Monthly Archives: November 2008

Top 5 Disruptions in the Past Twelve Months

These are the top hottest five topics that we have covered over the past twelve months with the biggest potential for a disruption in both the Communications Industry and in our habits.

1) Mobile Internet, the Internet way.
The iPhone and Google’s Android have revolutionized Mobile Internet in the handset, making web browsing such a cool and better experience that operators have embraced unlimited data plans for the first time, in bundle with these “next-gen” handsets (well, in fact operators did it first with Blackberry for unlimited enterprise email). Downloadable Mobile Apps were already available for Symbian, J2ME, Windows Mobile and Blackberry, but never have they been hotter than they are now on App Store and App Market. The Winners: Apple and Google (and even Blackberry to a certain extent). The Losers: Nokia, Sony Ericsson and Windows Mobile. The short-term winners, long-term who-knows?: The Service Providers that are cashing-in the flat fee Unlimited Data plans, but sacrificing their chances to ever control again the Mobile Internet as they did before.

2) Cloud Computing.
Amazon Web Services, Google App Engine, Google Apps, IBM “Cloud consulting”, or Google releasing Chrome to run complex apps on the browser at full speed, have made headlines in 2008. Startups such as Animoto run on Amazon’s cloud to enjoy flexible on-demand computer scalability (no wonder Amazon is also an investor in Animoto). The hype is such that these days everything is getting cloudy (or re-defined as cloudy) : GPS navigators face competition from the clouds with Google Maps (maps run on the cloud, with real-time info update and interactive recommendations/ads). Even speech recognition now runs in the cloud with Google Mobile App. The Winners: Google getting us to spend more time online, pioneer Amazon that gets economies of scale, and the IT vendors, such as HP or IBM, that will equip clouds. The Losers: Microsoft, for the moment. SaaS running on a browser make the OS less relevant. The catastrophe of Vista has only help the Cloud cause with enterprises eager to consider alternatives. Microsoft is building huge data-centers and will be a big cloud player too. For the moment, the cloud will put pressure on them.

3) Internet TV.
Hulu has brought national broadcast TV shows to the Internet. YouTube has confirmed the revolution of Internet Video, now well into the mainstream. YouTube not only is reaching agreements with content owners to be an ad-based platform for content distribution, but it has been a huge platform for politicians for the US 2008 presidential campaign, and now for President-elect’s change.gov. Not to mention the new habits of kids to search YouTube for information instead of searching Google. The Winners: All of us that now have virtually unlimited video content, including old-time TV jewels, just one click away. The Losers (yet to be confirmed): Broadcasters that will cannibalize higher CPMs revenues of traditional TV, with much lower CPMs prices in the online world. The effect is still small but innovative models will be needed before the cannibalization goes too far.

4) Wireless Broadband. With HSDPA or EVDO widely deployed, the 3G networks are now beginning to deliver on past promises. WiMAX has also seen in the past twelve months many commercial launches, and will play a key role in emerging markets where fixed broadband is not a financially viable option. The Winners: Mobile Operators that will get an additional source of revenues selling Mobile broadband, and opening the door to Machine2Machine applications taking advantage of ubiquitous wireless connectivity. The potential losers (not yet): Fixed Operators will need to keep fixed broadband ahead in terms of performance, to avoid substitution by wireless. Mobile Operators will lose too, as their hopes to make Mobile Internet different from fixed vanish.

5) Netbooks.
Asus EEE PC has been followed by most laptop vendors (supported by Intel low-power low-cost processors such as ATOM)  to bring a new class of 1 kg laptops with less than 9″ screens, ideal to enjoy full Internet on the go. Combined with Wireless Broadband, these low-cost laptops are not only a great companion for road-warriors but also are likely to power Internet access in many emerging countries as an affordable PC solution. The Winners: Millions of new Internet users worldwide, as well as Internet addicts. Flash memory manufacturers. The Losers: High-end lightweight laptop makers, that will face competition from low-end machines with enough power for everyday use. DVD/CD writers and disc makers, with discs replaced by memory cards and the disc writer by a card reader.

One Year of Blogging

One year has passed since we started this blog with Steve Job’s famous commencement address.

Less than one month later a post on LinuxMCE made it to the front page of Digg, and got 25.000 visits in one day!

Since then, we have spoken about iPhone, Android, Mobile Internet, Mobile TVIPTV, Internet TV, the economy of freenetbooks, WiMAXclouds, pipes and even nanotechnology. We have also echoed from great entrepreneurs as Guy Kawasaki, Tim Ferriss or Martin Varsavsky.

It has been close to 200 posts, 250 comments, 139.000 visits and 260.000 pages.

Thank you for being there.

Note: Did I mention we also wrote about iPhone?

Innovate for Tomorrow or Die

Any ambitious innovation must target to fix the problems of tomorrow considering the technology environment of tomorrow. Fail to consider the future environment and you might be pouring R&D dollars into the bin.

Innovations that did bet on tomorrow:

Remember when Gmail launched in 2004? It offered 1GB of storage when Hotmail or Yahoo only gave a few MBs. Google was anticipating the increasing volumes of email people would have to deal with in the future, while betting on the exponential reduction of storage costs. Gmail now give more than 7 GB of storage.

YouTube growth also rides on decreasing storage costs, increasing bandwidth and better video compression techniques to make Internet Video go mainstream. Not to mention the habit of a new generation of kids to search with YouTube rather than Google.

GPS navigators vendors should also be careful with Google Maps on new handsets such as Android or iPhone. With Unlimited Data Plans, why have a GPS Navigator when the GPS mobile phone can provide online up-to-date maps with extra real-time information? There are some advantages to run maps from the cloud rather than from a device memory, and Google will leverage on them.

Many anticipated that people would not carry a mobile phone and an mp3 player, when only a single device would do it. For Apple the iPhone was a matter of survival with iPod having the biggest market share by far, and Nokia adding Mp3 players to their phones. Not only did it created a great convergent phone-mp3 player, but also added the multi-touch and the mobile web revolutions.

Innovations that were shortsighted and are soon to die:

ATM (Asynchronous Transfer Mode) aimed to manage the bandwidth of data connections so that  different QoS could be handled over the same network. With increasing amounts of bandwidth, driven among others by Gigabit Ethernet, the Internet can perfectly cope today with Voice (and even Video) communications, as  Skype demonstrates, without any complex bandwidth management in the network. Why managing the bandwidth when there is plenty, and more is to come?

WAP was designed as a scaled down version of HTML to render web pages in a small screen. With faster microprocessors and  larger memory powering-up mobile phones, WAP window is over before it ever delivered on its promise. MMS is a similar case. Why MMS, when you can send an email with a photo from new phones with web/email capabilities, using unlimited data plans. Mobile Internet is become more and more Mobile Internet the Internet way.

Fon and other Wifi Hotspots networks might suffer from the limitations of Wifi (100m-300m of range) as a technology to provide wide area coverage. With WiMAX, HSDPA, EVDO (and LTE coming), wireless broadband is crossing the chasm. Once Wireless broadband is available and affordable, how can a Wifi Hotspots Network spotty coverage compete?

Technology trends can easily be predictable, at least regarding capacity growth, be it Moore’s Law on computing elements or its equivalent on bandwidth growth. Before embarking on an adventure, make sure it is consistent with future trends and its corresponding problems.

Will Speech-Reco Cross the Chasm with Google?

Speech Recognition technology is available for many years, still its impact has been quite low so far. Windows has speech recognition features that nobody use,  speech-to-dial is available in mobile phones since years. Few people configure it, and less of them ever use it. Only Interactive Voice Response (IVR) systems have been adopted in call centers to dispatch calls automatically depending what the callers answer, to despair of many who hate talking to machines.

Why such poor adoption? People still feel uncomfortable talking to machines, on one side because they feel ridiculous, and on another because few trust it will work. No one wants to voice-dial a a friend, and accidentally find you are calling your boss on a weekend. Or find that after you explain to the IVR your problem, the human agent that attends you later needs to hear the explanation again.

Why Google Speech-to-Search could make it though the Chasm? There are some niche applications that can make people get used to speech recognition. And Speech-to-Search can be one of the them. Voice is a convenient input for search while on the go. And unlike voice-dialling, the risks of mistakes are negligible. If it fails, just google again, anyway searchs take only milliseconds. Using voice to command Windows seems like a too difficult task. Using voice only for search from your mobile seems simple enough for me to get used to it. And the search results are customized to your location. Watch the video found via CrunchGear, and judge for yourself if compelling enough to go mainstream.

Reference Post: Check if Google Mobile App meets the criteria to be a Killer App: Searching for the Mobile Killer App

Update: The video seems to have been made private along the day. Was it a leakage from Google team? or a new way of viral marketing. Nothing gets a wider and quicker distribution than a disclosed secret.

See the picture via TechCrunch.

Update 2: Mike Arrington reports that something went wrong and Apple did not publish the Google application in the App Store, forcing Google to remove the video.

Update 3: Now it is official. Google Mobile App is available for iPhone. See a new video clip in Google Official Blog.

What Do Crashes and Bubbles Have in Common?

Financial Crashes and Bubbles are opposite expressions of how absurd and irrational markets can behave. Markets over-react irrationally, driven by the irrational sentiments of fear and greed. Panic drives the Crashes and over-enthusiasm drives the Bubbles.

As Martin Varsavsky said to Tim O-Reilly at the Web 2.0 Expo:

“Markets are bipolar, and they over-emphasize good times and bad times. […] Entrepreneurs need to distinguish Price and Value […] (and) steer in the middle of the tremendous swings of the Market, which are unreal in both ends.”

As “unreal” as Crashes and Bubbles might be, unfortunately they have a real impact in the economy. Stock market prices, or how much companies are valued, should not worry anyone but investors. The reality is different. Stock prices reflect the expectations of how companies are going to perform in the future, more than how they financially perform now. With stock prices plummeting irrationally driven by fear of crash (not by current performance), companies quickly adjust forecasts and cut investments and jobs.  Companies show investors how well they anticipate to the changing cycle. This is usually rewarded with a 5% price increase as the measures are announced, followed by 15% down once the downturn is confirmed.

Investment cuts have an immediate effect on the forecast of suppliers that in return also cut investment and jobs in a domino effect that extends throughout the value chain. With more unemployment, no industry is safe from reducing forecasts, and the downturn generalizes, bringing even more pessimism to the Markets. A Crash becomes a self-fulfilling prophecy driven by fear.

Bubbles are just the other extreme, where market irrationally foresee (and analyst justify) exaggerated growth, sometimes even infinite. The gains in stock prices only signal to companies that they need to invests more and grow more. And with everybody foreseeing a bright future, everyone spends more, invests more and take more risks to outpace competition and by doing the stock market goes up and up. It is when price-earning ratios reach 20 for a mature industry and 100 to 1000 for the most trendy industries, that one can sense that the bubble is ready to burst.

Market over-reaction and short-term speculation also amplify the drama. A few weeks ago we had a headline in Spanish newspapers with the biggest loss in history of Madrid’s IBEX down 10% in a day. The next trading day, we had a headline with the biggest ever win of IBEX up 10% in a day.

Analyst are quick to explain the crash and predict apocalypse: 1) Seeing Google stock going down, Om Malik writes “The Sky is Falling”  where not only he echoes some analysts concluding that the downturn will hit online ads, but also Om predicts they will find it hard to attract talent!!? 2) TechCrunch on their side echos a VC-rating site that explains that VCs will not make money soon. I wonder why they did not advice it one year ago. It would have been more helpful.

Analysts and economists are great at explaining the future aposteriori (when it is past). At predicting the future apriori (before it happens) they are as accurate as a monkey shooting darts.

Forget analysts, forget economists. Go find the next dream. Hope and work will do.

Martin Varsavsky on Web 2.0 Expo

Tim O’Reilly interviews Martin Varsavsky during the Web 2.0 Expo Europe last month. Martin is a serial entrepreneur that successfully created Jazztel and Ya.com to compete with Telefonica in fixed telephony and Internet access in Spain in the late 90s. He later IPO’ed Jazztel and sold Ya.com to Deutche Telekom with huge profits.

Martin is a very smart entrepreneur, and you can notice from the interview his clarity of thought.

  • “Markets are bipolar, and they over-emphasize good times and bad times. […] Entrepreneurs need to distinguish Price and Value […] (and) steer in the middle of the tremendous swings of the market, which are unreal in both ends. […] There are times when markets want to give entrepreneurs almost absurd amounts of capital, and others where the denial is absurd.”
  • His post on Sequoia’s panic is here.
  • Anecdote: The same bank that rejected Martin’s application for a $40,000 job, gave him a $12 million loan to start a company.

I am not a believer in Martin’s latest venture, Fon, that aims at creating a global community of Foneros that share their Wifi bandwidth. Although initially a good idea, with broadband prices falling , including 3G unlimited data plans, few people will be compelled to share Wifi, with the security risks involved, even if Martin claims in his blog that “it costs 85% less [to Operators] to send traffic through WiFi than through 3G.”

Whether Fon succeeds or not, Mr. Varsavsky is no doubt a savvy entrepreneur, and I feel proud we have him in Spain.

Don’t Be Evil?

Yesterday Google put an end to the advertisement agreement with Yahoo! that both companies announced in April. Google blamed the government regulators and some advertisers who had concerns on the deal. And who wouldn’t? The two major players in online advertisement were reaching an agreement to cooperate on search advertisement. Anyone smelling monopoly?

Yahoo! and Google deal back in April was meant to stop the Microhoo acquisition. Google was quick to give a hand to Yahoo! to “save” them from being absorbed by evil Microsoft. And it worked. Specially for Google. They avoided a Microhoo that would have been a stronger contender, and they made Yahoo! publicly concede defeat in online ads by agreeing to place Google ads in Yahoo!’s searches.

Now Google ends the agreement, which “surprisingly” raises concerns on regulators, and leaves Yahoo! defeated and weaker after six months of inaction waiting for a deal that is now trashed and has trashed Jerry Yang’s credibility with Yahoo!’s shareholders that have seen the share drop to less than $13 after refusing Microsoft’s $33 bid.

Did Google ever believe that the deal would go through? Google has won anyway. Sounds Machiavellian? Anyone remembers the spectrum auction in April where Google forced Verizon and AT&T to pay more than $4.6 Bn to secure the “openness” of the network? Not to be evil, these guys play tough.

As per Jerry Yang, both Mike Arrington and Om Malik do not write precisely nice words about him and Yahoo!

Still Mr. Yang can not be blamed for the financial crisis that has taken a big chunk of Yahoo!’s market capitalization since the $33 bid. As the graphic above shows, Yahoo! stock is not performing any worse than Apple or Google are in 2008. Jerry Yang’s decisions to reject Microsoft bid and to pursue a devil’s deal with Google have not been well received by shareholders. The good news is Yahoo! users are not going to stop using Yahoo! anytime soon. And for us users, it is better to have Google, Microsoft and Yahoo! than only Google and Microhoo. Competition is what drives innovation, and three is a better number of competitors than two.