Stalker Heaven: Snap a Picture, Get an Identification

Posted on March 31, 2011 by jyarmis

I’m generally someone who lives a very public existence and suggests that most people get used to that notion.  Google, however, is about to test our limits here.  They’re apparently about to introduce a mobile application comparable to their existing Goggles but instead of identifying places, it identifies people. [UPDATE:  Google denies working on such an app or at least terms it speculative.  In any instance, my observations below stand.]   Even to me, this one is creepy.  They’re already defending it by saying the default is “opt out” and that users must explicitly choose to share their pictures and information.  I have so many problems with this approach that I can’t begin to address them all.  But here are just a few:

  • “Informed consent” is only reasonable where the individual involves is making an “informed” decision.  Are people really going to read the fine print before they opt in?  Of course not.  And even if they did, is Google going to manage things in a “do you really want to do this” fashion or are they going to say “great, you agreed, let’s move on and forget about what you’ve really just done here.”  They’ll do nothing to discourage participation.
  • These things are a moving target.  Remember when you signed up for Facebook?  If it was more than a year ago, your privacy options were fairly limited then.  Only under extreme scrutiny and now the threat of governmental intervention has Facebook made its changes and defaults more open and user-friendly.
  • We’re doing things we never thought about when we signed up for a platform.  Facebook at first was about connecting with “friends” and sharing status messages.  We’re now sharing pictures and, even more  intimate, location.  I’ve only friended people on Foursquare (a location-based service) who I care to have know where I happen to be.  I’ve got over a thousand friends on Facebook, some of whom I don’t care to have know where I’ve checked in and where I happen to be.  I’ve set up a group on Facebook called “location OK” and have only included those friends whom I’m comfortable having know where I’m located, and I’ve set my privacy settings on Facebook so that Places check-ins can only be seen by members of that group?  Have you done that?  Do you know anyone else who has done that?  Probably not.  You set up your settings for a use case that may no longer be the case, and haven’t adapted.  This “creeping  incrementalism” has made it easy for you to ignore this stuff.  Managing Facebook and Google is no longer simple.
  • Deep integration.  You have no idea how much information you’re sharing across networks.  Every time you click “allow” to sign in with Facebook or Twitter, you’ve set up a data-sharing arrangement that goes well beyond what you ever intended.  Go look at your Twitter and Facebook settings and see how many people you’ve enabled to have access to your data and credentials.  I’ll bet you don’t even know what half of the things you’ve got in there are.  When I sign in like this, I change their default setting so that the approval is good for one day only.  Of course the default is “until revoked” which is polite language for saying “forever, because you’ll forget about this 10 seconds after you clicked it.”

As I said, I could go on and on.  So what’s going to happen here.  The scariest thing is that this mess has created a situation where the government’s going to step in to help save us.  Yikes!  Grandstanding politicians.  Just what we need here.  What we really need is for someone to create a really great privacy management tool that helps us manage all the complex relationships we’ve established and manage all the information we’re sharing in an easy-to-use, coordinated, centralized fashion.  Apple and Facebook and Google and Amazon are going to fight you at every step.  That leaves you, Microsoft.  Symantec?  Cisco (who needs to boost its consumer initiatives anyhow)?

Someone tell me a legitimate use case for this software, beyond stalking.  ”I should know their name but I forgot”?  ”They look familiar but I’m too embarrassed to ask”?  If this were anyone but Google (or other big players), I might ignore this app.  But Google?!  Do no evil??  This will be used for evil.

Filed under: Mobility, Social networking | Tagged: , , , , , , | 2 Comments »

Microsoft Tries to Derail the Barnes & Noble Juggernaut (!?)

Posted on March 24, 2011 by jyarmis

In the legal morass that is Android comes the latest news that Microsoft is suing Barnes & Noble, alleging patent infringement.  Think about the surface absurdity of that one.  Microsoft suing Barnes & Noble.  Even The Onion hasn’t contemplated this scenario.  So, what’s really going on here.

At a macro level, here’s what’s happening:

  • These kinds of patent lawsuits are so common that I’ve almost stopped looking at them altogether.  Usually it goes like this:
    • Someone sues someone else.
    • The someone else counter-sues.
    • The two companies exchange patent cross-licensing agreements, usually with one side or the other having to kick in some cash.
  • There’s a slight twist to the whole Android scenario, again though one that’s not uncommon.  Most of these patent lawsuits have focused on Android licensees and not the deep-pocketed Google.  It only makes sense to go after the weaker players, albeit ones with sufficient funds to pony up.

What are all these people suing in the Android space trying to accomplish?  It’s real simple.  If you’re trying to sell an operating system into a market where Google is giving it away, you need to make the OS appear not to be free.  In other words, you may not pay for the OS but by the time you factor in legal costs, your free OS all of a sudden isn’t so free.  Somewhere along the line, Google is probably going to have to ante up to help its partners by resolving all of these patent infringement issues.  It probably means Google’s going to have to write a check.  The good news:  they’ve got $34.9 billion in cash on hand and are printing more each quarter.  So much for the chilling effect on Android licensees.

What’s particularly interesting about the Microsoft/Barnes & Noble case is that presages interesting competition in the tablet marketplace.  Why should anyone be worried about Barnes & Noble or, by extension, Amazon?  The Barnes & Noble Nook e-reader actually runs on Android.  In effect, they’re selling a specialized Android tablet for $249.  How can they do that when the rest of the Android tablet marketplace is horribly overpriced as I’ve recently blogged?  Welcome to the new world of ecosystems and razors and razor blades.  Amazon and Barnes & Noble can sell these devices at low (or no) margin because the economics of incremental margin on the razor blades (books and other digital content) is so compelling and predictable that it pays to seed the market with devices.  That’s another reason why Apple, asides from supply chain efficiencies, can sell the iPad so competitively.  It can count on a reasonable income stream from the AppStore while in the Android space, those margins go to Google.

Yes, I know that the Nook and the Kindle are not general-purpose tablets.  Today.  But the color Nook is pretty darn close.  The Wall Street Journal’s Brett Arends even recently told readers how to turn their Nooks into tablets.  He overstated his case to make a point:  Barnes & Noble can do this easily and likely will.  If not, they deserve to follow Borders into bankruptcy.

Netting it out:

  • Google is likely to have to share some of its profits with its ecosystem to cover legal exposures.
  • Google is likely to have to share some of its app store revenues with partners.  Otherwise, the situation with competing app stores (already a fracturing standard) is going to get (much) worse rather than better.  They need to do this one quickly.
  • In other words, Android tablets need to get cheaper and Google will have to share its app and advertising revenues to make that happen.
  • Players like Barnes & Noble and Amazon can become strong players in the tablet marketplace because they have the economic model and ecosystem to compete with Apple.  Selling hardware alone is not much fun these days, and is only going to get worse.

Filed under: Ad-Supported Business Models, Cloud Computing, Consumer Electronics, Hardware, Mobility, Uncategorized | Tagged: , , , , , , , , , , , , | Leave a Comment »

Why Letting AT&T Buy T-Mobile Sucks for All of Us

Posted on March 21, 2011 by jyarmis

Letting AT&T buy T-Mobile sucks.  Even more insidious are the rumors that regulators have already given this a wink-wink approval.  Why does this suck?  For many years, we Americans lived in a mobile telecommunications backwater.  Large portions of the industrialized world had better, more advanced telecommunications systems than we did and even emerging markets were leapfrogging over our infrastructure and approach.  Then along came Apple.  Regular readers here know I’m no fan of Apple’s business practices but give credit where credit is due.  Apple knew it had something big and knew that it could strong-arm one of our carriers into playing business by its terms.  So committed was Apple to this approach that it was willing to go with AT&T when we all knew, and have come to see more and more, that its network sucked.

Apple begat Android and for a brief period of time, we lived in a world where capabilities and platforms and ecosystems ruled, not carriers with their focus on profits at the complete expense of user experience.  We were already seeing how much carriers hated that world.  Have you seen the crapware loaded on your phone these days, crap that can’t be removed?  Look at Skype on Verizon’s Android.  I can download Verizon’s version of Skype (and not uninstall it after that), which not only just works on 3G, it requires that you turn off WiFi (so that no other applications can access WiFi while you’re Skyping).  I’ve never understood this but I’m guessing that Verizon is scared enough of Skype as a competitor that they want to give it minimal functionality.  This also means that I can’t use WiFi for Skype internationally, even while Verizon’s CDMA technology is deployed only in a few other countries around the world.  Oh by the way, I can download Skype’s version of Skype, but that works only over WiFi.

Get used to it.  This is the world we’re going to see.  We’re likely to see a trifurcation of the app store world.  Trifurcation?  Yes, we’ll probably see app stores emerge from the carriers since they’ll each impose their own requirements for apps to be certified for their networks.  At the very least, since both networks are likely to impose data caps, each with their own byzantine pricing structures, you’ll have to download the app that’s best optimized for the network pricing model.  (You’re going to love that one, app developers.)  And trifurcation?  Well, the cable companies have already banded together to offer unified WiFi in many markets (e.g., TimeWarner and Cablevision in New York City), to better compete against mobile/telco Internet/TV incursion.  We’ll likely see an app store emerge from there, with apps that are designed around a very different model, whereby you do your high bandwidth transactions when connected to WiFi, in an online/offline synchronize model as opposed to the mobile model of perpetually available bandwidth.

This is not progress.  This is not innovation.  In fact, it will stifle innovation and inhibit the deployment of broad-based mobile applications and infrastructure.  What can we do about this?  Not much, I’m afraid.  I’d love to say “write your congressman and write to the FCC,” but I’m not so young and naïve as to believe that would help much.  What would I like to see the regulators do here?  For starters, I’d love to see them disallow the deal on anti-competitive grounds.  If you believe the scenario I outline above is possible or even likely, this clearly is a combination in restraint of trade.  If they won’t do that, at least impose these regulations on the merged entity:

  • Limitations on data caps for a period of 3-5 years.  Anyone with an unlimited plan at the time of the merger gets to keep that as long as they maintain a data contract with the carrier.
  • A prohibition on a carrier app store.
  • Limitations on the crapware installed on phones and/or the ability to remove it, at least after 90 days of phone ownership.
  • Serious notifications of potential data overage where there are data caps.  We’ve only recently gotten that protection for call overages — long overdue, and prompted by European regulators, not ours.  In data, it’s much more insidious because we don’t always know when/how much data we’re using.  There should be onerous requirements on the carriers here, such that we can effectively meter our usage.  And there should be rollover of unused data.

I wish I believed any of this would happen, but I don’t.  Instead, I think we’re about to enter a period where the ironically named Long-Term Evolution (LTE) is actually a major step backwards on the evolutionary scale.  We’ll have faster speeds…and much less ability to exploit them in interesting and game-changing fashion.  It’s a shame that AT&T, who was once broken up by the regulators, is so adept at the regulatory game that it is about to win via acquisition what it could never win the open marketplace.

Filed under: Mobility | Tagged: , , , , , , , , | 1 Comment »

Apple: That Didn’t Take Long

Posted on February 17, 2011 by jyarmis

Two weeks ago, I blogged that Apple was picking fights (then Sony) that it had no business picking.  The latest go-round now is with big publishers over how to sell subscriptions on the iPad and iPhone.  Naturally, Apple wants to dictate terms and extract its 30%.  Whereas bullying the music industry was pretty easy and, one could argue, justified, with these content producers, its a tougher argument and a tougher settlement.

In music, you could credibly argue that Apple made the digital music industry.  Before Apple came along, things were fractured, to say the least.  Apple unified a market, created a great experience, strong-armed the labels…and deserves to share in the fruits of its success.  With books, newspapers and magazines, it’s a different case.

  1. These players had well-honed approaches and strategies before Apple came on the scene.
  2. These players are much better politically-connected than the music people who, ultimately, are small and don’t influence politicians very much.  Magazines and newspapers:  bigger and, oh yeah, that political clout.

Not surprisingly, therefore, the Justice Department and the FTC are said to be looking into Apple’s business practices.  Wow.  That didn’t take long.  Apple announces something on Tuesday, on Wednesday Google launches a competitive offering (taking only 10%) and on Thursday there are rumors of government involvement.  If that didn’t tell you Apple picked the wrong fight this time.

We’ve seen what government intervention did to IBM, AT&T and Microsoft over the years.  We’re seeing Google’s challenges now.  Welcome to the party, Apple.  I reiterate my position that two weeks ago could have been Apple’s zenith.

Filed under: Consumer Electronics | Tagged: , , , , | 2 Comments »

The New Math: When 5 + 4 = 1 (Nokia and Microsoft Get Together)

Posted on February 11, 2011 by jyarmis

The rumored partnership of Nokia and Microsoft has come to pass, as Nokia announced today that it is going to embrace Windows Phone as their primary smartphone platform.   I’m not going to go into a deep analysis of the keys to success.  That will be well covered in the news today.  The big one obviously is how many platforms will developers support?  iPhone, of course.  Android is on the cusp of becoming 1a to Apple’s 1.  A must-do platform.  In certain markets (e.g., enterprise), Blackberry is 1b or at least a strong contender.  HP made its WebOS move earlier in the week, with some interesting value propositions, linking computers, tablets, phones and peripherals.  What would make Windows Phone compelling for developers?

Nokia has had its own set of challenges.  While they long said they were the world’s largest Smartphone company, they were kidding no one.  Once the iPhone came out, they were yesterday’s news.  Once Android gained momentum, they were in full denial mode.  They missed key trends (like Americans were buying clamshell phones) and took years to rectify the shortcoming, never to regain market position.

So now Nokia and Microsoft are partnering.  Not surprising, considering where Nokia’s new CEO, Stephen Elop came from.  (Microsoft, if you don’t already know.)  It didn’t take him long on the job to conclude that Nokia’s own efforts were failing and ultimately failed.  Nor did it take him long to conclude that his best strategic bet was Microsoft.  Given his background and their mutual desperation, it didn’t take long to conclude this deal.  In some ways, it’s almost stunning in its rapidity.

I just want to ask one simple question:  when have  two waning market players ever combined together to create one market-winning entrant?  I was sitting in a session yesterday at New York’s Social Media Week next to IBM AR star Mauricio Godoy and I asked him to come up with any examples of where this had worked.  Interestingly, he came up with a couple of situations.  Involving musical artists/groups.  I’m not sure they were entirely compelling but at least they had merit worth discussing.  But neither he nor I, nor anyone else I’ve asked this question to, could come up with a compelling instance where two fading businesses combined to reassert market leadership or even competitiveness.

Combining my problems with your problems sometimes solves both our problems.  More often, however, it increases complexity and amplifies both of our problems.  Friend and fellow analyst Bob Egan Tweeted this morning “Execution has been Nokia’s shortfall yet now it seems they are taking on even more execution complexity. Was hoping for simpler more focused.”

Often in business conversations, you hear people say that they’re looking for situations where 1+1 is greater than 2.  Here we have a situation where 5+4 is supposed to produce 1 or 2.  Now I admit that I’m just old enough that I missed the “new math” in high school.  (My sister, two years younger, learned it.)  But I don’t see the math working.  And in a market so dynamic and fast-moving, combining these two entities, neither of them known for their speed, may just hasten their mutual demise.  (I would, however, love to hear of successful business combinations in this vein in the comments.  Anyone?)

Filed under: Mobility | Tagged: , , , , , , , | 6 Comments »

Apple: When is Enough Enough?

Posted on February 2, 2011 by jyarmis

I’m a big admirer of Apple.  They design incredible products.  They innovate and, beyond innovation, they create new categories and approaches.  They have been richly rewarded for that and are now the second highest valued company in the world, behind ExxonMobil.  You know there’s a “but” coming.  And it’s a big one.  Is it good for anyone (other than Apple) — even you — when they put their hand so deep in everyone’s pocket and when they tell you and me how to do business?  (Full disclaimer:  I don’t own any Apple products.  I have a Sansa MP3 player, because I like the Rhapsody subscription music model.  I actually like the Microsoft Zune subscription model even better, because then I get to rent and own music, but that’s maybe my next device consideration.  I have an Android-based Motorola Droid, largely because I’m on Verizon and won’t buy any electronic device without a replaceable battery, so no, I’m not getting on line for a Verizon iPhone.  I do, however, own some really old Macs and an original, and still working Newton.  And my introduction to the technology industry in 1979 was on an Apple II+.  But I digress…)

The latest flap is over Sony’s e-reader application where Sony wants to enable users to buy books without paying Apple its 30% “tax.”  Apple, however, is insisting that all purchases must be made “in-app”…and as such, Apple wants to take its share of the transaction.

So, let’s get this straight.  Apple owns complete control over whether your application makes it into the app store and if they say no, there’s basically no “legitimate” way for you to get an application on to your phone.  With Android, while the default is to only allow apps to come in through the Android market, a simple uncheck in settings allows you to install applications from any source.  Apple will tell you that’s to protect the user experience.  That’s the same argument the telcos used to exclude devices from their network until, paradoxically, the iPhone came along and led to a new OS-centric model of wireless carriers here in the States and opened up the market to innovation that had been stalled for a decade.  In other words, bullsh**, Apple.

But that’s not enough for Apple.  Once the app has been approved, they want their full share of any revenue generated and won’t allow solutions that circumvent their taxing mechanism, regardless of how consumer-friendly and/or app provider-friendly those solutions are.  If you want to make money on the iPhone, pay us our 30%.  (This one will get really interesting the first time Oracle and SAP get serious about mobile apps.  Clash of the Titans anyone?  But it probably won’t get to that.  Read on.)

If this were any vendor other than Apple, the hue and cry would be so incredibly loud that it would drown out conversation about American Idol.  But Apple, our little darling, gets away scot-free.  Imagine if Microsoft said “any transaction that occurs on a Windows machine will henceforth and forever more involve a payment to Microsoft.”  The antitrust lawyers would move so fast that time would actually go backwards.  But Apple?

Actually, I think this time Apple made a mistake.  A big mistake.  This one is so outrageously wrong that it’s sure to draw scrutiny from all corners.  This could be the proverbial straw that broke the camel’s back.  Apple probably thought “well, it’s only Sony.  Who cares about them any more.”  The real target, of course, is Amazon whose Kindle software is available on all platforms (imagine that, not just iPhone and iPad) and whose sales enrich Amazon’s coffers.  Amazon is a threat to Apple’s control of the ecosystem.  If Kindle is the standard for some forms of digital content, how can Apple own the whole process they way they do with music and, increasingly, video?  If someone is able to stand up to Apple and not pay their ransom, what does that mean for all the others who feel they are being held captive?

So Apple started with Sony.  A trial balloon if you will.  This, however, could instead become Apple’s trial by fire.  What Apple’s trying to do here makes Google’s and Facebook’s privacy intrusions seem like a walk in the park.  Quite simply, Apple is trying to put a meter on the flow of digital content over the Internet.  I’m loathe to draw comparisons to what’s going on in Egypt this week.  Clearly, that’s a real-life saga that dwarves anything we’re talking about here.  However, it’s hard to ignore the parallels.  Enough is enough.  Whether it’s a military dictatorship or a technological one, at some point the citizenry/customers say this has gone on too long and we need to push back.

While I’m not of course predicting such a dire outcome, this could some day be remembered as Apple’s Waterloo.  They’re inviting legislative scrutiny in the United States and around the world.  They’re forcing their “partners” to stand up and revolt.  And most dangerous of all, they’re risking the love and support of their fan base.  If there’s a coordinated effort on the part of content creators across all media types (books, music, video and, with today’s announcement of The Daily, news and information) — heck, even without a coordinated effort — the risk to Apple’s reputation, position (and market cap) is considerable.

Apple is restricting choice, controlling innovation and enriching its coffers.  And it’s not benefiting you.  Enough is finally enough.

I do believe that this week may well have been the Zenith of Apple’s power.  And that’s pretty remarkable to contemplate.  Pride goeth before the fall.

Filed under: Consumer Electronics, Mobility | Tagged: , , , , , , , , , , , | 6 Comments »

Demand Media: Click Troll

Posted on January 26, 2011 by jyarmis

Demand Media went public today in one of the largest and most successful Internet IPOs in a long time.  That has to be good news, right?  We all want Internet companies to prosper.  We all want the financial markets to open up so we have more exit options.  Well, without getting into the financials of the whole deal (if you want a good analysis, read here), let me just state that I find the whole Demand model to be bizarre and unfortunate.

First of all, if you’re reading this blog, you’re probably not very familiar with Demand Media.  That’s because you’re generally smart enough to search and browse the Internet.  If you’re not so smart, well, Demand is looking for you.  Their business is really quite simple.  They accumulate a lot of domain names.  They populate those domains with low quality content created by a legion of freelance writers.  They then search engine optimize the heck out of that content so that it appears high on Google page rankings.

Here’s where it gets really insidious.  They then rely on the P. T. Barnum effect to drive revenue.  You know…”there’s a sucker born every minute”?  It’s actually important to Demand that the content be of low quality.  They don’t want you spending a lot of time with the content.  In fact, they’d be very happy if you never read the content.  What they want you to do is find nothing of interest on the page but find a link in an ad on the page that takes you where you actually wanted to go in the first place or really, just someplace else.  When that happens, kaching.  They get paid by Google for that ad click.  That’s their source of revenue.  Period.  Oh yes, they’re also a domain registrar but they do that not because it’s such an interesting business but because it gives them inside access to expiring domain names that they might like to own.  It’s also important for them to have a really good source of information on what people are searching for so that they can best satisfy that need with their content and domain names.

Google also benefits from this dirty little arrangement because Demand generates so many ad clicks that might otherwise have gone to organic search results.  Here’s though where it gets dangerous for Demand.  Let me hasten to note that the problem I’m about to talk about is not of Demand’s making.  They’re just a shrewd beneficiary.  Have you noticed that Google search results are getting worse and worse?  Most of you probably don’t even notice but right on the Google search screen, there’s a button that says “I’m Feeling Lucky.”  If you enter a search term and click that button, it takes you right to the first result of the Google search.  No search results page, just the first piece of content.  There was a time when that actually was a good choice.  Google’s search algorithm was so good, or so they represented, that you could just click that button and save yourself an extra click.  When was the last time you did that?  And what did you get?  Well, if you did it, you probably got a Wikipedia page (and if you wanted Wikipedia, wouldn’t you have gone there in the first place?).  Increasingly, though, there s a chance that you got not the information page you wanted but rather someone who did a great job of search engine optimizing (SEO).  There’s a whole industry around SEO.  I do Google searches these days that return such bad results that it’s not until the second page or later that I actually get to some content related to what I was searching for and not some Google-optimized retail “opportunity.”

Somewhere soon, Google is going to have jiggle with its indexing algorithm to push these “click trolls” further down in the results page so that the high quality content that you’re searching for actually appears back on that first page.  Whether they explicitly punish Demand Media, I have no idea.  Probably not.  But the net result should be that people who are trying to trick the search engine into presenting you their page when it really isn’t what you’re searching for should end up lower down in the listings.  For those of us trying to use Google as a vehicle to find information, this is great news.  For Demand Media, not so good.

Demand has built a business that today is valued at over $1 billion by gaming the system.  Good for them.  Not so good for us.

Filed under: Ad-Supported Business Models, Uncategorized | Tagged: , , , , | 4 Comments »

The Return of Larry Page and Google’s Need for Revitalization

Posted on January 21, 2011 by jyarmis

The news that Eric Schmidt is being “kicked upstairs” to Executive Chairman at Google, to be replaced as CEO by co-founder Larry Page, has us all reading the tea leaves for what that means for Google.  Google is almost as difficult to work with for analysts as Apple and thus, my reflections below come mostly as a long-time, interested observer of Google than any deep insights I have from working with them.  I do, however, spend a lot of time working with people who work with Google.

  • The replacement of a CEO by a founder at a successful company is not exactly without precedent.  Michael Dell got shunted aside by his Board only to lead a renewal of the company upon his return.
  • What do these people have in common?  John Sculley, Michael Spindler, Gil Amelio.  Those were the people who served as Apple CEO after Steve Jobs was pushed aside.

Thus, there’s precedent for a CEO returning to revitalize a company that has lost its way.  Now I’m not saying that Larry Page is Steve Jobs or even Michael Dell.  That has yet to be demonstrated.  However, make no mistake about it, Google is in need of revitalization.

How can I make that statement about one of the industry’s grand success stories?  Well, let’s peek under that success.  What exactly has Google succeeded at?  I and others have long observed that Google’s a one-trick pony even while acknowledging that the one trick is a pretty darned good one.  Other than selling advertising on search results pages, what has Google done that has earned money?  I’m a big fan of Android, and happily own a Droid, but that’s not a revenue story yet.  Clearly the bet is that mobile advertising is going to be really big and that owning the platform is essential to reaping full economic benefit or at least maintaining control of its own destiny.  Perhaps true but as yet unproven.  That’s largely it from a revenue producing standpoint in the immediate and medium-term.

Google’s other initiatives have largely been either failures (e.g., Wave) or acquisitions of interesting things (e.g., YouTube, Picasa) that haven’t particularly benefited (nor been harmed) by Google’s acquisition.  Saying “nor been harmed” is actually a positive statement as we’ve seen numerous tech acquisitions over the years where the acquired company/technology disappears into irrelevance.  Nonetheless, it’s fair to say that Google’s a one trick pony.

Here’s the challenge:  that one trick is on the verge of running out, perhaps a victim of Google’s own success.  Most of you are probably aware of the acronym SEO.  Search engine optimization.  Basically it means that it’s important for a web site to show up on the first page of a Google search result either through “gaming” the Google indexing algorithm and/or through buying keywords.  Both of those today face challenges.  Google used to be magic.  When you typed something into its search box, you were presented with the pages you actually wanted to see.  Now you see more and more pages that are not really the ones you wanted but instead are ones of someone trying to sell you something who have done a better job of playing the SEO game than the actual content you were trying to reach.  And if I wanted the Wikipedia page, which so often shows up first, well, I would have gone to Wikipedia in the first place.  Thanks for nothing.  I won’t get into the discussion about the challenges to Google’s keywords because either (a) you know this better than me or (b) if you don’t, it’s not really that interesting; just know that there are a lot of dissatisfied campers in the world who are really looking for alternatives, more cost-effective and more effective, than Google.

What does this have to do with Larry Page and Eric Schmidt?  Two-and-a-half years ago, Google’s Marissa Mayer said search is “90 to 95%” solved.  I was in violent disagreement with that then and since then, I would argue we’ve moved backwards.  It is getting harder and harder to find what we want and what we need, and the introduction of more complex time and location elements is only worsening the problem.  It’s not like Schmidt had a more compelling vision than Mayer as expressed in this interview at the time with Michael Arrington.

Google is in need of a reinvention.  I was going to say “desperate” but it hasn’t reached that point.  Yet.  However, search is being reinvented in front of our eyes.  For certain things, I don’t go to Google but instead go to Twitter or Quora or Facebook or any of a hundred different sites that give me not an algorithmic result but a human or curated one.  And there’s wide amounts of room to improve the algorithmic search taking radical new approaches.  I’m not holding up Bing as an example of a radical new approach but it is a step forward with an attempt to divine context when searching and to present “solutions” and not just algorithmically-resulting pages.  Cheap shot alert:  You know when Microsoft is out-innovating you, you’ve got an issue on your hands.

I don’t know whether Larry Page is the man with the vision to reinvent search and reinvent Google.  However, I’m pretty sure Eric Schmidt wasn’t that man.  Give Page (and Brin) credit for recognizing the “problem” before it really started manifesting itself in true harm to Google’s core business.  Google has always been noted for supporting its people in the development of quirky projects which have ranged from the totally inane to the mildly interesting.  I’ll be looking for signs now that we’re going to see profoundly new, important and creative approaches to Google’s core business, led and oriented by Page.  The one-trick pony needs a new trick.  Zenith or reinvention?  It’s going to be an interesting year.

Filed under: Ad-Supported Business Models | Tagged: | 1 Comment »

Dear Google: Buy Adobe

Posted on October 27, 2010 by jyarmis

Recent news reports have linked Apple and Microsoft as potential suitors for Adobe.  While Adobe CEO Shantanu Narayan has thrown cold water on the Microsoft discussions and the rancorous relationship between Apple and Adobe renders an amicable partnership unlikely, one name has been absent from these discussions, and they’re the ones who should most likely want to buy Adobe, has the resources to do so and can build an extremely synergistic business case for the combination, and that’s Google.

A brief look at the financials.  Adobe at this writing has a market capitalization of a little over $14 billion.  Google has $33.4 billion cash on hand and generated over $10 billion in operating cash flow in the last 12 months.  Not only does Google therefore have the financial wherewithal to make an acquisition of this size, it’s probably one of the few acquisitions of this scale (along with Salesforce.com; market cap almost $15 billion) that it could make without significant antitrust scrutiny.  While continuing to trash Adobe, it’s not like Apple could argue compellingly that Google shouldn’t be allowed to buy it.  (While we’re at it, Google should also buy Salesforce, but we’ll talk about that later.)

So, why should Google buy Adobe?

  1. In a battle for the hearts and minds of developers, Google is missing key elements.  Yes, Android is a successful and growing platform but Google’s developer relations are no better than Apple’s, with both of them being substandard.  As Google grows out its platform ambitions, with Chrome OS on the horizon, having a well-developed developer relations program will be important in its battles with Apple and also increasingly Microsoft.  Do developer relations matter?  One could argue that one of the compelling reasons why early Windows beat IBM’s OS/2 in the marketplace after the Microsoft/IBM split in the late 80′s and early 90′s was because Microsoft had strong developer relations and after the split, IBM had to effectively start from scratch and was way behind even while having the technologically superior platform.  Developers matter, differentiated applications matter and so developer relations matter.  Adobe has a long history with them; Google has none.
  2. Google, despite its myriad product offerings, is effectively a one-trick pony:  advertising.  Of course, if you’re going to rely on one trick, this is a pretty good one to rely on, and Google is an ongoing financial juggernaut.  However, to realize their full software and platform ambitions, Google is going to need to broaden beyond advertising as the sole source of their revenue.  Adobe presents Google with great opportunities to grow into traditional software licensing models.
  3. And while offering traditional software licensing models, Adobe also presents some familiar-to-Google bottoms up enterprise opportunities.  Adobe has, shall we say, an interesting portfolio of enterprise software.  Traditional industry analysts (read:  Gartner) have always had a hard time characterizing Adobe since they don’t always neatly fit into Gartner Magic Quadrants or at least their products are missing certain features that Gartner considers key in its category definitions.  Adobe’s response has always been “we just meet actual customer needs.”  While they haven’t therefore neatly fit into architectural diagrams, Adobe has successfully penetrated enterprises with a bottoms-up, or more accurately middle-out, approach.  This fits well with Google, who <sarcasm alert> hasn’t exactly penetrated the enterprise through the front door. <end alert>
  4. While Google advertising opportunities have enabled “freemium” models to flourish on the web, paradoxically Google itself has not benefited from such models.  Over 98% of Google’s revenue derives from advertising and there are scant opportunities to upgrade from free Google products into revenue-producing ones.  Adobe offers several such opportunities, from consumer-oriented ones like moving from Picasa to Photoshop to enterprise-oriented ones like Acrobat.
  5. While Google has major cloud computing infrastructure initiatives in place, the early market has been dominated by key emerging competitors Amazon, Microsoft and Salesforce.  Adobe has interesting infrastructure elements that expand Google’s presence in the cloud architecture space.
  6. As noted earlier, Google’s enterprise approach is largely lacking.  One could have said the same of Apple, who has pursued a consumer-driven strategy for virtually all of its corporate life.  It was interesting to see, therefore, Apple’s announcement earlier this week of a partnership with Unisys to better help integrate Apple technologies (notably the iPhone and iPad) into enterprise architectures.  Google, too, must pursue external relationships to meet real customer requirements but an Adobe acquisition would give Google some much-needed internal support capabilities as well.  As mentioned earlier, I still believe Google should acquire Salesforce.com to expand its software and platform capabilities and to dramatically expand its enterprise support capabilities.    Google is going to have to either acquire Salesforce or get serious about competing with them.  Either way, an Adobe acquisition would be a step in the right direction.
  7. Lastly, this makes sense as a defensive move.  To the extent Apple and/or Microsoft are seriously looking at Adobe, it would hurt Google were they to acquire Adobe, necessitating Google to adopt a piecemeal solution to the elements addressed above.

So why should Adobe be interested in a Google acquisition?

  1. While I hardly embrace Steve Jobs’s bombast about Flash, it’s clear that HTML5 presents a significant challenge to one of Adobe’s major and enduring platforms and thus from a purely financial perspective, this may be the best time to sell.
  2. Adobe’s cross-platform arguments diminish in a world where there are fewer platforms and different requirements.  If, as I have argued, the mobile world is coalescing around Apple IOS and Google Android, and Adobe’s presence on one of those platforms is insecure at best, the rationale for an Adobe solution is dramatically diminished.  Further, with the different requirements of a mobile platform, with its lesser hardware power, the ability to support interim software layers is not as clear-cut as on the desktop, or in the cloud.  Mobile devices are heavily about the integrated experience and Adobe doesn’t play well against that requirement.
  3. Adobe is a better fit with Google.  With Microsoft and Apple both, there are significant overlaps in the product portfolio and/or minimal interest in some of the pieces with the the likely result being that core Adobe products and platforms are discontinued or sold off.  There is little to no overlap with Google and yet strong synergies; thus the ability to preserve the product portfolio, and the driving vision behind it, remains largely intact.

Google and Adobe…better together

Filed under: Ad-Supported Business Models, Cloud Computing, Mobility | Tagged: , , , , | 2 Comments »

Windows Phone 7: Microsoft’s (Considerable) Challenges and its Surprising Opportunity

Posted on October 12, 2010 by jyarmis

As I discussed in my last post, mobile is a space Microsoft needs to win if it’s to remain as relevant in this decade as it was in the last two.  I’ll never underestimate Microsoft’s power and, more importantly, its stubbornness/tenacity in battles it must win.  However, there are so many moving parts in this space and so much potential for Microsoft’s efforts to go awry that it’s very hard for me to develop any enthusiasm for Windows Phone 7, launched yesterday.

Let’s just look at some of those challenges:

  • User interface.  Microsoft looked at the iPhone and unlike Google, which said “we should copy that,” instead said “we can do better than that.”  Trying to out-interface Apple is a daunting proposition.  Has anyone done that?  Ever?  And in any event, is this the time it’s going to happen?  I’ll give Microsoft credit for realizing that perhaps the market didn’t need yet another iPhone clone.  However, its approach is actually at odds with how it has succeeded on the desktop.  The desktop and to a large extent the iPhone and Android worlds have succeeded because they’re open platforms upon which application developers can unleash their creativity and users can freely and equally access that creativity.  Instead here Microsoft has said “we know what activities you do with your phone and we’ll make those more prominent.”  If this is actually a static set of activities common across a wide enough range of users, I’d actually applaud that approach.  However, I don’t believe it’s at all a static set of activities and I think there’s sufficient variation from user to user that this approach will generally suffer.  Sure, if you’re a Zune person, great for you.  Both of you.  But I don’t think many users are thinking “wow, this iPhone is too tough to use; I wish someone would simplify my choices for me.”
  • Does Microsoft’s approach make it harder for application developers to achieve prominence?  With Microsoft controlling so much of the initial user experience, applications are relegated to a less prominent position.  This might discourage application creativity in areas Microsoft considers “core,” like pictures or social networks, and might hurt application developers whose applications might otherwise be considered core by users but are relegated to less prominence on WP7.
  • How many platforms can the market support, anyhow?  It’s clear Apple is a long-term survivor.  I don’t say “leader” because ultimately that’s not their business model.  They don’t play in high volume, low margin spaces and make no mistake about it, the smartphone market is going to be high volume in very short order.  Blackberry is positioned to be a survivor as a niche solution.  Their investments in corporate-relevant infrastructure mean that they can be a trusted provider for key scenarios even while other providers infringe on them at the margin.  That means that Android, HP/Palm, Nokia/Symbian and Microsoft are left fighting for markets that can only support one or two of those parties.  The decision may actually rest on more than just smartphones, which leads us to our next discussion.
  • Whither the tablet.  Android needs rework to adequately support tablets.  HP is going to move Palm into a variety of Internet-connected devices, including tablets, printers and more.  What’s Microsoft’s tablet strategy?  I’ll need more time looking at WP7 to assess whether this is a viable UI for tablets or whether it’s more likely to be some evolution of Windows not-Phone 7.  If, however, WP7 is not a tablet or other embedded device OS, that constrains the market opportunity for WP7 and thus its attractiveness to application developers.
  • Velocity.  Microsoft’s track record at getting operating systems out the door is, well, spotty.  (I’m feeling charitable today.)  The velocity in the phone market is a radically different dynamic than on the desktop.  Upgrade cycles are measured in weeks and months, and certainly not years.  Is Microsoft going to be able to maintain that pace and do so in a way that doesn’t jeopardize product quality.  Their track record is sobering.

However, Microsoft is in an interesting position when it comes to the carriers, especially here in the States.  The carriers have a love/hate relationship with Apple.  They’d love to have the iPhone.  They hate that Apple gets to dictate all of the terms.  With Google, it’s more of a wary situation.

While Google is more complicit with the carriers than Apple, the carriers are (rightly) suspicious of Google’s motivations.  If Google isn’t exactly making money licensing the core platform, then what’s in it for Google?  Clearly Google views this as an essential step in moving its ownership of the search space on desktops into a mobile world.  Thus, at some level, Google’s economic rationale and that of its partners are competitive and/or misaligned.  That doesn’t make for a great partnership.  Google competitors all around are trying to drive stakes into that misalignment with these patent lawsuits that further the economic risk elements and point out some of the inequities in the relationship (I get the benefit, you assume the risk).  That said, unless we’re about to change the patent landscape and head to Armageddon like situations, these things usually resolve themselves with small amounts of money changing hands.  I actually think that should one of the involved parties pursue these patent matters to full resolution, it will be counter-productive and will in fact hasten the time when we see patent reform up to and including the elimination of software patents, many of which, to this outside observer, seem, well, patently absurd.

So where does this leave Microsoft?  To the carriers, Microsoft may actually seem like the most benign of the three partners.  At least they understand Microsoft’s licensing model and appreciate the fact that Microsoft was their complicit partner on earlier Windows Mobile platforms (even while such complicity rendered the platform in need of its very replacement).  Again, I’ll write about my dislike for the carriers in a future posting.  They still hold to a desire for control that is unhealthy for the ecosystem and for us users.  But given that they hold on to these notions, their desire to partner with someone who will cow-tow to their mandates is strong.  If Microsoft’s willing to be that partner, all may not be lost for them.

Of course, that means that a Microsoft victory could be very bad for the rest of us…

Filed under: Consumer Electronics, Mobility | Tagged: , , , , , | 6 Comments »

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