An Apple Watch Meta-Review Reimagined

 

by Jean-Louis Gassée

Product reviews of the Apple Watch launch are reaching new summits — and depths. A Business Insider post gave me an idea for a revealing experiment.

This isn’t an Apple Watch review — I don’t even have a Watch, yet. I’ve been told that my 42mm alumin-ium Sport model will arrive in “4 to 6 weeks”, mid to late May. Even then, I’ll hold out for my third impression. I’ve learned to distrust my first reaction: I thought the iPod was a bad idea because MP3 players had already been commoditized. The Apple Store? It will never catch on because it threatens the livelihoods of independent Apple retailers. When I came home with my first iPad five years ago, I resented the fact that my new tablet wasn’t very good at the “productivity tasks” I performed on my Mac… (I still think this, and, last year, called the iPad a tease – but I’ll leave the continuation of that saga for another day.)

As the first wave of Apple Watch reviews shows, waiting for impressions to settle down isn’t part of the Product Review genre. The psychoactive toxicity of Apple product launches that I made fun of two weeks ago is in full display as reviewers climb to the rooftops in a race for income-producing pageviews.

The Wall Street Journal’s Joanna Stern wore a helmet strong enough to support a full-size Canon DSLR while researching her review:

Joanna Stern w Tweet

No flimsy GoPro camera, we’re professionals here, this is a Wall Street Journal production. How this relates to your everywoman’s user is left to us to figure out. That said, I sincerely bow to Joanna Stern’s stamina and dedication to her mission.

Or we have the (presumably) unintended humor of a reviewer who felt “ridiculous” wearing the Milanese Loop on his left wrist:

Nilay Patel Big Band Edited 2

I’m not the only person who questions the “hot take” nature of modern Product Reviews. In his Above Avalon post, Neil Cybart says Product Reviews are Broken [emphasis mine]:

“There were 21 Apple Watch reviews published, but the 4 reviews that were more critical of the device got the most attention, leaving the 14 glowing reviews behind. Meanwhile, most of the important features of the Watch such as watch bands and durability were either not included or buried within lots of other text. Simply put: product reviews are broken.”

Our historian/philosopher Horace Dediu concurs:

Dediu Cash Register Experts

…and…

Dediu Don't Read Reviews

Ignoring Dediu’s advice, I stumbled upon a Business Insider “meta-review”, an edited summary of other reviews ominously titled The Apple Watch reviews are (quietly) brutal. The piece starts well:

“Apple Watch reviews are out today.
At first, they seem positive.
For example, New York Times tech reviewer Farhad Manjoo writes that he ‘fell’ for the gadget — ‘fell hard.’
The Verge’s Nilay Patel says it is ‘the first smartwatch that might legitimately become a mainstream product.’
Joshua Topolsky of Bloomberg Business says, ‘you’ll want one…After using it, I had no question that the Apple Watch is the most advanced piece of wearable technology you can buy today.’”

The article then attempts to demolish this happiness by citing carefully chosen damnations from the same reviews (“Topolsky says the Watch isn’t a very good watch.” “Patel says the Watch is too slow”), and concludes with a back-handed compliment [emphasis mine]:

“The most exciting thing about the Apple Watch isn’t the device itself, but the new tech vistas that may be opened by the first mainstream wearable computer.”
“For now, the dreams are hampered by the harsh realities of a new device. The Watch is not an iPhone on your wrist.

These initial reviews say more about the Product Review genre than they do about the Apple Watch. As the word genre implies, there are rules. One is that you have to provide quotable fragments that support your view — think of how movie posters and trailers quote reviews. Second, write what you want but remember you still need to eat in this town. In the case of tech reviewers, “lunch” is being among the select few invited to do the next “under embargo” product review — you don’t want to go hungry. Third, you have to be “fair and balanced”: You must provide at least a hint of negativity, no matter what, so you won’t be perceived as having “sold out”. Lastly, you have to write quickly, steamroll annoying counter-narrative trifles, and use strong words.

As an experiment, I cherry-picked quotes from the same sources as the “(quietly) brutal” Business Insider meta-review to see if I could come up with a different result. Much like the BI review, I decided what I wanted to say and then found the quotes that supported my thesis.

Here goes…

_______________________________________________________________

Burning Insider Meta-Review

The Apple Watch reviews are (giddily) enthusiastic

Apple Watch reviews are out today.
At first, they seem negative.
In his New York Times tech review Farhad Manjoo sounds disappointed:

“Third-party apps are mostly useless right now. The Uber app didn’t load for me, the Twitter app is confusing and the app for Starwood hotels mysteriously deleted itself and then hung up on loading when I reinstalled it.”

Out of the gate, The Verge’s Nilay Patel is unimpressed:

“Let’s just get this out of the way: the Apple Watch, as I reviewed it for the past week and a half, is kind of slow. There’s no getting around it, no way to talk about all of its interface ideas and obvious potential and hints of genius without noting that sometimes it stutters loading notifications.”

Another noted blogger, Joshua Topolsky of Bloomberg Business says:

“Yes, all these new functions, notifications, and tapping do make the Apple Watch very distracting. In some ways, it can be more distracting than your iPhone, and checking it can feel more offensive to people around you than pulling out your phone.”

But once you move past the obligatory “fair and balanced” negatives and get into the details of what the writers really say, it’s clear: The reviews are giddily enthusiastic.

Topolsky concludes:

“So Apple has succeeded in its first big task with its watch. It made something that lives up to the company’s reputation as an innovator and raised the bar for a whole new class of devices.”

Nilay Patel concurs:

“There’s no question that the Apple Watch is the most capable smartwatch available today. It is one of the most ambitious products I’ve ever seen; it wants to do and change so much about how we interact with technology.”

The NY Times’ Farhad Manjoo sees the Apple Watch as an extension of his body – one that makes him more sociable [emphasis mine]:

“I began appreciating the ways in which the elegant $650 computer on my wrist was more than just another screen. […] the Watch became something like a natural extension of my body — a direct link, in a way that I’ve never felt before, from the digital world to my brain. The effect was so powerful that people who’ve previously commented on my addiction to my smartphone started noticing a change in my behavior; my wife told me that I seemed to be getting lost in my phone less than in the past. She found that a blessing.”

David Pogue, one of the industry’s most thorough, experienced, and prolific tech writers, concludes his Yahoo Tech review thus:

“And this much is unassailable: The Apple Watch is light-years better than any of the feeble, clunky efforts that have come before it. The screen is nicer, the software is refined and bug-free, the body is real jewelry. First-time technologies await at every turn: magnetic bands, push-to-release straps, wrist-to-wrist drawings or Morse codes, force pressing, credit card payments from the wrist. And the symbiosis with the iPhone is graceful, out of your way, and intelligent.”

__________________________________________________________________

I think I can stop here.

If you, too, decide to ignore Horace Dediu’s advice, I found two reviews that stay away from the rooftops and make a serious attempt at providing insights into the nature of the Apple Watch, its user experience, and its future in the nascent “wearables” industry segment. (Keep in mind that while I have my own biases, the Monday Note doesn’t have advertising or other sources of revenue.)

Ben Bajarin’s Techpinions synthesis:

“Ultimately what I am convinced of is the Apple Watch represents a completely new computer interaction model. A PC is for when we have a few hours. Our smartphones is for when we have a few minutes. Our smartwatch is for when we have a few seconds. Each device, and the software and experience built for it, should help us maximize those hours, minutes, and seconds.”

John Gruber’s insightful Daring Fireball walk-through:

“Loosely, the path of all consumer electronic categories is to evolve as ever more computer-y gadgets, until a tipping point occurs and they turn into ever more gadget-y genuine computers. The sample size (in terms of product categories) is small, but Apple seemingly tries to enter markets at, or just after, that tipping point — when Moore’s Law and Apple’s ever-increasing engineering and manufacturing prowess allow them to produce a gadget-y computer that the computer-y gadgets from the established market leaders cannot compete with. That was the iPod. That was the iPhone.”

Those are nice exceptions to the Broken rule.
In the end, reviews don’t seem to matter much outside the kommentariat. In Neil Postman’s Amusing Ourselves To Death classification, most reviews aren’t Information but Entertainment. As recent Kantar World Panel research shows, consumers don’t pay them much attention:

Kantar Consumers Attention Edited

In the end, only Word of Mouth matters. After two or three months of actual availability, real humans will talk amongst themselves and decide the future of the Apple Watch, just as they did for the iPod and the iPhone. And, come to think of it, their conversation explains sagging iPad sales.

JLG@mondaynote.com

image_pdfimage_print

Jumping In bed with Facebook: Smart or desperate?

 

by Frederic Filloux

Update on May 13 : 9 publishers joining Facebook Instant Articles program

Capture d’écran 2015-05-13 à 10.59.34

[Our April 6 article]

Several major news organizations are said to be in negotiations with Facebook for a hosting deal. This throws the media sphere into an intense debate: Is this a path to prosperity or a dangerous surrender? 

The digital media odyssey’s latest chapter: According to a March 23rd New York Times article, half a dozen news organizations are currently in discussions with Facebook for a distribution deal. Cited as candidates for the experiment: The NYT itself, but also BuzzFeed, the National Geographic and even Quartz. (No one actually confirmed the information.) Under the putative deal terms, instead of simple links, Facebook would host media contents. In exchange, the media would get a cut of the ad revenue generated by the arrangement.

Media commentators quickly split into two camps: Those seeing this proposal as the most dangerous idea ever, versus others suggesting that times had changed, that Facebook had become the dominant ingredient in the Y generation media diet, and that news organizations better board the Facebook bandwagon or face a certain death (this Google News page provides a good glance at the controversy).

The debate about the increasing dependency on Facebook has been around for a while. Think tank seers remind us that FB has become the main source of news consumption. Last year, in its Digital News Report, the Reuters Institute asked which social platform had been used for any purpose (the dark blue bar), and more specifically for news (light blue):

361_reuters_institute_FB

At least a quarter of respondents mention Facebook as their source for news, reaching 67% in Brazil, 57% in Italy, and 50% in Spain. In the UK, when these readers are asked how they use Facebook for news, 48% say they browse their feeds and, more importantly, 44% say they actually click on a link, thus revealing a staggering level of engagement:

Actually, these numbers might be vastly underestimated. Last week, I interviewed a candidate for a project manager position at Les Echos. When asked about his media diet, the candidate said the vast majority of his news consumption took place on Facebook; he had about 500 various subscriptions and believed he didn’t miss anything. But he was barely able to mention a news brand on the main screen of his smartphone. I heard such a tale many times over.

When it comes to social media traffic referrals, Facebook is crushing everyone else. According to Shareaholic, in December 2014, Facebook generated 25% of all visits collected by publishers, leaving the rest of the social crowd in its dust. Pinterest, weirdly enough, comes in second, but with only 5% of referrals, and Twitter lags far behind with a mere 0.82%. The six other notable social platforms collectively weigh less than 2% of the total web traffic. Facebook “owns” the social distribution of news. But, impressive as it is, the 25% ratio needs further clarification: News organizations born with the digital era rely much more on social — sometimes up to 70% — while legacy media for only 10% to 15%.

This trend will continue as Facebook is actually expanding both ways: While its user base grew by 60% between December 2011 and December 2014, its referrals contribution grew by 277%, again according to Shareaholic. Aside from Pinterest (+685% growth over the last four years), other social channels did decline in the interval.

Hence Facebook’s powerful pitch to publishers:
– We grow in absolute terms — 1.4bn users and counting, with almost 1bn mobile users.
– We also grow in relative terms as our users stuff their feed with more news sources than ever.
– The engagement — time spent, click-through rate — is also on the rise.
– We provide the most granular ad targeting you can dream of.
– We can serve your contents on any platform much faster than you do, thanks to our technology and global infrastructure.

Seriously, who can resist that song?

The fact that the New York Times is said to be talking to Facebook rattled the news sector even more. The gold standard of quality journalism considering Facebook’s boost is indeed disturbing to many publishers — many of them in dire situations.

The decision-making process should factor the following items:
– The brand: the more powerful (read: established, acknowledged, ancestral) it is, the less likely it needs a social boost. (That’s the comfortable theory.)
– The type of content: Long form journalism is not the best fit for Facebook. Hardcore journalism, with its share of tragedies, is less likely to click than lighter, shorter pieces of information. ISIS doesn’t do well on FB’s newsfeed but Beyoncé scores high.
– Target group: The younger the better. If your readership is above 45, educated and affluent, you might consider a decisive social deal aimed at tapping into an additional pool of readers.
– Advertising: What’s in it for the publishers who might be part of the deal? That’s the big money question.

Let’s explore some answers.

Based on various deals seen here and there, the honey pot, as considered by publishers, consists in sharing advertising revenue. It is likely that Facebook will propose a two-pronged ad deal: a format sold by the publisher will collect between 70% and 100% of the revenue; if the ad is sold by Facebook, the network takes a cut that varies widely, depending on the partner’s bargaining power, but it can be 70/30… in favor of Facebook (a quota of say, a third of the inventory, can be reserved for the network.)

Last week, I spoke with two major european digital native players, each getting dozens of millions UVs per month. Both doubted the advantage of such a deal: Based on their experience with Google, they told me their audience increased while the revenue derived from the deal actually decreased. Their conclusion: Once hooked, the distributor will tend to arbitrarily tighten the deal, making it less and less favorable.

Can Facebook be trusted? The short answer is no. First of all, when someone subscribes to a given media content, Facebook’s algorithm will decide which amount of news the user will actually see. And s/he sees very little: for a specific flow of news pouring into Facebook, a ratio of 15% actually reaching a subscriber’s newsfeed is considered quite good. (In fact, Mark Zuckerberg said the average Facebook user could be exposed to 1500 stories per day but actually only sees a hundred of those, that’s 6%. As he sees it, Zuck’s own job is to determine which pieces of news everyone is entitled to see according to their profile.)

Facebook is an unpredictable spigot, whose flow varies according to constantly changing and opaque criteria. A given news stream will see its conversion into clicks vary widely for no apparent reason. (One suspected motive might be the correlation between ad spending on Facebook and the propensity of a news content to rise above the noise.)

Second, unlike Google which is relatively single-product oriented (structuring mostly text-based knowledge), Facebook carries lots of promises: it’s a video platform, a photo repository, a conversational system, an instant messaging service — all competing for the same real estate: your computer display or your mobile screen. Soon, Facebook will encompass a transaction platform, a classified service able to overthrow Craigslist or eBay, a search engine, etc.

In Facebook’s entanglement of platforms, services and applications, the news segment can only expect to play a minor role. In this ecosystem, news is expendable, it will be the adjustment variable that can be downplayed or even sacrificed should the company’s interest dictates it.

Having said that, news distribution through social channels must be part of any media strategy. A news brand, relying only on its notoriety might become increasingly secluded and lose its relevance by falling below its audience’s radar. Those who produce in-depth and unique editorial will consider Facebook a marginal addition to their core audience, while others, gushing loads of repackaged, cheap pieces of information will agree to be handcuffed by their distributor, for better or worse.

frederic.filloux@mondaynote.com

image_pdfimage_print

The Internet of Amazon Things

 

by Jean-Louis Gassée

With its new ordering system of one-push buttons spread around the home, Amazon wants to simplify lives, theirs more than ours as we’ll find out. In doing so, we’ll face – again – still unresolved issues for the Consumer version of the Internet of Things.

Amazon has just announced yet another tentacle into our homes and wallet, the Dash Button:

place_it

The spirited Don’t Let Running Out Ruin Your Rhythm intro video gives a quick overview of the process: Affix a button near your stockpile of essential goods, push it when the cache runs low, go to the front door and pick up your delivery.

Unsurprisingly, wags have seized the opportunity to suggest a button that might be legal in Amazon’s home state and other enlightened places:

weed

(From a comment on a Gizmodo post.)

As I’m in charge of laundry operations in our house, I went to the Amazon site, typed “Dash Button”, and was greeted with a series of enticing Get it by Monday April 6th offers such as this one for my favorite brand of detergent:

tide-2

But, no… I clicked on the link and was sent to the Dash Button main page with its By Invitation Only message [emphasis mine]:

dash_select

Picture the excited crowd behind the velvet rope, waiting for the opportunity to stick Dash Buttons on their washer/driers and coffee machines.

On the surface, the Dash Button makes sense. It’s the logical, Internet-of-Things extension of Amazon’s 1-Click ordering: Hang buttons on the objects that surround you and forestall the dreaded Running Out surprise. No complicated calculations, no need to leave your house. Just press the Dash Button when you stick the last ink cartridge in your printer, or when you see you’ll run out of diapers tomorrow. Peace of mind at your fingertips.

In practice, the process requires more mindfulness and skill.

The Dash Button connects to your home Wi-Fi router, set up via a dedicated smartphone app. In most cases, the person doing the setup will remember the Wi-Fi password. If not, the task will have to wait for the resident geek’s availability. Then there’s the matter of proximity. Does the Wi-Fi network reach your washer and dryer in the basement or garage?

Once you have the hardware set up, you return to the app to specify the replenishment quantity, and to decide whether or not you want Amazon to ignore subsequent Dash Button presses before the order arrives — a prophylactic against active toddlers, no doubt.

Everything’s ready. A tap on the button brings up a confirmation message on your phone with the opportunity to cancel the order in case you’ve changed your mind.

It sounds well thought-out… But why spread buttons around the house and go through an elaborate setup when you already have everything you need on your phone? Why not have an app that presents commonly-ordered items on its main page? When you see the bottom of the diaper drawer, you take out your phone, pull up the app, and click the Pampers button. You get an instant confirmation and you’re done.

No Wi-Fi set up; no worry about accidental “elbow ordering” as you unload the dryer; no besmirching your pristine appliances with branded, phosphorescent buttons (a strongly worded injunction from my high-end home-builder spouse). You don’t even have to be at home: You can order from anywhere, just as you do now.

I’m not the only person asking this question. As I was writing this note, I saw this Steven Sinofsky tweet:

sinofsky

Indeed, Sinofsky’s watch idea goes Amazon one better, and it plays to Apple’s central pitch: No need to whip out your smartphone.

Others, my son-in-law Christian Baxter included, have demonstrated how to build proof-of-concepts apps such as The Anything Button that make abundantly clear how you just need a smartphone, nothing else, for pre-programmed actions. There’s also the ingenious Pressy Button for Android phones.

Amazon is recognized as a sophisticated, long-term thinker. Is there more to the Dash Button than the added complications that we’re seeing? Possibly… but let’s remember that this is the company that came up with the “what were they thinking?” Fire smartphone. (See The Real Story Behind Jeff Bezos’ Fire Phone Debacle And What It Means For Amazon’s Future, in Fast Company magazine.)

In a recent must-read Andreessen Horowitz post, Benedict Evans provides some clues to Amazon’s occasional lack of coherence:

“Amazon is in fact organized not just in these segments, but in dozens and dozens of separate teams, each with their own internal P&L and a high degree of autonomy.”

This autonomy might be a well-calculated attempt to encourage experimentation, to provide a harbor for projects that would be impossible in a centralized command-and-control organization. A well-run, data-rich failure could calibrate the aim that leads to the next bull’s eye… or it could just be someone’s poorly thought-out vanity project. And/or an attempt to extract product placement or slotting fees for brands prominently featured on the Dash Buttons.

This led me to thinking about the nearly-forgotten Amazon Echo:

echo-4

Wi-Fi and Bluetooth enabled, the Echo provides access to an intelligent, always-listening agent called Alexa, a sort of Apple Siri or Microsoft Cortana. Alexa plays your music on demand and gives you the latest news and weather… To replenish my stash of Tide, why can’t I just ask Alexa to do the job? I’ll report back when I get my Dash Button and an Echo. (Announced last November as a “work-in-progress” the Echo is, to this day, available by invitation only. )

The Dash Button’s needless complications and the Echo’s tepid reviews (and privacy issues…would you want an “always-listening” agent in your kitchen, living room or bedroom?) are indications of the long difficult birth of the Internet of Things – in the Consumer space.

For industrial applications, the Internet of Things is already a reality. Teams of technicians install, extend, and maintain the complex array of “always-listening”, far-reaching devices that control the factory, gas refinery, or a server farm. This is what Cisco, IBM, and many others do for their customers, a continuation of their work in Enterprise applications.

Consumer instances of the Internet of Things are different. The setup and maintenance of an array of Internet objects in the home requires consumers to be their own IT support technicians. The home version of the Internet of Things assumes the ability to internalize and maintain a mental model of the network’s functions and exceptions. For non-geeks, this is an unnatural act.

Amazon’s own techies might be experiencing a failure of empathy:

circles

(From a now disappeared Mike Monteiro post.)

Someone, someday will make the Internet of Things work for The Rest of Us. That we still struggle with a Basket of Remotes shows how far we are from the goal.

JLG@mondaynote.com

image_pdfimage_print

Notes From The Road: Apple Watch, Apple Car

 

 by Jean-Louis Gassée

Taking a closer look at the size and precision of Apple’s manufacturing operations has made me rethink my skepticism about the putative Apple Car.

I’ve been in Paris for the last two weeks, mostly disconnected. I won’t wallow in specifics; suffice it to say that the struggle with cable TV, Internet, and cellular providers here is eerily similar to what we commonly endure in the Valley. There is one difference, however: A few hours ago, I watched as a cable technician spliced a fiber connection into our apartment, something I can’t get in downtown Palo Alto.

A few Web-free days watching people and eavesdropping on conversations in Left Bank cafés helped me rethink my position on the Apple Car – because of the Apple Watch.

The local level of interest in the Apple Watch is mild at best, nothing like the paroxysms in the States. Never have we seen such large-scale derangement over an Apple product announcement, not for the iPhone or for the iPad, Steve Ballmer’s and Dan Lyons’ shouts notwithstanding. Google “Apple Watch fail” and you’ll get more than 61M hits – and this is before anyone has had a chance to pay for and use the product.

The latest instance of mental poisoning comes from the NewYork Times’ tech columnist Nick Bilton. The (original) title of his anti-Watch column, “Could Wearable Computers Be as Harmful as Cigarettes?”, sounds like the work of a netwalker striking a provocative pose to attract pageviews. But Bilton is no carnival barker; he’s a real journalist with an otherwise impeccable professional record and a solid reputation for insightful writing. As you’ll see when you click on the link, the title has been changed to a less prurient “The Health Concerns in Wearable Tech”, and a long Editor’s Note and a Correction have been appended. If that weren’t enough, Margaret Sullivan, the Grey Lady’s Public Editor, has weighed in with an apology of sorts, calling some of Bilton’s assertions “pseudoscience”.

As detox, we can turn to “How Apple Makes the Watch” on Greg Koenig’s tech-porn blog Atomic Delights. Using pictures from the Apple Watch films, Koenig offers a lovingly detailed exploration of Apple’s industrial design decisions and manufacturing feats:

“Apple appears to have eschewed any revolutionary alchemy and instead, applied an innovative work hardening process to create gold that is (claimed to be) significantly harder than the typical 18kt used by other watchmakers. “

From gold alloys and steel forging, to CNC (Computerized Numerically Controlled) machining, laser clean-up, and in-process measurement exploits, Koenig’s post impresses us with the depth of the technical organization behind the product.

360-Mak_of_watch

After mentioning “rumors of entire German CNC mill factories being built to supply Apple exclusively” and the disappearance of manufacturing experts who later reappear in Cupertino or Shenzhen, Koenig concludes:

“While we all are massively impressed with the scale of Apple’s operations, there is constant intrigue as to exactly how they pull it all off with the level of fit, finish and precision obvious to anyone who has examined their hardware.”

(I can safely say you won’t be bored with Koenig’s blog. After reading about the Watch, you should continue down the page to his article on Mac Pro Manufacturing, followed by a 15-second video that shows how objects we can’t live without, springs, are made.)

After a couple of readings, Koenig’s thoughts on the scale and precision of Apple’s manufacturing process got me to rethink my views of the putative Apple Car. In two Monday Notes, The Fantastic Apple Car and Apple Car: Three More Thoughts, I expressed strong skepticism.

In the first place, I wrote, a long history of eating and drinking at the best restaurants on the planet doesn’t qualify you to become a successful restaurateur. More important, Jony Ive’s justly renowned prowess in coming up with exquisitely polished objects misses the point of car manufacture where the focus isn’t on the object itself, but on the machine that excretes the cars in high volume, high quality, and well-managed cost. It’s the Industrial in Industrial Design that matters.

On the weight of these two points I concluded that while the idea of an Apple Car is attractive, Apple shouldn’t confuse its love of cars and its high regard for beautiful swage lines with an ability to become a successful car maker.

Now, I wonder if I ought to Think Different.

The scale of Apple’s Supply Chain makes it clear that the company knows how to make the machine that makes the machines on a very large scale and at a high quality level. In a comparison at the beginning of his post, Koenig helps us grasp the otherwise unimaginable size of Apple’s manufacturing [emphasis mine]:

“Apple is the world’s foremost manufacturer of goods. At one time, this statement had to be caged and qualified with modifiers such as “consumer goods” or “electronic goods,” but last quarter, Apple shipped a Boeing 787’s weight worth of iPhones every 24 hours. When we add the rest of the product line to the mix, it becomes clear that Apple’s supply chain is one of the largest scale production organizations in the world.

787 of iPhones

(Initially, I read Koenig’s statement as “one 787 full of iPhones everyday”. But, no, this is the entire unladen weight of the 787 itself.)

How does this compare to cars? US sales of the 3,000 pound (1,500 kgs) Nissan Leaf averaged 2,500/month in 2014. That’s 7.5M pounds worth of cars. The iPhone’s monthly weight (240K lbs * 30 days) is…7.2M pounds. As another reference point, Tesla sold 2,500 cars in September 2014.

Such number play is just that, a feeble attempt to seize sizes. And even if we grant Apple the numbers — if we stipulate that Apple can manage a supply chain that produces a month’s weight worth of electric cars that are equivalent to the size and weight of a Nissan Leaf or, two notches up, of a Tesla — the next question is whether or not such a product will move the needle. Will it sell in multiples of Apple’s new unit of currency: $10B?

(Apple 2015 sales are expected to significantly exceed $200B.)

For this to happen, the putative Apple Car would have to sell in volumes about 10 times higher than what Nissan did last year in the US: 30K vehicles/month, at $30K each, times 12 months = $10.8B.

Of course, I’m looking at the putative Apple Car in terms of the car as we know it today, just as we all initially looked at the iPod and the iPhone using existing products as the frame of reference. Perhaps Apple has something more imaginative, more in keeping with its Think Different mantra than a mere derivation of existing designs. But whatever it intends, I no longer believe that Apple can’t design a machine to make cars.

JLG@mondaynote.com

image_pdfimage_print

Beware of Airbnb entering the hyperlocal travel guide business

 

by Frédéric Filloux 

Airbnb has every reason to enter the news services sector – and to threaten a broad range of media/services such as Trip Advisor or Yelp. 

Seen through the eyes of travel information publishers, Airbnb holds a dream position: a huge base of 25 million potential readers/users, spread over 34,000 cities in 190 countries, well in tune with the brand’s core product and attributes.

359_heatmap

For a start, should Airbnb develop a publishing arm, this unparalleled notoriety would spare it tens of millions dollars otherwise required to promote its content services: In the travel industry, advertising and marketing demand high spending. To put things in perspective, this year, according to the trade site Skift.com, HomeAway, one of Airbnb’s key competitors, plans to spend $100m (after shelling out $60m in 2014) “To show it’s not Airbnb“. HomeAway was created in 2005 and received $504m in funding before going public in 2011 — the stock lost 18% since. Airbnb has yet to go public after raising more than $800m. Its latest confirmed round closed in October was for $50M with a $13bn valuation. Airbnb is now rumored to be raising a $1bn “war chest” at an even higher price: $20bn.

Today, Airbnb’s expansion is a matter of concern not only for its direct competitors but also for large players in the travel information segment.

Last November, Airbnb fired the first shot: Pineapple, a 128 page, ad-free, glossy quarterly magazine, mostly written by hosts and guests gently discussing their experiences. With a tiny print run of 20,000 copies, it was distributed for free in some Airbnb hotspots and sold at selected bookstores such as WH Smith in Paris, where I got my copy for €12. According to Pineapple publisher Christopher Lunekzic (interview on the FIPP site), “The idea came from a desire to capture the unique nature of traveling through Airbnb. We wanted to bring that sense of creativity, culture and connection to life”. All the talking points of an elegant PR campaign are checked, part of Airbnb recent rebranding. Nothing to freak out travel press behemoths.

Except… Now, a sizable part of Airbnb community is aware of the company’s recent push into the magazine business. Which could make a serious difference.

That said, print is certainly not a key part of Airbnb’s media future. Mobile apps are. Last year, only 20% of Airbnb traffic came from mobile. That was before last December’s app redesign. Today, the Airbnb ranks in the top 5 apps in 7 countries, and in the top 100 in… 152 countries. That’s where the real potential is. And the San Francisco-based icon of the sharing economy is betting heavily on mobile: it recently announced a partnership with Deutsche Telekom’s T-Mobile to pre-install its app on Android smartphone across 13 markets in Europe (TechCrunch story here). A decisive move for Airbnb’s mobile expansion.

Now let’s indulge in a little bit of fiction — from the perspective of an Airbnb guest.

I’m booking a flat in, say in London’s Marylebone district. I’m not familiar with the best places to go out. In the dedicated section of the new Airbnb app, I enter the host’s postal code, which is precise down to the building (likewise, the American “Zip+4″ code provides a city block location; in other cities, the Lat-Long associated to a street address does the job). My host has listed her preferred spots: organic groceries, wine bars, galleries, shopping places, movie theaters… Every place shows up on a Google map. The practical details I might need appear over my host’s comments: business hours, booking information, etc. I can also check the reviews on third party sites, but given my host’s profile, I assume our tastes will match; plus, I don’t want to get drowned into a tedious (and too often dubious) series of five-stars searches.

On my phone, I now enjoy a mini-guide of the neighborhood where I’m going to spend the next few days, filled with trusted, non-commercially-induced recommendations. Right from the app, I can make reservation via Open Table, and even call a Uber car. That’s what API’s are for: connecting applications together, in a mutually beneficial way. The third-party service provider expands its reach and the app publisher offers a wider range of services while keeping the customer “inside”. Similarly, a gallery or museum can make its program available within the app.
APIs will be a major development engine for the apps ecosystem as the number of features and services that can be added is boundless. For example, Uber has recently made its API system much more accessible and now partners with 11 companies, including Hyatt, OpenTable, Starbucks, Time Out, TripAdvisor, TripCase — curiously, not Airbnb nor Yelp.

Why would such integration threaten large travel business publishers?

Beyond developing its gigantic global footprint, Airbnb wants to build a community of users, itself structured in homogenous layers (e.g. young families looking for budget rentals, yuppies aiming at trendy places…) There’s even the growing crowd of professionals who prefer an Airbnb apartment free of the check-in/out hassles of hotels, and who will gladly trade unexciting room service for a super-fast DSL connection. (I’m told a growing number of Googlers do so for their business trips, with their employer’s blessing.) Each of these sub-communities will be far more likely to trust their peers than the usual travel guides where it’s always difficult to sort actual user opinions from bogus reviews and paid-for insertions, disguised advertorials, etc.

The beauty of this powerful combination lies in its scalability. Airbnb listings contain a broad range of properties, including high-end, luxury items. Those who might be willing to cough up €2,000 a night for a two-bedroom unit with a stunning view of the Hong Kong harbor might also want a special cicerone, a much more sophisticated one than the peer-to-peer guide described above.

Sometime ago, Louis Vuitton — the main brand of LVMH luxury conglomerate — had the idea of creating a dedicated app aimed at its rich Chinese clientèle, at those able to spend €20,000 or more in a single afternoon shopping stroll through Avenue Montaigne in Paris. This special application was to offer the services of a personal shopper, but also a personal city guide (Louis Vuitton already publishes its own collection of high-end guides) to be used from planning the trip to the actual journey. Even better, the app was to rely on the Chinese-made WeChat application (500 millions users, roughly 85% from mainland China) connected to an actual human able to guide the wealthy tourist on a real-time basis, either with messages or voice contact. In such case, relying on peer recommendations made no sense, but a highly personalized service did. A couple of selected partners were in the loop.

Regardless of the market segment, a notorious brand coupled to a set of mobile services is a potent combination. In the case of Airbnb, the “full stack” company — a concept coined by Andreesen Horowitz’ Chris Dixon —  is likely to be a master tool for securing the position of a brand in its market.

frederic.filloux@mondaynote.com

image_pdfimage_print

News Media Should Drop Native Apps

 

by Frédéric Filloux

When it comes to the most basic form of news delivery, facts keep piling up in a way that makes native apps more and more questionable. Here is why it’s worth considering a move back to mobile sites or web apps…  

One of the most shared statistic on mobile use is this one: Applications account for 86% of the time spend b’y users. This leaves a mere 14% for browser-based activities, i.e. sites designed for mobile, either especially coded for nomad consumption, built using responsive design techniques that adapt look and feel to screen size, or special WebApp designs such as FT.com.

This 86/14 split is completely misleading for two reasons: the weight of mobile gaming, and the importance of Facebook.

Take a look at this chart form Flurry Analytics:

358_time_spent

 

If you combine gaming, Facebook and Social Messaging, roughly 60% of time spent on mobile is swallowed by this trio. As for Facebook, it reaped the top four slots in downloads for non-gaming apps worldwide:

358_2

Mobile consumption will concentrate even more as messaging and free direct communication (red dot in the chart) combine into the fastest growing segment by far. Mobile carriers have reason to be scared. Consequently, Facebook will tighten its grip on the mobile ecosystem as it commands the two dominant direct communication apps. If this wasn’t enough, there are two other fast-growing usages: Video streaming (+44% downloads last year) and Travel & Transportation — Uber, AirBnB, CityMapper — (+31%.)

The main characteristic of these services is they couldn’t be designed outside of a full-fledged application: They require key phone features not easily accessible through a browser such as radio modules, GPS,  image rendering (for maps, graphics), camera, etc.

By comparison, news-related applications do not requires a lot of phone resources. They collect XML feeds, some low resolution images and render those in pre-defined, non-dynamic templates. They use a tiny fraction of a modern smartphone’s processing power.

In fact, for news media, as the following matrix shows, native apps (iOS, Android and soon Windows) become a questionable proposition:

358_Matrix_3b
Summing up, apps for news distribution are technically justified for speed, ability to send notifications, inApp purchases, and the hypothetical use of phone sensors. That’s much money and a lot of complications for a small number of features. (On this subject, see the previous The Future of Mobile Apps for News column.)

Unless you are fighting for the prime phone screens, say the first three swipes, or if you are determined to provide key visual or functional differentiators, going for a set of native apps must be carefully weighed. Depending on the level of sophistication and required features, developing a native application costs between $50,000 and $100,000, for each environment, plus dedicated SDKs for marketing, analytics, etc., plus a 30% fee paid to the app store if you go for a paid or subscription model, plus hassles for approval of the smallest update in the messy iOS App Store…

But if you are already big on social and SEO, a mobile site, lightweight, clearly focused on a small feature set can be quite effective. Disappointing as it may be, HTML5-based web apps are all but dead (the difficulty lies in finding good developers and in managing them.)

Among all players, Google has the ability to overhaul the mobile ecosystem. If it comes up with an SDK or a framework aimed at creating simple and effective apps, indeed with limited performance but with enough features to accommodate news delivery, this could become an industry game-changer.

frederic.filloux@mondaynote.com

358_banner_Prez_d

image_pdfimage_print

After The First 3 Million AppleWatches

 

By Jean-Louis Gassée

We’ll soon know what the AppleWatch is and what it can do…it may take a while to understand why Apple has gone to such lengths to hype the device.

Under Steve Jobs‘ leadership, Apple 2.0 obsessed over the marriage of form and function. Starting with Jony Ive’s Bondi Blue iMac, Apple products stood out in a sea of beige and black boxes. But even so, fashion, the providential spawn of this fecund marriage, has always been a by-product — welcome, but not a first-order pursuit

With the AppleWatch things have changed: Fashion is now a primary component, co-equal with silicon and software. The assertive, carefully planned, and richly resourced entrance into the world of the dernier cri is as notable as the device’s technical challenges (battery life, user interface, sensors…).

357-applewatchPSD

We saw fashion writers at the September unveiling. Karl Lagerfeld and Anna Wintour attended the private event at Colette, one of Paris’ chicest stores on the ultra-chic rue Saint-Honoré. That these two fashion world divas — who don’t make paid appearances —  “found the time” to drop by speaks to the depth and strength of Angela Ahrendts’ (ex-CEO of Burberry), Paul Deneve’s (ex-CEO of Yves Saint Laurent), and Jony Ive’s various connections into a new world for Apple.

This recognition that  “fashion matters” has shown us something new: Apple is buying its way onto the covers of fashion and lifestyle magazines. (Search for “Apple Watch magazine covers” and you get about 57.6 million results; this may be a pittance compared to the 559M hits for a plain Apple Watch search, but it’s an impressive number, nonetheless.)

This is novel. Apple has a history of spending zero dollars advertising products it hasn’t delivered yet. Pre-launch rumors, whether erroneous or pinpoint accurate, are erogenous enough to enflame desire. On the first day of physical availability, customers happily line up at Apple Stores around the world.

Before we address the question of Apple’s foray into the world of Vogue, let’s admit that none of it will work until we know what the AppleWatch actually is, how it will affect and infect customers’ brains and entrails. We’re impressed by the physical objects we see in pictures on the dedicated website, including some famous Marc Newson designs for bands and clips, but the “live” experience, its intellectual and emotional nature will have the final word. For this we’ll have to wait — but not for long.

The first three million watches will sell “instantly”, in a couple of weeks, maybe less. These first sales won’t matter as much as will their consequence, the all-powerful Word of Mouth.

Let’s consider one scenario: The eager purchaser explores the device and shows it off to friends — who will want the full tour. As a result, the battery is exhausted in much less than the presumed day, perhaps a couple of hours in the most enthusiastic hands.

Bloggers shout from the rooftops: Let’s add the AppleWatch to the list of failed Apple products.

If this were a real problem, such as Antennagate or Apple Maps, we’d see a reaction from Apple, whether in the form of contorted explanations and settlement checks, or a sincere apology from Tim Cook — followed by management changes.

In the battery-exhausted-by-enthusiasm scenario, I don’t think Apple execs will wait and react. I expect them to be proactive. One law of good salesmanship is you don’t let the customer discover an important limitation – you proactively adjust expectations to forthcoming reality. (On that note, 9to5Mac has an good post on Apple Watch sales training for store employees. This old salesman agrees: Just help the purchase decision that’s already been made come to the surface.)

On Monday, when Tim Cook and other Apple execs do the AppleWatch Launch 2.0, let’s listen to the battery-life proaction. With months of field-testing by a large number of insiders, chances are management has an accurate view of early-adopters’ reactions.

One caveat: insiders might be just a bit too competent and thus consciously or unconsciously avoid the traps “naive” users will fall into. I’m optimistic, the Maps fiasco hasn’t been forgotten.

When we look beyond the first few weeks, it’s tempting to adopt the mercenary position and just consider the numbers. For the first year of sales, projections range from 8M to 30M units. Just for fun, I’ll use an iPhone-like average price, about $650. This adds up to revenue between $5B to $20B. That’s a wide range, from a minimally-noticeable contribution to the projected $250B company-wide (again, an approximation), to an insignificant blip.

Now let’s step back a bit and think about the AppleWatch’s place in Apple’s business.

The play, at least initially, is for the AppleWatch to make iPhones more valuable. The first iteration doesn’t pretend to stand on its own, it depends on the iPhone in the customer’s purse or pocket. For example, navigation might look good on the watch, but it has no GPS and thus needs the iPhone for geolocation. No sin, at least not in my book: The AppleWatch is an innovative and fashionable device that makes the iPhone, Apple’s monster money machine, more pleasant and more valuable.

Second, user interface innovations (the crown, pressure sensors on the screen) will generate new apps, new ideas, new usage patterns that will be adopted by other Apple products.

Third, critics may deride the enthusiasm of Apple devotees and cast them as cultish zealots, but given this level of unforced devotion, why spend so much advertising effort on the AppleWatch, particularly when the articles that accompany the pricey magazine covers do nothing to clarify what the product actually does?

Apple’s equal investment in both the technology and fashion of its watch may be glibly mocked, but I don’t think it’s so easily dismissed. I doubt Apple would go to such lengths for just one watch.

JLG@mondaynote.com

Afterthoughts…
One: John Kirk offers yet another of his literate, fun and relevant posts, this time, about AppleWatch, a cure for the pervasive malady of Premature Evaluation.

Two: Personally, if I had a choice between an AppleWatch and a new, even slimmer MacBook Air with a Retina screen and the latest Intel processor… I know which screen I’d look at the longest, which object I’d tinker with the most. But, of course, I want both.

Three: For perspective, see the March 24th, 2014 Wearables Fever Monday Note.

image_pdfimage_print

NYT vs Buzzfeed: Valuations Discrepancies – Part II

 

by Frédéric Filloux

My last column about new valuations in digital media triggered an abundance of comments. Here are my responses and additions to the discussion. 

The most revealing part of argument used by those who tweeted (800 of them), commented or emailed me, is how many wished things to remain simple and segregated: legacy vs. native media, content producers vs. service providers, ancestral performances indicators and, of course, the self-granted permission to a certain category of people to decide what is worthy. Too bad for cartesian minds and simplifiers, the digital world is blurring known boundaries, mixing company purposes of and overhauling the competitive landscape.

Let’s start with one point of contention:

Why throw LinkedIn, Facebook and old companies such as the NYTimes or the Guardian into the equation? That’s the old apples and oranges point some commenters have real trouble seeing past. Here is why, precisely, the mix is relevant.

Last Tuesday February 17, LinkedIn announced it had hired a Fortune reporter as its business editor. Caroline Fairchild is the archetypal modern, young journalist: reporter, blogger with a cause (The Broadsheet is her newsletter on powerful women), mastering all necessary tools (video editing, SEO tactics, partnerships) as she went from Bloomberg to the HuffPo, among other gigs. Here is what she says about her new job:

 LinkedIn’s been around for 11 years and today publishes more than 50,000 posts a week (that’s roughly 10 NYTs per day) — but the publishing platform is still an infant, debuting widely less than a year ago. The rules and roles are being defined and redefined daily; experimenting is a constant.

Here we are: LinkedIn intends to morph into a major business news provider and a frontal competitor to established business media. Already, scores of guest columnists publish on a regular basis on LinkedIn, enjoying audiences many times larger than their DeLuxe appearances in legacy media. (For the record, I was invited to blend the Monday Note into LinkedIn, but the conditions didn’t quite make sense to us. Jean-Louis Gassée and I preferred preserving our independent franchise.)

For a $2.2bn revenue company such as LinkedIn, creating a newsroom aimed at the business community definitely makes sense and I simply wonder why it took them so long to go full throttle in that direction — not only with an avalanche of posts but with a more selective, quality-oriented approach. If it shows an ability to display properly value-added editorial, LinkedIn could be poised to become a potent publishing platform eventually competing with The Economist, Quartz, FT.com or Les Echos. All of it with a huge data analytics staff led by world-class engineers.

That’s why I think the comparison with established media makes sense.

As for Facebook, the argument is even more straightforward. Last October, I published a column titled How Facebook and Google Now Dominate Media Distribution; it exposed our growing dependence on social media, and the need to look more closely at the virtues of direct access as a generator of quality traffic. (A visit coming from social generates less than one page view versus 4 to 6 page views for direct access.) Facebook has become a dominant channel for accessing the news. Take a look at this table from Reuters Institute Report on Digital News Report (PDF here.)

356-ReutersIns

There’s no doubt that these figures are now outdated as media’s quest to tap into the social reservoir has never been greater. (In passing, note the small delta between News Lovers and Casual Users.) It varies widely from one country to another, but about 40% of the age segment below 35 relies on social as its primary source for news… and when we say “social”, we mostly mean Facebook. Should we really ignore this behemoth when it comes to assess news economics? I don’t think so.

More than ever, Facebook deserves close monitoring. No one is eager to criticize their dope dealer, but Mark Zuckerberg’s construction is probably the most pernicious and the most unpredictable distributors the news industry ever faced.

For instance, even if you picked a given media for your FB newsfeed, the algorithm will decide how much you’ll see from it, based on your past navigation and profile. And numbers are terrible: as an example, only 16% of what the FT.com pushes on Facebook actually reaches its users, and that’s not a bad number when compared to the rest of the industry.

And still, the media sector continues to increase its dependence on social. Consider the recent change in the home page of NowThis,  a clever video provider specialized in  rapid-fire news clips:

356-NowThisHome

No more home page! Implementing a rather bold idea floated years ago by BuzzFeed’s editor Ben Smith, NowThis recently decided to get rid of the traditional web access to, instead, propagate its content only via, from left to right: Tumbler, Kik, YouTube, Facebook, Twitter, Instagram, Vine, and Snapchat. We can assume that this strategy is based on careful analytics (more on this in a future Monday Note.)

Among other questions raised by Monday Note readers: Why focus solely on the New York Times and why not include the Gannetts or McClatchys? It’s simply because, along with The Guardian or the FT.com, the NYT is substantially more likely to become predominantly a digital brand than many others in the (old) league.

To be sure, as one reader rightly pointed out, recent history shows how printed media that chose to go full digital end up losing on both vectors. Indeed, given the size of its print advertising revenue, the Times would be foolish to switch to 100% online — at least for now. However, the trends is there: a shrinking print readership, fewer points of copy sale, consequently higher cost of delivery… Giving up the idea of a daily newspaper (while preserving a revamped end-of-the-week offering) its just a matter of time — I’ll give it five years, not more. And the more decisive the shift, the better the results will be: Keep in mind that only 7 (seven!) full-time positions are assigned to the making of the Financial Times’ print edition; how many in the vast herd of money-losing, newspaper-obsessed companies?

Again, this is not a matter of advocating the disappearance of print; it is about market relevancy such as addressing niches and the most solvent readerships. The narrower the better: if your target group is perfectly identified, affluent, geographically bound — e.g. the financial or administrative district in big capital — a print product still makes sense. (And of course, some magazines will continue to thrive.)

Finally, when it comes to assessing valuations, the biggest divide lies between the static and the dynamic appreciation of the future. Wall Street analysts see prospects for the NYT Co. in a rather static manner: readership evolution, in volumes and structures, ability to reduce production expenditures, cost of goods — all of the above feeding the usual Discounted Cash Flow model and its derivatives… But they don’t consider drastic changes in the environment, nor signs of disruption.

Venture Capital people see the context in a much more dynamic, chaotic perspective. For instance: the unabated rise of the smartphone; massive shifts in consumer behaviors and time allocation; the impact of Moore’s or Metcalfe’s Laws (tech improvements and network effects); or a new breed of corporations such as the Full Stack Startup concept exposed by Andreessen Horowitz’ Chris Dixon (the man behind BuzzFeed valuation):

Suppose you develop a new technology that is valuable to some industry. The old approach was to sell or license your technology to the existing companies in that industry. The new approach is to build a complete, end-to-end product or service that bypasses existing companies.
Prominent examples of this “full stack” approach include Tesla, Warby Parker, Uber, Harry’s, Nest, Buzzfeed, and Netflix.

All of it is far more enthralling than promising investors a new print section for 2016, two more tabs on the website all manned by a smaller but more productive staff.

One analysis looks at a continuously evolving environment, the other places bets on an uncertain, discontinuous future.

The problem for legacy media is their inability to propose disruptive or scalable perspectives. Wherever we turn — The NYT, The Guardian, Le Monde — we see only a sad narrative based on incremental gains and cost-cutting. No game changing perspective, no compelling storytelling, no conquering posture. Instead, in most cases, the scenario is one of quietly managing an inevitable decline.

By contrast, native digital players propose a much brighter (although riskier) future wrapped in high octane concepts, such as: Transportation as reliable as running water, everywhere, for everyone (Uber), or Organize the world’s information and make it universally accessible and useful (Google), or Redefining online advertising with social, content-driven publishing technology, [and providing] the most shareable breaking news, original reporting, entertainment, and video across the social web (BuzzFeed).

No wonder why some are big money attractors while others aren’t.

frederic.filloux@mondaynote.com

image_pdfimage_print

Apple Car: Three More Thoughts

 

by Jean-Louis Gassée

[Update appended]
Beside free publicity, and huge amounts of it, the putative Apple Car raises interesting questions about car manufacturing, the future of automobiles, and the part that an interloper such as Apple could play in this century-old industry. 

The volume of comments and Twitter traffic in reaction to last week’s Monday Note, The Fantastic Apple Car, was just one small rivulet in this week’s gusher of rumors, jokes, and proclamations about Apple becoming a car manufacturer. Bloomberg takes the car as fait accompli, telling us that “Apple…is pushing its team to begin production of an electric vehicle as early as 2020”. A recent 9to5mac post provides a long list of car experts and executives hired by Apple, thus giving more than gossipy credence to the story of Apple committing huge resources to such a project.

There are many products and services I’d love to see Apple get into. For example, how could Apple not do a better job than Comcast, Verizon, and AT&T at providing wired and wireless broadband? But the Cupertino company stays out of that arena for a number of reasons: regulations, fragmentation, manpower, equipment both under and above ground.

One could argue that cars present a simpler challenge. Roads are roads and country regulations are well understood. And, yes, a car made and serviced by Apple could be an affordable quality product.

Still, I remain a skeptic. Monday Note commenter Hamranhansenhansen does a good job of summarizing my position:

“[…] if Apple were doing a car, why not just buy Tesla in the exact same way they bought Beats? Apple already made headphones for about 14 years and then bought Beats anyway. Tesla is the Beats of cars, and it is local to Apple and already has a factory and really great mindshare. If they did not want Elon Musk, he has SpaceX and could likely make a graceful exit. Apple’s car line would then be named “Tesla” same as their PC’s are named “Mac” and headphones named “Beats.” The price of Tesla right now is excellent, especially considering the battery crossover to iPhones and iPads.
It makes much more sense to me that Apple is going to become a car component manufacturer, so that BMW, Bentley, Ferrari, etc. can buy Tesla-style in-car dash systems from Apple, just as Ford bought the awful Sync from Microsoft. The itch that needs to be scratched is Jony Ive getting into his Bentley and his iPhone won’t hook up reliably and sits in a bolt-on cradle.

This week, I’ll add three vignettes, three morsels of food for thought about the hotly desired AppleCar.

For more than twenty years, two Apple execs roamed the Earth in search of technologies, suppliers, contractors, and entrepreneurs to acquihire. In their travels, they fortified themselves at many of the best restaurants on the planet, becoming friends, or so they thought, with the astute chefs, sommeliers, and maîtres d’hôtel.

Impressed by their own accumulated knowledge of the restaurant industry the two decided to parlay the money and ambition they had been soaking in at Apple and open a high-concept, high-end saloon. They spared no expense on location, decoration, wine cellar, state-of-the-art kitchen, big name chef, experienced front-of-the-house staff and, of course, a publicist.

After two miserable years of quarrels with prime donne, theft and drug use by the staff, bad reviews planted by rivals, and calamitous “surprise” food inspections, our two wannabe restaurateurs closed their dream place, millions of dollars gone to waste.

They got confused. After all the years they spent in the best restaurants in the world, they thought they knew the restaurant business. What they did know was how to be great patrons… how to talk wine with the sommelier, when to compliment the chef, how to respectfully send back a dish that isn’t just so. They were customers, not restaurateurs.

You know where I’m going with this: Some Apple execs are great car connoisseurs — one senior VP is even on the Board of Directors of Ferrari. They have the resources to own and operate, on roads and tracks, many of the choicest automobiles on the planet, but that doesn’t automatically give them the knowledge to be manufacturers.

The second vignette takes me back a few decades to Northern Italy. During my years at Apple, I took an Industrial Design team to pay a visit to Giorgetto Giugiaro, a towering figure in the automobile industry who would later be recognized as one of the Car Designers of the Century. (Both Wikipedia articles just linked to make for terrific reading – if you’re into cars.) Our goal, in visiting Giugiaro, was to find fresh inspiration, new stanzas for our design language. I had long admired not only the aesthetics of the cars Giugiaro had designed, but also their practicality and efficiency. The historic success of his work on the Volkswagen Golf re-started the company and put it on a trajectory to one day challenge Toyota.

When we walked into Giugiaro’s Italdesign offices, a surprise awaited us. When I thought of Industrial Design — Esthétique Industrielle in French — aesthetics first came to mind, industry second. But what Giugiaro showed us was the opposite: The industrial side of his practice was, for him, truly foremost. In his own words, his job wasn’t to design an award-winning shape for a car, his job was to design the process, the factory that would eventually excrete a continuous flow of vehicles.

An example from Giugiaro’s portfolio: The Renault 19. At a time when the French manufacturer saw a hole in its product line, Giugiaro raided the corporate parts bank, designed a production line, installed it, and trained the production technicians.

More than 25 years later, the conversation is still with me: One doesn’t design a car, one designs the machine, the process, the supply ecosystem that produces the vehicle. As Horace Dediu puts it, innovations are in the production system:

(Beside his Asymco blog and @asymco Twitter stream, Horace also produces Asymcar, a podcast series dedicated to the auto industry.)

I would love to be wrong about the AppleCar — I join the choristers who would love to see what Apple could do with a car — but we’ve heard a bit too much about Apple’s ability to design an interesting electric vehicle and not enough about the industrial part, about the machine that makes the machines.

Finally, there’s Carlos Ghosn. (Again, you won’t regret reading the Wikipedia article.)
How do you compete with this man?
The Brazilian born Ghosn spent his early school years in Lebanon, attended the prestigious École Polytechnique in Paris, and started his automotive career at Michelin, the very techie and idiosyncratic tire maker. After rising to CEO of Michelin North America, Ghosn was recruited by the ailing Renault, and Ghosn managed to turn two companies around by creating a global alliance with Nissan. He’s now the CEO of both companies – and a hero in Japan, featured in manga (a comic strip genre). He speaks Portuguese, Arabic, French, English and some Japanese.

As CEO of Renault-Nissan, Ghosn was instrumental in the creation of the best selling electric car on the market today, the Nissan Leaf (another interesting Wikipedia read). With 158,000 units sold, representing about $6B, the Leaf is a well-rounded implementation of an affordable “pure” electric car (as opposed to hybrids such as the Toyota Prius, or the Chevy Volt, or BMW i3 and i8 that are assisted by small accessory gasoline engines).

I don’t know which fine cars Ghosn drives for pleasure, but he certainly knows how to make the machines that create them. If Apple wants to make and sell electric cars in numbers large enough to garner revenue in multiples of 10 billion — the unit of currency for Apple in 2020 — they’ll first have to figure out how to beat Carlos Ghosn at his game.

JLG@mondaynote.com

Update
Tim Bradshaw, the author of the Financial Times article referred to above, points out his story came out before the Wall Street Journal piece and resents the “rewrite” label for his work.
I regret the error.
What led me astray is this, on FT.com, with a Saturday Feb 14 date:
“The Wall Street Journal reported on Friday that Mr Zadesky’s team was overseeing a project code-named Titan that had produced an initial design for a vehicle resembling a minivan.”
And that’s why I thought the WSJ (Fri 2/13) got there first.
It looks like the Feb 14th date was the stamp for the latest update to the article, not the 1st publication date that appears to have beaten the WSJ by “several hours” according to Arash Massoudi, one of Tim’s colleagues at the FT.”

image_pdfimage_print

The NYTimes could be worth $19bn instead of $2bn  

 

by Frédéric Filloux

Some legacy media assets are vastly underestimated. A few clues in four charts.   

Recent annual reports and estimates for the calendar year 2014 suggest interesting comparisons between the financial performance of media (either legacy or digital) and Internet giants.

In the charts below, I look at seven companies, each in a class by itself:

355-1
A few explanations are required.

For two companies, in order to make comparisons relevant, I broke down “digital revenues” as they appear in financial statements: $351m for the New York Times ($182m in digital advertising + $169m for digital subscriptions) and, for The Guardian, $106m (the equivalent of the £69.5m in the Guardian Media Group annual report (PDF here).

Audience numbers above come from ComScore (Dec 2014 report) for a common reference. We’ll note traffic data do vary when looking at other sources – which shows the urgent need for an industry-wide measurement standard.

The “Members” column seemed necessary because traffic as measured by monthly uniques does differ from actual membership. Such difference doesn’t apply to news media (NYT, Guardian, BuzzFeed).

For valuations, stock data provide precise market cap figures, but I didn’t venture putting a number the Guardian’s value. For BuzzFeed, the $850m figure is based on its latest round of investment. I selected BuzzFeed because it might be one of the most interesting properties to watch this year: It built a huge audience of 77m UVs (some say the number could be over 100m), mostly by milking endless stacks of listicles, with clever marketing and an abundance of native ads. And, at the same time, BuzzFeed is poaching a number first class editors and writers, including, recently, from the Guardian and ProPublica; it will be interesting to see how Buzzfeed uses this talent pool. (For the record: If founder Jonah Peretti and editor-in-chief Ben Smith pull this off, I will gladly revise my harsh opinion of BuzzFeed).

The New York Times is an obvious choice: It belongs to the tiny guild of legacy media that did almost everything right for their conversion to digital. The $169m revenue coming from its 910,000 digital subscribers didn’t exist at all seven years ago, and digital advertising is now picking up thanks to a decisive shift to native formats. Amazingly enough, the New York Times sales team is said to now feature a ratio of one to one between hardcore sales persons and creative people who engineer bespoke operations for advertisers. Altogether, last year’s $351m in digital revenue far surpasses newsroom costs (about $200m).

A “normal” board of directors would certainly ask management why it does not consider a drastic downsizing of newspaper operations and only keep the fat weekend edition. (I believe the Times will eventually go there.)

The Guardian also deserves to be in this group: It became a global and digital powerhouse that never yielded to the click-bait temptation. From its journalistic breadth and depth to the design of its web site and applications, it is the gold standard of the profession – but regrettably not for its financial performances, read Henry Mance’s piece in the FT.

Coming back to our analysis, Google unsurprisingly crushes all competitors when it comes its financial performance against its audience (counted in monthly unique visitors):

355-2
Google monetizes its UVs almost five times better than its arch-rival Facebook, and 46 times better than The New York Times Digital. BuzzFeed generates a tiny $1.30 per unique visitors per year.

When measured in terms of membership — which doesn’t apply to digital media — the gap is even greater between the search engine and the rest of the pack :

355-3

The valuation approach reveals an apparent break in financial logic. While being a giant in every aspects (revenue, profit, market share, R&D spending, staffing, etc), Google appears strangely undervalued. When you divide its market capitalization by its actual revenue, the multiple is not even 6 times the revenue. By comparison, BuzzFeed has a multiple of 8.5 times its presumed revenue (the multiple could fall below 6 if its audience remains the same and its projected revenue increases by 50% this year as management suggests.)  Conversely, when using this market cap/revenue metric, the top three (Twitter, Facebook, and even LinkedIn) show strong signs of overvaluation:

355-4
Through this lens, if Wall Street could assign to The New York Times the ratio Silicon Valley grants BuzzFeed (8.5 instead of a paltry 1.4), the Times would be worth about $19bn instead of the current $2.2bn.

Again, there is no doubt that Wall Street would respond enthusiastically to a major shrinkage of NYTCo’s print operations; but regardless of the drag caused by the newspaper itself, the valuation gap is absurdly wide when considering that 75% of BuzzFeed traffic is actually controlled by Facebook, certainly not the most reliably unselfish partner.

As if the above wasn’t enough, a final look confirms the oddity of market valuations. Riding the unabated trust of its investors, BuzzFeed brings three times less money per employee  than The New York Times does (all sources of revenue included this time):

355-5
I leave it to the reader to decide whether this is a bubble that rewards hype and clever marketing, or if the NYT is an unsung investment opportunity.

frederic.filloux@mondaynote.com

image_pdfimage_print