The Network Garden - Mark Sigal's Blog

Quick Take: Five Takeaways from Apple's new iPad Launch

1. If you STILL think iOS vs. Android is Mac vs. Windows, then you weren't there: You remember the axiom about the '60s, that if you could remember it, then you weren't there? Well, if you still believe that iOS vs. Android is destined to be Mac vs. Windows, then you weren't there at the rise of the PC...when Apple got outflanked and out-executed by Microsoft. Apple remembers all of the lessons about over-promising and under-delivering, relying on lazy sales channels, failing to court developers, leaving pricing overhang, and failing to maintain clear differentiation and clear positioning. In this regard, the new iPad is like a walking bullet point list of, "We remember, and we'll never forget."
2. Outflanking the PC and the Xbox: There were two disparate comments that I found noteworthy and telling about how well-positioned Apple is with iPad. One, was by Apple CEO Tim Cook, when he noted that the iPad, which he calls, "the Poster Child for Post-PC" sold 15.4M iPads in Q4, which was more than any PC maker sold of PCs in the same quarter. This is stunning and uparalleled for a product that is less than two years old. Two was a comment by the Epic Games exec demoing their new game on iPad, where he noted that the new iPad has more memory and higher screen resolution than an Xbox 360 or PS3. While memory and screen resolution alone do not equate to what makes an Xbox an Xbox, it certainly foreshadows Apple's expansion path into the living room. Along those lines, given the decision to simultaneously announce the new Apple TV at the same time as the new iPad, it left me wondering if there was some anticipated tie-in between the two that failed to come together at the 11th hour. Otherwise, the dual announcements felt orthogonal and bolted on to one another.
3. Apple has grabbed the mantle of being the Post-PC company, and it's unclear what Google can do with Android to change the narrative. This narrative from Tim Cook during the event is particularly telling about Apple positioning: "We're talking about a world where the PC is no longer the center of your digital world. A world where the devices you use the most need to be more personal and more portable than any PC has ever been. We have 3 Post-PC products. The iPod...the iPhone, and the iPad. Now any company would be thrilled to have just one of these devices. At Apple we're fortunate to have all three...Our Post-PC devices made up 76% of our revenues...We have our feet firmly planted in the Post-PC future." The net takeaway is that through product leverage and integration, through a multi-service focus, through a device, app, media and cloud focus, and through intelligent channels, Apple has defined the 'IT' that makes a Post-PC worth aspiring for, and they keep coming back to all of the various ways that they live and breath that IT. It's the reason that when they tout 315M iOS devices (and 62M in the last quarter), it REALLY means something. By contrast, the next time you watch a commercial for an Android device, note how dis-integrated the story is; it's about speeds and feeds, and the want for more speeds and feeds, as opposed to any specific outcome. Part of me believes that Google knows this, and understands that their success on phones is fools gold. But, a bigger part of me wonders if the ramifications of how disparate their core strengths are to what it takes to succeed in Post-PC relegate them to also-ran status at a time when Apple has every incentive to neutralize Google's footprint on those same 315M iOS devices.
4. Apple Segmentation speaks volumes: I thought that it was telling that just as Apple didn't retire iPhone 4 when they launched 4S, they didn't retire iPad 2. This sends three primary messages to market. One, is that if you don't need this year's model, you can get last year's model at a superior price point (i.e., no pricing overhang). Two is that we are so confident that last year's model is BETTER than anything the competion is offering even with their latest and greatest that we know it will sell like hotcakes. Three is that we know this year's model represents such an improvement over last year's model that we're unafraid to put them side-by-side in the market.
5. We're Just Getting Started: As impressive as the new iPad is (Retina Display, Faster Processor + Graphics, Better Camera, HD Video, Voice Dictation), what stuck with me was Tim Cook's closing summation: "Across the year you’re going to see a lot more of this kind of innovation, we are just getting started. Only Apple could deliver this kind of innovation in such a beautiful, integrated way. It's what we love to do. It's what we stand for." Does that sound like a company that is content to rest on its laurels to you?

Related:

1. You say you want a Revolution? It's called Post-PC Computing (O'Reilly)
2. Apple's segmentation strategy, and the folly of conventional wisdom (O'Reilly)
3. Five reasons iPhone vs Android isn't Mac vs Windows (O'Reilly)
4. Retail needs a Reboot to Survive (GigaOM)

Is Andy Rubin doubling-down on a losing hand with Android in Tablets?

In noting that the 'educated consumer' now realizes that "they're either picking the Apple ecosystem or the Microsoft ecosystem or the Google ecosystem," Android chief, Andy Rubin, promises that Google will 'double down' on Android tablets in 2012.

But this begs the question. Why is Google losing the Tablet wars in the first place, and what should they do about it?

After all, they're doing just fine in the Smartphones segment, with 850,000 Android devices activated each day, and over 450,000 apps in the Android Market.

Yet, things are apparently so bleak that even the 'glass-is-half-full' optimist, Samsung, willingly acknowledges, "Honestly, we're not doing very well in the Tablet market."

Hows does one reconcile breakout success AND failure on essentially the same platform (albeit with different form-factors)?

Is it that better devices are needed? More compelling apps? A better marketing campaign? Or is it something else?

I'd argue that Google's struggles in Tablets is a classic case of the chickens coming home to roost. Thus, it's worth spending a couple minutes on what exactly those 'chickens' are:

1. A Less than the Sum of the Parts Platform: The downside of Google's hard push of an open, loosely coupled web that is 'free' (i.e., ad-supported) is that it diminishes the importance of native, well-integrated apps for which consumers are willing to pay money. It's a truism to the point of self-fulfilling prophecy that while iOS device owners love-Love-LOVE their apps, Android device owners are more likely to plainly state that they "don't really use apps that much." As such, savvy developers look past the Android numbers, and see fragmentation, monetization and consumer mindset challenges, and focus their best efforts on iOS.
2. Confusing the Tail with the Dog: While there's a tendency to see the Android vs. iOS story as a case where one vendor creates a hardware-independent standard to achieve ubiquity on the backs of hardware OEMs (ala Windows vs. Mac), the core truth in Smartphones is that this is a market driven by: A) the power of carrier push (i.e., you can only buy what the carrier sells); B) the power of subsidy (i.e., carriers have trained consumers to ignore the real price of the phone and focus on the price after carrier-subsidy); and C) upselling Feature Phone customers to Smartphones. In other words, the success of Android is less about anything magical that Google has created from a software perspective, and more about enabling an established channel (carriers and handset makers) with proven market demand. As we shall see, when applied to the Tablet segment, it's akin to the kid who was born on third base, and thought he'd hit a triple.
3. The End-Run Around Intellectual Property: Let's face it. What many of us love about Google is that is has realized much of its vision to organize the world's information and make it universally accessible and useful. The downside is that in doing so, it has run roughshod over the intellectual property rights of content owners, social networks and especially media companies. This has created a dynamic where the very companies that Google needs as motivated partners if it intends to achieve parity with Apple's iTunes media universe of Music, Movies, TV shows and Books, look askance at the company when it comes time to content licensing. Thus, it's little surprise that despite the iPod media player being the core seed from which both the iPhone and iPad sprang, there is still no serious name brand, Android-based competior to iPod touch.

Hence, when you boil this down, what you are left with is the following:

One, is that unlike the Smartphone space where there is clear mission-criticality and a carrier controlling access to and pricing control (via subsidy), with Tablets there is NO table-stakes per se, because Tablets are not mission-critical devices.

iPad is winning in Tablets simply because Apple created and cultivated the demand for a device that offers a superior media experience, and a superior environment for games and other apps.

No less important, Apple built iTunes and App Store specifically with the goal of providing consumers with a curated, trusted environment for loading up on music, apps, movies, books and the like, complete with a friction-free monetization and distibution path for same. 

That's now the bar for entrance to the Tablet party, and any device that does less, had either better be focused on doing one thing well (e.g., Nook) or offering 'comparable' functionality at a much-lower price point, which is what Amazon is doing by tying Kindle Fire to both Amazon.com and Amazon Prime.

In other words, whereas Smartphones are driven by their mission-critical nature, and carrier "push," Tablets are driven by consumer "pull," and there is very little pull for a device that lacks an iTunes equivalent, killer apps, and a friction-free marketplace model.

Simply put, the successful tablet device makers (iPad, Kindle Fire, Nook) all have nailed the media side of the equation - music, movies, books and TV shows.

Until Google gets this piece right, I think they'll struggle, in and above all of the challenges that they face on the segmentation side.

Moreover, one is right to be dubious that the media players will play ball with Google, given how fully the company has tried to end-run their IP over the years.

In this light, it's unsurprising that Google Music has struggled to gain traction in the market.

Related:

1. Android: On Inevitability, the Dawn of Mobile and the Missing Leg (O'Reilly)
2. You say you want a revolution? It's called Post-PC computing (O'Reilly)
3. Amazon's Prime Strategy with Kindle Fire (O'Reilly)
4. Five Reasons Android vs. iOS is not Windows vs. Mac (O'Reilly)
5. Apple's segmentation strategy, and the folly of conventional wisdom (O'Reilly)

It’s Time to ‘Think Different’ because Conventional Wisdom is Dead: Thoughts on Apple’s Q1 Earnings Call

"We thought we were betting bold. We didn't bet high enough." - Apple CEO, Tim Cook

Unless you are living under a rock, by now you’ve heard all of the platitudes about Apple’s jaw-dropping earnings that are so big, they make my head hurt. 

$46.33 billion in quarterly revenue, $13 billion in quarterly profit, and $17.5 billion in cash flow from the quarter. This on unit sales of 37M iPhones, 15.43M iPads, 15M iPods and 5.2M Macs.

In fact, in the annals of largest quarterly profits of ALL-TIME, this is #4, and Apple is the only example in the Top 20 that is NOT an oil and gas concern.

In other words, conventional wisdom that Apple can’t win is dead, and thus, it’s high time that we start to ‘think different’ about what makes for great user experiences, great products and great companies.

But first, let me shine a light on the fundamental biases that have colored Apple’s skeptics over the years:

1. Apple can’t Win: The basic premise here is that by dint of a magical asteroid hitting planet earth, Apple first stumbled upon an iPod, then an iPhone, and then an iPad. But now that the competition has figured out what they’re up to, Apple’s can’t possibly win. The conventional wisdom here is that every product is destined to become a commodity, and when it does, a company like Apple, which has built its business on creating proprietary differentiation, must lose. Honestly, this one should have been laid to rest with the other bit of conventional wisdom about consumers not buying ‘premium’ products in bad economies. If the recession taught us anything it is that consumers won’t be frivolous, which simply means that they won't buy cheap crap that doesn’t last, OR over-priced goods that don’t deliver true value. Few consider Apple products to be in the low-value category, and increasingly, Apple has learned how to deliver that value without leaving pricing overhang for the competition to outflank them, a lethal combination. Ironically, in the area where Apple most clearly lost, the PC wars, the price of winning has been death or outright market abandonment for Dell, HP, IBM and Toshiba! Meanwhile, Apple hums along with the Mac breaking all-time unit sales records and outpacing the growth of the PC industry as a whole (+26% year-over-year for the Mac vs. 0% growth).
2. Android is Inevitable: This bit of conventional wisdom is the kin of the 'Apple can’t win' mantra, and it’s driven by two fundamental bits of misunderstanding. One, Android vs. iOS is not Mac vs. Windows all over again, as so many non-thinking analysts and media types regurgitate mindlessly. Case in point, Android’s success in smartphones has hurt Apple’s iPhone business not one iota. If anything, by Android accelerating the demise of the feature phone, that catalytic event has driven more consumers, more rapidly into Apple’s arms. Further, owing to the fractured nature of Android, whatever benefits users have seen with their Android phones is NOT translating into any 'halo effect' or loyalty for that same buyer as they start contemplating tablets (where the lure of carrier subsidies do not exist). Contrast that with iOS, where entire families standardize on iPod touch, iPhone and iPad because it is a no-brainer owing to the curation of the platform, the range of both media and apps, the tight integration of services (iTunes, App Store, iBooks, iCloud) and the friction-free nature of its logistics from developer tools and distribution, to discovery, monetization and cross-pollination between devices. Put another way, if Android is winning, then Apple must feel terrific about 'losing' to the tune of 315M cumulative iOS devices, with 62M devices added during the holiday quarter.
3. Horizontal is Best: As alluded to above, it is held as gospel that the path to market success is to build just a piece of the solution, be the best at just that piece, and then look to third-parties for the rest. The sad irony is that this thinking has pushed solution providers farther and farther away from their customers, led to product experiences that are confusingly-complex at best, babble-speak at worst, and manifested in sales and support channels that are blind, deaf, dumb and stupid. Very clearly, the Apple model of innovating the big idea, building the entire solution, and then tying the entire value chain together, down to the level of retail presence, is so at odds with conventional wisdom that it simply demands that conventional wisdom change.
4. Open will Always Prevail: This little bit of double-speak has been proffered in recent years by Google who, let the record show, is open-ish in areas that they seek to commoditize, but quite happy to remain closed in the areas that they monetize (e.g., AdWords, AdSense, Search algorithms). In fact, smart folks should bucket this one with the false bit of conventional wisdom that you can’t beat free. As privacy advocates are quick to note, free is often too high a price to pay when the true price of free is someone selling YOU (and your data) as the customer to advertisers, direct marketers and the like. Hence, in the post-PC universe one envisions a world bifurcating between well-rendered, well-supported products where the customer pays for the product, but knows exactly what they’re getting; and free products, where you get what you pay for; buyer beware. In truth, customers buy outcomes: they don’t buy attributes; and open, which has many conflicting interpretations, is an attribute. Buy the full dining experience, not the raw ingredient.
5. Without Steve Jobs, Apple is toast: Like Walt Disney and Henry Ford before him, Steve Jobs is a once in a 100 years type of leader. Hence, it must also follow that once he is no longer in the picture, Apple will return to its mediocre ways. While it’s way too early to gauge the efficacy of this one, what conventional wisdom does not account for is the fact that: A) Apple (under Jobs) built a very strong, and deep management team, virtually all of whom have been indoctrinated into the Apple Way for a decade or longer; and B) With Jobs battling cancer for the last eight years of his life, the transition plan was implemented in practice on a regular basis, what with three different health-related breaks forcing the issue.

Netting it out: My hope is that in all industries, not just tech, business leaders will take the time and have the intellectual courage to reboot their sensibilities about conventional wisdom, and what they have been taught to think is the 'one right way.'

It’s time to Think Different, inasmuch as Apple has proven yet again that there is another way, and it delights customers, creates serious halo effects, leads to game-changing new products, creates institutional leverage, and makes the creator a shit-load of money.

Who wouldn't want to emulate that? Our differentiated economy depends upon it.

Closing Notes:

1. Independent Analyst Andy Zaky of Bullish Cross deserves serious props for calling this earnings blowout back in December. What I love about Andy is his analysis is crisp and clear, and unlike the folks that write 27 different position pieces, and then spotlight the two that are right, conveniently ignoring the 25 that are wrong, he writes 1-3 pieces per month. The full piece is worth a read.
2. Tim Cook has consistently asserted that the iPad and tablet market is destined to be a bigger market than the PC, noting that iPad outsold the US PC market in the recent quarter. Along those lines, he had a great comment where he noted that you can SEE how the iPad is winning in market-by-market in segments like consumer, retail, pharma, education, and financial services, and cited lots of specific use case examples to prove the point. I'm certainly seeing this playing out in my daily travels, aren't you?
3. For all of the banter about Apple’s legendary secrecy, it’s ironic that their earnings calls are so transparent relative to earnings calls at Amazon, Google and Netflix. Whereas prying metrics from the other companies is like pulling teeth, Apple seems more than happy to breakout product lines, geographies, channels, market segments and the like. You know the axiom that you can’t improve what you don’t measure. Perhaps another appropriate axiom should be that you can’t really trust what you can’t measure, and Apple is very trustworthy in this regard. No fuzzy metrics.
4. One clear change in todays call was that for the first time, Apple acknowledged that they are now in ACTIVE mode in figuring what to do with their massive pile of cash, which is approaching $100B. Nothing specific was cited, but it’s perhaps a tacit acknowledgement that they either have more cash than they know what to do with, or that they are contemplating something game-changing that will take a lot of cash (buying Comcast, DISH or DirecTV?).
5. I was heartened to hear that per store sales are rocking at Apple Retail, hitting $17.1M in the last quarter versus $12M in the year-ago quarter (up 43%), which to me suggests that the impact of halo effects are tipping into another gear, as people default to the stores and buy for their entire family, as opposed to piece meal buys just for themselves. The company tracked 110M visitors to the stores vs. 76M the year before, which translates t 22K visitors per store per week. Cited was the role of Easy Pay in enhancing the ability to handle sales of in-stock items on busy periods, and the ability to order online and pick up at retail, all of which are subtle indicators of how even in a seemingly played category like retail, Apple continues to tweak and evolve. Mind you, the holiday period is an outlier relative to the other three quarters, but Retail is a game-changer when it works, and it is working big-time for Apple. 

Related:

1. Apple's Segmentation Strategy (and the Folly of Conventional Wisdom) 
2. Five reasons iOS vs Android isn't Mac vs Windows
3. Holy Shit! Apple's Halo Effect
4. Open "ish": The meaning of open, according to Google
5. Apple just became IBM of the Post-PC Era: Thoughts on Apple’s 'Q3 Earnings Call
   
   

The Apple Education Event: Can you say Halo Effect?

Only Apple could take on the educational textbook business, an industry seemingly frozen in the 1950’s, where three gorillas dominate 90% of the market, and credibly expect to win.

Then again, only Apple has the moxie and constitution to re-think the entire textbook value chain from device to development tool; from online marketplace to bricks-and-mortar, and into the classroom.

That Apple today simultaneously launched a new interactive book authoring tool, an updated online bookstore and a new platform for creating, instigating and managing online courses is…let’s face it…so very Apple-like.

This is what they do. Build great tools that only run on the Mac, that tie into a software platform that seamlessly integrates into their three flavors of ‘iDevices’ (i.e., iPod touch, iPhone and iPad), and that feeds into an iTunes + iCloud universe, which is the axis point for Music, Movies, TV shows, Books, Apps and Personal Media, not to mention 250M credit card-backed iTunes accounts.

I mean, this is the definition of a ‘Halo Effect,’ right? Every thing that the company does reinforces everything that the company does, and every new initiative builds upon this advantage, in the process creating new advantages in terms of brand, market penetration and, most importantly, mindshare.

It’s almost Microsoft-like (back in the days when the PC ruled the roost); namely, that there is an air of inevitability, that through the Apple approach, which is all about focus, rigor, integration, leverage, derivation and optimization, that when Apple decides to attack, they are destined to win. (To be clear, though, Apple winning does not mean that everyone else must lose.)

In fact, one great irony is how until recently, the conventional wisdom was that Apple couldn’t win with this type of vertically focused approach, and that Google’s aping of the Microsoft horizontal model was destined to prevail.

Why Apple’s Approach to Textbooks is Credible

In pointing their attention at the textbook, Apple does so with several tremendous advantages. One is the simple fact that education is a core part of the company’s DNA, Apple having built their initial education beachhead in the mid-1980s with the Apple IIGS in K-12, and later on, with the Mac in higher education.

In fact, beyond Apple’s strong Mac presence in education, there are now more than 1.5 million iPads used in schools, over 20,00 education and learning apps built for the iPad, and over 1000 universities using Apple’s free online lectures archive, iTunes U.

Two is the basic truth that the ethos of a lightweight device whose battery lasts all day, that is durable, richly interactive, loaded up with compelling content, highly customizable, and equally critical, which is coveted by the ultimate end-user of the device (the iPad was the number one coveted device by teens over the holidays), is iPad all the way.

After all, it’s not like there is some other device that is even remotely in the ballpark in terms of units sold, developer adoption or customer embrace.

Three is the fact that in targeting the textbook arena, Apple was cognizant of the ‘core jobs’ that they’d need to address to be successful; namely:

1. Making it easy to create the textbooks themselves;
2. Extending the concept of a textbook to be visually elegant and meaningfully interactive;
3. Nailing the information management side by making textbooks readily searchable, and cross-linkable between the table of contents, the text body and the glossary terms;
4. Enhancing the study side of the equation by making notation and highlighting very easy, and conversion of same into study cards in a single click.

So, in the big picture, how do I read what Apple is doing? Number one, they are changing the rules of the game for a company like Amazon, which has a credible hope of competing in this space, given the success of Kindle.

Thus, by providing an enhanced ebook experience, and the tools to create it (something I suggested that Apple would do back in 2009), Apple is laying down the gauntlet.

If Amazon wants to compete, they either need to up their game by building tools and forking more heavily away from Android, or they need to focus on being the best low-end and/or single-purpose solution.

They simply are not going to succeed going toe-to-toe with Apple in segments where being best-of-breed and scalable matters.

As to Google, given the fact that the Android Market still has a confused relationship with customer billing, that the platform still does not support in-app purchasing, and the company’s seeming inability to launch a credible alternative to iTunes, the Android-based tablet business remains best suited for folks who want to surf the web while on the potty.

Moreover, in turning iTunes U into a courseware platform, Apple is basically taking the end-to-end problem of online course logistics, and solving it by enabling instructors to create full-fledged courses that incorporate a syllabus, document assignments, and which build a new type of courseware ‘bundle’ that is a composite of iBooks, Apps, Audio, Videos, Documents and iTunes U lectures.

Plus, because it’s deeply integrated with the new iBooks, a professor can reference a specific page in an assignment, and by clicking on the reference, the app will take the user to the specific content section, be it a reading passage, a video, an interactive element, or even a custom note within a reading passage.

Finally, because the courseware ‘envelope’ is bounded by a new iTunes U app, teachers can post messages and update assignments, and students can mark the assignment as completed when done.

Personally, there’s more than a little irony that the same company the rebooted the music business by unbundling the single from the CD package is now looking to reboot the education business by bundling apps and media into courseware. 

Related Notes:

• The fact that iTunes U, which was previously limited to college courses, is now going to support K-12, is a big win for underfunded school districts, not to mention, homeschoolers, a rapidly growing segment.
• iTunes U could see major uptake outside of the US since the service will be available in 123 countries. Given that iTunes U will drive ownership of both iPads and the underlying content and apps that make up a course, this initiative could end up catalyzing a lot of international growth for Apple in the months ahead.
• The new iBooks model further muddies the already fuzzy boundaries between iBooks and Book Apps. Book Apps are clearly more dynamic and functionally rich than iBooks, but they are also more expensive to produce, and equally vexing, whereas Apple has pushed to maintain higher price points on iBooks, with Book Apps, they have allowed the category to be subject to the same downward pricing pressures as ordinary apps.
• By taking a leadership role in education, and coming off as deeply earnest about this being a core part of the company’s mission, Apple gets to counter attacks that they are a walled garden and a bully with the fact that in market after market, they are the hero of the consumer. I expect them to see continued brand uplift from this.
• On the downside, serious questions have been raised by others about the EULA in iBooks Author, inasmuch as Apple is trying to handcuff the author’s ability to do what they want with the output of the tool, and potentially raising questions of who owns the 'output' that is generated by the tool, but crafted by the author. Needless to say, this is an aspect of Apple that, business logic notwithstanding, makes more than a few queasy.
• It seems clear that many of these books will be 1 GB in size or larger, suggesting that the iPad of the not too distant future is going to need a lot more storage for education-oriented users.
• What, no social? It’s hardly surprising that Apple opted not to incorporate social functions into the new iBooks, given their two left-feet in this domain, but it’s also a missed opportunity to enhance collaboration and shared learning efforts.

UPDATE: Fred Wilson is the best (i.e., I love the richness of his perspective, and how business and product strategies manifest in the real world), but it's hard to imagine him celebrating ANYTHING that Apple does, which makes his complete dismissal of Apple's efforts here unsurprising (see 'Textbook Cases').

Related:

1. Holy Shit! Apple's Halo Effect
2. Apple's Segmentation Strategy, and the Folly of Conventional Wisdom
3. Rebooting the Book: One iPad at a Time
4. Amazon's Prime Challenger to the iPad
5. It’s Time to ‘Think Different’ - Conventional Wisdom is Dead (Apple’s Q1 Earnings Call)

The Hypocrisy of Open: Google's silent treatment of Amazon Kindle Fire

For a company that touts every milestone associated with the ascent of its Android platform (as they should);

That defends its refusal to ban 'craplets,' or apps dictated by the carrier, and often unremovable;

That notes that the presence of such craplets is a plus...

“That’s the nature of open..That’s actually a feature of Android.” (Andy Rubin said it.)

That acquires one of the three leading Android hardware handset makers (Motorola), despite the obvious disadvantage that it puts the other makers who bet on its commitment to openness.

Whereas Google has in essence stated a commitment to the good, bad and ugly that its open manifesto bears, they have been deathly silent about Amazon's successful launch of the Kindle Fire Tablet, the first REAL success of an Android-derived tablet.

Now, why could that be?

Because Amazon is using Google's open medicine to create a forked, proprietary village where Google is not invited?

Where Google Search is nowhere to be found;

Where Android Market is mostly unwelcome;

Where Android's look and feel is buried;

Where Google Maps won't open;

Where the 'spirit' of Google's version of open is closed for business.

Yes, for all of the platitudes that Google has uttered about 'open this,' 'open that,' they have said zero about what Amazon is doing.

When you boil it down, either:

A) This is the nature of open - a feature of it - and they should verbally acknowledge it as such. OR

B) They should raise their hand, and say that it's not cool, and embrace their 'open-ish'-ness. 

To sit silently as they are, in the face of a successful instance of their platform, is at best ironic, and more probably, hypocritical.

But, I am 'open' to other interpretations.

Related:

1. Amazon's "Prime" Challenger to iPad
2. Open "ish": The meaning of open, according to Google
3. You say you want a revolution? It's called post-PC computing
4. Existential Threats: Google v. Apple v. Amazon - who fares best?
5. Built-to-Thrive - The Standard Bearers: Apple, Google, Amazon

Inconvenient Truths: How Adobe lost the Mobile Wars

In 2005, I launched a startup in the online video space by the name of vSocial. Powered by Adobe Flash's 'embed and spread' capabilities, our service grew virally, piggybacking on the growth of the emerging social networks, most fundamentally, MySpace.

In about 120 days from launch, it would grow from 0 to 71M+ monthly page views, and 45M+ monthly videos served.

Moreover, there is little question that the rise of YouTube (and countless other video service providers) was directly tied to the power of Flash to facilitate viral distribution.

In fact, numerous video clip sharing networks existed before Flash took hold, but for this lack of virality, never reached a tipping point.

I was sufficiently blown away by the potency of Flash that I wrote in mid-2006 that Flash was delivering on the promise of 'write-once, run-anywhere' in a way that Java never would, and had the potential to be the fuel that drove the engine of social computing.

Meanwhile, Adobe was spreading the message how by the end of 2006, tens of millions of mobile devices would be running Flash lite, giving developers the dream scenario of being able to develop on one platform that would run on PCs, Macs, the Web and Mobile devices.

There are no Shortcuts to Greatness

I set the above backdrop, as in 2006, iPhone had not yet been announced, Adobe had incredible market momentum with Flash, legions of dedicated developers, and as a developer, the ideal of NOT having to create different code bases for different platforms, while maintaining rich application and media functionality, was a no-brainer. 

Thus, IF Adobe had delivered in mobile, I and most of the developers in my circle would have enthusiastically ridden that bandwagon.

There is not a SINGLE mobile Flash Success Story

Flash-forward to the present, and the inconvenient truth is NOT that Apple blocked Adobe, but rather, that there is not a single mobile success story that Adobe can hang its hat on showing why mobile Flash is more asset than liability, let alone a viral propagating game-changer.

Think about that for a moment. There is not a SINGLE mobile Flash success story that one can point to either at the killer app level, the handset level or the carrier level. And it's not for lack of interest on the part of any of these constituencies.

You don't think that RIM desperately wants to be able to piggyback on the installed base of Flash on the desktop?

Or, that Google didn't want Flash's presence on Android to make Apple's iOS look closed and hobbled?

Or, that the legions of Flash developers didn't want to see their existing Flash apps running on mobile devices?

Or, that AT&T and Verizon didn't want a device-agnostic software play that would strengthen their hand relative to end-to-end providers like RIM and Apple?

How the fuck did this NOT happen for Adobe?

If they had even remotely executed on the mobile side in terms of portability, performance and battery life, they would likely still be in the driver's seat, and Apple would have had no choice but to capitulate and put Flash on iOS (something that every Mac owner knows would have sucked the performance 'juice' out of iOS).

Adobe didn't Bow to Apple; they FELL on their face

The narrative that Adobe management would desperately love to propagate is that, in the end, pushing Flash on mobile was blocked by Apple, and the success of iOS forced the company to shift to open standards like HTML5 (which notably, has been long-pushed by 'closed,' proprietary Apple).

The hard truth is that almost eight years after Flash variants were introduced to run on mobile devices, and five years after Adobe began pushing mobile as core to its Flash everywhere strategy, mobile Flash is a dog without any serious defenders outside of Adobe.

In other words, in the so-called war for mobile video and mobile app run-time supremacy, Adobe simply never showed up, something to keep in mind when you see ludicrous headlines, such as WSJ's 'Adobe Bows in Apple Feud.'

If anything, the company that was once known for creating brilliant tools and core technologies for creative professionals and web developers, fell prey to its own internal entropy.

In this context, shooting mobile Flash in the head hopefully frees the company both psychically and from a resource perspective to focus on building great products that enable HTML and other open web technologies to realize their potential in mobile, the desktop and beyond.

But, as others have noted, the sheer PR-speak, gobbledy-gook nature of their announcement that they are killing mobile Flash is indicative of a company that continues to confuse assembling a bunch of fatty chicken parts with the magic and alchemy of creating a living, breathing, organic free-range chicken.

That, in tandem with their failure with Mobile Flash, is the inconvenient truth the company needs to get clarity on IF they are going to turn the tide of irrelevancy in mobile.

UPDATE: Mike Chambers, Adobe’s Principal Product Manager for developer relations for the Flash Platform, has written a 'clarifications' post that in blaming Apple, seems to be confusing correlation with causality so as to ignore an inconvenient truth. After all, Adobe was like the 'Boy who Cried Wolf' for so long that when Apple came along and solved many of the problems that Flash had been known for and then Adobe STILL failed to make them pay for it on Android, RIM, etc., it was more a case of death by irrelevance than by attack. 

Related:

1. Adobe Crumbling: Is Winning Mobile Flash Fight Critical to Company’s Success?
2. RIM: Confusing a Bag of Chicken Parts with a Living, Breathing Chicken

You Say You Want a Revolution? It's Called Post-PC Computing (O'Reilly Radar)

"You say you want a revolution,
Well, you know,
We all want to change the world." — The Beatles

I loved Google engineer Steve Yegge's rant about: A) Google not grokking how to build and execute platforms; and B) How his ex-employer, Amazon, does.

First off, it bucks conventional wisdom. How could Google, the high priest of the cloud and the parent of Android, analytics and AdWords/AdSense, not be a standard-setter for platform creation?

Second, as Amazon's strategy seems to be to embrace "open" Android and use it to make a platform that's proprietary to Amazon, that's a heck of a story to watch unfold in the months ahead. Even more so, knowing that Amazon has serious platform mojo.

But mostly, I loved the piece because it underscores the granular truth about just how hard it is to execute a coherent platform strategy in the real world.

Put another way, Yegge's rant, and what it suggests about Google's and Amazon's platform readiness, provides the best insider's point of reference for appreciating how Apple has played chess to everyone's checkers in the post-PC platform wars.

Case in point, what company other than Apple could have executed something even remotely as rich and well-integrated as the simultaneous release of iOS 5, iCloud and iPhone 4S, the latter of which sold four million units in its first weekend of availability?

Let me answer that for you: No one.

Post-PC: Putting humans into the center of the computing equation

There is a truism that each wave of computing not only disrupts, but dwarfs its predecessor.

The mainframe was dwarfed by the PC, which in turn has been subordinated by the web. But now, a new kind of device is taking over. It's mobile, lightweight, simple to use, connected, has a long battery life and is a digital machine for running native apps, web browsing, playing all kinds of media, enabling game playing, taking photos and communicating.

Given its multiplicity of capabilities, it's not hard to imagine a future where post-PC devices dot every nook and cranny of the planet (an estimated 10 billion devices by 2020, according to Morgan Stanley).

Read the full piece HERE.

Related:

• 5 takeaways from Apple's iPhone 4S event
• Ruminations on the legacy of Steve Jobs
• Amazon's "Prime" Challenger to iPad
• Apple's Segmentation Strategy (and the Folly of Conventional Wisdom)

 

Head to Head on R&D: Amazon since Kindle; Apple since iPod; Google since Android

If you believe that the market is a discounter of all known information, then in my interpretation the market seems to be saying that Kindle and iPod are emblematic of companies operating on offense to create new sources of revenue; whereas Android, for its impressive market share numbers, is perceived as a defensive move to protect existing revenue sources.

Related:

• Built-to-Thrive - The Standard Bearers: Apple, Google, Amazon

Amazon's "Prime" challenger to the iPad (Post @ O'Reilly Radar)

If you haven't noticed, creating and executing mobile platform plays is really hard. Just ask HP, RIM, Nokia and Microsoft.

Even Google's Android, which made it look easy to grab dominant market share in the smartphone market, is finding it much harder to secure a footprint in the tablet market, where, let's face it, there's iPad ... and iPad.

Enter Amazon, whose forthcoming Kindle Tablet represents the clearest alternative to Apple's iPad.

Read the full post HERE.

UPDATE: Amazon announced the device today, calling it Amazon Kindle Fire, pricing it at $199, and announcing a hybrid client-cloud browser called Silk as part of the composite offering. One core takeaway from assessing Apple's and Amazon's differing approaches to finding a "wedge" in the tablet/media device market is that unlike so many companies, both get market segmentation, and how it works. Namely, that It's NOT about selling attributes (as RIM, Samsung & webOS have discovered); it's about delivering targeted outcomes.

UPDATE 2: Amazon is getting flambeed in the press for what many consider a poorly conceived, poorly executed device. On some level, this is unsurprising, inasmuch as all of the rumors were that the device was delivered by the same ODM that built the RIM PlayBook (using comparable components). All heuristics seemed to suggest that this device was the stopgap to make Christmas, and that the next device will be the real deal. On the one hand, you have Amazon's assertions that the device is breaking records (whatever that means), and analysts modeling sales in the mid single-digit millions. On the other hand, you have some truly bad PR that could damage the Kindle brand, and Amazon's cred in this realm. I think they'll weather the storm, and that this is the messy pragmatism of Bezos at work - ship the idea, fix, iterate. Still, I wouldn't want to be owning the 1.0 Kindle Fire if I couldn't cope with tossing the device when the next one comes out.

Related:

• Apple's Segmentation Strategy (and the Folly of Conventional Wisdom)
• Five quickie thoughts on Amazon's tablet computer announcement
• Head-to-Head for Ten Years: Wal-Mart, Amazon, Google and Apple

 

(CHART) Head-to-Head for Ten Years: Wal-Mart, Amazon, Google and Apple

This chart is illuminating, I think. Wal-Mart is so completely instutionalized that the present, past and future seem "priced in." It's obviously a great company, but how can you argue any differently?

Meanwhile, Google is making a ton of money, is completely dominant in search advertising, and has executed their moat strategy very effectively.

Yet, when positioned side-by-side against Amazon and Apple, it too, is far removed from tremendous "upside surprises."

Netting it out: Apple and Amazon still seem to know how to pull rabbits out of their hats, and their stocks reflect it.

It's something to think about in handicapping the next stage of the media tablet market, and the respective ecosystems that will emerge, sustain or get marginalized around same.

UPDATE:Steven Cains (@cains) notes via twitter that it's not really fair to compare $WMT due to dividends (Wal-Mart pays em; Apple, Amazon and Google don't). It's an obviously fair point, but if anything, it seems to affirm the macro narrative that Wal-Mart's got predictability (in all forms) priced in.

Microsoft, Metro and the Next Wave in Computing (4 thoughts on Windows 8)

There is a classic scene in Steve Martin's, 'The Man with Two Brains,' where Martin's character, Dr. Michael Hfuhruhurr is a bit "backed up," having not consummated his marriage with his new wife, played the then-sultry Kathleen Turner. In the scene, Turner's character, Dolores, is getting Martin all hot and bothered before spontaneously shutting him down by saying, "I can't wait until NEXT Thursday."

Ah, such mental masturbation is the paradox in processing Microsoft's forthcoming Windows 8, the demo videos and written analyses (XLNT by Andy Ihnatko) of which are just starting to proliferate the web.

On the one hand, give Microsoft props. It is an original vision in an industry where everything seems mind-numbingly derivative of the latest, greatest from Apple. The concept of tiles as a UI construct, and a service abstraction layer for creating richly federated composite applications and services is compelling, if not completely new (son of OLE? sib of ActiveX? kin of OpenDoc? cousin of CORBA? neighbor of JavaBeans?).

Plus, it's not like the ascent of the Post-PC Era actually means that people have stopped buying and using personal computers. In fact, Microsoft rightly takes great pride in the fact that their most recent OS, Windows 7, has sold over 400M licenses.

And lest we forget that every platform play is a play for the hearts and minds of developers, and once upon a time, there was no one better at courting developers and making them rich than Microsoft.

Last time I checked, the IPOs of companies built on top of the iOS and Android platforms are non-existent, suggesting that while those platforms are generating a lot of apps and hordes of developer interest, the dollars are still relatively thin, a dilemma and an opportunity that I previously blogged about (SEE: 'The iPhone, the Angry Bird and the Pink Elephant').

But, here's where we splash some cold water on the hopes, promises and dreams coming out of Redmond. Number one, while it was very common for companies a decade ago to start the advance promotional tour on new software and hardware initiatives 6-12 months in advance of actually shipping a solution, the days of "trust me" are (largely) no more.

Why? Remember Microsoft Courier, the prototype tablet that pre-dated the launch of iPad? Uh, it never launched? Oh, well remember how Flash on Android and RIM's PlayBooks was going to be the achilles heel for Apple, which blocked Flash on iOS? How about how Google Buzz was going to kill Twitter, or Facebook, or someone, anyone?  

The point is that concepts and prototypes, tightly managed demos and well-laminated videos are NOT products. Executing living, breathing products, given the myriad of technical, tools, distribution channel, legacy, installed base and corporate culture challenges is HARD. Really HARD.

It's why our bar of expectations is so low, despite the fact that the 'ingredients' of technology have gotten amazingly good.

It's why we celebrate the magistry of Instagram, when it's little more than today's version of Sugar Water.

It's why Apple is rightfully the most valuable technology company on the planet, and everyone else is playing horizontal checkers to their game of vertical chess. 

Repeat after me. Execution is hard, and Microsoft, culturally-speaking has far more instances of screwing the pooch on new product innovation than actually delivering on new product innovation.

That stated, Windows 8 is actually closer to their core competency, and their heart of hearts than just about anything they've done over the past decade, and as such, if they even just barely credibly execute, they will be relevant again.

The tech biz is relatively stagnant for lack of a serious yang to Apple's yin. Here's hoping that Microsoft can make the game interesting.

Four quick thoughts from reading the tea leaves...

1. It's IBM Redux...Sort of: I recently finshed reading 'The Design of Design' by Fred Brooks (author of 'The Mythical Man-Month'), where he chronicles the development of IBM's System/360, an effort that Brooks lead at IBM to create a scaleable architecture, OS and tools that would run on a wide-range of hardware platforms to service different verticals and price points. It was a landmark success for IBM, and is conceptually consistent with what Microsoft is trying to accomplish with WIndows 8; namely, one OS that can scale from mobile, tablets and notebooks, to desktops, servers and virtualized datacenters. The difference between then and now is that there are well-entrenched players in the segments that don't look like a PC, and Microsoft has failed constistently to find even a tiny wedge in those segments.
2. It's the Microsoft Way: The story of Microsoft prior to iPod, iPhone and iPad was of a company that anticipated and orchestrated their way through the "disruption landmine," specifically by offering customers a way to preserve their investment in time, money, programming and attention. The transitions from DOS to Windows, offline to the Internet, and Desktop to the Web were all instances where a less-strategically sound company could have lost their mojo, margins and sway of influence. That all of the struggles since then have come under Steve Ballmer suggests that a Microsoft without Bill Gates is not the same lethal killer. Nonetheless, it does make sense that Microsoft would pursue a vision that is all about making devices homogeneous so as to sustain the hegemony of Windows, whereas the Apple story is all about heterogeneity, invention and embracing disruption. Is Apple right? Is Microsoft right? If you are an enterprise, Microsoft's bread and butter, you probably are pretty excited about Windows 8, having seen how Windows 7 rescued you from Vista. More to the point, the duality of 400M Windows 7 licenses and over 200M iOS devices suggests that, despite our best efforts to reduce everything down to the "one right way," the real world is not so black and white.
3. Nothing's Free: Here, I hearken back to an axiom that a friend once told me about abstraction layers, where he noted that, "They can solve virtually all problems...except performance." His point, loosely speaking, is that every technical problem is solvable a myriad of ways, but the solution has a cost or trade-offs that can't be completely avoided. Nothing's free. As such, if Windows 8 is going to run on a myriad of devices, screen sizes, input methods and processing capabilities, the system is either going to need to be "fatter" to manage all of that complexity; OR developers are going to have to do a lot of tweaking to optimize from one device target to the next; OR, real world solutions will target a lowest common denominator to achieve the widest reach; OR developers will target a primary environment, and ignore the others. Depending on the answer, you have either a more expensive device, a tax on developers, an LCD-driven market or a bunch of fragmented niches. 
4. Developers are the Straw that Stirs the Drink: A core question remains what does the community of developers (iOS, Android, Windows, Web) do when Windows 8 finally materializes? Is it a non-event that drives developers to simply continue what they are already doing? Does it push a more rapid move to HTML 5 as the 'Switzerland' of all of these platforms? Is there an economic argument that makes one platform more compelling than another for developers? Mark my words. Developers make or break a platform play. Just ask RIM, Nokia and WebOS. Or, Apple and Google, for that matter.

Oh, and one more thing. It sucks to be Adobe Flash. First, kicked off iOS, then touted then irrelevant on Android and RIM, and now designed out of the new Windows 8 browser. "Brownie, you're doing a heck of a job," in the immortal words of George W. Bush.

Related:

1. The iPhone, the Angry Bird and the Pink Elephant
2. Apple's Segmentation Strategy (and the Folly of Conventional Wisdom)
3. Comparing Microsoft to the Collapse of Communism
4. Apple just became IBM of the Post-PC Era: Thoughts on Apple’s 'Q3 Earnings Call

On BATNAs and the Law of Unintended Consequences: Thoughts on Google’s Acquisition of Motorola Mobility

 

As I stated in my post last month on Google’s earnings call, I am a big-time fan Larry Page, and the way that he is running Google as CEO. The guy is simultaneously a chess player and a coherent communicator about WHAT Google is doing and WHY.

Towards that end, today’s move to acquire Motorola Mobility is fundamentally a recognition that if Google doesn’t establish a serious defensive position with respect to its patent portfolio 'surround' on Android, it risks the proverbial 'death by a thousand cuts.'

In other words, the writing is already on the wall (and in lots of court documents) that between Oracle, Microsoft and Apple, the 'fig leaf' of plausible hope that Android's handset OEMs can embrace the mobile/post-pc software ecosystem funded by Google, and freely reap the rewards, must now be seen as nakedly untrue.

Henry Blodget of Business Insider puts it best when he says about the deal that, “It seems safe to say that, six months ago, investors and partners did not realize that Google was going to have to shell out $13 billion to ‘defend’ Android, let alone start competing with its hardware partners.”

Simply put, the best lipstick that you can put on this pig of a deal (more on that in a bit), and the reason that HTC, Samsung, LG, et al are giving their boilerplate support is that it answers a core question of any ecosystem play; namely, how clean is the intellectual property provided by the ecosystem operator, and how committed is that operator to protecting its licensees.

Is HTC happy about today’s deal, knowing that Google now has 'first cousins' whose sole reason for being is to sell hardware devices that directly compete with them?

Hell no, but they are immediately less happy about having their nuts squeezed by Microsoft, the specter of Apple stepping on their wind pipes, and Oracle pouring hot oil on them.

Compromised survival is better than risk of death almost any day, and that risk was long past the point of being merely 'theoretical.'

The Best Alternative to No Agreement (BATNA)

Thus, Google’s acquisition of Motorola should be seen as the best alternative to no agreements (BATNA) being made by Google to strengthen its IP portfolio.

It should also being seen as a formal acknowledgement that the question of IP purity is no longer a mere border conflict in the pursuit of Android-everywhere, but rather, a prolonged war out in the open.

Plus, to be clear, in the chess scheme game of things, it’s not like HTC, Samsung or LG have anywhere else to go. They have played that card by addicting themselves to Android, and as such, are effectively part of Google’s concubine.

Moreover, let’s be brutally honest. If Google really wanted to get into the hardware business, does anyone consider Motorola state-of-the-art? On any level? No.

Sure, in the abstract, you can connect the dots to mobile phones, tablet devices and set-top boxes, and conclude that there are other synergies in this deal, but to get them, you need to assume a second-order of corporate integration that Google is wise (and likely) to avoid.

After all, merging Motorola’s 19K employees with Google’s 29K employees is a soupy broth that, for cultural reasons, I am highly doubtful that Google wants to make.

The Law of Unintended Consequences

Netting all of this out, I can take Google at their word that this acquisition was a defensive move – although a note aside, that obviously doesn’t say a whole heck of a lot about the tenure of Sanjay Jha (Google Mobility's CEO) in terms of creating great products and sustainable value at Motorola. Would-be hardware OEMS counting on Android to save your hide, you might take note of that fact.

Moreover, I can see why HTC, Samsung and LG will hold their noses and support this deal, as this is the price you pay when you give up software-differentiation. The 'high' is great, but the hangover kinda sucks.

Similarly, today’s deal signals yet another reality check in the sanctimonious positioning of Google as operating according to some higher moral code. They are as ruthless as any profit-bound company, and all such commentaries about open-ness should be seen as marketing spin going forward. 

I will grant you that Google is better than most, but never forget that Google only seeks to fully open what they desire to commoditize, NOT what they aspire to monetize. Pontifications on open-ness are like those on beauty. It is in the eye of the beholder.

Similarly, this is one of those moves that feels like a big-company action, which is as it should be. Google is a big company.

But then again, in positioning itself with the best and brightest as the place to work, this move again signals an end of innocence, something that both recruits AND growth investors will take note of moving forward.

Now, while you might counter that peers like Apple or Facebook are hardly innocents in terms of their own ethos, note that this has never the positioning of these companies.

You go to Apple to build the insanely great, not to be warm and fuzzy, and sanctimonious. You go to Facebook to build the ubiquitous social utility, and join an hyper-aggressive culture.

For Apple, this deal opens the door for them to further assert that they were 'right' about the endemic goodness of deeply integrating hardware, software, service, marketplace and tools into a complete solution, and that Google 'blinked.'

Don't get me wrong. I don't believe that Google blinked (except on patents), but truth is the first victim of wars, and this will offer yet another salvo in the mobile/post-pc wars.

Today also opens the door to Microsoft potentially coming up with a new calculus (economics, positioning) to establishing a foothold with Windows Mobile 7, not to mention HP with WebOS. Will they? I am dubious, but they should (try).

Finally, it’s easy to see how this deal distracts Google ever so slightly in finding some mojo and momentum on the tablet front.

In a segment where there is no obvious catalyst to buy an Android-based tablet (e.g., the carrier push factor in mobile), and where Apple is running away from the competition, the time that Andy Rubin and team will be spending assuaging partners in the coming months, is time lost co-creating with them.

Bottom Line: Google needed to do this deal, I guess, and good for them for being decisive about it, but this was no rope-a-dope, as Dan Lyons dorkily suggests. It was simply better than doing nothing, and waking up one morning to find Motorola’s patent portfolio in the hands of Microsoft.

UPDATE: John Gruber of Daring Fireball has a delicious rant that is one part call out on Dan Lyons, and one part compilation of the various write-ups from the course of the day. As always, a fun read. 

UPDATE 2: Well that didn't take long. Bloomberg is reporting that Google is replacing Motorola Mobility CEO, Sanjay Jha, with Dennis Woodside, who led Google’s ad sales in the Americas before overseeing the merger from the Google side. As noted in my original piece, Google's dismissal of the strategic value of Motorola's hardware business (at the time of the deal announcement) spoke volumes about Jha's tenure. At the same time, the move to replace him with a Google insider versus an MMI member suggests that the combined companies will hardly be arms-length from one another. More fodder for the wake-up call aspect of this for Google's third-party hardware OEMs, not to mention the increased probability of "unintended consequences" alluded to in the piece.

Related Posts:

1. Quick Take on Google Earnings Call: Put me in the bucket of being a Larry Page 'fan' 
2. Apple's segmentation strategy, and the folly of conventional wisdom
3. Apple just became IBM of the Post-PC Era: Thoughts on Apple’s 'Q3 Earnings Call
   
   

Apple just became IBM of the Post-PC Era: Thoughts on Apple’s 'Q3 Earnings Call

 

 

"What would I do? I'd shut it (Apple) down and give the money back to the shareholders." – Michael Dell

“Amateur hour is over.” – RIM

“No one ever got fired for buying IBM.” – IT Buyer

With Apple’s stock surging towards $400 in after-hours trading, let me just say that I guess all of those 'Apple can't win' naysayers should have a cold, hard one with Michael Dell about now.

"Not open enough." "Too vertical." "It’s Windows versus Mac all over again." "The iPad is just a really big iPod touch." As if that last one is even an insult.

If anything, we are seeing the last vestiges of Apple being undervalued and under-appreciated - both as a stock and as an entrepreneurial institution - and the realization/capitulation that the company is the second coming of IBM, as in "No one ever got fired for buying IBM."

The good news in that is that the company has earned it through laser-like focus, brutally precise execution and a coordinated balance between short-term goals and tactics, and long-term planning.

There just is no other comparable in terms of this level of innovation, diversification, market penetration, corporate culture and eye on the money-making machine.

As such, like IBM in the good old days, companies big and small will want to gain access to some of the Apple magic, investors will pad their portfolios, and who knows, the next great job creation stimulus might come out of the elixir that engaging with Apple brings forth.

All that said, I like my Apple with a bit of a chip on its shoulder, surrounded by legions of skeptics, confidently, but with a bit of a bruised ego, needing to show 'em what they can't see from the highest heights.

I need good, scary competitors keeping the company hungry and lean of mind, and fear that in absence of same, sloth, arrogance and the easy path might water down true greatness.

To be clear, though, I heard zero in today's earnings call that gives me cause for pause, as these blowout numbers and jaw-dropping highlights suggest:

1. The Law of Big Numbers? Yeah right: Apple posted $28.57B in revenues for the quarter, an 82% year-over-year bump. But the company has never been one to confuse market share or even raw sales with profits and cash, and this quarter was no different. In terms of profits, Apple netted $7.31B for the quarter. That means that profit growth (up 125%) outpaced revenue growth. Imagine a quarter that drops $10.4 billion in new cash reserves (up 131% year-over-year), and you have a picture of Apple, which now has a tidy hoard of $76.2 billion. Oh, and they actually grew gross margins in accomplishing this (41.7% vs. 39.1% a year ago), spotlighting the single-mindedness of their assault. Good thing the board didn’t listen to Dell when they had the chance. I jest.
2. Victory over the Tyranny of the "One Right Way": One knock on Apple is that they are trying to do too much, and be too integrated, which is a false dichotomy in the same way that Apple winning doesn’t mean that Google has to lose, or even that the King of Old PC, Microsoft, will die anytime soon. Strategy that is well-planned and even better orchestrated is simply magical, and validates itself through measurable, repeated results. Were Apple to do nothing more than sell 20.34M iPhones in the quarter (representing 142% year-over-year growth, double the 67% growth rate of IDCs smartphone segment) it would warrant Lion-izing Jobs & Co (pun intended - it ships tomorrow). But it’s beyond shocking to see that on top of that performance they took the iPad, a product that did not even exist five quarters ago, a tweener device, and one for which there remains no viable competing solution, and sold 9.25M units in the quarter - a whopping 183% increase year-over year. Apple management was magnanimous in stating plainly that they literally sold every single iPad that they had to sell. Put another way, the iPad is now selling almost 2.5X the number of Macs sold quarterly in just its fifth quarter of life. Imagine the kid in diapers down the block, storming onto the court, and whupping LeBron James without breaking a sweat. It's that astounding. I am sure some analyst will find a dark cloud in Apple's "disappointing" Mac and iPod numbers, since the former is only growing 14% year-over-year and the latter actually contracted 20% year-over-year, but this is akin to a parent with a family full of prodigies lamenting that one of her kids was merely top of class, and not top of the world. Mac, after all, still sold 3.95M units to outpace the growth of the larger PC business by 5X, the 21^st consecutive quarter its growth has outpaced the larger PC market. And the iPod, where Apple still commands a 70% market share, is somewhat of a hodge-podge. After all, almost half of the 7.5M devices sold were the non-iPod touch variety, and thus, a long-term dead end on the street of smart devices. Meanwhile, the other half - iPod touch - is subsuming the legacy iPods on one side, and being subsumed by the god-device iPhone and the big daddy iPad on the other. 
3. When You Look Like the Safe Choice, You’re IBM: One hard takeaway throughout the call is how the one-two punch of iPhone and iPad, when combined with everything else that Apple has done right (Apple Retail, iOS unity, the SDK play, iTunes) has made Apple look like the "safe choice" in Post-PC computing. Consider emerging markets, like Asia-Pac where the iPhone business quadrupled year-over-year. Even the Mac is up 57% year-over-year there. Similarly, China, Mexico, Brazil and the Middle East were cited by Apple management as the mega-drivers of iPhone growth in the quarter.  And if you think that China is a bellwether, consider this. It generated $3.8B for Apple in the quarter, constituting 13% of Apple’s revenue. Moreover, in the K-12 educational segment, typically a laggard in new technology adoption, Apple sold more iPads than Macs in the most recent quarter. You wrap hard numbers like this with 'soft data' of iPhone and iPad pilots in the enterprise (91% and 86% of the Fortune 500, respectively, about half that amount in Global 500 companies), and the picture is clear. Apple looks like the safe choice, which history suggests has a way of becoming a self-fulfilling prophecy, as both IBM and Microsoft proved before them.
4. Masters of their (Channel) Domain: Now what’s scary in all of this is that the company is hardly at their apex from a market penetration standpoint. First and foremost, the almighty Apple Retail halo-effect creation engine, which no other device vendor has, is a business that is humming along with 36% year-over-year revenue growth, but equally important, one where Apple is seeing 20% Y-O-Y growth at the individual store level (now at $10.8M per store). Moreover, I took note of the assertion by Apple COO Tim Cook that the company is ready to move from “pilot stage” to “adoption phase” in the enterprise, something they plan to do vis-à-vis the dual leverage of: A) Piggybacking off of carrier’s sales forces that target enterprises to sell them voice and data solutions (where RIM’s inattention to their core competency, and obsession with chasing consumers will be business school fodder for years to come); and B) Building overlay sales organizations that co-sell with other enterprise solution providers (although details were fuzzy at best, and no mention was made to their recent B2B licensing programs). When you surround this gauntlet with an additional existing 115K outlets for Apple products, another 228 carriers (in 105 countries), and of course, the 225M account strong iTunes ecosystem (all backed by credit cards), and you’ve got something that is, dare I say, borg-like.

A side observation in trying to digest all of these numbers is that for all of the puffery about Apple being a "closed" company, if you compare their metrics breakouts in earnings calls to a more "open" company like Google, it’s laughable. Google, like a lot of companies, gives the flyover view, whereas Apple allows the interested to get fairly surgical in their understanding of Apple’s business.

I could go on and one, but the key point is..."Holy Crap!" And you can quote me on that. :-)

Related Posts

1. Apple's Segmentation Strategy (and the Folly of Conventional Wisdom)
2. Five reasons iPhone vs Android isn't Mac vs Windows
3. Holy Sh-t! Apple's Halo Effect
4. Is the enterprise dead as a tablet strategy?
5. Apple announces 'Custom B2B Apps for Business' Program...but there's a catch

 

Five quickie thoughts on Amazon's tablet computer announcement

The Wall Street Journal is reporting today that Amazon will be releasing a tablet computing device by October.

Some quickie thoughts on this:

1. Amazon is the only company with the media relationships AND comparably-sized billing relationship with consumers to directly challenge Apple. No one else has either of these elements, let alone both of them. Not Google, not HP, RIM, Microsoft, Facebook etc.
2. In the consumer realm, Hollywood-style media (music, movies, TV shows, books) is such a core "job" of a tablet device, that NOT having an iTunes equivalent is analogous to a missing leg on a table. It's pretty integral, unless wobbly is okay with you.
3. Arguably, Amazon understands product discovery and recommendation even better than Apple does, and certainly groks the transaction and distribution logistics of that equation at least comparably well.
4. What's interesting about this one, is that while the spotlight is on Amazon and Apple as competitors, Amazon is also very well-positioned to outflank Google's play with Android. How? By better leveraging their installed base with Kindle; by building both tight integration with the Amazon Android App store and with Amazon Cloud Services; by better harnessing their recommendation services on both digital and physical goods (e.g., "Looking to buy a screwdriver? Constructor App will help you with construction project budgeting."); and of course, the aforementioned billing relationship, which facilitates one click purchases.
5. For developers, the market needs an integrated alternative to iOS, if for no other reason than to keep Apple honest, and also because not enough developers are making serious coin in either the iOS or Android model. Amazon, if they get their act together, can seriously court developers on the premise of their success with their Cloud Services offerings, not to mention the various hybrid programs they have proven out over the years for smaller retailers to plug into the Amazon Marketplace. Heck, there is even a place for an affiliate model in all of this to make app discovery more viral. Put another way, there are legions of Android developers who like the Android model, but don't like having to support the compatibility matrix from hell on the device front, not to mention the fact that the Google model is all about free, which is not exactly music to the ears of the typical developer. 

What gets me most excited about this is the fact that in Amazon and Bezos, you have a company that is clearly focused on execution.

Case in point, on both the product and M&A front, they have had very few crash and burn outcomes. This is a company that is disciplined and durable such that when they launch an effort they keep iterating until they get it right...and then they make it better.

Plus, as a developer, they are focused on making stuff that directly makes money when it sells. Not a trick subsidized offering to sell their real product, be it advertising, customer's data, etc.

Finally, it's hard not to root for a vendor whose approach inspires the kind of loyalty that one associates with...Apple (and Google).

RELATED:

1. The iPhone, the Angry Bird and the Pink Elephant (O'Reilly Radar)
2. Built-to-Thrive: The Standard Bearers: Apple, Google, Amazon
3. Google Android: on Inevitability, the Dawn of Mobile, and the Missing Leg (O'Reilly Radar)