vicodin
February 22, 2011
 Email This Post
 Print This Post
Who wants $29B a year?
The ubiquity of cell phones has not gone unnoticed by anybody, even the stodgy old banker down at your local branch (though he merely finds his daughter’s monthly texting charges aggravating). Even the most primitive of modern cell phones is a small computer with wireless data capabilities. With cell phone penetration nearing 80% in the United States, and emerging nations adopting cellular as their first telecommunications infrastructure, soon a cell phone will be owned and operated by every homo sapiens and a few lower order mammals as well (cats will not deign to dial themselves … that’s what they keep humans for).
 Thus, folks who earn a dime from financing a dollar are interested in using any technology to speed payments. In our fast paced modern world, waiting behind someone using an ATM card at Starbucks seems like an incredible waste of time. Hence the rapid move by nearly everyone to engineer Near Field Communication (NFC) payment systems. The credit card companies want to, because they know NFC will eat away at their earnings ($39B between American Express, MasterCard and Visa alone last year). Apple, Google and Nokia want a slice of that too, though instead of the industry standard 2.16%, Apple will likely demand 30% of each transaction.
The math is compelling.
A little more than half of the world’s nearly seven billion people live in industrialized areas, and most have cell phones or are too old/young to enjoy being annoyed at every hour of the day and night. Shortly, 80% of these 3.4 billion industrialized people will have a handset, just like the U.S. Assuming that the average Joe, Jane or Jinjing makes a mere three small transactions each day, and that a single penny was collected for financially facilitating (and expediting) those transactions, there is about $29B to be made by implementing cell phone based payment systems. Much more money is at stake when we get realistic about the number and size of each transaction and the service fee collected for them
That’s not chump change, not even to Eric Schmidt.
Hence every handset and mobile OS maker is racing to engineer, certify and deploy NFC, which allows a payment to be made simply by putting a cell phone near a cash register and authorizing the transaction. No card to swipe, no PIN to enter, no slip to sign, no change to be given back. It is a win-win for everyone involved, which is why each technology and financial business wants first-mover advantage in order to keep everyone else from succeeding.
Which is why Android, again, is an interesting marketing lesson.
Unlike Apple (where the OS, hardware and overlording is supplied by one vendor) or Nokia (where the dismal duo of them and Microsoft are way behind), Android is growing virus-like by design. Google wanted fast, wide and deep Android penetration (fast as in “roll out a new cell phone design tomorrow”, wide as in “every vendor in every country” and deep as in “every possible cell phone price point”). This is why a mobile OS that was unknown two years ago is now out-shipping all others. Hence, Google is best positioned to leverage mass adoption of an operating system (on which they make no money) for services, including payment services.
An oft repeated marketing lesson at Marketing Memos is that ubiquity brings tangent rewards. Google could have cloned the Microsoft model and charged per-instance licenses for Android, and it would have been as popular as toe fungus. Instead, Google worked long, hard and gave away Android in order to make money later, in advertising, in impulse sales and in NFC enabled payments.
Technology exists to achieve something. The computer, OS and word process I use was purchased in order to communicate to you. Android was developed and disseminated in order to earn $29B later.
February 15, 2011
Email This Post
Print This Post
Mobile is a microcosm for market mechanics.
 In recent weeks we witnessed the mobile market churning in seemingly random directions, but each has actually affirmed fundamental and very mechanical aspects of every market. When Nokia makes a bold move by adopting Microsoft’s mobile operating system, it asserted one market imperative. When HP and Google forced Apple to blink, another market realty was at play. As Google’s Android OS heads toward ubiquity, yet a third force of marketing was displayed.
Commoditization: All markets commoditize over time as competitors provide similar or identical features. In the mobile market, Google is the major force toward commoditization as they emulate what Microsoft did with desktops (indeed, the rumor that Android and webOS will one day appear on phones, pads and laptops has caused Microsoft to publicly panic). More to the point, Google is forcing features down the price chain, assuring that Apple, HP and Microsoft follow, reducing differentiation between mobile environments.
Differentiation: With Android now leading mobile OS shipments and displacing Nokia’s Symbian OS as the top platform, Nokia sought differentiation without ruinous investments. Adopting Microsoft’s mobile operating system provided them market differentiation because, frankly, nobody else was using Windows Mobile. Nokia had only a few options aside from being assimilated into the Android universe, and one of those options – continued development of Symbian – was not working.
Whole product partnerships: Content will drive much of the mobile market as witnessed by music, e-books and magazines. Apple, as they are want to do, tried too hard to control content, hoping to get a slice of everybody’s pie as they did selling tunes. Magazine publishers (part of the mobile whole product mix) resisted, insisting that Apple share subscriber information. Google and HP (webOS) took the other path, giving publishers subscriber info and a larger piece of subscription revenues. Apple was forced to do likewise, reverting back to the industry norm that every participant in a whole product gets to do it their way, keeping control and money.
The marketing lesson herein is that market mechanics and forces are always stronger than any vendor. As strategists, we always maintain awareness of each market force and pick alternatives that ride market forces, not fight them. Nokia will attempt to ride a differentiation wave, Google drives the commoditization wave, and Apple bows to whole product realities.
It is as predictable as a politician’s promise is unreliable.
January 11, 2011
Email This Post
Print This Post
Is owning 95% of a market enough?
 Taking in a number of market share estimates, Apple iPads have about 5% of the potential U.S. market for pads/slates/tablets (or as the wags at The Register prefer to call them, Fondle Slabs). This is based on current P.C. market penetrations (north of 76% of households) and the estimated U.S. deployment of iPads. Thus, the green field of the slab market is currently wide open.
Which explains why several million Android slabs were introduced at CES last week.
Market mechanics are based on many things, with technical innovation being a misleading indicator. Apple has always been an innovator, but innovation in and of itself is insufficient. Apple invented the PDA market with the Newton, which sold four or five units. Pure innovation, but not only was it ahead of the market, it was also poorly marketed. Alternately the iPad was very innovative and well marketed (on the heels of the popular iPhone), and it immediately found its way into the hands of early adopters.
They make up about 5% of any market.
The glory of the iPad is not its engineering or innovation, but the identification of a need in the consumer electronics market space and the dexterity required to change the face of the market. Tablet computers have existed for years, their origami like screens providing both laptop and slab capabilities. But it took Steve Jobs rethinking human interfaces and providing always-on data to make the market respond. Apple’s early adopters showed that millions of units could be sold and this attracted the attention of every gizmo maker who wanted a share of the other 95% of the market.
Most of them chose Android as their OS, for painfully obvious reasons (cheap, Linux-based, Google supported, etc.)
The evolution of the slab market is beginning to mimic the history of the personal computer market. Old people (like me) remember that Apple offered the first truly consumer oriented personal computer. They had competition (Radio Shack’s TRS-80, IMSI, Altair, etc.) and each had its own durn way of doing things. Along came IBM, who could redefine any market, and introduced the world to a scrubby little operating system called MS-DOS from an unknown company called Microsoft. With the freedom to put MS-DOS on any computer, and with the market willing to clone IBM systems, the entire personal computer market sped toward ubiquity (aside from Apple’s perpetual 5% market share). Each vendor provided different price points, niche features and varying levels of support.
But they all ran MS-DOS.
Today we see sudden explosions in smartphone and slab markets. As Apple did with their desktops, they innovated and proved the viability of a market for slick pocket computers and slates. Other vendors, wanting some of that market chose what they believed to be the most viable alternative to the Apple operating system (MS-DOS then and Android now). With personal computers, once the decision for a standard was made, the market erupted, competition thrived, prices fell and Apple remained a nice player.
It looks like the same thing is happening again with mobile devices. Apple innovates and then is surrounded by something more portable, open and accessible.
(Before anyone utters the content access issue, know that Google and other vendors are able to inject music, book and video content into Androids, which erases any iTunes advantage).
This puts Apple into an uncomfortable long-term position (unless being an early adopter innovator pleases their shareholders). Apple must either continue to innovate at a hyperactive pace or be satisfied with 5% of the market (or they could compete on price, but that is always disastrous). Odds are they will continue their innovation streak, settle for minority market share, and sue everybody over patent violations.
But they won’t dominate the market because 95% will be owned by several dozen competitors backed by Google.
Markets are defined by forces much stronger than innovation. Sure, it is essential to innovate, but whatever clever invention you whelp will be cloned, or worse yet improved upon. Consistent innovation will build a great brand but not Microsoft-level market domination. This is the innovators quandary, a Sisyphus styled purgatory from which some people chose not to escape.
October 13, 2010
Email This Post
Print This Post
A start-up client of mine maintains an interesting page on their intranet that showed when employees typically come and go. The CEO routinely arrives at the office around 8:00AM, the software architect by 10:00AM, and their hotshot Java geek leaves the building at o-dark-thirty.
Technology is shifting time. In the bad old days (say 1998) lives were regimented. Between work and television, most Americans kept static and well matched schedules. Most everyone was at work at nine, home by six, integrated with their couch by eight and using Jay Leno as a nightlight for foreplay around midnight. Lives between people were synchronized out of practice and the necessity of both communing at work and the nature of broadcasting.
Technology has made work life at the start-up asynchronous and may well spell the death of broadcasting as we know it (expect the water cooler phrase “Did you catch blah-blah-blah on TV last night?” to be replaced with “You ought to Hulu blah-blah-blah when you get back to your desk.”) Sorry Jay.
Television is the more rapidly changing market now. Recently, a report surfaced showing that younger folks are much more prone to time shift their television viewing, mainly using DVRs. But they are also abandoning television all together (I dumped Comcast and gave away all my TVs earlier this year). Though real-time TV barely retains majority of viewership (52%) online entertainment occupies eyes more so than even on-demand viewing via cable and satellite companies. Youngsters (who for curmudgeon’s sake we’ll define as anyone not alive when Jimmy Carter was elected) consume only 41% of real-time TV, blowing apart the old image of television addicted children (they are Internet addicted today).
The trend will continue if Apple and Google have anything to do with it. Apple intends to offer reruns of television shows for the standard iTunes 99 cents. Google’s set top boxes (STBs) will allow for apps to be installed that facilitate online streaming (and content giant Sony is interested). Hulu is already popular with people who have abandoned TV but still need an occasional night to mentally vegetate. In short, as technology allowed the aforementioned start-up to radically shift employee office hours, so too is it disconnecting people from broadcast television, which may well suffer the same fate as newspapers – declining viewers, declining advertising revenue, scattered bankruptcies, forced mergers and a public that could not care less.
It is ironic that at the moment in human history when we literally have 999 television channels to chose from that the changing economics of broadcast will wipe most of them off your sets.
The other irony is that of newspaper and magazine fates. These were the original asynchronous media, ones that suffered greatly when television brought synchronized content to the country, then suffered more when the Internet brought better unsynchronized content to the world. Print publications got tackled high and low, and most will not make it. The shuttered Barnes & Nobel store down the street shows the future, as does the corner newsstand that survives only by the good luck of being near the town’s most popular breakfast counter. Newspapers are going online (which includes being in your pocket on your smartphone), magazines are being replaced by web sites, e-readers are eliminating printed books and brick building book stores, and television is devolving into a series of YouTube clones.
There is a real-time marketing lesson in this asynchronous Marketing Memo. People adapt their lives to necessity and preference. Technology changes the former and facilitates the latter. Knowing what people want and how to achieve that with technology is always the game. Fire was once the hot technology (groan) because people had a preference to be warm and not eat raw meat. We also tend to like flexibility in our lives, and being able to shift our activities to when it suits us is a constant goal. If you are in the content business, a primary objective is to facilitate content consumption on whatever technology people prefer and whenever they prefer to watch. Smart phones, slates and pads, and even those dinosaurs called PCs are the new video content targets.
September 7, 2010
Email This Post
Print This Post
 Google is proving an old joke right, and in the right way.
The joke was that UNIX is the original computer virus, spreading like an epidemic to every conceivable computing platform. Geeks used to laugh at this line … until Linux was first spotted running side-by-side on both a surplus x86 desktop and an IBM mainframe. It then leapt onto cell phones, into routers, and I think there is a Linux application for my toaster.
It may in your next television.
Samsung – whose cell phone division likes Android in the same way sumo wrestlers like cheeseburgers – let slip that they are considering baking Android into televisions. This is no meager moment because Samsung makes more idiot boxes than the public school system makes viewers. In fact, Samsung make more boob tubes than any other enterprise, and is single handedly responsible for most of the traffic on Best Buy’s web site (Samsung offers 82 different sets at BestBuy.com, with Sony running a distant second with a trifling 27).
Threatening to put Android on Samsung TV’s is a significant market trend event and a significant marketing move.
With few details, we can only speculate on what an Android TV might be (but it won’t be Google TV). Google and Samsung are wise enough to learn from other people’s mistakes, including Microsoft’s WebTV, Wink and Open TV, and thus avoid doing the same dumb things (like Google TV). Each of those forgotten offerings was either a disaster or a mere calamity, depending on how many worthless shares of incentive stock you held. Each product attempted to merge functions of interactive computing with the completely non-interactive purpose of television. Each company discovered – in exquisitely painful ways – that people watch television to avoid interaction – interaction with computer, spouses, children or anything else annoying. Thus interactive television was doomed from the conceptual start.
Which partially explains your set top box (STB in the industry lingo). Have a look at that gizmo. Internet ready. USB ports on the back. A keyboard we call a remote control. CPUs with more horsepower than your cell phone, which is a multitasking general computer. Your average STB has more computing power than my first four personal computers combined. This is because the cable and satellite industry understood the power of digital media, and needed to put computers on your TVs in order to deliver goods above and beyond basic cable.
Which is why Samsung wants to put the computer in your TV.
A major shift is occurring in video entertainment media. The old means of consumption are approaching an evolutionary epoch ahead of a rapid decline. Once digitized, content becomes portable. Your laptop can stream off of Hulu.com. Netflix and Amazon can stream movies to your gizmo enabled monitors. You can watch reruns on your iPhone, and no doubt some criminally insane zealot is developing a video watching app for a Microsoft cell phones (which shows even tiny markets attract developers). We are steadily shifting from a nation of people who shared televised moments (who didn’t watch Johnny Carson and joke about it around the water cooler the next day) to a species that consumes content then Twitters about it to share asynchronously.
Which means broadcast television as we know it is doomed.
This is one reason Samsung is considering baking an embedded computer into your electronic baby-sitter. Television is all about content, and content is now escaping the traditional distribution channels. By the time a television program reaches you today the production company, television network and cable company have all eaten a piece of the profit. Steve Jobs first figured out that digitized music needed a more direct path to consumers, and cut out the record store and wholesaler. As musicians taught themselves digital production, they started to cut out the record companies.
Samsung will help make possible cutting out Comcast (hmmm, why did my Internet connection disappear when I typed that?)
Like many things visual, Netflix showed the way. Once broadband penetration was wide spread enough, Netflix stared streaming movies to your TV set via a proprietary box. They could easily do the same with an Android app inside of a Samsung television. So could Paramount pictures, who might want to cut Netflix out of the profit chain. So could Demented Dave’s Demons, the local punk band who wants to distribute concert footage to people in Mongolia. Samsung is accelerating a trend to flatten content distribution. Any middle man will be on the losing end of the equation.
This includes Steve Jobs.
Shift happens, and the market for video content is shifting to a direct model. Ignore the economic efficiencies of delivering a movie directly from a web site to a million televisions and eliminating DVD manufacturers, packaging companies and the postal service. Do imagine the producers being able to cut the price of a movie rental in half and still double their profits. Do imagine the long tail behind any episode of any television program being rentable from now until really jazzy trumpets start blaring overhead. This trend is unmistakable and the largest maker of televisions in the inhabitable world and Canada knows it.
So does Google, who will be able to cross index your Internet searches, mobile locations, lunch break food preferences as well as your television viewing habits … and sell your detailed demographic profile to advertisers.
Next Page »
|
|
