The Network Garden - Mark Sigal's Blog

Why the mobile web vs. mobile apps debate is a false dichotomy (GigaOM)

The mobile web versus mobile native “grudge match” rages on, with over 300 comments to Super VC Fred Wilson’s post on whether now is the time to invest in mobile web apps (and services) over mobile native ones.

But the arguments presented in favor of the mobile web over mobile native represent a false dichotomy. Simply put, there is no universal truth in the mobile web vs. mobile native debate, and no “one right way,” despite what the pontificators would have you believe.

The argument in favor of mobile web goes like this: The web is open, ubiquitous, requires no special software, is globally searchable and algorithmically discoverable. As such, it is agile, extensible and readily manageable. Plus, there are lots of proven models for development, discovery, distribution and monetization. And, of course, mobile web development offers a higher degree of symmetry to PC browser-based web development than mobile native app development does.

The argument is favor of mobile native goes like this: There are over 400 million iOS devices and over 500 million Android devices, representing almost 1 billion devices worldwide. In the case of iOS, Apple has built a well-managed development, distribution and monetization platform that has yielded tremendous innovation and user engagement in areas ranging from photography to gaming, social networking, entertainment, education, music and other rich media.

On some level, the argument comes down to “good enough” and “universal” vs. the “richest possible experience” on the device type that is subsuming the PC.

Read the full article at GigaOM.

Related:

1. The iPhone, the Angry Bird and the Pink Elephant (O'Reilly)
2. The short 'half-life' of apps and the App Store 
3. OMG, WTF is going on with Apple Stock?

Post-PC Dividend: Average household spend on Apple products was $444

Oh, and that number has grown prodigiously since 2007:

In 2011, the average amount U.S. households spent on Apple products was $444, according to Morgan Stanley analyst Katy Huberty. That figure has been rising smartly every year. In 2010 it was $295. Back in 2007, it was only $150.

(via Daring Fireball)

Tim Cook on the relationship between collaboration and integration to Apple's success

This Businessweek interview with Apple CEO Tim Cook is an excellent read, but I really nodded when Cook talked about Apple's unparalleled level of integration and the role that collaboration plays in their culture and organizational structure, inasmuch as it points a bow around the core thesis behind my recent GigaOM article on the age of indivisibility and integrated systems design. Here's Cook:

"You look at what we are great at. There are many things. But the one thing we do, which I think no one else does, is integrate hardware, software and services in such a way that most consumers begin to not differentiate anymore. They just care that the experience is fantastic. So how do we keep doing that and keep taking it to an even higher level? You have to be an A-plus at collaboration."

Sounds sooo simple, yet just a tiny handful of companies on the planet have found a way to do this across products segments, product lifecycles, and do so at scale -- over a multi-year period. That's the magic of Apple.

Read the full Cook interview HERE.

Read my GigaOM piece HERE.

OMG, WTF is going on with Apple Stock?

Apple stock is down 25% since late September, and the pundits, naysayers and Apple haters are all saying that if there is this much antipathy for Apple stock, maybe the smart money knows something.

The narrative reasoning behind this is straightforward, and it goes like this. One year after Steve Jobs' death, Apple's magic is gone. Siri sucks. Maps suck. iOS 6 is buggy. There is no more iPod, iPhone or iPad like 'breakthrough device' in the offing. Tim Cook isn't Steve Jobs-like in keeping his management team moving in lock-step. The Apple Retail hire was an obvious cultural miss-fit from day one.

Finally, the competitive offerings are getting 'good enough,' meaning: A) Margins are destined to be under pressure; and B) The flow of devices into customers hands, and cash into Apple's coffers, are poised for disruption.

First off, let me say that in early September I predicted this EXACT backlash to play out following the iPhone 5 announcement (see: 'Get ready for the Apple + iPhone backlash').

You can read the piece to gauge the many reasons why market indigestion was a given, but that doesn't address the larger question of whether Apple has really lost its mojo, or not.

I have three thoughts on this one:

1. Stock Value: Apple is trading at a trailing price-to-earnings (PE) ratio of <12, and a forward PE of 9. By contrast, Google, which missed its latest earnings, is trading at a trailing PE of 20, and a forward PE of 14. Unless you believe that Apple is worth 60% of Google, it doesn't take a rocket scientist to conclude that something is amiss. In fact, the always-excellent Andy Zaky at Bullish Cross has done detailed analysis showing why at no point in recent history has Google been a better investment than Apple (see: 'Buy Google or Apple? The Answer is Simple'). Similarly, I wrote a piece some time back arguing that Apple is a "Gold Standard" investment, reserved for category leaders that consistently out-execute the competition; the point being that Apple's peers are not HP and Microsoft, but rather, Amazon, Google, Disney, Nike, McDonald's, Southwest Airlines, Berkshire Hathaway, Proctor & Gamble and Coca Cola. So what are those guys trading at? Factoring out Amazon, which trades at a wacky PE of 2,679, the averaged PE of those companies is 17.32. Again, Apple is trading at a PE that is 68% of the value of the Gold Standard companies (see: 'What is Apple Worth? The 'Gold Standard' Thesis'). The key point here is that whether you believe, as Andy Zaky argues, that Apple is a $1,000 stock in the next year or not, you should have conviction that Apple's stock values are out of whack.
2. This Time is Different: Uh, no. Actually as Horace Dediu at Asymco shows, Apple has had multiple of these types of valuation contractions over the years, as the market is fairly simplistic, dumb and reactive when it comes to the Apple narrative. Also, know that Q4 is routinely their weakest quarter since it's the wedge between back to school and holiday, and typically the new iPhone launches late in the quarter, meaning that revenue does not pop until Q1, the holiday quarter. Analysts always miss this, and in fact, last year the stock dropped 13% based on the same narrative. Just as last year, the miss was analyst numbers, not Apple's, something that I noted then. In fact, following last year's Q4 disappointment + end of year tax selling through to their Q1 earnings call (end of February), the stock went up 44%. If it did something comparable, the stock would trade at $750.
3. Apple and its Ecosystem: The other big picture is whether there are systemic issues fundamentally breaking Apple. Corporate culture is certainly a risk, and I am NOT betting that the company has another breakout iPad or iPhone type of device in 2013 (color me dubious on a game-changing Apple TV, which I blogged about HERE). Then again, they don't have to, as they are not priced richly, and there are a lot of legs left in iPhone and iPad in my opinion. Margins? Well, the margin story never ends, and yes, iPad mini tightens margins a bit, but then again, Apple's stock price assumes a margin collapse. What happens when margins tighten, but it's minimal? Is Apple losing business? Are they losing profits? Are they failing to generate cash? The answer is obvious - NO - so it really comes down to your intestinal fortitude and cash urgency as an investor. 

Obviously, I know no secrets, but if I were you, I would embrace the Warren Buffett-ism: Be greedy when others are fearful, and fearful when others are greedy.

The market is acting fearful. Be greedy.

UPDATE: I thought that Tim Cook's comments on the relationship between integration and collaboration (in BusinessWeek interview), and how the translates to uniquely Apple execution was instructive. There are a small handful of companies on the plan that have the DNA to do this.

Related Posts:

1. What is Apple Worth: The 'Gold Standard' Thesis
2. Get ready for the Apple + iPhone backlash
3. Why the Rumors About Apple Building a Television are Wrong (O'Reilly)

 

Apple Event: It's Time for Evolution + Keeping Foot on the Pedal

This was a really excellent and interesting event, showing how Apple sees itself post Steve Jobs, and the role of different voices within the compay.

There was the basic message that, we are an execution machine. And this was BEFORE Apple actually got around to what they were announcing.

Then there was the usual table setting around a converged Mac + iOS Universe:

• 3M iPods sold since launch (includes Shuffle Nano, Touch)
• 200M devices running iOS 6
• 300B iMessages sent this year (28K per second)
• 160M Game center accounts
• Shared photo streams (I love this feature): 70M photos shared
• 700K apps (275K iPad apps)
• 35B app downloads
• Mac outgrowing the PC six years straight (#1 desktop + #1 notebook in US)

Evolutionary thinking

But, factoids aside, Apple is a company that can hang their hat on visionary thinking, great design and a strong execution culture focused on the customer and rapid evolution.

I loved Phil Schiller's sermon on how iMac's evolution is representative of how Apple embraces, then iterates, markets. Not a bad lead-in for announcing the next generation of the incredibly cool iMac.

It's fascinating to see the role of polymorphism within the company. Consider the Retina screen, which now serves two different MacBooks Pro segments, the iPhone, iPod touch and iPad.

Look at the evolving relationship between iOS and OSX and the natural symmetries between iCloud, iMessages and iTunes.

Case in point, it seems that the catalyst for the new iBooks App to gain continuous scroll is to better serve iPad mini users. 

I love how Apple is baking sharing into everything, and books are a natural for this.

I am happy to see them supporting iBooks Author, as I think that there is yet to be a desktop publishing equivalent for the post pc era. 

I would be remiss if I failed to mention the Fusion Drive (marries HDD and Flash) in the new iMac. If it works, it could really up the user experience.

Controlling all facets of the system, as Apple does, is what can make such a robust storage service truly standout.

iPad mini AND iPad 4!?

This was a shocker and also makes a lot of sense. Moreover, it sets up an interesting inflection, which I will get to.

Apple has now sold 100M iPads in just 2.5 years, which is faster than the rise of iPhone. iPad accounts for over 90% of the web traffic from tablets. Apple is very well positioned in education, which happens to be where the next generation is growing up.

When Tim Cook said, "We are not taking our foot off the gas," he wasn't kidding. It was a two-fecta. A new form-factor in iPad mini, and the newest iPad in time for Christmas.

This says something since heretofore, there was the March event to announce the new iPad.

To give that up (they have to, right?), they must: A) Recognize that the market is at a point of maturity and imminent competition (maybe); B) Be factoring that the competition aims for the holidays to release their newest gear, and not want to disappoint the 'new-seeking' customer; and C) Figure that since Apple's holiday quarter is generally nuts, why NOT swing for the fences?

Some takeaways:

1. iPad is 9.7" vs. the iPad mini at 7.9" diagonal. But since both devices share the same pixel count (1024 x 768) all software for iPad and iPad mini will work without modifications. As a developer, I can tell you that this is huge. We gained another BIG segment for free.
2. Apple gave Android a bunch of air time in the early portions of the call. As someone on Twitter noted, that doesn’t feel confident.
3. iPad mini is the first iPad that you can operate using one hand. Logical segments: education; women with handbags; porn. I jest.
4. I was a bit surprised that they didn't price the mini below $300 ($299). That seems to be a logical segmentation point for the market, right? Why leave a wedge for Android? Noneteless, this will kill during the holidays. Not Retina, though.
5. The fact that Apple killed the spring iPad event, to me that means Apple is planning to announce a NEW product that they feel is worthy of that calendar spot. Otherwise, they will disappoint the market, who has been spoiled to expect a spring event, g-d dammit!

Related:

1. If Apple is all about the devices, Amazon is all about the services (GigaOM)
2. HP, Dell and the Paradox of the Disrupted (GigaOM)
3. Apple vs. Google: Lessons from Bill Gates' playbook (GigaOM)

 

Pattern Recognition: Maps Mea Culpa; Marketplaces; Lesser Evils; Particularity

My goal is to write one 'Pattern Recognition' a week. Just the top 3-4 stories that stayed under my skin. Here's what stuck this week:

1. Maps Mea Culpa: Unless you were trapped in a bomb shelter all day, you probably read Apple CEO Tim Cook's 'owning' of the fact that the new Maps in iOS 6 is a poor replacement to the old Maps in iOS 5 (and before). First off, that's the textbook right way you do it. Accept full responsibility, without caveat, something that I blogged about regarding brands and trust. For good measure, Apple even created an App Store section for Maps Alternatives (meh). Second, as I blogged about a couple of weeks back, almost regardless of what Apple did in launching iOS 6 and iPhone 5, a backlash was inevitable. This just provided the match. Third, know this; while Apple was not perfect in the time of Steve (see Me.com, Ping, AirDrop, AntennaGate), this time is different. Those instances were new products, new features or instances that touched a tiny subset of users. Maps is a CORE feature, and this is the first time that Apple has taken users BACKWARDS based upon business goals conflicting with consumers' best interest. Consumers trust Apple because they have repeatedly protected consumers interests and by ensuring that the solution would always get better. In this context, sideways or backwards is not acceptable. COOK SPEAKS: "At Apple, we strive to make world-class products that deliver the best experience possible to our customers. With the launch of our new Maps last week, we fell short on this commitment. We are extremely sorry for the frustration this has caused our customers and we are doing everything we can to make Maps better."
2. Mobile’s Hidden Opportunity - Marketplaces: I love the evolution taken place in marketplace models (see: Kickstarter, 99Designs, Etsy). In fact, I blogged about the topic recently for O'Reilly with respect to my own experiences using 99Designs for design of a new logo; it's an article that pissed off a bunch of designers (see the comments section). This piece by Matt Cohler frames the role of mobile, and codifies what models are most interesting. MONEY SHOT: "The best opportunities for creating new marketplaces (or reshaping old ones) via mobile will be in markets where supply is inherently constrained and there are no viable (similarly priced) substitutes for that supply. Aggregate that scarce supply and the demand will follow. This playbook isn’t new to mobile. Mobile just makes it a whole lot easier."
3. The Lesser of Two Evils: A friend of mine noted that in recent times, elections seem to come down to a choice between the lesser of two evils. He notes, "If you play that one out, at the end, all that you are left with is evil." I thought about this in reading Matt Taibbi's excellent article, 'This Presidential Race Should Never Have Been This Close,' which forked me to a great article by Frank Bruni of the New York Times. Bruni suggests that the electoral process systematically generates (increasingly) shitty candidates. Regardless, of which candidate you are rooting for, the current scenario is pretty sad. I will, however, express a bit of schadenfreude for Mitt Romney, who if he had even one iota of intellectual honesty or personal humanity, and simply ran on his record and history, probably would have been electible by people like me. Instead, the '47 Percent' ads simply kill for the simple reason that it's a case of a man in his own words confirming how most people believe he thinks. JUST TRY SHRUGGING THIS OFF: "If this race had even one guy running in it who didn't take money from all the usual quarters and actually represented the economic interests of ordinary people, it wouldn't be close. It shouldn't be close. If one percent of the country controls forty percent of the country's wealth – and that trend is moving rapidly in the direction of more inequality with each successive year – what kind of split should we have, given that at least one of the candidates enthusiastically and unapologetically represents the interests of that one percent?"
4. Spray vs. Solve; AKA The Power of the Particular: In the movie 'My Big Fat Greek Wedding' there is a joke about Nia Vardalos' dad. He seems to think that Windex is a magic tonic for which the answer to every challenge is to spray some Windex on it; "it" being EVERYTHING. This is emblematic of what ails so much of tech where the ethos is to "spray," be it 'speeds and feeds,' lines of business, social, mobile, media, real-time, analytics, etc. when the answer instead is to "SOLVE." This is why I am such an acolyte of the Apple model (see 'HP, Dell and the Paradox of the Disrupted'). David Brooks ruminates on the outcomes that such particularity yields (''The Power of the Particular)'. EXCERPT: "It makes you appreciate the tremendous power of particularity. If your identity is formed by hard boundaries, if you come from a specific place, if you embody a distinct musical tradition, if your concerns are expressed through a specific paracosm, you are going to have more depth and definition than you are if you grew up in the far-flung networks of pluralism and eclecticism, surfing from one spot to the next, sampling one style then the next, your identity formed by soft boundaries, or none at all."

Amazon 'kindles' the competitive fire: “We’re the elephant in the room” (GigaOM)

“Here endeth the lesson.” —Jim Malone, “The Untouchables”

There is a great moment in the movie “The Untouchables,” when street-smart cop Jim Malone (played by Sean Connery) explains to federal agent Elliot Ness (played by Kevin Costner) the laws of the urban jungle that was 1920s Chicago, culminating his sermon by saying, “Here endeth the lesson.”

In his own way, Amazon CEO Jeff Bezos delivered a similar message today about the laws of the post-PC jungle when he unveiled the next generation of all things Kindle. In doing so, he accomplished two things.

One, he firmly anchored the precept that other than Apple, Amazon is the elephant in the room when it comes to tablet and media devices, aka the post-PC universe.

After all, there is no company out there (other than Apple) that can so seamlessly combine ecommerce, digital media, publishing, cloud computing and hardware know-how — and do so at wafer-thin margins.

Read the full post at GigaOM by clicking HERE.

Related:

1. Amazon's "Prime" challenger to the iPad (O'Reilly)
2. You say you want a revolution? It's called post-PC computing
3. Built-to-Thrive: The Standard Bearers: Apple, Google, Amazon
4. Existential Threats: Google v. Apple v. Amazon - who fares best?

Pattern Recognition: Apple Vindicated; Retail Schadenfreude; Disruptive Paradox

My goal is to write one 'Pattern Recognition' a week. Just the top 3-4 stories that stayed under my skin. Here's what stuck this week:

1. Apple Vindicated: What protection does the industry's innovator merit against shameless knock-off artists? Does anyone really want to argue that what Apple has created is NOT uniquely proprietrary? That it merits less consideration than a Gucci bag or a new erection pill? Yes, I get it. Our patent laws suck, and there are ridiculous numbers of frivolous lawsuits, but Apple v. Samsung is not one of them. Feel free to pick apart this aspect or that of the IP that Apple is claiming, but know this. Apple has built proprietary differentiation, and by simple sniff test logic, they've earned the right to protection. It's not a god-given right that I can enter your house, eat from your refrigerator and not pay for it. To me, there is justice in this ruling; and vindication for The Legacy of Steve Jobs. No less, it's one year to the day from when he resigned as CEO of Apple. Talk about tributes!
2. Retail Schadenfreude: I love retail. My first career was in retail real estate. My brother is a shopping center developer. I can wax poetic about the magistry of Cheesecake Factory. But, I also love Amazon, and feel that they are a great retailer, and consistent innovator. Obviously, bricks and mortar has a place, wherever it can create differentiation. Otherwise, it will get Amazon'd on price. That's why I have little pity for Staples, just as I had little pity for Circuit City or CompUSA before that. These are businesses that either never had heart (CompUSA and Circuit City), or simply lost it (Staples); who killed the Mom and Pop just because they could. Now, Amazon is killing the Big Box. Karma's a bitch, isn't it? 
3. The Disruptive Paradox: In the movie 'Joe Strummer: The Future Is Unwritten,' a documentary about the life of the founder of The Clash, there is a great line uttered by Bono talking about the vibe in England and Dublin in the 70s. Bono says, "I was frightened...I was excited." That sentiment is applicable to our present time. Many, many industries in a deeply screwed mode. A completely unhealthy, ineffectual political system. Oh, and institutionalized conflicts of interests between Big Business and the government apparatus (I am intentionally distiguishing between Policy Creation and Policy Adminstration). Yet, something HAS to give. The patient will not simply get better with time. You can look at this pessimistically, and with cynicism. Or, you can be a little scared, but also be excited. Because we are at the end of a cycle, and approaching the beginning of a new one. It's post-global, post-digital, and post-commoditization. The new cycle is about making the inefficient more efficient, and creating differentiation where commodization exists. This is the 'stop the film and discuss' portion of the program. It stands to reason that some companies will figure this one out, providing the essential case studies for many others to get to the higher ground of re-invention. Be scared. But also be excited.

Pattern Recognition: Twitter's Betrayal; Apple's Set-Top Box; 30 Years of Bull

My goal is to write one 'Pattern Recognition' a week. Just the top 3-4 stories that stayed under my skin. Here's what stuck this week:

1. Twitter's Betrayal: There is no sugar-coated way to put what Twitter did to its developer ecosystem this week (see Marco Arment's write up here). Although in the company's defense, they sure tried to put lipstick on that pig of an announcement. It's a betrayal and an intellectually dishonest one at that. As John Gruber put so well, so much of what we think of as "Twitter" was created by third-party developers. A key selling point of the platform to developers was its simplicity, flexibility and win-win ethos. But, we get it. As Hunter Walk notes, when you raise hundreds of millions of dollars at an $8 billion valuation, investors want to you to focus on making money, and so that is what Twitter is going to do. But, I must say that in 20+ years in tech, I can not think of a more blatant case of a company pulling the carpet on its developers (okay, maybe Apple comes close - when Steve Jobs unceremoniously killed hardware clones upon his return to Apple), but as litmus tests go, consider this. If it was Apple who suddenly woke up and started co-opting its developer ecosystem, then created rules to ensure that none of them could compete with Apple or get large enough to be relevant, people would be clamoring for the Department of Justice. And that's the biggest bummer. Some of us thought that Twitter was like Apple, that it stood for something. That is the biggest bullshit sandwich about this announcement. One the other hand, if I was Microsoft, Google or Facebook, now would be golden time to reverse-engineer Twitter's API, and go on the attack with developer friendly rules. All's fair at this point.
2. Apple's Set-Top Box: The rumor mill is heating up with respect to Apple's ambition in the living room. In this latest go around, the banter is that Apple is focused on building a set-top box, and working through cable and satellite providers versus trying to route around them. My take, which I blogged on earlier this year, is that this path makes a heck of a lot more sense than Apple building a TV. For one thing, history suggests that Apple's greatest successes (in music and mobile) have come about by working through the incumbents, NOT by trying to dislodge them. Why would TV be any different? Whether through 'de-bundling' (individuals songs from complete albums), 'surrounding' (apps, web, communications) or 're-thinking' (touch), the Apple Way has been to embrace and extend. In mobile, this has lead to greater customer loyalty and higher ARPUs for the carriers, the antithesis of wholesale disruption. As such, the Comcasts and DirecTV's of the world would be wise to embrace what Apple has to offer. Their boxes aren't very good, anyway.
3. 30 Years of Bull Market: Our economy and our society is stuck in a stagnant place. Yet, Andy Kessler raises an excellent point in his piece on the durability of the stock market over the past three decades. He suggests that the reason for our impressive run is that in the past 30 years "the market and economy has transitioned from funding fixed assets (oil, gold, land) to funding ideas." When I think about it that way, it's hard not to be a believer in our future. Our society has no shortage of ideas, and I can construct scenarios where new "job creating" industry seeds take root. My thesis is this: Amazon and Google have commoditized that which can be commodatized, but what rises in response is companies born of the Apple ethos - integrated, differentiated and delightful. That's the wave that is going to drive industry for the next 30 years.

Pink Elephants, Zombie Software and the App Store

Man, I hate when valid macro arguments (there **is** lots of zombie software in the App Store) are mucked up by clear bias and self-interest.

Writing in GigaOM, David Meyer, quotes a startup analytics founder's assertion that an estimated 400,000 out of 650,000 apps in the App Store are zombie software. Why so many zombies, pray tell?

“This is based on Apple’s closed system — it’s tough to discover those kinds of apps. You don’t have proper search, so the only way to discover new apps is through the top listing,” says Adeven CEO, Christian Henschel.

Really? This is based on Apple’s closed system? What data supports that conclusion? The greater success of apps in other more 'open' app stores?

I mean is there even a scintilla of data that suggests less zombies on Google Play or the Amazon Android app store?

Let's get real. More probably, app store economics are stilted towards few big hits, and the longer tail pool of utility & productivity perennials that get updated, cared and fed for, marketed beyond the app store, etc.

Think: Instapaper, GoodReader.

Everything else either has an orthogonal business model, venture funding, or both (e.g., Dropbox, Yelp, Path, Instagram).

Beyond that, it's debatable whether the preponderance of zombies is a BUG or a FEATURE of App Store economics.

After all, with 650K apps, 90%+ will ultimately fail, just as 90% of businesses in the real world fail, right?

The larger question, what I refer to as the pink elephant in the room in my O'Reilly Radar piece, 'The iPhone, the Angry Bird and the Pink Elephant,' is whether ANY form of app store economics support the kind of vibrant software industry that promulgated during the PC era, and even during the web era.

Let's talk about pink elephants, and not so much about personal biases, is my take.

Pattern Recognition: Microsoft's Lost Decade; Differentiate or Die; Building the Whole Enchilada

My goal is to write one 'Pattern Recognition' a week. Just the top 3-4 stories that stayed under my skin. Here's what stuck this week:

1. Microsoft's Lost Decade: Once upon a time, Microsoft dominated the computing industry like no other. They were absolutely terrifying if they viewed you as the competition, as Borland, WordPerfect, Netscape, Lotus, Apple and many others can attest. Yet, Microsoft under Steve Ballmer has become a decidedly different company; one that has repeatedly gotten outflanked by Apple and Google. In fact, just ONE Apple product, the iPhone, now generates more revenue than the entirety of Microsoft's offerings. How did this happen, and why did I suggest back in 2007 that a decay was coming. Read this engaging Vanity Fair article to find out.
2. Differentiate or Die: We see it in the PC space, a market so commoditized that the only hardware OEM that is making any money is Apple. And of course, we are seeing how totally Apple is killing it in the post-PC market with a completely integrated and differentiated set of offerings that the competition can't touch. As John Gruber of Daring Fireball notes, "It’s a testimony to just how remarkable Apple’s last few years have been that 23 percent year-over-year growth (this past quarter) looks so bad on a chart." Meanwhile, this week we saw it in the grocery space, where Whole Foods (aka 'Whole Paycheck'), who StockTwits founder Howard Lindzon calls a 'platform business for new unique food brands,' is crushing it. Meanwhile, it's undifferentiated competitor, Safeway, is majorly struggling. I have a general thesis on this one. The conventional wisdom the past 20 years has been dominated by the loosely-coupled, 'horizontal' model that made Microsoft a lethal killer (upon the release of Windows 3.1 in 1992). That model was so effective that it made Bill Gates the richest man in the world, and industry after industry embraced horizontal as the 'one right way.' With the advent of the Internet, however, the downside of horizontal - a vicious cycle of commoditization - played out. Now, we are at the end-game, a point where few companies can make money under this model, unless they are the core supplier of the secret sauce. Thus, I believe that the next 20 years will look less like Microsoft and more like Apple; namely, tightly integrated, and vertically focused businesses where bricks to clicks are logistically worked out in a more than the sum of the parts fashion. Bet on the companies that figure this one out.
3. Building the Whole Enchilada: Speaking of the vertically integrated trend, BuzzFeed is a social news organization founded by Jonah Peretti, co-founder of Huffington Post, and they are killing it. This letter from Peretti to his BuzzFeed cohorts provides a great window into how a startup (in publishing, no less) is embracing a vertically integrated product strategy to breakout success. Here is an excerpt: "Most publishers build their site by stapling together products made by other companies. They get their CMS from one company, their analytics package from another, their ad tech from another, their related content widgets are powered by another, sometimes even their writers are contractors who don’t work for the company. This is why so many publisher sites look the same and also why they can be so amazingly complex and hard to navigate.  They are Frankenstein products bolted together by a tech team that integrates other people’s products instead of building their own. At BuzzFeed we take the exact opposite approach." Read the whole piece HERE.

Apple’s North Star vs. Earth’s Gravity: Four Takeaways from Apple’s Earnings Call

The broad narrative on Apple earnings for the quarter is that the company: A) Missed on most of Wall Street’s projections for them (except iPad and iPod sales); B) Barely beat their own comically conservative guidance; C) Provided guidance numbers for the quarter ahead that are especially conservative; and D) Acknowledged that the slowing global economy is a challenge on multiple fronts.

Unsurprisingly, the stock is down 5% after-hours. But the real question is, 'Buy,' 'Sell' or 'Hold,' right?

To answer this one, let me put forth two salient questions on the topic.

One, is Apple still selling something that the market wants, that customers are willing to pay for when times are tough, and is sufficiently differentiated to maintain high margins?

Two, as a stock, is Apple richly priced, fairly priced or under priced?

Related to this, any analysis of the quarter needs to take note of the fact that the company is in a clear ‘down period’ before the release of the next iPhone.

Simple logic dictates that those who know Apple's product release patterns would default to waiting for the next iPhone, knowing that it’s a quarter away.

Similarly, the same analysis needs to factor that Apple’s newest MacBooks contributed just a few weeks of revenue to the quarter given their date of release.

So, let me attempt to answer Question 1 (Demand + Differentation) and Question 2 (Stock Value) with my four main takeaways from the earnings call:

1. Performance is Relative: Apple revenue was still up over 22% year over year to $35B, so the law of big numbers is not catching up to them yet. Moreover, the company shows no signs of margin erosion. Quite the opposite. Margins this quarter were 42.8% vs. 41.7% a year ago, and 39.1% in the year ago quarter before that. Further, iPad is disrupting more segments within the PC market than ever before, as evidenced by Apple’s own accelerating separation in sales of iPads vs. Macs. A year ago at this time, Apple was selling 2.5 times as many iPads as Macs. Yet, in this quarter, that number mushroomed to 4.25 times as many iPads. And we already know that the Mac is outpacing the general PC market, growing 2% year-over-year, vs. the PC, which is shrinking 1% year-over-year. A big part of this is the educational sector, especially K-12, where Apple has intelligently segmented pricing with the $399 iPad 2. Apple CEO TIm Cook was quite pointed in asserting that when people talk about the 'tablet market' they generally mean iPad, notwithstanding the buzz and promise of Nexus 7, Kindle Fire and the Nook. Similarly, iPhone was up 28% year-over-year, and shows no signs of losing its magic with either consumers, the enterprise, or even carriers, especially with the promise of a new iPhone and iOS 6 in the fall. In other words, we can debate if Apple should have WON more, but we can’t and shouldn’t posit that they are LOSING anything anywhere. The iOS platform, now 410M devices strong (45M devices added in the quarter), coupled with iTunes and surrounded by iCloud (150M users), stands alone. (Some great charts on Apple numbers are HERE.)
2. The Economy Sucks: One of my favorite moments of the call was when Bernstein analyst Toni Sacconaghi challenged Apple CFO Peter Oppenheimer’s comments about being “pleased” with the quarter, by noting Apple’s various weak spots, and asking Oppenheimer what he wasn’t pleased about. This led to a bit of a 'tell' by Oppenheimer, who stated that, “Given what’s happening around us...” Oppenheimer went on to talk about a weak Europe, struggling economies that are based on natural resources, foreign currency weakness against the dollar, and delays in getting both the new iPad and the new portables into China. In other words, while Apple is quite strong in the US (no slowdown yet), and asserts great strength in China (they have not seen the rumored China slowdown in their business), there was ample acknowledgement that the economic picture is cloudy and getting dark, so much so that Apple’s going forward numbers assume a weak Europe, Australia, Canada, Brazil, France, Greece, Italy and even Germany. That, by friends, is macro risk, something that Sacconaghi, who is bullish on Apple, nonetheless suggests HERE.
3. Apple Retail is Flat, but No Alarm Bells: I watch this one like a hawk, inasmuch as retail presence is such a game-changer when it works (product discovery, social confirmation, sales, upsell, and support channel) and an albatross when it doesn’t. As such, I am perennially looking for canaries in the coal mine. Well, here the news is muddy.  Same store sales were up a measly 2.8% year-over-year (from $10.8M per store to $11.1M per store). But at the same time, overall sales numbers were up 17.1% year-over-year to $4.1B, and logic suggests that the company still has room for further geographic expansion. For some contrast, in the obviously seasonal holiday quarter, same store numbers were $17.1M (up 43% over the prior year's quarter), but in the more representative October quarter, they were $10.7M, a number that was actually 9.3% worse than the prior year. Do with this data what you will, but it suggests that Apple Retail continues to work.
4. Apple Stock Remains Cheap, Getting Cheaper: I have blogged on my 'gold standard' thesis with respect to Apple, so read that post, if interested. The upshot is that there are a small handful of companies that are such bellwethers that their value is almost segment independent. Their only peers are the other bellwethers. Who are the bellwethers? Think: Google, Disney, Nike, Coca Cola, Berkshire Hathaway, Amazon, Southwest Airlines, Procter & Gamble, McDonald’s. Well, after-hours Apple is now trading at 12.6 times trailing twelve-month earnings (per Horace Dediu of Asymco). By contrast, its gold standard peers are trading at 18.54 times trailing earnings, and that’s factoring OUT Amazon’s crazy multiple. Put another way, does anyone think that Apple is even remotely worth only 68 cents on the dollar of its peers? I sure don’t.

Final Notes:

1. Reality Distortion, My Ass: I have stated this previously, but it bears repeating given Apple’s reputation for secrecy and reality distortion. If you want to find out which company is more open about their strategy, tactics and results, all that you have to do is sit in on an Apple earnings call. Then compare it to a Google, Amazon and/or Netflix earnings call. For example, while Google may fancy itself as the more 'open' company, with its investors at least it generally provides 50,000 foot fly-over views of the business (and Amazon and Netflix are even worse). By contrast, Apple gets surgical, breaking out metrics, segments, margins, channels, etc. Where I come from, WYSIWYG is a good thing, especially where my pocket book is concerned.
2. Apple TV is a Nice $400M Hobby: Apple has now sold 4M Apple TV units this year, including 1.3M units in the quarter. That’s up 170% year-over-year, and Tim Cook was candid that Apple doesn’t pursue hobbies where they don’t think there is a 'there' there. Still, nothing in the call suggests that a full-blown TV is on the horizon, and I remain extremely dubious that that’s a business that they should get into, as I have previously written about. 

In closing, I'd like to note that I loved Tim Cook’s comment that, “Our (Apple’s) 'North Star' is to maniacally focus on making the world’s best products, and economy aside, we won’t deviate from that...that’s why we breathe, that’s why we live.”

I don't know about you, but I root for companies that aspire for greatness, as I know how few truly do set such lofty goals.

And as an Apple acolyte and frequent investor in the company, I know this isn't Tim Cook puffery. It is Apple gospel, something Cook put a bow around by noting that the company has seen time and again that when companies opt to belt-tighten vs. innovate in tough economic times, the end-result is that Apple puts more distance between itself and the competition.

When you get down to it, that's the Apple story over the next few quarters. To win convincingly by following their North Star, or succumb to Earth's Gravity, and be like everyone else.

Related Posts:

1. What's Apple Worth? The 'Gold Standard' Thesis
2. Understanding Apple's Q2 Earnings: It’s about Value & Integration, and it’s Global
3. It’s Time to ‘Think Different’ because Conventional Wisdom is Dead: Thoughts on Apple’s Q1 Earnings Call
4. Four things I heard at the Apple Q4 Earnings Call (2011) that caught my attention

Pattern Recognition: Mobile Web v. Mobile Native; TV's Blind Spot; 'Invisible' Designs

My goal is to write one 'Pattern Recognition' a week. Just the top 3-4 stories that stayed under my skin. Here's what stuck this week:

1. Mobile Web > Mobile Native > Bifurcated Native: In the continuing 'banjo duel' between Mobile Native and Mobile Web, three threads got into my bones. One, is the idea that whereas Apple has the best combined story in terms of providing BOTH a superior mobile web environment and the best mobile native platform, the reality is that their unfair, defensible advantage lies in iOS. Hence, it makes sense that Apple would boot Google from Maps, a native app, but keep them in Search, a mobile web environment, a decision that Danny Sullivan of Search Engine Land called 'Containment' (in lieu of Thermonuclear). After all, Apple is not at war with mobile web, but definitely wants to WIN mobile native. Two is the fact that whereas all of the banter is that HTML5 is the great disrupter to be of all things Native, the hard truth is that those who forget the past are doomed to repeat it. In abandoning their HTML5 gaming ambitions, featured Facebook Platform developer Wooga cited insurmountable challenges with discovery, performance and connectivity. I guess the contender is still a pretender, but then again, I have been waiting since 1994 for Web apps to offer a caveat free application model, as opposed to merely a (quasi) universal one. Finally, the meme of what it means to be mobile NATIVE, has been buzzing in my brain since reading Fred Wilson's excellent post on the topic. I think that I have a thesis around the evolution of native apps. If the first generation of native apps were knocked as being little more than native wrapers on web functionality, and the second gen were mostly parallel to the web, what we are going to increasingly see are what I call 'Bifurcated' Native Apps. These are apps, like Instagram and Path, where the optimal creation, consumption and service-ready environment (e.g., social share + discovery) is within the native app itself, BUT one of the output methods is in a web-friendly format suitable for blogs, tweets, Facebook, G+, LinkedIn pages and the like. In other words Native first, with a 'best-practical' gateway to the web. I can see a great many application scenarios for such apps.
2. TV's Blind Spot: Peter Kakfka of AllThingsD argues that the TV business is vulnerable, but it's not with highly pirated premium shows like 'Game of Thrones,' but rather, cheap to produce, cookie-cutter reality shows. I have two takes on this one. One, "must-see" programming and live sports are the straws that stir the drink, and everything else is bundles and fillers. That's why ESPN drives Disney profits, and HBO cares not one whit that GOT is most pirated. It's the same reason that Bravo, the den of reality programming, has cultivated the hell out of their few franchises, including continuous advertising, which cost serious coin.In other words, cost reduction is not the silver bullet in itself, even if it has real prospects as a low-end disrupter. What will be a silver bullet is when the next wave of web "tv" programmers start creating media units that are native to the web/app medium, and deeply integrated from the first storyboard. Whether that means integrating community into the programming, designing in locality handles, reinvigoration of live to create a new shared experience, game-ification, or something else, that's the bucket, and it's a different animal, in the same way that TV was not simply radio with pictures. So far, what we've seen are loosely-coupled approaches that I view similarly to the dog that walks on its hind legs. Interesting, but nothing that anyone would conclude was designed from the ground up to be that way. As an analog, think of the distinction between our concept of the smart phone pre-iPhone (see Blackberry) and post (see iPhone, iPad and beyond). TV has a long way to go in that regards.
3. Integrated to the Point of Invisibility: One of the books that has deeply influenced my thinking about industry, economy and technology models is the book 'Waves of Power' by David Moschella. In WOP, the author shows how technology evolves in waves, such that in the initial wave, the technology is so new, complex and brittle that the only way to deliver a real solution is to be verticalized. As the technology matures and becomes understood, the trend is towards commoditization. Here, the best model is to be horizontal, so as the leverage the broadest swath of innovation, and to be able to focus on the narrowest slice of differentiation, where your margins will come from. One can see how the mainframe and mini was the first wave of computing, and the PC era was the second wave. What's interesting is that Moschella, who wrote the book way back in 1997, goes on to show how the wave after horizontal is the embedded wave where the technology becomes so pervasive and the best practices are so well-formed that computing becomes both ubiquitous and invisible. Apple's dominance is best understood in this light. In an industry organized around 'speeds and feeds' and loose-coupling, they correctly realized that once everyone understood what technology could do, they would want it to work well. To do so, it would need to be an extension of their aspirations, their vanity and their daily outcomes, not the other way around. I thought about this in comparing my iPad 1 to my new iPad; namely, marveling at the many elements where the 'magic' lies not in some cool new feature, but rather in the tiny bits of integration 'finesse' that turned functionality that I formally noted, 'Wow, I can do that,' to instead, 'Wow, I no longer even think about the steps to doing it.' The source of delight is in the fact that it's simply invisible, an extension to what I am doing in the moment. I thought this an interesting contrast to Microsoft's announcement of Surface earlier in the week (which I like, even though it's vapor at this point), where they were touting the hinges on the kickstand of the device's case as being 'designed to feel and sound like a high end car door.' It's the opposite of designing invisbility, IMHO.

Pattern Recognition: Passbook is Apple's eWallet; Fragility; TV Business Collapse

My goal is to write one 'Pattern Recognition' a week. Just the top 3-4 stories that stayed under my skin. Here's what stuck this week:

1. Passbook is Apple's eWallet: In my analysis of Apple's forthcoming iOS 6 (part of my WWDC Keynote article), I saved my biggest WOW! for Passbook, noting that while Apple presented it as a consolidated place to organize things like gift cards, flight itineraries, movie tickets and the like, I believe that it's the true beginning of Apple’s foray into being the defacto eWallet. Happily, I stumbled upon this exceptional Quora thread about Passbook. Definitely worth a read, as I believe Passbook is a game changer. Excerpt: "Apple has entered into the mobile wallet marketplace by sticking just a toe in the ocean of mobile payments. In the process, Apple will change just about all aspects of discounts, ticketing and payments."
2. Fragility - How to Detect Who Will Go Bust: Nassim Nicholas Taleb is unquestionably one of my favorite writers/thinkers. Fooled by Randomness provided intellectual framing for comprehending how biases cloud our judgement, and how we frequently misfactor the role of chance. It also introduced the concept of Black Swan events into our lexicon (although Fooled by Randomness is a better read than Black Swan). His newest book is called Antifragile, and in it he espouses a methodology for figuring out if our miscalculations or misforecasts are more harmful one way or the other (than they are beneficial), and how accelerating the damage is. This article provides a nice overview. Anything pertaining to risk mitigation is a worthy ounce of prevention in these turbulent times.
3. Is the TV Business Starting to Collapse? I've read many arguments that TV programming is destined to go ala carte and unbundled, breaking the stranglehold that the cable, satellite and broadcast providers hold on consumers. This piece by Henry Blodget does an excellent job of detailing the many reasons this could happen, but I just don't see it happening any time SOON. Someday, sure, but not in the next 5-10 years, I believe. Why do I say this? One, is that the affilate fees that the cable companies pay to the content providers (e.g., ESPN, Bravo, TNT) are the consummate golden handcuffs. The day that ESPN wants to go ala carte is the day that Comcast can stop paying ESPN $4.69 per household per month. Plus, there is the factor of the selfish gene at work; namely, even if the content creators and network operators saw the wisdom of embracing new models, the individuals in power seats have a vested interest in protecting their fiefdoms, something that I blogged about HERE. "Not on my watch," is the unspoken operating logic here. How about Apple? Won't their rumored TV disrupt the business? First off, I believe that they are a more likely set-top box play than a TV maker, but more to the point, when Apple built the iPod, they worked through the record labels, didn't replace them. When they launched iPhone, they worked through the carriers, didn't replace them. I think the same equation will play here. Two related takes on this story. One is that our thirst for live sports (and perhaps, live content in general) is insatiable. It's why ESPN is ESPN, and why ESPN is the true profit center for Disney. Two is that original programming becomes the differentiator for long-term success. It's the reason that HBO can command the fees it does, and maintain high subscriber retention. It's why people care about AMC (Mad Men, Breaking Bad), and it's why TBS/TNT is no longer the place that syndicated shows go to die (although they do plenty of that, too).One other moral of the story is that creating this TV programming that viewers are loyal to is A LOT harder to produce, distribute and market than news content, which is why blogs could kills newspapers, but YouTube hasn't killed the networks. When someone figures out a different format or production methodology that changes the equation, look out.

Apple WWDC Keynote: On Capitulations, Steak, Sizzle and WOW!

 

“A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.” – Wayne Gretzky

Here’s hoping that after today's WWDC Keynote, the Google troika of Page, Brin and Schmidt have finally capitulated (at least internally) AWAY from their 'loosely-coupled' mantra and TOWARDS the more craftsman-like goodness of Apple-style integration.

After all, while Android is absolutely ‘killing it’ in terms of 900K daily activations, at what point can we acknowledge that this is a pyrrhic victory, and that Android is a paper tiger?

I mean, who exactly is winning? Consumers? Uh, actually Android consumers tend to utilize the mobile web less than iOS users, and swear that they don’t need apps, which might have something to do with the fact that most Android devices are running the Windows 3.1 equivalent of Android.

Are developers winning? Hardly (see recent Flurry report). They have to support dozens of form-factors, not to mention, a wavy-gravy medley of Android OS variants, and all this for the prize of making less money on Android than on iOS. Is it any wonder that none of us can name a single game-changing app that originated on Android that wasn't specifically built by Google?

But surely, the hardware OEMs are loving it, cuz…Uh, the vibrant ecosystem where a thousand flowers bloom actually killed Motorola, then HTC, and left only Apple-impersonator, Samsung, standing. How is that a win?

Even for Google, I don’t believe that they still see this so blithely as a redux of Windows vs. Mac in terms of monetization, mindshare or momentum. Increasingly, they just look defensive, reactive...and conflicted.

Google, you are better than this. You are! And don’t start pulling out more empty numbers about Google Plus. No one cares. Aggregated is not integrated. Fragmented, me-too, and bolted together is not innovating. It just isn’t.

Okay, that point made, let me tell you why I believe that Apple’s WWDC Keynote today was stunning in its effectiveness, substance, shock and awe. 

The “We bring good things to life” Company

When I was a kid, GE built an enviable brand position around the core message that GE brings good things to life.

Well, is there any question that Apple is the post pc era torch-bearer of bringing good things to life?

I mean these guys have reinvented music, freed the mobile phone from the hegemony of carriers, brought innovation back to the PC, increasingly freed us from the PC, made design matter again, re-thought software, marketplaces and the cloud, embraced accessibility for the handicapped, brought an ethos to building products at scale in an environmental-friendly fashion, and shown a willingness to boldly lead in segment after segment.

A bit off topic, but isn’t the problem in America right now (and much of the world, for that matter) a lack of bold willingness, a lack of vision, an intellectual dishonesty about taking shortcuts and a tolerance for poor execution?

Ya know, we could do worse than emulating Apple.

Keynote Highlights: Steak, Sizzle and WOW!

Let’s get the Steak out of the way, as it provides context for the Sizzle and the WOW.

By steak, I mean those items that show that Apple knows what they are building, who their customer is and what their business is. Specifically:

• iOS Ecosystem: There are now 400M accounts in the app store (365M of which are iOS devices), all backed by credit cards, and a one-touch workflow for buying, installing and enjoying. No less, the model has proven to work grandly across both media (songs, movies, tv shows, books) and apps (30 billion downloads). Further, the platform has yielded 650K apps (225K for iPad), several of which are considered standard-bearers for the power of post-pc, in the process generating over $5B for developers. Oh, and it’s a global success, operating in 120 countries, with 32 more on the way.
• The Un-Fragmented Platform: iOS vs. Android is a study in wince-inducing contrasts. Consider this excerpt from the keynote: "Almost all of our users are running iOS 5. Now if you compare that to the competition, they released a dairy product, 4.0, about the same time as we released iOS 5. Yet, only about 7% of their users are running it." 
• The Integrated Platform: iCloud is currently on 125M devices, and with iCloud integration deeply within Macs when Mountain Lion ships next month that means a unified + synchronized flow across Macs, iPads, iPhones and iPod touches in the following services (to name a few): Mail, Browsing, Note Taking, Messages, Reminders, Notifications and even Documents. In restaurant terms, this is the distinction between delivering ingredients, and crafting recipes that are fully conceived with a tightly orchestrated ‘dining’ experience in mind. Even sharing has been thought through across both Macs and iOS devices, so you can take advantage of multiple services, including Twitter and Facebook, without having to jump between apps or through hoops to make these workflows happen.
• Cross-Pollination: To Apple’s credit, they have continually shown a willingness to leverage best practices from Macs and feed them into iOS devices, and more commonly, feed iOS innovations back into the Mac. Case in point, Tabs in Mobile Safari has fed a new Tabview in Safari for Mac. AirPlay Mirroring from iOS is now part of OSX, and Game Center  (used by over 130M users) is now part of OSX, opening up cool scenarios like Mac vs. iPad gameplay. Cross-pollination is something that I have blogged about extensively (See Holy Sh-t! Apple's Halo Effect: HERE).
• New MacBooks: The main takeaways here are that Apple pushed down the cost of MacBook Air about $100, and introduced a new MacBook Pro that brings their vaunted Retina display to notebook computers. Hence, unless you are specifically a Windows devotee; or have a business or application-specific reason for not going with a Mac, just know that you are sacrificing R&D, integration with your mobile/tablet devices and of course, well-trained human support for when questions pop up Apple has retail, after all). 

Netting it out: the above simply underscores the deft skill by which Apple navigates the PC legacy market (Mac sales will do even better now that they better fit under the iOS Halo), tightens its domination of post PC, and bottom line, delights customers (over 75% of iOS users called themselves very satisfied vs. <50% for Android).

Heck, they even added Chinese specific features in recognition of China's position as the largest ‘green field’ market opportunity on the planet, one where they are, unsurprisingly, already incredibly well-positioned.

Put another way, if I am an Apple shareholder, I am very bullish that the company has kept its eye not only on the ball, but the whole field of play.

So Hot, It Sizzles

Put me in the camp of those who have looked at Siri, Apple’s voice-activated assistant, as a great foundation that is still more gimmicky than game-changer.

Putting aside the fact that Siri is hard to demo in noisy Apple stores, the larger truth is that the system is imprecise; a solution to a problem that may or may not exist.

Recognizing this, Apple focused in iOS 6 on giving Siri more contextually specific tasks that generate richer outcomes for users.

The demo showcased things like Sports related questions, yielding baseball card style media units to questions like, “What was the score of the last Giants game?” Or, “What is Buster Posey's batting average?”

There were similar examples of movie reviews, restaurant recommendations and dinner reservations vis-à-vis partner integrations with Yelp, OpenTable and Rotten Tomatoes (you can ask about directors and their movies, for example).

Further, Apple is working with auto manufacturers to integrate Siri into new cars and trucks via a service they call Eyes Free. Inasmuch as Apple has already built a wedge into such vehicles with the music and phone side of iPhone, the efficacy of burrowing deeper into automobiles via Siri makes a lot of sense.

In fact, seeing how Apple is cultivating Siri, it is not too far of a leap to imagine them creating a paid search product where questions and answers are bid up by vendors that want to be part of the Siri directory.

In this regard, Siri just **feels** like a domain destined to make Google less relevant in the mobile universe. A sidebar is that such a bid placement model would be a retro return to the old model that dominated during the age of the portals and AOL. 

Mind you, this is in addition to Siri’s growing support for international languages, including Chinese, integration with Facebook, Twitter, voice-based launching of apps, notifications, and its new Map service (see below).

Speaking of Facebook, while some might see this as more steak than sizzle, I can tell you how wonderful having twitter integrated at the system level is in turning inspiration into tweets.

With Facebook, it has the potential to go deeper since this is really where my true social relationships live. Ironically, this linkage to may photos, music, apps, maps and notifications is the exact opposite of the walled garden experience that Apple naysayers wrongly ding the company for. Plus, all of this is baked into the Mac as well.

Two other iOS feature adds that stood out for me are:

1. Smart app banners, a feature in Mobile Safari that makes it easy for Safari users to jump into an app (or download it) directly from the mobile web, further blurring the line between mobile web and mobile native.
2. Shared Photo Streams:  This is a feature that evolves the current “one silo” approach with Photo Streams into multiple shareable Photo Streams, where a user can choose the photos they want to share and the friends they want to share it with. 

WOW! A Map and a Passbook

It was the worst kept secret that Apple was going to abandon Google Maps in lieu of a solution that they could fully control, but WOW, Apple’s forthcoming Maps look terrific.

It works with Siri, it features turn-by-turn navigation, incorporates over 100M business listings (via Yelp integration) and has a nice “info card” style listing interface.

Moreover, the system supports anonymous real-time incident reports, just-in-time re-routing options and even a flyover feature that is derived from rich 3D models of the major cities around the world. 

Now, I LOVE Google Maps so while this is a definite WOW, in truth, Maps is all about utility so the real story on this one won’t be clear until we see what we’ve lost for all of these bells and whistles.

In closing, I save my biggest WOW for a new feature that Apple presented called Passbook.

While Apple presented it as a consolidated place to organize things like gift cards, flight itineraries, movie tickets and the like, I believe that Passbook is the true beginning of Apple’s foray into being the defacto eWallet.

Think of it this way, Passbook will materialize just in time for the holiday season, a time when loads of (historically) boring gift cards are handed out.

Via Passbook, these cards and tickets become something cool, dynamic and even geo aware (Starbucks is nearby, you have $18.25 on your eCard).

Plus, these cards are alive, so if your gate changes at the airport, your boarding pass will be updated and you will be notified.

Given that type of service-aware handle, how far of a leap is it for vendors to be able to present cardholders a flash sale or other special offer based on time of day or locality?

My point is that Apple can segment their approach here to be to be anything from the organizer (think: iBooks, Newstand) to the facilitator (i.e., the platform building blocks) to the curator to the market maker.

And that’s the point, as Tim Cook flagged is closing his keynote.

"Only Apple could make such amazing hardware, software, and services…They are perfect examples of what Apple does best. Ultimately, it's why people come to work at Apple, and with Apple. To create products that empower people. To make a difference. The products we make, combined with the apps that you create, can fundamentally change the world."

Not only does Apple have the skill and the footing, but equally, they have the will; and that leaves them incredibly well positioned.

Related Posts:

1. Understanding Apple's Earnings: It’s about Value & Integration, and it’s Global
2. DIS-Integrated Systems: A Parable
3. It’s Time to ‘Think Different’ because Conventional Wisdom is Dead: Apple’s Q1 Earnings Call
4. Five reasons iPhone vs Android isn't Mac vs Windows