Privacy: You Have Nothing To Fear

 

Pervasive sensors and IP connections, coupled with the “infinite” storage and computing power in the Cloud, threaten our privacy. We need to defend ourselves and get control of our personal data amassed by private companies and government agencies.

Optimists and pessimists may inhabit opposing camps, but they do have one thing in common: Their inclinations lead to behaviors that verify their prophecies. I’ve chosen my side: I’m an optimist and have been rewarded accordingly. As a reminder of my attitude, to make sure that the occasional frustrations don’t derail my determination, I keep a little figurine from the Provençal Crèche (Nativity Scene) on my desk. He’s called Lou Ravi, the Enraptured One:

The traditional characterization is that of a gent who wanders the world, innocently marveling at the simplest of miracles. (At times, I wonder if he isn’t just a polite version of the village idiot.)

Recently, a seemingly trivial incident cast a shadow over my life-long optimism, an event that awakened dark thoughts about technology’s impact on our privacy.

As I’m driving on the A10 not-so-freeway towards the Loire châteaux, I see my license plate displayed on a sign that tells me that I’m exceeding the speed limit (130kph, about 80mph). This is novel… where we used to have an anonymous flashing nag, now we’re individually fingered. On the one hand, it’s certainly more helpful than a broad, impersonal warning; on the other, it’s now personal.

Stirred from my enraptured stupor, I start counting other ways in which we’re targeted.

Staying within the realm of license plates, we have an official, Wikipedia-sanctioned acronym: ALPR, the Automatic License Plate Reader, a device that’s used (or mis-used) by municipalities to scan every vehicle that enters the city’s limits. An ALPR system is already operational in ritzy Tiburon just north of the Golden Gate Bridge, and it’s being considered in ritzier Piedmont, an island of wealth surrounded by Oakland. The NYPD has used mobile license plate readers to build a “database of 16 million license plates, along with locations where the car was spotted”. (A Google search for Automatic License Plate Reader yields more than 1M hits.)

We also have various flavors of “event data recorders” in our cars. Similar to a plane’s black box, an EDR can regurgitate the sequence of events that preceded a crash. According to the NHTSA (National Highway Traffic Safety Administration), 96% of all 2013 vehicles carry such a device and there is a proposal to make them mandatory in 2015 models.

Insurance companies see the EDR as an opportunity to better evaluate risk so they can offer lower premiums to good drivers. Privacy advocates are concerned that the data could be used for less benevolent purposes:

Though the information is being collected with the best of intentions – safer cars or to provide drivers with more services and conveniences – there is always the danger it can end up in lawsuits, or in the hands of the government or with marketers looking to drum up business from passing motorists.

Again, if you Google “car black box recorder”, you get about 6M hits and a wide range of third-party devices. Some come with a dashboard camera such as we see in American patrol cars (and that have been adopted by a huge number of Russian drivers); others plug into the OBD-II (On-Board Diagnostic) connector that’s present on all modern cars. Combined with accelerometers and precision GPS recording, these draw a very accurate picture of everything we do at the wheel, where, when and how.

It’s not all sinister: With appropriate software, weekend track drivers can visualize and analyze their braking, acceleration, and effective use of apexes. Still, the overall picture is one of omnipresent surveillance. And I’m certainly not encouraged when I read that “anyone with a handheld scanner and access to the port under your steering column can download a wealth of information about your vehicle.”

The regard for privacy that’s demonstrated by the public sector — the government agencies that can have an enormous impact on our lives — is also less than encouraging. We now realize that the IRS reads our email without requiring any authorization or judicial supervision; the DEA complains about iMessage encryption; we have National Security Letters that confer broad and little-supervised snooping powers to US government agencies.

On the private side, Google, Facebook, and cellular carriers amass and trade on our personal data, again, with little or no practical oversight. Try asking any of these companies what sort of information they have on you, to whom they sell it, and if you can have a peek at it.

The litany goes on: Escalating healthcare expenditures give insurers equally escalating incentives to acquire personal behavior data in order to improve their risk calculation (and reject claims). We’re photographed, videoed, and, now, face-recognized everywhere. Try counting the cameras that see you on the street, in stores, elevators, offices.

When we worry about such practices, we get the sort of rote retort infelicitously typified by Eric Schmidt: “If you have something that you don’t want anyone to know, maybe you shouldn’t be doing it in the first place.”

Sure, if you have nothing to hide, you have nothing to fear. All you need to do is lead a pristine life. Drive carefully; wait for the green light before you cross the street; eat a balanced diet; don’t take, view, or exchange the wrong pictures; don’t consort with undesirable people; don’t say or write bad words; don’t inhale the wrong smoke…

This is unrealistic.

If there is nowhere to hide, how can disagreements safely ferment in political life, at work, in relationships? By definition, change disturbs something or annoys someone. And, moving to paranoia, or full awareness, the age-old question arises: Who will guard us from the guardians?

Returning to my now slightly-strained optimism, I hope we’ll support the people and organizations, such as the ACLU and many others, who work for our privacy, and that we’ll use our votes to unseat those who sell us out to private and state encroachers. We can start with demanding a handle on who has what data on us. Playing on Habeas Corpus, it’s already called Habeas Data.

I’m curious to see what Google, Verizon, Orange, Facebook, Amazon and many others know about me. Insights await…

JLG@mondaynote.com

Schibsted’s High Octane Diversification

 

The Norwegian media group Schibsted now aggressively invests in startups. The goal: digital dominance, one market at a time. France is in next in line. Here is a look at their strategy. 

This thought haunts most media executives’ sleepless nights:My legacy business is taking a hit from the internet; my digital conversion is basically on track, but it goes with an massive value destruction. We need both a growth engine and consolidation. How do we achieve this? What are our core assets to build upon? Should we undertake a major diversification that could benefit from our brand and know-how?” (At that moment, the buzzer goes off, it’s time to go to work.) Actually, such nighttime cogitations are a good sign, they are the privilege of people gifted with long term view.

The Scandinavian media power house Schibsted ASA falls into the long-termist category.  Key FY 2012 data follow. Revenue: 15bn Norwegian Kroner (€2bn or $2.6bn.); EBIT: 13.5%. The group currently employs 7800 people spread over 29 countries. 40% of the revenue and 69% of the EBITDA come from online activities. Online classifieds account for 25% of revenue and 52% of the EBITDA; the rest in publishing. (The usual disclosure: I worked for Schibsted between 2007 and 2009, in the international division).

The company went through the delicate transition to digital about five years ahead of other media conglomerates in the Western world. To be fair, Schibsted enjoyed unique conditions: profitable print assets, huge penetration in small Nordic markets immune to foreign players, a solid grasp of all components of the business, from copy sales to subscribers for newspapers and magazines, to advertising and distribution channels. In addition, the group enjoys a stable ownership structure (controlled by a trust), and its board always encourages the management to aim high and take risks. The company is led by a lean team: only 60 people at the Oslo headquarters to oversee the entire operations, largely staffed by McKinsey alumni.

The transition began in 1995 when Schibsted came to realize the media sector’s center of gravity would inevitably shift to digital. The move could be progressive for reading habits but it would definitely be swift and hard for critical revenue streams such as classifieds and consumer services. Hence the unofficial motto that’s still remains at the core of Schibsted’s strategy: Accelerating the inevitable (before the inevitable falls on us). Such view led to speeding up the demise of print classifieds, for instance, in order to free oxygen for emerging digital products. Not exactly popular at the time but, thanks to methodical pedagogy, the transition went well.

One after the other, business units moved to digital. Then, the dot-com crash hit. In Norway and Sweden, Schibsted media properties where largely deployed online with large dedicated newsrooms, emerging consumer services built from scratch or from acquisitions. Management wondered what to do: Should we opt for a quick and massive downsizing to offset a brutal 50% drop in advertising revenue? Schibsted took the opposite tack: Yes business is terrible, but this is mostly the result of the financial crisis; the audience is still here, not only it won’t go away but, eventually, it will experience huge growth. This was the basis for two key decisions: Pursuing investments in digital journalism while finding ways to monetize it; and doing whatever it took in order to dominate the classifieds business.

In Sweden, a bright spot kept blinking on Schibsted’s radar. Blocket was growing like crazy. It was a bare-bone classifieds website, offering a mixture of free and premium ads in the simplest and most efficient way. At first, Schibsted Sweden tried to replicate Blocket’s model with the goal of killing it. After all, the group thought, it had all the media firepower needed to lift any brand… Wrong. After a while, it turned out Schibsted’s copycat  still lagged behind the original. In the kind of pragmatism allowed by deep pockets, Schibsted decided to acquire Blocket (for a hefty price). The clever classifieds website will become the matrix for the group’s foray in global classifieds.

In 2006, Schibsted had acquired and developed a cluster of consumer-oriented websites, from Yellow-Pages-like directories, to price-comparisons sites, or consumer-data services. Until then, the whole assemblage had been built on pure opportunism. It was time to put things in order. Hence, in 2007, the creation of Tillväxmedier, the first iteration of Schibsted Development. (The Norwegian version was launched in 2010 and the French one starts this year).

Last week in Paris, I met Richard Sandenskog, Tillväxmedier’s investment manager and Marc Brandsma, the newly appointed CEO of Schibsted Development France. Sandenskog is a former journalist who also spent eight years in London as a product manager for Yahoo!  Brandsma is a seasoned French entrepreneur and former venture capitalist. Despite local particularisms precluding a dumb replication of Nordic successes, two basics principles remain:

1. Invest in the number one in a niche market, or a potential number one in a larger one. “In the online business, there is no room for number two”, said Richard Sandenskog. “We want to leverage our dominance on a given market to build brands and drive traffic. The goal is to find the best way to expose the new brand in different channels and integrate it in various properties. The keyword is relevant traffic. We don’t care for page views for their sake, but for the value they bring. We see clicks as a currency.”

2. Picking the right product in the right sector. In Sweden, the Schibsted Developement portfolio evolves around the idea of empowering the consumer. To sum up: people are increasingly lost in a jungle of pricing, plans, offers, deals, for the services they need. It could be cell phones, energy bills, consumer loans… Hence a pattern for acquisitions: a bulk purchase web site for electricity (the Swedish market is largely deregulated with about 100 utilities companies); a helper to find the best cellular carrier plan based on individual usage; a personal finance site that lets consumers shop around for the best loan without degrading their credit rating; a personal factoring service where anyone can auction off invoices, etc.
Most are now #1 on their segment. “We give the power back to the consumer, sums up Richard Sandenskog. We are like Mother Teresa but we make money doing it….” Altogether, Tillväxmedier’s portfolio encompasses about 20 companies that made a billion of Swedish Kröner (€120m, $155m) in 2012 with a 12% EBITDA (several companies are in the growth phase.) All in five years…

France will be a different story. It’s five times bigger than Sweden, a market in which startups can be expensive. But what triggered Schibsted ASA’s decision to create a growth vehicle here is the spectacular performance of the classifieds site LeBoncoin.fr (see a previous Monday Note Schibsted’s extraordinary click machines): €98m in revenue and a cool 68% EBITDA last year. LeBoncoin draws 17m unique viewers (according to Nielsen). Based on this valuable asset, explains Marc Brandsma, the goal is to create the #1 online group in France (besides Facebook and Google). “The typical players we are looking for are B2C companies that already have a proven product — we won’t invest in PowerPoint presentations — driven by a management team aiming to be the leader in their market. Then we acquire it; we buy out all minority shareholders if necessary”. No kolkhoz here; decisions must be made quickly, without interference. “At that point, adds Brandsma we tell managers we’ll take care of growth by providing traffic, brand notoriety, marketing, all based on best practices and proven Schibsted expertise”. Two sectors Marc Brandsma says he won’t touch, though: business-to-business services and news media (ouch…)

frederic.filloux@mondaynote.com

Facebook Home: Another Android Lock Pick

 

Facebook’s new Home on Android smartphone is an audacious attempt to demote the OS to a utility role, to keep to itself user data Android was supposed to feed into Google’s advertising business. Google’s reaction will be worth watching.

Amazon’s Kindle Fire, announced late September 2011, is viewed as a clever “Android lock pick“. Notwithstanding the term’s illicit flavor, Amazon’s burglary is entirely legal, an intended consequence of Google’s decision to Open Source their Android mobile operating system. Download the Android source code here, modify it to your heart’s — or business needs’ — content, load it onto a device and sell as many as you’d like.

Because it doesn’t fully meet the terms of the Android Compatibility Program, Amazon’s proprietary version isn’t allowed to use the Android trademark and the company had to open its own App Store. In industry argot, Amazon “forked” Android; they spawned an incompatible branch in the Android Source Tree.

The result of this heretic version of Android is a platform that’s tuned to Amazon’s own needs: Promoting its e-commerce without feeding Google’s advertising money pump.

And that brings us to Facebook’s new Home.

(The company’s slick presentation is here. Business Insider’s also provides a helpful gallery.)

Zuckerberg’s new creation is the latest instance of the noble pursuit of making the user’s life easier by wrapping a shell around existing software. Creating a shell isn’t a shallow endeavor; Windows started its life as a GUI shell wrapped around MS-DOS.  Even venerable Unix command line interfaces such as C shell, Bourne, and Bash (which can be found inside OS X) are user-friendly — or “somewhat friendlier” — wrappers around the Unix kernel. (Sometimes this noble pursuit is taken too far — remember Microsoft’s Bob? It was the source of many jokes.)

Facebook Home is a shell wrapped around Android; it’s a software layer that sits on top of everything else on your smartphone. Your Facebook friends, your timeline, conversations, everything is in one place. It also gives you a simple, clean way to get to other applications should you feel the need to leave the Facebook corral… but the intent is clear: Why would you ever want to leave Home?

This is audacious and clever, everything we’ve come to expect from the company’s founder.

To start with, and contrary to the speculation leading up to the announcement, Facebook didn’t unveil a piece of hardware. Why bother with design, manufacture, distribution and support, only to sell a few million devices — a tiny fraction of your one billion users — when you can sneak in and take over a much larger number of Android smartphones at a much smaller cost?

Second, Home is not only well-aligned with Facebook’s real business, advertising revenue, it’s even more aligned with an important part of the company’s business strategy: keeping that revenue out of Google’s hands. Android’s only raison d’être is to attract a captive audience, to offer free services (search, email, maps…) in order to gain access to the users’ actions and data, which Google then cashes in by selling eyeballs to advertisers. By “floating” above Android, Home can keep these actions and data to itself, out of Google’s reach.

Facebook, like Amazon, wants to keep control of its core business. But unlike Amazon, Facebook didn’t “fork” Android, it merely demoted it to an OS layer that sits underneath the Home shell.

On paper and in the demos, it sounds like Zuckerberg has run the table… but moving from concept to reality complicates matters.

First, Facebook Home isn’t the only Android shell. An important example is Samsung, the leading Android player: it provides its own TouchWiz UI. Given that the Korean giant is obviously determined to stay in control of its own core business, one wonders how the company will welcome Facebook Home into the family of Galaxy phones and phablets. Will it be a warm embrace, or will Samsung continually modify its software in order to keep Home one step behind?

More generally, Facebook has admitted that differences in Android implementations prevent the first release of Home from working on all Android phones. In order to achieve the coverage they’ll need to keep Google (and its Google+ social networking effort) at bay, Facebook could be sucked into a quagmire of development and support.

Last but not least, there’s Google’s reaction.

So far, we’ve heard little but mellifluous pablum from Google in response to Home. (Microsoft, on the other hand, quickly attempted to point out that they were first with an all-your-activities-friends-communications shell in Windows Phone but, in this game, Android is the new Windows and Microsoft is the Apple of the early 90′s.)

Google has shown that it can play nice with its competitors — as long as they aren’t actually competing on the same turf. The Mountain View company doesn’t mind making substantial ($1B or more) Traffic Acquisition payments to Apple because the two don’t compete in the Search and Advertising business. Facebook taking over an Android smartphone is another matter entirely. Google and Facebook are in the same game; they both crave access to user data.

Google could sit back and observe for a while, quantify Facebook’s actual takeover of Android phones, keep tabs on users’ reactions. Perhaps Home will be perceived as yet another walled garden with a massive handover of private data to Facebook.

But Google already sees trouble for its Android strategy.

Many Asian handset makers now adopt Android without including services such as Google Search, Gmail, and Google Maps, the all-important user data pumps. Samsung still uses many of these services but, having gained a leading role on the Android platform, it might demand more money for the user data it feeds to Google, or even fork the code.

In this context, Facebook Home could be perceived as yet another threat to the Android business model.

A number of possible responses come to mind.

In the computer industry, being annoyed or worse by “compatible” hardware or software isn’t new. As a result, the responses are well honed. You can keep changing the interface, thus making it difficult for the parasitic product to bite into its host and suck its blood (data, in this case), or you change the licensing terms.

Google could change or hide its APIs (Application Programming Interfaces) in order to limit Home’s functionality, or even prevent it from running at all (at least until a particularly nasty “bug” is fixed). Worse, Google could makes changes that cause the Facebook shell to still run, but poorly.

I’ll hasten to say that I doubt Google would do any of this deliberately — it would violate the company’s Don’t Be Evil ethos. But… accidents could happen, such as when a hapless Google engineer mistakenly captured Wifi data.

Seriously, FaceBook Home is yet another pick of the Android lock, a threat against Google’s core strategy that will have to be addressed, either with specific countermeasures or with more global changes in the platform’s monetization.

JLG@mondaynote.com

The Mobile Rogue Wave

 

Publishers are concerned: The shift to mobile advertising revenue is lagging way behind the transfer of users to smartphones and tablets. Solutions are coming, but it might take a while before mobile ads catch up with users.
(A mistake in the ad revenue chart has been corrected) 

Last week, at a self-congratulatory celebration held by the French audit bureau of circulation (called OJD), the sports daily l’Equipe was honored for the best progression in  mobile audience. (I’m also happy to mention that Les Echos, the business group I’m working for, won the award for the largest growth in overall circulation with a gain of +3.3% in 2012 — in a national market losing 3.8%.) In terms of mobile page views, l’Equipe is three times bigger than the largest national daily (Le Monde). Unfortunately, its publisher tarnished the end the ceremony a bit by saying [I'm paraphrasing]: “Well, thanks for the award. But let’s not fool ourselves. The half of our digital traffic that comes from mobile represents only 5% of our overall digital revenue. We better react quickly, otherwise we’ll be dead soon”. While that outburst triggered only reluctant applause, almost everyone in the audience agreed.

Two days before, IREP (an advertising economics research organization) released 2012 data on advertising revenue for all media. Here is a quick look:

All media........... €13,300m......-3.5% 
TV...................€3,300m.......-4.5%
Print press (all)....€3,209m.......-8.2%
National Dailies.....€233m........ -8.9%
Internet Display.....€646m.........+4.8%
Internet Search......€1,141m.......+7%
Mobile...............€43m.........+29%

A few comments:
– The print press is nosediving faster than ever: In 2011, national dailies where losing 3.7% in revenue; in 2012, they lost almost 9%; and Q1 2013 doesn’t look better.
– On the digital side: Search is now almost twice as big as the display ads and it’s growing faster (7% vs. 4.8%). Google is grabbing most of this growth as the €1.14bn in revenue mentioned by IREP is roughly the equivalent of Google’s revenue in France.
– Mobile revenue is the fastest growing segment (+29%), but weighs only 2% of the entire digital segment (€1,830m revenue in 2012).

Looking at audiences reveals an even bleaker picture. Data compiled by the French circulation bureau for 87 media show that, between February 2012 and February 2013, the mobile applications audience grew 67% in visits and 102% in page views — again, in a segment that only grew 29% for 2012:

The conclusion is dreadful. Not only do audiences massively flock to mobile (more visits), but people spend more time in their favorite media app (with an even greater increase in page views) but, also, each viewer brings less and less money as ad revenues grew slower than visits — by a factor of two — and slower than page views — by a factor of three.

At the same time, in order to address this shift in audience, media are allocating more and more resources to mobile: Apps gain in sophistication and have to run on a greater number of devices. By the end of this year, the iOS ecosystem, until recently the simplest to deal with, will have at least five different screen sizes, and Android dozens of possible configurations. To add insult to injury, mobile apps don’t allow cookies, which prevents most measurements and users tend to randomly switch from their mobile devices to their PC or tablet, making tracking even more difficult…

Where do we go from here?

Publishers have no choice but following their readers. But, in doing so, they better be smart and select the right vectors. The coming months and years are likely to see scores of experiments. Native applications, meaning dedicated to a given ecosystem, might not last forever. As for now, they still offer superior performance but web apps, served from the internet regardless of the terminal’s operating system, are gaining traction. They become more fluid, accommodate more functionalities and improve their storage of contents for offline reading, but it will be a while before they become mainstream. In addition, web apps allow permanent improvements; if you look at the version number of web apps, you’ll see publishers pushing new releases on a weekly basis. They do so at will, as opposed to begging Apple to speed up the approval of native applications (not to mention the absence of a direct link to the customer.)

Similarly, many publishers are placing serious bets on responsive design sites that dynamically adjust to the screen size (see a previous Monday Note on Atlantic’s excellent business site Quartz). Liquid design, as it is also called, is great in theory but extremely difficult to develop and the slightest change requires diving into hugely complex HTML code (which also makes pages heavier to download and render.)

Technically speaking, in a near future, as rendering engines and processors keep improving, the shift to the mobile will no longer be a problem. But solving the low yield of mobile advertising is another matter. The advertising community evangelizes the promises of Real-Time Bidding; RTB basically removes the Ken and Barbie from the transaction process as demand and supply are matched through automated market places. But RTB is also known to pushes assets prices further down. As usual in the digital ad business, the likely winner will be Google, along with a few smaller players — before these are eventually crushed by Google.

The mobile ecosystem will come up with smarter innovations. Some will involve geo-located advertising, but the concept, great in demo, has yet to prove its revenue potential. Data collected through various means are much potent vector to stimulate mobile ads. Facebook knows it only too well: in the last quarter of 2012, it made $305m in mobile ads (that’s more than five times the French mobile ad market… in one quarter!); it accounts for 23% of FB’s total revenue.

Other technologies look more farfetched but quite promising. This article in the MIT Technology Review features a company that could solve a major issue, that is following users as they jump from one device to another. Drawbridge, Inc. was founded by Kamakshi Sivaramakrishnan, a statistics and probability PhD from Stanford. Her pitch (see a video here): bridging smartphones, tablets and PCs thanks to what she calls a “giant statistical space-time data triangulation technique”. In plain English: a model that generates clusters (based on patterns of usage and collected data) that will be used to create a “match” pinpointing an individual’s collection of devices. The goal is giving advertisers the ability to easily extend their campaigns from PC to mobile terminals. A high potential indeed. It caught the interest of two major venture capital firms, Kleiner Perkins Caufield & Byers and Sequoia Capital, who together injected $20m in the startup. Drawbridge claims to have already bridged about 540 million devices (at a rate or 800 per minute!)

This could be one of the many boards used to ride the Mobile rogue wave and, for many players, avoid drowning.

–frederic.filloux@mondaynote.com

Yahoo: The Marissa Mayer Turnaround

 

Critics spew well-meaning generalities when criticizing Marissa Mayer’s first moves at Yahoo! They fail to see the urgency of the company’s turnaround situation, the need to refocus the workforce and spruce up the management.

Last July, Yahoo! elected a new CEO, their seventh or eight, I’ve lost count. Marissa Mayer is an ex-Google exec with a BS in symbolics systems and an MS in Computer Science from Stanford, just like Scott Forstall. After a 13-year career at the biggest Cloud company on Earth, Mayer brings relevant experience to the CEO position of the once-great Web company. She also happens to be female but, unlike a predecessor of the same gender, Mayer doesn’t appear to feel the need to assert power by swearing like a sailor.

Power she asserts nonetheless. Barely pausing to deliver her first child, Mayer set to work: Yahoo! apps were too many, she vowed to cut them from 60 to the dozen or so that support our “digital daily habit“. Hiring standards have been seriously upgraded, the CEO wants to review every candidate to weed out “C-list slackers“. People were shown the door, starting in the executive suite. Some were replaced by ex-Google comrades such as her newly-appointed COO, Henrique De Castro.

The changes have been met with intramural criticism, from charges of Google cronyism to moaning over her meddling with the hiring process (“Yahoo’s Mayer gets internal flak for more rigorous hiring“). The complainers might as well get used to it: Mayer knows who she’s competing against, she wants to win, and that means Yahoo! needs to attract Valley-class talent. If she can pull them from Google, even better. The insiders who complain to the media only advertise their fear — a bad idea — and unwittingly make the case for Mayer’s higher standards.

The new sheriff is a high-intensity person. Friends tell me she also reviews new apps in great detail, down to color choices. (Didn’t another successful leader so annoy people?)

The protests over Mayer’s hiring practices and (supposed) micromanagement are nothing compared to the howls of pain over Mayer’s most controversial decision: No more Working From Home.

The prohibition is an affront to accepted beliefs about white-collar productivity, work/life balance, working mothers, sending less CO2 into the atmosphere. Does Mayer oppose a balanced life and a greener planet?

No, presumably — but reality intrudes. Once the king of the Web, Yahoo! stood by and watched as Google and Facebook seduced their users and advertisers. In 2008, in an effort to bolster its flagging on-line fortunes, Microsoft offered more than $44B to acquire Yahoo. The Board nixed the deal and Yahoo! kept sinking. Right before Mayer took the helm in July 2012, Yahoo’s market cap hovered around $16B, a decline of more than 60%.

The niceties of peacetime prosperity had to go. Unlike her “explicit” predecessor, Mayer doesn’t stoop to lash out at the protesters but one can imagine what she thinks: “Shut up, you whiners. This is a turnaround, not a Baja California cruise!”

In the Valley, WFH has long been controversial. In spite of its undeniable benefits, too-frequent abuses led to WFH becoming a euphemism for goofing off, or for starting a software business on one’s employer’s dime, an honored tradition.

Telecommuting requires a secure VPN (Virtual Private Network) connection from your computer at home to the company’s servers. These systems keep a traffic log, a record of who connects, from what IP address, when, for how long, how much data, and so on. Now, picture a CEO from the Google tradition of data analysis. She looks at the VPN logs and sees too much “comfort”, to be polite.

Mayer did what leaders do: She made a decision that made some people unhappy in order to achieve success for the whole enterprise (toned-up employees and shareholders). After seeing Yahoo! lose altitude year after year, the criticism leveled at Mayer makes me optimistic about the company’s future: Mayer’s treatment hurts where it needs to.

Among the many critics of Mayer’s no-WHF decision, the one I find most puzzling — or is it embarrassing? — emanates from the prestigious Wharton School of Business (at the University of Pennsylvania). In a Knowledge@Wharton article, scholars make sage but irrelevant comments such as:

Wharton faculty members who specialize in issues pertaining to employee productivity and work/life balance were similarly surprised by Mayer’s all-encompassing policy change. “Our experience in this field is that one-size-fits-all policies just don’t work,” notes Stewart Friedman, Wharton practice professor of management and director of the school’s Work/Life Integration Project. “You want to have as many tools as possible available to you as an executive to be able to tailor the work to the demands of the task. The fewer tools you have available, the harder it is to solve the problem.”

Nowhere in the article do the Wharton scholars consider the urgency of Yahoo’s situation, nor do they speculate that perhaps Mayer didn’t like what she found in the VPN logs. And, speaking of numbers, the Wharton experts provide no numbers, no sample size, no control group to buttress their statements. Our well-meaning academics might want to take a look at a recent blog post by Scott Adams, the prolific creator of corpocrat-skewering Dilbert cartoons. Titled Management/Success/Leadership: Mostly Bullshit, the post vigorously delivers what the title promises, as in this paragraph:

The fields of management/success/leadership are a lot like the finance industry in the sense that much of it is based on confusing correlation and chance with causation. We humans like to feel as if we understand and control our environments. We don’t like to think of ourselves as helpless leaves blowing in the wind of chance. So we clutch at any ridiculous explanation of how things work. 

Or this one, closer to today’s topic [emphasis mine]:

I first noticed the questionable claims of management experts back in the nineties, when it was fashionable to explain a company’s success by its generous employee benefits. The quaint idea of the time was that treating employees like kings and queens would free their creative energies to create massive profits. The boring reality is that companies that are successful have the resources to be generous to employees and so they do. The best way a CEO can justify an obscene pay package is by treating employees generously. To put this in another way, have you ever seen a corporate turnaround that was caused primarily by improving employee benefits?

Tony Hsieh, the founder and CEO of on-line shoe store Zappos, isn’t a blogger, cartoonist, or academic theoretician; he leads a very successful company that’s admired for its customer-oriented practices (culture, if you will). In this Business Insider piece, titled Here’s Why I Don’t Want My Employees To Work From Home, Hsieh is unequivocal about the value of Working From Work [emphasis mine]:

Research has shown that companies with strong cultures outperform those without in the long-term financially. So we’re big, big believers in building strong company cultures. And I think that’s hard to do remotely.

We don’t really telecommute at Zappos. We want employees to be interacting with each other, building those personal relationships and relationships outside of work as well.

What we found is when they have those personal connections that productivity increases because there’s higher levels of trust. Employees are willing to do favors for each other because they’re not just co-workers, but also friends, and communication is better. So we’re big believers in in-person interactions.

Who in good conscience believes that Mayer’s edict is absolute and permanent? You have a sick child at home, will you be granted the permission to work from home for a few days? Of course. Or, you’re an asocial but genius coder, will you be allowed to code at home from 10 pm to 7 am? Again, yes. Mayer saw it done, with good results, at her previous company.

With Mayer’s guidance, the patient has been stabilized and is on the road to recovery. But where does that road lead to? What does Yahoo! want to be now that it’s starting to act like a grownup? A better portal, a place to which we gravitate because, as an insider says, we’ll find more relevant fodder — without relying on “friends”? This would be a return to Yahoo’s original mission, one of cataloguing the Web, only with better technology and taste than Facebook, Google, AOL or even Microsoft’s Bing (Yahoo’s supplier of search data).

This leads to the $$ question, to Yahoo’s business model: advertising or services? With Google and now Facebook dominating the advertising space, how much room is left?

We hear Mayer is focusing Yahoo! on mobile applications. This sounds reasonable… but isn’t everyone?

In the search for a renewed identity (and profits), the question of alliances comes up. Who’s my enemy, my enemy’s enemy, irreplaceable partner/supplier, natural complement? In this regard, the Microsoft question will undoubtedly pop up again. I doubt Mayer has the utmost regard for Microsoft or for its CEO’s bullying style, but can she live without Bing? Is there an alternative? Also, what, if anything, could a healthier Yahoo! offer to Facebook or Apple?

The fun is just starting.

JLG@mondaynote.com

Data in the driver’s seat

 

Autonomous vehicles — fully or partially — will rely on a large variety of data types. And guess who is best positioned to take advantage of this enormous new business? Yep, Google is. 

The Google driveless car is an extraordinary technical achievement. To grasp the its scope, watch this video featuring a near-blind man sitting behind the wheel of an autonomous Prius as the car does the driving. Or, to get an idea of the complexity of the system, see this presentation by Sebastian Thrun (one of the main architects of Google’s self-driving car project) going through the multiple systems running inside the car.

Spectacular as it is, this public demonstration is merely the tip of the iceberg. For Google, the economics of self-driving cars lie in a vast web of data that will become a must to operate partially or fully self-driving vehicles on a massive scale. This network of data will require immense computational and storage capabilities. Consider the following needs in the context of Google’s current position in related fields.

Maps. Since the acquisition of Where2 Technologies and Keyhole Inc. in 2004, Google has been refining its mapping system over and over again (see this brief history of Google Maps). After a decade of work, Google Maps feature a rich set of layers and functions. Their mapping of the world has been supplemented by crowdsourcing systems that allow corrections as well as the creation of city maps where data do not exist. Street View has been launched in 2007 and more than 5 million miles of metropolitan area have been covered. Today, maps are augmented with satellite imagery, 3D, 45-degree aerial views, buildings and infrastructure renderings. All this is now merged, you can plunge from a satellite view to the street level.

Google’s goal is building the most complete an reliable map system in the world. Gradually, the company replaces geo-data from third party suppliers with data collected by its own crews around the world. To get an idea of how fast Google progresses, consider the following: In 2008, Google mapping covered 22 countries and offered 13 million miles with driving directions. In 2012, 187 countries where covered, 26 million miles with driving directions, including 29 countries with turn-by-turn directions. On the chart below, you can also see the growing areas of Google-sourced maps (in green) as opposed to licensed data (in red):

Apple’s failure in maps shows that, regardless of the amount of money invested, experience remains a key element. In California and India, Google maintains a staff of hundreds if not thousands of people manually checking key spots in large metropolitan areas and correcting errors. They rely on users whose individual suggestions are manually checked, using Street View imagery as shown here (the operator drags the 360° Street View image to verify signs at an intersection — click to enlarge.)

Google’s engineers even developed algorithms aimed at correcting slight misalignments between “tiles” (pieces of satellite imagery stitched together) that could result from… tectonic plates movement — it could happen when two pictures are taken two years apart. Such accuracy is not a prerequisite for current navigation, but it could be important for autonomous cars that will depend heavily on ultra-precise (think what centimers/inches mean when cars are close on the road) mapping of streets and infrastructures.

But, one might object, Google is not the only company providing geo-data and great mapping services. True: The Dutch company Tom-tom, or the Chicago-based Navteq have been doing this for years. As geo-data became strategically important, Tom-tom acquired TeleAtlas for $2.9bn in 2008, and Nokia bought Navteq in 2007. But Google intends to move one step ahead by merging its mapping and imagery technologies with its search capabilities. Like in this image:

Accurate, usable and data-rich maps are one thing. Now, when you consider the variety of data needed for autonomous or semi-autonomous vehicles, the task becomes even more enormous. The list goes on:

Traffic conditions will be a key element. It’s pointless to envision fleets of self-driving, or assisted-driving cars without systems to manage traffic. These goes along with infrastructure development. For instance, as  Dr. Kara Kockelman, professor of transportation engineering at the University of Texas at Austin explained to me, in the future, we might see substantial infrastructure renovation aimed at accommodating autonomous vehicles (or vehicles set on self-driving mode). Dedicated highway corridors would be allocated to “platoons” of cars driving close together, in a faster and safer way, than manned cars. Intersections, she said, are also a key challenge as they are responsible for most traffic jams (and a quarter of accidents). With the advent of autonomous vehicles, we can see cars taken over by intersection management systems that will regroup them in platoons and feed them seamlessly in intersecting traffic flows, like in this spectacular simulation. If traffic lights are still needed, they will change every five or six seconds just to optimize the flow.

Applied to millions of vehicles, traffic and infrastructure management will turn into a gigantic data and communication problem. Again, Google might be the only entity able to write the required software and to deploy the data centers to run it. Its millions of servers will be of great use to handle weather information, road conditions (as cars might be able to monitor their actual friction on the road and transmit the data to following vehicles, or detect humidity and temperature change), parking data and fuel availability (gas or electricity). And we can even think of merging all this with day-to-day life elements such as individual calendars, commuting patterns and geolocating people through their cell phones.

If the data collection and crunching tasks can conceivably be handled by a Google-like player, communications remain an issue. “There is not enough overlap between car-to-car communication and in other fields”, Sven Beiker, director Center for Automotive Research  (CARS) at Stanford told me (see his recent lecture about The Future if the Car). He is actually echoing executives from Audi (who made a strategic deal with Google), BMW and Ford; together at the Mobile World Congress, they were critical of cell phone carriers’ inability to provide the right 4G (LTE) infrastructure to handle the amount of data required by future vehicles.

Finally, there is the question of an operating system for cars. Experts are divided. Sven Beiker believes the development of self-driving vehicles will depend more on communication protocols than on an OS per se. Others believe that Google, with its fleet of self-driving Priuses criss-crossing California, is building the first OS dedicated to autonomous vehicles. At some point, the search giant could combine its mapping, imagery and local search capabilities with the accumulation of countless self-driven miles, along with scores of specific situations “learned” by the cars’ software. The value thus created would be huge, giving Google a decisive position in yet another field. The search company could become the main provider of both systems and data for autonomous or semi autonomous cars.

frederic.filloux@mondaynote.com

Apple is Losing The War – Of Words

 

Besides its ads, Apple says very little, confident numbers will do the talking. This no longer works as others have seized the opportunity to drive the narrative. 

The day before Samsung’s big Galaxy S4 announcement, Apple’s VP of Marketing, Phil Schiller, sat down for an interview with Reuters and promptly committed what Daring Fireball’s John Gruber calls an unforced error:

“…the news we are hearing this week [is] that the Samsung Galaxy S4 is being rumored to ship with an OS that is nearly a year old,” [Schiller] said, “Customers will have to wait to get an update.”

Not so, as Gruber quickly corrects:

But it ends up the S4 is — to Samsung’s credit — shipping with Android 4.2.2, the latest available version. Not sure why Schiller would speculate on something like this based solely on rumors.

To Samsung’s delight, we can be sure, the interview received wide coverage in publications such as the Wall Street Journal and Bloomberg, just hours before the S4 was unveiled, complete with the month-old Android operating system.

This didn’t go over well. Even before the “year old Android version” was exposed as unfounded conjecture, reactions to Schiller’s trash talk were uniformly negative. Apple was accused of being on the defensive.

But, the true-believers ask, isn’t this something of a double-standard? What about the trash talk Samsung ads that depicted the iPhone as old-fashioned and its users as either cult sheep or doddering golden agers, weren’t they also a form of defensiveness? Why were Samsung’s mean-spirited ads seen as fun and creative, while Schiller’s slight misstep is called “defensive”?

Yes, Apple is held to a (well earned) different standard. Once a challenger with an uncertain future, Apple has become The Man. Years ago, it could productively poke fun at Microsoft in the great I’m a Mac, You’re a PC campaign (the full series of ads is here), but the days of taking potshots at the incumbent are over. Because of its position at the top, Apple should have the grace to not trash its competitors, especially when the digs are humorless and further weakened by error.

Schiller’s faux pas will soon be forgotten — it was a minor infraction, a five yard penalty — but it stoked my enduring frustration with a different sort of Apple-speak characteristic: The way Apple execs abuse words such as incredible“, “great“, “best when they’re discussing the company’s products and business.

My accusation of language molestation needs examples. Citing a page from W. Edwards Deming’s gospel, In God We Trust, Everyone Else Brings Data, I downloaded a handful of Apple earnings calls, such as this one, courtesy of Seeking Alpha, and began to dig.

[Speaking of language faux pas, Deming’s saying was shamelessly and badly appropriated — without attribution — by Google’s Eric Schmidt in a talk at MIT.)

Looking just for the words that emanated from the horses’ mouths, I stripped the intros and outros and the question parts of the Q&As, and pasted into Pages (which has, sadly, lain fallow since January 2009).  Pages has a handy Search function (in the Edit > Find submenu) that compiles a list of all occurrences of a word in a document; here’s what I found… .

  • Across the five earnings statements, some form of the word “incredible” appears 7, 9, 9, 11 and 9 times. The Search function offers a handy snippet display so you can check the context in which the word was used:

  • “Tremendous”, in its various forms, appears 12 times.
  • Amazing: 8
  • Strong: 58
  • Thrilled: 13
  • Maniacally focused: 2
  • All told, “great” appears 70 times. A bit more than half are pathetic superlatives (“great products”, “great progress”, “we feel great about…”), some are innocuous (“greater visibility”), but there’s an interesting twist: The snippet display showed that six were part of the phrase “Greater China”:

“Greater” or not, China is mentioned 71 times, much more than any other country or region I checked (Korea =  1, Japan = 6, Europe = 12).

(In the interest of warding off accusations of a near-obsessive waste of energy, I used a command line program to generate some of these numbers. Android? give me a second…4. Google=0, Facebook=4, Samsung=2.)

Now let’s try some “sad” words:

  • Disappoint: 0
  • Weak: 7. Six of these were part of “weak dollar”; the other was “weak PC market”. By contrast, only five or six of the 58 “strongs” referred to the dollar; the rest were along the lines of “strong iPad sales”.
  • Bad: 0
  • Fail: 0

The dissection can go on and on, but let’s end it with a comparison between more and less . Eliminating instances of less as a suffix (“wireless”), the result shows a remarkable unbalance: morewins each of the five sessions with a consistently lopsided score: 28 to 3…more or less.

But, you’ll object, what’s wrong with being positive?

Nothing, but this isn’t about optimism, it’s about hyperbole and the abuse of language. Saying “incredible” too many times leads to incredulity. Saying “maniacally focused” at all is out of place and gauche in an earnings call. One doesn’t brag about one’s performance in the boudoir; let happy partners sing your praise.

When words become empty, the listener loses faith in the speaker. Apple has lost control of the narrative; the company has let others define its story. This is a war of words and Apple is proving to be inept at verbal warfare.

In another of his sharply worded analyses titled Ceding the Crown, John Gruber makes the same point, although from a different angle:

The desire for the “Oh, how the mighty Apple has fallen” narrative is so strong that the narrative is simply being stated as fact, evidence to the contrary be damned. It’s reported as true simply because they want it to be true. They’re declaring “The King is dead; long live the King” not because the king has actually died or abdicated the throne, but because they’re bored with the king and want to write a new coronation story.

I agree with the perception, but blaming the media rarely produces results, we shouldn’t point our criticism in the wrong direction. The media have their priorities, which more often than not veer in the direction of entertainment passed as fair and balanced information (see Amusing Ourselves To Death by Neil Postman). If Apple won’t feed them an interesting, captivating story, they’ll find it elsewhere, even in rumors and senseless hand-wringing.

Attacking competitors, pointing to their weaknesses, and trumpeting one’s achievements is better done by hired media assassins. A company, directly or through a PR firm, engages oft-quoted consultants who provide the required third-party stats, barbs, and encomiums. This isn’t theorizing, I once was a director at a company, one of many, that used such an arrangement to good effect.

A brief anecdote: When Microsoft was Microsoft, Waggener Edstrom, the company’s PR powerhouse, was an exemplary propagandist. I distinctly remember a journalist from a white-shoe East Coast business publication coming to my office more than twenty years ago, asking very pointed questions. I asked my own questions in return and realized that the individual didn’t quite know the meaning of certain terms that he was throwing around. A bit of hectoring and cajoling, and the individual finally admitted that the questions were talking points provided by the Seattle PR firm. A few years later, I got a comminatory phone call from one of the firm’s founders. My offense? I had made an unflattering quip about Microsoft when it was having legal troubles with Apple (the IP battle that was later settled as part of the 1997 “investment” in Apple and Steve Jobs). PR firms have long memories and sharp knives.

The approach may seem cynical, but it’s convenient and effective. The PR firm maintains a net (and that’s the right word) of relationships with the media and their pilot fish. If it has the talent of a Waggener Edstrom, it provides sound strategic advice, position papers, talking points, and freeze-dried one-liners.

Furthermore, a PR firm has the power of providing access. I once asked a journalist friend how his respected newspaper could have allowed one of its writers to publish a fellacious piece that described, in dulcet tones, a worldwide Microsoft R&D tour by the company’s missus dominicus. “Access, Jean-Louis, access. That’s the price you pay to get the next Ballmer interview…”

Today, look at the truly admirable job Frank Shaw does for Microsoft. Always on Twitter, frequently writing learned and assertive pieces for the company’s official blog. By the way, where’s Apple’s blog?

The popular notion is that Apple rose to the top without these tools and tactics, but that’s not entirely true. Dear Leader was a one-man propagandastaffel, maintaining his own small network of trusted friends in the media. Jobs also managed to get exemptions from good-behavior rules, exemptions that seem to have expired with him…

Before leaving us, Jobs famously admonished “left-behind” Apple execs to think for themselves instead of trying to guess what he would have done. Perhaps it’s time for senior execs to rethink the kind of control they want to exercise on what others say about Apple. Either stay the old course and try to let the numbers do the talking, or go out and really fight the war of words. Last week’s misstep didn’t belong to either approach.

One last word: In the two trading days bracketing the Samsung S4 launch Schiller clumsily attempted to trash, Apple shares respectively gained 1%, followed by a 2.58% jump the day after the intro. Schiller could have said nothing before the launch and, today, let others point to early criticism of the S4′s apparent featuritis.

JLG@mondaynote.com

More iWatch Fun

 

When looking at the potential for a really smart watch, the idea of an Apple iWatch looks almost sensible. Still, there is a long way between the attractive idea and stuffing the required computer power in a wristwatch.

As I somberly contemplate the death of personal privacy, our being spied upon everywhere, at all times (for our own good, you understand), a tweet from an ex-coworker known for his stiletto wit evokes a welcome smile:

Frank is referring to Nick Hayek Jr., the cigar-wielding head of Swatch Group AG (and Zino Davidoff doppelgänger):

In a Bloomberg article (from which the above photo is extracted), Hayek dismisses the iWatch rumors:

“Personally, I don’t believe it’s the next revolution,” the chief of the largest Swiss watchmaker said at a press conference on annual results in Grenchen, Switzerland. “Replacing an iPhone with an interactive terminal on your wrist is difficult. You can’t have an immense display.”

Hayek’s pronouncement triggered many sharp reactions, such as this history lesson from another sharp tweeter:

As Kontra (a “veteran design and management surgeon”) reminds us, Palm CEO Ed Colligan once famously pooh-poohed the unannounced iPhone

We’ve learned and struggled for a few years here figuring out how to make a decent phone, […] PC guys are not going to just figure this out. They’re not going to just walk in.

Colligan’s brush-off wasn’t the first time, or the last, that Apple’s “unauthorized intrusions” were decried by industry incumbents and arbiters of business taste:

  • The iPod: A doomed foray into the saturated, profitless market of commodity MP3 players.
  • iTunes: Single tracks for 99 cents? Not a chance against free online music sites.
  • Apple Stores: Another folly, zero experience in the cutthroat and manpower intensive retail business.
  • iPhone: The status quotidians scoff.
  • Homegrown ARM-based processors: A billion dollar mistake.
  • iPad: Ridiculous name. Steve Ballmer derides its lack of keyboard and mouse.

This isn’t to deny that the Apple Midas Touch is occasionally fat fingered. Prior to its launch, Steve Jobs touted MobileMe as Exchange For The Rest of Us; afterwards, he told the MobileMe team they should “hate each other for letting each other down”. Last year, Tim Cook had no choice but to apologize for the iMaps fiasco (and then showed a couple Apple executives the door).

So how would this hypothetical iWatch play out? Can Apple re-invent a known device à la the iPod, or are they venturing into territory without a map (or, one can’t resist, with an iMap)?

First, a brief look at today’s watches, smart and not.

After five centuries of improvements to their time keeping mechanisms (or movements), mechanical watches are no longer judged for their temporal accuracy, but for their beauty and, just as important, for the number and ingeniousness of their complications — what non-horologists would call “additional functions”. It’s not enough to just tell the time, watches must display the phases of the moon and positions of the planets, function as a  chronograph, provide a perpetual calendar… The moniker grande complication is applied to the most advanced, such as this one from the Gallet company (founded in 1466):

These complications come at a price: For $300k you can pick up the double-faced Patek Philippe Sky Moon Tourbillon with its 2800-star celestial chart. The Franck Muller Aeternitas Mega 4, which holds the record with 36 complications and 1400 parts, will set you back $2.7M:

These luxury watches function more as engineering marvels than utilitarian timepieces, and, accordingly, they’re worn as adornments — and status symbols.

The more common electronic watch, which uses a precise quartz oscillator and typically has no moving parts, hasn’t entirely killed the mechanical watch, but it hasn’t been for lack of trying. Electronic watchmakers, aided by the tiny microprocessors embedded in many of these devices, have piled on even more more functions — calculators, multiple repeating alarms, even circular slide rules…it’s simply an exercise in the proverbial mere matter of software.

But each new function introduces UI complexity, as this page from the instruction manual for my Seiko multi-function watch establishes:

Most of the manual’s 33 pages are in the same vein. As a result, normal humans find these electronic complications baffling and leave most of the functions unmolested.

And now we have the smartwatch, a true computer that’s strapped to your wrist. Today’s smartwatch will tell you the time and run some rudimentary applications, but its primary role is to act as an extension of the smartphone that you’ve paired through Bluetooth. A phone call comes in, your watch shows you the number; an email message arrives, your watch scrolls the sender’s address; if the music you’re streaming on your phone is too quiet, just tap your watch to turn it up…at least in theory.

These are all good ideas, but, as the NYT’s David Pogue found after test driving a sampling of these devices, their execution leaves something to be desired. His conclusion:

…you have to wonder if there’s a curse on this blossoming category. Why are these smartwatches so buggy, half-baked and delayed?
The Casio and Martian watches are worth considering. But if you ask the other watches what time it is, they’ll tell you: too soon.

So, again, where does the putative iWatch fit into all of this?

Let’s start with the UI. If we just regard the traditional chronological functions (date and time formats, alarms, stopwatch) an iPhone-like touch interface, albeit on a smaller screen, would easily eclipse the clunky buttons-along-the perimeter controls on my Seiko. For the more advanced “smart” functions, one assumes that Apple won’t be satisfied unless the user experience far exceeds the competition. (Of the five smartwatches that Pogue reviews, only one, the Cukoo, has even a hint of touch screen capability.)

Then there’s the matter of overall style. This isn’t a fair fight; there’s something viscerally compelling about a traditional mechanical watch with exposed movement. Even on the low end of the market you can find a mechanical watch that displays its inner beauty. Nonetheless, we can trust Sir Jony to rise to the challenge, to imagine the kind of style we’ve come to expect.

There’s also the battery question. Will the iWatch suffer from having a two or three days battery life as suggested by “[s]ources close to Apples [sic] project team”? Leaving aside conjectures about the anatomical location whence emerged these sources’ information, two thoughts come up…

First, it’s a safe assumption that the target audience for the iWatch are iDevice owners that Apple has “trained” (subjugated, critics will say) to charge their devices at night. For them, charging the iWatch, as well, won’t be a dealbreaker. The Lightning connector and charger for an iPhone or iPad should be small enough to fit a largish watch. Or perhaps the addition of the iWatch to the iDevice constellation will convince Apple to incorporate wireless charging (despite the diffidence of Phil Schiller, Apple’s VP of marketing).

Second, some electronic watches don’t need batteries at all. In Seiko’s Kinetic line, the kinetic motion of the wearer’s hand drives a tiny generator that feeds electricity into a capacitor for storage. (For the inert watch wearer, stem winding works as well. In a clever twist, some of newer models preserve the stored charge by halting the motion of the hands when the watch isn’t being worn.) It’s unclear whether the energy captured from hand movements will suffice to feed an ambitious Apple smartwatch, but the technology exists.

Turning to more advanced functionality: Will the iWatch be an iOS device? I think it’s very likely. That doesn’t mean that the iWatch will be an iPhone/iPod Touch, only smaller. Instead, and as we see with today’s Apple TV, the iWatch will enrich the iOS ecosystem: Reasonably useful on its own, but most important as a way to increase the value/enjoyment of other iDevices…at least for now.

Eventually, and as I’ve written here several times, I believe the Apple TV will become a first class citizen, it will have its own versions of apps that were written for the iPhone/iPad, as well as apps that are for TV alone. With iOS as the lingua franca, the iWatch could be treated with the same respect.

There are plenty of examples of apps that would work on a very small screen, either in conjunction with existing data (calendar, address book, stock market, iMessage, weather) or as a remote for other devices, including non-Apple products (the Nest thermostat comes to mind).

We should also consider biometric applications. The intimate contact of the iWatch makes it a natural carrier for the ever-improving sensors we find in today’s health monitors, devices that measure and record heart rate and perspiration during a workout, or that monitor sleep patterns and analyze food intake. What we don’t find, in these existing gadgets, is the ability to download new apps. An iWatch with health sensors coupled with the App Store would open whole new health and wellness avenues.

Finally, there’s (always) the money question. Would our mythical iWatch sell in sufficient volume — and with a high enough margin — to make it a significant product line for Apple? Given that watches easily sell for hundreds of dollars, and that we would almost certainly use an Apple iWatch more often and for more purposes than an Apple TV, the volume/margin question isn’t too hard to answer.

Back to reality, translating a fantasy into a real product is by no means a sure thing. A pleasant, instantaneous user experience requires computing power. Computing power requires energy; energy means battery drain and heat dissipation. These are challenges for real grown-ups. And sometimes a grown-up has to make the vital No We Won’t Do This decision that separates bloated demi-failures from truly elegant genre-creating breakthroughs.

JLG@mondaynote.com

Growing Forces in Mobile

 

As seen last week in Barcelona, the mobile industry is red hot. The media sector will have to work harder to capture its share of that growth.

The 2013 edition of the Mobile World Congress held last week in Barcelona was as large as the biggest auto-show in the world: 1500 exhibitors and a crowd of 72,000 attendees from 200 countries. The mobile industry is roaring like never before. But the news media industry lags and will have to fight hard to stay in the game. Astonishingly, only two media companies deigned to show up: Pearson with its huge education business accounting for 75% of its 2012 revenue (vs. 7% for its Financial Times unit); and Agence France-Presse which is entering the customized application market. No other big media brand in sight, no trade organizations either. Apparently, the information sector is about to miss the mobile train.

Let’s begin with data that piqued my interest, from AT Kearney surveys for the GSM Association.

Individual mobile subscribers: In 2012, the worldwide number of mobile subscribers reached 3.2 billion. A billion subscribers was added in the last four years. As the world population is expected to grow by 1.1% per year between 2008 and 2017, the mobile sector enjoyed a 8.3% CAGR (Compound Annual Growth Rate) for the 2008-2012 period. For the 2012 – 2017 interval the expected CAGR is 4.2%. The 4 billion subscribers mark will be passed in 2018. By that time, 80% of the global population will be connected via a mobile device.

The rise of the machines. When machine-to-machine (M2M) connections are taken into account, growth becomes even more spectacular: In 2012, there were 6.8 billion active SIM cards, 3% of them being M2M connections. In 2017, there will be 9.7 billion active SIM cards and the share of M2M connections will account for 13% with almost 1.3 billion devices talking to each other.
The Asia-Pacific region will account for half of the connection growth, both for individual subscriptions and M2M.

We’ll now turn to stats that could benefit the media industry.

Mobile growth will be mostly driven by data usage. In 2012, the volume of data exchanged through mobile devices amounted to .9 exabytes per month (1 exabyte = 1bn gigabytes), this is more than the all preceding years combined! By 2017, it is expected to reach 11.2 exabytes, that’s a 66% CAGR!

A large part of this volume will come from the deployment of 4G (LTE) networks. Between now and 2017, deploying LTE technology will result in a 4X increase in connection speeds.

For the 2012 – 2017 period, bandwidth distribution is expected to grow as follows:

M2M:......... +89% 
Video:....... +75% 
Gaming:...... +62% 
Other data:...+55% 
File sharing: +34% 
VoIP:........ +34%

Obviously, the huge growth of video streaming (+75%) points to a great opportunity for the media industry as users will tend to watch news capsules on-the-go in the same way they today look at a mobile web sites or an app (these two will be part of the 55% annual growth).

The growing social mobility will also be an issue for news media. Here are the key figures for today in active mobile users

Facebook:...680m 
Twitter:....120m 
LinkedIn:....46m 
Foursquare:..30m

Still, as important as it is, social usage only accounts for 17 minutes per day, vs. 25 minutes for internet browsing and a mere 12 minutes for voice calls. Most likely, the growth of video will impact the use of social networks as Facebook collects more and more videos directly uploaded from smartphones.

A large part of this growth will be driven by the rise of inexpensive smartphones. Last week in Barcelona, the largest stand was obviously Samsung’s. But a huge crowd also gathered around Huawei or ZTE showing sophisticated Android-powered smartphones — at much lower prices. This came as a surprise to many westerners like me who don’t have access to these Chinese devices. And for emerging markets, Firefox is coming with a HTML5 operating system that looked surprisingly good.

In years to come, the growing number of operating systems, screen sizes and features will be a challenge. (At the MWC, the trend was definitely in favor of large screens, read this story in Engadget.) An entire hall was devoted to applications — and software aimed at producing apps in a more standardized, economical fashion. As a result, we might see three approaches to delivering contents on mobile:
- The simplest way will be mobile sites based on HTML5 and responsive design; more features will be embedded in web applications.
- The second stage will consist of semi-native apps, quickly produced using standardized tools, allowing fast updates and adaptations to a broad range of devices.
- The third way will involve expensive deep-coded native apps aimed at supporting sophisticated graphics; they will mainly be deployed by the gaming industry.

In upcoming Monday Notes, we will address two majors mobile industry trends not tied to the media industry: Connected Living (home-car-city), a sector likely to account for most machine-to-machine use; and digital education taking advantage of a happy combination of more affordable handsets and better bandwidth.

frederic.filloux@mondaynote.com

Google’s Red Guide to the Android App Store

 

As they approach the one million apps mark, smartphone and tablet app stores leave users stranded in thick, uncharted forests. What are Google and Apple waiting?

Last week, Google made the following announcement:

Mountain View, February 24th, 2013 — As part of an industry that owes so much to Steve Jobs, we remember him on this day, the 58th anniversary of his birth, with great sadness but also with gratitude. Of Steve’s many achievements, we particularly want to celebrate the Apple App Store, the venerable purveyor of iPhone software. 

Introduced in 2008, the App Store was an obvious and natural descendant of iTunes. What wasn’t obvious or foreseen was that the App Store would act as a catalyst for an entire market segment, that it would metamorphose the iPhone from mere smartphone to app phone. This metamorphosis provided an enormous boost to the mobile industry worldwide, a boost that has benefitted us all and Google more than most.

But despite the success of the app phone there’s no question that today’s mobile application stores, our own Google Play included, are poorly curated. No one seems to be in charge, there’s no responsibility for reviewing and grading apps, there’s no explanation of the criteria that goes into the “Editors’ Picks”, app categorization is skin deep and chaotic.

Today, we want to correct this fault and, at the same time, pay homage to Steve’s elegant idea by announcing a new service: The Google Play Red Guide. Powered by Google’s human and computer resources, the Red Guide will help customers identify the trees as they wander through the forest of Android apps. The Red Guide will provide a new level of usefulness and fun for users — and will increase the revenue opportunities for application developers.

With the Google Play Red Guide, we’ll bring an end to the era of the uncharted, undocumented, and poorly policed mobile app store.

The Red Guide takes its name from another great high-tech company, Michelin. At the turn of the 20th century, Michelin saw it needed to promote automotive travel in order to stimulate tire sales. It researched, designed and published great maps, something we can all relate to. To further encourage travel, Michelin published Le Guide Rouge, a compendium of hotels and restaurant. A hundred years later, the Michelin Red Guide is still considered the world’s standard; its inspectors are anonymous and thus incorruptible, their opinions taken seriously. Even a single star award (out of three) can put an otherwise unknown restaurant on the map — literally.

Our Red Guide will comprise the following:

- “Hello, World”, a list of indispensable apps for the first time Android customer (or iPhone apostate), with tips, How-To guides, and FAQs.
- “Hot and Not”. Reviews of new apps and upgrades — and the occasional downgrade.
- “In Our Opinion”. This is the heart of the Guide, a catalogue of reviews written by a select group of Google Play staff who have hot line access to Google’s huge population of in-house subject matter experts. The reviews will be grouped into sections: Productivity, e-Learning, Games, Arts & Creativity, Communication, Food & Beverage, Healthcare, Spirituality, Travel, Entertainment, Civics & Philanthropy, Google Glass, with subcategories for each.

Our own involvement in reviewing Android apps is a novel — perhaps even a controversial — approach, but it’s much needed. We could have taken the easy path: Let users and third-parties provide the reviews. But third party motives are sometimes questionable, their resources quickly exhausted. And with the Android Store inventory rapidly approaching a million titles, our users deserve a trustworthy guide, a consistent voice to lead them to the app that fits.

We created the Red Guide because we care about our Android users, we want them to “play safe” and be productive, and we feel there’s no better judge of whether an application will degrade your phone’s performance or do what it claims than the people who created and maintain the Android framework. For developers, we’re now in a position to move from a jungle to a well-tended garden where the best work will be recognized, and the not-so-great creations will be encouraged to raise their game.

We spent a great deal of time at Google identifying exactly the right person to oversee this delicate proposition…and now we can reveal the real reason why Google’s Motorola division hired noted Macintosh evangelist, auteur, and investor Guy Kawasaki as an advisor: Guy will act as the Editor in Chief of the Google Play Red Guide.

With Guy at the helm, you can expect the same monkish dedication and unlimited resources we deployed when we created Google Maps.

As we welcome everyone to the Google Play Red Guide, we again thank Steve Jobs for his leadership and inspiration. Our algorithms tell us he would have approved.

The Red Guide is an open product and will be published on the Web at AppStoreRedguide.com as well as in e-book formats (iBookstore and Kindle formats pending approval) for open multi-platform enjoyment.
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No need to belabor the obvious, you’ve already figured out that this is all a fiction. Google is no better than Apple when it comes to their mobile application store. Both companies let users and developers fend for themselves, lost in a thick forest of apps.

That neither company seems to care about their online stores’ customers makes no sense: Smartphone users download more apps than songs and videos combined, and the trend isn’t slowing. According to MobiThinking:

IDC predicts that global downloads will reach 76.9 billion in 2014 and will be worth US$35 billion.

Unfortunately, Apple appears to be resting on its laurels, basking in its great App Store numbers: 40 billion served, $8B paid to developers. Perhaps the reasoning goes like this: iTunes served the iPod well; the App Store can do the same for the iPhone. It ain’t broke; no fix needed.

But serving up music and movies — satisfying the user’s established taste with self-contained morsels of entertainment — is considerably different from leading the user to the right tool for a job that may be only vaguely defined.

Apple’s App Store numbers are impressive… but how would these numbers look like if someone else, Google for example, showed the kind of curation leadership Apple fails to assert?

JLG@mondaynote.com