Some things Apple could do to dramatically redefine TV.
- Buy EchoStar - current market cap $1.8B - Apple could possibly buy it for $2.5B + debt. With EchoStar, they get nationwide Satellite Network, as well as IP to Sling Media. Convert Apple TV to be the Set-Top box for Dish Network. This is likely to be the easiest option for Apple, rather than negotiate with cable networks.
- Change to iPhone OS4 - opens up entire App Store.
- iPodTouch with IR Transceiver as Universal Remote. Should be usable as Remote, Keyboard, Microphone (for Video Conference) etc. EPG should be displayed on the iPodTouch.
- Multi-player gaming - AppleTV should be capable of creating an ad-hoc network with multiple iPodTouch units, for multi-player gaming.
- Offer an optional iControl unit for $99 - basically, iPodTouch with minimal flash, minimal RAM, lower end processor, 480x320 multi-touch OLED display.
- Open up USB port, with support for Web Cam and external storage. Video Conferencing would be a great application. External storage only for Personal Media - cannot be used for DVR.
- Offer an optional motor-panning 1080P iSight camera for $199 (panning and zoom controllable using the iControl remote).
- Instead of using low power A4, use full power chips, or even dual A4 chips, to support 1080P seamlessly, including 1080P videoconferencing (if customer has adequate bandwidth).
- Local DVR Functionality. DVR to be controlled from EPG on iPodTouch. DVR requests, etc to be stored on MobileMe - so user can setup recording remotely. User can also delete shows from MobileMe remotely, to clear up space on the local disk.
- Cloud DVR Functionality - customer can pay $10 extra per month to have access to ANY SHOW he wants, available at anytime streamed from the cloud. Cloud DVR shows would be available only for 1 week. If user wants longer term recording, he can copy content from Cloud DVR to local DVR. If the user does not want Cable TV, he can just pay $30 per month and get all his programs from the Cloud DVR, along with targeted rich interactive ads using iAd. But he won't get any live content - like Sports, news, etc.
- Integrated support for PlaceShifting (SlingBox functionality) - using MobileMe. Moment user logs into MobileMe and wants to watch either Live or recorded content, the local stream is turned off. Any content that is also available on the cloud would be streamed from the cloud rather than the source AppleTV, for bandwidth efficiency.
- Sell 3rd party licenses for Game Controllers - Steering wheels, Joysticks, Tennis Rackets, etc.
- Sell 3rd party licenses to integrate AppleTV directly into consumer electronics.
- YouTube competitor - Create a free videos section within iTunes, where users can upload their own videos for sharing with others. Customers can optionally also charge for their uploaded videos, with the usual 70:30 revenue sharing. Apple already has massive library of copyright content, it would be easy to use technology like Shazam to see if any user uploaded content violates copyright of any other content. With such a check, studios would prefer iTunes over YouTube. Can be integrated with rich interactive iAds, for revenue.
- Package AppleTV with 2 iControl units and one iSight HD camera for $599 - or for $199 with 2 year Cable TV contract at $49 per month or $399 with 2 year Cloud DVR only contract.
The main idea is to make full use of the ecosystem that already exists - and create cross-selling opportunities for other parts of the ecosystem. For instance, if the user wants remote DVR functionality or place shifting functionality, he/she has to get MobileMe. For the remote, s/he has to get iPodTouch. Since the unit supports multi-player gaming, there is an incentive to get multiple iPodTouches for the entire family. Cloud DVR would use iTunes. Interactive targeted advertising using iAd would dramatically change the way people look at advertisements. Could even support features like instant feedback on ads - so that the marketer knows how the ad is being received, by which demographic.
Saturday, May 29, 2010
Friday, May 21, 2010
In other news, pot calls kettle black...
Just read an unintentionally hilarious article on AppleInsider - http://www.appleinsider.com/articles/10/05/21/google_compares_apple_to_big_brother_from_iconic_1984_ad.html
Some executive at Google reportedly called Apple "Big Brother" in a reference to the famous 1984 commercial that announced the Mac.
Hilarious, because I don't think he could have put his foot in his mouth more effectively, and more publicly. Considering all the news around Google's privacy violations, and all the attempts by Google to ingrain itself in pretty much every single aspect of our lives, it is quite obvious who Big Brother is. In fact, the surveillance society referred to in the 1984 book eerily resembles Google.
I guess he refers to Big Brother not in a surveillance kind of way, but more about the fact that Apple does not give any choice to the developer or to the user. Steve Jobs decides how things should be, and that is the way things will be. Like as if Google gives its users all the flexibility they want. I remember years back when I signed up for GMail, I did not like the conversational style of GMail - and wanted to revert to the regular email style that you see in Yahoo, Hotmail, etc. Guess what - Google decided for me that GMail would stay conversational - no option to use regular mails. I haven't checked lately, but I wouldn't be surprised if that is still the case!
At least, the choices Steve Jobs makes are acceptable to the vast majority of end-users. It is usually only the tech geeks who feel crippled by Apple's restrictions. There are things that I have wished were different with Apple, but for the most part, things just work. Of all the people complaining about a non-replaceable battery, I wonder how many of them ACTUALLY carry a spare battery? The dramatic success of the iPhone has showed that the "restrictions" in the iPhone haven't really affected demand for the product.
Google acts and operates as if they are champions of Open Source, and everything they do is open. However, even a cursory look at Google reveals that the only things that are Open at Google are things they don't expect to make money on - and all their crown jewels are safely locked inside a proprietary safe.
There is another interesting comment this guy made - "If Google did not act, we faced a Draconian future where one man, one company, one device, one carrier would be our only choice. That's a future we did not want." The thing is, Google bought Android in 2005, well before the public launch of the iPhone. Quite obviously, they knew about the iPhone by 2005, and *specifically* bought Android to combat the launch of the device. If this is not an act of corporate espionage by Eric Schmidt, I don't know what is.
In fact, I firmly believe that Apple is very close to launching a major change in plans for AppleTV - launching a subscription model for iTunes content, together with tie-ups for live News and Sports broadcasts. This would finally offer users a viable alternative to CableTV. Google, by virtue of Eric Schmidt's board seat, obviously knew this was coming, and this is the motivation behind yesterday's announcement of GoogleTV. We will see more such vaporware announcements from Google, over the next few months - but thankfully, will end soon, because Apple realized the folly of having Eric Schmidt on the board last year.
Point 6 of Google's charter says - it is possible to make money without doing evil - and their motto is "Do no evil". I think Google needs to look at the mirror and see if they are living up to their ideals. They have clearly shown that they are OK with evil if it serves their interests - see their actions in China, and how they changed their minds only when they got bitten. Their track record of IP/copyright violations, is also indicative of the same malaise.
Some executive at Google reportedly called Apple "Big Brother" in a reference to the famous 1984 commercial that announced the Mac.
Hilarious, because I don't think he could have put his foot in his mouth more effectively, and more publicly. Considering all the news around Google's privacy violations, and all the attempts by Google to ingrain itself in pretty much every single aspect of our lives, it is quite obvious who Big Brother is. In fact, the surveillance society referred to in the 1984 book eerily resembles Google.
I guess he refers to Big Brother not in a surveillance kind of way, but more about the fact that Apple does not give any choice to the developer or to the user. Steve Jobs decides how things should be, and that is the way things will be. Like as if Google gives its users all the flexibility they want. I remember years back when I signed up for GMail, I did not like the conversational style of GMail - and wanted to revert to the regular email style that you see in Yahoo, Hotmail, etc. Guess what - Google decided for me that GMail would stay conversational - no option to use regular mails. I haven't checked lately, but I wouldn't be surprised if that is still the case!
At least, the choices Steve Jobs makes are acceptable to the vast majority of end-users. It is usually only the tech geeks who feel crippled by Apple's restrictions. There are things that I have wished were different with Apple, but for the most part, things just work. Of all the people complaining about a non-replaceable battery, I wonder how many of them ACTUALLY carry a spare battery? The dramatic success of the iPhone has showed that the "restrictions" in the iPhone haven't really affected demand for the product.
Google acts and operates as if they are champions of Open Source, and everything they do is open. However, even a cursory look at Google reveals that the only things that are Open at Google are things they don't expect to make money on - and all their crown jewels are safely locked inside a proprietary safe.
There is another interesting comment this guy made - "If Google did not act, we faced a Draconian future where one man, one company, one device, one carrier would be our only choice. That's a future we did not want." The thing is, Google bought Android in 2005, well before the public launch of the iPhone. Quite obviously, they knew about the iPhone by 2005, and *specifically* bought Android to combat the launch of the device. If this is not an act of corporate espionage by Eric Schmidt, I don't know what is.
In fact, I firmly believe that Apple is very close to launching a major change in plans for AppleTV - launching a subscription model for iTunes content, together with tie-ups for live News and Sports broadcasts. This would finally offer users a viable alternative to CableTV. Google, by virtue of Eric Schmidt's board seat, obviously knew this was coming, and this is the motivation behind yesterday's announcement of GoogleTV. We will see more such vaporware announcements from Google, over the next few months - but thankfully, will end soon, because Apple realized the folly of having Eric Schmidt on the board last year.
Point 6 of Google's charter says - it is possible to make money without doing evil - and their motto is "Do no evil". I think Google needs to look at the mirror and see if they are living up to their ideals. They have clearly shown that they are OK with evil if it serves their interests - see their actions in China, and how they changed their minds only when they got bitten. Their track record of IP/copyright violations, is also indicative of the same malaise.
Wednesday, May 12, 2010
For a few dollars more...
Right in the middle of the 3G auction, the government announced that 2G operators having more than 6.2MHz of spectrum will have to pay spectrum fees decided based on 3G auction prices. This announcement makes absolutely no sense - it will spell the end of the mobile revolution in India - because 2G operators would be forced to jack up prices. And if prices are jacked up, then we wont see 20M mobile users per month being added.
The reason why Indian operators are able to succeed at such low costs, is because they dont care about ARPU - they just care for overall revenues to be high, which they acheive by increasing penetration. In the current scheme of things, license costs are a percentage of revenue - 10%, 8% and 6% of revenues depending on the circle. So as long as the fixed costs are covered by the revenue, operators are profitable. But the moment they are forced to pay massive costs for spectrum, this model will not be viable - the amount of revenue they have to make to get profitable would go up dramatically. This means they can no longer be ambivalent about falling ARPU - they would be forced to increase ARPU. At higher ARPUs, significant number of customers would be priced out of the market.
Quite obviously, this is a bad policy for the government to adopt - so the only reason they are doing this, is because this will make 3G spectrum more valuable. If 2G operators ANYWAY have to pay for the spectrum at the same rates as the 3G spectrum, they might as well bid for 3G spectrum - so operators who chickened out of bidding at the higher levels would now consider bidding for 3G.
I expect that soon after the auction concludes, we will see a rethink by the government, and they will leave 2G spectrum pricing untouched. But the winners of the 3G spectrum would be in trouble, because they would have already bid extremely high for 3G spectrum, and cant back out just because 2G spectrum is not being charged for!
At these high prices, the 3G winners would find that they have to price 3G data access prohibitively high - and will not be able to attract large number of customers for 3G, and so they are stuck in a very unprofitable situation. If they price it low, they can attract a lot of customers, but they might still find it difficult to service the debt that they took on to bid for the 3G spectrum.
In a lot of ways, this is similar to killing the goose that lays the golden eggs.
The reason why Indian operators are able to succeed at such low costs, is because they dont care about ARPU - they just care for overall revenues to be high, which they acheive by increasing penetration. In the current scheme of things, license costs are a percentage of revenue - 10%, 8% and 6% of revenues depending on the circle. So as long as the fixed costs are covered by the revenue, operators are profitable. But the moment they are forced to pay massive costs for spectrum, this model will not be viable - the amount of revenue they have to make to get profitable would go up dramatically. This means they can no longer be ambivalent about falling ARPU - they would be forced to increase ARPU. At higher ARPUs, significant number of customers would be priced out of the market.
Quite obviously, this is a bad policy for the government to adopt - so the only reason they are doing this, is because this will make 3G spectrum more valuable. If 2G operators ANYWAY have to pay for the spectrum at the same rates as the 3G spectrum, they might as well bid for 3G spectrum - so operators who chickened out of bidding at the higher levels would now consider bidding for 3G.
I expect that soon after the auction concludes, we will see a rethink by the government, and they will leave 2G spectrum pricing untouched. But the winners of the 3G spectrum would be in trouble, because they would have already bid extremely high for 3G spectrum, and cant back out just because 2G spectrum is not being charged for!
At these high prices, the 3G winners would find that they have to price 3G data access prohibitively high - and will not be able to attract large number of customers for 3G, and so they are stuck in a very unprofitable situation. If they price it low, they can attract a lot of customers, but they might still find it difficult to service the debt that they took on to bid for the 3G spectrum.
In a lot of ways, this is similar to killing the goose that lays the golden eggs.
Tuesday, May 11, 2010
Barking up the wrong tree!
Last week, the Indian government announced a ban on Chinese Telecom equipment. While this has been discussed for quite some time now, the news of the ban still came as a surprise, because it takes a lot of guts by the government to come up with such a confrontational move.
The rationale for this ban is that Chinese Telecom imports could jeopardize India's security - while no one bothered to explain how security could be jeopardized, I guess the main worry is about things like sabotaging equipment, using a timebomb that is already present in the software, or sending instructions to disrupt functioning of the equipment as part of a regular software update. In the event of a war between India and China, it will be extremely foolish for India to rely on Chinese telecom equipment - even for civilian use.
However, what is the guarantee that American equipment has no security issues? Or for that matter Swedish equipment? Or Israeli equipment? While it is unlikely that India will fight a war with the US, Sweden or Israel, security considerations are not just about wars. What about spying, corporate espionage, etc?
Indian telecom market has grown to be one of the most significant markets in the industry. We add over 20 Million mobile users each "month" - this is the population of Australia! We spend tens of billions of dollars every year on telecom equipment. In fact the amount of money India pays for telecom equipment each year to foreigners dwarfs how much we pay foreigners for defence equipment. When it comes to defence, we have technology transfer clauses, we have requirements for domestic manufacturing, etc - because we realize that we have to be in control of the equipment eventually, and cannot afford to depend on outside help forever. When it comes to telecom equipment, why are we not insisting on such clauses? Telecom equipment is as important for our national security as defence equipment is.
Most telecom equipment is purchased by private sector telecom companies - but the government can atleast set the agenda when it comes to purchases by BSNL. What if BSNL insists that 10% of any contract has to be locally fulfilled by Indian partners. Or gives incentives for local procurement of the equipment? In fact if TRAI can step in and ban Chinese Telecom equipment purchases even by private telecom operators, why not mandate that private telecom operators have to procure 10% of their requirements locally? And mandate that this 10% should not be passive equipment like cables, towers, etc - but active equipment like Switches, base stations, etc. Because this industry does not even exist in India, they can start small, and slowly scale up the local content over time.
If we really care about security, it is in our long term interest to set up a thriving domestic telecom infrastructure industry. Initiatives like banning the Chinese will not work in long term - India is a big enough market, and Chinese equipment has a big enough price advantage, that it becomes attractive to setup dummy entities in some other jurisdictions to bypass these artificial restrictions. Do you expect Indian customs officials to pore through base station components and firmware to determine the origin of the product?
There is another important reason for India to encourage a domestic telecom industry. The Nano project by Tatas has shown that Indian engineering is second to none, and is best suited to create products specifically targetting Indian markets. Indian requirements are dramatically different from requirements in Sweden, US, etc. Nokia has done a great job customizing their product for the Indian market when it comes to handsets, but when it comes to infrastructure equipment, India uses pretty much same equipment as the rest of the world. One problem caused by this one-size fits all approach is the power situation. Power is not reliable in India - so towers need to have power backup solutions, generators, etc. Also because of extreme heat and dust in India, airconditioning requirements are also higher. The power backup needs to be capable of handling airconditioning requirements as well - so it adds very significantly to the cost of the deployment.
Maybe a solution engineering specifically for Indian conditions would do away with the requirement for Air-Conditioning. Maybe someone can create a solution that uses much lesser power. These solutions would be much better suited for Indian conditions, and would reduce the cost of deployment. The best part of this example, is that it is not a hypothetical example. Sloka Telecom - an Indian startup has created WiMAX base stations that do not require any air-conditioning, and use very little power, so that power backup requirements are lowered quite significantly. This makes the cost of deployment lower, and allows the operator to recover his investment at much lower ARPU.
Whether the ban on Chinese equipment stays or goes, it is high time India put policies in place to promote domestic companies to create telecom infrastructure. We should ensure that at least some of the billions of dollars that we spend on telecom each year comes back to us.
The rationale for this ban is that Chinese Telecom imports could jeopardize India's security - while no one bothered to explain how security could be jeopardized, I guess the main worry is about things like sabotaging equipment, using a timebomb that is already present in the software, or sending instructions to disrupt functioning of the equipment as part of a regular software update. In the event of a war between India and China, it will be extremely foolish for India to rely on Chinese telecom equipment - even for civilian use.
However, what is the guarantee that American equipment has no security issues? Or for that matter Swedish equipment? Or Israeli equipment? While it is unlikely that India will fight a war with the US, Sweden or Israel, security considerations are not just about wars. What about spying, corporate espionage, etc?
Indian telecom market has grown to be one of the most significant markets in the industry. We add over 20 Million mobile users each "month" - this is the population of Australia! We spend tens of billions of dollars every year on telecom equipment. In fact the amount of money India pays for telecom equipment each year to foreigners dwarfs how much we pay foreigners for defence equipment. When it comes to defence, we have technology transfer clauses, we have requirements for domestic manufacturing, etc - because we realize that we have to be in control of the equipment eventually, and cannot afford to depend on outside help forever. When it comes to telecom equipment, why are we not insisting on such clauses? Telecom equipment is as important for our national security as defence equipment is.
Most telecom equipment is purchased by private sector telecom companies - but the government can atleast set the agenda when it comes to purchases by BSNL. What if BSNL insists that 10% of any contract has to be locally fulfilled by Indian partners. Or gives incentives for local procurement of the equipment? In fact if TRAI can step in and ban Chinese Telecom equipment purchases even by private telecom operators, why not mandate that private telecom operators have to procure 10% of their requirements locally? And mandate that this 10% should not be passive equipment like cables, towers, etc - but active equipment like Switches, base stations, etc. Because this industry does not even exist in India, they can start small, and slowly scale up the local content over time.
If we really care about security, it is in our long term interest to set up a thriving domestic telecom infrastructure industry. Initiatives like banning the Chinese will not work in long term - India is a big enough market, and Chinese equipment has a big enough price advantage, that it becomes attractive to setup dummy entities in some other jurisdictions to bypass these artificial restrictions. Do you expect Indian customs officials to pore through base station components and firmware to determine the origin of the product?
There is another important reason for India to encourage a domestic telecom industry. The Nano project by Tatas has shown that Indian engineering is second to none, and is best suited to create products specifically targetting Indian markets. Indian requirements are dramatically different from requirements in Sweden, US, etc. Nokia has done a great job customizing their product for the Indian market when it comes to handsets, but when it comes to infrastructure equipment, India uses pretty much same equipment as the rest of the world. One problem caused by this one-size fits all approach is the power situation. Power is not reliable in India - so towers need to have power backup solutions, generators, etc. Also because of extreme heat and dust in India, airconditioning requirements are also higher. The power backup needs to be capable of handling airconditioning requirements as well - so it adds very significantly to the cost of the deployment.
Maybe a solution engineering specifically for Indian conditions would do away with the requirement for Air-Conditioning. Maybe someone can create a solution that uses much lesser power. These solutions would be much better suited for Indian conditions, and would reduce the cost of deployment. The best part of this example, is that it is not a hypothetical example. Sloka Telecom - an Indian startup has created WiMAX base stations that do not require any air-conditioning, and use very little power, so that power backup requirements are lowered quite significantly. This makes the cost of deployment lower, and allows the operator to recover his investment at much lower ARPU.
Whether the ban on Chinese equipment stays or goes, it is high time India put policies in place to promote domestic companies to create telecom infrastructure. We should ensure that at least some of the billions of dollars that we spend on telecom each year comes back to us.
Sunday, April 11, 2010
The knives are out - Apple goes after Google!
My last post dealt with the differences between Apple and Google, and how a major war was likely between the two. Over the last 4 months, a lot of this has played out in ways similar to what I predicted.
Apple has gone after HTC, in what many believe is a proxy fight against Google and Android. Going after HTC gives Apple several advantages - HTC does not have the financial clout that Google has. Any judgement against HTC will dissuade others from stepping on Apple's technology patents. At the least, this will be a long drawn out legal battle, and will muddy the waters for Android quite significantly. In that period, Apple can increase its technological and marketplace lead over Android.
Apple has announced iAd - this is a much more serious threat to Google, because it attacks the very core of Google. Like everything else Apple touches, they came in late to the advertising game, but they have come in with a really well thought out implementation which make it extremely difficult for Google to counter. The nature of mobile devices today, is such that people dont spend much time on the browser per se, and instead use applications that are specifically designed to do one task well. Because these applications dont connect to Google at all - Google has no effective way of targetting ads.
Apple's current iPhone development guidelines charge $99 from developers who want to sell paid apps in the App Store, but dont charge anything from developers selling free apps. I expect that this policy will be changed within the next year - anyone using iAd in their free apps would continue to get free placement in the AppStore, but anyone relying on other advertising services would have to pay $99 to offer even their free apps in the store. This single move, combined with the fact that iAd offers very generous 60:40 revenue sharing with the developers is likely to move developers towards iAd very quickly.
iAd ads are served up by the OS - which has a very good idea of your current location based on WiFi, GSM triangulation, or GPS, depending on your device. The OS also knows your iTunes user id, and hence details of your credit card and your billing address. It has details of your past purchases on iTunes, as well as on the AppStore. All this information can be used to efficiently target ads at the user. Also, iAd offers much more compelling ads, with video, built in games, etc. And the ads are relatively unobtrusive, because when the ad is closed you are taken back to the application. iPhone, iPod Touch and iPad also represent the cream of the user community - the people with high disposable incomes and spending power. All these are likely to create impetus for a quick shift to iAd from the advertising community.
How can Google compete against iAd - I think Google will soon realize that it is pointless and likely impossible to compete against iAd on Apple's platform. Their $750 million investment in AdMob might be worth a lot less now. Their best bet would be to implement something similar in Android - but even here, Apple already has a patent on embedded advertising controlled from the OS.
Google belatedly realized the implications of this patent and has filed for a Location Based Advertising patent. This could take some of the sting from Apple's patent if successful - but unfortunately for Google, Location Based Advertising has several examples of prior implementations in Japan and other markets. It is unlikely that Google can get this patent - and even if they do, it is unlikely that they can successfully defend it. Apple's OS based advertising however has absolutely no prior implementation as a threat.
But all this is moot - Apple is not in this game to make money selling advertisements. They want to make sure that they remain in full control of the ecosystem, and they can sell more devices that become even more valuable because they can access content that is subsidized by ads in a verifiable way. This is very similar to the Hulu model where TV episodes are offered free in return for the user agreeing to see ads. In Apple's case, they can offer much wider variety of content for free - and because the ads are played by the OS itself, they can enforce that the user actually sees the ads. If Apple makes money from showing these ads, it is just gravy for Apple - but for Google the money from Ads is their biggest source of revenue. Apple is really going for Google's throat with iAd.
There are other subtle ways in which Apple is targetting Google. For the last 2-3 months, there has been speculation that Apple will replace Google as the default search provider on the iPhone - and possibly cut a deal with Microsoft to position Bing as the default search provider. However, this was seen as a move that would piss off Apple's user base, as Bing is clearly nowhere near as good as Google in web search. Such a move by Apple would have been seen as ineffective, because most users would have immediately switched their default provider back to Google. Apple however took a completely different path. Instead of picking a default search provider, they just removed Google's branding from the Search functionality, and just called in "Search Web". When the user searches, results are displayed from Google, Yahoo, and possibly even Bing. This kind of collating of results creates an advantages for the user - because you can get the best results from all search providers at one shot. From Google's perspective however, while their search results are available on the iPhone, they cant make money off it - because Apple strips off the ads and other things in the results.
Several years back, there was a major fight between web publishers and Google - with the web publishers complaining that Google News was displaying articles from websites, without showing the ads that were present on the websites. Only when users clicked on the "Read more" link would they be taken to the original website. In an age of information overload, it is natural that most people never bothered to click the "Read more" link, and instead got all their news from just the main Google News page. The clock has come full circle now - with Apple displaying the search results from Google's website, without displaying the Ads and other links in the website! It will be interesting to see how Google counters this move of Apple, without weakening its position on Google News, Google Reader, Google Books, etc. It will be brilliant if Apple just offers links like "More results from Google", "More results from Bing", etc - and place these alphabetically, so that Bing would come before Google.
This is just the beginning - expect to see more such initiatives over the next few months. Google is going to regret the day it decided to compete with Apple.
Apple has gone after HTC, in what many believe is a proxy fight against Google and Android. Going after HTC gives Apple several advantages - HTC does not have the financial clout that Google has. Any judgement against HTC will dissuade others from stepping on Apple's technology patents. At the least, this will be a long drawn out legal battle, and will muddy the waters for Android quite significantly. In that period, Apple can increase its technological and marketplace lead over Android.
Apple has announced iAd - this is a much more serious threat to Google, because it attacks the very core of Google. Like everything else Apple touches, they came in late to the advertising game, but they have come in with a really well thought out implementation which make it extremely difficult for Google to counter. The nature of mobile devices today, is such that people dont spend much time on the browser per se, and instead use applications that are specifically designed to do one task well. Because these applications dont connect to Google at all - Google has no effective way of targetting ads.
Apple's current iPhone development guidelines charge $99 from developers who want to sell paid apps in the App Store, but dont charge anything from developers selling free apps. I expect that this policy will be changed within the next year - anyone using iAd in their free apps would continue to get free placement in the AppStore, but anyone relying on other advertising services would have to pay $99 to offer even their free apps in the store. This single move, combined with the fact that iAd offers very generous 60:40 revenue sharing with the developers is likely to move developers towards iAd very quickly.
iAd ads are served up by the OS - which has a very good idea of your current location based on WiFi, GSM triangulation, or GPS, depending on your device. The OS also knows your iTunes user id, and hence details of your credit card and your billing address. It has details of your past purchases on iTunes, as well as on the AppStore. All this information can be used to efficiently target ads at the user. Also, iAd offers much more compelling ads, with video, built in games, etc. And the ads are relatively unobtrusive, because when the ad is closed you are taken back to the application. iPhone, iPod Touch and iPad also represent the cream of the user community - the people with high disposable incomes and spending power. All these are likely to create impetus for a quick shift to iAd from the advertising community.
How can Google compete against iAd - I think Google will soon realize that it is pointless and likely impossible to compete against iAd on Apple's platform. Their $750 million investment in AdMob might be worth a lot less now. Their best bet would be to implement something similar in Android - but even here, Apple already has a patent on embedded advertising controlled from the OS.
Google belatedly realized the implications of this patent and has filed for a Location Based Advertising patent. This could take some of the sting from Apple's patent if successful - but unfortunately for Google, Location Based Advertising has several examples of prior implementations in Japan and other markets. It is unlikely that Google can get this patent - and even if they do, it is unlikely that they can successfully defend it. Apple's OS based advertising however has absolutely no prior implementation as a threat.
But all this is moot - Apple is not in this game to make money selling advertisements. They want to make sure that they remain in full control of the ecosystem, and they can sell more devices that become even more valuable because they can access content that is subsidized by ads in a verifiable way. This is very similar to the Hulu model where TV episodes are offered free in return for the user agreeing to see ads. In Apple's case, they can offer much wider variety of content for free - and because the ads are played by the OS itself, they can enforce that the user actually sees the ads. If Apple makes money from showing these ads, it is just gravy for Apple - but for Google the money from Ads is their biggest source of revenue. Apple is really going for Google's throat with iAd.
There are other subtle ways in which Apple is targetting Google. For the last 2-3 months, there has been speculation that Apple will replace Google as the default search provider on the iPhone - and possibly cut a deal with Microsoft to position Bing as the default search provider. However, this was seen as a move that would piss off Apple's user base, as Bing is clearly nowhere near as good as Google in web search. Such a move by Apple would have been seen as ineffective, because most users would have immediately switched their default provider back to Google. Apple however took a completely different path. Instead of picking a default search provider, they just removed Google's branding from the Search functionality, and just called in "Search Web". When the user searches, results are displayed from Google, Yahoo, and possibly even Bing. This kind of collating of results creates an advantages for the user - because you can get the best results from all search providers at one shot. From Google's perspective however, while their search results are available on the iPhone, they cant make money off it - because Apple strips off the ads and other things in the results.
Several years back, there was a major fight between web publishers and Google - with the web publishers complaining that Google News was displaying articles from websites, without showing the ads that were present on the websites. Only when users clicked on the "Read more" link would they be taken to the original website. In an age of information overload, it is natural that most people never bothered to click the "Read more" link, and instead got all their news from just the main Google News page. The clock has come full circle now - with Apple displaying the search results from Google's website, without displaying the Ads and other links in the website! It will be interesting to see how Google counters this move of Apple, without weakening its position on Google News, Google Reader, Google Books, etc. It will be brilliant if Apple just offers links like "More results from Google", "More results from Bing", etc - and place these alphabetically, so that Bing would come before Google.
This is just the beginning - expect to see more such initiatives over the next few months. Google is going to regret the day it decided to compete with Apple.
Friday, December 11, 2009
The Googlification of Apple
Even 5 years back, if someone said that Microsoft would be irrelevant in the technology world today, they would be laughed at. Today, MS is not only irrelevant, but doesn't look like it can regain its stature any time soon. For a long time, people thought it was because of Windows Vista - but even the launch of Windows 7 does not seem to have changed much.
Today, Google and Apple seem to have a monopoly on mindshare - everyone is on top of what these 2 companies are up to. At one point, it looked like these two companies were partners against a common enemy - Microsoft - but as MS has become irrelevant, it looks more and more like Google and Apple will end up competing with each other. In a way, Google taking the mass market route and moving up the chain, whereas Apple already owns the high end consumer, and is looking to move down the chain to the value conscious consumer. Each has different strengths that will help it fight the other.
Google has always based itself on search - even today, despite having fingers in so many pies, 97% of Google's revenues come from Search. In a way, all other activities at Google are being subsidized by the massive revenues Google makes in Search. Because of this, there is absolutely no way any company can challenge Google in any of its initiatives, unless they can challenge Google's ownership of Search. In a lot of ways, this is similar to MS owning Windows and Office, and using the revenues from those areas to muscle into a lot of other areas.
Apple on the other hand has always been a high margin player - they don't do anything unless they can make 30% margins on it. Because of this high margin threshold, Apple has always been a small niche of the market. Despite having a small % of market share, Apple has always had a disproportionate % of mindshare. Because of this mindshare, Apple actually comes across as a bigger threat than it is.
Google has always operated from the traditional mindset - that no one wants to pay for anything on the internet anyway, so might as well give it to them free, and make money displaying ads to them. Apple on the other hand has shown that people are willing to pay if they get a valuable product/service at a reasonable price. These are two diametrically opposite business models, but Apple has an advantage that they can extend their business model to make money from ads - but Google has not had success in making money out of anything but Advertising, related to their domination of search.
Over the last 2-3 years, we have seen moves by Apple and Google that position each company as a competitor to the other. Google announced Android soon after Apple's iPhone, and now with Chrome browser and Chrome OS, they are stepping on Apple's toes as well. Similarly, Apple made a big push into Cloud Computing with .Mac and the Mobile Me - which are competing services to Google Apps.
Considering the friendly relationship between Apple and Google in the past - to the extent of having a board member in common, it is a fairly major thing when you see the relationship turning into unbridled competition - especially note the tepid reaction to Google Voice at Apple, and Google's complaint to the FTC regarding the same. The gloves are now well and truly off.
Google today owns AdMob - and strangely, is now in a position to make more money off the Apple AppStore, than Apple makes. Apple has made it amply clear that the 30% it gets from the paid apps barely covers the costs of running the store - because of the fact that most of the downloads are not paid for - they are either for free apps, or for upgrades of already paid for apps (on which neither Apple nor the App seller makes any money). Google on the other hand now stands to benefit from the AppStore because it now controls the largest ad seller for the iPhone. How long will Apple allow Google to make money from the AppStore, while Apple pays all the bills, and barely breaks even?
When Version 4.0 of the OS and the new iPhone are launched by summer 2010, I think Apple would have taken some steps to remedy this situation. I foresee that Apple will come up with its own equivalent to AdMob, and offer the same 70-30 model to the app developers - basically keeping 30% of the ad revenues to cover the costs of running the store. To avoid FTC and monopoly issues, they will likely offer a deal where the free apps have a choice - stay totally free with no ads, pay a flat fee for hosting at the store and use any Ad service to make money, or go with Apple for Ads in exchange for free hosting. This will be a direct attack on Google and AdMob - but is inevitable.
The competition between the iPhone and Android also makes it inevitable that Apple will eventually take away Google's special status on the iPhone - by offering Maps and Youtube alternatives that are not from Google. There is already an initiative to replace Maps, but Youtube might not be replaced anytime soon, just because there are no viable alternatives at the moment. But I can easily see Apple building out a Youtube like service within iTunes, and give people a way to make money off their home made videos. They have the basic infrastructure in place, just need to beef it up significantly. Who knows, maybe this is the reason behind the massive data center coming up in North Carolina!
Considering that mobile is becoming a very significant part of internet access, and will only gain more prominence in the future, this move by Apple will be a direct challenge to Google's ownership of Advertising revenues. Remember, it is not Search per se that is lucrative for Google, but the Advertising dollars that Google gets because of its ownership of Search. Once Apple gets a foothold into the Advertising space with the AppStore, it is a lot easier to extend that reach to other areas - like the iTunes store, etc. And Apple's ownership of iPhone and the AppStore mean that Apple can easily extend this domination to all aspects of the iPhone - including Mail, Browsing, Apps, Music etc. The same targeted ads that Google serves up on the desktop can be done by Apple on the iPhone. Arguably, Apple can even charge a premium on these ads, because the audience served by Apple is the high end consumer - Mac users are way high end compared to the average desktop user, and iPhone users are high end compared to the average mobile phone user.
Like Google, Apple is also making grand moves - that are targeted at platform ownership and dominance. The only difference is that Google is doing the same without making money off of these moves, whereas Apple has managed to dominate music, movies and mobile in a profitable way. They are now making attempts to do similar things in the print publications space and in TV. This is one area where Google also has a lot of interest, and it is likely that Google and Apple will go head to head in this space as well. Google has a headstart in terms of converting books to electronic formats, etc., searching and giving access to the websites of magazines/newspapers, online Video distribution, etc., but they have not figured out ways to make money off these initiatives. Apple on the other hand has the model where they can make money off device sales, planned obsolescence cycles (no user replaceable battery), etc.
Today, it looks like Google is stepping on Apple's toes, and competing with Apple - but in reality, Google is trying to protect itself so that it stays relevant in the future. They know that the kind of domination Apple has, in important areas like music, mobile, online movie distribution, etc., can easily be extended to compete with Google. Apple has done the hard work to build the platform, and has even managed to make money while doing so. The moves Google are making today are actually defensive moves, to ensure that Google will also have a say in an Apple world, and Apple wont run away with all the profitable areas of digital content.
In the next 2 years, we will see the tide turning, and we will see Apple stepping on Google's toes a lot more. So many people have tried to fight Google and have failed - so people assume that Apple has no chance if they try to fight Google. But what most people dont realize, is that the Microsoft's and Yahoo's of the world dont have the type of advantage Apple has, if Apple decides to take on Google. Apple owns/dominates several important industries, so they can fight the battle in ways that other people cant.
Both companies have massive warchests of cash, both have immense goodwill in the markets, and at the same time both companies have detractors. This will be an great story.
Remember, you read about this here first. No other blog, web site, newspaper or magazine has seen this coming yet. Even today everyone looks at Google as the unstoppable juggernaut. But it is Apple that has all the trump cards in this fight.
Today, Google and Apple seem to have a monopoly on mindshare - everyone is on top of what these 2 companies are up to. At one point, it looked like these two companies were partners against a common enemy - Microsoft - but as MS has become irrelevant, it looks more and more like Google and Apple will end up competing with each other. In a way, Google taking the mass market route and moving up the chain, whereas Apple already owns the high end consumer, and is looking to move down the chain to the value conscious consumer. Each has different strengths that will help it fight the other.
Google has always based itself on search - even today, despite having fingers in so many pies, 97% of Google's revenues come from Search. In a way, all other activities at Google are being subsidized by the massive revenues Google makes in Search. Because of this, there is absolutely no way any company can challenge Google in any of its initiatives, unless they can challenge Google's ownership of Search. In a lot of ways, this is similar to MS owning Windows and Office, and using the revenues from those areas to muscle into a lot of other areas.
Apple on the other hand has always been a high margin player - they don't do anything unless they can make 30% margins on it. Because of this high margin threshold, Apple has always been a small niche of the market. Despite having a small % of market share, Apple has always had a disproportionate % of mindshare. Because of this mindshare, Apple actually comes across as a bigger threat than it is.
Google has always operated from the traditional mindset - that no one wants to pay for anything on the internet anyway, so might as well give it to them free, and make money displaying ads to them. Apple on the other hand has shown that people are willing to pay if they get a valuable product/service at a reasonable price. These are two diametrically opposite business models, but Apple has an advantage that they can extend their business model to make money from ads - but Google has not had success in making money out of anything but Advertising, related to their domination of search.
Over the last 2-3 years, we have seen moves by Apple and Google that position each company as a competitor to the other. Google announced Android soon after Apple's iPhone, and now with Chrome browser and Chrome OS, they are stepping on Apple's toes as well. Similarly, Apple made a big push into Cloud Computing with .Mac and the Mobile Me - which are competing services to Google Apps.
Considering the friendly relationship between Apple and Google in the past - to the extent of having a board member in common, it is a fairly major thing when you see the relationship turning into unbridled competition - especially note the tepid reaction to Google Voice at Apple, and Google's complaint to the FTC regarding the same. The gloves are now well and truly off.
Google today owns AdMob - and strangely, is now in a position to make more money off the Apple AppStore, than Apple makes. Apple has made it amply clear that the 30% it gets from the paid apps barely covers the costs of running the store - because of the fact that most of the downloads are not paid for - they are either for free apps, or for upgrades of already paid for apps (on which neither Apple nor the App seller makes any money). Google on the other hand now stands to benefit from the AppStore because it now controls the largest ad seller for the iPhone. How long will Apple allow Google to make money from the AppStore, while Apple pays all the bills, and barely breaks even?
When Version 4.0 of the OS and the new iPhone are launched by summer 2010, I think Apple would have taken some steps to remedy this situation. I foresee that Apple will come up with its own equivalent to AdMob, and offer the same 70-30 model to the app developers - basically keeping 30% of the ad revenues to cover the costs of running the store. To avoid FTC and monopoly issues, they will likely offer a deal where the free apps have a choice - stay totally free with no ads, pay a flat fee for hosting at the store and use any Ad service to make money, or go with Apple for Ads in exchange for free hosting. This will be a direct attack on Google and AdMob - but is inevitable.
The competition between the iPhone and Android also makes it inevitable that Apple will eventually take away Google's special status on the iPhone - by offering Maps and Youtube alternatives that are not from Google. There is already an initiative to replace Maps, but Youtube might not be replaced anytime soon, just because there are no viable alternatives at the moment. But I can easily see Apple building out a Youtube like service within iTunes, and give people a way to make money off their home made videos. They have the basic infrastructure in place, just need to beef it up significantly. Who knows, maybe this is the reason behind the massive data center coming up in North Carolina!
Considering that mobile is becoming a very significant part of internet access, and will only gain more prominence in the future, this move by Apple will be a direct challenge to Google's ownership of Advertising revenues. Remember, it is not Search per se that is lucrative for Google, but the Advertising dollars that Google gets because of its ownership of Search. Once Apple gets a foothold into the Advertising space with the AppStore, it is a lot easier to extend that reach to other areas - like the iTunes store, etc. And Apple's ownership of iPhone and the AppStore mean that Apple can easily extend this domination to all aspects of the iPhone - including Mail, Browsing, Apps, Music etc. The same targeted ads that Google serves up on the desktop can be done by Apple on the iPhone. Arguably, Apple can even charge a premium on these ads, because the audience served by Apple is the high end consumer - Mac users are way high end compared to the average desktop user, and iPhone users are high end compared to the average mobile phone user.
Like Google, Apple is also making grand moves - that are targeted at platform ownership and dominance. The only difference is that Google is doing the same without making money off of these moves, whereas Apple has managed to dominate music, movies and mobile in a profitable way. They are now making attempts to do similar things in the print publications space and in TV. This is one area where Google also has a lot of interest, and it is likely that Google and Apple will go head to head in this space as well. Google has a headstart in terms of converting books to electronic formats, etc., searching and giving access to the websites of magazines/newspapers, online Video distribution, etc., but they have not figured out ways to make money off these initiatives. Apple on the other hand has the model where they can make money off device sales, planned obsolescence cycles (no user replaceable battery), etc.
Today, it looks like Google is stepping on Apple's toes, and competing with Apple - but in reality, Google is trying to protect itself so that it stays relevant in the future. They know that the kind of domination Apple has, in important areas like music, mobile, online movie distribution, etc., can easily be extended to compete with Google. Apple has done the hard work to build the platform, and has even managed to make money while doing so. The moves Google are making today are actually defensive moves, to ensure that Google will also have a say in an Apple world, and Apple wont run away with all the profitable areas of digital content.
In the next 2 years, we will see the tide turning, and we will see Apple stepping on Google's toes a lot more. So many people have tried to fight Google and have failed - so people assume that Apple has no chance if they try to fight Google. But what most people dont realize, is that the Microsoft's and Yahoo's of the world dont have the type of advantage Apple has, if Apple decides to take on Google. Apple owns/dominates several important industries, so they can fight the battle in ways that other people cant.
Both companies have massive warchests of cash, both have immense goodwill in the markets, and at the same time both companies have detractors. This will be an great story.
Remember, you read about this here first. No other blog, web site, newspaper or magazine has seen this coming yet. Even today everyone looks at Google as the unstoppable juggernaut. But it is Apple that has all the trump cards in this fight.
Sunday, September 14, 2008
What does music do for you?
Read a very interesting post by Arun about Rhythmic Trances. Set me thinking about the subject. Thanks Arun, for giving me a great subject to start my blogging with!
I think I get what Arun is referring to - using music to shut everything else out, and help stay in the "zone". And the longer you are in the zone, the more productive you can be.
Definitely wouldn't want the lyrics as part of the consciousness then - because instead of shutting everything else out, the lyrics actually stay in your brain! And possibly even distract you.
But I guess it is also a function of "understanding the music". A song in a language which we cant understand, should serve the same purpose as instrumental music, right? And wouldn't listening to an instrumental version of Maiya Maiya be almost as distracting as watching Mallika Sherawat cavorting on the screen?
Interesting to think about what exactly music does for us, at different times. When I am going on long drives, music helps me stay awake - whereas, at other times, the exact same playlist, can help me fall asleep as well! It is more a function of how I relate to the music - on long drives, I would be singing along, totally involved with the music, and the music actually takes away the monotony of the drive - whereas when I am in bed, the music takes the focus away from all the things that would likely keep me awake longer - in a sense, creating a "monotony" that can help me sleep.
I think more than a specific genre of music, it is how we chose to relate to music that makes the difference. Even the most lilting lullaby might not put you to sleep, if you are the one singing it! Of course, different genre's work best in different situations, without doubt - but it might not be as simple as just the genre.
I think I get what Arun is referring to - using music to shut everything else out, and help stay in the "zone". And the longer you are in the zone, the more productive you can be.
Definitely wouldn't want the lyrics as part of the consciousness then - because instead of shutting everything else out, the lyrics actually stay in your brain! And possibly even distract you.
But I guess it is also a function of "understanding the music". A song in a language which we cant understand, should serve the same purpose as instrumental music, right? And wouldn't listening to an instrumental version of Maiya Maiya be almost as distracting as watching Mallika Sherawat cavorting on the screen?
Interesting to think about what exactly music does for us, at different times. When I am going on long drives, music helps me stay awake - whereas, at other times, the exact same playlist, can help me fall asleep as well! It is more a function of how I relate to the music - on long drives, I would be singing along, totally involved with the music, and the music actually takes away the monotony of the drive - whereas when I am in bed, the music takes the focus away from all the things that would likely keep me awake longer - in a sense, creating a "monotony" that can help me sleep.
I think more than a specific genre of music, it is how we chose to relate to music that makes the difference. Even the most lilting lullaby might not put you to sleep, if you are the one singing it! Of course, different genre's work best in different situations, without doubt - but it might not be as simple as just the genre.
Subscribe to:
Posts (Atom)