Developer events, Developers, Google, Google I/O

Three questions for Google at I/O

On Wednesday this week, Google kicks of its developer event, Google I/O, completing the trifecta of major developer events with Microsoft’s Build and Apple’s WWDC. These events set the stage for at least the next year for these companies, and in some cases far more. And though they’re targeted at developers, they often tell us a great deal about the companies’ outlook and strategy beyond just those who write for their various platforms. As such, I thought it would be useful to outline three big questions for Google to answer at I/O later this week, and what the answers might mean. I’ll be at I/O for the keynote Wednesday morning at least, and I’ll be sharing my thoughts during the event on Twitter, and afterwards here and at Techpinions.

Which way will the pendulum swing between open and controlled?

Android has famously been described since its release at Google as an open operating system, and is literally an open source operating system at least as far as the AOSP version is concerned. But Google has been steadily chipping away at this openness, by preventing licensees of the Google Mobile Services package from also selling forked versions of Android, by allegedly putting pressure on Samsung to tone down its UI customizations, and by abstracting more of the core features of Android into standalone apps. At the same time, it’s acquired Nest (which is itself now acquiring Dropcam), has developed Google Glass and self-driving cars and released the Chromecast dongle for TVs. All of these products combined Google-owned hardware with Google-owned software, a departure from the platform approach it has taken with Android. Is this new, more controlled approach the shape of things to come, and the way we should think about Google’s approach to the markets it will enter in the coming years, or are they anomalous? Will Google the platform and software company become Google the hardware company, even as it rids itself of by far its biggest hardware unit in the form of Motorola?

How does Google think about integration between its platforms?

Both Microsoft and Apple showcased their approaches to cross-device and cross-platform integration at their respective developer events, and they’re quite different, as I’ve talked about here previously. Both of those companies have two separate operating systems, and they’ve talked about how they bring those together for end users. Microsoft has focused more on a common user interface at the end user layer, and a common kernel and tools at the developer layer, while Apple has focused on a common and integrated user experience and now a common language. With two operating systems of its own in the form of Chrome OS and Android, Google needs to tell the story of how these come together for both users and developers. So far, Google’s integration has been largely focused on its services, which operate not just on any of Google’s platforms but on third-party platforms such as iOS and Windows as well. But as its two major competitors focus on deeper integration between their platforms, Google’s two platforms feel as far apart as they ever have. Will putting them both under one leader in the form of Sundar Pichai change things? What will we see at I/O that demonstrates that Google understands the need to rationalize these two operating systems in some form?

How will Google respond to the privacy gauntlet thrown down by Apple?

At WWDC, Apple focused more than it ever has on its approach to security and privacy, with several explicit digs at Google in the process. HealthKit, HomeKit, iOS and its sandboxing approach, preserved even as Apple adds Extensibility – in all these announcements, Apple reiterated its commitment to securing its users’ data and protecting them from intrusions from both malicious actors and over-zealous marketers. Google has always pushed the boundaries in terms of privacy and security, both policing Android less than Apple polices iOS from an apps perspective and itself intruding ever more on users’ privacy. With the Nest acquisition (and now the Dropcam acquisition) Google has been forced to make clear statements about the separation between these units and Google itself from a data perspective. DuckDuckGo continues to grow rapidly if at a very small scale as an alternative to Google in the search engine world. Reverberations from the Snowden revelations continue to be felt. Samsung continues to build its own enterprise security and device management capabilities on top of Android. How will Google respond to all this? How will it demonstrate that it is creating not only secure platforms but platforms and services which respect user privacy?

Beyond product and feature announcements

I think we’ll see explicit or implicit answers to all these questions at I/O, and those answers will signal broader strategic shifts from Google which will be felt for years to come. Yes, it will make individual product and feature announcements including – in all likelihood – a new version of Android, the first Android Wear products and others. But it’s these big strategic choices that will have far more impact over the long term.

Apple, Apple Retail, Beats, Developer events, Distribution, Emerging markets, HealthKit, HomeKit, Mature markets, Retail, Smart home, WWDC, WWDC 2014

Apple is doubling down on mature markets

As we gear up for Google I/O next week, and imagine what we might see from Google there, I wanted to have one last look at Apple’s WWDC, from a slight different perspective. One of the thoughts about WWDC that’s taken a while to percolate for me is that WWDC was a good sign that, from a product perspective at least, Apple is doubling down on mature, developed markets, rather than joining the land rush in emerging markets.

HomeKit and HealthKit are about solving first-world problems

I wrote about HealthKit and HomeKit in a couple of previous pieces here and on Techpinions. I think they’re both much-needed solutions to real problems in the health and fitness and home automation categories. But these are in some ways the very definition of first world problems. Trying to get your smart lock, your smart lightbulb and your smart thermostat to talk to each other is a challenge experienced only by people who can afford to buy the overpriced products on offer in these markets.

HealthKit also comes into its own in part when tying together several different fitness tracking devices, which is another first-world phenomenon. There is, though, another element to HealthKit, which is about access to medical data from various healthcare providers. But again, this is something of a mature-market issue. A recent data set from Opera Mediaworks highlighted the disconnect between mature and emerging markets when it comes to searching for health related information on mobile devices:

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Apple, podcasts, Smartwatches, Wearables, WWDC

New podcasts

I’ve done two podcasts in the past week:

  • The Beehive Startups / Startup Daily podcast, which I occasionally guest on. This episode was recorded shortly after Apple’s WWDC, so we talked a lot about what Apple announced there, including HealthKit, HomeKit and Swift. We also talked a bit about Google’s self-driving cars.
  • The Techpinions podcast, where I’m a regular contributor (I also write a weekly column on the Techpinions site). We talked about E3 and consoles, PCs, and wearables. Some of the thoughts on smartwatches I’d previously shared in this post about the potential for an iWatch.

Happy listening!

Amazon, Fire Phone, Kindle Phone, Smartphones

Why an Amazon smartphone makes sense

It seems highly likely that Amazon will finally announce its long-rumored smartphone next week at a special event. From what I’ve seen on Twitter and elsewhere, there’s a lot of skepticism about Amazon’s entry into this market, so I thought I’d review some of the reasons why I think it makes sense for Amazon to make a smartphone.

Amazon needs a storefront on mobile

Amazon is becoming an increasingly diversified company, with offerings across many parts of e-commerce, an increasingly strong digital content business, local grocery deliveries, a range of enterprise cloud services, and many others. On the desktop, Amazon.com is where these things come together – a unified storefront for all the things Amazon wants to sell you, carefully curated and personalized to combine what Amazon particularly wants to sell today with what it thinks you may be particularly interested in buying today. This allows Amazon to promote its Fire TV product, its Kindle Fire tablets, Prime shipping and Instant Video and various other products prominently, and thus cross-sell and up-sell to the hundreds of millions of people using Amazon.com on a regular basis.

But Amazon lacks such a storefront on mobile. Yes, it has a variety of standalone apps on mobile devices, including an Amazon.com commerce app, Instant Video, Kindle and Amazon MP3 apps. But they’re not interconnected the way the Amazon.com experience is, and there’s little push from one to another. In addition, though there was a time when a number of Android smartphones came with the Amazon MP3 app pre-installed, those days are now passed. Though Amazon still manages to do deals with Android OEMs and carriers from time to time to get some of its apps pre-installed, they’re often buried in a folder, and there’s little push for the user to use them. Meanwhile, the OEM, carrier or OS vendor’s own competing apps are often put front and center for the user.

Amazon therefore needs to create a mobile storefront equivalent to what it has on the desktop with Amazon.com, and to do that it needs to create an Amazon-centric experience on the most ubiquitous device, the smartphone.

The growing role of m-commerce

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Apple, Big picture, Developer events, iMessage, Messaging, Whole company analysis, WWDC, WWDC 2014

What “winning” means for Apple

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I posted a tweet yesterday that seemed to hit a nerve with people, and so I thought I’d expand on my thinking a bit here. What I actually posted was two related tweets, though it was the second that seemed to resonate – the first was merely context:

There were at least two articles that prompted my tweet, but the main one was this one from Ellis Hamburger at the Verge. Both took a tack that I felt fundamentally misunderstood what Apple does and how it does it, but there was one particular section of piece on the Verge that sums up the mentality here very well, so I’ll use that as the jumping off point:

But today, communications are a commodity, and it’s hard (if not impossible) to survive in the long-run as an app that only works on one platform. A dozen messaging apps are sweeping the globe, and all of them work whether you have an iPhone, Android, Mac, or PC. Apple’s Messages app, and the iMessage platform therein, only work if your friends and family use Apple products. In the United States, where iPhone market share is highest of almost any country, iMessage’s thin ice is harder to perceive. The United States is one of the only countries where no one messaging app reigns king, but elsewhere markets are dominated by one messaging app or another, all of which have similar features and work on all platforms.

A single-platform messaging app cannot win. Despite its tasteful new feature additions, however derivative they may be, Apple is playing on borrowed time. If Apple is determined to stay single-platform, it’s going to take more than new features to save its messaging ambitions.

To suggest that Apple is trying to “win” in the messaging wars is equivalent to suggesting that iTunes was an attempt to “win” in the music-playing software wars. Neither is the case. The first thing to understand about Apple is that it’s motivated first and foremost by creating the best possible experience on Apple devices. This imperative drove Steve Jobs to the extent that he made poor business decisions early on in his time at Apple, ultimately leading to his ouster. He was so fixated with this objective that he lost sight of others and ultimately of what it would take to keep Apple in business as a public company, a lesson he learned the hard way and ultimately brought back to Apple when he returned. But that has always been the fundamental motivation for Apple’s senior leaders above all else.

That motivation leads to one of the other defining characteristics of Apple as a company: the tight integration of hardware, software and services. Apple has never been about creating cross-platform services. To those of you who may wish to point out that Apple has long had iTunes on Windows, I direct you to this quote from Walter Isaacson’s 2011 book on Steve Jobs:

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.

Apple’s only significant cross-platform move was still a move to make Apple devices more compelling – the simple fact is that an iPod was not a standalone device, and it needed iTunes to be at all useful. Given the Mac’s very low share of the global PC market, releasing iTunes for Windows was an obvious strategic imperative. But it was done with one objective in mind – making the iPod a compelling device for a larger number of users, and yes, selling more iPods as a result.

What both the pieces I linked to above ignore is that everything Apple does is part of an ecosystem, and that’s exactly why people buy its products. Ever since the iPod and iTunes launched, Apple has been in the business of connecting its devices together in a way that adds value to each of them. The iPod added value to the Mac by providing a portable music player for your iTunes music, and iTunes on the Mac added value to the iPod by providing the conduit through which you obtained music to put on your device. When Apple released iTunes, it wasn’t competing in the music-playing software market anymore than iMessage is Apple’s attempt to compete in the messaging market. Both products were software Apple developed to add more value to its hardware products, and should not be seen as products in their own right.

When the whole rationale for Apple’s software is to add value to its hardware products, the idea of providing cross-platform software or services becomes inimical. To the extent that Apple software or services are available on non-Apple devices, they cease to provide meaningful differentiation for Apple products. By contrast, making Apple-exclusive software and services available on various different Apple hardware products adds significant value, and providing tighter integration between those devices through software and services adds even more. Hence the focus on these things at WWDC on Monday. To suggest that Apple needs to make its Messages product (or any other product) cross-platform in order to succeed is to get things exactly backwards – Apple doesn’t make hardware to be successful in messaging; it makes a messaging product to be successful in hardware.

This makes its Beats acquisition particularly interesting, since the Beats music streaming service is cross-platform today. But I suspect that the product we eventually see from Apple which integrates Beats’ streaming and curation technology will go back to being Apple-only. If there’s any strategic rationale to Apple spending so much money to stay at the forefront of the music business, it’s to make the iPhone the best device for music, and not to create a broad-based music subscription service.

All of this is part of a broader trend in the consumer technology space, which is that the most successful companies are competing in a different way, by combining hardware, software, content, communications (and in some cases connectivity) in integrated ways which create compelling end-to-end experiences for consumers. I see the same flawed logic among people criticizing Amazon’s entry to the smartphone market on the basis that no-one makes money in smartphones. If Amazon is entering the smartphone market, it’s not to make money on smartphones, but to drive buyers to spend more money with Amazon as a whole, across digital content and e-commerce. Amazon and Apple each have a core business that makes the bulk of their money, and their entry into adjacent spaces is intended to reinforce the core business, often at break-even or even negative margins. Google is the archetype of this model, providing many services for free, all of them funded by advertising and especially search advertising. It provides those services not out of the kindness of its heart but in order to increase the appeal of the Google ecosystem and to gather data that helps with its other businesses.

Apple isn’t fighting the messaging war. To the extent it’s fighting a war at all, it’s fighting an ecosystem war, and so far it’s winning. Is Apple’s tightly-integrated model the only way to be successful in the consumer technology market? Not at all, though it certainly seems to be the way to generate the best margins. There’s always going to be room and demand for other models too, and both Microsoft and Google have benefited greatly in market share terms from taking a less integrated approach. But to imply that Apple’s approach is ultimately doomed is to ignore what’s made it so successful over the past several decades, and the model it needs to continue to pursue to remain successful.

Apple, Apple TV, Developer events, Developers, fragmentation, Google, HealthKit, HomeKit, iOS, iOS 8, iWatch, Microsoft, OS X, Smart home, Smartwatches, Wearables, WWDC, WWDC 2014, Yosemite

Apple resurgent – thoughts on WWDC

Today’s WWDC keynote was a sign of a renewed swagger on the part of Apple, whose executives seemed to relish the deluge of new product announcements they unleashed on developers and on their customers. In the process Apple established or strengthened its competitive positioning against two major foes – Microsoft and Google – while opening itself up in unparalleled ways to developers. Today’s announcements may come to be seen in the same way as Steve Jobs’ original launch of Mac OS X, in that it lays the groundwork in several areas for years of future Apple products.

The demotion of Google continues

Two years ago at WWDC, Apple removed erstwhile close partner Google from the iPhone in two significant areas: as the backend provider for the Maps app, and in the form of the pre-installed YouTube app. But Google’s last major bastion on iOS is its position as the default search engine in Safari, and it’s much harder to remove there. In the sense of typing a query into a search box or address bar in a browser, hitting enter and being presented with a screen of blue links, Google is unrivaled, and Apple knows that. But it has slowly been inserting itself between the user and that search box over the last couple of years, and today’s keynote provided further evidence of Apple’s pre-empting of the Google search on both iOS and OS X devices.

Apple’s more subtle disruption of the user-Google relationship began with the launch of Siri, which began to address some users’ queries without an explicit search, and which uses Wikipedia, Wolfram Alpha and Bing, but not Google, as underlying search providers. And it has continued since then, as more third party services have been layered into Siri, pre-empting the Google search for movie listings, restaurant reservations and sports scores. Today’s keynote added Spotlight search to the list of places where users will now find answers to their queries without the classic search box experience, thus further inserting Apple between users and Google.

This is potentially significant for Google, for which the US continues to be easily its single biggest and most lucrative market, and for which mobile is increasingly important. To the extent that iPhone users, which make over 40% of US smartphone users, start using Apple and its tightly integrated third party services instead of Google, for search, that’s pretty bad news. That isn’t, of course, why Apple is taking these steps, but it’s an unpleasant side effect for Google. And a great way for Apple to participate in the search business without having to match Google in the page-of-blue-links business.

A device for every need, not one device for every need

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Apple, Google, HomeKit, Nest, Smart home, WWDC 2014

Apple and the smart home

The FT reported yesterday that Apple will be announcing some sort of smart home ecosystem next week at WWDC. Interestingly, I’d written about Apple’s potential to do something interesting in the smart home space a couple of months ago on Techpinions, as part of a longer piece about how Apple has the potential to de-fragment various industry sectors, including wearables, payments and the smart home. Monday’s report got me thinking about some of those themes a bit more, and triggered several more thoughts, some of which I shared with Tim Bradshaw of the FT (who broke this news as well as the Apple-Beats news) for his follow-up piece on the subject. I thought I’d write up some of them here in more detail too.

Current state of the smart home market

In a word, fragmented. This market is characterized by a wide range of players with their own approaches to knitting together the various components of what might make up a smart home. No-one does everything end to end, so you’re either stuck with various islands that can’t talk to each other, or reliant on trying to find devices that participate in one of several ecosystems which are emerging. Qualcomm has AllJoyn/AllSeen, the UPnP forum is extending its work with UPnP and DLNA into this area, SmartThings, Staples, AT&T and others are creating their own proprietary ecosystems and so on. But it’s a messy business and no-one really owns it today. If you’ve bought products from several vendors, chances are you’d have to go into your Nest, Belkin and Phillips apps separately to turn your thermostat, home audio system and lights on separately. That’s not exactly user friendly.

But the point here is that the smartphone is the obvious controller for all these various devices, and yet none of the players currently playing in this market has a direct stake in the smartphone market, at either the hardware or OS layer. Qualcomm perhaps comes closest, but is two steps removed from the end user and as such has little direct influence over user behavior. The players in the strongest position here are those who craft smartphone hardware and software.

Apple’s smart home solution likely has several parts

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iPad, Microsoft, Surface, Tablets

Surface Pro 3, like every other device, is a compromise

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Microsoft today announced the Surface Pro 3, its latest Windows 8-based tablet, with the tagline “The tablet that can replace your laptop”. That sounds great in principle, and it’s a great slogan, but the reality is that the Surface Pro 3, like any other device – be it smartphone, tablet, laptop or whatever – is a compromise. Microsoft’s biggest mistake in marketing the Surface – and Windows 8 – is its repeated claims that there is no compromise, or that the Surface can somehow meet needs normally served by a combination of tablets and laptops or desktops.

Satya Nadella provided the setup for the launch with talk about “dreaming the impossible” and creating a device which (I’m paraphrasing based on my notes) “enables any individual to be able to read, create and write. Allows you to watch a movie and make a movie. To enjoy art and create art.” To me, that sounded just like the reality of the iPad. There was nothing unique in this vision, nothing impossible about it – it’s a reality we’ve had with us for the last four years. But the point is, Apple has never claimed that professional moviemakers should be using the iPad camera for shooting movies or iPad apps to edit them. Apple knows better than anyone that professionals want professional-grade equipment and software (including Apple’s own Mac Pro and Final Cut Pro products) to make movies. And the same goes for many other professions. The iPad offers great benefits – smaller, lighter, longer battery life, more personal and interactive – over laptops and desktops. But the tradeoff is that it lacks the power, the large screen, the peripherals and so on of a larger device. Apple will happily sell you a device from five different major product lines: the iPhone, the iPad, the MacBook Air, the MacBook Pro and the Mac Pro – because it knows no single device meets all needs, and doesn’t try to convince consumers that it can.

The problem for Microsoft is that it only makes one device, the Surface, itself. And so its mission from the start has been to turn that device into the holy grail – the single device that can meet all your needs, replacing both other tablets and laptops. It has good strategic reasons for wanting to do this, which I’ve covered elsewhere. But the result is that it has to constantly claim that its single device can replace two devices from any other vendor, notably the MacBook Air and iPad shown repeatedly at today’s launch event. But it fails to acknowledge the compromises such an approach entails. Though Panos Panay repeatedly compared the Surface Pro 3 to the 13″ MacBook Air, he never compared it to the iPad Air or even the 11″ MacBook Air, which has a much more comparable size. Here’s why:

SP3 to iPad and MBA comparison

It’s because Microsoft recognizes that this isn’t really a tablet that can replace your laptop: it’s a laptop that happens to have a detachable keyboard. It’s priced like a premium laptop, and it weighs the same as a premium laptop.Start comparing it to the best tablet on the market, though, and it starts to look much less attractive: the iPad Air and iPad Mini cost substantially less (even if you add a good third party keyboard for $100), and weigh much less. They’re much easier to hold in the hand and they come with a far greater number of tablet-optimized apps.

The biggest change in Microsoft’s Surface strategy over the last several years has been the locus of the compromise it’s still inevitably making. The first Surfaces were intended to be good tablets first and good laptops second (and ended up being neither). But with the Surface Pro 3, Microsoft has created a competitive laptop first, and a compromised tablet second. But it’s still pretending that there’s no compromise, and that is why the Surface line will continue to perform poorly. At some point, Microsoft has to stop pretending that a single device can meet all needs and start optimizing for different use cases with different devices, just like every other manufacturer. If it isn’t willing to do that, it should probably just cede the market to its OEMs.

Big picture, Pauline Kael, Tech media

“No-one I know voted for Nixon” in tech

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There’s a famous quote attributed to Pauline Kael, the movie critic, which is usually paraphrased as “How did Nixon win? I don’t know anyone who voted for him” but which actually goes like this:

“I live in a rather special world. I only know one person who voted for Nixon. Where they are I don’t know. They’re outside my ken. But sometimes when I’m in a theater I can feel them.”

The point was, Nixon had just won the US presidential election, and yet Pauline Kael lived in a world where almost no-one had voted for him. How was this possible? Who were these mysterious people who voted for Nixon, and what made them tick?

I fear that the people who spend all day thinking and writing about technology often suffer from the same myopia about the behavior and mentality of the vast majority of everyday users of technology. We are nothing like them in many respects – we know far more about the technology than they do, we use a far greater variety of devices and services than they do, we read far more about it than they do, and we inhabit the same sort of bubble as Pauline Kael did, where we’re often shut off from how regular people think about technology. Sure, we use our spouses, our parents, our non-techy friends and siblings as proxies and convince ourselves we get it. But I fear we’re often fooling ourselves. And it’s dangerous, because we often get things really wrong as a result.

This was in evidence this past week with regard to the rumored Apple/Beats acquisition. There was a sneering condescension about the Beats product and its users on the part of the tech media, and a collective “I don’t get it” about the value of the Beats product and brand 1. And that’s because the tech press is largely not the target market for Beats products, and it’s insulated from the segment that is. But the same thing applies to tech bloggers’ obsession with stock Android and many other things regular users just don’t care about. Those things loom much larger in the minds of the expert class than they do in ordinary people’s minds, and it distorts judgments about what really matters in the market.

As a result of these distortions, coverage of major products and companies is often skewed to deem new products, tweaks to existing products or other news as much more important than they really are. Most people are much less prone to change, much less well informed, much more influenced by casual conversations and friends’ recommendations than we think. Just consider the fact that AOL still has almost 2.5 million dial-up subscribers, or that the churn rates at Verizon Wireless and AT&T mean that the average subscriber stays with them for about 8-10 years. Apathy is a huge factor in technology choices, coupled with feelings of safety and simplicity that drive behavior that might seem baffling to the experts.

This is a self-reinforcing problem – much of the tech media writes for the obsessives, those who care about the topic as much as we do. We’re not writing for the normals, because they simply don’t care, and definitely don’t read our stuff. With the exception of the personal tech columnists at major newspapers, the vast majority of us are writing for a very unrepresentative sample of the population as a whole. But that means all our engagement comes from commenters and forum posters who are unrepresentative too, reinforcing our removedness from the general population and further distorting our perceptions of reality.

I don’t know how we solve this problem, but we all have a responsibility to try, because it’s hurting us, and hurting our ability to do our jobs properly.

Notes:

  1. I’m not saying the Apple/Beats acquisition is a shoo-in either – I wrote about it here and I’m still on the fence about its merits. I’m talking about the Beats headphones specifically ↩
Earnings, Q1 2014, Sony

Thoughts on Sony’s Q1 2014 earnings

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This will probably be the last in my series of posts about big tech companies’ Q1 2014 earnings. There was lots of press coverage of Sony’s earnings over the last several weeks, most of it for the wrong reasons – guidance revised downward, forecasting a loss for the next financial year and so on. There are plenty of pundits saying that if Sony was an American company, there would have been calls for Kaz Hirai’s resignation by now. But I wanted to take a minute and review some of the latest numbers, and highlight some of the positive trends in Sony’s business.

Sony has a reputation as a dysfunctional company (and I’ve said as much myself), with a combination of assets that seem like they could be really powerful but with cultural, structural and political divisions between business units that have so far prevented that enormous potential from turning into real achievement. Its glory days are long since behind it, and it’s struggled both to generate a profit and to demonstrate that it can again become the powerhouse it once was.

One quick note: Sony’s financials as reported have benefited from the weakness of the Yen relative to other currencies, and so some of the revenue growth it’s seen is unrelated to the performance of its own business, so I’ll try to use other metrics in addition to revenue growth wherever possible below.

A business in many parts

The most striking thing about Sony’s business is that it has so many parts to it – this is a company with its fingers in a lot of pies. Just look at the split of revenues shown in the pie chart below (I’ve taken some of the top-level segments and further divided them into their constituent parts because some of the sub-segments are actually quite different as well):

Sony segment revenue split

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