Mac Pro: Seymour Cray Would Have Approved

 

As we celebrate 30 years of Macintosh struggles and triumphs, let’s start with a semiserious, unscientific comparison between the original 128K Mac and its dark, polished, brooding descendant, the Mac Pro.

Mac 128KMac Pro

The original 128K Mac was 13.6” high, 9.6” wide, 10.9” deep (35.4 x 24.4 x 26.4 cm) and 16.5 lb (7.5 kg). Today’s Mac Pro is 9.9″ by 6.6″ (25 by 17 cm) and weighs 11 lb (5 kg) — smaller, shorter, and lighter than its ancient progenitor. Open your hand and stretch your fingers wide: The distance from the tip of your pinky to the tip of your thumb is in the 9 to 10 inches range (for most males). This gives you an idea of how astonishingly small the Mac Pro is.

At 7 teraflops, the new Pro’s performance specs are impressive…but what’s even more impressive is how all that computing power is stuffed into such a small package without everything melting down. Look inside the new Mac Pro and you’ll find a Xeon processor, twin AMD FirePro graphics engines, main memory, a solid-state “drive”, driven by 450W of maximum electric power… and all cooled by a single fan. The previous Mac Pro version, at only 2 teraflops, needed eight blowers to keep its GPU happy.

The Mac Pro achieves a level of “computing energy density” that Seymour Cray — the master of finding ways to cool high-performance, tightly packaged systems, and a Mac user himself — would have approved of.

(I’ve long been an admirer of Seymour Cray, ever since the introduction of his company’s first commercial supercomputer, the CDC 6600. In the early nineties, I was a Board member and investor at Cray Inc.  My memories of Seymour would fill an entire Monday Note. If you’re familiar with the name but not the supercomputer genius himself, I can recommend the Wikipedia article; it’s quite well-written.)

During Cray’s era of supercomputing — the 1960’s to early 90’s — processors were discrete, built from separate components. All of these building blocks had to be kept as close to each other as possible in order to stay in sync, to stay within the same “time horizon”. (Grace Hopper’s famous “one nanosecond equals a foot of wire” illustration comes to mind.) However, the faster the electronic module is, the more heat it generates, and when components are packed tightly together, it becomes increasingly difficult to pump out enough heat to avoid a meltdown.

That’s where Cray’s genius expressed itself. Not only could he plot impossibly tight circuit paths to guarantee the same propagation time for all logic signals, he designed these paths in ways that allowed adequate cooling. He sometimes referred to himself, half-seriously, as a good plumber.

(Seymour once told me he could fold a suit, change of shirt, and underwear in his small Delsey briefcase, and thus speed through airports on the way to a fund raising meeting while his investment bankers struggled with their unwieldy Hartmann garment bags…)

I finally met Seymour in December 1985 while I was head of Apple’s Product Development. The Mac Plus project was essentially done and the Mac II and Mac SE projects were also on their way (they would launch in 1987). Having catered to the most urgent tasks, we were looking at a more distant horizon, at ways to leap ahead of everyone else in the personal computer field. We concluded we had to design our own CPU chip, a quad-processor (today we’d call it a “four-core chip”). To do this, we needed a computer that could run the design and simulation software for such an ambitious project, a computer of commensurate capabilities, hence our choice of a Cray X/MP, and the visit to Seymour Cray.

For the design of the chip, the plan was to work with AT&T Microelectronics — not the AT&T we know now, but the home of Bell Labs, the birthplace of the transistor, Unix, the C language, cellular telephony and many other inventions. Our decision to create our own CPU wasn’t universally well-received. The harshest critics cast Apple as a “toy company” that had no business designing its own CPU chip. Others understood the idea but felt we vastly underestimated the technical challenges. Unfortunately, they turned out to be right. AT&T Microelectronics ultimately bailed out of the microprocessor business altogether.

(Given this history, I couldn’t help be amused when critics scoffed at Apple’s decision to acquire P.A. Semiconductor in 2008 and, once again, attempt to design its own microprocessors. Even if the chip could be built, Apple could never compete against the well-established experts in the field… and it would cost Apple a billion dollars, either way. The number was widely off the mark – and knowing Apple’s financials wouldn’t matter anyway. We know what happened: The 64-bit A7 device took the industry by surprise.)

Thirty years after the introduction of the original Mac, the Mac Pro is both different and consistent. It’s not a machine for everyone: If you mostly just use ordinary office productivity apps, an iMac will provide more bang for less buck (which means that, sadly, I don’t qualify as a Mac Pro user). But like the 128K Mac, the Mac Pro is dedicated to our creative side; it serves the folks who produce audio and video content, who run graphics-intensive simulations. As Steve put it so well, the Mac Pro is at the crossroad of technology and liberal arts:

Crossroads

Still, thirty years later, I find the Mac, Pro or “normal” every bit as seductive, promising – and occasionally frustrating – as its now enshrined progenitor.

As a finishing touch, the Mac Pro, like its ancestor, is designed and assembled in the US.

JLG@mondaynote.com

————————–

Postscript. At the risk of spoiling the fun in the impressive Making the all-new Mac Pro video, I wonder about the contrast between the powerful manufacturing operation depicted in the video and the delivery constipation. When I ordered my iMac early October 2013, I was promised delivery in 5-7 business days, a strange echo of of the December 2012 quarter iMac shipments shortfall. The machine arrived five weeks later without explanation or updated forecast. Let’s hope this was due to higher than expected demand, and that Apple’s claim that Mac Pro orders will ship “in March” won’t leave media pros wanting.

Those media assets that are worth nothing

 

The valuation gap between high tech and media companies has never been wider. The erosion  of their revenue model might be the main culprit, but management teams, unions and boards of directors also bear their heavy share of responsibility. 

Two weeks ago, with a transaction that reset the value of printed assets to almost nothing, the French market for newsmagazines collapsed for good. Le Monde acquired 65% of the weekly Le Nouvel Observateur for a mere €13.4m ($18m), at a valuation of €20m ($27m). In fact, thanks to convoluted transaction terms, Le Monde will actually disburse less than €10m for its controlling share.

This number is a hard fact, it confirms the downward spiral of French legacy media values. For a while, rumors have been flying about bids for prominent newsmagazines that would float around €20m. At the same time, Lagardère Groupe (a €7bn media conglomerate based in Paris) put most of its French magazines on the block, saying it would close them down if no buyer showed up. It turned out to be a “good” way to tip potential bidders, they can now sit and wait for prices to come down as balance sheets continue to deteriorate. This brilliant strategy is attributable to Arnaud Lagardère, the son of Jean-Luc Lagardère, the swashbuckling group founder. The heir is fond of tennis, top-models and embarrassing statements. He once said of himself: “Maybe [he] is incompetent, but not dishonest” — definitely right on the first count. Today, Lagardère Groupe faces a negative value for a large part of its magazine portfolio, meaning it is willing to actually pay the buyer willing to acquire a publication.

I discussed this situation with financial analysts in Paris and London. They are unforgivingly critical of the causes for this unprecedented value depletion. For a start, newsweeklies paid the price of deteriorating copy sales (roughly -15% for 2013) and of an anemic advertising market. But the real sin, these analysts point out, is the delay in transforming and restructuring companies. One put it bluntly:  “It is clear there won’t be a single euro left for shareholders who didn’t do their job. Today, every acquisition on the French market is first and foremost weighed down by the need for a costly restructuring, which, in addition, will take three or for times longer than in the UK or elsewhere in Europe”.

The case of Le Nouvel Observateur is the perfect example. This iconic magazine of the French social democrats perfectly fits the picture of a nursing home where residents don’t do much while waiting for the unavoidable end. A thick layer of journalists there are keen to praise the weekly: “You come on a tuesday morning to write your column and by the following thursday, you’re gone. I don’t complain.” Two insiders told me that one of the events that finally pushed the aging owner of the “Nouvel Obs” to sell was the nixing of a timid management proposal: cutting one week of vacation (out of twelve) to save money. Also true, a good third of the staff actually does working hard to produce the magazine week after week. But a digital transformation — comparable, for instance, to what the Atlantic Media Group undertook is the US — is a dream completely out of reach.

From an investor standpoint, buying the Nouvel Observateur means spending from the outset €15m to €20m, just to realign the company with decent working practices. French laws and collective bargaining do not help. In the case of Le Nouvel Observateur, the change in ownership will trigger a “clause of transfer” that will entitle every journalist to leave the company with at least one month of salary per year of employment (raised to 120% of the monthly wage beyond 15 years). For the upper layer of the newsroom that will see their working habits incompatible with a probable productivity realignment, this could be a once-in-a-lifetime opportunity to reward their long and tranquil tenure… at a cost of several million euros for the new owner. The same goes for mandatory buyouts, the customary way to push out people no longer needed. (What is Le Monde buying you might ask? Basically a 500,000 subscribers base, a better bargaining position on the advertising market, add a dose of vanity…)

Again, from a investor perspective, being forced to spend €15m-20m before allocating the first cent to a transformative investment is a severe deterrent. This mechanism also threatens daily newspapers such as Liberation (another icon of the French left wing, where I spent 12 years of my career). Isolated, stuck with a single product, dealing with a 35% decline in its paid circulation last year, a weak advertising base and a discredited management (in a recent internal vote, 90% of staff mistrust the bosses), a negative P&L despite €12m in State subsidies, this company faces a certain death unless it radically transforms itself. Its only way to survive might be to forgo the costly daily print edition, move to a well-crafted weekly distributed in selected urban areas, and extend it to realtime digital coverage on web, mobile and tablet. But such a move would mean yet another downsizing, along with heavy costs. No one is willing to be dragged into such “social Vietnam”, as one of my interlocutors puts it.

Those who advise potential buyers are quick to point out that, if the goal is to take a position in the digital world, their money would better be spent in building a pure player from the ground up. With €20 or 40 million, you can definitely build something powerful in the journalistic field.

The highly publicized startup culture — some would say “ideology” — with its unparalleled mixture of agility and skyrocketing valuations contributes to the demise of legacy medias. Consider the table below. It shows the gap between the valuation of each customer of social networks and legacy media:

305 valuations

For what it’s worth, this comparison illustrates the tremendous loss in value for legacy media. Several actually make (slim) profits while digital companies such as Pinterest or Snapchat don’t even have a revenue model. But as unfair as it sounds, investors — venture capital firms, Wall Street, high tech giants — are betting on two factors: the scalability of current user bases (with factors 10x or 20x being the norm) and also the ability of digital players to swiftly adjust themselves to quickly changing environments. Two qualities unfortunately not associated with legacy media.

frederic.filloux@mondaynote.com

 

Puzzling Over Google’s Nest Acquisition

 

Looking past the glitter, big names, and big money ($3.2B), a deeper look at Google’s last move doesn’t yield a good theory. Perhaps because there isn’t one.

Last week’s Monday Note used the “Basket of Remotes” problem as a proxy for the many challenges to the consumer version of the IoT, the Internet of Things. Automatic discovery, two-way communication, multi-vendor integration, user-interface and network management complexity… until our home devices can talk to each other, until they can report their current states, functions, and failure modes, we’re better off with individual remotes than a confusing — and confused — universal controller..

After reading the Comments section, I thought we could put the topic to rest for a while, perhaps until devices powered by Intel’s very low-power Quark processor start shipping.

Well…

A few hours later, Google announced its $3.2B acquisition (in cash) of Nest, the maker of elegant connected thermostats and, more recently, of Nest Protect smoke and CO alarms. Nest founder Tony Fadell, often referred to as “one of the fathers of the iPod”, takes his band of 100 ex-Apple engineers and joins Google; the Mountain View giant pays a hefty premium, about 10 times Nest’s estimated yearly revenue of $300M.

Why?

Tony Fadell mentioned “scaling challenges” as a reason to sell to Google versus going it alone. He could have raised more money — he was actually ready to close a new round, $150M at a $2B valuation, but chose adoption instead.

Let’s decode scaling challenges. First, the company wants to raise money because profits are too slim to finance growth. Then, management looks at the future and doesn’t like the profit picture. Revenue will grow, but profits will not scale up, meaning today’s meager percentage number will not expand. Hard work for low profits.

(Another line of thought would be the Supply Chain Management scaling challenges, that is the difficulties in running manufacturing contractors in China, distributors and customer support. This doesn’t make sense. Nest’s product line is simple, two products. Running manufacturing contractors isn’t black magic, it is now a well-understood trade. There are even contractors to run contractors, two of my friends do just that for US companies.)

Unsurprisingly, many worry about their privacy. The volume and tone of their comments reveals a growing distrust of of Google. Is Nest’s expertise at connecting the devices in our homes simply a way for the Google to know more about us? What will they do with my energy and time data? In a blog post, Fadell attempts to reassure:

“Will Nest customer data be shared with Google?
Our privacy policy clearly limits the use of customer information to providing and improving Nest’s products and services. We’ve always taken privacy seriously and this will not change.”

What else could Fadell offer besides this perfunctory reassurance?  “[T]his will not change”… until it does. Let’s not forget how so many tech companies change their minds when it suits them. Google is no exception.

This Joy of Tech cartoon neatly summarizes the privacy concern:

Thermostats

The people, the brands, the money provide enough energy to provoke less than thoughtful reactions. A particularly agitated blogger, who can never pass up a rich opportunity to entertain us – and troll for pageviews – starts by arguing that Apple ought to have bought Nest:

“Nest products look like Apple products. Nest products are beloved by people who love Apple products. Nest products are sold in Apple stores.
Nest, in short, looked like a perfect acquisition for Apple, which is struggling to find new product lines to expand into and has a mountain of cash rotting away on its balance sheet with which it could buy things.
[...] Google’s aggressiveness has once again caught Apple snoozing. And now a company that looked to be a perfect future division of Apple is gone for good.”

Let’s slow down. Besides Nest itself, two companies have the best data on Nest’s sales, returns, and customer service problems: Apple and Amazon. Contrary to the “snoozing” allegation, Apple Store activity told Apple exactly the what, the how, and the how much of Nest’s business. According to local VC lore, Nest’s Gross Margin are low and don’t rise much above customer support costs. (You can find a list of Nest’s investors here. Some, like Kleiner Perkins and Google Ventures, have deep links to Google… This reminds many of the YouTube acquisition. Several selling VCs were also Google investors, one sat on Google’s Board. YouTube was bleeding money and Google had to “bridge” it, to loan it money before the transaction closed.)

See also Amazon’s product reviews page; feelings about the Nest thermostat range from enthusiastic to downright negative.

The “Apple ought to have bought Nest because it’s so Apple-like” meme points to an enduring misunderstanding of Apple’s business model. The Cupertino company has one and only one money pump: personal computers, whether in the form of smartphones, tablets, or conventional PCs. Everything else is a supporting player, helping to increase the margins and volume of the main money makers.

A good example is Apple TV: Can it possibly generate real money at $100 a puck? No. But the device expands the ecosystem, and so makes MacBooks, iPads, and iPhones more productive and pleasant. Even the App Store with its billions in revenue counts for little by itself. The Store’s only mission is to make iPhones and iPads more valuable.

With this in mind, what would be the role of an elegant $249 thermostat in Apple’s ecosystem? Would it add more value than an Apple TV does?

We now turn to the $3.2B price tag. The most that Apple has ever paid for an acquisition was $429M (plus 1.5M Apple shares), and that was for… NeXT. An entire operating system that revitalized the Mac. It was a veritable bargain. More recently, in 2012, it acquired AuthenTec for $356M.

With rare exceptions (I can think of one, Quattro Wireless), Apple acquires technologies, not businesses. Even if Apple were in the business of buying businesses, a $300M enterprise such as Nest wouldn’t move the needle. In an Apple that will approach or exceed $200B this calendar year, Nest would represent about .15% of the company’s revenue.

Our blogging seer isn’t finished with the Nest thermostat:

“I was seduced by the sexy design, remote app control, and hyperventilating gadget-site reviews of Nest’s thermostat. So I bought one.”

But, ultimately, he never used the device. Bad user feedback turned him off:

“[…] after hearing of all these problems, I have been too frightened to actually install the Nest I bought. So I don’t know whether it will work or not.”

He was afraid to install his Nest… but Apple should have bought the company?

So, then, why Google? We can walk through some possible reasons.

First, the people. Tony Fadell’s team is justly admired for their design skills. They will come in handy if Google finally gets serious about selling hardware, if it wants to generate new revenue in multiples of $10B (its yearly revenue is approximately $56B now). Of course, this means products other than just thermostats and smoke alarms. It means products that can complement Google’s ad business with its 60% Gross Margin.

Which leads us to a possible second reason: Nest might have a patent portfolio that Google wants to add to its own IP arsenal. Fadell and his team surely have filed many patents.

But… $3.2B worth of IP?

This leaves us with the usual questions about Google’s real business model. So far, it’s even simpler than Apple’s: Advertising produces 115% or more of Google’s profits. Everything else brings the number back down to 100%. Advertising is the only money machine, all other activities are cost centers. Google’s hope is that one of these cost centers will turn into a new money machine of a magnitude comparable to its advertising quasi-monopoly.

On this topic, I once again direct you to Horace Dediu’s blog. In a post titled Google’s Three Ps, Horace takes us through the basics of a business: People, Processes, and Purpose:

“This is the trinity which allows for an understanding of a complex system: the physical, the operational and the guiding principle. The what, the how and the why.”

Later, Horace points to Google’s management reluctance to discuss its Three Ps:

“There is a business in Google but it’s a very obscure topic. The ‘business side’ of the organization is only mentioned briefly in analyst conference calls and the conversation is not conducted with the same team that faces the public. Even then, analysts who should investigate the link between the business and its persona seem swept away by utopian dreams and look where the company suggests they should be looking (mainly the future.)
There are almost no discussions of cost structures (e.g. cost of sales, cost of distribution, operations and research), operating models (divisional, functional or otherwise) or of business models. In fact, the company operates only one business model which was an acquisition, reluctantly adopted.”

As usual — or more than usual in current circumstances — the entire post is worth a meditative read. Especially for its interrogation at the end:

“The trouble lies in that organization also having de-facto control over the online (and hence increasingly offline) lives of more than one billion people. Users, but not customers, of a company whose purpose is undefined. The absence of oversight is one thing, the absence of an understanding of the will of the leadership is quite another. The company becomes an object of faith alone.  Do we believe?”

Looking past the glitter, the elegant product, the smart people, do we believe there is a purpose in the Nest acquisition? Or is Google simply rolling the dice, hoping for an IoT breakthrough?

JLG@mondaynote.com

 

Is Yahoo serious about media?

 

Under Marissa Mayer’s leadership, Yahoo keeps making substantial efforts to become a major news media player. Will a couple of well-know bylines and a shiny mobile app do the job? 

A big Silicon Valley player entering the news business has long been the worst nightmare of legacy publishers. Combining an array of high tech products with the ability to get all the talent money can buy, the Valley giant could be truly disruptive. Ten years ago, the ongoing fantasy was Google or a Yahoo gulping the New York Times or another such big media property. For many reasons — economical as well as cultural ones — it didn’t happen. Yahoo once approached NYT’s columnist Thomas Friedman, offering him a hefty pay raise to become its star writer. But the Times’ globo-pundit quickly backed off when he realized that most of his reputation —  as arguable as it can be (see the cruel Tom Friedman OpEd Generator) — was tied to his employer. Yahoo and others put the issue at rest for years, focusing on core challenges: survival for Yahoo and global domination for Google.

Until now.

Last year, we first witnessed a significant move from the tech galaxy: Jeff Bezos acquired the Washington Post by. As mentioned in the Monday Note (see the Memos To Jeff series), Amazon’s technical firepower will undoubtedly exert a transformative — rather than merely incremental — impact on the Post. Further, I guess this will end up being a welcome stimulus for the entire industry, it really needs a tech kick in its sagging backside.

Then came the Yahoo initiatives. Last fall, Marissa Mayer, snatched three visible talents from the New York Times: Megan Liberman, until then the Times’ deputy news editor, was appointed Yahoo News editor in chief; Mayer also tapped iconic tech columnist David Pogue; a month later, she picked the Times’ chief political correspondent Matt Bai. Finally, on November 25th, Marissa Mayer announced that she hired former TV host Katie Couric as the portal’s “global anchor”.

Here we are: Expect Yahoo to simultaneously enter three major information segments: General audience programming with Katie Couric’s show; political and national issues; and tech coverage (in addition to the classical Food site). Logically, Yahoo started with the tech side. Pogue himself introduced Yahoo Tech on stage at CES last week — and didn’t pass up the opportunity to blast its competitors, mocking their nerdy and obscure language. Interface wise, I found the site pretty clever with its one page, endless scrolling structure — a trend to be noticed —  and articles showcased in about 120 tiles (approx 7 tiles x 18 rows), each expanding as needed and keeping its own URL, which is essential for social sharing uses.

Regardless of David Pogue’s ability to put a the human face on technology, Yahoo Tech is entering an increasingly crowded segment. This month, the Wall Street Journal rolled out WSJD, set to take Walt Mossberg’s and Kara Swisher’s AllThingsD slot, itself reborn as Re/Code (can’t find a geekier name), operated by the same duo. The Re/Code money machine will be the already sold-out Code Conference and its offsprings. WSJD features potent editorial firepower with no less than 50 writers on deck.

Marissa Mayer made no mystery of the fact that her editorial initiatives will be directed at Yahoo’s #1 priority, “the company’s commitment to mobile”. When she landed at Yahoo, Mayer was dismayed to discover that everyone received a Blackberry. Now, the company wants to board every relevant ecosystem, starting with iOS and Android.

That’s what Yahoo does with its interesting NewsDigest App for iOS, launched at CES. As its tech web site does, the mobile app focuses on a series of hot trends. First of all, with its truncated structure, the app borrows a lot from Circa (see a previous Monday Note); it also inherits technology developed by Summly, the startup it acquired in March last year (merely five months after the app’s launch). Summly’s core idea is a news summarizing algorithm. The NewsDigest iteration does actually much more than condensing stories: In a neat interface, it creates context by slicing coverage as follows:
–Image gallery
–Infographics
–Maps
–Stock charts
–Main Twitter feeds
–Video
–Wikipedia
…plus a set of references if you want more.

For a story picked up yesterday, it looks like this:

304_yahoo_news

Evidently, there is room for improvement. Weirdly enough, the app is updated only twice a day and carries less than ten stories. Both elements go against the idea of a smartphone app supposed to update on a permanent and to provide content in an endless stream. Plus, automated as it is, the prose can’t quite compete for a Pulitzer Prize. But, if Yahoo decides to hand the key ingredients over to a competent editorial team, the NewsDigest could become a really good product.

Coming back to this column’s main topic, I believe Yahoo is really up to something in the news sector:
— Yahoo enjoys huge traction in the mobile world: According to Marissa Mayer, among the 800 million people who access Yahoo every month (excluding Tumbler), roughly 400 million reach the portal through their mobile phone. (Despite that number, one irritating thing: Yahoo made its app available to the US AppStore only, ignoring the hundreds millions of English-speaking users on other shores, East and West of Sunnyvale, California.)
— Unlike with Google’s mobile strategy, Yahoo is free from Android’s strategic goals and from a difficult relationship with Apple. It can therefore play the two ecosystems equally, opening the potential for one to gain leverage against the other.
— Even better, by last week acquiring Aviate, an Android customizing interface layer, Yahoo can now create its own branded experience on top of the standard Android interface.
— Assuming it enters the news business for good, Yahoo will act like a tech company, not a legacy media one. In other words, it will first build a sizable audience for its news ecosystem while deliberately ignoring the revenue side as long as needed. Then, it will optimize and datamine this user base to understand in the most granular way what works and what doesn’t. Having successfully gone through those steps, Yahoo will then transform the (hopefully vast) newly acquired audience into a money machine.
This is the way it works nowadays.

frederic.filloux@mondaynote.com

@filloux

 

Internet of Things: The “Basket of Remotes” Problem

 

We count on WiFi and Bluetooth in our homes, but we don’t have appliances that provide self-description or reliable two-way communication. As a result, the Internet of Things for consumers is, in practice, a Basket of Remotes.

Last Friday, I participated in a tweetchat (#ibmceschat) arranged by friends at IBM. We discussed popular CES topics such as Wearables, Personal Data, Cable and Smart TV, and the Internet of Things. (I can’t help but note that Wikipedia’s disambiguation page bravely calls the IoT “a self-configuring wireless network between objects”. As we’ll see, the self-configuring part is still wishful thinking.)

At one point, the combined pressures of high-speed twittering and 140-characters brevity spurred me to blurt this:

Remotes Basket Case

A little bit of background before we rummage through the basket.

In practice, there are two Internets of Things: One version for Industry, and another for Consumers.

The Industrial IoT is alive and well. A gas refinery is a good example: Wired and wireless sensors monitor the environment, data is transmitted to control centers, actuators direct the flow of energy and other activities. And the entire system is managed by IT pros who have the skill, training, and culture — not to mention the staff — to oversee the (literal) myriad unseen devices that control complicated and dangerous processes.

The management of any large corporation’s energy, environment, and safety requires IT professionals whose raison d’être is the mastery of technology. (In my fantasy, I’d eavesdrop on Google’s hypergalactic control center, the corporate Internet of Things that manage the company’s 10 million servers…)

Things aren’t so rosy in the consumer realm.

For consumers, technology should get out of the way — it’s a means, not an end. Consumers don’t have the mindset or training of IT techies, they don’t have the time or focus to build a mental representation of a network of devices, their interactions and failure modes. For example, when my computer connects to the Net, I don’t have to concern myself with the way routers work, how the human-friendly mondaynote.com gets translated into the 78.109.84.91 IP address.

Not so with a home network of IoT objects that connect the heating and cooling systems, security cameras, CO and fire sensors, the washer, dryer, stove, fridge, entertainment devices, and under-the-mattress sleep monitoring pads. This may be an exaggerated example, but even with a small group of objects, how does a normal human configure and manage the network?

For an answer, or lack thereof, we now come back to the Basket of Remotes.

I once visited the home of an engineer who managed software development at an illustrious Silicon Valley company. I was shocked, shocked to see a basket of remotes next to the couch in front of his TV. ‘What? You don’t use a programmable remote to subsume this mess into one elegant device and three of four functions, TV, DVR, VoD, MP3 music?’

‘No, it’s too complicated, too unreliable. Each remote does its separate job well, with an easy mental representation. These dumb devices don’t talk back, there’s no way for a unified remote to ask what state they’re in. So I gave up — I have enough mental puzzles at the office!’

Indeed, so-called “smart” TVs are unable to provide a machine-readable description of the commands they understand (an XML file, also readable by a human, would do). We can’t stand in front of a TV with a “fresh” universal remote – or a smartphone app – touch the Learn button and have the TV wirelessly ship the list of commands it understands…and so on to the next appliance, security system or, if you insist, fridge and toaster.

If an appliance would yield its control and reporting data, an app developer could build a “control center” that would summarize and manage your networked devices. But in the Consumer IoT world, we’re still very far from this desirable state of affairs. A TV can’t even tell a smartphone app if it’s on, what channel it’s tuned to, or which devices is feeding it content. For programmable remotes, it’s easy to get lost as too many TVs don’t even know a command such as Input 2, they only know Next Input. If a human changes the input by walking to the device and pushing a button, the remote is lost. (To say nothing of TVs that don’t have separate On and Off commands, only an On/Off toggle, with the danger of getting out of sync – and no way for the TV to talk back and describe its state…)

Why don’t Consumer Electronics manufacturers provide machine self-description and two-way communication? One possible answer is that they’re engaged in a cost-cutting race to the bottom and thus have no incentive to build more intelligence into their devices. If so, why build unbearably dumb apps in their Smart TVs? (Korean LG Electronics even dug up WebOS for integration into its latest TVs.)

A look at Bang & Olufsen’s Home Integration page might give one hope. The video demo, in B&O’s usual clean luxury style, takes us through from dining to sleep to waking up, opening curtains, making coffee, morning news on TV, and opening the garage door. But it only provides a tightly integrated B&O solution with the need for one or more IT intervention (and it’s expensive — think above $100K for the featured home).

This leaves middle class homes with an unsolved, mixed-vendor Basket of Remotes, a metaphor for the unanswered management challenges in the Consumer IoT space.

JLG@mondaynote.com

@gassee

 

Surviving 2014

 

2014 won’t be an easy year for the digital news business. The good news is the list of mandatory actions is coming into sharper focus. Today, we look at key items.  

The hard part is finding positive signs. My own guess: for the news industry, the excruciating migration from print to digital will get worse before it gets better. If I had to draw a J curve, as economists put it, it would look like this:

303-J-curve

Note that the green list is longer than the red one. But we are still not through with the negative key factors.

For the news media industry, advertising will remain problematic this year. The graph below sums up the sector’s dire situation (a US view that mostly applies to other mature markets):

303 revenue

For 2014, planet remains badly aligned:

There is nothing is sight to correct the huge imbalance between the supply of digital advertising space and advertisers’ demand. Digital media continue to produce millions of new URLs per day that banners simply can’t match. As long as no one is willing to reduce the supply-side, the imbalance is likely to last. This is even more regrettable when considering how the media industry will need to increase its own promotion activities in order to support the diversification that is key to its survival. Practically, if an online publication decided to close 30% of its inventory and assign it to promote its mobile apps, verticals, ancillary products, etc., it would win on both ends. First, it would recreate some scarcity, meaning higher revenue metrics and, second, it would beef up the promotion of its own products. Unfortunately, such an idea won’t last a minute in a short-term budgetary review.
– Thanks to Real-Time Bidding (RTB), publishers actually fuel the price deflation
by auctioning their leftover inventory on various marketplaces. In doing so, they generate some revenue – at the expense of the format’s per unit value (in such auctions, expect no more than 5-10% of nominal prices). In addition this process mechanically applies negative pressure to premium placements because the advertisers will opportunistically purchase a guaranteed and targeted audience wherever available. Even the New York Times will jump on the RTB bandwagon  — “in [its] special way”, it claims. We’ll see.
- Making serious money with mobile ads will remain elusive. For most digital news outlets, mobile users are likely to pass the 50% of the total audience later this year. Unfortunately, the magic advertising formula has yet to be cracked as a mobile user only brings a fraction of the equivalent web revenue. I don’t believe in a miracle ad format that will make the commercial experience “engaging” or “enjoyable”… You don’t “engage” people on the move. You grab, seduce, retain them with repetitive and attractive contents that properly fit their time-wise needs and cognitive availability. Then, if the content is good enough, unique, and able to create a reflexive daily habit — then you might be able to convince a fraction of the audience to pay for it. Note the italics, they point to significant obstacles on the road to the mobile pot of gold.
On mobile, I feel interface quality and selectiveness of functionalities are even less forgiving than on the web: you can’t allow useless stuff on a smartphone screen, there is simply no tolerance for it. All contents being equal, the success of a mobile news product will largely depend on the quality of its interface.

Now let’s turn to the green part, the hopeful one.

Agility. One of the benefits of the continuing newsrooms shrinkage (no, we’re not through, yet) will be news staffs making further gains in agility and polyvalence. As Scott Klein, senior editor for news applications at ProPublica, puts it in the NiemanLab Predictions for 2014 (worth a read):

You can be a good journalist without being able to do lots of things. But every skill you don’t have leaves a whole class of stories out of your reach. And data stories are usually the ones that are hiding in plain sight.

Scraping websites, cleaning data, and querying Excel-breaking data sets are enormously useful ways to get great stories. If you don’t know how to write software to help you acquire and analyze data, there will always be a limit to the size of stories you can get by yourself. And that’s a limit that somebody who competes with you won’t have.

To put it more bluntly, in 2014, thriving newsrooms will share the following characteristics: (a) they will be fastest to inject a critical proportion of new blood in their ranks and (b) they will invest in training to add the skills, mostly tech ones, required by modern journalism.

New Forms of Ads. Digital Advertising is half-way through a decisive transformation. As I wrote here many times, the market will stretch at its extremities; one will end up with more automation (the aforementioned RTB trap) while the other end might be more virtuous. It will be based on tailored promotional operations and Branded Content product lines (see coverage in the Monday Note), both form carrying higher CPMs and better reader acceptance. I’m a true believer in the continuity — not the blend nor the confusion — between journalistic contents and commercial editorial. Brand, companies, have a lot to tell beyond traditional advertising. Most publishers will be slow movers in that field. Even if such new forms of ads turn to be a fad (which I don’t believe), it won’t be a costly mistake to hire a commercial editor flanked by a couple of smart people, a combination of writers and strategic planners (not easy to find, I’ll admit, you might instead consider training existing staff), able to understand and convert client needs into good storytelling aimed at attracting (but not deceiving) readers.

2014 will be the year of media companies realizing they must morph into technology companies — or embrace, one way another, the technologies that guarantee their survival. Consider the following factors: advertising requiring better audience profiling; smart recommendation engines becoming mandatory to retain readers; semantic “footprint” becoming the de rigueur instrument to serve a solvent and loyal readership; journalism thriving through data… These all make the need for tech people able to understand editorial issues more pressing.

As long as those prerequisites are well understood, I’m bullish on the future of digital news.

–frederic.filloux@mondaynote.com
@filloux

The Hybrid Tablet Temptation

 

In no small part, the iPad’s success comes from its uncompromising Do Less To Do More philosophy. Now a reasonably mature product, can the iPad expand its uses without falling into the hybrid PC/tablet trap?

When the iPad came out, almost four years ago, it was immediately misunderstood by industry insiders – and joyously embraced by normal humans. Just Google iPad naysayer for a few nuggets of iPad negativism. Even Google’s CEO, Eric Schmidt, couldn’t avoid the derivative trap: He saw the new object as a mere evolution of an existing one and shrugged off the iPad as a bigger phone. Schmidt should have known better, he had been an Apple director in the days when Jobs believed the two companies were “natural allies”.

I was no wiser. I got my first iPad on launch day and was immediately disappointed. My new tablet wouldn’t let me do the what I did on my MacBook Air – or my tiny EeePC running Windows Xp (not Vista!). For example, writing a Monday Note on an iPad was a practical impossibility – and still is.

I fully accept the personal nature of this view and, further, I don’t buy the media consumption vs. productivity dichotomy Microsoft and its shills (Gartner et al.) tried to foist on us. If by productivity we mean work, work product, earning one’s living, tablets in general and the iPad in particular have more than made the case for their being productivity tools as well as education and entertainment devices.

Still, preparing a mixed media document, even a moderately complex one, irresistibly throws most users back to a conventional PC or laptop. With multiple windows and folders, the PC lets us accumulate text, web pages, spreadsheets and graphics to be distilled, cut and pasted into the intended document.

Microsoft now comes to the rescue. Their hybrid Surface PC/Tablet lets you “consume” media, play games in purely tablet mode – and switch to the comfortable laptop facilities offered by Windows 8. The iPad constricts you to ersatz folders, preventing you to put your document’s building blocks in one place? No problem, the Surface device features a conventional desktop User Interface, familiar folders, comfy Office apps as well as a “modern” tile-based Touch UI. The best of both worlds, skillfully promoted in TV ads promising work and fun rolled into one device.

What’s not to like?

John Kirk, a self-described “recovering attorney”, whose tightly argued and fun columns are always worth reading, has answers. In a post on Tablets Metaphysics – unfortunately behind a paywall – he focuses on the Aristotelian differences between tablets and laptops. Having paid my due$$ to the Techpinions site, I will quote Kirk’s summation [emphasis mine]:

Touch is ACCIDENTAL to a Notebook computer. It’s plastic surgery. It may enhance the usefulness of a Notebook but it doesn’t change the essence of what a Notebook computer is. A keyboard is ACCIDENTAL to a Tablet. It’s plastic surgery. It may enhance the usefulness of a Tablet, but it doesn’t change the essence of what a Tablet is. Further — and this is key — a touch input metaphor and a pixel input metaphor must be wholly different and wholly incompatible with one another. It’s not just that they do not comfortably co-exist within one form factor. It’s also that they do not comfortably co-exist within our minds eye.

In plain words, it’s no accident that tablets and notebooks are distinctly different from one another. On the contrary, their differences — their incompatibilities — are the essence of what makes them what they are.

Microsoft, deeply set in the culture of backwards compatibility that served it so well for so long did the usual thing, it added a tablet layer on top of Windows 7. The result didn’t take the market by storm and appears to have caused the exit of Steve Sinofsky, the Windows czar now happily ensconced at Harvard Business School and a Board Partner with the Andreessen Horowitz venture firm. Many think the $900M Surface RT write-off also contributed to Ballmer’s August 2013 resignation.

Now equipped with hindsight, Apple’s decision to stick to a “pure” tablet looks more inspired than lucky. If we remember that a tablet project preceded the iPhone, only to be set aside for a while, Apple’s “stubborn minimalism”, its refusal to hybridize the iPad might be seen as the result of long experimentation – with more than a dash of Steve Jobs (and Scott Forstall) inflexibility.

Apple’s bet can be summed up thus: MacBooks and iPads have their respective best use cases, they both reap high customer satisfaction scores. Why ruin a good game?

Critics might add: Why sell one device when we can sell two? Apple would rather “force” us to buy two devices in order to maximize revenue. On this, Tim Cook often reminds Wall Street of Apple’s preference for self-cannibalization, for letting its new and less expensive products displace existing ones. Indeed, the iPad keeps cannibalizing laptops, PCs and Macs alike.

All this leaves one question unanswered: Is that it? Will the iPad fundamentals stay the way they have been from day one? Are we going to be thrown back to our notebooks when composing the moderately complex mixed-media documents I earlier referred to? Or will the iPad hardware/software combination become more adept at such uses?

To start, we can eliminate a mixed-mode iOS/Mac device. Flip a switch, it’s an iPad, flip it again, add a keyboard/touchpad and you have a Mac. No contraption allowed. We know where to turn to for that.

Next, a new iOS version allows multiple windows to appear on the iPad screen; folders are no longer separately attached to each app as they are today but lets us store documents from multiple apps in one place. Add a blinking cursor for text and you have… a Mac, or something too close to a Mac but still different. Precisely the reason why that won’t work.

(This might pose the question of an A7 or A8 processor replacing the Intel chip inside a MacBook Air. It can be done – a “mere matter of software” – but how much would it cut from the manufacturing cost? $30 to $50 perhaps. Nice but not game-changing, a question for another Monday Note.)

More modest, evolutionary changes might still be welcome. Earlier this year, Counternotions proposed a slotted clipboard as An interim solution for iOS ‘multitasking‘:

[...] until Apple has a more general solution to multitasking and inter-app navigation, the four-slot clipboard with a visible UI should be announced at WWDC. I believe it would buy Ive another year for a more comprehensive architectural solution, as he’ll likely need it.

This year’s WWDC came and went with the strongest iOS update so far, but no general nor interim solution to the multitasking and inter-app navigation discussed in the post. (Besides  the Counternotions blog, this erudite and enigmatic author also edits counternotions.tumblr.com and can be followed on Twitter as @Kontra.)

A version of the above suggestion could be conceptualized as a floating dropbox to be invoked when needed, hovering above the document worked on. This would not require the recreation of a PC-like windows and desktop UI. Needed components could be extracted from the floating store, dragged and dropped on the work in process.

We’ll have to wait and see if and how Apple evolves the iPad without falling into the hybrid trap.

On even more speculative ground, a recent iPad Air intro video offered a quick glimpse of the Pencil stylus by Fifty-Three, the creators of the well-regarded Paper iPad app. So far, styli haven’t done well on the iPad. Apple only stocks children-oriented devices from Disney and Marvel. Nothing else, in spite of the abundance of such devices offered on Amazon. Perhaps we’ll someday see Apple grant Bill Gates his wish, as recounted by Jobs’ biographer Walter Isaacson:

“I’ve been predicting a tablet with a stylus for many years,” he told me. “I will eventually turn out to be right or be dead.”

Someday, we might see an iPad, larger or not, Pro or not, featuring a screen with more degrees of pressure sensitivity. After seeing David Hockney’s work on iPads at San Francisco’s de Young museum, my hopes are high.

JLG@mondaynote.com

@gassee

Shameless Carriers

 

Wireless carriers used to rule smartphone suppliers. In 2007, Steve Jobs upended such rules. Why can’t the carriers accept the change and enjoy the revenues the iPhone generates for them… and why do tech journalists encourage their whining?

Until about two weeks ago, it seemed that our major wireless carriers had given up whining about the unjust subsidies imposed by a certain overly-confident (they said) handset maker. I hoped that their silence on the topic meant that they had finally realized that the extra revenue (ARPU) generated by these smartphones more than made up for the “subsidy burden”, for the exorbitant amounts of money that (they thought) ended up in the wrong coffers.

Then, I saw this this headline:

Everyone Pays No 5c

The article’s lede promises to reveal secret Apple deals that squeeze rivals and tax you. According to the piece’s “logic”, Apple’s one-sided agreements force carriers to swallow inordinate numbers of iPhones, an arrangement that produces all-around nefarious results. To meet their volume commitments, carriers allocate disproportionate amounts of shelf space to iPhones, thus crowding out competitors. And because the Apple contracts drain their finances, carriers are forced to price other handsets higher than they otherwise would. Hence an “iPhone Tax” that everyone must pay, even when using another brand.

In the same piece, we find dark suggestions that Verizon is threatened by a $12B to $14B shortfall in meeting it’s $23B commitment to purchase Apple handsets. A bit of googling led me to a pair of July 2013 articles (here and here) that back up the prediction by pointing to an anal-ist’s write-up of Verizon’s SEC filings (a medium that, as Regular Monday Note readers know too well, I happily wallow in, especially the always-rich MD&A [Management Discussion and Analysis] section where execs are supposed to help us navigate the filing’s sea of numbers).

I went to Verizon’s SEC Filings page and looked up quarterly and annual reports. The first mention of an Apple agreement appears in the 10-K (annual) filing of February 28th, 2011. Since then, no word whatsoever of any purchase commitment, whether for the iPhone or any other device. If you search for “purchase” and “commitment” in the latest October 2013 SEC document, you’ll only find talk of pension funding and share-repurchase obligations:

Verizon 10-Q Oct 2013 Commitments

One would think that a looming $12B to $14B shortfall — more than a third of Verizon’s $30B quarterly revenue — would be mentioned to shareholders. The worried articles fail to explain Verizon’s silence.

This is both novel and familiar.

The novelty is finding Apple guilty of forcing carriers to raise prices on competitors‘ handsets. I hadn’t seen this angle before.

The familiar is the carriers’ use of journalists who present themselves as independent observers/reporters when, in fact, these practitioners of access journalism carry water for their corporate connections. During a lunch conversation some years ago with a Wall Street Journal repentito, I pointed to a fellatious Microsoft article in his old paper and questioned the excessive reverence: ‘Access, Jean-Louis, access. It’s the price you pay to get the next Ballmer interview… ‘

We saw the process at work in a December 2011 WSJ article titled How the iPhone Zapped Carriers, a devotional piece that makes the key points in the carriers’ incessant complaint:

Carriers do all the grunt work while handset makers and software developers take all the money.
The $400 subsidy per iPhone (and now a similar amount for its best competitors as well) is clearly excessive and must stop.
We need a new business model to account (to monetize) the shift from voice to voracious use of data.

Let’s rewind the tape. Once upon a time, there was The Way of The Carrier. Verizon, Sprint, AT&T treated handsets makers the way a supermarket chain treats yogurt suppliers: We’ll tell you the flavors and quantities we want to carry, we’ll set the delivery schedule, dictate the marketing/branding arrangements, define the return privileges and, of course, we’ll let you know what we want to pay for your product — and when we want to pay it.

Then Steve Jobs hypnotized AT&T’s management. He convinced them to let Apple set the terms for iPhone distribution in exchange for AT&T’s “running the table”. This meant no AT&T fingerprints on Apple’s pristine iPhone, no branding, no independent pricing, no pre-installed crapware — content and software would be downloaded via iTunes, only.

In this arrangement, the iPhone helped AT&T steal customers from its main competitor, Verizon. When Verizon finally signed up with Apple in 2010, they were in a much weaker position than if they had obliged at the very beginning of the Smartphone 2.0 era.

Apple is master of the slow-but-steady, surround-from-below approach. First, sign up a weaker player who will accept Apple’s stringent control in exchange for the opportunity to take business away from the dominant player who balks at Cupertino’s terms. After enough customers have switched to the smaller competitor, the market leader changes its mind and signs up with Apple — on Apple’s terms.

The drill has worked in Japan. The smaller SoftBank signed up with Apple while DoCoMo, Japan’s largest wireless carrier, refused. DoCoMo wanted to install its own software on the iPhone; Apple wouldn’t budge. Subscribers migrated to Softbank in numbers significant enough to change DoCoMo’s mind. The happy ending is DoCoMo and its competitors now appear to sell large numbers of iPhones.

Turning to China, the same maneuver is at work. China Unicom and China Telecom have been selling iPhones with the expected result: They’re taking customers from the giant China Mobile. (There are rumors of an Apple-China Mobile agreement, but it’s unclear when this will happen. We should know soon.)

This only works if – and only if – the iPhone is a great salesman for the carrier. Apple extracts a higher price for its iPhone for two reasons: strong volumes and higher revenue per subscriber compared to other sets. In Horace Dediu’s felicitous words [emphasis mine]:

‘I repeat what I’ve mentioned before: The iPhone is primarily hired as a premium network service salesman. It receives a “commission” for selling a premium service in the form of a premium price. Because it’s so good at it, the premium is quite high.’

Carriers should stop whining; these are robust companies run by intelligent businesspeople with immense resources at their disposal. As explained in previous Monday Notes (here and here), there’s no rational basis for their kvetching. Assuming they bleed an extra $200 when subsidizing an iPhone (or a top Samsung handset, now that the Korean giant followed suit), they only need $8/month in extra subscriber revenue from the “offending” smartphone. And yet here we are: Randall Stephenson, AT&T’s CEO, predicts the end of subsidies because  “wireless operators can no longer afford to suck up the costs of customers’ devices”.

I don’t know if Stephenson is speaking out of cultural deafness or cynicism, but he’s obscuring the point: There is no subsidy. Carriers extend a loan that users pay back as part of the monthly service payment. Like any loan shark, the carrier likes its subscriber to stay indefinitely in debt, to always come back for more, for a new phone and its ever-revolving payments stream.

I was told as much by Verizon. In preparation for this Monday Note, I went to the Palo Alto Verizon store and asked if I could negotiate a lower monthly payment since Verizon doesn’t subsidize my iPhone (for which I had paid full price). Brian, the pit boss, gave me a definite, if not terribly friendly, answer: “No, you should have bought it from us, you would have paid much less (about $400 less) with a 2-year agreement.” My mistake. Verizon wants to be my loan shark.

In the meantime, AT&T has finally followed T-Mobile’s initiative and has unbundled the service cost from the handset. If you pay full price for your smartphone, an AT&T contract will cost you $15 less than with a subsidized phone on a 2-year agreement. This leads one to wonder how long Verizon can keep its current indifferent price structure.

All this leaves carriers with conflicted feelings: They like their iPhone salesman but, like short-sighted bosses who think their top earner makes too much money, they angle for ways to cut commissions down.

On the other side, Apple’s teams must be spending much energy finding ways to keep generating high monthly revenues for their “victims”.

JLG@mondaynote.com

Other carrier news: Sprint, now owned by SoftBank’s Masayoshi Son, is said to be preparing a $20B bid for T-Mobile. We barely avoided excessive concentration when the Department of Justice nixed AT&T’s attempt to acquire T-Mobile; now we again risk a three-way market and its unavoidable collusions. As much as I admire SoftBank’s founder and am happy he took control of Sprint, I hope our regulators won’t facilitate more concentration.

This might be the last Monday Note for 2013. I’ll soon be in Paris where jet-lag and various (legal) substances will conspire to make writing more difficult. If so, Happy Holidays to Monday Note readers and their loved ones. –

The not-so-quaint charm of the email newsletter

 

In spite of today’s obsession with social networks, the email newsletter remains a potent vector for the dissemination of news and for driving traffic back to websites. It comes with one condition, though: reintroducing a human touch. 

Today, producing a newsletter looks so easy: Select RSS feeds from your site, fire a plug-in to extract selected headlines and areas, insert the feeds in a template and send the whole thing via a router interface. Done.

Many sites do it on auto-pilot. And the result of such automated treatment is crude newsletters throwing together a bunch of headlines and snippets. On the surface, the output does reflect the content of a site, but it actually fails to reveal any editorial choice other than the basic home page hierarchy. An opinion piece, an in-depth profile, or an investigative report will be processed in the same mechanical way: headline, nutgraf, a couple of links and nothing further.

Based on my personal use, such work ends up in a special designated folder I created on my main Gmail account for each publication I subscribe to. After a while, I stopped looking at those robotized emails. To make things worse (for the senders), Google does the filing for me — unbeknownst to me, actually. A couple of months ago, Gmail created several tabs, one of them titled “Promotions”, that collect all newsletters, including the ones I willingly subscribed to. Google chooses for me the emails should I read first. Great. I don’t understand why this arbitrary filtering didn’t trigger any outcry, both from subscribers and publishers of legit newsletters (I happen to be both). Needless to say, the opening rate of emails falling into the infamous Promotions folder is significantly altered. All at the pleasure of Google and its algorithms.

Coming back to the newsletter itself, we can detect the beginning of a shift away from robotized email towards the written-by-humans form.

Again, I’ll refer to Quartz, the business site launched a year ago by the Atlantic Media Group (see a previous Monday Note series here). Their email newsletter is called “The Daily Brief”; it is 800-words long, no images, cleverly written and edited, sent to about 45,000 subscribers worldwide, in three editions (US, Asia, Europe and Africa.)

Here is how it looks on mobile devices:

qz phones

The structure is simple: Five main headers containing five to seven items, each summing up what the story you might click on is about. The headers are: “What to watch today”, “While you were sleeping”, “Quartz obsession interlude” (it refers to Quartz’ proprietary revision of the old beat structure), “Matter of Debate”, and “Surprising discoveries”. A good mixture of news, fun, serendipity, thoughtful items. The links do not always send back to qz.com, they can lead anywhere. Sounds pretty simple at first. But, as Quartz editor Kevin Delaney recently told me, the Daily Brief is the result of a thorough editorial process. The email newsletter is touched by no less than four people, including two seasoned editors, Gideon Lichfield, Quartz global news editor who spent 16 years at the Economist, and Adam Pasick, the Asia editor and a 10-year Reuters veteran. Newsrooms who assign junior writers to expedite email newsletters should think again… Quartz is one of the few media I know to actually devote sizable resources for such a “simple” news product (also read this analysis on MailChimp, Quartz email router). But many are now considering the formula: The Wall Street Journal recently launched its “10-Points” email newsletter, built on the same principles as Quartz’s Daily Brief.

wsj-10points2

Sophisticated email newsletters are not new. For years, bloggers affiliated or not with large media organizations have been using them to promote their work and attract readers, gaining significant traction in the process. To name but a few, Andrew Sullivan’s Daily Dish on Politics, or Andrew Ross Sorkin’s Dealbook (part of NYTimes.com) have become full-fledged news brands. I asked Juan Señor, partner at Innovation-Consulting, who worked on many newspaper modernizations, for his opinion on the matter:

Conceptually, our take and that of other newspapers investing in newsletters or news briefings – as we call them – is that you have to move from commodity news to selling intelligence. In an age of abundance you have to sell scarcity. The laws of economics prescribe that the more abundant a product is, the less valuable it is in price. The more volume I have, the less value I can extract from it.’ 

Juan adds two critical factors needed to create a valued product: Timing — sending a news briefing at the right time to maximize its impact — and the multi-device format.

In spite of their age, email newsletters remain a relative primitive stage. Let’s talk first about the user interface. A newsletter begs to be read both on mobiles and on a desktop. You can no longer decide for the reader which screen size h/she will read your stuff on. Responsive design is mandatory. But applying responsive design techniques is way more complicated for newsletters than it is for websites. Even large medias such as the NYT are providing single formats newsletters. (I will humbly admit that, while the Monday Note blog switched to responsive design a while ago, I’m still struggling to do the same for our newsletter.) While I want to send a newsletter from a series of blog posts in a single stroke, I’m still waiting for the WordPress plug-in that will let me do that through a wide range of email routers. In the same fashion, I would welcome add-ons to the most popular word processors that would output good-looking, responsive html emails.

Another thing about email design: It must be conceived to be read offline. I live in a 4G city (Paris) but I still get poor 3G or even EDGE service in too many places (French carriers are said to slow down network speed in order to accelerate the switch to 4G). Therefore, the ability to read complete content offline beyond headlines is, in my view, a basic feature. Going a bit further, I would dream of newsletters pre-loading multiple layers of reading, allowing the reader to jump from the main page to one or two levels down — without requiring a connection.

Deeper improvements to newsletters will come from the usual combination of analytics and semantics. A well-crafted engine will detect what parts of an email newsletter I read the most, what subjects I’m more inclined to click on. Then, the system will adapt the content of my newsletters in order to increase my propensity to open and to engage (i.e. to click on links.) This will make the old-fashioned newsletter an even more powerful website traffic vector.

frederic.filloux@mondaynote.com

 

Microsoft CEO Search: Stalemate

 

The Microsoft CEO succession process appears to be stalled. This is a company with immense human, technical, and financial resources; the tech industry is filled with intelligent, energetic, dedicated candidates. What’s wrong with the matchmaking process?

Blond, Japanese, 25 years old, 15 years experience – and bisexual. This is a caricature, but only barely, of the impossible CEO job specs that executive recruiters circulate when on a mission to replace the head of a large company.

The real list of requirements describes a strategist with a piercing eye for the long term… and daily operational details; a fearless leader of people, willing to inflict pain… but with a warm touch; a strong communicator, a great listener, and an upstanding steward of shareholder interests…and of the environment.

When I gently confront a recruiter friend with the impossibility of finding such a multi-talented android, he gives me the Gallic Shrug: “It’s the client, you know. They’re anxious, they don’t know what they want. So, to tranquilize their Board, we throw everything in.”

I ask the distinguished headhunter what character flaws will be tolerated in a candidate. The query is met with incomprehension: “What? No, no, we can’t have character flaws; this situation requires impeccable credentials.” And perfect teeth, one assumes.

Still in a caustic mood, I prod the gent to picture himself driving to Skyline Boulevard and walking to the top of Borel Hill, a great place to meditate. Turning away from the hills that gently roll down to the Pacific, he faces the Valley. Can he sit, quiet his mind, and visualize the gentle crowd of pristine CEOs down there?

No. He’ll see a herd of flawed men and a few women who regularly exhibit unpleasant character traits; who abuse people, facts, and furniture; and who are yet successful and admired. Some are even liked. There are no Mother Theresas, only Larry Ellisons and Marisa Mayers, to say nothing of our dearly departed Steve Jobs. (Actually, the diminutive Albanian nun was said to have had a fiery temper and, perhaps, wasn’t so saintly after all.)

For a large, established company, having to use an executive recruiter to find its next CEO carries a profoundly bad aroma. It means that the directors failed at one of their most important duties: succession planning. Behind this first failure, a second one lurks: The Board probably gave the previous CEO free rein to promote and fire subordinates in a way that prevented successors from emerging.

Is this the picture at Microsoft? Is the protracted search for Steve Ballmer’s successor yet another sign of the Board’s dysfunction? For years, Microsoft directors watched Ballmer swing and miss at one significant product wave after another. They sat by and did nothing as he lost key executives. Finally, in January of this year, Board member John Thompson  broke the bad charm and prodded Ballmer to accelerate the company’s strategic evolution, a conversation that led to the announcement, in August, of Ballmer’s “mutually agreed” departure.

Having badly and repeatedly misjudged the company’s business and its CEO, is the Board looking for an impossibly “well-rounded” candidate: the man or woman who can draw the sword from the stone, someone with a heart and mind pure enough to put the company back on track?

For some time now, we’ve been hearing rumors that Ford’s current CEO, Alan Mulally,  could become Microsoft’s new CEO. Mulally is well-respected for his turnaround experience: Since 2006, he’s been busy reviving the family-controlled Ford, the only Detroit automaker that didn’t need (or take) bailout money. Before Ford, Mulally spent 37 years in engineering and executive management positions at Boeing, where he rubbed elbows with Microsoft royalty in Seattle.

As the rumor has it, Mulally would be appointed as a transitional leader whose main charge would be to groom one of Microsoft’s internal candidates and then step aside as he or she assumes the throne. Will it be (the rumor continues) Satya Nadella, Exec VP of  Cloud and Enterprise activities? Or former Skype CEO Tony Bates, now a post-acquisition Microsoftian? Both are highly regarded inside and outside the company.

(I’m surprised there aren’t more internal candidates. Tech pilgrim Stephen Elop is sometimes mentioned, but I don’t see him in the running. Elop has served his purpose and is back in Redmond — some say he never really left — after a roundtrip to Finland during which he Osborned Nokia, thus lowering the price of acquisition by his former and again employer.)

On the surface, this sounds like an ideal arrangement.

And yet…

For all his intellectual and political acumen, his people and communication skills, Mulally possesses no domain knowledge. He has none of the bad and good experiences that would help him understand the killer details as well as the strategic insights that are needed to run Microsoft — insights that, in retrospect, Ballmer lacked.

But, you’ll say, this is no problem; he can rely on the CEO-in-waiting to evaluate situations for him and make recommendations. No. Mulally would have no way to really weigh the pros and cons outside of the streamlined charts in a fair and balanced PowerPoint presentation.

In addition, the grooming process would prolong the company’s confusing interregnum. The people who have to perform actual work at Microsoft will continue to wonder what will happen to the party line du jour when the “real” CEO finally assumes power. The uncertainty discourages risk-taking and exacerbates politics — who knows who’ll come in tomorrow and reverse course?

Fortunately, the Mulally proposition no longer seems likely. The latest set of rumors have Mulally staying at Ford until the end of 2014. Let’s hope they’re right. Wall Street seems to think so… and expressed its disappointment: After regularly climbing for weeks, Microsoft shares dropped by 2.4% on Thursday, Dec 5th, after Mulally declared that he wouldn’t jump ship.

So where does Microsoft turn, and why are they taking so long? Once you put aside the Mr./Ms. Perfect fantasy, there’s no dearth of capable executives with the brains and guts to run Microsoft. These are people who already run large corporations, or are next-in-line to do so. Exec recruiters worth the pound of flesh they get for their services have e-Rolodexes full of such people — some inside the company itself.

Now, place yourself inside the heart and mind of this intelligent candidate:

‘Do I want to work with that Board? In particular, do I want Bill Gates and his pal Steve Ballmer hovering over everything I do? I know I’ll have to make unpopular decisions and upset more than a few people. What’s in it for me – and for Microsoft – in a situation where unhappy members of the old guard would be tempted to go over my head and whine to Bill and Steve? How long would I last before I get fired or, worse, neutered and lose my mind?’

Consider it a litmus test: Any candidate willing to accept this road to failure is automatically disqualified as being too weak. A worthy contender makes it clear that he or she needs an unfettered mandate with no Office Of The Second Guessing in the back of the boardroom. Bill and Steve would have to go — but the Old Duo doesn’t want to leave.

It’s a stalemate…and that’s the most likely explanation for the protracted recruitment process.

We’ll soon know where Microsoft’s Board stands. Will it favor a truly independent CEO or will it cling to its past sins — and sinners?

Or, as a Valley wag asks: Which elephantine gestation will end first, that of Microsoft’s new CEO, or Apple’s equally well-rounded Mac Pro?

JLG@mondaynote.com