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Archive for the ‘apple’ Category

Virtualization Made Mac What it is Today

Posted by Bob Warfield on February 18, 2011

Sam Diaz is writing about Apple’s latest Draconian App Store subscription policies and how they’re not a bad thing.  Forrester CEO George Colony says Apple is headed for a repeat of their defeat at the hands of Windows with these policies:

We know what happened — the world has had to use a lowest-common denominator PC operating system for decades, with excursions into wonderful places like Vista. This time around, Apple’s hostile position could result in a 2014 App Internet market that looks something like this: 80% Android, 10% Apple, 10% Other.

Colony’s concern is that this is the formative time for app consumption and app markets.  It’s too early to exert a monopolist’s egregious tax on those markets.  People aren’t locked in enough yet.

Diaz has a counter-argument:

Here’s the thing: Colony says that like it’s a bad thing. Say what you will about Apple’s share of the PC market – but the fact is that Apple’s lineup of Mac computers are far superior to anything that’s running Windows. And increasingly, quarter after quarter, the company notes that its share is growing and that about half of the Mac purchases in a single quarter have been by consumers who switched from Windows.

My problem with Sam’s argument is that none of that shift started happening until Virtualization meant you could have your Mac cake and eat some Windows software too.  It isn’t really clear they’re leaving the door open to do that with their App Store policies.  This isn’t about not only having Apple wonderfulness PLUS everything else in the world when Apple doesn’t happen to have the right answer.  It’s about ONLY having the Apple wonderfulness and being glad of it, dammit.

It’s going to be interesting to see what happens come the June 30 deadline for compliance with the new policies.  We will no doubt get hints along the way.  As an iPad user who set aside his Kindle but still constantly reads using the iPad’s Kindle app, I’m keenly interested.

During his last go-round with book publishers and Amazon, Steve Jobs largely managed to get book prices on Kindle raised.  That may turn out to be the result here too.  Kindle charges a “publishing expense” fee back to the book publishers.  So far it covers the wireless costs for Kindle’s built-in Sprint modem.  Perhaps Amazon will decide to roll the iPad 30% into that fee, making books sold there dramatically less profitable for publishers.  There would be a certain poetic justice in that.  The publishers leaned on Jobs to break one walled garden only to see another spring up immediately in its place.  What are they going to do about this one?

 

 

 

 

 

Posted in amazon, apple, business, cloud, Marketing, mobile | 1 Comment »

Microsoft’s Extraordinary Quarter, Valuations, and “Who Owns the Cash?”

Posted by Bob Warfield on October 29, 2010

As usual, there is another fascinating discussion underway among the Enterprise Irregulars.  And again, as so often happens, there are related discussions.  In this case we have a discussion about whether there are any companies who’ve reached $100M in revenue with 100 employees, and one about Microsoft’s recent quarter, its cash position, relative valuations versus companies like Apple, and the idea that Microsoft’s cash belongs to shareholders.  It’s fascinating to watch these threads come together serendipitously, and then extract further meaning from the gestalt. 

Gordon Gecko at Teldar Paper

Shareholder Gordon Gecko

Let’s start with the $100M/100 employee thought.  Are there any such companies?  Perhaps, but they are certainly private and they are likely insanely profitable.  The profitability piece means there would be a tendency to spend the profits to reduce risk (and what won’t be said, make everyone’s life easier) and explore new growth possibilities.
 
I think it is very likely doable to build such a company, just that few are motivated to do it and would perceive such a model as very high risk.  I also think some of the technologies you need to do it may not have existed until recently.  The alternative to technology is an unfair market advantage as evidenced by gross levels of profitability.  Let’s talk about each.
 
Go through the laundry list of $100M businesses, and ask yourself what are the characteristics that drive headcount that have to be minimized:
 
–  Leveraged marketing and sales–no feet on the street.  So it’s marketing driven, whatever it is, and it’s either sold online or through a dealer channel that doesn’t rake too much off so you can transfer cost to the channel.  But supporting the channel can drive up heads, so you almost would need something they have no choice but to carry.  That leads to an idea that is both an unfairly strong brand and is also something of a monopoly.  Not sure what qualifies today, but back in the day DOS would have been a great example.  More on that in a second.
 
–  Customer Service:  Amazing how many heads this drives.  You need a product that either requires very little service or a Customer Service methodology that produces very little cost (Social CRM can reduce your costs to 1/3 of what they were, been there, done that). 
 
–  Product:  Platforms and on-prem drive spurious headcount.  At Callidus, we estimated we could get by with 40% fewer heads if we only had to support the current release on 1 platform and we would have no loss of innovation.  I will go further.  The optimal number of developers is a maximum of 10.  Any more than that and your team loses efficiency due to communication loss.  Give me 10, and I can build almost any single product you can imagine in 12-18 months or less.  Been there, done that.  Quattro Pro kept up with 10 developers against Lotus and MSFT teams of 100 or more.  However, they do have to be the RIGHT 10 developers.  I could write a long post on that, but will spare you here.  To get more than 10 working efficiently, you need a loosely coupled application suite, where each module has its own 10 and the communication requirements between them are modest.
 
–  Manufacturing and Fulfillment:  Clearly (well, maybe not, I guess I can imagine some cases, sort of) it will be hard to get there with physical goods.  You can outsource it all.  Could a Dell back in the day do $100M with 100 and all the right outsourcing?  Maybe, but we are speaking of software here.
 
The Internet and technologies like Social CRM make some of this possible.  The alternate model, which is a product with ridiculous margins and brand ubiquity to drive unbridled demand, has also existed.  Back in my Borland days, we used to envy MSFT having a $250-300K ratio of revenue per employee.  We knew that the profitability was very uneven and that the monopoly DOS franchise financed a lot of it.  I have no doubt that DOS could’ve been cut out and scaled to a $1M per employee business.  This is probably true of some Google businesses too.  But, these companies never do that.  They finance the future and they reduce risk by spending the profits today.

Now, one of my esteemed colleagues mentioned that it would be a terrible investment decision for a company with such margins not to embark on a plan of ambitious investment.  That is certainly the conventional wisdom, but the track record says otherwise.  The majority of M&A transactions started out with just such a thesis and wound up net destroying shareholder value.  I would venture to say this is probably also the case for large companies trying to start new businesses.  It is rare that they can get them up to the levels of performance of the core franchise, and hence they are dilutive.  This was certainly true for Oracle and its apps business relative to the DB business, for example.

It will be interesting to see whether today’s technologies and Internet allow some of the bootstrap players who’ve already gotten quite large to get there.  Their motivations as “lifestyle” companies (and I don’t say that like it’s a bad thing), might lead them not to care about this “invest to grow” imperative.  I’m speaking of companies like a SmugMug or a 37Signals.  I suspect their revenue/employee metrics are pretty close already even if the absolute revenue numbers are not.  You don’t have to read many interviews with the SmugMuggers to realize they’re in love with photography and their customers and are unlikely to move too far afield of that.

Now we see pretty clearly the link between the $100M/100 and the Microsoft quarter.  Both are examples of what I will call “unfair profitability.”  These are profits born not just of good ideas and good execution, but of some sort of lock-in effect that inhibits competition over long enough horizons to build such franchises even though the profits are so huge that competitors should be homing on it like heat seeking missiles.  Coincidentally (can there be so many discussion coincidences, or is there more at work in the Universe than we know?), there is a fabulous article by Jim Stogdill on this very issue of unfair profits called Points of Control = Rents.  Worth a read for a good discussion of who has unfair profits in our world today and how did they get them. 

We’re on the downslope now folks, so bear with me. 

Next up for discussion is the statement that the disparity in PE multiples between AAPL and MSFT is crazy given the margins of the two companies and the quarter MSFT just had.  My response is that the disparity in multiples is not crazy at all.  Take your Yahoo stock charts and overlay 5 year performance of MSFT and AAPL:

AAPL vs MSFT Share Price

There should be no doubt in your mind why AAPL gets a higher valuation.  In fact, the contrast is so stark you may wonder why AAPL doesn’t have an even bigger premium.

Inevitably, Warren Buffet’s name was invoked as was the question of whether one could invest in MSFT for the long haul.  In essence, was MSFT so undervalued as to be an ideal Buffet Tech Stock?  But if you’re familiar with Buffet’s investment thesis, MSFT is not really a Buffet business.  Value is not the only part of the Buffet/Graham equation.  Value is the insurance in case the rest of your thesis fails and there has to be has to be a rest of the thesis.  In particular, for Buffet, there has to be reason to believe earnings growth can go on forever at a rate that amounts to an interesting rate of return.  Industries with disruptive tendencies are not good bets because that growth is not reliable in the long haul.  Hence Buffet will declare self-deprecatingly that he won’t invest in tech because he doesn’t understand it.  What he means is he can’t predict when then disruptions will happen, and they happen often enough he can’t hold for a sufficiently long horizon to be interested.
Lastly, we get to the idea that companies have a responsibility to distribute excess cash because the cash belongs to shareholders.  The idea that the cash belongs to shareholders is also an interesting one.  It’s become something of a cliche, in the Gorden Gecko at Teldar Paper Shareholder meeting-esque sort of sense. 
 
If shareholders really owned the cash or even the company, they could call up and have the cash sent over.  Companies can trade below their cash value, and it isn’t even all that uncommon for them to do so.  If shareholders owned the cash, they would call up and have it sent over from one of those companies.  If you had a company that had delivered the kind of equity returns that Balmer’s Microsoft has (flat for so long that it has been called a “Value Trap” by one of our EI’s), I suspect you would also like to have a lot more cash sent over.  But you don’t own the company or the cash, so you don’t control the cash, despite it feeling good to claim otherwise.  What you own is a piece of paper that grants you certain shareholder rights.  That’s a steed of a different hue.  There are lots of people in the “That cash belongs to us” food chain that are much closer to being able to pick up the phone and have the cash sent over than the poor common shareholder.
 
Ask any VC what terms have to be in the deal for the preferred to be able to pick up the phone and have the cash sent over.  Entrepreneurs should make no mistake, it is possible for those guys to own the company and the cash.  In fact it is very likely for that to happen.  I have even personally seen a case where a firm picked up the phone, had the round they’d just put in sent back, and closed the doors.
 
Ask your banker what terms have to be in their note such that when those provisions are not met, they don’t even have to pick up the phone.  They can sweep the cash.  It was a big concern among startups that this was going to happen a lot very recently.
 
These people and many others are closer to “owning the cash” than common shareholders.
 
Common shareholders are not powerless, just almost powerless so that it takes ridiculous numbers of them working together to have a voice.  And even then, what can they really do?  They can jawbone about it.  They can sell their shares.  They can launch proxy fights, which the company will respond to with all sorts of machinery that is efficient at blocking hostile takeovers.  They can launch shareholder suits about failures of fiduciary responsibility.  Yada, yada.  There has to be an awful lot at stake to get enough of them mobilized to go through any of these processes with much chance of success.  Having too much cash on hand is not something that will rise to that occasion.  It’s not enough to mobilize the troops.  If nothing else, the processes are lengthy, the cash is liquid, and quarters are fragile.  If you want to get an envelope full of cash out of a car whose ownership is being contested, you don’t set fire to car to increase your chances.  There has to be some malfeasance, some sense that management is doing something really grossly unfair to the common and well outside their fiduciary responsibility.  We’ve all seen enough shenanigans to know that “grossly unfair” is a very high bar indeed.
 
In the end of the day, companies that can establish unfair points of control allow them to create artificial scarcity and milk the consumer.  Network effects are the most popular Lock-In 2.0 for the Web World, though they existed in the form of available apps and hardware platforms back in the DOS days, the CP/M days before that, and all throughout the mini and mainframe eras.  Today’s buying marketplace is only slightly more canny in their ability to see the garden wall being built and get upset with the gardener about it.  If they see it in time, they try to steer clear.  Open Source has become powerful for exactly that reason.  I love the Red Hat quote, “We love to turn a billion dollar business into a couple of hundred million dollar business.”
 
The prior software generation also had an “implementation rent.”  If you just spent $100M to get SAP live, even if the whole experience was terrible, and the end result only just tolerable, it will be a long long time before you consider undertaking anything remotely like that again.  Most careers won’t survive it.  I vividly remember asking a telco senior exec one time how she thought about the ROI of billing systems.  She laughed and told me there was no ROI.  Nobody thinks about that ROI.  They only think about whether their career can survive the process of replacing a billing system should they be unlucky enough that it comes up on their watch.  SaaS companies road into some of these situations with the idea they would be so much easier to install they would defeat the “implementation rent.”  Some of them are encountering the penalty for that largesse in the form of unreasonably high churn.  If it was easy to put it in, it is easy to take it out as well.
 
So if you are an investor, don’t predicate your success on ownership of the cash.  Rather, choose companies that have unfair points of control that allow them to be unfairly profitable in markets that are growing faster than the S&P 500.  Make sure those unfair points of control and that market growth can continue unimpeded for as far as the eye can see.  Beware disruption.  Does AAPL warrant a higher multiple than MSFT?
 
Yes, despite the current extraordinary MSFT quarter, it seems the market favors Steve  Jobs’ ability to create these unfair points of control in fast growing long tenure markets over the apparent failure of Microsoft to add any new ones and the evidence their old points of control and markets are at risk.

Posted in apple, business, saas, strategy | 1 Comment »

Android is so Open, it got Flash Back on the iPhone

Posted by Bob Warfield on September 9, 2010

How ironic.  On the same day that MG Seigler was penning one of his characteristically snarky posts (snark is one of the ways Techcrunch pursues its Follower Economy) about how Android isn’t really open, Apple announces the return of Flash to the iWorld.

Adobe’s stock price is cooking this morning as a result (I wonder if 10% of Adobe’s revenue is even traceable to Mobile Flash? Maybe), and I have to admit, being the Adobe Flex fanboy that I am, I’m chortling over my morning cafe mocha too!

A couple of things to talk about on this news.

First, why do I award credit for this to Android?  Peeps, come on–Steve Jobs didn’t just wake up from his hissy fit about Flash (thanks for that link, Larry!) and decide, “Oh darn, I was wrong.”  No, no, no, not happening.  Something grabbed Steve Jobs by the throat and shook him right out of his reality distortion field.  That something was competition.  Not only has Android been selling extremely well, but the Bastiches have even been using Apple’s, “Hey, we’re not the Man, we’re Cool“, marketing tactics.  Dude, what’s next, Android thinking differently (I can’t see Google having the populist moxie to get that grammar wrong the way Apple did, all those PhD nerds just couldn’t handle it).

Competition is what forced this change, MG Seigler.  Android’s “We’re more open than open can be” pitch was working.  In fact, this Apple announcement sweeps away most of what one would’ve argued were barriers to openness.  It isn’t just Flash that benefits.  Besides which, a heck of a lot of people love their iDevices (3 out of 4 of our whole family have iPhones and we share an iPad) but want Flash access.  Forget movies, they can change.  I can’t even see the stock graphs on Yahoo because they’re Flash.

Gordon Gecko was wrong when he said, “Greed is good.”  It pains me as a person often described as being slightly to the right of Attila the Hun to reach that realization.  What Gordon should have said was this:

Competition, for lack of a better word, is good. Competition is right, Competition works. Competition clarifies, cuts through, and captures the essence of the evolutionary spirit. Competition, in all of its forms; Competition for life, for money, for love, knowledge has marked the upward surge of mankind.

And here, it has let Flash back into the iWorld.  Good job, Android!

Second, I want to take a few lines to talk about why I think Flash is so important.  Much has been made of how the LAMP stack has transformed web development.  Companies can now create products without requiring millions of dollars in R&D expense.  But the LAMP stack primarily benefit the back-end, in other words the server-side.  What about the client?  What is the equivalent of a LAMP stack for client development?  Unless you’re a tremendous fan of 3270 green screen UI, and I know some are even in this day and age, you need the equivalent of the LAMP stack to efficiently product great clients.  Here is the secret:  Flash is the LAMP stack of UI development!  Yes, there are some Flash wannabes out there, specifically Silverlight.  So what?  Microsoft would love for .NET to be the LAMP alternative too.  Flash is it for these simple reasons:

–  It is ubiquitious.  Aside from the iWorld, and that changes today, the vast majority of the world has already installed Flash and it runs in their browsers.  That’s 99.3% penetration in mature markets.  Essentially, everyone has it.

–  It is a write once run anywhere tool that really works.  You write your Flash code and all 99.3% of users can run it without you needing to give it another thought. 

–  AJAX and Javascript, the alternative, is riddled with browser dependencies.  Any dev team that has tried to get even simple rich UI like a Wiki-style rich text editor to work understands this.  It’s a huge overhead to keep up with all of these browser dependencies, and a constantly moving target.  With Flash, Adobe does that work for you so you can get on with building your app.

–  Flash has amazing graphical power and Job’s protestations to the contrary is actually quite fast.  People are writing 3D games in it, for example.

–  Flash can transcend the browser to create apps via AIR, and as we’ve discovered in the mobile world, apps are where it’s at.  Google used to offer Gears for this purpose, but pulled the plug on it.  Silverlight?  Hey, competition is good, bring it.  But they aren’t really there yet.

This all adds up to something that’s very important to the ongoing evolution of User Experience across all devices.  Simply put, Flash deserves to keep going and to be available on all those devices.  Thank you, Steve Jobs, for relenting, even if it took a gun to your head.  Adobe: now is not the time to rest on your Laurels.  There are some issues here and there in the House of Flash that you still need to attend to.

Posted in apple, platforms, ria, software development, strategy, user interface | 6 Comments »

What Apple TV Should Have Been

Posted by Bob Warfield on September 2, 2010

I read with interest Don MacAskill’s post about the disappointment in Apple TV over at SmugMug.  He listed a bunch of limitations that boiled down to their being no open apps capability.  It’s all closed:

–  The only photo share is Flickr.  No Facebook or SmugMug photos and videos.

–  You get ABC and Fox for TV, over and out.  BTW, Amazon already has those too, big deal.

He goes on, the post is worth a read.  And, as he starts out, they’re all Apple Fan Boys over there.

I couldn’t resist leaving the following comment paraphrasing Google:

It’s almost like Apple TV has a draconian future, where one man, one company, and one carrier controls its future.

Oh wait, my bad.  That’s the iPhone and iPad.  Not Apple TV.

Carry on!

BW

Seriously silly business.  The control just keeps ratcheting up to more and more unnecessary levels.

Posted in apple | Leave a Comment »

Android: The Long Term Bet

Posted by Bob Warfield on June 24, 2010

Fascinating news from a recent Appcelerator survey of 2700 mobile developers:

– The long term bet among these developers is Android

– Apple is a short term bet, mostly because it’s a hot platform now.

– The reason is open-ness and cross-platform portability

The really interesting thing is that a lot of Apple’s problems are self-inflicted.  They could be a lot more open and trustworthy, but they’re not acting like Switzerland

It isn’t too late for them to change, but it looks like they have a lot of trust to rebuild.  Is Jobs capable of listening?

Adobe, this is good news for you too.  Your Flash/Flex platform offers the best cross-platform compatibility out there, except that it doesn’t run on Apple’s platforms.  Follow my 7-step plan and prevail as Android comes into its own.

Posted in apple, strategy | 3 Comments »

Adobe: 7 Things You Should Do With Flash/Flex

Posted by Bob Warfield on June 21, 2010

Dear Adobe:

Apple has started the anti-Flash/Flex snowball rolling, and it is getting steadily bigger.  It’s a perfect storm, because they’ve got the platforms that are perfectly suited to Flash, their platforms are wildly popular, and your faithful audience desperately wants to be there.  But that’s not all.  They didn’t just prohibit Flash, they have called a lot of attention to a credible competitor: HTML5.  I know, I know.  It will be a long time before HTML5 is everything Flash is today.  It’s not even close right now, and a lot of people have conflated media delivery with Rich User Experience in ways that unfairly diminish your platform.  Get over it.  Economic pressures (aka naked greed and envy to be on these precious Apple platforms) have created a hill of growing height, and the water that is developer mindshare is rapidly flowing down that hill and away from Flash.

What can you do?

Lame ads won’t help.  Complaining about it won’t help.  Technology and innovation can help.  If you move quickly, and you have some things in your camp that buy you time (Android), you can still salvage the situation.

Here is what it takes:

1.  Absolute Single Minded Focus on Performance and Stability

People have concluded your platform is buggy and slow.  It doesn’t matter if you agree or not, the customer is always right.  When you hear McAskill at Smugmug and Adler at Scribd railing about your stuff, it’s time to move from denial to acceptance.  Their voices and those of many others are too loud and being spread too efficiently to pretend it isn’t so.  It’s past time to deal with it, in fact.  You need to embrace this problem, own it, and deliver the solution as quickly as possible.  The solutions can take many forms.  My recommendations are part of this post, and this point is more about declaring a focus both publicly and internally and owning the problem.  You don’t have to say, “We agree, our platform is slow and buggy.”  You do have to say:

“We have a great platform and our customers have told us to make it dramatically faster and more stable.  That’s our #1 priority, and here’s how we plan to do it…”

2.  Stability:  Quality + Security.  Get a Czar.

I’ll define Stability as consisting of equal parts Quality and Security.  Your customers are finding too many bugs.  There are too many public security issues.  This is happening at a time when you can ill afford it.  Get a Czar nominated and equipped to deal with this area.  Apportion your development cycles between performance and stability, give the stability cycles to the Czar and just do it.  The Czar needs to rapidly do the following:

– Identify the most egregious problems you have missed that are troubling your customers.  Look outwardly not inwardly to find them.  Fix that first tranche rapidly.

– Upgrade your automated testing so regressions are under control.

– Put in place a culture of quality that ensures that every single release is better than the last one.

– Investigate whether some of the quality issues don’t stem from education issues.  If customers are approaching it wrong, or don’t know how things work, they may be seeing behavior that is exactly what’s expected, but that looks to them like a bug.  Do not let this be an excuse for thinking you don’t have real bugs too.

– Be transparent about the plans and the results.

Get this stuff fixed and make sure it stays fixed.  This is not a, “Let’s fix the top 100/1000/or whatever bugs,” thing.  It’s a cultural change accompanied by results.

3.  Build a High Performance Native Compiler

Yes, I know, it is wonderful that Flash programs work everywhere.  But you are dealing with Performance perception and a company that says they will only let Native tools in the tent.  Figure out how to kill both birds with one stone.  Every platform does not need a native compiler.  But, if Facebook can afford to build a PHP compiler for performance sake, you definitely can afford to do this.  If you don’t have any serious compiler gurus, get some on board.  While you’re at it, build an optimizer for your interpreted stuff too.  You need a two-pronged attack:

–  Better bytecodes with the usual optimizations that matter closer to the language–operator strength reduction and all that.

–  Killer native compiler that will run circles around your bytecode stuff when it needs to.

If you do it right, it should be possible to pick and choose which classes are native and which are bytecode within the same Flash app.  You will also need to provide infrastructure that makes it easy to serve up the right native version to whatever platform is being used by the consumer.  Don’t make your developers figure that out.  BTW, you need to get this into Beta in less than 12 months.  You don’t have much time.

There is an old saying, “If you want people to make a new decision, you must give them new information.”  This pair of developments is the new information for performance haters.

4.  Revisit the Asynchrony of Flash and Embrace Multicore

This may just be baked too deeply into the programming model, but it sucks.  Sometimes programs want to be able to block until something happens, and when they can’t they wind up wasting their time and you mobile device’s battery life to no good end.  This asynchronous stuff is a throwback to not having a real multi-thread model for Flash, and in the Multicore Era, that’s a liability.  Sure, current mobile platforms don’t have many cores.  It doesn’t matter.  #3 is really only a stopgap.  In the Multicore Era, if you want to completely crush the competition on performance, do it with more cores.  When I was at Oracle, it was all about building benchmarks that could use more cores than SQL Server.  Once you use more cores than the other guys, you become almost exponentially faster.

And while you’re at it, you will deliver a model that is much friendlier to developers.  Being able to deal with multiple threads and blocking should be the basis for Flex 5.

5.  Embrace the GPU and Knock ‘Em Dead With 3D

Last point.  For most machines, the graphics processor is the most powerful CPU in the machine.  That’s a big surprise to many, but hey, it’s true.  That sucker has got vector processing going on just like the old Cray supercomputers.  There are companies building supercomputers out of them, for Heaven’s Sake.  Our freakin’ Air Force uses the GPU’s in Sony Playstations to build supercomputers fer cryin’ out loud.  I know it is a pain to go native on the GPU.  Sometimes the OS doesn’t help you very much.  But you have to find a way to get your developer’s hands on those beautiful MIPS.  This is especially true since Flash is all about the visuals.  While you’re at it, build a killer 3D subsystem for Flash so peeps can create virtual reality, 3D modelers, CAD/CAM, killer FPS games, and a whole of others things you haven’t even thought of.  With #’s 3, 4, and 5, nobody will be able to touch you on the performance front.

6.  Bring Back the Flock with a Cross Compiler

In many ways, Apple’s insistance on anything but Flash is like an old-fashioned shelf space war straight out of the pages of Ye Olde Shrink Wrapped Software.  If I build my app in not-Flash, it is a pain for me to go back to Flash no matter how much I like it.  It is worse if my not-Flash is on a super hot platform, because I kind of want to just keep writing not-Flash on that platform once I get hooked. 

Here is the thing: if HTML5 is really as limiting as Flash devotees claim, it should be trivial to translate the limited functionality of HTML5 to Flash.  While you are at it, please undertake the slightly less trivial task of moving Objective-C to Flash.  Sound hard?  It is a little, but not any harder than all the other stuff you need to do.  Besides, I’ll bet you can do this one as a joint project with Google.  Why?  Easy:

Take any award-winning iPlatform app.  Feed source into your new cross compiler.  Push a button.  Get back an award-winning Android app written in Flash.  BTW, you can have it on your desktop or anywhere else too. 

Now what iPlatform developer could resist that if it all works great?  Don’t think of it as aiding the enemy by giving developers an opportunity to start from HTML5 with less downside.  The developers that will use this are already lost to you, and you need to bring back your flock.

7.  Keep Your HTML5 Powder Dry

By now Adobe, I expect you’re really feeling pretty unhappy with this post.  The stuff I am telling you needs to be done is not easy, and it won’t be cheap.  At the same time, you know in your heart that this is what it really takes to win this war.  It’s about to get worse.  HTML5 is coming.  All of those other steps will only allow you to maintain your lead for longer. 

You need to recreate everything that is great for your platform on HTML5.  But, you need to keep it in the backroom until the timing is right.  Don’t dribble it out.  Do big quantum leap releases.  Your first one should not be an also-ran.  It should establish Adobe as the premiere resource for HTML5 developers.

It’s just that simple

As I’ve said, this is a hard road.  But, if you don’t follow it, if you don’t dig down deep and go to war now in a meaningful way, you won’t catch up later.  You’ve got a great platform.  If you want to keep it, you know what to do.

Posted in apple, flex, Marketing, Open Source, platforms, ria, strategy, user interface | 6 Comments »

iPhone 4: Ho hum, but at least it fuels some trickle down economics…

Posted by Bob Warfield on June 7, 2010

Despite being plastered all over Techmeme, there’s nothing about the iPhone 4 that really gets my blood pumping.  About the same look, about the same feel, a few more features here and there, none of which I’m dying to get my hands on.  But at least its cheap.

Some years ago, there was the constant urge to upgrade one’s PC.  You had to get the new hotness, and it was hot.  Without the latest greatest, you couldn’t run the newest video games, and of course it was faster.  Yum!

We’re now an all-smartphone family.  The two kids and I have iPhones and my wife has an Android (like many women, she wanted a real keyboard because her fingernails made the iPhone hit or miss).  That’s cool, because like those PC ugrades of yore, there’s a farm team here which likes the upgrade-hand-me-downs.  My poor daughter has my original non-3G iPhone, though she still loves it.  Frankly, getting an iPhone 4 would make her happier than any of us, no matter whether she actually got the iPhone 4 or one of the hand-me-downs. 

With PC’s, there was more flexibility.  Give one kid the better video and the other the better mobo post-upgrade.  Then switch.  Harder to do that sort of thing with these new devices.  But there is still some hope of hand-me-down goodness.  After all, there are 2 Kindles, and that raises the question of a potential iPad incoming, which would free up a Kindle.

Welcome to the new device trickle down economics.

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Time Commoditizes Every Advantage

Posted by Bob Warfield on May 25, 2010

“For over a thousand years Roman conquerors returning from the wars enjoyed the honor of triumph, a tumultuous parade. In the procession came trumpeteers, musicians and strange animals from conquered territories, together with carts laden with treasure and captured armaments. The conquerors rode in a triumphal chariot, the dazed prisoners walking in chains before him. Sometimes his children robed in white stood with him in the chariot or rode the trace horses. A slave stood behind the conqueror holding a golden crown and whispering in his ear a warning: that all glory is fleeting.”
– Gen. George C. Patton

Indeed, all glory is fleeting, as is all competitive advantage.  Steve Jobs is one of the modern-day Pattons of Tech, very much in the mold of the George C. Scott movie character.  He is a superb warrior who occasionally embarrasses himself through his ego, but who rarely loses the fight.  His thirst for more glory in the form of more crushing wins for Apple is seemingly insatiable.  But time is not on his side from many perspectives.

When left to his devices, Jobs will eventually spawn a product that completely upsets the conventional wisdom and storms the markets.  John Doer has rightly called Apple one of the four horsemen of the Internet, and Steve Jobs is surely the rider and master of the horse.

Yet the very success Jobs craves drives competitors to extraordinary lengths to take the market back.  Imitators come along and at first do poorly.  But over time, they get better and better as Apple’s advantage gets less and less.  Eventually it boils down to brand and fashion.  Sure, its a nice polo shirt, but mine has an alligator or a polo player, so it has to be better.  Time whittles away competitive advantage.  It is relentless and cannot be bargained with.  The only antidote is to keep running to produce more innovations.  Apple is actually quite good at this, but they’re poised on a teeter totter of advantage that can come crashing down quickly as weight shifts.

Because their devices are better and came first, many more people use them.  Because many more people use them, their ecosystems are more vibrant, which makes more people use them.  It’s a virtuous cycle, but it is vulnerable.

Larry Dignan says the Android Tablet Armies are starting to form.  He has a great insight in that the iPad isn’t as big an innovation as the iPhone was.  In fact, it is many of the same innovations built on a different form factor.  The world is further along at copying the iPhone, so therefore the iPad will enjoy an even shorter period of uncontested glory.

Google is already outselling the iPhone with Android during some periods.  A growing audience is getting experience with both phones, and will write about the experience.  Some people will choose the alternatives for reasons that Apple’s followers will scoff at–because they are cheaper, because they have keyboards (I know a lot of women who hate the iPhone because their long fingernails make the touch screen difficult), because they like Flash (and mobile Flash games are pretty cool), because the Kindle screen is easier to see in direct sunlight, because Android has tethering, to get away from AT&T, and on and on. 

This is the part where open beats closed just by sheer attrition, and one man, one device, and one carrier cannot claim to be more open, no matter how skilled they are at marketing.

The other thing that happens is a peculiar emotion related to Schadenfreude (pleasure derived from the misfortune of others).  We’re genetically wired to be wary of the most popular thing.  There’s too much power there that can one day be used against us.  In fact, you don’t have to watch the Tech Markets for very long to conclude it will be used against you–it’s only a matter of time.  This genetic wiring is why the underdog always has a following.  In this case, Google is doing a masterful job of positioning themselves as the good guys and the underdog, just as Apple’s share of these devices is huge and the value of their stock is soaring, even though Google itself isn’t exactly an underdog by any normal measure.   It doesn’t matter, people crave an alternative to the leader.   It isn’t safe when there is only one leader.

Startups take heed.  A long time ago a very successful VC drew a chart on a napkin that he said was everything anyone needed to know about startups.  It consisted of a line that popped up very suddenly and then grew slowly.  Meanwhile a faster growing line starts a little later, but without the big initial pop.  The initial pop represents the startup’s inspiration–the big idea that put them on the map, created most of the value, and then grew from there.  The faster growing line represents the market trying to copy and commoditize the startup’s idea for their own advantage.  We don’t necessarily know all the variables at the outset:  how big is the pop?  How fast can the startup grow?  How long will the market wait before it tries to commoditize?  How fast can it commoditize?  What we do know is that when the lines cross, the startup is changed forever unless it can create another big innovation.

You can grow a startup to a big company either because all the variables line up right (you got a really big pop, you grew really fast, and the market gave you time to build up an unassailable lead), or because you keep building with more innovation pops.  Either way, you’re running out of time faster than you think.  Time commoditizes every advantage.  All glory is fleeting.

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What is the iPhone’s Market Share?

Posted by Bob Warfield on May 5, 2010

After my last post on the iPhone, there are still a lot of people arguing that Apple doesn’t have nearly the market share of a monopolist. 

I’ll get to that, but first, there are also a fair number of fans who are hurt that Apple may in some way be “penalized” or taken to task for having built an insanely great product.  In any such discussion, its important to remember that it isn’t illegal to have a monopoly.  Many exist.  It isn’t even “Evil”, in the Google sense.  It is only when companies abuse their monopoly in some unfair way in order to take unfair advantage of it that problems start.

OK, with that shocking moral dilemma out of the way (phew, fanboys relax!), let’s look at some market numbers.  It’s interesting to try to drill down further on the iPhone phenomenon. 

A good place to start is to ask what a Smartphone is anyway, since Apple apparently has a relatively small share of the Smartphone market.  The answer, so far as I can tell, is it is any phone that can do more than, well, be a phone.  As I suspected, not a very interesting answer, and certainly the iPhone is a Smartphone, but it is a whole lot more besides.

Smartphone OS share is one source of that 25% market share and under number we keep hearing about the iPhone:

iPhone:  17%

Symbian:  47%

Blackberry:  15%

Windows Mobile:  14%

Android:  5%

Others (such as Palm):  2%

No monopoly there.  But that’s kind of like looking at everything that has a microprocessor in it and saying because there are so many, PC’s and Mac’s have no market share.

How about the share of Internet traffic due to Smartphones?  That’s much closer to what this discussion is all about, much closer to what makes iPhones different and what I think their real market is:

Apple:  69%

RIM:  13%

HTC:  10%

Palm:  3%

Other:  5%

Wow, that’s a lot different picture, isn’t it?  Some will argue that’s just a random slice and not a market.  But Apple is monetizing that random slice like crazy in all kinds of ways, which makes it a market.  Moreover, it is access to and participation in that market that the Apple/Adobe wars are all about.  Lastly, Apple is making arbitrary rules to prohibit access by anyone that doesn’t use a very narrowly defined set of tools that happen to coincide nicely with Apple’s interests.

Mary Meeker provides another slice of numbers that tell us about Apple’s monetization of that market.  First thing she says is that mobile will shortly overtake desktop Internet use and that it is ramping much faster than the desktop did.  BTW, she attributes $8B in revenue for Q409 alone to this monetization, so its no small thing.  There’s a reason Apple’s market cap has soared.

What kinds of share numbers have led to this monetization?

  • iPhone has 54% of page views
  • It has 51% of app usage
  • 44% of all ads to Smartphones are served to iPhones, but Android is coming on strong at 42%

This is all no accident.  Until the skirmishes with Flash, I don’t think many would have argued Apple was doing anything Draconian.  They simple have a way better user experience that makes their users much more likely to participate:

  • 65% of iPhone subscribers buy music versus 35% for Smartphones in general
  • 61% buy games versus 48%
  • 58% participate in Social Networking vs 43%

If there is a category where iPhone users don’t over achieve versus the Smartphone industry average, I haven’t seen it.  Bravo Apple, we love your products!

With that said, this argument that we have to only use exactly the tools Steve Jobs likes because we might otherwise build crappy apps and damage the precious platform is just silly.  We’ve been down this road before.  It always starts out this way with Steve, and then eventually sanity prevails (or the market intrudes with competition) and the company backs off. 

Macs started with no arrow keys because they were afraid the availability of arrow keys would allow crappy apps onto the platform.  18 months later, the arrow keys were back.  Some will argue their absence was pivotal to the platform’s success, but that’s just silly. 

The Mac was introduced with great applications that showed the way.  A rush to deliver “arrow key” applications would’ve been a joke.  The platform would never have been choked by them because the people who wanted that platform wanted it precisely because they wanted what the new Mac apps had. 

If you don’t believe me, look at the early days of Windows.  There was no end of crappy software hastily ported.  Some of it had huge brand support behind it from the market leaders of the time such as Lotus (for spreadsheets) and Word Perfect (for word processors).  It didn’t matter a whit.  That software was crushed by software built right for the new platform.

Steve, you and your gang build great products for us users.  But you sure don’t think much of our ability to select those products out of the noise.  We don’t need a Big Brother to watch over us and tell us what to do.  We just want more choices, and then we’ll make the right ones.  Your customers are actually pretty smart about it.  If you think about it, that’s a good thing, isn’t it?

Related Posts

Steve Cheney writes a brilliant post about all the things Apple is doing to secure its control of the platform.  Take away–there are two key reasons to deny Flash (and other write once run everywhere tools):

–  Secure their tax on every app.  You can’t allow an app that can run other apps lest it let others sneak into the tent without paying.

–  Take shelfspace.  In the bricks and mortar world, shelfspace is a huge determiner of success.  If some of your cereals are must-haves, and you insist on stores carrying every one of them to get the must haves, then competitors have less shelf space available.  If Steve Jobs forces you to use tools that only work on the iPhone, then he ensures that the pool of scarce talent expends all of their energies on his platform first.  He hopes they will have little energy or desire to do it all over again on some other platform.

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Is the iPhone a Monopoly or Not?

Posted by Bob Warfield on May 5, 2010

In the Flash Wars between Apple and Adobe, many commentators have said that there is no anti-trust case because iPhone only has a 25% share.  Larry Dignan has written along those lines, for example.
 
Yet, I have to ask, a 25% share of what?  What is this market definition that they only have 25% of?  I don’t know, but I’ll bet it isn’t the real iPhone market at all.
 
What about the market of phones that can do more than phone + email (sorry, Blackberry-holics)?  What about the market for phones that can run apps?  I submit the iPhone’s share is much much higher under those definitions, and it really is a monopoly.
 
This came to mind as I was reading a number of blog posts that were all talking about how high a proportion of some business or other’s mobile traffic is iPhone.  Topix, for example, says it is 70%.  I use Google Analytics on all my own web sites, and it tells me that mobile visits are 84% iPhone.

 
That’s monopoly territory for sure.  The question is whether the definition of the market will be one the FTC finds interesting and that Apple’s lawyers can’t derail.  Certainly if it boils down to the mobile application ecosystem, I think it will be hard to argue Apple doesn’t have a monopoly.

 
Former FTC lawyer Glazer tries some fancy footwork to get around this argument when he says you can’t consider a market for smart-phone applications an Apple monopoly because its not a market that Apple is in.  But it is certainly a market Apple is making money from hand over fist.  Their desire to keep that tax in place is part of the reason they’re at war with Adobe in the first place.

 
At the same time, another former FTC policy director, David Balto, says:
What they’re doing is clearly anticompetitive…They want one superhighway and they’re the tollkeeper on that superhighway.

 
It’s been my experience that the courts have a terrible time understanding technology.  Probably this case will be no better.

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