Marketing Memos

“Linux, the original computer virus.”

That line used to be said of UNIX, but no single flavor of UNIX ever spread across so many platforms and onto so many handsets.  Those handsets, the oft predicted unified communications solution, are the new OS battleground.  In a relatively short time we have seen:

• Google issue Android and, with partners Motorola and Verizon, shook Steve Jobs so bad he nearly busted a spleen (but I hear he can buy replacement parts easily enough)
• Flush from that success, Motorola decides that owning a Linux distro might be a good long-term option and buys Azingo
• Intel bought Wind River, the leader in embedded operating systems, and one who was grooming the embedded Linux market, including handsets, a chip target high on Intel’s priority list
• HP, unhappy that Apple iPads beat them to the Slate market, and seemingly unhappy with Microsoft’s offerings for slab devices, buys Palm to own WebOS and thus bring down the cost of cranking-out hPads (and produce a device that does not require rebooting every other minute)
• And, of course, RIM created and maintains the BlackBerry OS, which has proven to be so addictive that the FDA has considered regulating it

The interesting twin market dynamics are that every hardware manufacturer wants a slick mobile operating system, and nobody wants to be beholden to a software company.  Apple, HP and Nokia own theirs, Google and Motorola leveraged Open Source for their operating system (OS-OS?) and market leader Nokia did both, buying then outing Symbian.  Microsoft is found … well, it isn’t.  The factors that are driving this market change are:

Cost: Microsoft embedded OSs go for $3-16 per unit.  If you sell a million handsets in a year, that is real money and owning and OS or leveraging a ‘free’ operating system like Linux makes economic sanity.  Given that you can retail a smart phone for under $300, eliminating 5% of the cost of manufacture is a Good Thing™.

Control: For Apple, control is everything (they won’t even cede control of any part of the user experience to Adobe Flash).  Many Windows handset vendors felt they had little control over the user experience, which was largely bad anyway.  Buying an OS or influencing Linux development makes everything possible.

Innovation: If you do not have the ability to alter or extend the OS, then you have limited ability to extend the user experience – just ask anyone who waited an eternity to get copy/paste on an iPhone.  Having access to the OS source code means you can either mandate or influence core functionality.

The customer: People like what they know.  If you create a good daily user experience early in a product relationship, then the customer is more likely to stay with you in future purchases, especially if you have special lock-ins that make switching difficult. Owning or manipulating the OS makes this more likely.

Unclear is if the recent OS buying binge will soon abate.  Some of the alternate handset makers – Samsung, HTC, etc. – who have played the field might see the wall writing and hedge their bets by buying a mobile OS, or become specialists in one or more of the open varieties.  The real question is which strategy will win in the long term.

Don’t bet on Apple.  Walled gardens keep people out as well as in.

Don’t bet on Windows because their partners aren’t.

Don’t bet on WebOS because HP will not have the market breadth to make it a widely known and loved OS (and, as RTE, MPE and HP-UX have shown, operating systems are not HP’s strong suits).

Don’t bet on Motorola/Azingo because Moto is not a software company and lacks the creative energy to enhance Linux.

Place a side wager on Symbian because it is better than most people think and might be a dark horse.

Bet big on Android.  Google is driven, creative, knows how to lead and Linux has the power of an ecstatic developer community.  And being the original computer virus, it will handily port everywhere while stuff like Blackberry OS, iPhone OS and WebOS don’t.  Change often comes from the inspired or frustrated masses and Google can channel that into Android, as can their partners who have the skills and the motivation to make it happen.

UPDATE: A few hours after this blog was posted, a report hit our desk showing that Android OS is now selling faster that iPhone by seven market share points.  Double down?

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Newspapers.  Some say they are going, others think they are gone.  I think they are on the verge of a comeback.

I have a cartoonist friend who is makes a good living drawing web cartoons.  He wishes a fast and speedy death to newspapers, believing that their business model is older and less lovable than Charles Foster Kane.  He sees no reason that any business built on the daily delivery of dead trees should continue.

Some newspapermen reluctantly agree.  I spent part of Sunday afternoon with two reporters for a local newspaper group, which despite the efficiencies of consolidation admit that they live from fiscal quarter to quarter.  They have no idea how they are going to survive.  The cynical observation “Trying to be a first-rate reporter on the average American newspaper is like trying to play Bach’s St. Matthew’s Passion on a ukulele,” may be outdated.  We have to substitute the uke with a kazoo.

Newspapers are failing in our wired and wireless 24-hour news cycle nation.  People are fully accustomed to getting their news, sports updates, and even their comics in an on-demand mode.  Even in the day when afternoon papers existed, news was always several hours old.  This is unacceptable in a world where news happens all the time and has become a form of entertainment for many.  Between major advertisers finding better buyer recruitment online, and with Craig’s List eliminating classified advertising income, there came a huge mismatch between falling revenues and high fixed costs for papers.  Something has to break, and if Chapter 11 filings are any indication, it is the newspapers themselves that are breaking.

Sure, many papers have tried to make a move to digital, though their approach has been universally unsound.  Local news web sites do not take advantage of online opportunities.  They fail on many fronts to deliver to what Amazon.com has conditioned people to expect.  Newspaper web sites are little more than static pages with click ads, and enjoy the same roaring financial success that the Kitty Kat Korner blog does.

So it is odd that Steve Jobs, a man who has made life difficult for so many industries, may rescue newspapers.

Not Steve per se, but the whole growing Kindle, iPad, Slate hardware class.  The fact is that people like newspapers, books and other traditional media formats.  They just don’t like the limitations that dead tree delivery requires.  When you can fit all of your semester’s college text books into a manila envelope – by first putting it on a Kindle – then you have fundamentally changed the nature of the media.

Newspapers haven’t figured this out yet.  They are not yet fully aware that they need to make several related yet fundamental changes to their business model in order to thrive in the new digital reality.  It isn’t just going electronic: it is about maximizing the user experience, which is really what product design is always about.  Here are the big steps newspapers need to take in order to survive and stay relevant.

Save the trees: The cost and delay factors of newsprint are no longer viable.  Going to an all electronic distribution system will be a brave new world, but a highly cost effective one.

Instant news updates: Because people have shown a willingness to be wirelessly connected, newspapers need to push news down to the devices on a regular, constant basis (or at least allow a total newspaper download on demand) and that the news be just that – the latest breaking details and updates.  A commuter should have the equivalent of an up-to-the-minute morning paper on their iPad when they leave the office and sit on a subway train.  This alone might make newspaper subscription models viable again.

Targeted advertising (location based too): Advertisers are abandoning newspapers because they have better options.  When you can target ads to desired demographics and measure success, who would want the hit-and-miss of major display advertising in a pulp paper media?  But if an advertiser could target individual newspaper readers, that changes the value proposition.  If you are a 90 year old woman and your newspaper carries ads for motorcycles, either the advertiser wasted their money or you are one cool granny.  Newspapers should be able to deliver their constant news updates with advertising that targets the individual subscriber, so that granny sees ads for walkers and your teenaged son sees the motorcycle ads.  Toss in location based ads and you increase advertiser options.

Customized content: Most of the daily newspaper is waste paper, except in households with a lot of very different people.  I have met men who toss everything but the sports pages, women who only read the human interest section, and news junkies that only scan Section-A. In the modern age it will be viable to send all that content to every reader every hour, but premium content can be delivered on an ala carte basis.  This creates a value-add for newspapers and valuable new content for consumers.

Combined these changes address newspaper costs, enhance newspaper revenues, bring advertisers back to the press, and expands choice and goods to consumers.  Which is why so few papers will take the plunge.  There is a lot to do here, and though it is all a mere matter of software, there are enough moving pieces to be problematic.

There is an open market opportunity here.  Many newspapers have adopted content management systems for their online editions.  Some even use Open Source alternatives.  Extending these systems for reformatting, packaging, customizing and ad-targeting to subscribers is not the ugliest PRD ever written.  But the various disciplines combined are.  With the slate market fragmenting, and with content warlords like Steve Jobs making it tough for anyone wanting not to be imprisoned in walled gardens, the device-side coding will be cumbersome.  Ad targeting with load management is a science and best left to experts.  So it may take an entrepreneur aggregator to make all of this occur.

But, that is why Gawd invented Silicon Valley – to solve these pesky problems.

The marketing lesson here is almost Zen like.  Occasionally the universe pushes you in the right direction.  You just have to be pliable enough to float, like a loose piece of newsprint on the breezes of market momentum.  Instead of fighting to preserve the old model, brave newspapers need to do a complete conversion to the 21^st century and rake in the rewards.

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