Yesterday, Apple announced that it had sold 4.19M iPads in its fiscal Q4 2010, up from 3.27M in Q3. That means it sold more iPads than Macs in Q4, even though quarterly Mac sales were the highest they've ever been: 3.89M, a 27% unit sales increase from the year-ago quarter. Given that calendar Q4 sales typically account for 35%-40% of consumer electronics sales, we could be looking at 15M+ iPads sold globally for Apple in its first, three-quarter year. I am not the only analyst saying "Wow" right now.
There were tons of interesting tidbits in Apple's earnings call yesterday but I want to focus on a two points that I know are plaguing product strategists in this area. In particular, Steve Jobs attacked:
Believe it or not, that was a piece of "advice" that I discovered while trying to fix a problem with Google Chrome. The question was about a browser, but the answer was about an operating system. It was clearly not helpful, at least in dealing with my immediate problem.
On the other hand, pseudo-advice like that is very useful if you want to understand the state of the technology industry in 2010. It's the subject of this autobiographical psychodrama that I might entitle, Personal Computers Are Not Appliances. If you decide to read on, let me warn you: it's a terrifying tale of reasonable people at the mercy of unreasonable levels of complexity and unreliability. During this exposition, you'll encounter interesting characters like the Apple iPad, Google's business plan (of sorts), Marc Benioff, and our evil cat Kelly.
When Chrome Lost Its Shine
Yesterday morning was crunch time at stately Grant Manor. The quarter was coming to a swift end, which meant all kinds of deadlines for research documents, expense reports, client projects, and a variety of other tasks. Regular activities, such as phone calls with technology companies about their latest product and service offerings, still happen during these hyper-busy periods, when time becomes so compressed that it fails to serve its basic purpose of, in the words of Richard Feynman, preventing everything from happening all at once.
Eric Schmidt has seen the future, and it's "autonomous search." That's a fancy term that means "discovery." But no matter what words you use, it still means the same thing: more empowered consumers and greater value in earned media.
Some people are creeped out by portions of what Schmidt said, but he has suggested an exciting future for empowering people to create greater influence and be armed with timely, relevant, and useful information. At TechCrunch Disrupt, Schmidt envisioned a future where people and technology come together to create "a serendipity engine . . . a new way of thinking about traditional text search where you don't even have to type."
As you look into the future, the distinction between “search” and “discovery” gets muddy. While it sounds like science fiction to suggest that technology can help search for things you don’t even yet know you want, the opportunities to improve human discovery are very real. Combining a person’s context—where they are, who they’re with—with their past opinions and actions and the opinions and actions of others can create tremendous value and relevance.
I'm always surprised when there's a great deal of news buzz over something everyone knew was going to happen. When I lived in Milwaukee, we'd joke about the first snowfall of the year and the sorry assignment given the lowliest reporter to stand on a giant pile of municipal salt to report on the efforts to clean the streets. We all know it snowed, we can see the snowplows--what's newsworthy about this, exactly?
That's the way I felt reading all the headlines about comScore's report that time spent with Facebook exceeded Google in August. Any informed person knew the trends and expected this to happen, so whether Google or Facebook is No. 1 is less interesting to me than what the trend really means. This week's news is not as immediately dire for Google nor as immediately beneficial for Facebook as the headlines would imply. That said, the trends do highlight the fact that Facebook has succeeded where Google has not in creating a single, cohesive experience that gives today's consumers what they want.
When people hear the Google name, the first thing that comes to mind is the search engine which, of course, is not a place where people spend a lot of time--users search and leave quickly. But Google has many popular "sticky" sites, such as YouTube and Gmail, and despite the news, these sites are not losing attention. In fact, Google isn't shrinking while Facebook is growing, it's just that Google isn't growing as fast as Facebook.
Google has said nothing about its rumored social networking offering, but it may be that the company has just revealed its secret weapon to take on Facebook. The new Priority Inbox feature in Gmail hints at social media’s next great battleground: Relevance!
Facebook itself inadvertently demonstrated the value of relevance and what is most wrong with the current Facebook user experience. The Facebook Places announcement event two weeks ago was the geeky event you’d expect, but there was an unexpected moment of clarity and beauty in the midst of the typical discussion of APIs, partners and functionality. Facebook VP Chris Cox told a story set in the future that defines the true promise that social networking has yet to fulfill:
“In 20 years our children will go to Ocean Beach and their phone will tell them this is the place their parents had their first kiss, and here’s the picture they took afterward, and here’s what their friends had to say.”
It’s a great story, isn’t it? But today’s Facebook experience offers no chance this experience could actually occur. Instead, here’s what would happen based on the current Facebook functionality: Those kids will visit that beach and their parents’ precious story will be nowhere to be found on the Ocean Beach Places page. That wonderful 20-year-old status update and picture will be buried under 500 pages of less meaningful messages such as “Don’t buy a hot dog from the snack bar,” “Here’s a picture of some hot babes I took here,” and “Beach kegger party this Saturday night, dudes!”
Google's decision to pull the plug on Wave was hardly surprising. Not only did Wave stumble out of the gate and then never quite get its footing, it violated a core principle of software as a service (SaaS): It's the application, stupid.
If you're going to be in the SaaS business, you need to deliver an application that's attractive, comprehensible, and usable immediately. Not after a horde of developers built a library of interesting widgets. Not after a quasi-beta program in which the product is really in production, but you just choose to call it beta. Not after potential users scratch their heads for days, wondering what the heck this Wave thing is supposed to do, and then sell their equally perplexed colleagues on its purported value. Deliver value now is the cardinal rule of SaaS.
On-Premise Strategy For An On-Demand Application
Wave's product strategy resembled a traditional on-premise strategy, in which you built the platform first, and then added an application to it. In the cloud, the product strategy moves in exactly the opposite direction: application first, then platform. A classic example is the Salesforce portfolio, which started with a highly capable CRM application that was easy to implement. Later came the platform, Force.com, on which customers and partners could build customizations and adjacent applications.
On the heels of some positive court decisions earlier this year, Google today announced that they're changing their keyword bidding policies in Europe to match those already in place in the US, the UK, and elsewhere. Most notably, this means European marketers will now be able to display paid listings to users searching for other companies' trademarks. There's lots of coverage around, including:
Obviously, this isn't great news for brands. That's why Louis Vuitton and others were fighting against these policies in court; they've worked hard to build brand recognition and credibility and to drive the consumer desire that leads to a Web search -- and they feel as if Google is making money by selling those consumers to other marketers at the last moment.
But brands don't always lose. Sometimes those other marketers will be competitors, of course -- but sometimes they'll be the channel partners of the brands being searched for. Sony, for instance, shouldn't have any problem with Amazon.com and other retailers advertising Sony's digital cameras when consumers search for those cameras by name. For the retailers, then, this decision is a win: They have more freedom than before to target in-market buyers, no matter the brand for which they're searching.
Google announced yesterday that it is buying ITA Software for $700 million. ITA does two main things: airline eCommerce and reservations management solutions and a cross-airline flight comparison tool called QPX, used by most of the major travel comparison Web sites including Kayak, Orbitz, and Microsoft Bing.
Google purchased it for the QPX product in a classic example of buying technology instead of either building it in-house or licensing it.
Today, Bing, Microsoft’s search offering, offers a solutionthat is based on QPX to help customers search for flight information on the Bing Web site. Google has nothing comparable; instead, they direct customers to other travel specific sites (see the screenshots below).
Google is focused on the goal of staying at least half a step ahead of Microsoft in all aspects of search technology; in order to stay ahead of Microsoft in this area, Google had three major options: 1) License the technology; 2) Build it themselves; 3) Buy ITA.
Licensing the technology would mean that Google would end up with a solution equivalent to Microsoft’s and not as robust as specialized Web sites like Kayak. Building the technology would take several years, allowing Microsoft and other competitors to continue to differentiate themselves and pull ahead.
This left the acquisition as the only viable path to regaining leadership in this area, while at the same time placing Microsoft in the awkward position of relying on Google-owned technology as the backend for one of their major search features.
It has only been a few weeks since Google announced it would create a brave, new world with its Google TV platform. In all the reactions and the commentary, I have been amazed at how little people understand what's really going on here. Let me summarize: Google TV is a bigger deal than you think. In fact, it is so big that I scrapped the blog post I drafted about it because only a full-length report (with supporting survey data) could adequately explain what Google TV has done and will do to the TV market. That report went live this week. Allow me to explain why the report was necessary.
Some have expressed surprise that Google would even care about TV in the first place. After all, Google takes nearly $7 billion dollars into its coffers each quarter from that little old search engine it sports, a run-rate of $27 billion a year. In fact, this has long been a problem Google faces -- its core business is so terribly profitable that it's hard to justify investing in its acquisitions and side projects which have zero hope of ever contributing meaningfully to the business (not unlike the problem at Microsoft where Windows 7 is Microsoft). So why would Google bother with the old TV in our living rooms?
Because TV matters in a way that nothing else does. Each year, the TV drives roughly $70 billion in advertising and an equal amount in cable and satellite fees, and another $25 billion in consumer electronics sales. Plus, viewers spend 4.5 hours a day with it -- which is, mind you, the equivalent of a full-time job in some socialist-leaning countries (I'll refrain from naming names).
Google's goal is to get into that marketplace, eventually appropriating a healthy chunk of the billions in advertising that flow to and through the TV today with such painful inefficiency.
Today Google announced that it had generated $54 billion worth of economic activity in the US in 2009. The report, which shows state by state economic contribution, bases Google's total value on three factors: 1) Sales driven through AdSense and AdWords; 2) Ad revenue generated for publishers through AdSense; and 3) Google grants. As a research analyst, I'll admit that you can make numbers tell any story you want to, and my gut here is that this report is principally a PR effort to: 1) Communicate some altruism about the Google brand that has been getting some bad press of late; 2) Simplify the complex transformation Google has brought to advertising into a simple, single number; 3) Shift the focus away from questionable strategic decisions that Google has recently made. I wholeheartedly believe that Google has transformed advertising and is almost singularly responsible for the phenomenon of biddable media buying which I think will ultimately replace relationship-facilitated media buys across channels. But I don't believe that Google stimulated $54 billion worth of business. I think what Google did do is provide a new revenue stream to small businesses and site owners, catalyze some new sales, and take a share of commerce and media expenditures that would have happened anyway.