Visualizing cross-platform development

Much has been made recently of Microsoft’s shift from a Windows-centric worldview to a cross-platform approach to the development of applications and services. Sometimes, efforts like this are difficult to visualize, so I wanted to take some time to analyze the actual numbers around all this in an attempt to provide a visualization of the degree to which Microsoft has transformed itself. In the process, I’ll highlight a few other points too.

First, the overall numbers

Let’s start with some numbers. These numbers represent the number of apps each of the three major platform companies makes for each of the three main platforms. Specifically, I’m looking here at installable apps, not those that come pre-installed on phones (there is a slight issue here with the fact that Google offers many of its pre-installed apps in the Play store too, but for the sake of simplicity I’ve ignored that). The table below summarizes the current state of affairs (I’ve broken out the mobile and PC operating systems to provide additional granularity):

Cross platform development tableNow, let’s drill into some specific companies.

Apple – still living by Steve Jobs’ maxim

There’s room for debate about the extent to which Apple still reflects Steve Jobs’ values and policies, and how far it has moved beyond those. One area where it seems to have stuck pretty closely to Steve Jobs’ philosophy is cross-platform development. One of my favorite quotes on this topic comes from Walter Isaacson’s biography of Steve Jobs, in which Jobs described his attitude towards developing an iTunes app for Android thus:

We put iTunes on Windows in order to sell more iPods. But I don’t see an advantage of putting our music app on Android, except to make Android users happy. And I don’t want to make Android users happy.

That perfectly encapsulates Steve Jobs’ philosophy, and Apple’s approach in general, towards cross-platform development: do it when you have to, to enable you to sell devices to people not using Macs, but don’t do it for its own sake. Apple has remained true to that maxim so far under Tim Cook – the chart below has the relevant cells highlighted:

Apple cross platform developmentThe key conclusion here is that Apple has focused very much on its own platforms, developing a little over a dozen apps for both iOS and OS X beyond those pre-installed on devices, but barely touching the other platforms at all. Where it does so, it’s exclusively to support major Apple services for iPhone and iPad users who also use Windows: iCloud Drive and iTunes are two of the three apps, while QuickTime – necessary for playing Apple-generated video files – is the third. Development of Safari on Windows – arguably a departure from Apple’s usual rules for a time – has been discontinued. It’s also worth noting that, even on its own platforms, Apple isn’t developing dozens of apps – there’s a small, focused number, which reflects another key Apple principle: keeping things simple, and focusing on what it does best.

The one thing I’ve left out of the chart above is the Beats Music app. I left it out because it was acquired by Apple, rather than developed in-house, and because I suspect that at some point it will be replaced by something integrated with iTunes in the coming months. When that happens, it will be extremely interesting to watch what Apple does from a cross-platform perspective. Will it merely strictly honor its promises at the time of the acquisition and keep the old Beats app around for whoever wants to use it on Android, while developing an iTunes-branded alternative that’s more exclusive in its reach? Or will it use this as an opportunity to reinvent both Beats and iTunes while launching an Apple app on Android for the first time?

Google – developing for the platforms that matter most

Google’s incentives when it comes to cross-platform development are quite different, because its revenue and profits are driven by having the broadest possible audience and not by preferring its own platform. It also has a much more diverse and diffuse set of apps and services it makes available on all platforms though the web. Another favorite quote is this one from Andy Rubin (as quoted by Steven Levy in his book In the Plex), which somewhat summarizes Google’s philosophy:

We don’t monetize the thing we create… We monetize the people that use it. The more people that use our products, the more opportunity we have to advertise to them.

As such, Google develops apps very broadly, not just for its own platforms, but for Apple’s too:

Google cross platform development

Google actually offers more installable apps for iOS than Apple itself does. In fact, it’s likely that Google is among the most prolific developers for iOS around. All of Google’s core services are now available in some form on iOS, though it hasn’t made the same investment in apps on OS X, largely because these services run perfectly fine in a web browser. Google does make a handful of native apps – such as Picasa, Google Drive and Google Earth – available on both OS X and Windows, but neither platform has been a significant source of investment for Google. Meanwhile, its own Chrome OS has almost 40 apps available, largely because these are simply packaged websites.

Microsoft – broadest cross-platform development

To return to the point that sparked this post, Microsoft clearly has the broadest approach to cross-platform development of the three, developing significant numbers of apps for its own platforms but also those of Google and Apple. Within the last few weeks, Microsoft has announced its intention to add the full version of Office to the list of apps it offers on Android, and last week it released a slew of new MSN branded apps on iOS. The Microsoft column highlighted below really brings out quite how pervasive the company’s presence is on the other two companies’ platforms:

Microsoft cross platform developmentMicrosoft’s count of apps for its own platforms is skewed quite a bit by the large number of Xbox-branded games on Windows and Windows Phone, but there are also huge numbers of legacy enterprise apps on Windows in particular. But it also has almost 50 apps on iOS and over 50 on Android already, and the number looks set to grow even further. It’s worth noting that this hasn’t all happened in the past year: Microsoft has, in fact, been doing a lot of this for quite some time, so it doesn’t just reflect some Nadella epiphany. But the number and nature of those apps available on Apple and Google’s platforms has begun to increase under Nadella, and I think this will continue.

Windows – the platform only a mother could love

All of which brings us to the lonely last rows in the table, those representing Microsoft’s two platforms. While Microsoft develops for all three platforms, Google develops only for iOS and its own platforms, and Apple keeps to itself. Windows and Windows Phone are the platforms that get the least love from the other two, with hardly any apps from either Google or Apple:

Windows cross platform developmentThis is particularly remarkable because Google’s objective, as stated above, is to get its services in as many users’ hands as possible. It is likely that the calculus behind Google’s absence from Windows Phone in particular is twofold:

  • First, the investment needed to bring key services to Windows Phone is such that the current user base doesn’t justify the time and expense
  • Second, there may be a strategic element to withholding Google’s services from its traditional rival, even if Apple seems a more direct threat in many ways.

There may also be an element of leaving Windows Phone to the Microsoft-centric users, though it’s clear from the number of ersatz apps in the Windows Phone store that there’s strong demand for Google apps on the platform. More broadly, though, it’s likely that the first of those two bullet points is the real answer: it simply isn’t worth Google’s time and money to develop for a platform with very small market share and an increasing tendency towards low-end devices. This, of course, mirrors my recent piece on the Windows Phone app gap, and the broader challenge for Windows Phone. And all of this reinforces the need for Microsoft to embrace cross-platform development in the first place: as long as smartphone and tablet users continue to choose platforms owned by the other two companies, users aren’t coming to Microsoft, so Microsoft will have to go where they are, and that’s increasingly on iOS and Android.

Spending your end of year budget

I try to avoid being overly self-promotional in my writing here – I know readers don’t come to be sold to, and I try to write to capture your interest rather than your dollars. But I do run a business, while blogging here and elsewhere is mostly just an outlet for my thoughts and a way of advertising my wares. As such, I wanted to do a quick end-of-year post reminding you all of what I do for my day job, and provide you with opportunities to turn your interest in what I do here into support for the business that pays my bills. I’m somewhat facetiously titling this post “Spending your end of year budget” as a reference to the fact that I know some companies take a “spend it or lose it” approach to budgets, and at this time of year companies are sometimes looking for ways to spend the last of what they have for the year.

With all that said, here’s a brief list of paid products and services I provide through my firm, Jackdaw Research:

  • Research subscriptions: I offer an annual subscription to my research reports, which includes in-depth profiles on major tech companies, equally in-depth reports on market trends, occasional one-offs and series of reports on other topics, and quarterly decks on major market sectors. The price for major tech companies is $20,000 per year, but I offer substantial discounts for smaller companies, so please get in touch if you’re interested in this option.
  • One-off reports: two of my previous reports are available for one-off purchase through the company website. The Apple profile is available here, and the smartwatches report is available here. Each report is $500, and there’s a Buy Now button on each of those pages, where you can buy the report through Paypal (using a credit card or a Paypal account). A third report – my recent one on the State of Windows Phone – is available for free here.
  • Custom presentations: these can be delivered in-person or over the phone. One presentation I’ve delivered a lot in recent months is my overview of consumer technology business models (a shortened version of the deck I use is available on Slideshare for download). I’m also offering a new one on the Digital Layer. But I’m also happy to develop custom presentations from scratch for specific needs. Pricing depends on location, preparation and delivery time, but starts at $2,500.
  • Retainers: I offer retainer agreements, both open-ended on an annual basis and limited to a specific number of hours, for clients who simply want regular access to me to pick my brain about whatever’s on their mind. This option has been used over the past year by companies as diverse as hedge funds, advertising firms, major tech companies and carriers. This is often a good fit for companies that have custom ongoing needs rather than wanting off-the-shelf research. 20 hours are available for $10,000, but I’m flexible about the number of hours and also offer unlimited agreements. Before the end of the year, I’m offering a 20% discount on my hourly rate.

Beyond all this, I’m always happy to take on custom consulting work, writing custom reports and more or less any other type of work that fits with my topic coverage and allows me to maintain my independence (i.e. I don’t endorse products or companies). If you’re interested in any of the above options, please contact me at jan@jackdawresearch.com or (408) 744-6244. And please have a Merry Christmas and Happy New Year.

More quick thoughts on Twitter and Instagram (and Apple)

I posted some initial quick thoughts on Instagram hitting 300 million users yesterday, but there were two articles today that prompted some more quick thoughts on Twitter and some parallels (and important differences) when compared with Apple.

The first article was this one by Walt Mossberg on Apple, and it included this paragraph:

In my conversations with Apple executives, they vehemently insist that market share isn’t — and won’t be — their goal, and even go so far as to say that most public market-share numbers are somehow off the mark, though they decline to explain how.

There are two parts to this: one, Apple doesn’t think market share is the right goal for them to chase, and two, it doesn’t think market observers measure it right anyway.

Now, the second article, which is an interview with Ev Williams, one of the founders of Twitter, commenting rather forcefully on the news that Instagram has more users than Twitter:

Why is users the only thing we talk about? The crazy thing: Facebook has done an amazing job of establishing that as the metric for Wall Street. No one ever talks about, ‘What is a [monthly active user]?’ I believe it’s the case that if you use Facebook Connect—if you use an app that you logged into with Facebook Connect—you’re considered a Facebook user whether or not you ever launched the Facebook app or went to Facebook.com. So what does that mean? It’s become so abstract to be meaningless. Something you did caused some data in their servers to be recorded for the month. So I think we’re on the wrong path.

If you think about the impact Twitter has on the world versus Instagram, it’s pretty significant. It’s at least apples to oranges. Twitter is what we wanted it to be. It’s this realtime information network where everything in the world that happens on Twitter—important stuff breaks on Twitter and world leaders have conversations on Twitter. If that’s happening, I frankly don’t give a shit if Instagram has more people looking at pretty pictures.

Do you see the parallels here? First, a rejection of the metric of choice for comparisons between the company and its competitors, and second, a questioning of the accuracy of those metrics.

I think it’s fair for a company to suggest alternative metrics it wants to be measured by, especially if those relate better to (a) its own strategy and (b) its ability to generate growth and profits for its shareholders. That’s certainly the case for Apple, which generates several times more profits than any other player in the smartphone market despite its minority share, and also captures a great deal of the revenue. But it’s not the case for Twitter, which despite all its attempts over the last few months to point Wall Street at metrics other than MAUs, has failed to either provide alternative metrics in a reliable fashion or demonstrate that those are better indicators of its future profits.

For the record, I’ve no idea whether Williams’ assertion that Facebook counts Facebook Connect usage is accurate, but when Facebook’s users are multiple times Twitter’s users, I’m not sure that matters a great deal. Apple likely objects to market share numbers on the basis that they tend to measure shipments, and shipments are neither the same as sales to end users, nor is shipment market share the same as installed base market share,  and nor do they reflect the way in which those devices are actually used. But in Apple’s case, market share actually doesn’t matter to its business model or its ability to generate outsize revenues and margins from what share it does capture. Twitter’s problem is precisely that its MAUs are exactly the source of its current revenue streams, and it hasn’t yet demonstrated how it will monetize the broader bases of users it wants Wall Street to start thinking about. It’s all very well to jump on your high horse about the metrics you want others to use, but you have to back up your assertion in order to avoid looking bitter.

Quick thoughts: Instagram at 300 million

Facebook today announced that Instagram now has 300 million monthly active users. This has invited inevitable (unfavorable) comparisons to Twitter, which had 284 million MAUs at the end of last quarter. I wanted to talk about a couple of things in relation to those comparisons.

Facebook and Instagram

Firstly, I wrote a post a year ago which I titled “Instagram’s advertising problem” which was really about the challenge of serving relevant and timely ads, and the degree to which various services struggle to hit that sweet spot. Instagram’s core challenge as a standalone business was that it knew next to nothing about its users, especially before brands started being a big presence on the service. What’s becoming increasingly clear since then is that one of the biggest forms of synergy between Facebook and Instagram is the ability to use the data Facebook has on users to target Instagram ads. See this quote from the Wall Street Journal’s interview with Instagram CEO Kevin Systrom today:

We use Facebook to serve the ads to Instagram. Basically, we’re making it very clear that data is shared between the services under Facebook’s roof. Facebook helps us provide relevant ads to the users. You don’t want a 50-year-old male who’s interested in autos seeing an ad for a beauty-care product targeted at teens. If you ask users what they hate most, it’s not having relevant ads being served to them.

It’s also very clear that information doesn’t flow back the other way:

WSJ: Does my activity on Instagram affect the ads I see on Facebook?

Systrom: I don’t think we have plans for that right now.

That’s likely because there’s almost no useful information that could be sent back the other way, because Instagram activity provides almost no insight into user demographics or interests (except to the extent that users have explicitly followed brands). All this also raises an interesting question: to what extent do the two user bases overlap? Are the vast majority of Instagram users also Facebook users, who’ve built up enough of a profile there to provide targeted advertising on Instagram? For now, I think the answer is likely yes: many of the teenagers now swarming to Instagram likely had Facebook accounts already (even if they’re not using them as often), but what if future teenagers (or other Instagram adopters) skip the Facebook stage entirely, or never bother populating their Facebook profiles with enough material to effectively target ads?

Twitter and Instagram

So, on to that unfavorable comparison to Twitter. I actually want to talk about two things here: one is why Instagram is growing so much faster, and the other is addressing the idea that Twitter should have bought Instagram instead.

First, why is Instagram growing so much faster? I think the answer is that it basically mirror the network effects of Facebook itself, in that it’s built around a community of friends and family. It benefits hugely from the fact that once a critical mass of your friends joins, it becomes inevitable that you will join too, to avoid missing out. This is especially the case among what is (likely) one of Instagram’s strongest-growing demographics: teenagers. Twitter entirely misses out on this phenomenon, by being a platform that’s largely about connecting with people, brands, news sources and so on that you have no existing personal connection to. It also suffers from the fact that so much of its content is easily available to its famous “logged-out users”. Because it’s inherently a public platform, there’s no great benefit to being logged in (or even registered) for much of the content shared there.

As I’ve written about previously in various posts on Twitter (e.g. here, here and here – full archive here), Twitter’s focus seems to be on talking up the size of its existing audience, partly by expanding the definition of what that includes, but what it really needs to do is find ways to keep growing the core base. And it’ll do that only if it (a) lowers the barriers to entry (as I described in this piece), and (b) taps into those viral and network effects that true social networks enjoy.

Secondly, the issue of whether Twitter should have bought Instagram instead. Arguably, Instagram might have helped Twitter solve the very problem I’ve just been talking about: as a true social network, Instagram enjoys network effects Twitter doesn’t, and it could have both plugged a gap and served as a focal point for Twitter’s messaging and other efforts. Instead, it’s now trying to build those things around the core Twitter experience instead, and that’s going to be tough. So there are some good arguments for such a combination. But the biggest counter-argument goes back to the point I started with, which is that without Facebook, Instagram really had no way to monetize effectively, because it had no way to display timely, relevant ads.

With Facebook’s help, it now scores very highly on the relevancy side, because it can leverage Facebook’s data on its users where the two user bases overlap. Twitter, on the other hand, suffers from a very similar problem to Instagram itself: it knows something about its registered and logged-in users, though arguably not that much, but knows almost nothing on its own about the logged-out users. Instagram wouldn’t have helped with that, and without its own data on those users, and likely relatively small overlap between the two bases, it would have found it very difficult to effectively monetize Instagram. For all these reasons, though there is some logic behind a combination of Twitter and Instagram, it would have been enormously tough to justify financially for Twitter. I think it’s a much better fit for Facebook, but unfortunately that leaves Twitter struggling with the same old problems.

Business models in consumer tech deck

I’ve recently been delivering a presentation to various tech companies on the evolving nature of business models in consumer technology, and the implications for both large and small consumer tech companies. I’m making a shortened version of the slide deck available through SlideShare (and embedded below, if you’re reading this on the web), as a way of sharing this content with a wider audience. When I deliver this presentation in person, it’s somewhat longer, and usually customized to the audience. If you’d be interested in paying to have such a presentation delivered to an audience at your company, please contact me and I can provide pricing information. You’ll notice that the deck also touches a little on the Digital Layer concept I introduced last week: I’m working on a separate slide deck which fleshes that concept out further. Feel free to view, download, embed and share the deck as you see fit!

The Windows Phone app gap

Much has been written in the past about Windows Phone’s lack of apps compared with iOS and Android. Both Nokia and Microsoft have responded in the past with claims that quality and not quantity is what matters in an app store. Both arguments represent over-simplifications, and neither accurately captures the reality of what’s going on with the Windows Phone app store and its competitiveness with Android and iOS. This post is a summary of one of the major sections of a new report on the state of Windows Phone published by Jackdaw Research this week, which examines this question among others in depth. The report is available for free here, and I encourage interested readers to download it and read the whole thing.

The quantity gap

Windows Phone does suffer from a quantity gap versus both Android and iOS, which are essentially neck and neck in the app store stakes. On the one hand, Microsoft has done well to get out of the gate quickly and get a good number of apps on the platform in a short space of time – the chart below shows the number of apps on each of the three major platforms within the first 15 quarters following launch:

Major platforms first 15 quartersThe problem, of course, is that Windows Phone isn’t competing against those platforms 15 quarters from their launch – they launched considerably earlier, and the current situation is much less favorable:

Apps available in major storesWindows Phone continues to lag the other two major app stores (and even Apple’s iPad-specific list of apps) considerably, and the gap is widening rather than narrowing.

The quality gap

The frequent response from Nokia (before its acquisition by Microsoft) and from Microsoft itself has been that Android and iOS have thousands of apps no-one needs or uses, and that the real question is one of quality rather than quantity. But the problem is that Windows Phone suffers from a lack of quality as well as a quantity problem. There are several ways to look at that, so I’ll run through a few of them. Continue reading

What I use

Every now and then I think it might be helpful if I outlined here the various tools I use to get my job done. Aside from acting as a form of recommendation to others, it’s perhaps a helpful set of disclosures as well. I hope this proves useful. I’ll probably update it periodically to add or change things. This first version was written in November/December 2014.

You’ll notice right away a serious bent towards Apple products – both hardware and software. I first began experimenting with Apple products back in about 2005, when we bought a Mac Mini for our family, and we began buying iPods around the same time. Several MacBooks followed, and iPhones started showing up in 2008. I find Apple products to be highly reliable, beautifully designed and high-performance devices that do the jobs I need them to do well. They also run all the software I need them to (mostly as apps downloaded through Apple’s various App Stores). The other thing with the Apple ecosystem is that it’s self-reinforcing – the more (and the more exclusively) you use it, the better it gets, because the parts work together well. However, because I have to regularly use other devices for testing and reviews, I try not to over-commit to Apple’s various products so that my workflow doesn’t break down entirely when I switch to something else!

Hardware

My main computer is a pretty maxed-out “Mid 2010″ version Mac Pro I acquired a couple of years ago when we were starting a small video production company and I had to do a ton of video editing. Here are the basic specs:

Mac Pro specs

This thing is my workhorse and it’s plenty powerful to do everything I need to do and then some. I never have to worry about running too many programs at once or having too many tabs open. It’s running Yosemite, and in fact was running the Public Beta right from when that first became available.

When I’m traveling I currently use a 13″ current vintage MacBook Air that’s on loan from Apple as a review unit. I’ve found this to be the perfect traveling computer – small and light enough to fit easily in my backpack or a briefcase without slowing me down, starts up instantly when I open it up, runs for hours and hours, and just the right size to use on an airplane or on my lap.

When I’m traveling I also always take an iPad, and when I’m attending a conference where I’m going from one meeting to another, the MBA tends to stay in my hotel room or my car while I carry an iPad Air with a Logitech Thin Keyboard for typing on. I find I can take perfectly adequate notes, do email and the other things I need to do during such a day on the iPad without any problems. And of course the battery lasts all day, even if I occasionally need to use it as a hotspot to provide connectivity to another device.

My main smartphone is an iPhone, and has been since the iPhone 3G came out. At present, I’m using an iPhone 6, also a review unit from Apple, though before that I was using an iPhone 5S I bought last year. The iPhone is running the latest version of iOS 8, and I generally keep my OS and the various apps on the phone religiously up to date. However, I regularly switch devices and use many Android and a smaller number of Windows Phone devices during the course of the year as various vendors send me review units. I’ve found the recent higher-end Android devices to be very good, and particularly enjoyed the second-generation Moto X recently.

Software and services

The following software and associated services are critical parts of my daily and weekly workflow: Continue reading

The Digital Layer

I’ve often described the consumer technology market which I cover as being comprised of five main domains: hardware, software, content, communications and connectivity. The successful big consumer technology companies compete across at least three or four of these domains, and tend to increase their scope and reach across these domains over time as they build ecosystems and compete on that basis. I’ve described and sized these markets, and they comprise significant opportunities, although some companies and some niches are much more lucrative than others. However, there’s another domain which is emerging, which has the potential to be significantly larger than all the rest over time, and it’s that sixth domain that I want to talk about here. I’m calling it the Digital Layer.

Transforming, but not replacing, analog products and services

The other five domains are made up to a great extent of digital products and services: though the hardware we purchase is obviously made up of atoms, and physical infrastructure is necessary to deliver all the content, communications and connectivity we enjoy, the products and services themselves exist to a great extent in the digital world and are made up of bits. In many cases, these digital products and services have replaced analog equivalents: ebooks have replaced paper books, digital music has replaced CDs, email has replaced paper letters, calendar apps have replaced physical journals and datebooks, and so on. What distinguishes the Digital Layer is that it doesn’t displace an analog model, but rather adds a layer to it in a way that has the power to transform business models while leaving many of the underlying components intact.

Examples

At this point, it will probably be helpful if I provide some examples to help make this theoretical construct concrete.

Example 1: E-commerce

In some ways, e-commerce is the original Digital Layer service: the digital layer is the online catalog, search, recommendations, ordering and payment capability that enables the more efficient and lower-cost distribution of the same physical goods we’ve always consumed. This layer replaces the physical retail store, but doesn’t replace the actual analog goods we consume.

Example 2: Uber

Though e-commerce has now been around for many years, other Digital Layer services are of more recent vintage. Uber is a great example of a newer Digital Layer service. Uber is firmly rooted in the physical world, with physical drivers picking up and transporting flesh-and-blood human beings. And yet, Uber is a Digital Layer service because its key value proposition is that it uses digital technology to bring together customers and suppliers in a unique, highly efficient way. The Uber app and service replaces just a thin layer – the process of hailing or ordering a cab – while leaving the physical layer (drivers, cars and passengers) intact, but in the process transforms the business model.

Example 3: Apple Pay

Apple Pay is arguably Apple’s first foray into the Digital Layer, from a company which began life in the hardware domain, and has successively expanded into the software, content and communications domains (as yet, the one domain Apple has left to others is connectivity). Apple Pay’s digital layer replaces the physical handover or swiping of plastic cards in the retail environment with a digital process, where the plastic card no longer needs to be present and software takes its place, thereby improving convenience and security. But it doesn’t replace the analog elements entirely – physical cards still exist in the back end and are necessary to the service, and physical goods are still delivered in return.

Example 4: Nest

Conversely, Nest is arguably Google’s first move into the Digital Layer, after spending years as more of a digital replacement specialist. Home automation equipment is another form of Digital Layer service in that it layers digital control and monitoring on top of physical elements such as lighting, HVAC systems and locks. It replaces just the thin layer of physical controls with digital controls, but leaves the analog systems beneath intact, while transforming the ways in which they’re used.

Shared features

I could list many other examples, but hopefully you get the idea. What all these examples have in common though, is three facets:

  • Rather than entirely replacing an old value chain, the Digital Layer merely replaces a single layer – often the one the customer deals with directly – while leaving the underlying structure in place
  • The introduction of the Digital Layer is often transformative to the underlying business model, even as it preserves many of its components
  • Digital Layer services often provide significant benefits in terms of efficiency, usability and reach, sometimes increasing the size of the underlying markets.

Potential greater than other domains

The great potential of the Digital Layer comes from the fact that, whereas the other domains largely replace existing products and services and therefore are somewhat limited by the existing size of those markets, Digital Layer services essentially extend to almost every aspect of our lives. E-commerce by itself is already larger than any of the other five domains at around $1.5 trillion per year, and it’s just the oldest and most established of the Digital Layer services, with many others only now springing up. Together, the new breed of Digital Layer services has the potential to become several times the size of the current market over the coming years, with e-commerce at its core. Of course, many of these services will only skim a percentage of total value off the top on a net basis, but it still has the potential to be a far larger market than many of the traditional opportunities in consumer technology.

Questions to think about

I’m spending a lot of time thinking about some of the implications of the Digital Layer as a domain for the companies in the consumer technology market, and I’ll be sharing my conclusions with my clients and to some extent in future blog posts. Some of the questions I’ll be tackling are:

  • What other industries are ripe for a Digital Layer disruption, beyond those we’re seeing today, such as accommodation (AirBnb), Transportation (Uber, Lyft and others) and so on?
  • What factors drive sustainable differentiation for Digital Layer companies, and does this have implications for companies that start in one segment (e.g. Uber in transportation) and their ability to extend into other segments? How should this effect valuations of these companies?
  • To what extent will Digital Layer companies have to build broad ecosystems as they scale, versus specializing in a particular segment?
  • Which of the existing major consumer technology companies have the potential to become significant players in the Digital Layer? Does the rise of Digital Layer-centric companies threaten any of them?
  • To what extent is the Digital Layer a sustainable model, and to what extent will it eventually give way to Digital Replacement models (e.g. much as Amazon’s online sale of paper books eventually led to the sale of ebooks)?

I’d love your feedback on the concept, and on these questions (and any others you might have). If you or your company would be interested in an in-depth presentation on this topic, please contact me.

Techpinions Insiders post on Mozilla, Google and Apple

Going forward, while I’ll continue to post regularly here, I’ll also be contributing increasingly to the Techpinions Insiders service, which is a subscription-based offering that complements the publicly-available content on Techpinions. Right now it’s $5 per month, and subscribers get lots of extra content for that $5. I highly recommend subscribing.

My first post for the service is a quick take on the news from yesterday that Mozilla is switching its default search engine for Firefox from Google to Yahoo, ending a long-standing relationship. I examine the key data around both search engine and browser market share, as well as the changing economics of Google’s search business, and I also talk about Apple’s slow and subtle move away from Google for search. I encourage you to go take a look (individual pieces may be read for a micropayment of 25 cents).

Oh, and I also have my regular weekly post on Techpinions today, which is about the various lenses through which one can see Google, and the implications.

Quick thoughts: BlackBerry’s announcements

BlackBerry yesterday made a series of announcements around its enterprise software and services strategy and roadmap, and I was able to attend both the event itself and some analyst-only sessions under NDA afterwards. I obviously can’t share the afternoon’s content, but from what we learned in the morning and from other insights I gained yesterday, I wanted to update my recent takes (here and here) on BlackBerry a little.

Focus on regulated industries, ambitions beyond

I’ve praised BlackBerry for their focus on the regulated industries when it comes to devices, because it shows how realistic BlackBerry is being about its prospects in the enterprise today. Especially in the US and other mature markets, BlackBerry is unlikely to sell devices other than in the public sector and other highly regulated industries. However, as I’ve said before, BlackBerry’s future lies in building a business that’s not directly tied to its dwindling device installed base and in going beyond these regulated industries to other businesses.

BlackBerry shared results from a survey yesterday about enterprises’ concerns about security and risk. There were no new findings here and lots of old themes: a vague sense of unease about the management of mobile devices and potential risks their use in the enterprise pose. BlackBerry is hammering away at worn themes here, but it’s hoping that broader awareness of the growing security risks in the enterprise will eventually pay off for them. There’s an element of scaremongering here, and the real challenge will be convincing enterprises beyond the regulated industries that there’s a real threat in mobile security that (a) requires going beyond the standard basic protections available in major operating systems and management systems today and (b) requires a BlackBerry solution rather than one from a competitor.

Fleshing out the cross-platform story

A big part of that story, in turn, has to be fleshing out the cross-platform story BlackBerry has been trying to tell since the announcement of BES 10. The vision has always been there, but it hasn’t been clear why a company would choose BlackBerry to manage non-BlackBerry devices. BES 12 is part of the answer to that, as it finally provides a unified approach to managing all devices, but the Samsung deal is the first concrete step in fleshing out the cross-platform vision. That’s because it’s the first step towards crafting truly optimized solutions built around a very popular device category in the enterprise rather than just focusing on standard APIs and tools. Samsung KNOX hasn’t been a great success yet, and its contribution to Android’s efforts and the BlackBerry partnership are both signs of its weakness and need to gain momentum. But on BlackBerry’s side, it’s also an admission that the generic approach hasn’t resonated, and something more targeted may be needed. There’s more coming as part of the Android for Work initiative too.

Multiple tiers now available on BlackBerry

CEO John Chen started the day’s sessions by talking about BlackBerry’s end-to-end solution for secure mobile communication and productivity. He made much of the multi-layered approach, starting with chips and firmware, the OS, the applications, the BES and the NOC. This is the top tier of the secure solutions BlackBerry offers. But it now arguably offers two other tiers as well: Samsung KNOX as part of the BES and NOC system, and other devices managed through a BES on a more generic basis. This creates a slight awkward situation where BlackBerry devices managed by the BES are the gold standard, with KNOX/BES devices a second tier (silver?) and others a third. I asked BlackBerry executives about this, and specifically how they imagined enterprises using each of these tiers within their companies, and they said they see companies using multiple tiers for different kinds of users based on their security and risk profiles. That makes a certain amount of sense, but the top tier has always been more or less exclusive to BlackBerry: the question is whether it can make inroads in the middle and bottom tiers, which is where the vast majority of devices in use are today.

Selling productivity against the big guys is tough

BlackBerry’s other big story is selling a suite of communications, collaboration and productivity solutions, with its content storage and syncing solutions such as Blend, BBM Meetings announced yesterday, and so on. It believes it’s created the best mobile-first solution for these things and points to the lack of full feature sets on the mobile versions of Lync, Adobe Connect and other similar products. That’s a fascinating value proposition, but I see two major problems with it. Firstly, the others will catch up fast: for example, Microsoft’s rebranding of Lync as Skype for Business is likely to come with an expanded feature set on mobile devices in the near future. Secondly, BlackBerry isn’t known for these things, and once again the challenge will be selling these new products and services beyond the traditional BlackBerry base. With a direct sales force of only a couple of hundred, BlackBerry will be heavily reliant on its indirect sales teams, many of whom also sell competing products. Why will channel partners sell these solutions when awareness is lower, preference for others is stronger, and many companies already have relationships with competitors?

Short-term growth prospects are all in enterprise software

BlackBerry is very aware of the two peaks problem I talked about in an earlier piece – that is, that its traditional business, which was directly tied to its device base, is in decline, and it needs significant new revenues to slow the decline and eventually get back to growth. The company has in the past talked about three potential new sources of revenue: enterprise software and services, BBM and the Internet of Things. However, of these, only enterprise software and services is going to generate any significant amount of revenue in the near term. The company’s target for BBM is $100 million by next financial year, whereas the target for enterprise software and services is $500 million, a doubling year on year. The company’s Internet of Things efforts, meanwhile, are too nascent even to warrant a public revenue target in the near term. That puts a heck of a lot of weight on the enterprise software and service activities, and the success of BES 12 in particular since so much else is dependent on that. The company’s management seems to be extremely realistic about its prospects overall, but this is one area where their goal seems like it’ll be a real stretch.

Overall, I remain somewhat positive on BlackBerry’s short-term prospects: they’ve reduced costs and cash burn to the point where there’s no longer an immediate danger of going under, and revenues are starting to stabilize. The question continues to be whether these new businesses can grow, and importantly grow independently of the device base, sufficiently in the coming years to return the company to significant growth. The next year or so will give us a really good sense of whether that’s possible or not.