The Network Garden - Mark Sigal's Blog

Twitter Financing: Pruning the Garden with $100M Shears

A lot of banter and rumination going on at the moment pondering Twitter’s (rumored) $100M fund raise at a $1B valuation.  

Chris Dixon, in particular, has written a thoughtful post on what the deal says about the state of Venture Capital. 

I won’t get into that one, preferring to focus instead on what Twitter could possibly need $100M of additional funding for.

For Twitter (and Twitter's investors), this financing makes a lot of sense if one assumes that they roll up the choicest portions of the third-party twitter ecosystem into their core (through M&A), refine their API approach to this newly aggregated/federated platform and then cultivate a deeper, richer ecosystem around same.

Then, when the tree needs a good "pruning" again, they can start the M&A process anew.

Simply put, the sheer openness of Twitter’s API and ecosystem approach has led to the “blooming of a thousand flowers,” as hundreds of application developers find the goodness in piggybacking off of Twitter’s real-time messaging infrastructure, brand equity, user base and single sign-on support. 

Ranging from rich client applications (TweetDeck) to URL shorteners/analytics (Bit.ly) and composite services (StockTwits, Twiddeo), the flowers are yielding some really interesting hybrids. 

The opportunity for Twitter is to pick from the best, brightest and most synchronous, and role them into their platform to: 

A)  Make a better platform 

B)  Enrich user engagement

C)  Fortify their monetization/business picture

After all, even the best gardens must be pruned from time to time.

(Side note: TechCrunch has a good post, ‘The Future of Twitter Visualized,’ that incorporates a couple of really good “connect the dots” graphics from Steve Rubel and Brian Solis.)

Related Posts:

1. “Right Here Now” services: weaving a real-time web around status 
2. iPhones, App Stores and Ecosystems 
3. The Mobile Broadband Era: It's About Messages, Mobility and The Cloud

Rebooting the Book (One iPad at a Time) guest column @ O'Reilly Radar

 

The book business is under assault. Book sales have been stagnating for some time, Amazon is the industry's boogeyman, and more terrifying, book publishers have no idea how to market books in a world (largely) devoid of bookstores. 

Moreover, in the age of the always on, it's fair to ask, do people even still read anymore? 

Just as it re-envisioned the Media Player, the Mobile Phone and Mobile Computing, Apple is well positioned to reboot the Book with its forthcoming iPad Tablet. 

Read the full article HERE.

Related Posts:

1. Touch Traveler: London, Paris and only an iPod Touch
2. Apple iPad Tablet Computing Device
3. The Library of the Commons: Rise of the Infodex
4. Old Media, New Media and Where the Rubber Meets the Road
5. iPhone, the 'Personal' Computer: The Future of the Mobile Web

iPhone, the 'Personal' Computer: The Future of the Mobile Web

Welcome to GigaOM Mobilize, aka the Apple iPhone-induced 'Industry Reset' Conference. 

We join our program, already in progress.

Once upon a time, Carriers had the exclusive Billing Relationship, and it was good for them.  

As a Handset Maker or Software Developer, it could be good for you, too...if you recognized who was the Sheriff in town.

Unsurprisingly, in those days things like User Experience and Product Design were somewhat gated by what the Carrier would allow the Handset Maker to do, which was not much.  It was a heavily-fortified, walled garden.

For third party Software Developers, the game then was as much about supporting (and QA'ing) a dizzying array of handset devices as it was about building cool software. 

Moreover, because supporting such a byzantine structure takes brute force (and VC dollars), there were some companies that did really well by inculcating themselves within the protected confines of the money flow (e.g., Jamdat) but there were far more busts, and more to the point, there was no point of even trying if you were a tiny venture.

Then Apple introduced the iPhone, and the good old days for Carriers were no more. Too much ink has spilled on the "Why" side of iPhone as a game-changer, but let me add one more thought to the mush. 

Simply put, the iPhone is the first truly 'personal' computer; more personal to its owners than the PC ever was.  Talk to iPhone owners (not to mention, the 20M iPod Touch owners), and this truth bubbles to the top again and again.

Needless to say, this has completely disrupted a once horizontally oriented value chain (Carrier, Handset Maker, Software Developers, Consumer), and as such, a lot of dollars and destiny is truly at stake.

No less vexing, as the iPhone is a vertically integrated platform (hardware, software, service, SDK, marketplace footprint) it’s not so easy as ‘emulating by imitating.’ 

The most honest answer I have heard on the state of the market is from Sprint’s CEO, when asked about iPhone versus the Palm Pre (Sprint is its exclusive reseller).  He cooly noted that, "It's like comparing someone to Michael Jordan."

In a panel discussion at Mobilize, user experience guru Jesse James Garrett (founder of Adaptive Path, who also coined the term, Ajax) summed it up best, noting that “iPhone has brought design back to the fore as a core differentiator in the competitive marketplace.”

In any event, that’s now the standard experience that customers aspire to, and to not be able to deliver it, is to raise all sort of existential questions for carriers and Handset Makers alike.

As a result, if there was any singularity of purpose at Mobilize it was this: To Beat Apple at its Own Game.

In this Corner...Android! 

For the Anyone But Apple Coalition, there is Google Android. Mobilize underscored this truth in no uncertain terms.

I have two intersecting thoughts in my head on this point.  

One is that Apple has secured some really prime real estate for the industry completely reboot itself and collectively organize around the only other company that disrupts entire industries (and value chains) as much as Apple, and that's Google.

Two is Android’s Andy Rubin assessment that what’s good for the Internet is good for Google.  He’s right, and it once again illuminates the interesting (unique) polarities between Google and Apple (read 'The Chess Masters: Apple versus Google' for further analysis on this point).

So why are Carriers and Handset Makers doing this?   

In Android, the 'Anyone But' Coalition hopes to harness one broadband platform that can modulate to the individual definitions of broadband in different geo nationalities and market segments, not to mention, different form factors.

To them, Android is Open because it’s open to carriers, handset guys, developers, and no less important, the underlying source code is open so you can take it in-house if you want.

Plus, it’s not like Apple is available on any and all carriers (like RIM's Blackberry) so while I see plenty of splintering of this would-be open but unified alternative to iPhone playing out, the market's not zero-sum (i.e., there are plenty of non-iPhone aspirants out there), and for them Android is a viable answer.

So, that's the game that's afoot, and towards that end, there was a lot of talk about Design, and the need to change the mobile Brand Experience to extend the durability and depth of the Customer Relationship (ala Apple).

In a really good discussion on mobile device, web and user experience design, the following nuggets bubbled to the top:

1. Look Beyond the Digital Realm (and that of your competitors) to all of your real and virtual world experiences. Work backwards from where and when you expect to be using the Device, including the constraints on the user when they are using the device (e.g., on a crowded, noisy bus). One example here is to think in terms of runtime and workflow constraints that span 3 minutes, 30 minutes and/or three hours so as to come up with appropriate interaction models for each mode.
2. Make sure that your product exposition process is holistic and measured across all stakeholders, including the technical support folks.  Too often, this process excludes a key stakeholder, thereby failing to uncover critical gotchas or worthy aspirations to satisfy.
3. Multi-Touch is evolving from single touch a truer Multi touch engagement model, and this simple extension of the experience will lead to bigger devices as more fingers must be touching the device in this model. Needless to say (as the panel noted), this presents some design   challenges as there as no accepted conventions, and bottom line, more fingers equals exponentially more potential permutations.

This brings me to Motorola’s Last Best Hope; namely, announcing Motorola CLIQ, an Android-based Motorola handset (to be distributed by T-Mobile) that features a Motorola directed user experience, which Moto calls MotoBlur. 

(Sidebar: If you are looking for a 'How Far the Gorillas have Fallen' example, look no further than Motorola.) 

Back to Motorola CLQ and MotoBlur, do yourself a favor and give Lance Ulanoff’s article on the product’s launch at Mobilize a read - Motorola CLIQ: A Lesson on How Not to Launch a Product. His assessment pretty much mirrors my experience of watching this launched live.

Netting it out, MotoBlur pushes the ball forward a bit. It’s interesting in the sense that if offers up a top-level integrated feed oriented multi-service experience (SMS, Facebook, Twitter, pics, vids, email), premised on the ideal that a 'glance-able' front end to the Internet is worth aspiring to.  Good, but no game changer. 

For the moment at least, it seems like everyone knows that the rarefied air of iPhone 'like-ness' is not yet on the horizon.

Location, Location, Location

In real estate, there is a saying that to understand the business, all that you really need to know is that it’s all about location, location, location.

This is no less true in the mobile realm, where location is the real-time anchor for context; a context that is surrounded by an embarrassment of data riches, including the fact that GPS is ubiquitous and free, not to mention really good Wi-Fi positioning/Cellular Tower triangulation-based locative services that fill in the gaps for non-GPS users.

Consider the following. Skyhook Wireless (a Wi-Fi based positioning service provider) serves up 200 million location updates a day. 

Now, a restaurant chain wants to be able to target lunchtime audiences according to a time of day and geo zone overlay, so as to serve up lunchtime offers when consumer are in a ready mode to buy (lunch).

Expanding this concept out a bit, imagine a trip to Vegas, and the Travel and Entertainment experiences such a device could satisfy. 

Simply type in a keyword (or short phrase), geo-radius, $ budget or other like filter, and click, GO.  

It’s easy to see lots of monetize-able events in this equation, isn't it?

A couple of the panel discussions at Mobilize flagged the fact that the low hanging fruit here is to piggyback off of core data SMS revenue and being the 'rounding error' for that large number by building value add on top of a pre-existing business versus trying to carve out a wholly new standalone revenue segment.

Plus, Alerts and SMS are natural as bridging functions between ‘lite’ ubiquitous web apps and native apps, a bifurcation that has played out to the benefit of the Twitter Ecosystem.

In fact, the opportunity is so vast that  social mobile handset maker, INQ  (they make Facebook and Twitter centric phones) sees a market for standalone LBS (location based services) wireless devices emerging in the not too distant future. 

Meanwhile, in the category of "Bubbles to Watch," a soon to be white-hot market in Augmented Reality is beginning.  

Foursquare (a real-time social status updating tool, with a bit of game-ification thrown in) just got funding, and they had the luxury of choosing among a furry of term sheets, extremely rare in the mobile segment, let alone this economy.

While Foursquare largely is focused on text based messages , the iPhone and Android phones are opening up a realm of real-time visual overlay capabilities that ride on top of the camera, video views supported by these devices. 

The most simple analog for how AR works in this construct is the billboard.  Imagine walking in a neighborhood, holding up your phone, and the combination of touch, tilt, location and compass yields any of the following: a static picture overlay so you can see a push-pin of notes from previous visitors; an interactive avatar that can give you a tour of the area; or an information billboard that spotlights the best pizza in the neighborhood. 

No less, there are a myriad of ways that such an interface can be represented, so it's ripe for innovation (subject to broadband and computational resource realities, not to mention privacy concerns).  

Concerns aside, this is the one segment that the VCs get most excited about, as observed at both Mobilize and O'Reilly Foo Camp, which is ironic in that VCs are writing very few early stage checks for Mobile at all.

Surprised?  I was.  What it comes down is that Apple has so totally unwound the old value chain that a new monetization arc that scales to the levels of VC worthiness has not yet formed.  Plus, there is plenty of past experience of VCs getting burned by investing in carrier dependent startups (a point underscored in the VC panel at Mobilize). 

Worth noting here is that among VCs there seemed to be a uniform sense that Carriers were largely tone deaf to customer-centric innovation, a trend that is different outside of the US, where owing largely to carrier nationalization, there has been more of an open service gateway for third party development to flourish.

The best quote here (as one VC noted) is that we are "Starting to see the unbundling of what a cell phone company is." Amen to that, given the legacy of non-innovation relative to non-US carriers and the rest of the computing and communications landscape.

Netbooks, Notebooks and the iPad

One final hot topic at Mobilize was the Netbooks segment, an area that I have spent a lot of time reading and writing on so I wanted to close this piece by sharing some information on key takeaways from the event.

First off, Netbooks is outgrowing notebook computers (Laptops) as a segment in terms of unit count by a two to one margin. 

Second, in terms of utilization environments, this is the device that you take with you to Class/School; when you are Traveling; Lying on the Couch; it’s the Extra Computing Device for your kids. It serves Verticals like Hospitals and Field Workers.  

In other words, it doesn't replace the notebook but it targets segments where the notebook is less convenient, too bulky, too hot or too expensive.  

What remains to be seen is whether such a device cannibalizes or complements that general computing market (notebook or otherwise), but the data suggests that this is a 'dog that will hunt.'

Ironically, this device is potentially the perfect overlay for the Carrier that wants to deepen their relationship with their Mobile, Satellite, DSL and/or POTs customer by extending their account across more devices.

As such, it's a leverage play that could beat Apple at its own game, although my guess is that many will do so by reselling Apple’s forthcoming, iPad Tablet Computing Device.

Related Posts:

1.  Why Innovation is Hard

2.  Surplus, Scarcity and the App Store

3.  Apple’s forthcoming iPad Tablet Computing Device

4.  Virtual Reality, Meet the iPhone

5.  Touch Traveler: London, Paris and only an iPod Touch

Assessing the Internet: Great Creator or Better Destroyer? (Guest Column @ GigaOM)

 

The Business Insider recently ran a well-argued, provocative piece entitled “Economy Will Be Back In Recession By Early Next Year” that takes into account the continuing job losses in the U.S. economy and the prolonged struggles within a number of industries, including finance, media, manufacturing (especially the auto industry), advertising, big box retail and real estate. 

But as a longtime techie and a former bricks-and-mortar real estate guy before that, I can’t help but look at how the Internet has impacted the above segments over the past 15 years and wonder what it’s yielded more of: pain or gain.

Read the full post HERE, and let me know What's Your Take? 

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Creating New Synapses in the Global Brain: Notes from Foo Camp, 2009 (#foo09)

 (photos by Scott Beale / Laughing Squid and JRandomF)

This is a post on takeaways from Foo Camp, 2009, which I took part in last weekend.  Foo Camp is an event whose mission is to ‘create new synapses in the global brain’ by facilitating new, unexpected, and interesting connections between people and ideas.

What is Foo Camp? 

FOO stands for Friends of O’Reilly (Media), and it is a camp in the truest sense of the word.  Campers living in tents for the weekend behind O’Reilly Media's offices (a large rural green with more open space - an orchard - behind it); or sleeping under desks in the actual office space itself. 

We are well-fed, fully taken care of and made to feel safe.  The structure is loose, but nonetheless, it is structured so that it’s broken into a bunch of one-hour time slices, physically spaced across O’Reilly’s many varied indoor and outdoor spaces.  (Tent-based sessions were my favorite.)

Foo Camp is hosted by Tim O’Reilly and Sara Winge (thanks, guys, it was a life experience), and it’s an eclectic mix of artists, educators, media folk, policy wonks, entrepreneurs of all shapes and sizes, financial types and makers. 

Worth noting is that the O’Reilly Universe is a constellation of nice people, and at Foo Camp there is no sense of boundaries or hierarchy so the event emanates from that, which is a gift that I am sure all attendees were grateful for.

How Foo Camp is Launched

After a round of intros and breaking some bread together, a time grid is set up, and people begin to create Post-Its that they can place on the grid if they want to propose leading a session.  

In a frenzy of very few minutes, the agenda for Foo Camp is established.  Just like that (with some smart editing/finessing behind the scenes).

It’s very organic and fertile.  Every night crescendoes with live performances.  One type of performance was Ignite, where a set of chosen Attendees each present sessions of 20 rotating slides to deliver a narrative on their presentation topic in five minutes.  

As Ignite’s makers say, ‘Enlighten us but make it quick.’

In another performance, Ge Wang, co-founder of Smule, demonstrates the legacy (and still dominant) technology behind Ocarina, an iPhone App and Service that marries computing and music.

The session, as much as anything, underscores the physicality of the iPhone.  Also, worth noting is that while there was not one Apple attendee at Foo Camp, it was a love fest for the iPhone, albeit with some definite signs of Android among attendees (and a ton of Googlers in attendance).

Ge’s demonstration pays off big dividends when the next night, Zoe Keating performs a multi-tracked musical arrangement with live cello as the centerpiece (watch/listen to the mesmerizing 'Escape Artist' here).  

Literally moments earlier, I wondered how tough it was going to be to follow MC Frontalot’s rapper sensation scat in ‘Message No. 419.’

As to the sessions, they are created on the fly, subject to the session leader’s style and the audiences’ own vector.  

These are strong, opinioned people, some are experts, others are just impassioned in general, so it's the proverbial cat herding exposition.

Over the course of the event, I participate in nine sessions, and it's through this rapid fire that you come to realize that some people you have more convergent paths with than others (by virtue of running into each other at the same sessions), which is a nice side touch of the event format.

At the same time, there are enough meals, snack and beverage set asides that you get to zig/zag between modes and conversations with whoever is in front of or behind you in line; next to you or across the table.

That said, the formal sessions are my fave because you really get a 360-degree perspective on a topic, inasmuch as at least a couple of fully formed arguments on the topic are put forth, and then refined a bit further, and of course, you feed your own arguments and conclusions into the mush.

The eclectic nature of the people mix (there were ~300 people at Foo Camp) proves that different buckets of approaches work for different people (i.e., there is no one RIGHT recipe for success), a point that the sessions truly crown, which is both encouraging and humility inducing at the same time.

Sessions and Takeaways at a Glance

One session looks at the topic of Anonymity, and whether it should be encouraged or discouraged in online environments, like communities and blogs. 

A simple truth is that people are often less nice when they are anonymous, and there are trolls and spammers, too. 

At the same time, there are valid reasons that we consider the right to be anonymous a civil liberty.  Plus, there are pragmatically sound decisions for ensuring anonymity, such as to protect whistle blowers.

A really thoughtful point is raised that maintaining a pseudonym (e.g., hypermark versus my real name) doesn’t necessary equate to anonymity. 

A counter-measure to anonymity, though, is focusing your energies on making authentication and verification a virtue within your service; namely, by figuring out the cases where users want to be verified and recognized to begin with.

Meanwhile, multiple sessions tackle the topic of Data munging, modeling and visualization, how the Cloud emerges, how brittle information capture is not only within computer systems but in certain physical places of the world (e.g., afghanistan voting data), and what that means in terms of systems thinking/solutions.

Another spirited discussion picks apart the topic of native versus web based Mobile Applications for developers; a decisioning path that is pretty much defined by the relatively uniform consensus that the iPhone is the only platform that matters today (for developers, at least), and that the bar is pretty much set as requiring access to device attributes, purchasing mechanisms and robust SDKs, an area where Apple is clearly best of breed (today).

Bunnie Huang of Chumby presents a really great framework for understanding the economics and logistics of Hardware Device based businesses.  Excerpt: "You can do anything once, but once you try to do something a million times it is A LOT harder."

There is a thought-provoking, almost melancholy, session on the future of the Book.  

Is print dead?  Does Kindle turn it into a $9.95 download default pricing model?  

Do people even still read?  Will Apple’s rumored iPad Tablet device change the game?  I will be writing a post shortly on this topic.

Countering the rumination of the Book are sessions on Augmented Reality, which juxtaposes nicely for me personally when I spend a good 90 minutes in Google’s Holodex; essentially, the Google Earth application with a really good hand controller and eight (8) 50” HD video screens vertically tilted and interconnected to create a 320 degree concentric viewing periphery.  Jaw-dropping visual WOW!

The session ‘Let Twitter handle that’ uncovers a truth about Twitter as a company.  They are still targeting the developer hacker with their platform (versus enterprises and big ticket customers), even while understanding the responsibility that goes with being a platform in terms of SLA’s and what not.

There is an interesting discussion if when you tweet is it inherently in the public domain or do usage rights require formal granting (there were some discussions on creative commons and legal factors in this area, too). 

Me-thinks a public tweet is public domain, but mixed opinions on this one.

Here’s one for you that is uncovered from a side discussion nestled within a session. 

Facebook’s long-term monetization 'tax' on Facebook Platform developers and where apps fit within the Facebook site structure (in terms of visibility/accessibility) is the key gate to social gaming startup, Zynga, going public.  

Why?  Zynga has built a (rumored) $100M business on the back of Facebook, but still doesn't know what Facebook will charge them to continue access to that base of users (e.g., 30% ala Apple iPhone or equity AND rev share ala Comcast/TCI); or, whether Facebook will wake up one day and decide to muck things up (by burying apps or favoring certain developers over others, etc.).  

Also, a session on startups and incubators, uncovers the nugget that for startups, having good graphic design aesthetics is a often predictor of success!  

Apparently, it speaks to a level of caring about the presentation, experience and little details that ripple over into a lot of other areas.

Finally, Bill Janeway of Warburg Pincus leads a wonderful presentation on the Global Financial Crisis, and it's troubling similarities to the financial crisis of 1929-1931.  

As he notes, while both events were driven by:

• Global financial imbalances  (Then: Reparations and War Debts; Now: US-China current account deficit/surplus);
• Collapse of speculative asset bubbles IN THE US (Then: stock market; Now: housing);
• Global crisis of financial confidence drives  demand for cash (Then: fear of currency  depreciation/inflation; Now: loss of confidence in financial models);  
• Collapse of  international  trade;  
• Global economic contraction

Here’s the good news (or more accurately, less horrific news).  

While the world went from financial crisis in 1931 to the Great Depression by 1933, we will NOT because:

(1) Then, the Gold Standard acted as a constraint on policy response since there were fears of hyperinflation if we left the gold standard. We aren’t hindered thus, as no longer on gold standard so central banks can supply liquidity demanded by private sector;

(2) Scale of Public Sector: Then: US Federal Government <2% of national economy; Now: US Federal Government = 20% of national economy...and still smallest share of the developed world.   This makes an enormous difference in cushioning the collapse in private spending and making it even possible for fiscal stimulus to offset the decline.

(3) Conceptual Framework.   Then: built into the worldview of economists and policy-makers was an analytical framework that assumed all resources, including people, are fully employed at all times, so any government borrowing and spending can only generate inflation.  They held to this in the face of 25% unemployment and falling prices (Deflation).  Thanks to Keynes in particular, most policymakers and most economists understand that government borrowing and  spending can and should offset a major collapse in the private sector such as  we have had globally now.

(4) In 1931, no  government tried to offset the decline in the private sector.  Today, the US and the Chinese governments have been most vigorous in offsetting the decline in private sector borrowing and spending by vigorous fiscal action.   Note that "we" - not the Chinese - are now funding our government's fiscal stimulus: the $1 trillion of government borrowing just about exactly offsets the $1 trillion decline in household borrowing over the past 12  months.  Even the Germans, who badmouth "crass Keynesianism" are actually running substantial (and welcome) deficits.

BUT, the danger remains that residual fear of government deficits will induce a withdrawal of stimulus too soon (as in 1937 in the US and in the mid-90s in Japan), resulting in an extended period of stagnation as the private sector continues to rebuild its balance sheet by trying to save more and borrow and spend  less.

Netting it out: Foo Camp was simultaneously a brainstorm session on steroids (and/or coffee, red bull, wine, beer); a cultural social event (ala Maker Faire); and a state of mind that left one and all both inspired AND exhausted.

Related Posts:

1. Pattern Recognition: Makers, Marketplaces and the Library of the Commons  
2. 3D Glasses: Virtual Reality, Meet the iPhone 

The Library of the Commons: Rise of the Infodex (guest post @ O'Reilly Radar)

Somewhere between the realm of Personal and Shared media lies the realm of the Universal. 

The realm of the universal is something that I call the Library of the Commons, a global repository of user-generated and crowd-sourced media and information. 

Services that logically nest in the Library include: Amazon Reviews, Yelp, YouTube, Craigslist, Wikipedia, Flickr, Tweets. 

This post not only provides a framework for understanding the Library of the Commons, but suggests a federated listing model that I call the Infodex - a kind of next generation Rolodex - for housing, organizing and sharing such listings.

Read the full post HERE.

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2. Envisioning the Social Map-lication
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Government 2.0 & The Library of the Commons

The short (45 seconds) video post captures some thoughts on what Government 2.0 means to me.

In a nutshell, I am advocating the creation of an online library that consists of the composite knowledge base of every topic where governance plays a part, including both "official, curated" sources and “user-submitted, crowd-sourced” content, such as magazine articles, video segments, industry white papers, blogs, opinion polls and the like.

Imagine the President being able to say, "Go to the Gov 2.0 website, read our official articulated position on Health Care Policy, alongside the official positions of the Republican Party, Big Pharma, AMA and ordinary Americans, and then let us know your thoughts."

To be effective, such a system would need to have clear communal policies, like no personal attacks, clearly delineating opinions versus facts, citing and linking to referenced sources and a reasonably simple structure so those interested in just stats can get that, those interested in just white papers by the medical establishment can get that, and those interested in personal blog/life stories can get that.

Similarly, Gov 2.0 implies a dashboard of key metrics, transparency on their measures and mechanisms to amplify (tag, rate, comment) and disseminate content/positions of interest. Optimally, one system (with open APIs) would enable the Administration, Congress, Lobbyists/SIGs and Consumers to rally their base, and provide common communication paths for meetups, online engagement, capture of the outcome and follow up.

What other building blocks do you see in the evolution of Government and governance?

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2. Getting Real: On Doomsday, the Demise of So-Called Experts and the New Arbitrage
3. Capitalism 2.0: TED Spreads and Lessons from Japan’s Lost Decade
   

Touch Traveler: London, Paris and only an iPod Touch (Guest Post @ O'Reilly Radar)

Recently, I spent two weeks vacationing in London and Paris with only an iPod Touch for communications and connectivity.

Mind you, I am not suggesting that this was a wise thing to do, but it's what I did, and this post captures the good, bad and ugly of the experience.   :-)

First off, the revelation (for me) was how much the Google Mobile Maps App on iPod Touch completely changes the equation when traveling.

Moreover, Maps allows you to visually navigate in Real-Time (very different from the experience on my Blackberry), all the while push-pinning favorite destinations, and determining routes in just a few clicks.

It is the consummate reality augmentation application for travel, a sort of "magic compass."

Read the full article HERE.

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APPLE is EVIL, You're All Fanboys and other half-truths (guest post for O'Reilly Radar)

There is a meme afoot. Apple is evil. Its arrogant ways and dependence on the cult of personality are to be its demise. Developers are said to be unhappy. And, Apple Secrecy Doesn't Scale. Google-ification is the way, the RIGHT way. The Apple Way can't possibly persist ad infinitum.

But, you know what? It’s a crock. In the here and now, Apple's success is unparalleled, and the engine is humming better than ever on multiple vectors - products, margins, developers, profits and consumer engagement.

Read the full post HERE.

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Environment Variables: On Surplus, Scarcity, Fear & Greed

I am a big believer that markets gravitate between FEAR and GREED, and that industries are driven by core assumptions about the SCARCITY or SURPLUS of enabling resources.

Think about the stock market in terms of the former (it's heavily outlook driven), and the evolution of computing, as afforded by the latter (i.e., the commoditization of processing, storage and bandwidth).

With that in mind, here's a riddle for you:

If you were to ruminate on what type of economy you thrive best in, and the type of company/industry that you gravitate towards, where would it fit on the following 2 * 2 matrix:

On the X axis, you have MARKET UPTAKE DRIVERS; namely, whether customer-buying decisions are driven by Greed (the belief that tomorrow will be better than today) or Fear (the belief that rainy days are ahead);

On the Y axis, you have RESOURCE AVAILABILITY ASSUMPTIONS; namely, whether the industry's success is predicated on resource Scarcity or resource Surplus (commoditization).

Based on the resulting four quadrants (i.e., Surplus/Fear; Scarcity/Fear; Scarcity/Greed; Surplus/Greed), I have plugged in one example type of company/industry for each quadrant.

Given the above, what type of economy do you thrive best in, and what other examples come to mind for each quadrant?

Similarly, what types of products or services can you imagine as the offspring of each of these quadrants?

Old Media, New Media and Where the Rubber Meets the Road (Guest Post @ O'Reilly Radar)

Analog (old) media is all about managing scarcity by controlling distribution, the net effect of which is to enable publishers to price access to their “toll roads” as they see fit. 

Digital media, by contrast, is premised on the assumption that the tools for content creation, selling, distributing and marketing said media content enable meta-professionals and prosumers to create a surplus of “good enough” content.

This content, in tandem with un-tethered distribution and pretty good information search/retrieval functions, operates in complete disregard for the old media-based pricing models that preceded it.

As such, when the forces of analog media collide with digital media, as they have in music, newspapers, yellow pages, books and magazines (and are beginning to collide in television and movies), a brutally efficient “creative destruction” process occurs.

Simply put, when the digital forces can assemble a “good enough” version of the un-tethered content, then in most cases, the analog media provider is in deep trouble (read: devastating business model disruption).

In this guest post for O'Reilly Radar, I take a look at Media Disruption in the real world; examine Differentiated v. Undifferentiated Media strategies; and analyze the implications for Re-thinking Your Product and Your Audience.

You can read the full post HERE.

UPDATE 1: Great article by Dan Lyons, writing under 'The Secret Diary of Steve Jobs' about "Why Mainstream Media is Dying."  Excerpt: Every once in a while you get to see a mainstream outlet cover a story right alongside a blog, so you can put them up against each other and see why one was so much better than the other. This week TechCrunch and the New York Times (photo) provided just such a lesson.  The issue was a company called Zynga, which makes online games, like FarmVille, that have become incredibly popular on Facebook among people who are missing parts of their brains. On Oct. 31 TechCrunch broke a big story called “Scamville: The Social Gaming Ecosystem of Hell” about how Zynga was making money by selling scam ads — the kind that trick kids and other frigtards into signing up for useless subscriptions to stuff they don’t want. After all this, we woke up Saturday to find a story in the New York Times, also about Zynga (and other Facebook game companies) with the headline, “Virtual Goods Start Bringing Real Paydays.” The Times put two reporters on the knob-polisher, and somehow they managed to interview Pincus, and to quote him — and yet they included not a single word about the scammy ads. Not. A. Fucking. Word. 

Related Posts:

1. Digital Media Rules: The Open Sourcing of Information
   
2. Apple, the ‘Boomer’ Tablet and the Matrix 
3. How Social Media Works: It's About Breadcrumbs and Conversations
4. The Programmable Fan Site: A New Media/Ad Unit Model
   
5. Flip Video News Network: Crowd-Sourcing meets CNN

Analysis: Apple June Quarter Earnings Call - Keeping it Real

APPLE (AAPL) STOCK PRICE: 
Jan. 20 = $78.20 
July 20  = $152.91

Remember all of the platitudes about Apple being doomed since they are a consumer-centric company selling high end products in the worst economic cycle in decades?

Well, it was the mighty consumer that enabled the company to (once again) report its highest non-holiday quarter (in terms of revenue and earnings) in Apple’s history. 

More on that in a minute. But first, some numbers.

In terms of GAAP, Apple generated $8.34B in sales in the June quarter, a 12% increase over last year’s June quarter, which is incredible considering the economic shift between last June and now.  

No less, this growth did not come at a cost of margins and profitability.  Instead, the company generated net income of $1.23B, or $1.35/share, on gross margins of 36.3%, which was 300 basis points better than they guided; so much for sacrificing margin to entice customers to buy. 

More impressive is when you add in the full impact of iPhone revenue via the non-GAAP model that Apple now provides transparency on (it backs out the impact of subscription model accounting - i.e., two-year ratable revenue recognition). 

Here, the sales mushroom to $9.7B and net income to $1.9B, a bump of $1.4B and $700M, respectively. 

Oh, and cash, Apple has LOTS of it.  They are now sitting on a “sick” $31.1B pile of it, an increase of $2.3B from the prior quarter.

Yowza!  So, how did they do it?  Well, that’s a story worth analyzing a bit, as it provides a framework for making sense of the durability of the company's performance over the next handful of quarters.

The Mac Business

Incredibly, the company has outgrown the market now for a staggering 18 of the last 19 quarters, and in the June quarter, they were up 4% versus 3-5% contraction for the industry (a 7-9 point outpacing of the market). 

They did this by selling 2.6 million Macs, setting a new June quarter record.  Clearly, this was aided by accelerated sales after the launch of new MacBooks in the June quarter, but interestingly, whereas institutional business, education and pro segments were down, the consumer segment was up. 

Credit Apple’s execution here in taking down the average sales price of their products to remain compelling to cash strapped consumers – without sacrificing margins.

By contrast, the competition continues its assault on high volume, low margin, undifferentiated offerings, which predictably, has played into Apple’s hands.

The upside scenario in the Mac segment is that as K-12, higher ed and pro segments rebound, the company could see significant upside to this part of their business, further aided by federal stimulus inflows into the education segments, which in this quarter, had no impact (good or bad) for the company.

The counter is that now that the company has refreshed both its desktop and notebook lines, some of the call to action is muted in the coming quarter. 

iPod, iPod touch and iPhone

First off, this was the first time that I heard the company refer to the iPod, iPod touch and iPhone product lines as “Pocket" products. 

My gut is that this is a precursor to the segmentation (and hardware/software matrix) that they will announce when they come out with the larger form-factor tablet device that is (expected) in the October time-frame (see my post on the iTablet here).

The bottom line is that the descent of the iPod is in full force (10.2M units sold, down 4%) versus the ascent of both the iPod touch (numbers not presented, but up 130%) and the iPhone, but this is more a product of the maturation of the market than Apple losing any market share (they have 70%+ of the MP3 player market).

By contrast, the iPhone sold 5.2M handsets in the quarter, nominally aided by the presence of a $99 3G after the June 19 launch of the 3GS (which sold 1M  units in the first three days following its release). 

I have written too much on the phenomenal success of the iPhone platform so the only things of note here are that the company:

1. Has a dearth of 3GS supply, which suggests that they have achieved the right balance between low-end 3G buyers and high-end 3GS buyers.  And unlike the Apple of years past, one gets the sense that the company has a good handle on its supply chain/demand planning.
2. Is seeing growing interest from the enterprise in terms of iPhone 3.0 OS and iPhone 3GS due in part to hardware encryption and improved security. They are doing particularly good with small businesses and large orgs that allow people to purchase phones for personal use. In fact, 20% of the Fortune 100 have purchased 10,000 units each, with some orgs having purchased more than 25,000 units. This data, coupled with a highest overall satisfaction rating among business customers (according to JD Power), and being approved for purchase by over 300 higher ed institutions, leaves them confident that they are still at the tip of the iceberg of this market.

Apple Retail Stores

I would, however, flag Apple retail as the “potential fly in the ointment” bucket, inasmuch as while the company still shows that over 50% of the Mac buyers in Apple stores are first time Mac buyers, and they saw an uptick of store visitors to 38.6M from 31.7M last year (up 22%), same store sales (versus the prior year) were down $5.9M (versus $6.8M), a drop of 13.2%.  

This is the one clear asymmetry in their numbers, and in retail land (my first career was in retail real estate asset management), when same store sales drop, it is often an early warning sign that new stores are cannibalizing old ones, and the macro business is approaching a ceiling. 

Plus, the shrinkage is a deviation from all of the aforementioned growth numbers in the macro business. 

Finally, and purely anecdotal, is the fact that Apple’s former head of retail now works for Microsoft spearheading their (likely disastrous) foray into retail.  

Know this.  Retail real estate guys rarely jump off of gravy trains. They are either pushed or see the opportunity for real growth as behind them.

In any event, this is one to watch.

Other notes of interest:

1.    There was no cameo appearance by Steve Jobs in the call, and no one asked where he was, which is both a credit to Apple's performance and perception management (i.e., perception is that the company is in good hands in terms of operational performance).

2.    Over 8 billion songs have now been downloaded from iTunes store. By contrast, 1.5 billion apps have been downloaded from App Store in about a year. Not a one-to-one comparison, since many of the app downloads are free, but gives some relativistic view into the potency of Apple’s media and platform strategy.

3.    Snow Leopard is coming sometime in the next quarter, and as noted in past posts, it is being priced as a $29 upgrade from Leopard, which I believe is tied somehow to unannounced functionality in the tablet and/or new ways that Apple will better bridge the distinctions between MacOS and iPhoneOS computing models; the implication being that we (Apple) want/hope/need everyone to upgrade to take advantage of something unannounced, and are pricing the upgrade accordingly.

4.    Tim Cook sidestepped questions about an Apple tablet/netbook device.  One of the questions asked by analysts was whether Apple had plans or saw a market for netbooks. Cook's answer was a tell; namely, that the company saw no viable $399-499 type of offering that would meet its goals, reminding the audience that Apple isn’t about maximizing units (whither Nokia, Dell, etc.) but rather, on delivering ease of use, value and innovation, suggesting that the netbook buyer was replacing a full featured notebook with something underpowered, cramped, small display, etc.  When asked by a different analyst if Apple saw a market for such devices at ANY price, Cook punted.  Translation: a $700-900 device solving a different problem than a shrunken down notebook, and presumably offering more than a bigger screen version of an iPod touch is coming soon. I can hardly wait.

5.    App Store differentiation. The question came up whether Apple could keep ahead of the competition, which is now building its own app store concepts and platform plays, and Cook basically noted Apple App Store's 65K apps versus 1-5K for Android, RIM, Palm and Nokia, respectively.  All true, and the company has knocked the ball out of the park, and back again, which I blogged about here, but there has been serious developer backlash about a race to the bottom and Apple’s capricious, non-transparent approach to its developer constituency, so I would flag the health/happiness of the developer ecosystem as a category to watch over the coming quarter. The key challenge for the competition is to come up with the "desktop publishing differentiator" that changes the equation from a simple law of numbers to a metrics of success discussion (i.e., we are solving a different problem, and supporting the ecosystem accordingly). Yeah, I know.  That as easy as "just add water," but the game is no longer about trying to meet Apple punch for punch. It's about changing the rules (again).

6.    iPhone in China. The word I have heard is that a deal is finally done, and we will see a stripped down iPhone in China later this year.  Cook went so far as to say that it is Apple’s goal to have the iPhone in China within a year.  I will leave the analysis on units and dollars to others.

Netting it out: Apple continues to be the sexiest company in tech by balancing a brilliant, gusty vision with a boring focus on the basics: strategic planning, execution, innovation, value, ease of use, diversity and leverage.  And it has its (traditionally) two best quarters of the year upcoming.  Wishing you owned this puppy at $78.20 when the sky looked like it was falling?  

UPDATE 1: Chris Albrecht of NewTeeVee asks What the Heck is Going on with Apple TV, noting that Apple didn't evening mention the "hobby" in the earnings call, and analysts didn't ask.  I know that I forgot, even though there is no way that I believe that Apple is doing little/nothing with the product.

UPDATE 2: China Unicom in 3-Year iPhone Sales Deal, Reuters reports.  China Unicom Ltd. (CHU) has reached an agreement with Apple Inc. (AAPL) to be the sole supplier of the iPhone in China for three years, the Shanghai Securities News reported Tuesday, citing unnamed sources. The mainland's second-largest mobile operator by users after China Mobile Ltd. (CHL) will guarantee total iPhone sales of at least CNY5 billion by buying 1 million to 2 million phones from Apple annually, the report said. China Unicom could begin selling the iPhone in China around late September, the paper said.

Related Posts:

1. Apple, the 'Boomer' Tablet and the Matrix (O'Reilly Radar guest post)
2. Is the iPhone Platform Destined to Disrupt the Packaged Software Industry? (GigaOM guest post)
3. iPhones, App Stores and Ecosystems 
4. Analysis: Apple WWDC Keynote - Punishing the Wizard, Part Two 
5. Built-to-Thrive - The Standard Bearers: Apple, Google, Amazon 

The Mobile Broadband Era: It's About Messages, Mobility and The Cloud

 

PC-centric computing is giving way to the age of Mobile Broadband, best exemplified by iPhone, the first caveat-free mobile platform.  

This article, a Guest Post that I wrote for O'Reilly Radar, looks at the elements that will define mobile computing.

Here's an excerpt:

Forty years ago, media theorist Marshall McLuhan asserted that the “medium is the message,” as a way of underscoring how different forms of media are imbued with their own contextual forms of meaning.

Yet, as we sit at the waking hours of the Mobile Broadband Era, it is hard not to conclude that it is The Message that is to be the defining characteristic of this era.

Why, The Message?  Simply put, messages have compelling attributes.  One, they can be date stamped and packaged up to elegantly deal with both real-time and asynchronous communication scenarios.

Read the full article HERE.

Related Posts:

1. Envisioning the Social Map-lication
2. The Nine Essential Truths of Entrepreneurial Success
3. Right Here Now Services: Weaving a Real Time Web Around Status
4. Digital Media Rules: The Open Sourcing of Information
5. Surplus, Scarcity and the iPhone App Store

Quantum Leaps and Wave Logic

 

I have been ruminating a bit about the onset of the Mobile Broadband Age and the rise of Cloud Computing models, and will blog about the topic shortly.

This quote by Carver Mead struck me as pretty relevant to thinking about the fulcrum that is forming before us: 

"The quantum world is a world of waves, not particles. So we have to think of electron waves and proton waves and so on. 

Matter is 'incoherent' when all its waves have a different wavelength, implying a different momentum.

On the other hand, if you take a pure quantum system – the electrons in a superconducting magnet, or the atoms in a laser – they are all in phase with one another, and they demonstrate the wave nature of matter on a large scale.

Then you can see quite visibly what matter is down at its heart."

- Carver Mead

Apple, the 'Boomer' Tablet and the Matrix (Guest Post @ O'Reilly Radar)

I have written here, here and here about Apple’s inevitable assault on the Tablet market. What I hadn’t factored until recently is how symbiotic such a device would be for Baby Boomers.

Why Baby Boomers? Well, for the same two reasons that this demographic is unlikely to embrace the palm-sized iPhone en masse.

One, such a bookish-sized tablet device – I’ll call it the Boomer Tablet – would be tailor-made for home Wi-Fi setups, thereby obviating the mobile access costs associated with iPhone, a significant barrier for a generation that is programmed to keep mobile bills within a tight spending range.

Two, because a larger-form factor device would offer Boomers a bigger viewing screen and “lifestyle” settings, like fatter keys and a more forgiving keyboard to ease input, and wizard-like shortcuts to simplify recurring tasks.

This is key, because with the onset of age, Boomers’ motor skills have become less precise; their vision has become poorer; and their eyes get tired easier.

As such, the premise of them plugging away on tiny keys and peering into the tiny screen of a mobile device like iPhone/iPod touch is a non-starter.

By contrast, the Boomer Tablet offers a superior input, viewing and playback environment for accessing your iTunes library, personal media, syndicated content services, iPhone Apps and presumably, Mac Apps; something that the 70M+ Baby Boomers in the US who are aged 53-73 would likely find compelling.

Moreover, if Apple put a video camera in the device – not a stretch since they are doing it in the iPhone GS – it could make video conferencing and VOIP ubiquitous in a relatively short time (Skype already has a client for the iPhone/iPod touch). What better way to stay connected to distant loved ones?

Read the rest of the post HERE (at O'Reilly Radar).

UPDATE 1: Good Article in Fast Company looking at how Amazon is attempting to play its cards right with respect to Kindle.  Check out 'Amazon Taps its Inner Apple.'

UPDATE 2: My post on the (baby) Boomer Tablet computing device was referenced in today's New York Times. Very cool.  P.s., yes, I noted that the author misspelled my name.

UPDATE 3: AppleInsider is reporting that it has confirmation (from a trusted, reliable source) that this device will be coming to market in Q1, 2010 (versus Q4, 2009).  I wish it was the earlier date, but as my post underscores, this is a BIG undertaking.  Meanwhile, over at Seeking Alpha, Jason Schwarz argues 'Why Apple's iTouch Tablet Will Become It's Flagship Product."

Related Posts:

1. Start in the Middle: The "Jobs," "Outcomes" and "Constraints" Innovation Model
2. Apple, TV and the Smart Connected Living Room
3. iPhones, App Stores and Ecosystems
4. Is the iPhone Platform Destined to Disrupt the Packaged Software Industry?
5. Analysis: Apple WWDC Keynote - Punishing the Wizard, Part Two