Market opportunity: "Your Neighborhood CE Consultant"

I expect consumer electronics to get more complicated before they get simpler... this helps to explain the big push by Best Buy, CompUSA, and others to sell installation services into the home. I think there is a much bigger market opportunity. I think there is a chance for a firm to become "Your Neighborhood CE Consultant". This service would be everything from education before purchase, to installation, to support. Consumers could be billed on a "per use" or "annual" basis. Here is proof that this type of service is needed:

I love gadgets. I read Engadget, Gizmodo, and I often hop over to C|NET just to check out the latest and greatest gear. I often give friends advice on buying computers, DVD players/recorders, HDTVs, etc. Well today I felt like the average Joe shopping for consumer electronics.

As some of you know I am expecting my first child soon. Today I started looking at the camcorder market because the minute my girl enters the world I want to capture all the important moments. I figured this would be a quick little exercise in which I could jump to a few review sites and find the best camcorder for a dad to be on a budget. Holy S**t was I wrong.

I knew from the start that I wanted a Mini-DV camcorder, but after that I kept an open mind in terms of design, features, and price. I quickly learned that the camcorder market is harder to decode that then the dead sea scrolls. I found myself swimming in CCD chips, effective megapixel resolution, low light conditions, etc. I have NO IDEA which of these characteristics is important to me. I have no idea how I will use the camcorder other than I will be taping my baby girl. Do I need a camera which tapes well in low light conditions? How many effective megapixles do I need?

One day there will be a consumer electronics company that understands consumer marketing. Instead of creating products called "Sony DCRHC40 MiniDV" they will create the "Mid range - good for parents & average use". They will also come up with some standard ways to measure the performance.... no more "poor in low light levels"... it will say something like "Scored a 5 out of 10 in low light level performance, which correlates to 'this type of image' in 'this type of light condition'" All I know is that after hours of research I feel like I should just throw up my arms and buy what ever consumer reports suggests.

Windows In Hospitals????

I generally didn't feel the hatred that most feel for Microsoft. I had just accepted that Windows lacks stability and security, neither of which were all that important to me when I was playing MP3s on my desktop at home. Having spent the last 2 1/2 weeks living in the hospital I have a new found disdain for Microsoft. The reason for this disdain is that the machines that monitor my wife and my unborn child run on Windows and the damn machine crashes WAY TOO OFTEN! I am fortunate that my wife is pretty stable right now and that the baby is doing well but so help me god if something in their conditions changes and they bring in a machine that crashes while monitoring their condition...

Golf, Gadgets, & Business... how could I resist

Image from Engadget

I love Engadget, it is my favorite gadget blog slightly ahead of Gizmodo. Three of my favorite things in life are golf, business, and gadgets so when Engadget blogged about a "Radar Golf" product I couldn't help but comment.

The concept is that an RFID chip would be implanted in a golf ball that would then allow a golfer to easily find the ball with a handheld device. I hate to say it, but while this product is a good idea, it will never take off. The reason is simple economic incentives. The golf ball manufacturers count on you losing balls so you will buy more, helping you find ball will hurt their sales. Additionally, pro shops make a lot of money selling new balls and used balls. They sell used balls by simply picking up lost balls off the course and reselling them for over a $1 a ball, so they don't want you losing less balls, they want you to lose more balls. These incentives mean that the only way this type of product will get out on the market will be for some entrepreneur to manufacture the balls and distribute them through alternative channels, like eBay.

Does Google really innovate?

Before I write a post that many will consider blasphemy, let me state that I LOVE GOOGLE. I really love the company and I think their products rock. I love the company so much that for a final paper for one of my classes this semester a friend and I decided to write a paper on how Google was "out innovating" Microsoft. We wanted to explore Google's model for innovation and compare it to Microsoft's to see if how the firms structured themselves resulted in the perceived innovation gap. What our research showed was that the two companies were incredibly similar in both their innovation models and approaches to the market.

What prompted this post you may ask? Well recently Wired posted their Wired Top 40... which are supposed to be the "masters of innovation, technology, and strategic vision." Does the following profile of Google make you believe they should be #1 on this list:

Search - Google was roughly the 41st search engine to funded and enter the market. Companies such as Yahoo!, Altavista, and Lycos helped to pioneer this market.

Contextual Advertising - ~95% of Google's revenue is generated from advertisements the company serves next to either search results or news stories. This market was started by a company called Overature which was bought by Google competitor Yahoo!

Orkut - Social networking sites had been in existence for over 5 years before Google entered the market. The recent explosion in popularity of Friendster has prompted numerous "me too" services, including Google's Orkut.

Froogle - Froogle is Google's entry into consumer ecommerce. The site takes a search query and returns products that are available for purchase on the internet. Companies such as Shopping.com have provided cross site ecommerce searching capabilities for years before Google.

Google Toolbar - A "toolbar" is a small application that integrates into a web browser that allows users to more easily accomplish some of the basic tasks they perform on the internet, such as search. Google released its toolbar well after the market had been established by players such as Yahoo!

Gmail - Google's most recent product launch has been Gmail, a free web based email offering. The market for free internet mail was well established by companies such as Hotmail back in the 1990s.

I hate to say it, but Google's real only market innovation came from their search algorithm that has since been essentially replicated by other firms. Based on rumors and reports it appears that their best innovation is a technical one, and that is their ability to build a massive distributed computing network based on cheap hardware.

'Pirate Act' scares me

I just read about the 'Pirate Act' over at News.com and this act scares me silly. Reading between the lines of the article it is clear to me that Hollywood lobbyists are behind this crazy bill that could allow federal officials to wire tap my electronic communications. This bill makes me sick... instead of spending millions on lobbying politicians maybe Hollywood should be spending that money building product and services that consumers are looking for.

Comcast to launch phone service

No surprise here... today Comcast announced they will launch their phone service with the hope of reaching half of their 21 million subscribers by the end of next year. See my previous post about the cable companies getting into the phone business and the telephone companies getting into the video services business for more details of what this will mean to you.

TiVo's real problem

Today TiVo announced their quarterly numbers. There was a quarterly loss, but most analysts are focusing in on the subscriber numbers, and this past quarter the company added 264,000 subscribers, a great number considering last year at this time the company only had around 700,000 subs after 4 years!

While many analysts are looking at revenue or subscriber growth, I think the key number to focus on is the percentage of subscribers coming from DirecTV, and not for the obvious reasons. During the holiday quarter 200,000 of 330,000 new subscribers came from the DirecTV, roughly 60%. This quarter 196,000 of 264,000 subscribers came from DirecTV, roughly 74%. Many analysts simply will point to this trend and state that TiVo is too dependent on DirecTV for subs and miss out on possibly a much larger problem. TiVo is in the midst of transforming its product from a simple DVR to a product capable of managing digital media around the home. With DirecTV now controlling 900,000 of the 1.6 Million (roughly 56% and climbing) the company will have a hard time offering advanced services to more than half of their installed base.

Bottom line: When you can't offer the advanced services that your company's future depends on to 3 out of every 4 new subscribers, you have a serious problem.

Big Mac, Fries, and a DVD to go please...

McDonald's has announced it is piloting a DVD rental program in Denver this summer. If you are the CEO of McDonald's you are always looking for ways to increase revenue per restaurant, a recent example of this is the free Wi-Fi service (meant to drive more consumers to the restaurants) tested at various McDonald's across the country. The DVD rental business sounds pretty risk free since it appears the company will be using a third party ATM like machine to rent out the movies and they will only charge $1 per day for the movies. Even if they don't make any money on the rentals, how many people do you know can walk into a McDonald'ss and return a DVD without buying something else to snack on?

OpenCourseWare - The revolution in education is on... where are you Harvard, Stanford, Yale, etc.?

OpenCourseWare spreading worldwide:"There can be no greater hope for humankind than the belief that wisdom generated through increased learning will ultimately lead to a better world. With OCW, MIT has taken an ethical stand against the belief that knowledge should only be accessible to those who can pay for it or are in proximity to it." - Andrew Wilson of the United Kingdom in October 2003. I think Mr. Wilson expressed the OpenCourseWare (OCW) goal perfectly.

Over the past two years I had to pay around $400 per semester to get case studies from the Harvard Business School. Today there are dozens of MIT Sloan MBA courses up on OCW, and if Sloan is willing to put an entire class up on the web for free, why can't HBS give out their cases for the betterment of the world? I am not concerned about the budgets of MBA students, I am concerned about the people around the world trying to better their understanding of management issues. Imagine you are in Ecuador and studying Corporate Finance through OCW... you have done all the readings associated with the concepts of weighted average cost of capital (WACC) but you can't understand anything about the lecture notes because you can't afford to pay $170 for all the HBS cases associate with the class.... why can't HBS just give away cases like MIT gives away CLASSES?

An even better question is why haven't Harvard, Stanford, Yale, Princeton, Northwestern, etc. followed and opened up their classes for the betterment of the world?

Lessons learned from the launch of Segway

I have a book shelf in my house with about 8 books on it. This is my "to read" shelf, and with all the free time I have had on my hands lately I finally got around to starting on these books. The first one I decided to read was Code Name Ginger. The book is a behind the scenes look at the development of the Segway Human Transporter (code named Ginger before launch) from its very conception to just before launch. The book is absolutely fascinating and I would recommend it to anyone interested in start-ups, product development, venture capital, or even project management. Rather than jump into a prolonged book review (which you can get from those much more qualified than I) I will just pass along some of my "take aways" from the book.

1) Founders can be visionary and a pain in the ass - Dean Kamen, the man behind Ginger, is clearly a visionary who can change the world. The book also shows the ugly side of what happens when a technical visionary can't let go of a product and becomes the prototypical founder getting in the way of success.

2) Engineers may hate marketing, but marketing really matters - Millions of dollars had been thrown at developing Ginger before anyone asked the question of "who is the customer for this product?". Kamen just assumed that just about everyone in the world would want one. It wasn't until a board of directors got together and started asking hard questions did Kamen allow a small number of people to test Ginger. The investors in the company often talked about getting to a Billion in sales quicker than any other company ever, but they also never talked about how much the product would cost. I read almost 200 pages before the book even mentioned the price of Ginger, and then they only did so in vague terms.

3) Watch your back when VCs come on board - The minute Dean Kamen brought VCs on board they were looking to kick out the CEO, Marketing Director, and Ginger Project Manager. The VCs hadn't worked with these individuals, they just knew that these people weren't "their people." VCs invest a lot of money in risky projects expecting a huge return... and once they have poured millions into a company they want "their people" to run the company.

Cha-Ching Opera hits up the Microsoft ATM

According to News.com, Microsoft has made a $12 million payment to Opera to settle a dispute about Microsoft properties purposefully writing code to not work with Opera. I have written before about what I call the Microsoft ATM, which is in reference to Microsoft's recent propensity to shell out cash to settle all problems. What is more troublesome about this apparent settlement is that these are exactly the tactics that Ballmer & Gates have been claiming to try and eradicate from the company culture. Apparently they have some more work to do.

Plaxo gets a plan

According to News.com Plaxo, the contact management company, has finally come up with a way to make money. For the companies sake I hope there is a better plan than the one outlined by the News.com article. The plan is incredibly unimaginative and I question the real value proposition to users. Apparently there will be a VIP service from Plaxo that for $19.95 a year will offer things such as automatic synchronization with portable devices and better customer service. Also, since everyone else is making money off search Plaxo has entered that game too with a Toolbar for search within Outlook. I don't think either of these services will generate much revenue and Plaxo should probably go back to the drawing board. My guess is that the firm has something else up their sleeve, how else would they have gotten Cisco and others to get in on a second round of funding.

Gateway claims profitability by 2005

Gateway announced they intend to be profitable by 2005. The new management team at Gateway is really transforming the company into a more traditional CE / Computer manufacturer. The new CEO worked at Best Buy way back in the day so he certainly understands the power of distribution when it comes to CE products. If Gateway can get their products into Best Buy, Circuit City, and even WalMart expect them to possibly hit that 2005 date.

G4 Ends Call for Help

My father is a pretty technical guy, he has an undergrad degree in physics and has always amazed me with his ability to remember the most detailed technical information. Even with these gifts he often times needed a little assistance when it came to computers and one of the places he loved to turn was TechTV's Call For Help. He loved that Leo would always walk through any computer problem in exactly the right amount of detail, not talking down to the views but at the same time not assuming they knew everything about technology either. According to Leo's blog, it appears G4 (who recently bought TechTV) will be canceling the show. In his blog he notes the recent successes the show has had and it appears that it was really headed in the right direction.

Sons and daughters across America should thank Leo for helping to educate the country on important computer issues. I guess I should expect a few more calls from my relatives now that Leo won't be able to help them out.

The Perfect Storm: How evolving technologies, market changes, and a rising star could kill Windows

This is such a long posting I have created a very short summary to help people determine if they want to read the full posting.

Executive Summary:
Google has the opportunity to utilize evolving technologies (Linux, ubiquitous connectivity, increasing storage capacity, etc.) and market conditions (delays of Longhorn, overshoot of market needs by Windows, etc.) to dethrone Windows.

Full Posting:
Windows’ dominance on the desktop has withstood attacks from the likes of Sun, Apple, Netscape and the venerable IBM. It takes more than just one company or technology to kill Windows; IBM couldn’t do it with OS2, Sun with the networked computer or Netscape with the browser. I believe it will take "the perfect storm" of market conditions, technology changes, and a branded technology company to bring down Windows. I also believe that these pieces are sliding into place today and we are about to witness one hell of a battle for the future of computing.

The last great threat to Windows occurred close to a decade ago when Netscape threatened to reduce Windows to "a partially debugged set of device drivers" according to Marc Andreesen who helped to create Netscape. The idea was simple; the web browser would become the new platform for which all applications should be written. Microsoft made sure that the browser would not become the next generation platform by creating Internet Explorer and tying it to Windows which helped it to gain market share. Once the market tipped to IE, Microsoft had killed any chance of the browser becoming the next generation platform because they made a decision internally to protect the Windows franchise. (For a compelling read about the Netscape / Microsoft battle you should read Breaking Windows by David Bank).

The account above is a rather simplistic look at why Netscape lost the battle. One could argue that Windows 95 was a poor operating system who was in direct competition for platform dominance with Netscape’s browser. Netscape had a window of opportunity (from the Netscape launch until the Windows 98 launch) to out innovate Microsoft and win the battle. The problem was that Microsoft launched their own browser that by all accounts caught up and surpassed Netscape’s in functionality by version 4.0. This inability to win at the browser war closed the window of opportunity.

While Microsoft has proven resilient in defending Windows against competitors, today’s market is different. Today, Microsoft’s biggest competition on the OS is its previous versions. Back in 1995 every computer user in the world couldn’t wait for the next version of Windows since the benefits of upgrading were huge. Today, we have seen corporations and home reluctant to upgrade since they don’t perceive much of a benefit in moving from Windows 2000 to XP. This is an important event since it signals that Windows has overshot the market need for certain attributes. For example, while Windows 2000 isn’t stable enough for everybody, it is stable enough for most users so they don’t see a need to upgrade to the more stable Windows XP, this shows that stability is no longer an attribute driving adoption of new versions of XP and that they have probably overshot the market need for stability with Windows XP. (Note: There are certain attributes like security where Windows is incredibly far behind the market need and therefore they can use security to drive adoption of XP when service pack 2 is released… assuming it fixes all the security issues it claims it will)

While Windows is overshooting the market, Linux is just now starting to meet market needs. While the OS has become more consumer friendly with interfaces like Gnome evolving over time, applications like Open Office (the open source office suite) have started to become real alternatives for users looking for a free alternative to Office. In short, the Linux ecosystem is starting to mature at the exact time Windows is overshooting the market. (while not the first to propose the concept of overshoot or disruption, Clayton Christensen’s book Innovators Dilemma is the must read book on the topic simply because everyone else has read it.)

One of the key issues with the browser becoming the platform back in 1995 was the assumption that we would be connected to the internet at all times. Today the dream of ubiquitous connectivity is much closer to reality than a dream. Verizon is rolling out their broadband wireless technology in markets across the country and it offers DSL like speeds even while driving in car.
These emerging technologies (Linux / wireless broadband) and market changes (Window’s overshoot) represent a unique opportunity for a well respected consumer software company to overthrow Windows as the standard computing platform. It is clear to me that the company best positioned to topple Windows is Google. Google could overthrow Windows in a number of ways: launch a Google branded Linux OS, push the Sun vision that the network is the computer and build the scalable computing and storage network necessary to power the network, or do both at the same time.

Launching a Google branded Linux OS is clearly an important strategic option that Google should be evaluating if not working on already. With Microsoft’s Longhorn rumored to eliminate the browser and integrate search capabilities into the OS, Google must determine how they want to react. Today it was reported that Google would launch a search application for the Windows desktop, but this in my opinion is not a viable long term strategy to fend off Longhorn. I believe that Google knows this and the desktop application they are building will be a part of a Google Linux OS they release and that they want to gather data about usage from users and make switching costs to their OS lower since users will be familiar with a small portion of the OS. (Heck, with Google creating the OS maybe search will be the primary interface). While I have been talking about a Google OS for a long time (my friends think I am nuts for even suggesting it) we know that it is atleast being talked about in Mountain View. Jeffrey D. Ullman, a computer science professor at Stanford University and a member of Google's four-person technology-advisory council, has publicly urged the company to get into the Linux desktop business. In a recent story for BusinessWeek Ullman is quoted as saying: "If Google doesn't reach the desktop, Microsoft will eventually take Google's business, just like it took Netscape's."

Betting that the network will be the computer seems more in line with Google’s current capabilities of creating massive distributed computing networks, but a riskier play. Gmail, Google’s entry into the email market, is a great example of an application that could help shift computing online when ubiquitous connectivity exists. While the complimentary applications necessary to make the network the computer don’t exist today, they certainly could develop quickly if the market was to tip in this direction.

Opportunities to create a dominant computing platform seem to come along once every couple of decades. This is the opportunity of a lifetime for the employees of Google to utilize the rise of Linux, the imminent explosion of wireless broadband access and market overshoot by Microsoft to take the market by storm. I only hope that the folks at the Googleplex recognize the short amount of time between now and the release of Longhorn and that they take advantage of this opportunity to mix the right technologies and market trends to create the perfect storm to knock Windows off the desktop.

Place your bets... 1 MILLION MBs of storage, a database error, or something in between?

I always enjoy the opportunity to walk out on a limb and look really smart or to look like a fool, so I am going to take a guess at what is going on with Gmail accounts today.

It appears that some Gmail users today opened their account to see that their storage limit now appears to be 1,000,000 MBs (no that is not a Terabyte, a TB is 1,048,576 MBs) rather than the standard 1,000 MBs (no that is not a GB either, a GB is 1,024 MB... but I digress). I have a couple of theories around what is going on here.

Theory 1: Rumor has it that Google employees are allocated 1,000,000 MBs of space in their Gmail accounts. I am guessing that during a refresh of the user database, there was a mix up that accidentally flagged some users and Google employees and therefore they now appear to have the increased storage size. If this is the case I would expect Gmail to fix the mistake in a short time frame before people start filling up over the standard 1,000 MBs.

Theory 2: With the recent announcement by Yahoo! that they would raise their free accounts to 100 MB in storage Google could be flexing their muscle and showing exactly how scalable their infrastructure is while trying to get back their storage advantage before launching Gmail.

Theory 3: The Gmail team is testing the market to see what the reaction would be to 1,000,000 MB of email storage. If the response is that they are crazy, they can just say it was a minor bug, but if it is positive they can roll it out to the rest of the users without really worrying about having to add much storage, because seriously, it would take a long time to just upload that much data :)

I am voting for theory 3... Feel free to let me know what you think in the comments below or through email.

Is Gmail now offering approx. 1 Terabyte????

Rumors started flying today on Orkut (the Google social networking service) that some users had account limits of 1,000,000 MB not 1,000 MB. I initially thought that this was simply someone having some fun with photoshop but it now appears that numerous users are reporting their user interfaces tells them they have 1,000,000 MB of storage and not 1000 MB. If this turns out to be more than a little bug or joke I will post about it more.

For now check out the blog that broke the news: gmail quota = 1 terabyte - Amidst a tangled web

Buying music services in bulk

So what do you think it would cost to buy a music subscription service in bulk? Well apparently Napster is looking to charge Ohio University $3/month per student for their service. For $3/month I would guess the service is breaking even, but the strategy is clear, get college students hooked on Napster so when they graduate they pay for the service. Not a bad strategy.

Thanks to TechDirt for turning me onto this story.

MSOs vs. RBOCs - The winner will be consumers

Your local cable company (aka MSO) and local phone company (aka RBOC) have enjoyed monopoly status for years. The telecom act of 1996 was meant to spur competition in the local phone market while the emergence of direct broadcast satellite providers was expected to drive competition in the pay tv market. Each of these events spurred some competition, but the real battle is just starting to shape up.

Today cable companies are starting to offer voice over IP (aka VOIP) service that competes directly with wired telephony service. Verizon announced long ago that they intend to run fiber optic cables to the home which would give them the opportunity to offer video services, super speed internet access, and other services yet to be dreamed up over the huge bandwidth pipe that fiber provides. While telephone companies have been dreaming of running fiber to the home for years, it appears that costs are finally starting to hit points that make the unit economics feasible (meaning that it makes sense to spend $1,000 running fiber to the home since the discounted cash flow expected from the new offering exceeds $1,000).

The only certainty in this coming war is that consumers will win. Consumers are already seeing the benefits when these two companies fight to offer broadband services (DSL prices have come down from $54 to around $29 per month). Today I spend around $180/month to RCN for digital cable (HBO, Cinemax, etc.), all I can use local and long distance phone service, and high speed internet access (5 mbps which rocks!)... but I can't wait for the day that Verizon can offer me the same package and price wars break out. I can envision cost competition driving this bill down to around $80/month if not less.

God bless competition.

Broadband - Does "speed" matter to consumers?

Verizon has announced that it intends to offer faster DSL plans to consumers. While the cable and telecom companies have been fighting the DSL & Cable Modem wars for a couple years, I get the sense that the market is headed toward commodity status.

I don't believe that an average consumer can understand the difference between a 1.5 mbps download speed and 3 mbps, but they certainly understand the difference between $29.95/month (roughly the price for DSL these days) vs. $45/month (roughly the price for a cable modem). With price as the basis of competition today firms offering DSL services at cheaper prices are gaining subscribers faster than their cable modem offering cousins.

The inability to understand download speeds is probably tied to the lack of applications that really take advantage of broadband capabilities. When consumers start using services like Cinema Now or MovieLink, it will be easier to market cable over DSL or vice versa. Imagine an ad explaining that the movies you download would take only 30 minutes rather than 60 minutes, now consumers can understand that. Until there is a killer application for broadband, expect price to drive adoption of DSL and cable modems services.

The failed execution of Gmail

It is hard for me to recall a web product more hyped up than Gmail. As you all know Gmail is Google’s free web based email service that gives users 1000 MB of free storage in exchange for having targeted ads displayed that are relevant to the email the user is reading. At the time of the Gmail announcement I wrote about how I thought that Gmail was a stroke of genius since Google “changed the rules” of competition in the web based email market. Before Gmail it seemed as though the basis of competition between Yahoo! Mail and Hotmail were not features but how well they could drive traffic back to their portal pages. Neither product had innovated much. When Gmail entered the service promised to flip this market on its head and it changed the basis of competition back to offering what users wanted: more storage space, better spam filters, an easy to user interface, and a fast interface.

I hate to say it, but it appears that Google blew this one big time. Yahoo! today announced that they will be offering 100MBs of storage to its current users shortly and essentially unlimited storage to pay customers. Google simply took too much time between announcement & public launch and they have allowed the competition to react and remove the pain points that would have prompted people to switch. How long before Yahoo! integrates their search capabilities into their free mail offering? Assuming the media storm settles down how long before they use Overture to offer contextual ads in emails for users? Google seems to have forgotten that switching email addresses is a painful thing to do, and in order to switch, the product a user is considering switching too had better be substantially better than the incumbent… well Gmail is substantially better than both Yahoo! mail and Hotmail; but it appears those days are numbered and it may well be just another email service when it launches.

NOTE: If anyone at Google reads this… please think about the pain of switching email accounts and build in a simple utility to import mail and contacts from other services!

VOIP going mainstream

VOIP provider Vonage has begun selling its product through RadioShack's 4000+ retail locations. Often times you will see companies trying to stuff retail channels with products that are not ready for the mainstream. For example Segway launched their much hyped Human Transporter through Amazon. This was an interesting decision considering how many people do you think would buy a $5,000 product whose value proposition was unclear to the masses?

Vonage's move into broader distribution channels is a smart strategic decision. Broadband penetration is on the rise across the country and cable/DSL companies are ramping up to sell VOIP services to consumers directly. This would in effect shut out players like Vonage before they can get going, much in the same way TiVo faces the potential of being shut out by Cable & Satellite companies offering generic DVR capabilities.

While TiVo has tried to sell it's product as a lifestyle product, Vonage has sold its product based on price. This is an important distinction because it provides TiVo the opportunity to move up market by adding capabilities and features, while Vonage could be stuck in a price war soon. Vonage's best bet could be to get broad distribution (think Wal-mart, Best Buy, RadioShack) to push adoption before the companies controlling the broadband connection into the house get into the business.

Sony's Death... Samsung's Rise

I love the consumer electronics industry. Most people look at the industry and hate it… they say that there is too much competition, it isn’t all that profitable, intellectual property is hard to retain, and your firm can be too dependent on outside factors (gov’t regulation, complementary products, etc.). While these attributes make it difficult to compete in the marketplace, think about the power of a great consumer device; they can literally change the world. The cell phone has revolutionized the way we communicate; the iPod has taken the country by storm changing the way people enjoy music, digital cameras are leading a revolution in the photography world, etc. And I love the idea of creating world changing products.

Decades ago Sony created a product that changed the world: the Walkman. From the huge success of the Walkman, Sony began its long march to becoming the world’s most powerful consumer electronics company. Year after year Sony created products that were meeting consumer needs and they appeared to understand global markets better than any other firm in the industry. I believe that we are in the midst of watching a giant fall, and that Sony today is making decisions that will be used in business schools around the world for what not to do. Lets walk through a few of those decisions:

- Sony was so late to the flat panel TV market that they were recently forced to lay off 20,000 employees globally and shut down numerous cathode ray tube (CRT) factories that produce the old bulky TVs seen in most houses today.

- After shutting down these CRT factories the firm found itself so far behind in the flat panel market they were forced to partner with a market leader… in this case Samsung (more on them shortly)

- Name a company in a better position to manage the transition to digital music better than Sony. Sony owns a major music label as well as the know how to create a great CE device to play the music. They recently launched their Connect music service which is just terrible. (Please see my review here.

- Over the past few years Sony has continued to try and push proprietary formats on consumers to lock them into their products. Just look at the Connect service and how it only work’s with Sony devices and the ATRACK format, look at the memory stick format, their proposed portable television product (closed architecture), etc. Firms that try and lock consumers into their platform clearly don’t understand that consumers don’t want to be locked into buying from one company. There are times when creating a closed proprietary standard can be beneficial to consumers, but this isn’t one of them… there are clearly other options / platforms for consumers to choose from that work well… and Sony doesn’t understand this.

The fall of Sony is not only being driven by bad managerial decisions but also a rising star from Korea… Samsung. Over the last five years Samsung has transformed itself from a commodity player to a producer of high end products across numerous segments. Just think about the following facts:

- According to DisplaySearch Samsung is the worlds largest manufacturer of flat panel displays.

- It sells more TVs than Sony and Philips Electronics

- It is now # 2 in the world in cell phone revenue behind Nokia… an incredible accomplishment given that they have only been in the industry for around 5 years.

- Samsung has been the fastest growing brand in the world for two years in a row according to the survey done by Interbrand and BusinessWeek

I worked at Samsung last summer as a MBA intern, and I really believe that the company has the products to remain differentiated to provide great experiences to consumers. The executives at Samsung have Sony in their cross hairs and if they continue to execute while Sony continues down their path of proprietary products that are late to market then it is only a matter of time before Samsung rises up to the top of the CE world and kills today’s king.

Life Events

When I started this blog I decided that it would be focused on the business issues that technology companies are facing and what is occurring in the markets. There are millions of blogs out there where the author writes about what they had for breakfast, who they dated last night, their favorite color, etc.  I wanted to keep my private life private and I also figured that my life is relatively boring, so why write about it.  Instead I wanted to write about something always on my mind, business / technology issues. Well I have had a crazy 48 hours that have forced me to make my first posting about my life.

On Tuesday night I was headed off to an interview down the Virginia area and when my flight landed I got a call telling me that my wife went into labor and she is only 27 weeks pregnant. I ran to the gate with the last flight to Boston and talked my way on the plane. When I got to the hospital in Boston my wife was on medications to stop the contractions. After a sleepless night the great staff at Beth Israel Hospital and my brave wife were able to slow down the contractions and we are now resting comfortably in the hospital. We hope that our stay here will be long and that our daughter won't be delivered for weeks to come but we are prepared for anything.

I am living my life minute by minute right now.  I expect that there will be some down times where I will post a lot and there will be times when I won't post all that often. I expect that writing will be therapeutic for me; so just bear with me as I bunker down for my extended stay here at the hospital and I settle into a new routine.

Yet another failed hardware play by Microsoft

Microsoft has had numerous forays into the hardware space including UltimateTV, X-Box, and their line of home networking products. Today Microsoft announced that it is getting out of the home networking business. Check out the following interesting quote from the News.com article:

"A source close to the company said Microsoft entered the Wi-Fi field with hopes of 'raising the bar' on security, ease-of-use and performance and now feels it has accomplished those goals. "

Does anyone think that the Microsoft entry into wi-fi accomplished any of these goals? I think the real reason they left the business is that the margins were terrible compared to software and they were getting their butts kicked in the market by Linksys. I believe that products like UltimateTV and this Wi-Fi push are great examples of the company wasting shareholder money. What the company really needs to do is to start paying a huge dividend that will force the company to really focus on investing in business that are strategically important to the business.

MIT Media Lab launches CELab

Today the MIT Media Lab held a consumer electronics symposium to mark the launch of the Consumer Electronics Lab (CELab) within the Media Lab. I attended the first half of the day (I had to miss the second half due to classes) and here are some thoughts and quotes from the morning:

V. Michael Bove, Jr. - Director of the CELab
- Stated that the major themes of the lab would be: Materials, Power, Sensors/Actuators/Displays, Self managing ecosystems/smart displays, Cooperative wireless networks
- Michael also highlighted a major change in funding policy for the CELab... in the past only large institutions could afford to sponsor (sponsorship gave the rights to all intellectual property within the research group being sponsored and it typically cost millions) the Media Lab and reap the intellectual property benefits from membership. The CELab will be open to firms of all size and sponsorship fees will be based on the sponsor firms revenues.
- In a typical marketing move the lab is offering 20% off for those that sign-up before July 1st and 10% off for those that sign-up before October 1st.

Nicholas Negroponte - Chairman of the MIT Media Laboratory
- Nicholas believes that we are entering a new era of computing
- Era 1: Bits are bits - this was the realization that all bits are just bits and it doesn't matter if you are storing music, pictures, text or video, it is just bits
- Era 2: Bits vs. Atoms - this era focused on how bits can transform atoms... think along the lines of how Amazon changed retail distribution and how Apple is changing music through iTunes and iPod
- Era 3: Bits IN Atoms - This is the era we are heading into where bits will co-exist with atoms everywhere. Think about embedded computing and the idea of computing devices being everywhere, including inside the body

- Nicholas also mentioned that firms need to start thinking about not: "Piling on more stuff into gadgets moving on Moore's law VS. making stuff easier to use"

Walt Mossberg - WSJ personal technology columnist served as emcee
- Walt commented that while the notion of convergence has been hyped for decades now, a sign it could now be occurring is that the most popular CE device on the market is made by a computer company - Apple's iPod
- Here are some great quotes from Walt about the recording industry's effort to raise prices on digital downloads:
-"the infinitely stupid recording industry"
-"I couldn't match their stupidity if I tried"

- Despite all the talk about home networking, Walt remarked that most consumers only get wi-fi to share an internet connection, not for any real home networking purposes like sharing files or printers.

Geoffrey Frost - Chief Brand Officer - Motorola
- Geoffrey had a great quote about how you can tell the wireless industry is in it's beginning: "we call it wireless... today we don't call cars 'horseless'."

The afternoon was packed with great professors from the Media Lab that I am upset I missed. I noticed that the event was being taped so check out the media lab homepage to see if they will post the sessions there.

New Blogger, New Look

Blogger, the software that I use to manage this site, has re-launched with some new functionality. The site is a little easier to use, and there are some new cool features but I am upset because despite promises during the sign-up process, Blogger will not allow me to upgrade to a premium account. A premium account would allow me more control over the entire site to add more functionality.

Anyway, here is a list of the changes on this site:

1. New look and feel
2. New "Previous Posts" section - This can be found on the right hand side of the page and it will list the titles of some of my most recent postings
3. New "My Favorite Books" section - This section will contain links to all my favorite books
4. New "My Favorite Gadget" section - Not added yet, but when I get around to it you will see a list to what I think are the coolest technology products out on the market

As always, I would love feedback on these changes and what features you would like to see.

The legitimate online music explosion

This past week Apple Computer announced they sold 3.3 million songs through iTunes. While some will argue that this number was boosted by a temporary increase in traffic due to the release of iTunes 4.5, I believe that the legitimate online music world is in the midst of explosive growth. Just think about it, with 3 million songs sold through Apple and RealNetworks Rhapsody service having roughly 500,000 subscribers paying around $9.95 per month the online music market is not made up of only geeky leading edge users anymore... this market is crossing into the main stream.

Given their recent actions, the major music labels may agree with me on this point. With their attempts to raise song prices, bundle songs, etc... the labels are making a last ditch effort to tip the economics of the industry further in their favor before too many users get used to buying songs at 99 cents. The labels don't want consumers to get used to buying single songs at 99 cents because they will have a very hard time making money in this model... so expect them to continue to pressure iTunes and RealNetworks to raise prices for both subscriptions and song singles.

Which is more evil: Gmail or the state of Massachusetts?

A while back I blogged about how a state senator from California was introducing legislation to try and stop Google from launching Gmail because of privacy concerns. Well recently, Massachusetts, the state I currently reside in has posted on the state's website a list of individuals and businesses they believe to be delinquent on their state taxes.

Now I don't know about you, but I feel much safer having email in the hands of Google than I do having my financial reputation in the hands of my Tax person. Think about it... pretend you are in the midst of a job hunt and you have a disagreement with your home state around your income taxes. The state then posts your name on its website saying you are essentially a criminal where any search engine could get this information. I don't know about you, but I trust Google with my email more than I trust that any state tax & IT system.

AOL's Survival Will Depend on Premium Services

So what do you do with a business that is turning out cash like there is no tomorrow, but your customer base is declining fast? If you are AT&T you essentially transform yourself into a VOIP company... that is their only chance to survive long term. If you are AOL you enter into premium services to leverage your huge install base and hope to lock them in before they jump to broadband without you. In a smart move the company is launching a new video game site that they hope will get customers to buy into AOL even after they switch to broadband. Now more than ever AOL needs to be creative in new services and utilize content from other Time Warner companies to offer services that can't be matched by rivals. Imagine insider Sopranos episodes that can only be viewed by AOL subscribers or concert tickets that go on sale early to only AOL users. I am not preaching anything new here... but now is the time for AOL to move before broadband just explodes in the next 12 - 24 months.

DVD-Recorders & the fight for CE cash

High definition TVs, HDTV Service, DVD-Recorders, DVRs, Digital Music, iPod... these are some of the hottest consumer technology products and services available today. Not only are these products & services hot they are not cheap. Consumer electronics companies are being forced to really compete for every dollar these days... and services like Netflix, TiVo, and Rhapsody (Real's online music subscription business) will run someone around $43 dollars a month or $516 dollars per year. It now looks like consumers are ready to dive into what will be another expensive habit... DVD recording. According to a new report DVD-recorder sales are set to soar. Might as well throw in another $5 - $10 per month for blank DVDs.

I wonder how consumers will respond when they upgrade to HDTV and realize that all these other products and services don't work with HDTV. Out with the old TiVo, the DVD burner won't burn at HDTV quality, currently there is no HD-DVD player so you will have to suffer at 480p resolution, etc. The entire "entertainment stack" will need to be replaced and upgraded, which will give CE companies a few golden years to reap the benefits. I only hope that the average consumer doesn't go out and blow all their cash on products and services that will be obsolete before they know it.

The end of TechTV as you know it

For all you geeks out there today is a sad day. Leo Laporte's blog reports that Comcast, who recently purchased TechTV, is laying off the entire TechTV staff. Apparently all operations in San Fran will be shut down by July and all the jobs will be moving down to LA. For a network that has struggled, TechTV had some great shows like The Screen Savers, Fresh Gear, Tech Live, and others. I hope the folks at Comcast can keep some of the great talent and build a stronger new station. Best of luck to all you TechTV employees that have worked your butt off.

I wonder if Comcast has made a mistake in the way they have handled this purchase. When you buy a station like TechTV you aren't buying it for a large viewer base, you must be buying it for the assets like the talent and the shows. With a blanket firing of all the staff it doesn't appear that new management is making many friends. I hope that they find a way to keep on the talent and continue to build on the best shows there.

Mossberg on Gmail

Seems like everyone has an opinion on Gmail. Heck, I have been blogging too much about it myself. Today Walt Mossberg (the same Walt Mossberg that in this blog I called the most powerful person in consumer technology) weighed in on Gmail. While you can read his entire article here, let me summarize it for you by quoting his final paragraph:

"So I'm calling on Google to preserve its sterling reputation for honesty and customer focus by offering an alternative form of the new Gmail service. The company should offer Gmail accounts without the ads, and without the scanning, for a modest annual fee. That would put the choice where Google has always placed it: in the hands of its users."

I think Walt is 95% of the way to the solution that will make everyone happy. Allow users to either use Gmail in its current form, ads and all for free or allow all those who are worried about the privacy issues pay a small annual fee and their email will not be scanned and no ads will appear on their pages. Let me know what you think.

First Impressions: Sony Connect

There are so many online music stores today that I can't even remember them all. There is iTunes, RealNetworks Rhapsody and Music Store, Napster, Wal-Mart, etc. Given all the offerings today any new comer to the market needs to either be exponentially better than what is on the market or simply as good but carry a great brand name. Fortunately for Sony, they carry one of the biggest brand names in the world, because their new music service called Sony Connect SUCKS!

Yes, I said the service sucks! I couldn't find another word to better describe my first impressions of Connect. So what is so bad that I have resorted to the term "Sucks" to describe it... well its starts from the very beginning when you try and install the software. I have been through some painful software installs, but Sony has taken it to the next level with Connect. After downloading over 10MB of software the application took around 15 - 20 minutes to install on my laptop. In comparison, all other music services took me less than 5 minutes to get up and running. I never let the install process affect my thoughts about the actual product, so after installing (and being forced to reboot) I waited a while before launching the application and seeing the features.

Upon launching the application it is hard to ignore how terrible the user interface is. I have a 15" screen on my laptop and unlike iTunes which uses all of that space to allow me to see information and navigate my music Sony wastes 75% of my screen with nothing! It is literally painful to try and navigate the 3000+ songs I loaded into the application. There is a search feature that works decently and the main way of navigating your tunes is through a drop down list and a "mini keypad" that will allow you to choose a letter and jump to artists whose name starts with that letter.

When you jump over to the music store the wasted screen space becomes even more annoying. Doesn't Sony realize they are trying to sell music and that utilizing less screen space makes it hard to find content because you spend more time scrolling than anything else. So lets pretend that you find the album you want to buy, Outkast's Speakerboxxx/The Love Below. And what do you find... you can't even buy the album!!! You are told you can go buy the songs one by one and you see the option to buy only 36 of the 40 songs! Now if you head over to iTunes you can buy the entire album for $19.99 and get ALL 40 songs. Recap: Buy 36 of the 40 songs on Sony for about $36 bucks or buy the entire album, all 40 songs for about $20 bucks from iTunes... Perhaps the only redeeming factor for Connect is that you can use United Airlines miles to purchase songs.

Summary: Shame on Sony! Shame on them for being so late to enter the market. Shame on them for forcing users to buy some albums song by song! And most of all, shame on them for creating such a TERRIBLE product.

The King of Technology

So who is the most powerful man in the world of consumer technology? Bill Gates has over $50 billion in the bank and wants to turn your home into a digital dream house. Steve Jobs has helped transform the music industry in a legal way. The men running Sony hope to marry content and devices to shape the future of entertainment. Yet all of these people have less power than Walt Mossberg, the personal technology columnist from the Wall Street Journal. Walt's reviews of products can have a serious impact on the fate of not only the product, but also the company. Take a look at what Wired Magazine calls "The Mossberg Effect":

The Mossberg Effect
Walt said	What happened
"CNET is the real deal, a serious, scrappy online news organization." (1996)	CNET's stock climbed 33 percent in the five days after the review.
"This is simply the most gorgeous personal computer I've ever seen or used." (2000)	Apple's stock price jumped 10 percent the day after his Cube review hit stands.
"The initial radios are poorly designed & Navigation is a nightmare." (2002)	XM's stock dropped nearly 9 percent the day Mossberg panned its radios.
"Overall, we like Vialta's idea of incorporating your television into a videophone." (2003)	Vialta's stock rose 15 percent the day the column ran.
"Try it. You may never go back to Internet Explorer again." (2004)	Installations of Stilesoft's Web browser jumped 371 percent the day of his rave.
"Mailblocks is a very good system for eliminating spam. And it will only get better." (2004)	Mailblocks' daily sales tripled the day after Mossberg's endorsement.

The full article can be found here: Wired 12.05: The Kingmaker

Best Buy & Dell are winners

Every year Twice, the consumer electronics industry publication, releases its analysis of consumer electronics sales through retailers. While the industry grew at only 6%, both Dell & Best Buy grew at much faster rates. Surprisingly, Wal-Mart didn't grown nearly as fast as Dell or Best Buy... here are the top 10 retailers for this year along with comparable sales for last year: (all revenue is in Millions)

Rank 2003 Rev 2002 Rev
1 Best Buy 19531 $16,589

2 Wal-Mart 15,680 14,141

3 Circuit City 9,750 9,950

4 Dell Computer 6,263 5,178

5 Target 4,962 4,799

6 RadioShack 4,649 4,577

7 Staples 4,022 3,676

8 CompUSA 4,010 4,155

9 Sam’s Club 2,763 2,536

10 Office Depot 2,599 2,670

*in $ millions




Full story can be found here: TWICE- CE Sales Reach $106.6B For Top Chains: "Rank2003 Revised 2002

Yahoo's secret weapon

With all the talk about Google's IPO and Gmail, there was almost no mention in the media when Yahoo! released a beta version of the next version of Yahoo! Messenger. While this new version of Messenger offers some fun new features like avatars, new "stealth settings", additional emoticons, and games... there is one feature that I think is an important strategic move for Yahoo!. Yahoo! has integrated the LAUNCHcast Radio service into messenger which will now dramatically broaden the distribution and awareness of the LAUNCHcast service. For those of you that don't know anything about LaunchCast, think of it as an internet radio service with the ability to customize your own station so that you only hear favorite artists, albums, or tracks. I used LaunchCast last summer during my internship and really enjoyed the service. At the time you would listen to about 5 or 6 songs and then hear an advertisement mostly around offering the ability to upgrade to LaunchCast pro and stop being interrupted by commercials. There is no doubt in my mind that this integration into messenger represents the first step before either a full blown iPod music store or a Rhapsody like music subscription service.

In addition to launching music services through messenger, it is only a matter of time before AOL, Microsoft, or Yahoo! realizes that their IM clients are really platforms to launch social networking services. Just think about it, Yahoo! and any other IM service already knows who your friends are, how you have classified them and your email address. All they need to do is extract all the relationships that exist in the application today and dump them into a service like Friendster or Orkut. Imagine just logging into Messenger and being told that you can simply accept an invitation into the Yahoo! social networking service and all your friends will be there without having to send out invites to your friends.

In summary, companies like Microsoft, AOL, and Yahoo! can utilize their IM platforms to launch compelling services. The real question is what is taking so long?

The Gmail Bubble has burst

I wrote on Friday about the insane bidding that was taking place on eBay for Gmail accounts. For a brief period on Friday the demand for Gmail accounts far exceeded the supply so some people paid $200+ for a single account (Here is the original auction I blogged about that ended up closing at $200.) Given the insane prices the market for accounts was quickly flooded, and at a point this weekend there were over 220 accounts up for sale. From there simple economics took over and with this new supply came lower prices. Accounts are now being sold for around $30.

So why have I posted about this situation 3 times? Well I can't help but wonder if we are likely to see a similar pattern with Google in the near future. As you all know Google has filed for an IPO and will be selling shares through an auction process. There is no way that everyone interested in the Google auction will be able to get certified to participate, and even if they are certified not everyone will win in the auction (you can bid both too high and too low causing you too lose out). So unlike the old days where IPO shares were spread out to friends of bankers through the underwriters, now the more shares will end up in the hands of the public... but not enough shares. So what will we be left with? A small number of people that got in on the auction and the rest of public clamoring for shares resulting in the same insanity we saw in the bidding for gmail accounts. Rest assured though, market forces will fix the problem of supply in the stock market at well... you can be certain the boys over at Sequoia and Kleiner Perkins are looking to dump some shares quickly.