Category Archives: Consumer Tech

The Fast-Changing Landscape

Image representing iPad as depicted in CrunchBase

In tech, we talk a lot about how fast things change, how dynamic things are.  As an investor in mobile, I think and talk about this all the time.  I sound like a booster, sometimes even to myself.  I try to balance that, I really do.

This week, though, wow, if you ever thought that the landscape was settling and the picture was coming into focus, did that ever get thrown out of the window.

Intel saw a 27% year-over-year drop in earnings as the PC market continues to shrink.  Chipmaker Qualcomm, which is riding the mobile wave, overtook Intel in market cap: unbelievable.  Also highlighting the headwinds in the PC market, Michael Dell is reportedly looking to take the company he started in his dorm room private.  Hard to imagine giants like Intel and Dell facing such a changed landscape.

At the same time, it’s not like new markets are standing still.  Sharp is reporting that its ramping down production of the full-sized iPad as the demand for the iPad Mini is so much stronger.  Gee, that was quick!  Has the iPad Mini even been out for 6 months yet?

And finally, it’s exciting to see that someone other than Apple is starting to see consumer hype and love in the mobile market, with the WSJ is reporting that the upcoming Galaxy IVS from Samsung is seeing “iPhone like hype.”  I’m not hating on Apple here, I just think its great for everyone when there’s strong competition, which Samsung appears to e bringing.

However stifled innovation may seem today, it sure seems like the market is pretty dynamic.




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Where are we?

Over the past few weeks, I’ve noticed two themes in press and analysis around the tech world.

economist cover

Theme #1 : Where has the innovation gone?  This was represented best I think with this week’s cover of the Economist, asking whether we’ll ever invent anything as useful as a toilet ever again.  This echoed folks like Michael Arrington who quipped that he was bored and Peter Thiel who griped that instead of flying cars, we got instead 140 characters.

Usually, when I hear lots of mainstream concern that innovation is dead, that’s when I start getting excited.  The froth is coming out of the market, and the true innovation is out there, lurking, perhaps unrecognized (yet).  But it’s out there, just waiting to delight.

So on one hand, I’m excited.  Bullish about the future.

Theme #2: Thoughts on the Series A crunch.  Lots has been written about the pending Series A crunch.  I basically agree with Michael Maples Jr’s as quoted in a PandoDaily article, where he says (paraphrasing) that every year there are about 10 fantastic startup companies.  Irrespective of funding environment, those 10 are the ones everyone wants to get into and those have little trouble finding funding.  The goal is to start or be involved with one of those companies.

With that as context, I’ve read with increasing alarm the press that prominent incubators are putting out about how much follow-on funding their companies have attracted.  Here was one such announcement just made today.  I can understand why its useful and its not to take away from the work that incubators are doing to help companies get themselves started and off of the ground.   I’ve never been much of a fan of funding announcements though.  I’m more of a fan of announcements of big customer wins, market share achievements, and partners that are committing to your solution.  That’s real traction and where you have those wins, funding will follow.  I do worry that the signal from incubators on follow on financing is going to, if anything, prolong the Series A crunch.

These are just thoughts.  The concrete action feedback, if you’re a startup, is to stay focused on winning in the market place through traction–customers, market share, partners, revenue, growth, etc.

Delight a rapidly growing customer base and the Series A crunch and the concerns on a lack of innovation in today’s tech market will magically work themselves out.


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Disruption Daily: Early Thoughts on Facebook Graph Search

Peter Drucker dies at 95

Big tech news today with Facebook announcing its new Facebook Graph Search.  Wall Street apparently didn’t like the news, sending FB down -2.74% on a day the rest of the market was pretty sharply up.  I might need to lean in and pick some up.

I think it is a big tech story for 2013.  I agree with David Weekly’s initial observation that this is a serious ongoing threat to Google.  It’s a pretty obvious step for Facebook and I think its going to pay off for a few basic reasons.

First, it starts to highlight in a very mainstream way how Facebook has, in effect, become the internet for many people.  People are spending so much time on Facebook that it makes sense that FB would invest in convening a “Dream Team” of Google Search engineers to do some semantic forking and NLP stuff to make Facebook the place you go for search.  It makes all the more sense when you consider that Facebook content isn’t really searchable via Google–I can’t go to Google and search for that status update, photo, or meme you posted.  Just doesn’t work.  So an obvious strategic move.

Will it succeed?  I’m bullish.  It’s one of these strategies where Facebook’s chocolate meeting the peanut butter of search seems to fit really nicely.  Certainly it seems a lot smoother of a fit than Google trying to veer into social with G+.  (With Marissa Mayer taking her talents to Yahoo, I think Google’s push into social is perhaps even more at risk, as her fingerprints in terms of user experience and design were so pervasive.)

Second, I think that there are a variety of scenarios where FB search could be quite disruptive in the shorter term–with local in particular.  We are all connected to friends through Facebook, and I’d bet that a lot of accounts have a huge portion of friend connections who are nearby.  The next time you need to know whether that new Chinese place is any good, are you really going to go to Yelp or Google, or would you like to see that 6 of your friends had “Liked” the place on Facebook.  Local is a big kahuna market, and FB has a nice route to going after it.

Third, it’s a winning move in that FB is growing engagement and retention, and search (along with mobile) gives it a new avenue to continue driving this lift.  Surely there’s an opportunity to go for the jugular over time with Google, and this is good for the industry.

A final point on Facebook’s capacity to disrupt Google in a major way… I remember reading an interview of Peter Drucker in 1997 or 1998, around the time that the Department of Justice was lining up to take on Microsoft for anti-trust violations.  The interviewer asked the father of modern management what his opinion was on the anti-trust case. His answer, basically, was that in the case of the technology industry, the market moves too quickly.  When a company becomes as big as Microsoft  the seeds for obsolescence are in a sense already planted.  He forecast that based on Microsoft’s size, some small, disruptive company that no one had yet heard of would step up to take on Microsoft in relatively short order.  Though there’s no reason to think Drucker had ever heard of them in 1998 when the interview happened, it’s pretty clear that he was prophesizing Google.

Now certainly we’ve all heard of Facebook, so this time around is a little different.  But at the same time, it’s not lost on me that in the same week that the Department of Justice announced it would not pursue action on Google after 2 years of investigation–the true sign of being a tech behemoth–Facebook announced its Facebook Graph Search.


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Digital Health Getting Real

Image representing GE as depicted in CrunchBase

Amid all the CES press, I was interested to read that GE had hired Risa Stack, PhD, from venture giant KPCB, to become the General Manager of GE’s Emerging Health Innovations group.  This hire, along with the details of the resources GE is putting into this effort and its just announced partnership with the StartupHealth incubator, is significant.  I’m excited to see where this leads.

First, while the intersection of health and technology is heating up, the path to distribution has been challenging.  While a company like FitBit has overcome the distribution challenge, getting startup consumer devices into mainstream channels remains very, very hard for most.  For startups that gain access to GE’s resources through the StartupHealth incubator partnership will help de-risk this crucial element of distribution.  Surely, companies will still need to build great products that solve real problems, but to have a big player like GE in support of these efforts will go a long way towards solving a key choke point.

Second, as a consumer, I’m excited and interested to see what new products will get created and offered.  I’ve not been one of these measure-everything-about-my health folks.  As a member of the cult of Crossfit, I tend to stick to the basics of writing out my performance in a notebook log with an old Bic pen.  But that doesn’t mean that I’m not interested, I am.  I think though that beyond just personal fitness, there will be all kinds of interesting health and consumer tech opportunities that make our lives better across of big and current hard chronic health management situations, e.g., diabetes, cancer treatment, MS, potentially kidney-related issues, etc.

I’m excited about GE’s commitment and approach to its Healthymagination effort.  I think it’s exciting for startups and exciting for us as health care consumers.


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Market Cap / Employee

Monday I caught up over lunch with long time friend and superb Japanese entrepreneur, Nori Matsuda.  Matsuda-san is the CEO & Co-Founder of Sourcenext, a publicly listed consumer software company in Japan.

During the discussion, he talked to me about how he thinks about building public technology companies.  He mentioned a metric he thinks about a lot: Market Cap per Employee.  He thought that this was an interesting expression of a company’s culture, of how much opportunity, how much energy there likely was at the company.  He then rattled off the Market Cap per Employee of several large public tech companies.

I built this simple chart below, and I think it’s telling:

Company Market Cap (B) Employees (K) M/E (M$)
FB 52 4 $13.0
APPLE 528 73 $7.2
GOOG 219 54 $4.1
MSFT 227 94 $2.4
AMZN 107 51 $2.1
YHOO 21.8 14 $1.6
CSCO 98 67 $1.5
Zynga 1.8 3 $0.6
Nokia 13 105 $0.1
HPQ 23.6 350 $0.1


If you’re thinking of working at a public company, then this is probably an interesting metric to look at and consider.

Alternatively, if you’re running a startup, it’s also an interesting metric.  You might consider your current valuation and divide it by the number of employees.  See where you stack.  It’s probably at least some kind of indicator of the opportunity and the momentum in front of you.


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Be Careful What You Wish For : Color’s Cautionary Tale

TheNextWeb broke the news that Apple is acquiring Color Labs.  This closes what was one of the highest profile, most hyped startups of the last 5 years.  In my time in Silicon Valley, I’d say Google’s launch of Google Wave and the launch of Color were the top two in building massive hype that then came up really short.  (Do you all remember when people were *begging* for Google Wave invites?)

And that’s ok.  Sh*t happens. New ideas fail every day.  That’s reality.  What *has* changed I think that the costs of failing are dropping.  A lot.  Moore’s Law, the continuing growth and robustness of cloud-based infrastructure and open source tools and development environment, and the development of methodologies like the Lean Startup, have all combined to help teams run customer development cheaply and quickly.  They can build and vet ideas quickly and when they start raising money, they have a much better sense of what works and why.

Color ran counter to this–it went big.  On every front.

I think the cautionary tale is that you should be careful what you wish for.  I was once invited to judge a startup pitch contest.  This contest was held at Color’s Headquarters in downtown Palo Alto.  This was post Color launch, and the bloom was definitely off the rose.  Half of Color’s office space was allocated now as kind of event space, which is where we held this startup pitch competition.

Anyway, before the contest, there was a long networking cocktail type event.  I remember standing there talking to different startup teams.  One of the teams I talked to pitched me their idea.  I said to them, ‘hey, what you’re doing is interesting.  I am not interested in investing in it [for wahtever reason, can’t remember] but let me know if there’s anything I can do to help.’   One of the founders looked at me, then glanced around the room and said to me, ‘Well, there’s a $42m check sure would help,’ referring of course to the monster Series A Round that Color had reportedly raised.

My response: “Look, be careful what you wish for.  If I had invested $42M in this thing, and now half of the prime real estate in Palo Alto was being used as event space for cocktail parties and startup pitches, I would want to fire everything that breathed.  This would make me so angry.  Go out and build something awesome.  Then the world of investors will find their way to your door.”

Too much of the press and Silicon Valley community celebrates the raising of money.  Indeed, a raise is seen as press worthy.  I’m less convinced that its news worthy–some founder convinced some investor to write a check.  Meh.

To me what is news worthy is winning a customer, getting a really high profile, value added partnership nailed and in market, landing a truly world class exec or developer.  The really important building blocks to constructing a real company are what we should be celebrating.  Not that you got someone to write you a check.  Focus there, and do that great and the funding announcements will find a way of happening.


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Why Tablets Won’t Be NetBooks 2.0

From TechCrunch today, “Tablets Join the Long Race to the Bottom,” writer John Biggs decries his fear that the tablet market is basically the NetBook 2.0 market.

In a way I share Biggs’ fears: it would be shameful if the bottom of the tablet market fall out, if tablets get renamed ‘craplets,’ But for the most part, I disagree with the thinking.  I’m more bullish on the Tablet market overall, for several reasons.

First, I think the dynamics of the tablet industry and market are completely different than the netbook/PC business.  In the PC business, basically the entire profit pool on the hardware side is with Apple and on the software OS side is with Microsoft.  The net book phenomenon was spawned by low-cost manufacturers trying to use their unit volume capacity with ever cheaper componentry to try and gain share in low-income, emerging markets, or as supplemental PCs in middle-income households.  OEMs like ASUS bet that they could build and hit ever cheaper price points, and that this would create demand.

For these low cost netbook manufacturers, there was always hope that there’d be cheap web-based services that the manufacturers could resell that would then help make additional margin.  This was generally an epic fail, as low-cost hardware manufacturers generally lack the skills needed to build a high-quality and well done ecommerce solution.

While netbooks do continue to ship, particularly in emerging markets, they certainly haven’t made a massive dent in the profitability of the industry, nor have they shifted the powerful holds that Microsoft holds on the OS, Apple on the hardware, Intel on the chipset.   (Though ARM has undeniably had some impact, particularly in the tablet space.)

In the current tablet industry, by contrast, several key factors are different.  First, two of the leading hardware manufacturers are Apple and Amazon.  Neither has a strategy of being the low cost leader in hardware manufacturing–that’s not their strategy at all.  Instead, both have very substantial and well-delivered services (books, movies, etc.) they distribute through the tablets to users.  So unlike the netbook that wanted to try and sell you an upgrade crapplets from their crappy netbook desktops, Amazon Kindle Fire users are buying and reading books, magazines, and movies.  So the total value proposition for these tablet makers is totally different.  PC makers are all about lower BOM cost, win the lowest ERP on the store shelf.  Amazon and Apple has a different approach, one that’s  about winning share of one’s digital basket: hardware device, software, services, media, etc.

Given these core differences between the Netbook and Tablet markets, I’m more optimistic that the Tablets will evolve in a different direction.  Now don’t get me wrong: I do agree with Biggs that we will see tons of crumby tablets.  It is the hardware industry after all, and we still have too many hardware suppliers that will look to deploy resources into a new hardware market.  Expect everyone in mobile computing–Samsung, ASUS of course, but also the Japanese OEMs, Toshiba, Sony, Fujitsu, etc–to enter the market.  Prices will drop at retail and for users.

And I think that in general this will be fine for the market, though again, you’ll have to wade through a fair amount of junky hardware.  The reason it will be fine is because the price point pressure that the low-cost netbook centric tablet guys will drive will have some impact on guys like Apple and Amazon.  But at the end of the day, there will be equilibrium.  Equilibrium will be achieved when Apple and Amazon find a price point where they have a nice quality Tablet that is priced relatively competitively with lower quality machiens.  And Apple and Amazon can both subsidize in effect the price point of their SKUs knowing that users are likely going to use that to consume all sorts of digital media through their stores.  Razors and razor blades.


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A Giant Awakes: Microsoft Surface

LOS ANGELES, CA - JUNE 18:  The Microsoft tabl...

Microsoft yesterday announced its new Windows Surface tablet.  Though prices and release dates are not yet confirmed, this won’t stop the prognosticators from calling Surface DOA or a Kick Ass Return.

I’m bullish.  I’m excited.  For a bunch of reasons…  Here they are:

We need competition on Tablets.  Right now, iPad is totally kicking ass in Tablets–it’s not even close right now.  Android Tablets are the Bump of the Tablet world–lots of press that there’s tons of users, but no one has seen a user in the wild. Having MSFT enter with a credible device is good for the tech industry and for the world.

I want a keyboard!  I love my iPad: it is totally and completely awesome for reading and deleting email, and for reading news.  It is total crap when it comes to composing or dealing with emails that are not deletes.  Why?  No keyboard–you can’t type.  I appreciate Siri as an alternative–in the phone form factor in particular–but having a keyboard for a tablet is definitely something I’ll check out.  Would be great to have an easy way to power through more email via keyboard than trying to speak to an iPad.  Nice!

Office + Surface <> MSFT Zune.  If you believe MSFT’s earning calls, which I do, many of us are still using Microsoft Office products.   I still use MS Excel and PPT a fair amount.  (Goog Docs is fine for most docs.)  Blending Microsoft Office and Surface is something I’m super excited about.  Can’t wait.

To me, this is the big kahuna as to why I’m bullish on this effort where I was more skeptical on Zune.  Zune was trying to battle against Apple’s iPod and iTunes service–a value proposition that Apple had all the strength and leverage.  Surface is different.  Surface leveraging Microsoft Office is a big deal, as Office is still a huge franchise.  This makes this play totally different.  (BTW, for Microsoft watchers, don’t forget: Windows President, Steven Sinofsky is the former head of Office, so this integration will be slick #justsayin’.)

Hardware Channel Conflicts will get worked out.  MSFT haters are pointing out how much pushback Windows OEM partners will have on Microsoft’s entry into the Tablet and the Hardware space with tablets.

Do you know what my response would be if I were at Microsoft talking to these OEM partners?

I’d probably ask these questions:

How long have we known about the iPad?  (3-4 years.)

How many SKUs have we produced that are reasonable alternatives? (0)

How important do you view the Tablet business over next 5 years? (Very.)

Given that, would you rather be part of an ecosystem that has at least 1 credible alternative or would you rather continue getting your ass kicked by Apple?

The answer is clera.  In 2012, there are effectively zero competitors to the Apple iPad.  We’ve all seen the device in market for years, and the best offerings so far– the Samsung Galaxy Tab IMHO–have gained little share.

So my view is the Microsoft ecosystem has got to  take it to them and raise the water line on Apple a little bit.  Let’s make them sweat at least a little bit .  Ultimately: let’s get on the field.  Then let’s get the ecosystem moving forward.  Let’s build a next generation as the WinTel / WinARM consortium of the 90’s and get after it.  But let’s get on the field.  Otherwise, we’re all just going to continue to get screwed.


So to me, a Giant is now very much awake.  And the Giant of MSFT should be: Tablets are about as core a threat as Microsoft can face.  All hands are on deck, and while yes its late, and yes its not got the apps, the Surface and the Microsoft effort here will be one to watch.  Certainly not to be trifled with or discounted.

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Android Slowing in the US?

An article from today’s NYT Tech Section questions whether Android growth is slowing in the US.  The article quotes an analyst who states that iPhone growth remains healthy, but that growth rates of Android in the US are dropping.  No mention of Windows Phone or RIM btw, which I interpret as those two platforms not yet having achieved relevance.

The article is light on analysis, but it will be worth digging in on.  My quick take on Android is that as the very clear unit share leader in smartphone OS’s, it gains several advantages.  It gains broad ecosystem support from hardware/handset makers.  Developers have to pay attention, etc.

But unlike the Apple/Windows ecosystem battle of the PC Era of the 90s, in which Windows’ commanding market share basically pulled all client app developers to their ecosystem, the same effect is not happening.  In fact its the opposite this time around.  The iOS ecosystem seems by most accounts to be where the money is for developers, and few  development teams that would target Android at the long-term exclusion of iOS.  (Some devs will use Android as a test platform as its app approval process is far simpler than Apple’s.)

What’s driving the different outcomes this time around are a few things, namely:

  • Mobile adoption is happening much faster and more broadly than the PC era of yesteryear.  The market has grown so fast and so many users are now using smartphones that the market to support two (or more) viable ecosystems clearly exists.  While not the market share leader in units, iOS has a big unti share and it pulls the vast majority of profit share in the space.  iOS gets the premium users and their ecosystem is well designed to get users spending money and developers rewarded.  All in all a very healthy ecosystem over there in Apple.  In the PC war era, Apple lacked this virtuous cycle.  The explosive market growth of Mobile enabled 2 ecosystems to do this.
  • Android’s developer ecosystem is still too fractured.  Developers tell me about real concerns on Android owing to the different OS versions, firmwares, etc.  The compatibility problems are all over the place, and it has a chilling impact on developers.  iOS has its own issues, but at a minimum, developers know that if they get an app Approved by Apple they’ll get their app onto devices that can run their app.
  • The mobile app ecosystem and infrastructure is much better developed, enabling developers to support (with some cost) both ecosytems.  In the early PC era, app developmernt and distribution was still so inefficient that developers had to make a choice as to which ecosystem to target.  In today’s world, with eveyrthing from AWS, Phone Gap, HTML5, to say nothing of the ease with which the different app stores can help distribution all helps developers build and support apps on more than one ecossytem.  This efficiency enables more than one ecosystem to thrive.

So all in all, I’m not super troubled by this report.  Android is still a big dog in the space.  It does need to simplify the development ecosystem, IMHO, and showcase that developers can really succeed there.  But being the #1 market leader in units always has benefits, and I expect Android to retain that spot for some time.


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RIP Zune

Today’s New York Times has an article titled “RIP Zune” that notes Microsoft’s announcement that its discontinuing the Zune Music/Video service in favor of the better known XBOX Live services.  A no-brainer decision by MSFT, more wood behind a stronger arrow.

I received a Zune device (generation 1, I think) in early 2007 as a gift for a launch I’d worked on at Microsoft.  It was alright, and truthfully, the rental service–a lot like an early version of Spotify though with a smaller catalog–worked well.  The iPod at that point was still just so much farther ahead that it was difficult to see how the Zune would really catch up.

I did have a funny Zune story though.  I left Microsoft on August 31, 2007 and was on a flight back to the US from Tokyo, where I worked, on September 1, 2007.  As I got into my seat on the flight to San Francisco, where I would be starting my new career and head into the unknown, I dropped my Zune.  My seat mate picks up the device, looks at it for a few seconds, and says, “Is THAT A ZUNE? I’ve NEVER seen one!”  I let him play with it for a few seconds, as we giggled about the rareness of these devices.

Within a week of moving to the Bay Area, I’d dropped the Zune for an iPhone.  Within a quarter, I’d moved from Windows to a Mac.  Now our home is filled with Apple devices–Macs, iPhones, iPods, iPads, and Apple TVs.  Come a long way since owning a Zune 5 years ago!


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