mobile internet

iPad Pro: The Missing Workflow

 

The iPad started simple, one window at a time, putting it in the “media consumption” category as a result. Over time, such category proved too narrow, the iPad did well in some content creation activities. Can the new 128 GB iPad continue the trend and acquire better workflow capabilities?

Last week, without great fanfare, Apple announced a new 128 GB version of its fourth generation iPad, a configuration popularly known as the “iPad Pro“. The “Pro” monicker isn’t official, but you wouldn’t know that from Apple’s press release:

Companies regularly utilizing large amounts of data such as 3D CAD files, X-rays, film edits, music tracks, project blueprints, training videos and service manuals all benefit from having a greater choice of storage options for iPad. 

Cue the quotes from execs at seriously data storage-intense companies such as AutoCAD; WaveMachine Labs (audio software); and, quirkily, Global Aptitude, a company that makes film analysis software for football teams:

“The bottom line for our customers is winning football games, and iPad running our GamePlan solution unquestionably helps players be as prepared as possible,” said Randall Fusee, Global Apptitude Co-Founder. 

The naysayers grumble: Who needs this much memory on a “media tablet”? As Gizmodo put it:

The new iPad has the same retina display as its brothers, and the same design, and the same guts, with one notable exception: a metric crap-ton of storage. More storage than any decent or sane human being could ever want from a pure tablet…

(Increased storage is…indecent? This reminds me of the lambasting Apple received for putting 1 — one! — megabyte of memory in the 1986 Mac Plus. And we all recall Bill Gates’ assertion that 640 Kbytes ought to be enough for anyone. He now claims that the quote is apocryphal, but I have a different recollection.)

Or maybe this is simply Apple’s attempt to shore up the iPad’s average selling price ($467, down 18% from the year ago quarter), which took a hit following the introduction of the lower-priced iPad mini. (What? Apple is trying to make more money?)

The critics are right to be skeptical, but they’re questioning the wrong part of the equation.

When we compare iPad prices, the Pro is a bargain, at least by Apple standards:

The jump from 16GB to 32GB costs $100. Another doubling to 64GB costs the same $100. And, on February 5th, you’ll get an additional 64GB for yet another mere $100. (By comparison, extra solid state storage on a MacBook costs between $125 and $150 per 64GB.)

We get a bit more clarity when we consider the iPad’s place in Apple’s product line: As sales of the Mac slow down, the iPad Pro represents the future. Look at Dan Frommer’s analysis of 10 years of Mac sales. First, the Mac alone:

This leads Dan to ask if the Mac has peaked. Mac numbers for the most recent quarter  were disappointing. The newer iMacs were announced in October, with delivery dates in November and December for the 21.5″ and 27″ models respectively. But Apple missed the Xmas quarter window by about a million units, which cut revenue by as much as $1.5B and margin by half a billion or so (these are all very rough numbers). We’ll probably never find out how Apple’s well-oiled Supply Chain Management machine managed to strip a gear, but one can’t help wonder who will be exiled to Outer Mongolia Enterprise Sales.

Now consider another of Dan Frommer’s graphs:

This is units, not revenue. Mac and iPad ASPs are a 3 to 1 ratio but, still, this paints a picture of a slow-growth Mac vs. the galloping iPad.

The iPad — and tablets in general — are usurping the Mac/PC space. In the media consumption domain, the war is all but won. But when we take a closer look at the iPad “Pro”, we see that Apple’s tablet is far from realizing its “professional” potential.

This is where the critics have it wrong: Increased storage isn’t “insane”, it’s a necessary element…but it isn’t sufficient.

For example, can I compose this Monday Note on an iPad? Answering in the affirmative would be to commit the Third Lie of Computing: You Can Do It. (The first two are Of Course It’s Compatible and Chief, We’ll be in Golden Master by Monday.)

I do research on the Web and accumulate documents, such as Dan Frommer’s blog post mentioned above. On a PC or Mac, saving a Web page to Evernote for future reference takes a right click (or a two finger tap).

On an iPad, things get complicated. The Share button in Safari gives me two clumsy choices: I can mail the page to my Evernote account, or I can Copy the URL, launch Evernote, paste the URL, compose a title for the note I just created, and perhaps add a few tags.

Once I start writing, I want to look through the research material I’ve compiled. On a Mac, I simply open an Evernote window, side-by-side with my Pages document: select, drag, drop. I take some partial screenshots, annotate graphs (such as the iPad Pro prices above), convert images to the .png format used to put the Monday Note on the Web…

On the iPad, these tasks are complicated and cumbersome.

For starters — and to belabor the obvious — I can’t open multiple windows. iOS uses the “one thing at a time” model. I can’t select/drag/drop, I have to switch from Pages to Evernote or Safari, select and copy a quote, and then switch back to the document and paste.

Adding a hyperlink is even more tortuous and, at times, confusing. I can copy a link from Safari, switch back to Pages, paste…but I want to “slide” the link under a phrase. I consult Help, which suggests that I tap on the link, to no avail. If I want to attach a link to a phrase in my document, I have to hit the Space key after pasting, go to Settings and then enter the text that will “cover” the link — perfectly obvious.

This order of operations is intuitively backwards. On a Mac (or PC), I select the target text and then decide which link to paste under it.

Things get worse for graphics. On the iPad, I can’t take a partial screenshot. I can take a full screenshot by simultaneously pressing the Home and Sleep buttons, or I can tap on a picture in Safari and select Save. In both cases, the screenshot ends up in the Photos app where I can perform some amount of cropping and enhancing, followed by a Copy, then switch back to Pages and Paste into my opus.

Annotations? No known way. Control over the image file format? Same answer. There’s no iPad equivalent to the wonderful Preview app on the Mac. And while I’m at it, if I store a Preview document in iCloud, how do I see it from my iPad?

This gets us into the more general — and “professional” — topic of assembling a trove of parts that can be assembled into a “rich” document, such as a Keynote presentation. On a personal computer, there are plenty of choices. With the iPad, Apple doesn’t provide a solution, there’s no general document repository, no iCloud analog to Dropbox or Microsoft’s Skydrive, both of which are simple to use, quasi-free and, in my experience, quite reliable. (One wonders: Is the absence of a Dropbox-like general documents folder in iCloud a matter of technology or theology?)

Simply throwing storage at the problem is, clearly, not enough to make the iPad a “Pro” device.  But there is good news. Some of it is anecdotal, such as the more sophisticated editing provided by the iPad version of iPhoto. The better news is that iOS is a mature, stable operating system that takes advantage of fast and spacious hardware.

But the best news is that Apple has, finally, some competition when it comes to User Experience. For example, tablets that run Microsoft or Google software let users slide the current window to show portions of another one below, making it easier to select parts of a document and drop them into another. (Come to think of it, the sliding Notifications “drawer” on the iPad and iPhone isn’t too far off.)

This competition might spur Apple to move the already very successful iPad into authentically “Pro” territory.

The more complex the task, the more our beloved 30-year-old personal computer is up to it. But there is now room above the enforced simplicity that made the iPad’s success for UI changes allowing a modicum of real-world “Pro” workflow on iPads.

JLG@mondaynote.com

iPhone Low-cost Numbers

 

For years, Apple’s been told its products were too expensive – and prospered mightily. Today, many suggest Apple should launch a low-cost iPhone. Will history repeat itself, or have the rules of the Smartphone Wars changed in ways that will force Apple to alter its strategy? 

Dismissing the prospect of a Low Cost iPhone isn’t all that difficult. Just look at Apple’s history. For years, the high tech pundits have hectored Apple for it’s inability to see the wisdom of the cheap. In the late eighties and into the nineties, they insisted that a low cost Mac was the only way the company could survive against the swarm of PC clones. Steve Jobs returned and righted the Apple ship, no LC Mac required.

A decade later, the netbook was cast as the killer torpedo that would sink the resurgent Mac business. Jobs famously dismissed the netbook as a cheap plastic device Apple would never stoop to make: “We don’t know how to build a sub-$500 computer that is not a piece of junk.”

At the September 2012 iPhone 5 launch, Tim Cook announced that the MacBook is the #1 selling notebook in the US (5:30 into this video). Couple that with the success of the iPad, and the netbook is dead. And thus, by analogy, there will be no iPhone LC. Apple doesn’t do cheap. The company will focus on a premium customer experience and enjoy a high profit margin. The race to the bottom will be left to Android clones. Move along, nothing to see.

Not so fast.

Using Apple’s history — and particularly the sorry netbook story — to dismiss the iPhone LC makes questionable assumptions. As Marx (Karl, not Groucho) liked to say: ‘History doesn’t repeat itself, it stutters’. Smartphones aren’t PCs, only smaller; the rules of the Macintosh game don’t apply to the iPhone. The Smartphone Wars are waged by markedly different laws, and are waged well by Google and Samsung, unencumbered by a PC past.

But let’s back up: What would a Low Cost iPhone look like, whom would it serve, and just how “low” is Low? The easiest way to picture the thing is to drag out your old iPhone 3G or 3GS. A plastic body, an “original-resolution” screen (no Retina here), a slow processor and even slower wireless connection. It’s not today’s iPhone 5, with its metal body, lovingly machined chamfers, Gorilla Glass, high-speed A6 processor, and 5 megapixel camera.

The phone would serve the prepaid market, it addresses customers with little or no credit. Everything is paid for with cash up front: You pay the full, unsubsidized price for the phone and you buy “minutes” (let’s call them units of wireless network utilization) in advance. Buying units for these devices is a simpler experience than I imagined: Go to the neighborhood drugstore, pick out a phone card by a (virtual) carrier such as TracFone, and the cash register prints an activation code you then enter into the phone. Simple, pervasive, and very successful — even in a “rich” country such as the US.

So far, Apple has avoided the prepaid approach. When we give $199 to Verizon for a $650 iPhone, the $450 subsidy is an act of faith by the wireless carrier. The philanthropic organization assumes we’ll pay our bill every month for two years, by which time the carrier has recouped the subsidy. This is the postpaid world that Apple understands.

As for the pricetag, let’s assume that an iPhone LC would cost about $100 to manufacture — that’s half the cost of the basic iPhone 5. If we apply a 60% margin percentage — the same as today’s iPhone 5 — the unsubsidized iPhone LC would sell for $299.

That’s too high. Let’s try lower numbers: 50% margin gets us down to $199; 30% to $149. To get to the magic $99 unsubsidized retail, with an un-Apple 30% margin, the iPhone LC would need to be manufactured for less than $75, about one third of today’s iPhone 5.

And even $99 may not be low enough. Go to Amazon and look for prepaid cell phones. The first models start at $6.99 (not recommended, I tried one at $8.99 for my visiting Mother-in-Law, that was a mistake). Real smartphones running Android 2.2 start at $49.99 – today! For another $10 you get 2.3. The $80.73 Kyocera Rise runs the much more modern 4.0 (Ice Cream Sandwich) version. (I checked prepaid prices in other countries and the situation is similar.)

In his earnings release conference calls, Tim Cook constantly refers to Apple’s interest in the vast prepaid market segment but so far it’s been all talk. The reason for the gap between words and deeds sits in plain view on Amazon’s prepaid cell phone page. As more devices enter the market, we can only imagine what the page will look like a year from now.

The prepaid market, without carrier subsidies, is already in a PC-like race to the bottom. For Apple to enter and prosper in this segment, it has to determine two things: What sort of premium can it get for a low cost iPhone, and what would the device mean for the rest of the product line?

Apple execs are fond of saying they’d cannibalize their products themselves rather than let competitors do it. Even if exquisitely executed and priced just so, it’s hard not to see the (putative) iPhone LC as the augur of a new era of lower Apple margins. In other words, the iPhone LC wouldn’t be born of a tactical decision to add a new set of customers, it would be a strategic move that signals a new phase in the Smartphone Wars.

Apple loves to control the game. So do Google, Microsoft, Samsung, and everyone else, of course, but Apple’s love is an unusually intense, deeply seated drive that stems from Steve Jobs’ own (carnal as opposed to deliberate) need to master and direct every aspect of the game.

In the PC business, Jobs pushed vertical integration down beyond hardware and software, and into its retail chain of Apple Stores, thus ensuring a tightly controlled delivery of the product experience. The same applied to the iPod and its integration with iTunes. The well-controlled media delivery and novel micro-payment system was a huge win: In 2006 iPod revenue outpaced the Macintosh line.

The iPhone started with Apple fully in control. AT&T stood aside and let Apple run the table, handle all aspects of the customer experience (except for call quality). Later, the App Store extended Apple’s control of the game. The iPhone became an app phone and a phenomenal success.

(We also have the counterexample of Apple TV, an exception that proves the rule. TV content owners, distributors, and carriers haven’t let the Cupertino company seize control of the customer experience, and thus Apple TV remains a “hobby”.)

Apple is still in control of its iPhone ecosystem… but things have changed. Now the company faces Google and Samsung. Google isn’t just Android, it’s also a provider of a wide set of services such a Google Maps, Gmail, Google Docs and Drive, Google Voice, and on and on. Samsung is more vertically integrated, makes its own smartphones components, and spends more marketing money ($13B last year) than anyone else.

In today’s smartphone scene, can Apple still enjoy the control — and the ensuing profit potential — it craves? And if not, how will it react? Tactics or strategy?

JLG@mondaynote.com

2013: The Year Of…

 

As Samsung dominates the Android market, one has to wonder, who controls whom? Is Google really in charge, or is Samsung so strong it can now rule the Android game?

This morning’s thoughts are harder to focus than usual: I’m sitting across the street from Sciences Po — the Paris Institute of Political Studies — one of France’s elite graduate schools. As hundreds of students gather at the door, smoking (and littering the pavement with very Parisian hauteur), I’m dismayed by the thought that many of these smart, eagerly alive young people will die from lung cancer. Somber thoughts made more acute by the loss of a dear friend two days ago to that very illness — the third smoking-induced death of a close relation in a matter of months. This from a legal drug that’s much more dangerous than some that can land you in jail….

Back to less morbid topics: Like so many other high tech observers, the impending CES (Consumer Electronics Show) in Las Vegas has prompted me to take a guess at what — or who — will turn out to be 2103′s most important development. One name that isn’t on the list: Microsoft.

CES isn’t just an endless series of booths manned by barkers and BS artists where companies peddle their latest vacuum tube audio gear and touch-screen laptops, it’s also the venue for a conference with a series of keynote speeches. During the Golden Age of the PC, Bill Gates was the obligatory headliner on the eve of the trade show. Gates’ keynote was an opportunity for the head of the world’s most important software company to describe (and prescribe) the future according to Microsoft.

When he ceded the CEO title, Gates also passed the keynote baton to Steve Ballmer who continued the propaganda, although with progressively diminishing success. Last year’s keynote was widely trashed by the press (see here, here or here)

Microsoft CEO crashes and burns in final CES keynote.
At CES, Microsoft’s Steve Ballmer Strains For Relevance

There will be no keynote address from Ballmer or any other Microsoft representative at this year’s CES.
The baton has indeed been passed, but to whom?
The ascendancy will be decided in a fight between Google and Samsung — and that could turn out to be the most important 2013 development.

Samsung is, by far, the biggest promoter and the best advertisement for the Android platform. Not only does the Korean giant dominate the Android market in unit volume — about half if we believe the company’s necessarily imprecise numbers — it also sets the standard for quality with handsets such as the Galaxy S III. And when you consider the huge amount of money Samsung has spent promoting their devices (about $13B — see Horace Dediu’s chart, below, from yet another of illuminating posts, The Cost of Selling Galaxies), you would think that the two companies would be close allies.

But as Samsung dominates ever more of the Android market, one has to wonder: Who controls whom? Is Google really in charge, or is Samsung so strong it can now set the rules in the Android game?

I don’t think Samsung’s competitors fully appreciate the implications of the company’s spare-no-expense investment in securing a dominant market share. In particular, I wonder what Apple execs think of the disproportion between their own relatively tiny marketing expenses and Samsung’s gargantuan budget. Apple has shown, time and again, that they can do more with less, but have they let Samsung secure an inexpugnable market position? Perhaps the Cupertino team was simply unwilling to waste money stimulating a demand they knew they couldn’t satisfy due to iPhone supply chain bottlenecks.

Is Google truly happy with all this free advertisement? Samsung is firing on all cylinders: great Android handsets, apparently limitless manufacturing capacity, imaginative and prolific marketing campaigns. There may be a feeling in Mountain View that the tail is starting to wag the dog, the handset vassal could end up dictating terms to the platform creator. Samsung could parlay its dominant share of Android handsets in a number of ways.

For example: The Android economy doesn’t rely on licensing revenues but on user data that flows back to the Google mothership through the use of Google applications running on platform-compliant handsets. (Such data then flows through Google’s advertising money pump, but we’ll leave that aside for now.) What if Samsung could renegotiate its Android license and demand “role-appropriate” levies for running Google apps on its market-leading handsets? We’ve heard rumors of just such a levy before: Apple is said to receive significant payments for favoring Google’s search engine in iOS devices.

Another possibility is that Samsung could emulate Amazon’s practice of picking the Android lock. By modifying the Open Source Android source code — a completely legal maneuver — Samsung could create its own set of revenue-generating apps and services and thus cut Google out of the income stream. A number of other handset makers, particularly in China, are headed down this path, proposing devices based on Android-derived platforms such as Tapas and OPhone.

Lastly, although less seriously, Samsung has announced handsets based on Tizen, an OS that has joined the chorus line of Open Source platforms: Gram (née WebOS), Jolla (Nokia émigrés), Ubuntu (née Debian), Firefox OS. My apologies for possible oversights…

Samsung can’t possibly believe it can build a viable business on Tizen. It must know that the platform itself no longer matters, that this has become an ecosystem war. Even with Samsung’s resources and determination, betting on Tizen as an alternative to the Android ecosystem isn’t realistic — and can’t possibly impress Google execs. Complicating matters, Samsung also builds handsets on Windows Phone and Bada (developed in house). Such complexity isn’t sustainable.

Over in its corner, Google has Motorola. Ostensibly acquired for its patents, Motorola could    be the piece of the puzzle that Google needs to create a fully-integrated device, a “proper” Android handset that Google execs feel their ecosystem deserves and that independent handset makers have failed to deliver. Rumors of an xPhone are in the air, but they don’t say much about what the product will do, exactly, or when it will come out.(Google protests that it won’t give its Motorola team any unfair advantage…a promise that comes from a company that gives special access to partners-of-the-moment such as HTC, Samsung, and LG.)

Of course, creating a device in the numbers that can effectively compete with leading Samsung (and Apple) devices is easier said than done. Google/Motorola will need to convince component suppliers and device manufacturers — who are “controlled” by Samsung and Apple — to free up some space on their assembly lines.

So on one side, we have Samsung, an extremely capable and determined Korean giant with huge technical and financial resources — and little regard for niceties.

On the other, we have Google with its unparalleled infrastructure, full control of the Android ecosystem through its Google apps (think Maps) and services, very strong finances, and real long-term vision. As for niceties, Google’s style may be more “polished” than Samsung’s, but it isn’t a pushover. Google can stand toe-to-toe with anyone.

In the end, ownership of the ecosystem should tip the scales: Google will win the undeclared war with Samsung. The Mountain View company will help itself to the higher value of vertically integrated products and, at best, degrade the Korean giant’s margins or, worse, drive them into a PC-like race-to-the-bottom with other handset makers.

This isn’t an outcome Samsung will take lightly.

JLG@mondaynote.com

PS: Bill Clinton will attend Samsung’s CES keynote

Mobile’s Rude Awakening

 

Mobile audiences are large and growing. Great. But their monetization is mostly a disaster. The situation will be slow to improve, but the potential is still there — if the right conditions are met.    

This year, a major European newspaper expects to make around €16m in digital advertising revenue. The business is even slightly profitable. But there is a catch: while mobile devices now provide more than 50% of its traffic, advertising revenue from smartphones and tablets will only reach €1m. For this particular company, like many others, mobile advertising doesn’t work. It brings about 5% or 6% of what desktop web ads do — which, already, suffer from a 15 times cut in revenue when compared to print.

Call it a double whammy: Publishers took a severe hit by going digital in a way that compounded commoditization of contents with an endless supply of pages. The result is economically absurd: in a “normal” world, when audiences rise, advertising reaches more people and, as a result, rates rise. At least, that was the rule in the comfy world of print. No such thing in digital media. As many news sites experienced, despite double digit audience growth, CPMs (Cost per Thousand page impressions) actually declined over recent years. Fact is, this sector is much more sensitive to general economic conditions than to its extraordinary large adoption. And as if that wasn’t enough, publishers now take another blow as a growing share of their audience moves to mobile where money hasn’t followed… yet.

Granted, there are exceptions. Nordic media, for instance, benefit from an earlier and stronger mobile adoption (think Nokia and Ericsson, even before smartphones). Supported by many paid-for services, Scandinavian media houses extract a significant amount of profit from mobile. Similarly, Facebook mobile operations are faring quite well. According to the latest TBG Digital report, Click Through Rate (CTR) on ads placed on mobile News Feeds are 23 times higher than those displayed on the desktop version (respectively a CTR of 1.290% vs. 0.049%).

The digital mediasphere is struggling with mobile ads. In June, we went through most of the causes (see Jean-Louis’ note Mobile Advertising: The $20bn Opportunity Mirage). Problem is: there are still few signs of improvement. Inventories are growing, ad creativity remains at a low point (just look at the pixelated ads that plague the bottom of your mobile screens). As you can see below, programmatic buying is on the rise as this low-yield market remains vastly intermediated (click to enlarge):

– Too many middlemen? –

This results in the following eCPMs (effective CPM is the price advertisers are willing to pay for a given audience) as surveyed for different mobile platforms:

iOS iPad........... $0.90-$1.10
iOS iPhone......... $0.70-$0.80
Android Tablet..... $0.60-$0.70
Android Phones..... $0.40-$0.60

Advertising-wise, mobile is mostly a dry hole.

OK. Enough whining. Where do we go from here? What to expect in the next 18 months? How to build upon the inherent (and many) advantages offered by the mobile space?

For rate cards, we have some good news: prices on Android and iOS are converging upward as Android demographics are rising; soon, the two dominant mobile platforms will be in the higher price range. The value of ads is also likely to climb a little as screens gets better and larger, and as bandwidth increases: such improvements will (should) allow more visually attractive, more engaging ads. The ecosystem should also benefit from the trend toward more customized advertising. Ideally, promotional campaigns should be completely integrated and provide a carefully designed continuum within the three digital vectors: desktop web to be viewed at home or at the office; mobile formats for quick reading on the go; and tablet-friendly for a slower, more engaged, lean-back consumption (reading time is five or ten times higher on an iPad than on a PC). But, again, as long as creative agencies or media themselves do not commit adequate resources to such a virtuous chain, the value created will stay dangerously close to zero. (Those players better hurry up as a myriad of agile startups are getting ready to take control of this neglected potential.)

A few more reasons for being bullish on mobile. For instance, the level of personalization has nothing to do with what we see on the PC; a smartphone is not shared; it’s personal; and it’s the best vector to carry an intimate environment in which to create one’s dedicated social interaction system, transactional tools, entertainment selections (games, movies, books, TV series), etc. Mobile devices come with other, high potential features such as geolocation, ability to scan a bar-code — all favoring impulse buying. (This happened to me more than once: In a Paris bookstore, if the only copy left of a book I want is worn-off, or if the salesperson seems annoyed by my mere presence, I quickly scan the bare-code and order it from Amazon on the spot, right from the store. Apparently, I’m not the only one: about 20% of mobile users admitted they scanned a bar-code, or took a picture of a product in a store). And soon, these features will be supplemented by electronic wallet functions. Think about it: which marketeer wouldn’t dreamed of having access to such capabilities?

frederic.filloux@mondaynote.com

What happened to the iPad?

 

On October 23rd, Apple announced the widely expected iPad mini. The company also surprised most by also introducing a faster “4th generation” iPad, swiftly replacing the one launched on March 7th this year, seven and a half months ago.
That same day, Tim Cook proudly proclaimed a an iPad milestone: 100 million shipped since its April 2010 debut. Impressive.
No less impressively, Wall Street analysts quickly did their subtractions and concluded Q4 iPad shipments — to be officially announced two days later — were going to miss expectations.
They were right.
Where seers expected somewhere between 15 and 16 million iPads, the actual Q4 number was 14 million. Using the Average Selling Price (ASP) we’ll discuss in a moment, a “miss” of 2 million units translates into more than $1B in missed revenue.

Compared to the 17 million iPads shipped in Q3 (ending in June), Q4′s 14 million units look like a steep decline. This isn’t in keeping with the fast growth the iPad had shown since its 2010 beginning. On a “Quarters After Launch” basis, the iPad used to grow faster than the iPhone. Now, we see a decline from the 15.4 million units shipped in Q1 (ending December 2011), and only a modest 26% increase from last year’s Q4. Where are the go-go days of 70% or even 100% year-to-year growth?
Two days later, at the October 25th Earnings Conference Call, Apple’s CEO tried to put a better face on that strangely anemic 26% growth. As noted by Horace Dediu, Tim Cook pointed to a different number: sell-thru, units actually delivered to customers, grew by 44%. Not great, but not as tepid as 26%.
(See Philip Ellmer-Dewitt’s detailed explanation here. In essence, when product ships, it “changes hands”: the channel partner “takes title”, meaning it moves from Apple’s books to the reseller’s. For Apple, the items thus shipped count as revenue, even if they’re not sold-thru, that is sold to end customers. When the volume of products Apple ships to retailers is less than the volume sold-thru, channel inventories decline, more sales out than shipments in. This is how Apple sees revenue go up by 26% while sell-thru increases by 44%. A likely explanation for last quarter’s depletion of channel inventory is making room for the two new iPad models.)
Resorting to sell-thru numbers as a way to put iPad numbers in a better light could be habit-forming, it could force Apple’s management to provide more detailed inventory numbers more regularly.
On the end-customer demand side, Apple execs attributed the low Q4 iPad number to several months of intense and detailed rumors ahead of the iPad mini launch.
So, the iPad story could look this: Last year, the yearly iPhone refresh moved from June to October; as a result, Q4 iPhone shipments disappointed; but fast growth resumed once the new model shipped; the pattern now applies to the iPad as well.

No, the iPhone and the iPad behave more differently than in the above scenario. I went back to SEC filings and extracted data for the following graph tracking iPhone and iPad ASP’s for the past eight quarters:

The iPhone ASP is stable. Carriers keep indulging in (wooden) saber-rattling, complaining about “excessive” iPhone subsidies. Here, subsidy means the difference between the price carriers pay for a handset and the typical end-user price: $199 for the phone with a two-year contract. In such a $199 arrangement, for the past five years, Apple has been able to extract more money from carriers than any of its competitors. Paraphrasing Horace Dediu, the explanation for such an enduring advantage is a simple one: For carriers, the iPhone is a better salesman, it generates more revenue, a higher ARPU (Average Revenue Per User). As a result, carriers pay the iPhone salesman a higher commission, meaning a higher handset price. (And they sound like the grouchy bosses who complain their star sales person makes too much money…)

For the iPad, there is no such arrangement, no two-year contract, no subsidy. For example, AT&T will sell an iPad with a no-commitment, month-to-month wireless data contract. Without a two-year commitment, carriers have no incentive to sell the iPad at a particularly attractive price, causing customers to face the price without a subsidy fig-leaf. (One might argue smartphone contracts lead customers to borrow money, the $400+ subsidy, at usurious rates, but such habits are hard to break. Rare is the carrier that will offer a cure, a lower monthly contract if you pay full price for the phone.)

How do iPad customers react to the cold price truth? All we know is the ASP has been falling for five quarters. And we can also surmise price figures more actively in competitive situations than it does with smartphones. Or, for that matter, with notebooks and desktop computers: ASP for Macs is stable or growing a little, from $1282 last year to $1344 last quarter. These prices don’t prevent Apple from being number one on desktops and notebooks in the US — as Tim Cook reminded everyone on October 23rd.

The surprise iPad refresh can be seen as a reaction to competitive pressures, existing or upcoming ones. And, for the iPad mini, we have an interesting combination: premium price and an avowed lower gross margin, ‘significantly below our cooperate average‘ says Apple’s CFO during the October 25th Earnings Conference Call.

The iPad definitely behaves differently, neither a bigger smartphone, nor a smaller PC, thus confirming it belongs to a new category whose rules are still being established. The next few quarters will be even more interesting than recent ones: Google, Amazon and Microsoft have new products worth watching, they all intend to fight for a dominant role in the new space.

JLG@mondaynote.com

Brand x Device = Reach

 

Combine the enduring strength of media brands with emerging mobility reading habits: the result could boost digital news.  

The equation in the headline is based on a simple, important fact: By and large, digital users still trust old news outlets. In the new world, media brands are far from dead, predictions of their extinction have been vastly exaggerated. In fact, we can see an opportunity for the new reading patterns seen in smartphone and tablet to provide welcome help to legacy media in their painful transition.

Last week, the Poynter Institute released interesting data Surveying Americans who define themselves as news consumers:
=> 53% get their primary digital news from web native outlets (Huffington Post, portals like Yahoo, AOL, or shallow verticals like Drudge or TMZ — the celebrity news-breaker).
=> 83% seek a secondary source for confirmation or amplification right after getting breaking news.
=> 60% do so by relying on established media brands such as the digital version of newspapers, TV networks, etc.

Let’s pause for a moment and reflect on the latest figure, the six-out-of-ten who go for the trusted brands.

Traditional media missed the train for digital breaking breaking news; this is barely a surprise. We know the factors only too well: newsrooms were too slow to catch the wave; publishers didn’t foresee the audience battle; they didn’t invest in relevant technologies, they got swamped in the battle of free vs. paid; they stayed fixated on avoiding cannibalization of the (dying) flagship product, newspapers, broadcast news, etc. In doing so, legacy outlets left an open field for more agile, less scrupulous, traffic-obsessed young ventures. The new entrants started with a blank slate which, indeed, cannibalized the old league thanks to their speed and ubiquity.

As a result, a new vulgate emerged: newcomers would eat “old” brands alive. They would do this by capturing every segment of news:  the “commodity” format (near-live news, same everywhere for everyone, and free); the sophisticated treatments (long forms, in-depth reporting, profile…). Pundits speculated the Yahoos and the Googles of the new Digital World Order would soon hire talent and build newsrooms giants from scratch.

Fact is: it didn’t happen. Some internet brands did a great job addressing niches in politics, society or business. But, broadly speaking, once the predictions dust settled, ancestral brands seems to have been able to salvage the quality part of their franchise. Unfortunately, this one is the costliest and the less audience-driving segment. The HuffPo might have a huge audience, its readers are essentially looking for snapshots of news. For serious complement, they go for the New York Times or the trusted brand of their preference.

As for social media, the Poynter survey reframes the debate in a rather blunt way:

Despite all the social sharing buttons littering news sites, the study finds the top methods of sharing news are still word of mouth and email. (See earlier:Limited use of sharing buttons Sharing buttons look “a little desperate“.)

Having said that, for the younger generation, social networks are a key source of primary news: 35% of the Generation Y, 23% of the Gen X and 11% of the Boomers find their news there. As they get older and better educated, they could, supposedly, rely more on traditional media.

Let’s now talk about the Grand Disruption, namely how the rise of the smartphone and tablet impacts the news. According to the Poynter survey, established media benefit more from mobile devices than web native sources do. It goes like this:

The prime reason is reader engagement. The Pew Research Center for the People and the Press, exposes this in two 90-page surveys : The Future of Mobile News, produced in collaboration withe the Economist Group (PDF here), and the Trends in News Consumption 1991-2012 (PDF here).
First, the 11-years evolution of how people “got their news yesterday”:

The rise of the mobile is obvious (So is the free fall of the newspaper.) According to the Pew survey:
=> Among smartphone users (44% of the US adults) : 62% get their news weekly and 36% daily.
=> Among tablet users (22% of the US adults): 64% get their news weekly and 37% daily.

In addition, numbers reveal a high level of engagement among tablet users:
=> 78% read more than one in-depth article during a sitting (nine times out of ten for personal interest).

… and the tablet appears to be a remarkable vector for serendipitous use:
=>  72% of users end up reading in-depth articles they were not initially looking for.

More broadly, the tablet format induces further reading:
=> 69% end up reading a full article after checking headlines.

And more than one device equals more time with news:


To close the loop, the Pew survey confirms the Poynter’s findings on the preeminence of trusted brands on mobile — and more specifically on tablets as 60% of tablet users read long form journalism from publications they regularly keep up with.

The tablet is indeed the next bing thing for media. Apple is no longer the only one (I put my hand on the €200 Google Nexus 7 and it’s an excellent product). The market is now poised for a real takeoff. The tablet is the most favored vector for more in-depth news — which is legacy media’s core value proposition. And since device and media both address the most solvent segment of the population, a sustainable model is bound to emerge.

frederic.filloux@mondaynote.com

 

Quartz: Interesting… and uncertain

 

Atlantic’s new digital venture named Quartz is aimed at global business people. It innovates in many radical ways, but its business model remains dicey.

Two years ago, Atlantic Media’s president Justin Smith was interviewed by the New York Times. The piece focused on the digital strategy he successfully executed:

“We imagined ourselves as a Silicon Valley venture-backed startup whose mission was to attack and disrupt The Atlantic. In essence, we brainstormed the question: What would we do if the goal was to aggressively cannibalize ourselves?”

In most media companies, that kind of statement would have launched a volley of rotten tomatoes. Atlantic’s disruptive strategy gave birth to a new offspring: Quartz (URL: qz.com), launched a couple of weeks ago.

Quartz is a fairly light operation based in New York and headed by Kevin Delaney, a former managing editor at the WSJ.com. Its staff of 25 was pulled together from great brands in business journalism: Bloomberg, The Wall Street Journal, The Economist and the New York Times. According to the site’s official introduction, this is a team with a record of reporting in 119 countries and speaking 19 languages. Not exactly your regular gang of digital serfs or unpaid contributors that most digital pure players are built on.

This professional maturity, along with the backing of the Atlantic Media Company, a 155 years-old organization, might explain the set of rather radical options that makes Quartz so interesting.

Here are a few:

Priority on mobile use. Quartz is the first of its kind to deliberately reverse the old hierarchy: first, traditional web (for PC), and mobile interfaces, second. This is becoming a big digital publishing debate as many of us strongly believe we should go for mobile first and design our services accordingly (I fall in that category).

Quartz founders mentioned market research showing their main target — people on the road interested in global economy — uses 4.21 mobiles devices on average (I love those decimals…): one laptop, one iPad, and two (!) Blackberrys. (Based on multiple observations, I’d rather say, one BB and one iPhone.)

No native mobile app. Similarly, Quartz went for an open HTML5 design instead of apps. We went through this before in the Monday Note. Apps are mandatory for CPU intensive features such as heavy graphics, 3D rendering and games. For news, HTML5 — as messy as it is — does the job just fine. In addition, Quartz relies on “responsive design”, one that allows a web site to dynamically morph in response to the specific connected device (captures are not to scale):

Here is how it looks on a desktop screen:

… on an iPad in landscape mode:

 

…on an iPad in portrait mode:

on a small tablet:

..on an iPhone:

and on a small phone:

(I used Matt Kerlsey Responsive Design Test Site to capture Quartz renderings, it’s an excellent tool to see how your site will look like on various devices).

A river-like visual structure. Quartz is an endless flow of stories that automatically load one below the other as you scroll down. The layout is therefore pretty straightforward: no page-jumps, no complicated navigational tools, just a lateral column with the latest headlines and the main windows where articles concatenate. Again, the priority given to mobile use dictates design purity.

A lightweight technical setup. Quartz does not rely on a complex Content Management System for its production but on WordPress. In doing so, it shows the level of sophistication reached by what started as a simple blog platform. Undoubtedly, the Quartz design team invested significant resources in finding the best WP developers, and the result speaks for itself (despite a few bugs, sure to be short-lived…).

Editorial choices. Instead of the traditional news “beats” (national, foreign, economy, science…), Quartz went boldly for what it calls “obsessions”. This triggered a heated debate among media pundits: among others, read C.W. Anderson piece What happens when news organizations move from “beats” to “obsessions”? on the Nieman Journalism Lab.  Admittedly, the notion of “beats” sounds a bit old-fashioned. Those who have managed newsrooms know beats encourages fiefdoms, fence-building and bureaucracy… Editors love them because they’re much simpler to manage on a day-to-day basis; editorial meetings can therefore be conducted on the basis of a rigid organizational chart; it’s much easier to deal with a beat reporter or his/her desk chief than with some fuzzy “obsession” leader. At Quartz, current “Obsessions” appear in a discreet toolbar. They includes China Slowdown, The Next Crisis, Modern States, Digital, Money, Consumer Class, Startups, etc.

To me, this “obsessive” way of approaching news is way more modern than the traditional “beat” mode. First, it conveys the notion of adjustability to news cycles as “obsessions” can — should — vary. Second, it breeds creativity and transversal treatments among writers (most business publications are quite boring precisely due to their “silo culture”.) Third, digital journalism is intrinsically prone to “obsession”, i.e. strong choices, angles, decisions. For sure, facts are sacred, but they are everywhere: when reporting about the last alarming report from the World Bank, there is no need to repeat what lies just one click away — just sum up the main facts, and link back to the original source! Still, this shouldn’t preclude balanced treatment, fairness and everything in the basic ethics formulary. (Having said that, let’s be realistic: managing a news flow through “obsessions” is fine for  an editorial staff of 20, certainly not so for hundreds of writers.)

Quartz business side. Quartz is a free publication. No paywall, no subscription, nothing. Very few ads either. Again, it opted for a decisive model by getting rid of the dumb banner. And it’s a good thing: traditional display advertising kills designs, crappy targeting practices irritate readers and bring less and less money. (Most news sites are now down to single digital digits in CPM [Cost Per Thousand page views], and it will get worse as ad exchanges keep gaining power, buying remnant inventories by the bulk and reselling those for nothing.) Instead, Quartz started with four sponsors:  Chevron, Boeing, Credit Suisse and Cadillac, all showing quality brand contents. It’s obviously too early to assess this strategy. But Quartz business people opted for being extremely selective in their choice of sponsors (one car-maker, one bank, etc.), with rates negotiated accordingly.

Two, brands are displayed prominently with embedded contents instead of usual formats. Quartz is obviously shooting for very high CPMs. At the very least, they are right to try. I recently meet a European newspaper that extracts €60 to €100 CPMs by tailoring ads and making special ads placements for a small list of advertisers.

Again: such strategy is fine for a relatively small operation: as it is now, Quartz should not burn more than $3-4M a year. Betting on high CPMs is way more difficult for large websites — but niches can be extremely profitable. (For more on Quartz economics, read Ken Doctor’s piece also on Nieman.)

To sum up, three elements will be key to Quartz’ success. 

1 . Quickly build a large audience. Selected advertisers are not philanthropists; they want eyeballs, too. Because of its editorial choices, Quartz will never attract HuffPo-like audiences. To put things in perspective, the Economist gets about 7M uniques browsers a month (much less unique visitors) and has 632,000 readers on its app.

2 . Quartz bets on foreign audiences (already 60% of the total). Fine. But doing so is extremely challenging. Take The Guardian: 60 million uniques visitors per month — one third in the UK, another in the US, and the rest abroad — a formidable journalistic firepower, and a mere £40m in revenue (versus $160m in advertising alone for the NYTimes.com with half of the Guardian’s audience, that’s a 5 to 1 ratio per reader.)

3 . Practically, it means Quartz will have to deploy the most advanced techniques to qualify its audience: it will be doomed if it is unable to tell its advertisers (more than four we hope) it can identify a cluster of readers traveling to Dubai more than twice a year, or another high income group living in London and primarily interested in luxury goods and services (see a previous Monday Note on extracting reader’s value through Big Data)

4 . In the end, Quartz is likely to face a growth question: staying in a niche or broadening its reach (and its content, and increasing its staff) to satisfy the ad market. Once its audience levels off, it might have no other choice than finding a way to make its readers pay. It should not be a problem as it focuses on a rather solvent segment.

frederic.filloux@mondaynote.com

Apple’s $30B Maps

 

A short week after releasing the iPhone 5, Apple’s CEO publicly apologizes for the Maps fiasco and the company’s website updates its description of the new service. As the digital inspirations blog found out, the unfortunately emphatic description that once read:

Designed by Apple from the ground up, Maps gives you turn-by-turn spoken directions, interactive 3D views, and the stunning Flyover feature. All of which may just make this app the most beautiful, powerful mapping service ever.

becomes more modest:

Designed by Apple from the ground up, Maps gives you turn-by-turn spoken directions, interactive 3D views, and the stunning Flyover feature. All in a beautiful vector-based interface that scales and zooms with ease.

In his letter of apology, Tim Cook also reminds everyone of alternatives to his company’s product, and of easy ways to access Google and Nokia maps:

While we’re improving Maps, you can try alternatives by downloading map apps from the App Store like Bing, MapQuest and Waze, or use Google or Nokia maps by going to their websites and creating an icon on your home screen to their web app.

And Consumer Reports, after trying the new Maps found that, warts and all, they weren’t too terrible:

Apple uses maps from TomTom, a leading navigation company. We suspect many criticisms pointing to the map quality are misguided, as we have found TomTom to provide quality maps and guidance across multiple platforms. Instead, the fault may be Apple’s software applied to the TomTom data. […] Either way, in our experience thus far, this is a minor concern.
Bottom line:
Both the free Apple and Google navigation apps provide clear routing directions. Apple feels like a less-mature product. But as seen with the initial competing applications for the iPhone, we would expect updates to this new app over time–and Apple has promised as much. When getting down to the nitty gritty, Google provides a better overall package, but we feel that both provide a good solution for standard software. We expect the competition between the companies will benefit customers with ongoing improvements.

So… Normal teething problems, forgivable excess of enthusiasm from proud Apple execs, the whole media fireworks will blow over and everything will be soon forgotten — remember Antennagate?

One would hope so, especially if Apple’s Maps keep improving at a good pace.

But look at this graph:

Since the iPhone 5 release, and the Maps fracas, Apple shares lost about 4.5% of their value, that’s about $30B in market cap.

Fair or not, it’s hard not to fantasize about another course of events where, in advance, a less apologetic Tim Cook letter would have told Apple customers of the “aspiring” state of Apple Maps and encouraged them to keep alternatives and workarounds in mind. And where Apple’s website would have been modest from day one.

We’ll never know how Apple shares would have behaved, but they certainly wouldn’t have gone lower than they stand now — and Apple’s reputation as a forthright, thoughtful company would have been greatly enhanced.

This is more than piling on, or crying over spilled maps. We might want to think what this whole doing the right thing — only when caught — says about Apple’s senior management.

First, the technical side. Software always ships with fresh bugs, some known, some not. In this case, it’s hard to believe the Maps team didn’t know about some of the most annoying warts. Did someone or some ones deliberately underplay known problems? Or did the team not know. And if so, why? Too broad a net to cast and catch the bugs? Too much secrecy before the launch? (But Maps were demoed at the June WWDC.)

Second, the marketing organization. This is where messages are crafted, products are positioned, claims are wordsmithed. Just like engineers are leery of marketeers manhandling their precious creations, marketing people tend to take engineers’ claims of crystalline purity with, at best, polite cynicism. One is left to wonder how such a hot issue, Apple Maps vs. Google Maps, wasn’t handled with more care — before the blowup. And why, with inevitable comparisons between an infant product and a mature, world-class one, the marketing message was so lackadaisically bombastic.

And last, the CEO. Was trust in his team misplaced, abused? Were the kind of checks that make Apple’s supply chain work so well also applied to the Maps product, or was some ill side-effect of team spirit at play, preventing the much-needed bad news to reach the top?

We don’t need to know. But Apple execs do if they want the difficult birth of Apple Maps to be written in history as a wake-up call that put the top team back on track. I don’t want to think about the alternative.

JLG@mondaynote.com

Apple Maps: Damned If You Do, Googled If You Don’t

While still a teenager, my youngest daughter was determined to take on the role of used car salesperson when we sold our old Chevy Tahoe. Her approach was impeccable: Before letting the prospective buyer so much as touch the car, she gave him a tour of its defects, the dent in the rear left fender, the slight tear in the passenger seat, the fussy rear window control. Only then did she lift the hood to reveal the pristine engine bay. She knew the old rule: Don’t let the customer discover the defects.

Pointing out the limitations of your product is a sign of strength, not weakness. I can’t fathom why Apple execs keep ignoring this simple prescription for a healthy relationship with their customers. Instead, we get tiresome boasting: …Apple designs Macs, the best personal computers in the worldwe [make] the best products on earth. This self-promotion violates another rule: Don’t go around telling everyone how good you are in the, uhm…kitchen; let those who have experienced your cookmanship do the bragging for you.

The ridicule that Apple has suffered following the introduction of the Maps application in iOS 6 is largely self-inflicted. The demo was flawless, 2D and 3D maps, turn-by-turn navigation, spectacular flyovers…but not a word from the stage about the app’s limitations, no self-deprecating wink, no admission that iOS Maps is an infant that needs to learn to crawl before walking, running, and ultimately lapping the frontrunner, Google Maps. Instead, we’re told that Apple’s Maps may be  “the most beautiful, powerful mapping service ever.

After the polished demo, the released product gets a good drubbing: the Falkland Islands are stripped of roads and towns, bridges and façades are bizarrely rendered, an imaginary airport is discovered in a field near Dublin.

Pageview-driven commenters do the expected. After having slammed the “boring” iPhone 5, they reversed course when preorders exceed previous records, and now they reverse course again when Maps shows a few warts.

Even Joe Nocera, an illustrious NYT writer, joins the chorus with a piece titled Has Apple Peaked? Note the question mark, a tired churnalistic device, the author hedging his bet in case the peak is higher still, lost in the clouds. The piece is worth reading for its clichés, hyperbole, and statements of the obvious: “unmitigated disaster”, “the canary in the coal mine”, and “Jobs isn’t there anymore”, tropes that appear in many Maps reviews.

(The implication that Jobs would have squelched Maps is misguided. I greatly miss Dear Leader but my admiration for his unsurpassed successes doesn’t obscure my recollection of his mistakes. The Cube, antennagate, Exchange For The Rest of Us [a.k.a MobileMe], the capricious skeuomorphic shelves and leather stitches… Both Siri — still far from reliable — and Maps were decisions Jobs made or endorsed.)

The hue and cry moved me to give iOS 6 Maps a try. Mercifully, my iPad updated by itself (or very nearly so) while I was busy untangling family affairs in Palma de Mallorca. A break in the action, I opened the Maps app and found old searches already in memory. The area around my Palma hotel was clean and detailed:

Similarly for my old Paris haunts:

The directions for my trip from the D10 Conference to my home in Palo Alto were accurate, and offered a choice of routes:

Yes, there are flaws. Deep inside rural France, iOS Maps is clearly lacking. Here’s Apple’s impression of the countryside:

…and Google’s:

Still, the problems didn’t seem that bad. Of course, the old YMMV saying applies: Your experience might be much worse than mine.

Re-reading Joe Nocera’s piece, I get the impression that he hasn’t actually tried Maps himself. Nor does he point out that you can still use Google Maps on an iPhone or iPad:

The process is dead-simple: Add maps.google.com as a Web App on your Home Screen and voilà, Google Maps without waiting for Google to come up with a native iOS app, or for Apple to approve it. Or you can try other mapping apps such as Navigon. Actually, I’m surprised to see so few people rejoice at the prospect of a challenger to Google’s de facto maps monopoly.

Not all bloggers have fallen for the “disaster” hysteria. In this Counternotions blog post,”Kontra”, who is also a learned and sardonic Twitterer, sees a measure of common sense and strategy on Apple’s part:

Q: Then why did Apple kick Google Maps off the iOS platform? Wouldn’t Apple have been better off offering Google Maps even while it was building its own map app? Shouldn’t Apple have waited?

A: Waited for what? For Google to strengthen its chokehold on a key iOS service? Apple has recognized the significance of mobile mapping and acquired several mapping companies, IP assets and talent in the last few years. Mapping is indeed one of the hardest of mobile services, involving physical terrestrial and aerial surveying, data acquisition, correction, tile making and layer upon layer of contextual info married to underlying data, all optimized to serve often under trying network conditions. Unfortunately, like dialect recognition or speech synthesis (think Siri), mapping is one of those technologies that can’t be fully incubated in a lab for a few years and unleashed on several hundred million users in more than a 100 countries in a “mature” state. Thousands of reports from individuals around the world, for example, have helped Google correct countless mapping failures over the last half decade. Without this public exposure and help in the field, a mobile mapping solution like Apple’s stands no chance.

And he makes a swipe at the handwringers:

Q: Does Apple have nothing but contempt for its users?

A: Yes, Apple’s evil. When Apple barred Flash from iOS, Flash was the best and only way to play .swf files. Apple’s video alternative, H.264, wasn’t nearly as widely used. Thus Apple’s solution was “inferior” and appeared to be against its own users’ interests. Sheer corporate greed! Trillion words have been written about just how misguided Apple was in denying its users the glory of Flash on iOS. Well, Flash is now dead on mobile. And yet the Earth’s obliquity of the ecliptic is still about 23.4°. We seemed to have survived that one.

For Apple, Maps is a strategic move. The Cupertino company doesn’t want to depend on a competitor for something as important as maps. The road (pardon the pun) will be long and tortuous, and it’s unfortunate that Apple has made the chase that much harder by failing to modulate its self-praise. but think of the number of times the company has been told You Have No Right To Do This…think smartphones, stores, processors, refusing to depend on Adobe’s Flash…

(As I finished writing this note, I found out Philip Ellmer-DeWitt also takes issue with Joe Nocera’s position and bromides in his Apple 2.0 post. And Brian Hall, in his trademark colorful style, also strongly disagrees with the NYT writer.)

Let’s just hope a fully mature Maps won’t take as long as it took to transform MobileMe into iCloud.

JLG@mondaynote.com

 

The Silly Web vs. Native Apps Debate

 

Mark Zuckerberg admits Facebook was wrong to bet on HTML5 for its mobile app. Indeed, while the previous version was a mere wrapper around HTML code, the latest iOS app is much improved, faster, nimbler. Facebook’s CEO courageously admits the error, changes course, and promises to ship an equally native Android app in the near future.

A fresh set of broadsides from the usual suspects predict, with equal fervor, the ultimate success/failure of HTML5/native apps. See, for example, Why Web Apps Will Crush Native Apps.

This is bizarre.

We don’t know what Zuckerberg and the Facebook technical team were thinking, exactly, when they chose to take the HTML5 route, but the decision was most likely guided by forces of culture and economy.

Perhaps more than any other company in the HTTP age, Facebook is a product of the Web. The company’s engineers spent days and nights in front of big screen monitors writing javascript, PHP, and HTML code for PC users. And no Website has been so richly and promptly rewarded: Facebook is now the #1 or #2 most-visited site (depending on whether you count pageviews or unique visitors).

Even as the Smartphone 2.0 era dawned in late 2007, there was no reason to jump the Web app ship: Smartphone numbers were low compared to PCs. And I’m guessing that when Facebook first looked at smartphones they saw “PCs, only smaller”. They were not alone.

Then we have the good old Write Once Run Anywhere (WORA) refrain. Developing and maintaining native apps for different devices is time-consuming and expensive. You need to hire separate teams of engineers/designers/QA, experts at squeezing the best performance from their respective devices, educing the most usable and intuitive UI, deftly tracking down elusive bugs. And even then, your product will suffer from “feature drift”: The ostensibly separate-but-equal native apps will differ in subtle and annoying ways.

HTML5 solves these problems. In theory.

In practice, two even more vexing dilemmas emerge: Performance and The Lowest Common Denominator.

Mobile users react poorly to sluggish performance. Native apps have more direct access to optimized OS modules and hardware features…which means better performance, faster, more immediate interaction. That’s why games, always looking for speed, are almost universally native apps, and it’s why all smartphone vendors promote native apps, their app stores sport hundreds of thousands of titles.

For the Lowest Common Denominator, consider a player piano that can read a scroll of eight parallel punched hole tracks, a maximum of eight simultaneous notes. You want to create richer music, perhaps on an organ that has multiple ranks, pedals, and stops? Sorry, we need your music to play everywhere, so we’ll need to enforce the eight note standard.

In the world of smartphones, sticking with the Lowest Common Denominator means trouble for new platform features, both hardware or software, that aren’t available everywhere. A second camera, a new sensor, extended graphic primitives? Tough luck, the Web apps can’t support them. The WORA approach stands in the way of creativity and innovation by demanding uniformity. This is especially wrong in a world as new, as fast-changing as the Smartphone 2.0 universe.

Pointing to the performance and lowest common denominator problems with the WORA gospel shouldn’t be viewed as a criticism of HTML5. This new (and still evolving) version of the Web’s content language provides much improved expressive power and cleans up many past sins.

Also, there are usage scenarios where Web apps makes sense and run well across several platforms. Gmail and Google Docs are prime examples, they work well on all types of PCs and laptops… But Google took pains to write native Android and iOS apps to provide better access to Google Docs on leading smartphones.

Forget facts and nuance. “It Depends” isn’t as enticing a headline as the fight between Right and Wrong.

JLG@mondaynote.com