Very Personal Computing

The center of financial gravity in the computing world—the Center of Money—has shifted. No longer directed at the PC, the money pump now gushes full blast at the smartphones market. One of my colleagues, Bob Ackerman, calls smartphones the very personal computers. Measured by size and potential, they’re both smaller and bigger than today’s PCs.

The Math

Consider the numbers: HP, the world’s foremost PC maker, sold $10B of “Personal Systems” in its last reported quarter:

(turn “on” display image in your mail reader
to see the graphics)

Despite their premier position, HP isn’t making much PC money: $500M, 5% Operating Profit. (The full HP Q1 report in PDF can be found here.)

Now let’s turn to Apple’s most recent quarter. Smartphones constituted 40% of the company’s revenue:

When we add up the numbers, we see that the iPhone = Mac + iPods. And this rough calculation “misunderestimates” the weight of the iPhone OS. In the more mature iPod category, the iPod Touch (the iPhone without a phone) grew by 63% year-to-year according to Apple COO Tim Cook in the most recent earnings conference call. (Full Q2 2010 SEC filing available here.) More

The Nexus One Puzzle

Let me state it at the outset: I understand the buzz generated by the Google Phone a.k.a Nexus One. But, the more I look into details and their ramifications, the more I’m puzzled. What exactly is Google trying to do? Make Android, their smartphone OS platform the “Windows” of the new era of really personal computers? Or become a dominant handset player to effectively compete with RIM’s Blackberries or Apple’s iPhones? Or, third possibility, dominate the new world of mobile advertising as it does the “old” universe of Web ads for PCs?

Let’s start with the product.

It’s not really a Google Phone. Its real name is Nexus One and it’s made by HTC, the well-regarded Taiwanese handset maker that produced the first G1 and G2 Android phones — as well as their Sidekick ancestor from Danger. Microsoft bought that company but the CEO, Andy Rubin joined Google as head of the Android team.
But, you’ll object, most cell phones and smartphones are made by one company, a manufacturing subcontractor and branded and sold by another. Apple doesn’t make its iPhones, nor does RIM make any of its Blackberries, to use but two well-known examples. Indeed, the Nexus One is sold by Google at If you already have a Google Checkout account, the purchase process can’t be simpler.

I’m Chrome, You’re Rust

As you know, Google proceeded with the second announcement of its Chrome OS this past week, the first one took place on July 7th, 2009, and the ship date being a year away, we can be sure to have more launch events: one of the first beta, a couple more for applications and partnerships agreements before the Big One, in time for the 2010 Holidays shopping season. So goes our industry and its posturing ways.

Did we learn something new?

On the product itself, not really. On Google’s intentions, official or real, a little bit more or, as you’ll see, perhaps a tad less.

In two past Monday Notes, “Chrome-Plated Linux or Microsoft 2.0” and “Trojan Horse: Web Apps”, we discussed the product itself, Google’s Chrome browser sitting on a Linux-derived OS kernel and, more important, Google’s goal: killing the Microsoft earnings engine with a new generation of mixed-mode productivity applications displacing Office.

As we know, most of Microsoft’s earnings and cash generation (“only” $5B in additional cash for the past year) come from the Windows + Office + Exchange triad.
We know Google’s Web apps such as Documents, Presentation and Spreadsheets. There, for Microsoft, the most dangerous part is something called Google Gears or Offline mode on our PCs and Macs. For example, Gmail can work off-line, with a local copy of your mail; when the connection is restored, everything syncs back with the Cloud. The idea isn’t new, Microsoft’s Outlook has been providing such a dual on-line/off-line arrangement for years, it’s called the Cache mode.
This, meaning dual-mode Google Apps, is the Microsoft Office killer and, as a result, the end of the Microsoft money machine.

In theory. The rest, as we like to joke, is a “mere matter of implementation”.

On that subject, that is how Chrome OS and its applications will do in the marketplace, last week’s disclosures left some of us puzzled.

The OS kernel itself looks well thought out. It is said to boot fast and to be very secure, same thing for the browser, one we’ve seen already on PCs, spartan, a good restart from the feature accumulation we’ve seen on Explorer or even Firefox. More

Droid and Android

Last Friday November 6th, the much-awaited Motorola Droid came out. Powered by the latest version of Google’s smartphone OS, Android 2.0, the new handset is exclusively distributed by Verizon. The carrier backs Motorola’s handset with an aggressive marketing campaign on its website and on TV ads.

For such a “gifted” (Motorola + Verizon + Google) product, the reviews came fast and… furious, that is very opinionated.
One gent rejoiced: Droid, was going to free him from the iPhone – at last! Small detail: as you’ll see by clicking on the link, writing on October 19th, a couple of weeks before the Droid came out, the “reviewer” helpfully admits he hadn’t used the product: “I haven’t seen the phone, but I’ve talked with someone who has worked directly with it”.
That’s why I prefer playing customer, buying the product, getting the everyday usage experience.
More “facts-based” reviews are available from MacWorld, quite positive, Endgadget, very detailed, Business Insider, with a crisp conclusion: If you don’t buy an iPhone, buy a Droid. The very geeky, well connected Gizmodo, comes to the same “if not iPhone then Droid” result. I’d be remiss if I didn’t link a summary of Walt Mossberg’s review, that’s how you know you’re an über-geek, when your reviews are reviewed. See also the Wall Street Journal’s gadgetmeister’s original oracular blessing.
A deeper discussion of OS platforms and voice applications is available here at TechCrunch. [Disclosure: one of the protagonists, British Telecom’s JP Rangaswami, bought Ribbit, an Internet phone company, imagine Skype with an API (Application Programming Interface). The venture firm where I currently work, Allegis Capital, was an investor in Ribbit.] I’ll end the procession with a vigorous critique of Verizon’s punchy ad campaign by Andy Ihnatko, another respected, witty industry columnist.

With this in mind, unlike most opining individuals above, I went to a Verizon store and paid my own money to get a Droid. I did this on the very Droid-day, Friday November 6th, at the University Avenue Verizon store in Palo Alto, around 11:30 am. No line, I waited two minutes for a salesperson, a simple transaction as I already have a Verizon account. The activation turned out to be just a bit more problematic: ‘Too much traffic’ said the sales gent. I left the phone with him, went back to my office one block away. When I returned by lunchtime, everything was in order. Easy enough. More

The “Love Triangle”: Apple, Google and Verizon

At the end of my August 9th Monday Note, “War in the Valley, Apple vs. Google”, I committed to get into Google’s potential weaknesses in this conflict. Since then, things have gotten a tad more complicated.

The enemy of my enemy is my friend.

As discussed last August, Eric Schmidt, Google’s CEO, had to leave Apple’s Board of Directors because, even for a Valley used to “coopetition”, the conflict of interest became really blatant.

Both companies make operating systems for smartphones, the new wave of personal computing. There, we have Android vs. iPhone OS. For the desktop, it’s Chrome OS vs. OS X. Yes, for the desktop: Chrome OS purports to be a Cloud-oriented netbook OS but, as explained in the same August 9th MN, Chrome smuggles very substantial desktop code under the cover of “mere” browser plug-ins, this to let Chrome OS stay useful in the absence of a Net connection. Picasa competes with iPhoto, Chrome, the browser, not the OS, competes with Safari. In July, Apple bought PlaceBase, a mapping company, whose Web site is now reduced to a set of API (Applications Programming Interface) documents, very likely to gain independence from Google Maps.
The more we dig, the more we find places where both companies want to pick the same pockets. If you think about it some more, both companies behave as if they’d want all your attention and all your money. Still ruminating, could it be both companies no longer take Microsoft seriously and, having lost a common enemy must now be at each other’s throat?

Then, we have Verizon and Apple. The “love” between these two has been hot since or, actually, before the very beginning of the iPhone. A few weeks before the inaugural June 30th, 2007 shipment of the JesusPhone, Verizon incautiously circulated the now semi-famous “iWhatever” memo to its troops, dissing the iPhone and its maker. 50 million (we’ll see the latest numbers in about 10 days) iPhones and iPod Touch(es) later, Verizon is more than ever dead set against letting Dear Leader have its way with its business model. To Verizon, AT&T’s fate is anathema: AT&T let Apple “run the table” for digital media sales over its wireless network. Put more crudely, AT&T bent over and became a “dumb pipe”, a wireless ISP in the service of the iTunes content distribution and revenue engine. For this unnatural act, AT&T got a $100 ARPU (Average Revenue Per User, the industry-wide average is about $50) and the use of the iPhone as a lure to steal Verizon subscribers. Verizon can’t stand that thought, they want to keep their birthright, that is a piece of every bit of digital content revenue moving through its network. More

Google OS: Chrome-Plated Linux or Microsoft 2.0?

Here’s what I think its taking place:

Microsoft executives and Board members are no dummies: they know Cloud Computing threatens the Windows + Office + Exchange gold mine, the biggest in our industry’s history. They know the future is Office + Exchange running in dual-mode. From the Cloud when a Net connection is available; locally when the Cloud is out of reach. Everything synched back when the connection is restored.
 Imagine Outlook in Cache Mode, just with a browser, without a local client, generalized to all Office applications.
 Their delicate mission, should they choose to accept it, is to move Office and Exchange into the Cloud, into dual-mode applications. The challenge is to get there before Google Apps gain acceptance but without prematurely cannibalizing the existing Office + Exchange profit stream.

On its side, Google wants to protect the search-based advertising gold mine. To do so, they need to hurt Microsoft’s ability to finance a broad-front attack against Google’s core business. That’s why Google wants to offer an alternative to “Office in the Cloud”: with Microsoft no longer able to dictate prices, the Office profit stream would dry up and so would Microsoft’s ability to finance an attack against Google’s core business.

This, I surmise, is the context for last week’s Google Chrome OS announcement — and for a rumored Microsoft event this coming week.

With this in mind, let’s look at Google’s pronunciamento. More

eBooks and Smartphones

Update: see a presentation of the Kindle2 here.

Another look at an old, but not aging, topic: eBooks. There is visible agitation ahead of Amazon’s expected announcement, probably as you read this note Monday February 9th.  Jeff Bezos is set to announce a new version of the Kindle eBook reader, let’s call it Kindle 2.0. [Since I first drafted this column, bloggers obliged with more details.  February 9th announcement, ships Feb 24th, price $359 (?!).  See here]. By “coincidence”, Google announces a neat eBook reader Web application (as opposed to a native one, to code running on the device) for Android and iPhone.  See it here, it’s almost perfect on the iPhone, with an option to place a neat dedicated icon on the Home screen.  I write almost perfect because, unlike Google Reader, another Google Web app, the top of the book reading app screen seems to be fighting with the always present top of the iPhone screen. FINR (Fixed In Next Revision). More

The end of Motorola?

Once upon a time, Motorola was the king of cell phones. AT&T invented the cellular network, Motorola, already a leader in radio technology, designed the mobile devices and, in 1983, introduces the Dyna-Tac, the first of a long line of clearly superior products, all ending in Tac.  In the late eighties and nineties, MicroTacs and StarTacs were musts for Silicon Valley geeks and MBAs alike.  Motorola’s prowess was, in fact, much wider, ranging from NASA communication equipment to microprocessors (6800, 68000 and PowerPC families) and networking equipment.  The company even made yet another name for itself by inventing the Six Sigma quality improvement processes.  Motorola was a widely admired electronics giant.  Was. More

Android: First Impressions

Let’s forget, for a moment, the sublime irony at the end of the W years, the right-wing neocons’ parting gift: a socialistic, state-owned financial system. Too depressing.
Instead, let’s take a first look at Android, the latest entry in the most dynamic segment of the high-tech industry, smartphones.  (The nice folks at T-Mobile will immediately object, it’s their phone not Google’s, but tell that to users, it’s Android, it’s the Google phone.) More

By the numbers. And what do they mean for our industry

This is the Fall season of business plans for the coming year. The numbers will mean pain for the media industry. Below is a set of facts and figures to keep in mind when considering newspapers, advertising, search, mass collaboration… and coffee.
The newspaper industry’s overall condition
80% gone: Within the last 12 months, the market value of newspapers groups such as Gannett and McClatchy went down by 80% or so. The New York Times lost 70% of its market cap during the same period, closing Friday at $13, lowest in ten years.  Monthly figures are not encouraging either: the New York Times Co.’s revenue (including the International Herald Tribune and the Boston Globe) dropped by 10% from a year earlier. Advertising sales are down by 16% and circulation revenue slipped by 0.5%. Classified (jobs, cars, real-estate) are down 30%.  For Gannett and McClatchy, ad revenue losses are accelerating, approaching the -20% zone for the past twelve months basis. Even News Corp has seen its value erased by 40% since Rupert Murdoch bought the Wall Street Journal. (Alan Mutter is tracking those numbers in his blog)
What it means: two things. More newsrooms layoffs, more consolidations.  For the latter, consolidations, the weightiest — and yet quite unlikely – would be the acquisition of the New York Times by Murdoch. As reported by Michael Wolff in Vanity Fair’s latest issue, Murdoch keeps crunching numbers in contemplation of such a move. (One of the assumptions is merging the back-office operations of the Times and the Wall Street Journal). Europe won’t be spared by massive restructurings, not only slashing the editorial meat (the easy way), but also by repositioning newspapers and changing revenue models.
IPhone & mobile browsing
$1million a day. That’s the gross revenue for iPhone applications sold through the AppStore. Apple reported 60 million downloads of applications for the iPhone, just one month after the opening of the AppStore (source: Wall Street Journal, Aug. 11). Apple is getting “only” 30% of this revenue. Still, this market, potentially $1bn a year, didn’t exist three months ago.
+58%. IPhone browsing has increased by 58% from July to August as reported by Market Share (the 3G version was launched July 11).
What it means: the mobile Internet is finally gaining traction. By the end of the year, several competitors (Nokia, RIM-Blackberry, Android) will join the fray with powerful and user-friendly browsers. We foresee another steep increase in mobile browsing after the holiday season. 2009 could be “the” year for mobile browsing.
140 million users of mobile social networks by 2013. According to ABI Research, the next big thing is mobile access to social rings such as Facebook or MySpace. ABI might be right judging by the number of people who got the Facebook app on their iPhone.  The exact number isn’t known but this app received the highest number of reviews of all iPhone apps, more than 2030 reviews, compared to a couple of hundreds for the next one down the list.
What it means: even though social networking has yet to become a channel for news delivery, it is the medium of choice to reach young people. Facebook, MySpace and others are used by:  85% of online and mobile active users from the “Generation Y” (born after 1979);  71% by Gen X (born  between1965-19789); and 59% by Baby-boomers (born between 1946-1964). (Sources: Pew Research and eMarketer)
24.4 million downloads of the ad-blocking plug-in for Firefox, a 10 times increase in one year. It is by far the most popular add-on this browser. This yields only 5,4 million daily users but their number is growing fast and a rate of half million download per day can’t be ignored. (Source:
What it means: sites should think twice before before inundating their home page with invasive and poorly executed advertising. Those are incentives to use to ad-blocking software.
42% of all online ad spending goes to search ads, and the proportion is growing. According to this eMarketer 2008 estimate, display ads spending will remain flat. (In fact, the percentage share will decline, since the overall online ad market is still growing at a healthy 20% in the US).
What it means: keep that in mind if you are in business plan or website redesign mode (make room for Google Ads rather than for big banners).
Search and News
83% of people reading news on the internet use search engines to find stories of interest, even though they land, most of the times (51%), on a news brand they know (small consolation). The proportion was 70% in 2004, it is reaching a new plateau. But the intensity of search engines use is still growing: in 2004, 19% admitted using a SE three times a week; this proportion is now 31%.
What it means: search engine optimization is definitely a “must” investment. No doubt. A good SEO person in an e-newsroom quickly pays for his salary.  As far as Search Engine Marketing (keywords acquisition) is concerned, this is a different story. Some news sites (such as Le Figaro in France) are racking up great ranking thanks to a massive investment in keywords. Viewed from an Excel perspective, it does work — in the short run. But there is still no model showing how a site that relies heavily on keywords purchases actually keeps its audience. It’s dope, you’re high for a short time.
700 to 1000 Google computers are used to execute a single search (when you hit the enter key). In a split second (113 million results for ‘léonard’ in 17 hundreds of a second), a Google-brewed software called Map Reduce slices up your request, distributes it among its million servers and sends back results. Google invests about $2bn a year in datacenters.  For this, the company buys up land across the world on one condition: as traffic grows, it must accommodate a new building within six months.

What it means: theses numbers are just a glimpse at Google’s unparalleled power. The latest iteration of Google’s drive for more power is the new browser Chrome (see Jean-Louis’ column below). But it is not the last. Google wants to index the world, from 32 million books listed in libraries worldwide to your voice-print if you call its phone directory, or street views (readable text included) of your town. Now, Google must be taken into consideration while planning for any information system.
Long tail true stories
90% of Netflix’s catalog (the American DVD rental store) is rented at least once a month. And nearly two-thirds of the movies are rented thanks to a recommendation generated by the site itself.
MSNBC uses a cookie to keep track of the 16 articles recently read and uses automated text analysis to predict what news story you’ll want to read. (Source: Super crunchers by Ian Ayres)
What it means: social recommendation engines and collaborative filtering works. They help revive inventories, movies or news stories. OK, this bruises the charming notion of serendipity. But keep this in mind: a ten-year old newspaper publishing an average of 50 stories a day built a stock of 150.000 articles to dig in.  Next, consider that online papers have between 3 to 5 pages views per visits.  An optimized delivery system for related stories makes a huge difference in revenue.
10 million subscribers for Safaricom, a Kenyan mobile phone operator. Interestingly, when Vodafone bought a stake in this company back in 2000, the first version of the business plan bet on 400,000 users max. It got 25 times more. Among things other than good service and good pricing, Safaricom encouraged new uses such as transferring money. Working with Barclays, Standard Chartered and Oracle, Safaricom created M-Pesa a mobile phone cash-transfer system, now a quasi-bank. Safaricom is a profitable $1bn company (read its CFO interview in Kenya business daily).
What it means: new (big) businesses can emerge  from unexpected applications based on existing platforms.
Wiki dynamics
1.7 minutes. This is the time it takes to see an obscenity removed by the editors of Wikipedia, according to the MIT. Nature magazine took a sample of 42 scientific entries and found 3 inaccuracies in Encyclopedia Britannica and 4 in Wikipedia. One big difference: on Wiki the new, corrected edition, is just minutes away. (Source: Wikinomics,  by Don Tapscott and Anthony D. Williams).
What it means: the idea of full-of-crap wiki systems is dead. Fact is: due to its contributive structure, Wikipedia is a fairly accurate tool. On a purely statistical basis, editors and publishers should not be afraid of setting up Wiki-information systems for news-related topics. Today’s reluctance lies in our culture, not in the cost column: Wikipedia has only five full time employees.
Water consumption
840 liters of water to produce this article. That’s about the eco-footprint of the six cups of coffee I drank writing this note. Each 125ml cup required 140 liters of water to grow and process the beans. Stunning, isn’t it? And that’s nothing compared to 16.000 liters (yep, sixteen tons of water) to produce one single kilogram of beef. By comparison, the computer industry is downright frugal with only 32 liters to produce a 2gr microchip. How does it relate to the news business. Uh, it doesn’t. ( –FF