Yesterday The New York Times picked up the hopeful news from the global music business that the revenue free-fall from $38 billion a year more than a decade ago appears to have stopped at $16.5 billion, leaving the industry at less than half its pre-digital size. This bottoming out of the revenues will come as some relief to industry executives who have wished and prayed for this day because, until it actually arrived, nobody knew for sure what type of revenues to expect in the future. That can make running a business pretty tough.
The music industry is everybody's favorite example of digital disruption done wrong -- including mine, since I covered music for Forrester several times. I have some classic stories I could tell to illustrate the point about executives who believed that suing customers was the path to profitability and so on, but I'll spare you those. However, as the author of a book called Digital Disruption, I actually owe it to the music industry for teaching me a few key principles of how to manage digital disruption:
Orange’s CEO mentioned during a business show on French TV that Orange is receiving money from Google for transmitting Google’s traffic (most of which stems from YouTube). No details about the financial arrangement of the year-old deal were disclosed.
So, does the Orange-Google deal mean that Orange has won a true victory and that the balance of power between carriers and OSPs is restored? Does the deal really address the challenges of the carrier world? Hardly.
Carriers rely on video content that drives demand for high broadband connectivity. Moreover, consumers already pay the carriers for their broadband connectivity. In my opinion, there is a valid argument that those end users who want high-quality video should be able to have it at extra cost. But this extra fee could be paid directly to the carrier in the form of a high-end broadband connection fee. Alternatively, the carrier could offer wholesale connectivity to OSPs, allowing the OSPs to offer content that comes with embedded high-quality connectivity.
Today is, apparently, Cyber Monday in the UK. But there's a more interesting story in the UK's eCommerce market. It's about tax.
The debate is about the tax policies of a number of prominent multi-national businesses that operate in the UK, including Amazon, eBay, Google, Starbucks and Vodafone, most of which pay little or no Corporation Tax, which is levied as a percentage of profits. (It's relatively easy and perfectly legal for a subsidiary of a multi-national company to avoid taxes on profits in one country by buying services from a sister company in another country so that it makes no profit in the first country.)
Today, the Public Accounts Committee of the House of Commons published a scathing report on tax avoidance by multi-national companies operating in the UK. As the report puts it about Starbucks, which has made no profits in the UK for 14 of the past 15 years: "We found it difficult to believe that a commercial company with a 31% market share by turnover, with a responsibility to its shareholders and investors to make a decent return, was trading with apparent losses for nearly every year of its operation in the UK." What the committee says about Amazon is, if anything, worse.
What's the relevance to eBusiness? While it's uncomfortable for Google and Starbucks to be in the limelight for the wrong reasons, demand for both information and coffee is (presumably) fairly constant through the year. But for retailers Amazon and eBay, the timing couldn't be worse, because this debate is taking place in the run-up to Christmas, the crucial sales period for all retailers in the UK.
It's now a year later and a lot has happened. Digital Disruption will soon be available as a hardback book (also as an eBook, natch). You can pre-order a copy now at Forr.com/DDbook. To complete the book I had to get far outside of my comfort zone -- I work with media companies and consumer product companies primarily, but to prove that digital disruption is a fundamental change in the way we all do business, I had to interview people in the pharmaceutical industry, the military camouflage industry, and I even recently spoke to the CIO of a cement manufacturer! And to my pleasant surprise, they were every bit as digitally disruptive as their counterparts in the consumer-facing enterprises that we think of when we imagine digital disruption.
One of the main reasons every company can be and eventually must be a digital disruptor is the rise of digital platforms. These platforms are founded on a set of devices, wrapped together with software experiences that identify each customer individually, and are open to app contributions from thousands of partners. The platform owners that matter today are Amazon, Apple, Facebook, Google, and Microsoft.
Windows 8 is a make or break product launch for Microsoft. Windows will endure a slow start as traditional PC users delay upgrades, while those eager for Windows tablets jump in. After a slow start in 2013, Windows 8 will take hold in 2014, keeping Microsoft relevant and the master of the PC market, but simply a contender in tablets, and a distant third in smartphones.
Microsoft has long dominated PC units, with something more than 95% sales. The incremental gains of Apple’s Mac products over the last five years haven’t really changed that reality. But the tremendous growth of smartphones, and then tablets, has. If you combine all the unit sales of personal devices, Microsoft’s share of units has shrunk drastically to about 30% in 2012.
It’s hard to absorb the reality of the shift without a picture, so in the report “Windows: The Next Five Years,” we estimated and forecast the unit sales of PCs, smartphones, and tablets from 2008 to 2016 to create a visual. As you can see below in the chart of unit sales, Microsoft has and will continue to grow unit sales of Windows and Windows Phone. But the mobile market grew very fast in the last five years, while Microsoft had tiny share in smartphones and no share in tablets.
If you look at the results by share of all personal devices, below, you can see how big a shift happened over the last five years as smartphone units exploded and the iPad took hold.
Microsoft Windows will power just one-third of personal computing devices sold during 2012. Say what? Over the past five years, the transition to mobile devices has transformed Microsoft’s position from desktop dominance to one of several players vying for share in a new competitive landscape.
And so Microsoft is making some very bold moves to transform Windows: creating a singular touch-native UX for a seamless experience across PCs and mobile devices, building an app store distribution model, and engaging its vast user base to develop core personal cloud services.
You’ll learn about the trends and behaviors shaping a painful, but ultimately successful, five-year migration for the Windows franchise. We will size and forecast the future of Windows’ presence in a device landscape where market share is measured across all computing devices, not just PCs. And we will outline the new personal computing success metrics for OS providers and ecosystems, which look beyond device market share to customer engagement across multiple formats, online services, and content delivery.
The other day I had an interesting discussion with Google about their Fiber-to-the home (FTTH) infrastructure. Google’s reasoning behind the move into the network infrastructure space stems from the belief that online growth and technology innovation are driven by three main factors:
The cost of storage, which has fallen considerably in previous years.
Computing power, which has increased in previous years.
The price and speed of Internet access, which has been stagnant for a decade. Today, the average Internet user in the US receives 5 Mbit/s download and 1 Mbit/s upload speed.
I published Understanding Tag Management Tools And Technology about six weeks ago. The research has been a valuable resource for documentating the vendor landscape and - most importantly - identifying how buyers deploy and benefit from tag management solutions. But as we've regularly noted, tag management is an early-stage market undergoing rapid expansion and evolution. Strictly speaking, "Understanding Tag Management Tools and Technology" was fully accurate for about a week. Since we published the research in mid-August, the TMS vendor landscape has continued to exhibit highly dynamic (and exciting!) behavior:
August: BrightTag acquires SiteTagger. US-based BrightTag sets its sights on establishing a strong foothold in the EU by acquiring UK-based SiteTagger. You can read about it here.
September: Mediaplex launches a TMS offering. Digital media powerhouse Mediaplex jumps into the TMS market with its own offering - named Master TMS - to further enhance their stack of advertising technology and services. You can check it out here.
October: Google launches a TMS offering. This is the big one. Web and tech giant Google launches its own TMS offering - named Google Tag Manager - to make digital marketing easier to manage and to bridge their broad portfolio of analytics and media products. You can read the official announcement here, and check out Justin Cutroni's blog for a more technical overview.
Now that Apple has apologized and the uproar over Mapplegate is starting to subside, it's time to step back and focus on why Apple had to do what it did. The fact is, Apple had to replace Google Maps for three reasons:
iPhone map users are too valuable to leave to Google. According to ComScore, the iPhone users account for 45% of all mobile traffic on Google Maps, with the remaining 55% coming from Android. This means approximately 31 million iPhone users access Google Maps every month. iPhone users also use Google Maps more intensively than Android users. On average, iPhone users spend 75 minutes per month in Google Maps versus 56 minutes per month for Android users. And iPhone users access Google Maps more frequently than Android users, averaging 9.7 million visits daily versus 7.1 million visits for Android users. Given this data, Apple has a vital strategic interest in moving its iPhone users off Google Maps and onto an Apple mapping solution. Doing so not only deprives Google of its best users but also gives Apple the customer base they will need to drive adoption of new location-based services.
This week, the New York Times ran a series of articles about data center power use (and abuse) “Power, Pollution and the Internet” (http://nyti.ms/Ojd9BV) and “Data Barns in a Farm Town, Gobbling Power and Flexing Muscle” (http://nyti.ms/RQDb0a). Among the claims made in the articles were that data centers were “only using 6 to 12 % of the energy powering their servers to deliver useful computation. Like a lot of media broadsides, the reality is more complex than the dramatic claims made in these articles. Technically they are correct in claiming that of the electricity going to a server, only a very small fraction is used to perform useful work, but this dramatic claim is not a fair representation of the overall efficiency picture. The Times analysis fails to take into consideration that not all of the power in the data center goes to servers, so the claim of 6% efficiency of the servers is not representative of the real operational efficiency of the complete data center.
On the other hand, while I think the Times chooses drama over even-keeled reporting, the actual picture for even a well-run data center is not as good as its proponents would claim. Consider:
A new data center with a PUE of 1.2 (very efficient), with 83% of the power going to IT workloads.
Then assume that 60% of the remaining power goes to servers (storage and network get the rest), for a net of almost 50% of the power going into servers. If the servers are running at an average utilization of 10%, then only 10% of 50%, or 5% of the power is actually going to real IT processing. Of course, the real "IT number" is the server + plus storage + network, so depending on how you account for them, the IT usage could be as high as 38% (.83*.4 + .05).