driving a car!

What’s that? You promise to only use the paddles on the steering wheel and to expedite all interactions via voice? Question: How often has Siri worked for you without error?

25% of the time? 50%? 90%? And that was when you had your hand on the iPhone screen and your mind fully focused on the (non-driving) Siri-related task at hand. The fact is, despite millions of dollars in advertising and years of effort, Siri continues to have painfully clear limitations.

I cannot believe that I am the only one that has such misgivings about CarPlay. And, yet, following Apple’s announcement…

The New York Times happily noted that “Apple’s CarPlay Captivates The Auto Industry.”

Forbes cheered Apple’s “powerful play to seize the dash.”

AutoNews proclaimed “CarPlay is smart but simple.”

I can only hope. I am disappointed, however, that they appear to have glossed over the very real safety concerns we all should have about CarPlay (and all similar efforts). In their statement officially announcing CarPlay, Apple endeavors to put us at ease. CarPlay is:

designed from the ground up to provide drivers with an incredible experience using their iPhone in the car

Is this true?

After all, every single car maker will continue to have complete control over their dash, their buttons, their type of screen, their steering wheel and how they integrate CarPlay. Oh, and they must simultaneously make sure to configure their settings in such a way that the vast majority of drivers — those without iPhone — can also operate everything effectively.

Not to worry, Apple says:

Users can easily control CarPlay from the car’s native interface or just push-and-hold the voice control button on the steering wheel to activate Siri without distraction.

I’m still not convinced. To me, this screams complexity — and thus distraction: native interface, steering wheel controls, Siri. Now add your mother behind the wheel.

It gets worse:

iPhone users always want their content at their fingertips and CarPlay lets drivers use their iPhone in the car with minimized distraction.

Yes, we do want all the wonderful content from our iPhones at our fingertips. My smartphone is rarely more than an arm’s length away. This does not mean we should allow it to be accessible while we are driving! In fact, the more I read from Apple’s own PR statement, the more worried I become. Parse this:

Apple has led consumer technology integration in the car for more than a decade.

What? Where? I’ve hooked up the cable television in my home but I don’t claim to have a decade’s experience in the entertainment industry. Implementing iOS in the car is a completely new endeavor, and for drivers, a completely new experience.

Putting more apps, more content into our cars, telling ourselves that it’s fine because Siri can manage it all — I simply do not believe this, not yet, and will not take part in what I consider be nothing more than a consensual hallucination.

Go to Apple’s very own CarPlay “coming soon” website. Remember, every single auto maker will implement this differently, with different knobs, different buttons, different screen types, different paddles, different layouts, different response modes. Yet, even using Apple’s own imagery, CarPlay appears to aggressively demand your focus.

Here’s just a sampling:

Do Apple’s very own pictures look either distraction-free or Siri-optimized? Now imagine 10,000 drivers with this. Or 1 million. Or 30 million.

Despite my fears, my concerns, I must be fair in my judgment of CarPlay. I have not used it, only seen it demonstrated. When it comes to developing intuitive touch and voice interfaces, Apple has led the way. Moreover, I doubt any car maker will do a better job of crafting a more intuitive, less distracting ‘infotainment’ system. Furthermore, Apple has so far restricted what they will allow offered via CarPlay. iTunes, Siri, Maps and a few other third-party apps, such as Beats, Spotify, iHeartRadio. No Yelp, no Twitter or Facebook. No WhatsApp.

Unfortunately, I simply do not believe this will remain the case. As the National Safety Council has stated, “the auto industry and the consumer electronics industry are really in an arms race to see how we can enable drivers to do stuff other than driving.” We mere mortals will no doubt demand more apps, more services, more entertainment, and if Apple doesn’t deliver we will turn to Android or some other provider for our fix.

Perhaps our focus should instead be on preventing access to all of the things, not enabling it.

Aegis Mobility is one of several companies that offer solutions for organizations with car and truck fleets, solutions specifically designed to prevent drivers from accessing their phones while driving. This is good for the driver, obviously, good for the company — good for all of us, in fact. Their tools detect movements, limit what phones can do during a driver’s work hours, or whenever the vehicle is in motion, can prohibit certain functions, such as texting. Try and skirt these barriers and you just may find yourself out of work. Perhaps we should demand this of ourselves and of every other driver, rather than promoting access to evermore data and entertainment.

There are over 1 billion cars on the road. Drivers are more distracted than ever before. We are hurtling down the wrong path. There’s still time to turn back.