No Tech Tuesday today as I am pondering the big news that Microsoft is acquiring Nokia’s devices and services business. From glancing at the deal terms it is not clear to me whether this was really an offensive move (as Microsoft is positioning it) or a rushed defensive rescue of a failing company that was the only one making Windows phones at meaningful volume. Here is one line from the press release that suggests that it may have been an emergency: “Microsoft will also immediately make available to Nokia EUR 1.5 billion of financing in the form of three EUR 500 million tranches of convertible notes that Microsoft would fund from overseas resources” (my highlighting).
There are lots of other fascinating aspects of this deal, such as the fact that Nokia is retaining its patent portfolio with Microsoft obtaining only a 10 year license initially, albeit with an option to extend this to perpetuity. Microsoft is, however, obtaining Nokia’s longterm patent agreement with Qualcomm. Furthermore Nokia’s HERE division, which provides maps and map related services (and arose in part from Nokia’s acquisition of Navteq) is not part of the deal. Instead, Microsoft is becoming a licensee and is contributing some patents to HERE. All of this can be seen as further evidence that the deal is all about the devices and an attempt to maintain HERE as an independent business (one that I would expect Nokia to now separate from the rest of Nokia and spin out as its own public company).
It will remain to be seen what all of this means for the consumer in the long run, but in the short run it guarantees the existence of Windows Phone. With RIM essentially gone, I find myself rooting for Microsoft and Windows Phone. It would be great to have at least a three horse race in the mobile arena, with potentially additional offerings coming from Samsung, Xiaomi and also Mozilla’s Firefox OS. For developers this will be a bit of a pain as they need to support multiple platforms but it will keep any one provider from getting too much power — and that will ultimately be be good for innovation (and thus good for consumers and developers).
Yesterday Facebook announced “Home,” a homescreen takeover application for Android that makes Facebook your phones primary interaction surface. Here are my initial reactions.
First, this is a smart move by Facebook as an attempt to counter the threat of unbundling that is posed by apps. Competing apps unbundle different pieces of functionality (Twitter for status, Instagram for photos, Foursquare for location, Kik for messaging, etc). Facebook has rightly recognized that whenever you have unbundling there is an opportunity for re-aggregation.
Second, the idea of making the re-aggregation be around people is an interesting one. Our portfolio company Brewster has been working on some related ideas. Eventually though I expect that there is no single organizing principle for re-aggregation (not functions, not people, not locations) but rather we need overall contextual awareness. For example, the surface I want my phone to present to me when I first pick it up in the morning is quite different from the middle of the day and for each of those there will be variations depending on whether it is a work day or I am on vacation, my current location and so forth.
Third, personally I can’t imagine choosing Facebook to be the re-aggregator on my phone. I would want a company to do that which is neutral across all the other networks (a network of networks) and whose interests are better aligned with those of its endusers. In the past I had hoped that Google would be that company, but that was before Google decided it had to have its own apps for everything. Now I believe this is an opportunity for startups.
Fourth, this is a clear example of how much more open for developer innovation Android is than iOS. Whether or not you like Facebook Home, this could never have been done by a third party on an iPhone. I have long predicted that its excessive control will come to bite Apple and in addition to seeing more people personally make the switch to Android, I am now also encountering more startups that develop Android first and in some cases Android only.
I have my previous Nexus S still at home and may use it to try out Facebook Home when it comes out. I am curious whether anybody reading this can see themselves making Facebook their Home. Also, would love to get reactions to the concept of the phone becoming a smart re-aggregation point for unbundled functionality.
Yesterday I posted about how the current Do Not Track debate is muddling the underlying issues. I got a great reply from Mike Yang on Twitter that rightly pointed out at P3P had been a mess in part because Microsoft jumped the gun on it. That got me to think about an even broader context here which is the shift to mobile. A do not track battle on the web only is even more absurd in the context of a rapid shift in where people spend time and can be tracked even better (at least in the new iOS).
Mike then pointed out that Android has a pretty good permission system, which I agree with. The system is easy for end users to understand and doesn’t get in the way because you need to approve it once when you start using an application and then only if an upgrade to that application wants more permissions.
So the better idea here might be to start with mobile and then extend that model to teh web. When you first visit a site there would be a one time permission dialog. Websites in the EU already do this with regard to cookies. Now one might think that this becomes very cumbersome. But with a standard, browsers could be configured so that you don’t even see the dialog if a site is only requesting permissions that you are willing to always grant.
Of course web sites don’t operate in a sandbox so there would be some trust involved. But a standard like this would also make it possible to construct automated services that can crawl the web, register for sites and services, monitor marketing systems and see if sites are abiding by their requested permissions.
The permissions themselves should be things that can be worded in relatively plain English (substitute your language here), such as “Permission to send emails to you” or “Permission to share anonymized information with third parties for marketing purposes.” This approach would also make it possible to weave in things that are one off now, such as sites permitting access to location or potentially local storage.
It will take some work, but I think one could come up with something that works across both mobile and the web with the same language. That would be a real win for consumers and also provide operating clarity for companies.
There is a rumor that Amazon today will announce an Android based smartphone tomorrow. And despite repeated denials there is also a persistent rumor of a Facebook phone that might be Android based. In China there are already several custom phones based on Android, such as the one by Xiaomi. Some people are seeing this as further evidence that Android will fragment to a point where it will be no longer be a single platform.
While that’s is a possibility, I actually think that it speaks to the strength of Android and is much more likely to be a highly transitory phase. We are still early in the market for smartphones and that’s where a lot of experimentation is actually a plus. Android phones have already given us many more screen sizes, phone form factors, home screen designs, price points etc. than the iPhone. Admittedly, many of these experiments have been terrible, but big screen phones were pioneered on Android and are a real hit with users. As are cheap smartphones in large parts of the world.
This experimentation phase won’t last forever though. Instead, it is likely that within the next couple of years we will settle on a limited number of display sizes. Also the variety of processor speeds and capabilities is likely to decrease as more and more phones will have reasonably fast processors. Given the relatively fast phone upgrade cycles older Android phones will disappear fairly quickly.
The Android phones that will succeed with users over time will be the ones that do the best job running the most popular applications. An Amazon phone that cannot run other popular Android applications without a major effort by developers is not likely to succeed in the long run. While Amazon, Facebook, Xiaomi, et al may try to make it hard for people to get to apps outside their respective app stores, that too is quite likely to give way over time as long as Android stays sufficiently open so that people can sideload apps (Including new app market places).
So I think the right time to judge Android fragmentation and its effect is not today but a couple of years from now when the pace of innovation on phone hardware has slowed down a bit, the market had time to shake out weaker phones and only a few app markets matter.
The shift of usage away from the web and to mobile is going on in full force. About half of the US population now has a smartphone and that penetration is rapidly growing. That shift has been widely cited as a problem for Facebook. But generally the problem is stated in terms of a smaller advertising opportunity on mobile devices as a result of screen size. That goes back to Facebook’s own amendments to their IPO filings, in which they stated:
"Although the substantial majority of our mobile users also access and engage with Facebook on personal computers where we display advertising, our users could decide to increasingly access our products primarily through mobile devices. We do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven."
The real problem, I am beginning to think, is more dramatic: the shift to mobile may make Facebook less relevant altogether.
Why? Mobile devices are doing to web services what web services did to print media: they unbundle. On my phone another app is just a button push away and there is relatively little that fits on each screen. So it is just as much effort to go to another part of the Facebook app as there is to go to a different app altogether. So Facebook for mobile may not be Facebook at all but rather a combination of say Instagram, Kik, Twitter, Foursquare and others.
Facebook seems to realize this to some degree already. They launched a standalone messenger app and of course more importantly they acquired Instagram. There are also persistent rumors of Facebook working on a phone. Even if they come out with their own phone on all other phones they will have to compete with best of breed point applications. So the challenge here is what Facebook can do to make its own individual apps be part of a suite that together is more compelling. That may turn out to be a tough nut to crack.
About 3 years ago, I wrote how phone numbers might be an important part of mobile identity. I started to change my mind on this last year. Now I am thinking that phone numbers may in fact much more rapidly be approaching the end of their useful life.
Why? Because of my recent experience in London with a data only SIM card. Having tired of crazy international roaming charges, I picked up a 1 GB data onlyl SIM card from a vending machine at Heathrow for 20 pounds and popped it into my phone.
I happily used foursquare, Twitter, kik and email all day long. But I was wondering how others would reach me who are not yet connected to me. I had a couple of different options. I could run Skype for voice. I could publicize my kik handle. Fortunately, I am “albertwenger” on both services so people could also just guess.
I believe that there are a bunch of ways this could go. There could a dominant global provider of a unified namespace for people if one of the existing big guys like Facebook or Twitter or one of the up and comers like kik becomes ubiquitous. Or there could be one or more providers of proprietary “phonebooks” that make it possible for people to let themselves be found on the services they want to. Or a new standard could emerge that is the equivalent of DNS but just for individuals.
Would love to know what others are thinking about this. How do you think of your mobile identity? Still phone number first or some handle? And how would you feel about a phone book approach that lets you register multiple handles? Should that be an open standard?
All of my China impressions are to be taken with a fairly big grain of salt as I only spent 12 days there and was mostly a tourist. I am sure people who have been living there for years and/or have started businesses will be more reliable sources of information. With that caveat out of the way here is one of my most important impressions. China has the opportunity to grow its Internet sector by leapfrogging development stages common in the US and other Western economies. This is particularly obvious in two areas: mobile and e-commerce. Much has been said about the growth of mobile in China already so no need to add to that.
At first I was struck by the tremendously fast growth of some of the e-commerce companies in China. But the second one goes outside the center of the big cities one can discover an interesting reason: there is no highly developed bricks and mortar retail sector. Even in residential areas of large cities there are far fewer stores than we are used to. The US by contrast had a long time period to perfect bricks and mortar retailing and on top of that people living in rural areas here have cars to get themselves to stores. While China is adding cars at a pace that is causing all sorts of problems (more about that in another impressions post) the vast majority of the population is relying on other modes of transport. So e-commerce, accessed from a mobile device, can be native purchasing behavior for many Chinese instead of requiring a behavioral switch.
I have not tried to do this, but it might be a useful exercise to go through Mary Meeker’s latest report which has a wonderful section on “re-imagining” of various activities and see which ones of these might be subject to leapfrogging in China. One company that demonstrates how powerful leapfrogging can be is Xioami, which makes an Android phone and sells it directly via the Internet. Google tried this in the US but the existing behavior pattern of buying a subsidized phone from a carrier was way too strong. Xioami by contrast is apparently selling hundreds of thousands of their phones in a single one-day flash sale!
First there was the Path address book tempest. Now there is a concern about apps being able to access photos without permission. It would be a shame if this resulted in more centralized control over apps and longer review processes. What we need instead is some kind of peer produced approach to app security. What I have in mind is something along the lines of what Chris Dixon did with SiteAdvisor for web sites. Some people will (voluntarily?) run software on their mobile handsets that monitors app activity, including which servers these apps communicate with. The results from these “monitors” are aggregated to provide security rankings for applications.
This is not meant to be a substitute for a permissions model but to complement it. I like that apps need to check with me about accessing say my location and I certainly would want the same for my address book. But that still doesn’t tell me anything about where this data goes. Admittedly monitoring what an app does won’t capture what happens once the data reaches servers. For that we will need to rely on other trust models. This is an opportunity for startups like Parse that are providing a backend for mobile apps.
If there is an initiative like this already out there, I would love to know about it. I think it will be critical to a healthy app ecosystem that doesn’t get choked by a few centralized market places.
Facebook recently released Messenger as a separate mobile app. Google+ launched with multiple separate mobile apps (Google+, Huddle, Places). What’s going on here? We are seeing the results of limited screen real estate combined with effective notification systems and a fully logged in user on mobile. Unlike on the desktop (Microsoft) and even the browser (Google, Facebook) this means that large integrated apps or even “suites” have no advantage from a usability perspective. For instance, when I get a foursquare notification, I wind up in the foursquare app at the right place. I am already signed in (the phone is a single user device) and can immediately start to interact.
That is great news for startups that are targeting specific areas that are also being attacked by the bigger players. The big players, however, may still hold an advantage on the back end. They potentially have more data available to themselves on the specific user and his or her social graph to be able to deliver a richer front-end experience. One way to think about this is that with mobile we have entered the era of data bundling rather than functionality bundling as a source of competitive advantage. This has a couple of important implications for startups. First, make sure that you can get your hands on all the data you need to deliver a compelling user experience - either by getting it from your users or partnering with others who can provide it. Second, if you are generating valuable data don’t just fork that over to a big company if that company is already or will likely be competing with you.
Competition in mobile is now maybe in the second inning. So there is still a lot that will happen. But I believe the part to pay most attention to will be invisible. It’s data where the real battles will be fought.
I used to think that (mobile) phone numbers might play an important role in identity as they are quite stable for people. For instance, I have had my current number since 1999. But now I am wondering whether phone numbers will become meaningless entirely. I receive very few calls that I did not ask for on my mobile - most calls instead are pre-arranged via email. For any pre-arranged call, I could eventually use some form of IP telephony that will be namespace based (e.g., I already often do these kind of calls viae Skype).
That leaves people who need to reach me in an “emergency” — e.g., the kids’ school when one of them shows up at the school nurse. If I got a new phone number it wouldn’t be that hard to think about the half dozen places or soe that need to know about it. Ideally at some point in the future though I could simply tell the school to call me at “albertwenger.”
In a way phone numbers are IP addresses for people. If we had the web services equivalent of a gigantic telephone book (with some kind of permissioning) phone numbers would be pretty meaningless. That transition is, however, likely to take a very long time because we are missing the right standards. We need something like DNS and SMTP but aimed at the individual namespace and real-time communication. Paging DARPA?