Unpacked for Friday, August 26th, 2016

Rumored $5 Amazon Music Service for Echo is not an Easy Sell – By Carolina Milanesi

This week, several publications reported on the rumor Amazon might be launching a music service for $4/5 that will be available only through the Amazon Echo. The news was received positively but I am not so convinced that uptake will be a slam dunk.

Current Echo Owners

Sales of the Amazon Echo have been estimated at four million units thus far, which would not be a bad start for the service. Yet, consumers who bought an Echo did not do it for a music service but for Alexa’s abilities. If they did try the Music service that comes free to Prime Members, they might have been somewhat disappointed given the limited choices. Trying something that requires paying a monthly subscription, albeit cheaper than most out there, might require some reassurance on the quality of the catalogue.

Music Lover vs. Casual Listeners

It is hard for me to see music lovers invest in an Echo in order to listen to the music through the service as the quality of the speaker is ok but not great. Of course, you could link your Echo to a Sonos or other speaker systems. Yet, if you are serious about music, you might find the fact the service is only available within the home (at least for now) leaves having to choose another service for your on-the-go needs.

If you are a casual listener, you might be ok with the quality of the speaker but not with the cost of the service. It will be interesting to see if Amazon will stop supporting other music services through Echo. This would not be a surprise after we saw the Amazon store stop sales of Apple TV and Chromecast.

Pitching to Potential Echo Buyers

Echo is a speaker so listening to a music service through it makes a lot of sense. Except, I really do not think of Echo as a speaker. I think of Echo as the genie’s bottle where Alexa lives. Trying to advertise it as an enabler of a music service would risk, in my view, confusing consumers as to what Echo’s true value proposition is, bringing this magical device to the level of a commodity one.

Maybe my concerns are misplaced and consumers will just consider the money savings vs. a different service and be happy with it. Time will tell.

WhatsApp begins passing user data to Facebook – by Jan Dawson
WhatsApp on Thursday announced it would start passing the user data it collects to Facebook, with the intention of helping to better target advertising. This coincides with a move to allow businesses to send users messages through WhatsApp and it’s easy to see the two changes taken together as a potential invasion of privacy.

Technically, WhatsApp is sticking to its anti-ad principles in a strict sense — ads won’t appear in WhatsApp. Rather, Facebook will gain additional insights into its users by tapping into this new set of user data, much as information is already passed back and forth between Facebook and Instagram. But it’s hard to avoid the sense WhatsApp founder Jan Koum’s principled stand against advertising in WhatsApp is beginning to erode or, at least, this is the first step in that direction.

History suggests this will be in the news for a few days, causing a small outcry and perhaps prompting some users to opt out of data sharing with Facebook but that it will quickly blow over. People in tech tend to have long memories – I saw people sharing a tweet from Jan Koum decrying advertising in general that was several years old after the news broke – but most ordinary people have no idea who Jan Koum is, never mind that he has an opinion on advertising. All they know is that WhatsApp doesn’t have ads and, if that doesn’t change, they likely won’t care what else might be happening behind the scenes.

Perhaps more significant is the business angle on WhatsApp itself, which is the first hint of a real monetization strategy for WhatsApp. The company famously had very little revenue when it was acquired and it subsequently killed off the annual fee and with it, revenue altogether. But opening up to businesses in a manner similar to some Asian messaging apps has been in the cards for some time for both Messenger and WhatsApp and we’re starting to see the first moves in this direction. This needs to be very carefully managed by WhatsApp so as to protect the user experience and avoid the sense of spam, something the company’s blog post on Thursday makes clear it’s aware of. Some businesses, of course, are already using WhatsApp in this way informally and, in those markets, it won’t be much of a cultural shift. Elsewhere, it will be a bigger change and it will be interesting to watch how users respond (and whether they show any interest at all) in markets like the US.

Two Interesting News Bits About Apple – Ben Bajarin
I want to add a few points to some news tidbits about Apple from yesterday that are of particular interest. The first is this note by Bloomberg that Apple is looking to integrate a specific technology that is, as far as I know, is unique to Japan. It allows for an Apple Pay-like tap-to-pay feature in areas of Japan like their transit system.

I find this interesting because Apple was on a path to sell only one SKU of the iPhone in every part of the world. This would make the supply chain a bit easier to manage rather than having different SKUs for different countries. However, if they are taking the path to localize specific hardware and features in iPhones that contain would be unique to that country, it could signal a strategic direction of a more local focus of products. While I’m speculating here, Apple could be on the path to start selling region specific iPhones. Of particular interest to me with this strategy is India. I’ve long held a scenario in my mind where Apple sells products that are only sold in certain regions. India was always one market I thought this made sense in since the market has much more extreme price sensitivity than others Apple is eyeing. The more they flex their supply chain muscle to regionalize iPhone hardware in different regions, the more this type of strategy becomes possible.

The second is another article from Bloomberg that Apple is working on some new apps that could fall into the social category.

The article speculates this is an attempt to compete with Snapchat and Facebook but this is highly unlikely. The trend within social networks is not to consolidate. The most recent Q2 data we have on social networking behavior indicates that, on average, global consumers have eight different social networking accounts. While the number they use regularly is lower than that, the bottom line is people have a broad capacity to use many different social networking apps and they use them for different reasons. It would be absolutely foolish to believe people will leave Snapchat or Facebook. This is less about competing and more about enabling. Apple can integrate features, similar to Snapchat for example, into something like iMessage or the camera app which enables consumers to share in whatever way the choose. I could imagine a scenario where features Apple comes up with for the camera app or others find their way to Snapchat.

Bottom line is that Apple is smart to create new experiences via first party apps which are capable of things that don’t exist in other apps or platforms. But no one is going to leave the networks they are part of. It means the better strategy is to enable unique things of the iPhone to be used on these different apps and networks. Live Photos being integrated into Facebook is a good example of this. Look for this type of strategy rather than a replacement or a compete with type of strategy from Apple.

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Carolina Milanesi

Carolina is a Principal Analyst at Creative Strategies, Inc, a market intelligence and strategy consulting firm based in Silicon Valley and recognized as one of the premier sources of quantitative and qualitative research and insights in tech. At Creative Strategies, Carolina focuses on consumer tech across the board. From hardware to services, she analyzes today to help predict and shape tomorrow. In her prior role as Chief of Research at Kantar Worldpanel ComTech, she drove thought leadership research by marrying her deep understanding of global market dynamics with the wealth of data coming from ComTech’s longitudinal studies on smartphones and tablets. Prior to her ComTech role, Carolina spent 14 years at Gartner, most recently as their Consumer Devices Research VP and Agenda Manager. In this role, she led the forecast and market share teams on smartphones, tablets, and PCs. She spent most of her time advising clients from VC firms, to technology providers, to traditional enterprise clients. Carolina is often quoted as an industry expert and commentator in publications such as The Financial Times, Bloomberg, The New York Times and The Wall Street Journal. She regularly appears on BBC, Bloomberg TV, Fox, NBC News and other networks. Her Twitter account was recently listed in the “101 accounts to follow to make Twitter more interesting” by Wired Italy.

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