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 »

Microsoft’s Challenges

Posted on October 4, 2010 by jyarmis

It has been more than a year since I’ve posted, and it’s nice to be back.  I’ll talk about my absence in another post but let’s just say that being the “disruptive technologies” guy at a company that doesn’t embrace disruptive technologies is an interesting challenge.  Anyhow, I thought I’d being my return to active blogging with a discussion about my long-time favorite vendor, Microsoft.

Goldman Sachs just downgraded Microsoft’s stock to neutral, saying Microsoft needs to do three things to get back into Goldman’s graces:

  1. Increase its dividend
  2. Rationalize its consumer strategy
  3. Lead in cloud computing.

I’ll touch on each of those in turn but while I haven’t read the Goldman report, it seems to me that they’re missing the two critical places Microsoft needs to succeed at as well:  mobile and social.  Maybe those are covered under “consumer” but (a) I don’t think they fully belong there and (b) I think they’re so critical to Microsoft’s success that they bear separate mention.

As for mobile, it’s clear that the imminent Windows Phone 7 launch is Microsoft’s last chance to get this right.  There are too many platforms fighting for too few developers and while Apple has caved a little on the use of cross-platform tools, developers will still prioritize and exploit platforms in different orders.  I’ll give Microsoft credit for the realization that another iPhone clone (after Android) is not what the market is waiting for.  Whether Windows Phone 7 is different enough, and better at all, is an open question.  I have my considerable doubts but at least Microsoft is pursuing a high risk/high reward strategy instead of a low risk/guaranteed failure one.  We can lament all we want about Microsoft’s litany of failures in this space, and they are considerable, but in a charitable moment I may actually allow that Microsoft’s failures are actually what enabled Apple’s and Google’s successes.  They tried to do the impossible — get the carriers to see the light — well before the carriers were remotely interested in conceding anything.  (The carriers still don’t see the light, but that’s a discussion for another day.)

In social, I think Microsoft needs to get much more aggressive but not in building a competitor to Facebook.  They’ve already lost that battle, even while their equity investment in Facebook will produce a nice financial windfall in the next year or two.  Rather, I think the wide open market remains creating the “Facebook for the enterprise.”  This is still an underdeveloped space and the market leaders remain small companies with uncertain futures.  I think we’ll start to see these companies acquired by the bigger players within the next year so Microsoft’s window, if you will, of opportunity is small.  And please don’t tell me that SharePoint is that strategy.  SharePoint is certainly a beachhead Microsoft can exploit but as a user-driven total Facebook-like solution, it’s not even close.  If Microsoft doesn’t act soon, their old nemesis IBM is actually well-positioned here.  I observed to an IBM executive over a year ago that if some company not named IBM had IBM’s product suite, the world would be wild over what they’ve put together.  However, being buried within IBM has cost it broad market awareness.  But as customers start to understand the power of enterprise-grade social networking, IBM is very well positioned to capitalize on that demand.  Microsoft has an even stronger opportunity but is much further away from being able to exploit it.

Now, briefly, to Goldman’s points.

As for the dividend, I’m not a financial analyst but it’s clear that Microsoft has to do something with its amazing cash hoard of over $36.5 billion.  As an analyst, I’d always prefer to see Microsoft come up with interesting internal ways to invest it first, then also to pursue acquisitions, but given its track record and the sheer volume of that cash balance, I can understand demands to return it to shareholders in the form of dividends, especially when the 11 year chart of the stock price is basically flat.

As for the consumer strategy, I think it would be a huge mistake to divest itself of the portfolio.  I think, however, Microsoft needs to better integrate its consumer and enterprise strategies in a coherent whole, exploiting synergies between the two.  From a user perspective, I think the two experiences are totally blurred.  We do consumer things at work and enterprise things at home.  (If you doubt users are doing consumer things at work, see how much time they spend on fantasy football in the office.)  If the user perspective is blurred, there’s an opportunity for someone to provide a blended experience and who better than Microsoft?  In fact, I would argue that this is Microsoft’s opportunity alone.  Do I think they get it?  Nah.  But is it a huge opportunity?  Oh yeah.

Finally with cloud, I would agree with Goldman.  Microsoft has a huge opportunity, and a long-term imperative to be a clear leader here.  However, Christiansen’s “innovator’s dilemma” rears its ugly head here.  While Microsoft has actually been surprisingly aggressive on the server side, their stance with Office continues to lag the market opportunity and other market entrants precisely because the self-impact is greater than the market opportunity.  On the server side, the self-impact is less clear and thus Microsoft can afford to be more aggressive.  However, when it comes to allocation of resources, marketing and development, their packaged offerings certainly get more attention precisely because they get more current revenue.  It’s hard for any CEO of an established company to put weight behind the oft-stated position “we need to attack our own business before someone else does.”  And Steve Ballmer, given his historical background and predilection for sales and marketing would have a harder time than most to actually implement that.  But if he doesn’t…well, the technology industry has always been very unforgiving of market leaders during times of market transition.  With the emergence of new platforms — social, mobile and cloud — unless Microsoft gets more competitive and more aggressive in all three of these areas, it is not out of the realm of possibility to think that Microsoft becomes the CA of this decade, exploiting a captive installed base but doing little else of fundamental interest.

Filed under: Uncategorized | 3 Comments »

The Top 10 Signs Your Social Media “Expert” Isn’t

Posted on July 13, 2009 by jyarmis
  1. They refer you to their profile on Friendster.  Where it lists as qualifications:  “Twitter is hot.  I’m a twerp.  Coincidence?  I think not.”
  2. Their Twitter profile:  Following 12,782, Followers 6, Tweets 2
  3. Their Facebook vanity profile:  http://www.facebook.com/HowDoYouUseThisAnyhow?
  4. “LinkedIn is, like, for people with jobs.”
  5. They’re under 26.  (Revenge for http://www.valleyprblog.com/social-media/a-rant-why-older-generations-shouldnt-blog/)
  6. They’re over 50.  (Other than me, of course.)
  7. Their resume’ includes any of these campaigns.  Worse, their resume’ includes all of these campaigns:  http://blog.thoughtpick.com/2009/06/10-social-media-campaigns-that-failed-avoid-their-mistakes.html
  8. They utter the phrase “but you have to be a part of the conversation” as the answer to every question.   In fact, be wary if they use that as the answer to any question.
  9. “Metrics, shmetrics.  We don’t need no stinking measurement.”
  10. They’re unfamiliar with YouTube but they’ve Dugg YouPorn.  Multiple times.  Per hour.

Filed under: Uncategorized | 1 Comment »

Google’s OS Announcement: Nailed It!!!

Posted on July 8, 2009 by jyarmis

It’s nice as an analyst when you make a significant call well ahead of the market that turns out to be spot-on.  I had one of those with my report in February of 2008 entitled “Twitter:  The Most Important Platform You’ve Never Heard Of.”  As you might imagine, a year and a half ago the report generated some amount of scorn, even internally.  Looks pretty good now, eh?  I took great joy when the CEO of my former company actually signed up for his own Twitter account.

Well, nailed another one.  🙂  Google announced, via blog post, the Chrome operating system yesterday.  In a research note dated September 6, 2008, at the introduction of the Chrome browser, here’s the beginning of what I had to say.  (AMR clients can read the entire research note here.)

“Google introduced a “product” named Chrome this week.  It is wrong to think of Chrome as a browser.  It is really Google’s omni-client strategy, appearing here as a desktop rich internet application platform (RIAP), to complement Android, Google’s mobile version of the platform.  This is a disruptive maneuver, presaging a serious Google effort to control more of the desktop environment and to strengthen and extend its position in the mobile and online/cloud environment.  Enterprise ISVs and IT organizations have an intriguing platform to evaluate.  In the short-term, however, shortcomings in the browser itself will limit Chrome’s impact.

 There are really three ways to look at Google Chrome, in increasing order of interest:

  1. As a browser.
  2. As a platform for Google Apps.
  3. As Google’s omni-client platform strategy and a replacement for the Windows environment for desktop and mobile applications.”

Now, after the self-congratulatory blather, a few thoughts:

  • The market is ready for a fundamental rethink of the notion of an operating system, designed around web-enablement.
  • I’m not a big fan of “light” operating systems.  There are reasons why the client operating system should be a rich environment for application developers and users.  That said, designing it from the ground up to be web-aware is the right design criterion.
  • Microsoft’s Windows 7 is the latest, and last, iteration of the client-centric operating system.  You can expect Microsoft to talk a lot about Azure in response to this.  How much more than talk they do is still an open question.  Their near-term revenue opportunity is Windows 7 and thus their considerable focus and marketing effort will be on Windows 7.  This gives Google considerable opportunity to demonstrate thought leadership and to deposition Microsoft’s cloud efforts.

The cloud era has officially begun.

Filed under: CIO, Cloud Computing | 3 Comments »

The Twitter Generation: Coping with Information Overload

Posted on July 6, 2009 by jyarmis

People look at Twitter, Facebook and other social media and often observe “oh great, just what I need.  More distractions.”  Perhaps now more than ever, my learnings of over 20 years as an analyst are broadly useful.  As an analyst, I’ve been trained to look at the world through the lens of input, process and output.  You have to allocate your time among those three and also make sure that each is managed, typically in different fashions.

Input

In the good old days of “information is power,” we had a finite number of inputs, often giving us an incomplete picture of the situation.  Today, we still may have holes in the input but the bigger issue now is information overload, too much input.  Still, we must do two things.  First, make sure that among that choices of inputs that we have that we choose a balanced set of inputs to give the broadest possible picture.  Too many people on Twitter, for instance, follow people “just like them,” giving an echo chamber kind of effect.  Their thinking gets ratified because the only inputs they choose to select are those that confirm their position.  Bad situation in which to find yourself.  At the same time, it’s all too easy to conclude that because of the volume of inputs you’re receiving that you somehow must be seeing everything you need to see.  False.  It’s every bit as critical in this “too much information” world to identify the underlaps in your information flow as if you were in a “too little information” world.  So many post-disaster analyses demonstrate that the information to realize we were making a mistake existed, just that it hadn’t crossed the relevant person’s radar screen.  The old saying still applies:  “if you don’t know what you don’t know, you don’t know enough.”

Process

In the “good old days,” we’d actually spend time thinking about or debating things.  In today’s world, process consists of clicking “like” on Facebook or retweeting on Twitter.  Perhaps with the volume of data today, it’s easier to identify trends but then again, extrapolating straight line conditions was never a terribly valuable skill to possess.  In a data-rich world, every bit as much as in a data-poor one, identifying the non-intuitive conclusions is the real value contribution.  I suppose there’s a place in the world for the Scobles and Kawasakis – the broadcast media of social networks – but the real value I’ve found always comes from those who apply selection, judgment and insight to the data, not merely rebroadcast it.  This is one of the values of the Internet OldTimers Foundation network to me; my OT time is usually thought-provoking and insight-focused.  There is very little of the “see this, pass it on” and much more of the “so what does this really mean?”  And perhaps the biggest insight I’ve gathered over the years from focusing on process is to look for proof you’re wrong.  If you look for proof you’re right, you’ll almost always find it…even when everyone else long ago concluded you were wrong.  If on the other hand, you give your search for your errors a true and honest effort, only in the absence of information negating your position might you begin to feel comfortable in your correctness…subject of course to a full range of inputs as outlined above.  This search for wrongness makes me sometimes a difficult person to work (or live) with – I’m the one who, when everyone else is rushing to agree, stops to see what we’re missing.  On the other hand, that makes me a great consultant; I’ll see what those of you too close to the matter (whose inputs are biased in one direction) might miss.

Output

At the end of the day, what you do with your inputs and processes is what really matters.  Mental masturbation is a wonderful game in which to participate but if your inputs and processes don’t lead to substantive behavioral changes, it wasn’t necessarily time well spent.  Don’t spend a lot of time in maintenance of the status quo.  Instead, look for those outputs that call for a behavioral change.  That’s where you get the real return on your investments of time above.

It’s real easy to lose track and get caught up in one of the above steps – the information junkie, the debater or the presenter.  I find great personal value in being aware of these processes and biases and actively managing them.

Filed under: Social networking | 3 Comments »

Advertising 2.0 and Facebook’s Valuation

Posted on May 27, 2009 by jyarmis

The news today that Facebook has accepted $200 million from a Russian investment group, valuing the company at $10 billion, has revived the question of what exactly is Facebook worth.  Much of that discussion has focused around the ability, or lack thereof, of Facebook and other social networks to sell advertising and delivering advertising results.  I think this discussion totally misses the point.  The question isn’t how advertising will work on Facebook but rather how Facebook and social networks change advertising.

I’m loathe to introduce yet another 2.0 moniker but if ever an industry needed to be 2.0-ized, it’s advertising.  Almost a century ago, retailer John Wannamaker is purported to have said “half of all advertising works, I just don’t know which half.”  (This quote is often attributed to PR maven David Ogilvy but my quick persual of the Googlesphere seems to show Wannamaker significantly predating Ogilvy.)  Today, that 50% goal may even be wildly optimistic.  On the Internet, clickthrough rates have fallen precipitiously as clutter has replaced clarity.

I think we’re on the verge of a major rethink of the fundamental premises of advertising.  We have long understood that in addition to challenges in measurement (what works), we also have had challenges in credibility.  Consumers typically rate advertising as their least credible information channel.  However, sellers continued to invest in advertising because they could compensate for the lack of credibility through broad distribution and high impact creative.

Today, however, that equation has been shattered.  Word of mouth/peers have consistently been rated the most credible sources of information but, as the name implied, the distribution model was limited.  Those of you old enough may remember the Clairol ad that showed 2 people who told 2 people such that by the end of the commercial, there were 64 faces on screen.  Today, 1,000 people tell 1,000 people and very quickly the message has reached millions of people.  Credibility now has a channel for mass distribution.  If you don’t think that has profound implications for how we “advertise,” you’re just not paying attention.

The mass distribution of credible information sources will transform advertising.  In fact, early indications show that the impact may even be larger in that people are finding “people like them” who they don’t know are as credible as the people they do know.  In other words, if I’m, say, a CIO, I’ll find the opinions of other CIOs whom I’ve never met every bit as credible as the ones I know.  Maybe more so, in that I’m less willing to denigrate the opinions of people I don’t know whereas the people I know…well, I know their shortcomings and inadequacies.

While no one has cracked the code on this yet, I think there are a few things one can point to:

  • Facebooks’s Connect and other similar technologies allow people to bring their social map as they traverse the Internet.  If you haven’t thought yet about how you might incorporate the social map into the way you deal with customers and prospects, call me.  This is going to be huge and the opportunities are immediate.
  • I’m a big fan of Loomia’s SeenThis Facebook application.  While a Facebook application, I actually “use” it elsewhere.  In particular, on the Wall Street Journal, you’re probably familiar with the boxes that show what stories other Journal readers have read.  This “most read” designation is rarely interesting to me and generally reflects the editorial judgment of the WSJ editors and what stories they promote.  However, I see an additional box, showing me what stories my Facebook friends and groups have read.  This is a much more interesting designation to me and generally I end up clicking through on most or all of those articles as the “recommendation” from my peer group is much more interesting and relevant to me than the recommendations of the general WSJ readership or editorial board.

Some other time I’ll talk about the overlay of location with social, which is going to further transform advertising.  However, for the sake of today’s discussion, I think social networks are going to transform the way companies communicate with consumers and potential consumers in profoundly interesting ways.  As such, questions of Facebook’s valuation are at best mildly amusing to me.  If Facebook indeed is in the vanguard of transforming the way companies reach consumers, $10 billion will some day seem laughably small.  And it’s not a question of whether this will happen.  It’s only a question of when, how and who.  And as for when, it’s already happening.  Consumers are voting with their clicks that social networks matter.  It’s up to the advertising industry to remove its collective head from its collective, um, sandbox and enable and exploit this transformation.

Filed under: Uncategorized | Leave a comment »

Saving Newspapers? Amazon Introduces a New Kindle

Posted on May 7, 2009 by jyarmis

Let’s get this straight right away.  The new Amazon Kindle DX has nothing to do with solving the root causes of the problems of newspapers.   The top 5 reasons the Kindle is not the solution:

  1. At a price of $489, this is a niche subset of what remains a niche category.
  2. Newspaper subscriptions are only available in areas where the paper editions are not available.  Yes, this is clearly early and is likely to change but that tells you what the papers are thinking about things now.
  3. The existing Kindle (cheaper and more broadly available) already offers subscriptions to 37 newspapers at $10/month.  Form factor is not the only reason keeping these versions from being a success.
  4. Amazon keeps 70% of the revenue from newspaper subscriptions.  It takes a LOT of subscribers at $3/month to make money.
  5. Articles on the Kindle do not display ads.  This too will/must change.

Let me note that the DX may be a revolutionary product for its other market, college textbookss.  I’m not going to cover that here.

I think all the discussion on the future of newspapers has missed a critical point.  Much of the discussion has focused on the broad availability of content from multiple sources and also mention the growth of “citizen journalism,” be it blogs or Twitter.  So what does this discussion miss?  There are two related issues which combine to fundamentally attack the business model, not the product or content.

First, how do people get their news today?  While some of us go directly to newspaper sites on the web or get their electronic summaries in our inbox, news is more commonly found via web portals (e.g., MyYahoo or iGoogle) or via a Google web/news search.   When this happens, the first monetization opportunity comes not to the news source but to the aggregator.  Google and Yahoo have seized the upstream revenue opportunity and have diffused the downstream opportunity by making the “choice” of news source less relevant.  You go not to the source you favor but rather the one that appears highest in the search rankings.  You may even never make it to one of the downstream sources, instead going to your portal’s newswire feed from a source like AP or Reuters.  Ultimately, a considerable portion of the audience never makes it to the newspaper site.  Newspapers, Google is not your friend.

At the same time, the core monetization engine of newspapers — advertising, not subscriptions — is under assault from many angles.  When the obituary of newspapers as we know them is written, the first major illness should be listed as Craigslist-itis.  Category after category of listings has moved on to the web where things are cheaper, more timely and more effective.  And if you think the bad news is over, you’re mistaken.  Another staple of newspapers — legal notices — will find its way to the web sooner or later, probably sooner.  Already some heavily regulated marketplaces (e.g., drug advertising) can use web notices in lieu of print lineage.  It’s only a matter of time before governments realize that web listings, while not universal, are every bit as “available” as print notices and are more “accessible”.  In other words, the affected audiences are more likely to find this information on the web than they are in the newspaper.

Are newspapers doomed?  In their current state, yes.  Period.  How would I reinvent the industry?  Here are a few thoughts:

  • Local is not your salvation.  Niche audiences are very hard to monetize.
  • Digital paper is important.  When the price point of a newspaper-like device falls under $100, you’ve got a market.
  • Look at what’s going on in the netbook space.  Not so much from the point of view of a cheap device — that’s obvious — but rather the emerging discussions with cellular carriers where, much as is the case with today’s cell phones, the carriers will subsidize the price of the device to drive network usage.  I’m not sure what Amazon’s revenue relationship is with Sprint, the network carrier for the Kindle, but there’s clearly money there to be divvied up.
  • Two models:  Hulu and The Week.  What these both have in common is aggregation.  Curiously, the best vision in this regard, The Week, is a weekly print publication.  I find it a compelling read as it looks at the top news of the week from the perspective of multiple newspapers.  A single story might give me regional US slants, a European snippet or two and something from an Arabic perspective.  What makes these two sources compelling is their aggregated nature.  From a consumer’s perspective, it’s a single destination where I’m likely to find what I want.  From an advertiser’s perspective, it’s an aggregated audience.  The bigger the audience, clearly the better the monetization opportunity.  If a site can achieve a critical mass (which I’ll leave undefined for the purposes of this discussion), it can broaden its advertising base and achieve some independence from Google or the advertising networks.  Newspapers have largely not done that.  Aggregation may be their only salvation.
  • eBay partnership.  eBay has its own challenges.  At some level, Craigslist has delivered an important localization the eBay hasn’t.  When the shipping price of a product is greater than the price of the product, you’ve got a market inefficiency.  By making things local, Craigslist has become the first destination for many products that otherwise would have ended up on eBay.  I know I said “local is not your salvation.”  However, it’s a start to monetization.  Leverage the eBay opportunity and combine it with the aggregated opportunity I talk about into a fundamental redefinition of your revenue model.  Much as bricks-and-mortar retailers have one-upped dedicated web retailers by offering physical pick up and return, so to can newspapers combine the benefits of local with the benefits of global.

 The newspaper is dead.  Long live the newspaper.  Digital paper, aggregation and savvy partnerships.  These three can redefine the newspaper.

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

The Twitterization of Facebook: Facebook’s Flaw

Posted on April 27, 2009 by jyarmis

Facebook is expected to announce today that it is opening up its news feed to third party application developers.  Twitter has benefitted for some time from the unfettered access of application developers to the Tweatstream, and with this move Facebook continues the move to embrace more Twitter-like functionality that began with the recent interface redesign that made status updates much more prominent.

On the one hand, this is the right move for Facebook to make and will only serve to increase the value users derive from the Facebook platform.  I have a folder of over 40 Twitter applications that enhance the core value of the platform.  Without these third party applications, Twitter’s value would be severely compromised and its growth stunted.  However, in this rush to Twitterization, I believe Facebook has fundamentally failed to appreciate the messaging taxonomy in which it operates.  In so doing, they will compromise their value to users, perhaps the first real chink in Facebook’s inexorable growth.  (Yes, there has been the occasional terms of condition firestorm but that was ultimately much ado about nothing, as evidenced by the small voter turnout in the recent terms of condition affair.)

So where’s the confusion?  While many people use third party tools to automatically post their Twitter posts directly to their Facebook status, I think the two play fundamentally different roles.  I use my Facebook status to reflect big picture events or thoughts.  As such, I expect the status to remain relatively static, at least as compared with the Twitter feed.    I may only change my Facebook status a few times a day and on occasion, I leave it the same for several days at a time.  By contrast, my Twitter feed may include multiple updates a minute, reflecting minute changes in what I’m doing, what I’m thinking or what I’m looking for.  The Facebook status is for seeing the forest through the trees; the Twitter feed is the very root system of that forest and those trees.

By confusing those two, Facebook risks devaluing the status feed, increasingly its triviality and decreasing my likelihood of perusing it.  I rarely browse the Twitter feed any more, instead relying on a variety of search and filter mechanisms to make sense of the vast stream from the almost 2,000 people I now follow.  By contrast, even with over 1,000 friends on Facebook, I regularly browse the status updates because their high level information is sufficiently valuable for me to devote that level of effort and attention.

For Facebook to retain its level of value to and attention from me — critical if it hopes to increasingly monetize the platform through advertising — it’s essential that they understand the messaging taxonomy in which they play.  At the lowest level, there’s Twitter.  High up on the hierarchy is the Facebook status update.  In between are some of the other elements of the Facebook feed (posts, events, etc.).  Unless Facebook makes steps to embrace this taxonomy, it is at risk of decreasing its user value, something it can ill afford to do.

So the expected announcement today of the opening of the platform to third party developers is a great thing, but if Facebook fails to embrace the messaging taxonomy outlined above, in a few years we may well view today’s announcement as the day Facebook “jumped the shark.”  To date, Facebook has responded quickly and appropriately to major platform gaffes (e.g., Beacon).  This, however, is a much more subtle and insidious “gaffe.”  Let’s see how quickly Facebook reacts…or whether this is a huge and deleterious mistake.

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Qualcomm and Broadcom

Posted on April 27, 2009 by jyarmis

First of all, sorry for the hiatus.  This unemployment and rehab thing is exhausting, physically and emotionally.  It’s time to get back into the saddle.  And what better day than today?

Qualcomm and Broadcom announced a settlement of their longstanding and broad-based legal battles.  For many of you, these two are perhaps familiar names at best, more likely evoking questions of “what is it exactly they do?”  However, when you realize that they’re effectively the Intel and AMD of the mobility space, it gives their settlement a new perspective.  Make no mistake about it, both have significant ambitions in an increasingly mobile computing platform, and world.

The two have spent considerable energies, monies and court time in fighting each other.  The net result of all this fighting was ultimately some degree of customer uncertainty.  Not customers as in end-users, who are largely unaware of the role these two play, but instead in the minds of handset and other device manufacturers who were often caught up in this maelstrom.  Now that this longstanding battle is behind them, Qualcomm and Broadcom can now devote increasing focus and attention to emerging market opportunities, which are considerable.

Many will focus on this as a Broadcom “win,” and any settlement where you get paid almost a billion dollars is pretty much a win, but I believe Qualcomm is really the big winner here.  Yes, a billion’s a lot of money but Qualcomm’s licensing business model is really a license to print money.  They can afford it.  Heck, the savings in litigation expenses alone is probably almost a wash.  While this doesn’t mean Qualcomm’s legal staff is now sitting around like the Maytag repairman, there’s a real savings here.  More importantly, Qualcomm management can now focus on market opportunities instead of legal strategies.  That can only sharpen their market focus.  Lastly, and most importantly, Qualcomm is now largely unencumbered in its efforts to pursue new opportunities, drive new licensing opportunities and pursue new relationships.  Qualcomm’s toxicity has largely been removed and real barriers to growth have been shed.

That’s an outcome well worth the billion dollars they’ll pay.

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Where Motorola Blew It

Posted on February 3, 2009 by jyarmis

I’ve also started guest blogging at BusinessWeek.com and here’s my first posting there.  It even made it to the home page of the web site there.  🙂

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