Marketing Memos

If I were a young pup just starting out into the big, bad, brawling world of technology marketing, I’d run like the Devil himself were chasing me into the mobile market.

It is a wild place, with zero loyalty between vendors, customers, partners, and technology. It is currently one huge cesspool of competing interests, awaiting a shakeout, collapse, and consolidation.

But since we — as an alleged society — have only started to explore the potential of carrying and wearing wirelessly connected computers, the market-wide shakeout is still a long way off.

What better challenge exists for a marketing maven than making a buck in utter chaos.

Which brings me to Nokia (I’m betting my friends at Nokia just soiled themselves).

Nokia is a smart group of folk. They saw the early rise and global opportunity of the mobile market, and were one of the first firms to profit on the hardware side. But both they and Motorola (another of the early success stories) were recently floundering as the mobile hardware market became hypercompetitive, and they are not creating perpetual advances in product design.

Nokia appears to see how the market has changed, and is taking steps to dominate once again. It shows. Nokia’s profits were up 44% in the latest quarter, and Motorola’s profits fell 84%.

Nokia is doing a number of things which show they understand that the market is bifurcating (dividing into two branches for those of you with a public education) and that they have opportunity on both ends.

Nokia is making good money on the bottom of the market, selling cheap handsets into parts of the world that are jumping directly from third-world status to unwired and Internet ready (imagine having never seen a wired telephone in your life). Most of their recent 44% profit rise came from being the low cost, commodity device maker.

But they also understand that the high end of the market drives early adoption, that today’s luxury features are tomorrow’s commodity ante, and that buying the core technology (instead of licensing it) reduces overall cost per unit.

This week Nokia bought Trolltech. For those who have never set foot in the Open Source space, Trolltech makes a number of nifty user interface tools, including Qt, which is the basis for KDE, the dominant Linux desktop interface (no slight to the Gnome crowd, but KDE really is slicker). Being an open and portable technology, it is used in mobile applications as well.

But Nokia gets Qtopia, Trolltech’s framework for building mobile applications. Qtopia rides atop the operating system, and works best on mobile Linux, as Nokia’s competitor Samsung has done. Trolltech has enough Linux experience that Nokia would be able to build their own Linux stack for mobile device, leverage Google’s Android, or partner with all of the mobile Linux foundations … or all of the above.

And it gives them a top-shelf solution for application development and deployment, which is still the big opening in the mobile marketplace.

The point (which leads to my next point) is that they are bringing in-house all the expensive software components of mobile devices, and in the process they are dropping their per unit cost of manufacturing. This adds to their profitability on the high end of the market, allows them to move high-end features profitably into the commodity realm, and kick their competitor’s butts at either extreme.

Gawd, I love a good marketing strategy, and they all start with blocking your competitors.

Also recall that Nokia recently bought Navteq, one of the top makers of GPS software and mapping databases. Nokia will generate income from Navteq sales to even their competitors, while reducing to near zero the cost of adding GPS functionality to their products. GPS is the next big demand item for mid-range cell phones, and Nokia has positioned themselves to dominate that segment of the market and drive ubiquitous adoption down the road.

You have to applaud Nokia for market insight, agility, and the willingness to change the rules of the game by changing the economics of manufacture for handsets. Bravo!

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I will be speaking at the Sales, Licensing, Alliances & Marketing (SLAM) conference in San Francisco, April 3-4, 2008.

I’ll present on the topic Marketing in Troubled Time, a talk I was giving frequently during the dot-bomb era.   I’ll provide insights into how customers respond to economic slowdowns, tell you some interesting tactics for maximizing revenues during recessions, and tie this together with our latest observations on how the software industry is getting crazier all the time.

Mark your calendars now and drop by SLAM.  Your corporate survivability may well depend upon it.

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I have written often about how the technology industry is commoditizing itself. I have also written about how consolidation is an inevitable process in every industry.

Now we see how the two work together and create what some might view as the End of Days (of course those same people had apocalyptic visions when Microsoft announced NT).

The big news of the day, week, month, and thus far the entire year is that Sun Micro (of all people) is buying MySQL for a cool billion dollars. So much for Mister Mickos growing rich slowly. This takes the world’s most popular DBMS (in terms of number of installations) and gives it a global sales and support team. Not bad for a hardware company.

(The wisdom of forfeitting 8% of Sun’s current market capitalization is suspect however — you can buy a lot of offshore programmer time for a bill)

MySQL, like Linux, is Open Source and a force for commoditization of the IT infrastructure. Vendors who waited too long to realize that their markets were being commoditized (like Sun and their UNIX servers) get clobbered. So Sun is shifting and grabbing strong players in the commodity technology business.

Sun’s CEO Jonathan Schwartz seems to understand the mechanics of commodities, something his glib predecessor McNealy did not. Schwartz recently noted:

“Exxon just reached a half a trillion dollar market cap based on a commodity. Commodities are where it’s at.”

This is a mighty switch for Sun. In the past they retreated to high-end servers and software in order to escape the forces of commoditization, and found themselves selling to fewer and fewer customers. Wealthy customers they were, but the higher up the technology curve Sun drove, the less total revenue they made.

Now Sun is submitting and planning on profiting in the volume business that is commodity technology.

“MySQL is by far the most popular platform on which modern developers are creating network services … The adoption of MySQL across the globe is nothing short of breathtaking. They are the root stock from which an enormous portion of the web economy springs.”

If I were Larry Ellison, I’d be tempted to take Scwartz’s scalp … or at least that ratty looking ponytail. Oracle is on its own buying spree in an attempt to escape the commoditization of their piece of the IT infrastructure. Oracle is buying and building applications and middleware (mainly for high-end customers), and added to their portfolio by purchasing BEA.

Anyone else see what I’m seeing?

Oracle is running away from commoditization the same way Sun once did. Sure, Oracle now owns most of the popular commercial CRM packages, but that doesn’t bother SalesForce.com or SugarCRM, who are taking different paths to commoditizing that application segment. From a recent consultation I had with Oracle’s middleware group, I know they are feeling the heat of commoditization in the developer tools category as Eclipse, JBoss, and other software take all recognizable market mind-share. Internally at Oracle, the two forces have been reconciled.

Larry Ellison makes very few mistakes, and if his charge up the stack is a mistake, it will take a few years to see cracks in his castle wall. But over a five year span, I would not bet on Oracle’s strategy.

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Alas, poor Netscape. I knew them heretofore.

It is indeed sad to see the reaper claim Netscape Navigator. And sadly enough, the very thing that brought them fame may well have killed them — namely buzz.

When the net was first being popularized, and HTML was still a quirky technology at best, we had limited choices for web surfing. People with graphical terminals (you lucky *#&**#^!) had Mosaic. Primitive as it was, it at least allowed for direct and intuitive access to the few thousand web pages in existence at that time. It was a durn site better than the text-based browsers (lynx) to which I was restricted.

Then along came Netscape. They picked-up where Mosaic left-off, adding polish and professionalism. Andreessen, Clark and the rest of the Netscape team knew the net better than most anyone at the time, and leveraged that knowledge in one of the earliest instances of Internet buzz marketing.

And it worked … very, very well. Word of Netscape Navigator spread like a Santa Anna wildfire, and soon everyone had downloaded a copy. In short order, buzz had driven Navigator into total market dominance. The only thing that could disrupt this market leadership was to change the default browsing experience, which is what Microsoft did when it began bundling Internet Explorer on every new desktop machine sold on the planet.

Buzz marketing is good, but it is not good enough by itself to displace that degree of forced adoption. Buzz is good enough to claim market, and in this case to end the long life of Netscape Navigator.

Firefox achieved it’s current market penetration (10% by common estimates, 17% by traffic on this web site) through buzz. By providing something different (a browser that worked the same across three major desktop platforms) and proving itself safer that Microsoft’s browser, they generated self-sustaining buzz. When my non-techie family members started to ask me about Firefox, then I knew its buzz had achieved break-through status.

The chart above shows the Google search trends for the words “firefox” and “netscape” (Firefox is the blue line — click on the graphic for a larger version). Firefox wasn’t even released until late 2004, and yet had substantial buzz early in the year. Netscape buzz continued its steady downward trend by offering nothing newsworthy.

If anything, Firefox buzz accelerated the demise of Navigator. I won’t opine on if this is a good or bad turn of events, but it illustrates the two edges of the buzz sword. Not only can buzz be used to increase awareness of and demand for a product, it can diminish the demand for competing products. In this buzz is somewhat unique, in effect sucking all available oxygen out of a market and suffocating competitors.

Yet another reason buzz management needs to be part of every marketer’s armory.

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