Saturday, Jun 25, 2011
Excellent insights on the risks in Groupon's sales model from Wharton professor, David Reibstein. Here's the important bit:
Knowledge@Wharton: Why do you believe that business model will not support the current growth rates? Reibstein: Let me talk about some of the fundamental weaknesses. Obviously, one is, however brilliant of an idea it is, there is also now a huge increase in competition. When Groupon had few competitors, it was more viable than it is now with 499 competitors. But that is not the big weakness. The Groupon business model works better during a recession than it does during a vibrant economy. I will explain why, and this is where it gets intriguing. The reason some retailers might be willing to provide supply to Groupon is because they have excess inventory. That is particularly the case for services. One of the services I notice frequently [offered on group buying sites] is that of beauty salons. They have so many seats and so many beauticians. If I don't sell that 3 p.m. to 4 p.m. time slot on Thursday afternoon, I cannot carry that time slot in the inventory tomorrow. It perishes. It perishes in the same sense as an [unsold] airplane seat [once] a plane takes off down the runway. Because of the recession, there has been an abundance of people who are forgoing beauty salons and other sorts of luxury, discretionary services. Rather than let that airplane seat go [unfilled] and the beautician hour go with no revenue, [companies] would [rather] sell it for a little above whatever the incremental costs are. So there is a willingness to do deep discounting. As the economy picks up and there is less excess inventory, the availability of supply will go down. The willingness of the merchant to offer deep discounts will go down. The business proposition to the customer will be less attractive if [the item or service being offered] doesn't have the same deep discount.I wonder if Groupon is keenly aware of this and whether it has anything to do with their rush to IPO. (hat-tip to Mitch Kapor)
Tuesday, Jun 21, 2011
Why? Because Apple will be the first major player to crack the consumer cloud storage nut. Who? Google or Microsoft. The fact that there are two viable buyers drastically increases the chances that a sale will happen sooner rather than later, lest one company's sloth lead to a missed opportunity.
Tuesday, Jun 07, 2011
Last weekend I made a list of technologies and features I hypothesized Apple is working on and would announce at Monday's WWDC keynote. As I mentioned, it wasn't based on any inside info and was admittedly far-reaching. In truth I only expected a handful of these things to be announced this week. So enough with the equivocation. How'd I do? Here's my self-graded assessment in light of Steve's keynote announcements. First, the stuff I got right:
Friday, Jun 03, 2011
I get the feeling that the announcements at next week's Apple WWDC are going to represent the same kind of fundamental shift in Apple's offering that the iPod did in 2001. I don't have any inside info, and I make a point of not trying to pry secrets from my friends who work at Apple, but the rumblings are huge. 'iCloud' could mean anything, but given the complete failure of MobileMe over the last decade there's no way Apple would introduce it on such a pedestal unless it's incredible. My guess is that iCloud is to MobileMe as iPhone was to Newton: a complete, deep, polished solution after an underwhelming market failure. Apple took a long time to get the Internet. Geeks were still installing FTP clients and web browsers for years after Apple belatedly included TCP/IP and PPP to their OS and, when Apple finally did integrate the Internet into Mac OS, it was in a very tacked on kind of way. A browser, an app for making web pages, eventually a few vertical online stores. I think that's all about to change. The scene has been building for a long time: The iPhone blurred the line between using a local device and being online. Chromebooks propose to eliminate the line completely by using an OS that expects to be online all the time (though still has limited functionality when the wireless cord is cut). Dropbox is a huge hit because it provides the most seamless way to use native apps while still writing to the cloud. Google and Amazon are tripping over each other (and the music labels) trying to roll out virtual music lockers. My guess though is that these vertical solutions will seem pretty thin by the end of next week. In no particular order, here are some thoughts about where Apple may be going. These are not based on any inside info, and they certainly won't all be right:
Tuesday, May 24, 2011
I'm excited to hear what Microsoft is focusing on for Windows 8, targeted for 2012. I have to say though, that even the lock screen delivers a little trepidation, asking the user to press the eternal "CTRL + ALT + DELETE" to log on.
Why does this bug me? Okay:
Wednesday, May 18, 2011
I'm turned off when someone describes their startup as "the
Tuesday, May 17, 2011
Are Microsoft, Apple and Google quietly preparing for war with mobile carriers? I think so. With all the advancements made to mobile phones in the past ten years, the part that’s been woefully slow to improve is the act of calling. Making calls, placing calls, searching for signal and scrimping minutes hasn’t changed much since the mobile phone came out, because carriers have little incentive to innovate. Mobile carriers make their money either way, and ‘innovation’ comes down to increasing the bottom line, whether it's charging $1,300/megabyte for text messages or adding 20 seconds of instructions on how to leave a voicemail so that the carrier might get an extra minute’s revenue. If technology or product companies were in control of the full telecom stack, you’d be able to get caller ID data for incoming cellphone calls. You’d be able to see someone’s availability before you call them, and that availability could be controlled by the user or automatically by time of day, location, current calling status (“Kevin is currently on the phone.”) You'd see robust competition producing a hundred other innovations to make calling a reasonable mode of communications again. Sure, a few middleware services like Google Voice (and Grand Central before them) have offered some innovation, but they’ve been hobbled by spotty levels of OS integration across platforms and even more limited access to carrier services. They don’t let you ping a phone for status before you call, or a dozen other features that can be found in IM or email clients. Even the iPhone's visual voicemail was only implemented because it was a dealbreaking feature Apple insisted upon in its negotiations with AT&T. Remember, carriers have a disincentive to make calls more efficient because they get paid by the minute. Then there’s the cell network. Recent innovation in cell networks has been driven almost exclusively by skyrocketing mobile data needs. Most 4G-capable phones can’t even use 4G for voice calls, falling back to their secondary 3G (or 2G) chipsets and cell networks when placing or receiving calls. At present, 4G is just for data on these phones and voice calls happen in a completely different way. SMS messages are similarly distinct from data. (Think a backup tricycle in the trunk of your sports car.) Your phone's Wi-Fi capable? Tough, you can’t use that for calls either, unless you buy a microcell for your home network. That microcell creates a mini 3G network that plugs in to your home internet, but you'll still pay your mobile carrier for the minutes on calls you pipe through your own internet connection because they go from there to your mobile carrier's central computers and back out again. That’s the preamble for what’s broken, and I could go on, but I’ll get to the point: What if Microsoft’s plan is to fix it? To create a new full mobile pipeline you’d need to control the mobile phone hardware, the mobile OS, and the carrier. It’s incredibly hard to start a new cellular network because placing cell towers all over the country is extremely expensive and permits for individual towers can take years to obtain, so most small carriers lease capacity from one of the major mobile carriers, which gives small carriers a disadvantage when it comes to pricing. Also, leasing access from a primary carrier doesn't let you bring much new technology to the table. The data is still going through their limited systems using their stagnant protocols, which leaves Wi-Fi and cellular data as the ways to go. Our phones already use Wi-Fi for data access, falling back seamlessly to the cellular network when Wi-Fi isn’t available. Wi-Fi usage is essentially free, so a ‘soft carrier’ could drastically lower their costs by routing calls over wi-fi when available, and buying data access from a primary mobile carrier's network when Wi-Fi isn't available. If over half of a soft carrier’s airtime minutes were carried over Wi-Fi rather than a leased cellular network, that carrier could beat a traditional mobile carrier on price even if the traditional carrier doubled their costs when they leased access to the soft carrier, and for every customer who only has 3G access there’s another who has almost exclusively Wi-Fi access, and over time the scales continue to tip toward the latter, steadily lowering soft-carrier costs. Rates could either be flat regardless of transport, averaging out the benefit to all customers, or discounts could be given to those who use Wi-Fi more often. Going back to the three ingredients: Microsoft has a good mobile OS, they just bought a soft carrier in Skype, and whether the rumors of a potential acquisition of Nokia pan out or not, Microsoft’s recent deal with Nokia seems to go beyond a simple OS licensing agreement. If Microsoft is trying to turn the cellular industry on end, it’ll start out with Nokia hardware built to Microsoft specifications. No other hardware manufacturer would likely risk pissing off their major customers (AT&T, Verizon, etc.) with a move that so directly challenges the entire mobile industry. And of course Microsoft isn’t alone in this ambition. Apple and Google each appear to have been moving to the same destination by different paths. Apple’s integration of FaceTime, first into the iPhone, then the iPod Touch, iPad 2, and Mac OS, is a clear move toward carrier independence. In a limited sense, the iPod Touch is already a wi-fi phone. It would take very little for Apple to build its own Facetime-to-POTS gateway and roll out a voice-only version to create an experience almost identical to a cellular carrier but living entirely in the data stack, using Wi-Fi when available. In fact, I’d be amazed if such software wasn't already running inside Apple. Mix in Apple’s recent deals with voice recognition leader Nuance and we’re several steps closer to what former Nuance licensee TellMe (acquired by Microsoft in 2007, by the way) calls ‘Dialtone 2.0,’ where phone conversations start simply by lifting the receiver to your ear and talking to the computer. Google Voice and Google’s long-time interest in the FCC spectrum auctions are clear indications of their ambition in this area, and their recent moves to tighten their control on the design and feature sets of Android handsets may be another indication that changes are afoot. Add Amazon in as a wild-card and you have four new mobile telephone creators and carriers, all with ample experience with routing large amounts of data, passion for bringing new capability to their customers, and a consistent resentment of working with partners who get paid beyond what they bring to the table. And if any one of these companies moves to cut out the carrier, the others will race to compete at the same level. The next five years are going to see as much innovation in the way we make and take calls as the last five have seen in how we use our phone for data. It’s about damned time.
Tuesday, Apr 26, 2011
It wasn't so long ago that the battle for personal electronic supremacy was being fought on the desktop. Back then the conventional wisdom was that Apple, with 5% market share, was a niche player. Steve Jobs and Apple devotees everywhere fought back against this characterization by drawing a parallel to the cars:
"Apple's market share is bigger than BMW's or Mercedes's or Porsche's in the automotive market. What's wrong with being BMW or Mercedes?" - Steve JobsThis trope continued when the iPhone was announced, and Microsoft CEO Steve Ballmer belittled the product, saying:
"There's no chance that the iPhone is going to get any significant market share. No chance. It's a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I'd prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get." - Steve BallmerNow, of course, the tables have turned and Apple is a major player in the smartphone market and the clear market leader in the tablet market. Now when a new tablet is unveiled the knee-jerk question is, 'Is it an iPad killer?' and if the answer is 'no' then that is the perspective from which it is viewed. If it's not "The One" then the question is how slow will its death be and will its successor be "The One"? Apple has shown a unique ability to democratize the smartphone and tablet markets. Not everyone can afford a smartphone, but many can, and they're using the same phones that billionaires use, because the top products in the market are within arm's reach. A similar move has taken place in the tablet market. Where products recently ranged from cheap underpowered novelties to $4,000 touchscreen PCs, the market has flattened to the point where the President of the United States carries around the best tablet money can buy, and it's the same iPad that is forecast to sell 40 million units this year. So what makes 2011 different than 1984? Now that the tables have turned and Apple is the market leader, is the belittlement of the 5% market share just as disingenuous? Perhaps not. Apple (almost) never tried to be Windows. They (almost) never allowed their product line to be commoditized, and when they did, back in 1995, they realized their mistake and shut down the clones. Niche products survive because they meet niche needs. In the '80s and '90s Apple survived first on the backs of the education market, and later as the workhorse of the creative market. Their products cost more than the mainstream competition, but they were superior in their markets. The difference with smartphones is that the transition of the phone to a highly flexible software platform has removed market differentiation. The last major smartphone brand specifically designed for a market segment is the Blackberry, with its focus on the needs of the enterprise, but even their base is drifting off because people don't exist as enterprise employees 24/7, and they've become unwilling to tote multiple devices for the different facets of their life. Now companies that try to compete with (or unseat) Apple in the phone or tablet space do so by trying to create a marginally better product with slightly better specs at an identical price point. Rather than trying to be BMW, they're trying to be the Hyundai to Apple's Honda. They roll out cars that may be just as good (though they're not yet) but they have no status. They're not something people would pay more for, which is why the Motorola Xoom isn't a BMW. It has neither the brand nor the performance to be a luxury alternative to Apple's commodity iPad. Put more succinctly, products designed to replace the iPhone or iPad fail if they only reach 5%, because that 5% is unprofitable and often unsustainable. Alternatively, a product designed to meet needs that are being underserved by the market-leading product can be proud of its 5%, because it stands for something. Like the Mac in the '80s or the Blackberry a decade ago, such a product builds a story, a brand and a community around itself. It's better for some people because it caters to their specific needs in the way that the mainstream product can't. It can justify a premium price because it holds a place of pride in those who use it. In short, such products are 'the products for the rest of us.' There is no 'tablet for the rest of us' or 'smartphone for the rest of us' out there challenging Apple. Android's doing very well at competing with Apple in the smartphone space. They may even beat them in the long run. But Android with a 5% market share would never be deemed successful. Maybe the advantages of scale herald the end of the 'BMW of electronics,' but I don't think so. Consumer hardware is a hard market for a startup to find success, but I bet it'll happen. Just as SpaceX and others have recently heralded a new age in rocket innovation there will be a time down the road where a few small companies will redefine the mobile computing market in a way that will eventually be adopted by the major players, but for a time will still be the BMW of their day. Just as upstart Palm defeated the Newton and Danger changed the way people viewed phones as digital communication devices, in a few years the market will stagnate, leaving an opening for something completely new. And in the decades that follow those companies will probably be absorbed by the bigger players and their uniqueness will be incorporated into the greater whole, making something even better, just as Palm is being reinvented by HP and the fruits of Danger are found both in Android and deep in Windows Phone 7. The wheel turns.
Sunday, Apr 17, 2011
Question: What's the difference between 'Dilbert' creator Scott Adams and crazy vengeful author Jacqueline Howett (seen here yelling at readers for not thinking her book is brilliant)?
Answer: When Scott Adams tells commenters they're idiots because they don't agree with him, he does it while masquerading as someone else.
Because apparently his personal attacks against me in his blog and misogynistic rants were't already enough, today's the day I take Dilbert out of my reading queue and don't look back.
Sunday, Apr 17, 2011
Somewhere deep in San Jose:
I kid because I love some of Adobe so much that the parts I hate are like a +80 contrast adjustment layer.
Inspired by this comic.
Hi, I'm Kevin Fox.
I also have a resume.
I'm co-founder in
The Imp is a computer and wi-fi connection smaller and cheaper than a memory card.
We're also hiring.
©2012 Kevin Fox