Before we kick in a new year of post, I want to take a quick look back at things I covered on 2011 as I still believe many of those represent important trends and inform some of my thinking.

I kicked off the year with the usual prediction list (and closed it out with a review) and was surprised by how many of the themes I highlighted ended up making their way through other entries.

I had set a goal for myself to do a post a week and decide to create a framework that allowed me to do so efficiently. My process is to capture simple ideas in a backlog and then dig through them once a week, sometimes tying the story to a recent development. Every Friday night or Saturday, I then crank out a post that covers that top in as broad a way as I could.

I write mostly for myself, as a way to get a better sense of my own thinking on a topic and then get feedback on how wrong (or occasionally, right) I am. This allows me to refine the strategy behind Keepskor and get a better sense of where our industry is heading.

While I never set a narrative for what is being covered on TNL.net, one seems to emerge when I look at the work I produced over the last year.

An emerging New York

I kicked off the year by making a bold prediction about a re-emerging and re-invigorated New York technology scene.  A year later, I feel ever more strongly about the things I highlighted in that series of posts: New York has emerged as a major player and I suspect that, within a generation or two, New York has a chance to displace the valley as the center of the US tech industry (note that the longer view is something I articulated later in the year but has been a dominant theme on this site for a decade).

The series created quite a stir when it came out and was one of the most trafficked group of entries this year (in fact, it still gets a decent amount of traffic a year later.)

If you’re on the East coast, you no longer have to relocate south of San Francisco to make it. New York provides an environment that rivals San Francisco and has a few extra advantages I had not covered in that series. For example, being halfway between London and the Valley, New York is the perfect place to manage a business that is not solely aimed at the US.

Myth-busting in startup land

This feeling from the ground, as I started re-entering the startup world, got me in the direction of thinking about the broader trends relating to startups. I a series about startup myths, I debunked the ideas that startups are risky, expensive, idea-based, smooth rides where everyone makes money.

My reason for doing this series of post was to archive thoughts on this that I could send to people when they brought up those myths (and as someone who spend too much time on Wall St., I’ve been exposed to quite a few of those people.)

Financial Markets

Using some of the skills I did pick up on Wall St., I’ve been trying to make sense of the financial markets and get a better understanding of the overall economic picture. This first led me to analyze whether internet valuations were getting over-inflated (they weren’t.)

As internet companies started testing the IPO waters again, I checked to see if LinkedIn was overvalued and highlighted some concerns around the GroupOn offering and later in the year, I started thinking writing more about digital currency.

The Internet War

The concept of digital currency is but one of the hot flashpoint between the current world and the internet one. Over the past year, we’ve seen increased activity from hacker groups and the rise of the internet as a political philosophy. Calling for an end to apathy on the part of our industry when it comes to policy making, I tried to make the case for the creation of a new set of definitions and protocols to control the internet of the future.

This is in reaction to an increasing privatization of large parts of the web, balkanizing the open web,  as companies try to monetize their user base to return value to their investors or counter suspected threats by new entrants. Along the way, those companies are redefining identity ownership through surprising terms of service agreements.

A resurgent Microsoft

Meanwhile, another story that has made its way through my narrative has been a massive comeback: Over the last few years, Microsoft has become a symbol of technology decline. But 2011 has shown us a resurgent company, first in its agreement with Nokia, which will bear fruits in 2012; then with the bets its placing on the web as a core component of the next version of Windows; and then through the success of its revolutionary Kinect device.

Microsoft’s bet on the web as the core of Windows is a smart one. HTML5 is enjoying wider support and new technologies like WebGL are bringing the web to new levels, levels that could be matching native apps soon. I will probably write more about these trends in 2012.

Internet and TV Colliding

Another item I have covered extensively in 2011 is the merging of television and the internet. Last year, I looked at where 2010 box office winners were streaming, how available popular TV shows were, and whether there was a delay in availability.I also looked into why live TV streams were not available online, explaining how some of the missing pieces of the puzzle could fit together. This provided readers with a stronger understanding of where the market stood. At the time, the results showed that availability was getting better but still had a long way to go.

I will start revisiting a lot of this information next week to gauge how much progress has been made in making movies and TV shows available on the internet.

My interest in this as a trend is that it provides us with a better view into whether internet TV is ready for primetime as a new internet channel (Netflix getting into the content production business was a major event in that direction, opening the door for other internet companies to offer something on that third screen… and for a few players to become new gatekeepers if we are not careful.)

I suspect this collision is part of the reason we have seen the entertainment industry rally behind SOPA, as it has seen first the music and now the book industry getting impacted in radical ways as media increasingly become mobile and can be consumed on phones and tablets.

Other trends

However, I was surprised that I had not spent more time covering some other trends I’m seeing emerging.

My archives did not include any mentions of bitcoin, though I think that virtual currencies are one of the hot topics currently sitting below the surface. While I am not convinced that bitcoin is the one that will win in the future, I do believe that we will see increasing traffic in that arena soon.

I also strongly believe that a new manufacturing age is upon us. The revolution behind 3D printing, 3D scanning and more customized and micro-produced materials is something that we will see on the edge this year and probably in the mainstream by end of year or early next year. This will have a substantial impact on our economy in the long run and I will keep an eye on it.

Conclusion

While I have deliberately chosen not to focus my writing on a narrow area, it appears there are broad topics that I return to on a regular basis. The intersection of media, technology, business and politics are part of the broad trends I follow around here and generally form the core of what I write about. My friend Anil defines his own writing as being about culture and I believe that broadly, he and I write about some of the same things.

Over the next year, I will revisit a lot of the work I did in 2011 as I wanted to establish a few foundational posts from a trending standpoint. But as we become more public about Keepskor, I will also write about some of the things that led to its creation and some of the thinking behind it. As someone who spent a lot of time dealing a dual life as blogger and Wall Streeter, I haven’t really said much about what I’m working on but I’m sure that readers will be interested as it taps into some of the trends highlighted above and a few that I haven’t talked about yet.

2012 is going to be a very exciting year and I will try to have a body of work at the end of it that matches what I’ve accomplished in 2011.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title 2011: The year that was. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

With a new year kicking in, it’s time for a new batch of predictions.

Business

One of the easiest predictions to make is that Facebook will go public this year, and it will manage to do so in a very successful IPO. I suspect that this may actually be the high watermark for the current boom cycle as Facebook is the most successful of the companies that were born of the Web 2.0 cycle. In a fashion similar to what happened with the Netscape IPO in 1995, the Facebook IPO may create a small window of opportunity for many other companies to go public.

On the private end of the spectrum, I think we will see the following companies see some form of liquidity event via either acquisition or IPO: Twitter has a strong chance of being acquired by Apple, which will quickly merge the offering into all of its products; Another possibility is that Twitter and Tumblr merge to create a mico-blogging powerhouse spanning both ends of the country. Meanwhile, Foursquare will either IPO or be acquired by Facebook or GroupOn in a share-only deal. Meetup will go public, creating another great story for the New York technology scene.

When it comes to Google, we will see the company continue its integration of Google+ into everything it does, with the biggest impact being the move to migrate all Orkut users to the new service. This will create an outcry in countries like India and Brazil, where Orkut has been popular but will leave many in the American media to wonder what the big deal is as Us customers have mostly left already.

Meanwhile, a lot of the companies that went public in 2011 will meet some strong headwinds as the rigor of the public market make it much more difficult for them to maneuver. Expect some changes at GroupOn and Zynga, with many people questioning their business models and long term viability.

Media

For a couple of years, there’s been a slow ramp up to the integration of the Internet with television. The rise (and to some extent fall) of Netflix, along with the entrance of new players like Hulu and Amazon, have made video distribution on the big screen one of the areas where the Internet and television have already intersected.

However, other areas of interaction have, so far, not been quite as successful. Apple is still treating AppleTV as a hobby, Google has mostly failed so far with GoogleTV, and other players like Roku and Boxee have, to date, been only adopted on the fringe.

In 2012 all that changes as the TV screen takes center stage in a way that a new generation of smart phones arose after the 2007 iPhone announcement. First of all, we will see some increased standardization around how to deliver content to TV screens, with agreements from TV set manufacturers like Samsung, Panasonic, Sony, and Vizio agreeing to some level of standardization. Apple will also announce a large screen product it will position in the TV market: The set will have AppleTV’s technology built-in, be accessible over WiFi, and connect directly to the iTunes store as well as integrate with the iPhone and iPad and other Airplay compatible devices. The set will run iOS and will be managed by a remote that runs on iPod touch, iPhones and iPads.

Meanwhile, cable companies will start opening up their platforms with some software development kits allowing to access content on the set top boxes they use. Once the Motorola acquisition is completed, Google will start transitioning the Motorola set-top boxes, which are a large part of the cableTV market, to GoogleTV, increasing the footprint of the service in the marketplace. Along the way, we will also see GoogleTV become more streamlined and less ambitious, focusing on delivering Android apps to the big screen instead of trying to rebuild the whole TV industry.

The concept of cord-cutting will continue to gain support but will not yet jump into the mainstream consciousness. With shows now being available exclusively on the likes of Netflix, we might see some interesting positioning whereas some TV carrier will offer Netflix as a premium service.

Politics

Social media will dominate the political cycle in 2012, with Twitter, Facebook, YouTube, Tumblr, and Meetup becoming part of the political operative tool belt. However, traditional electoral models will continue to be disrupted by the rise of distributed networked organizations like Occupy Wall Street, Wikileaks, or Anonymous. Except those players and new ones built on a similar model to have a substantial impact in terms of registering new voters and getting those voters to the polls in elections in Europe, the Middle East, and the United States.

In the US, the 2012 electoral cycle will see Republicans select Mitt Romney, a candidate most of their electorate is not very excited about, to run against Barack Obama. With the unexpected support of Occupy Wall Street and its splinter organization, Obama will win re-election as issues around economic disparities and job creation continue to be big topics of discussion.

In Europe, expect to see incumbents toppled in many countries: with major elections coming up in France, Spain, Russia, and Finland, it is possible that we will see a major change in political alignments across most of Europe, along with an increase chance of protest in those different countries. In Russia, in particular, we may see the internet play a crucial role in organizing protest if there are questions regarding voting irregularities.

The continuing protests in the middle east region may also lead to substantial changes in governance in several countries including Bahrain, Syria, and Saudi Arabia. During the presidential elections in Iran, we will see increasing clampdowns on internet sites as the government tries to shut any means of communication available to large groups of protesters.

… and of course, the easiest prediction to make is that the media industry will continue to push for more restrictions on the Internet, leading to more activists pushing back.

Technology

2012 is going to be an explosive year for technology.

First of all, we will see HTML5 roaring back, as many companies realize that it is cheaper to build in HTML5 and that the gap between platform specific code and HTML5 is shrinking. The introduction of WebGL, and proper implementation of geolocation and caching within mobile devices will give developers the ability to develop applications in HTML5 that can rival some of the offerings of native code. This is a move that will be resisted by platform makers like Apple and Google as it will loosen their stranglehold on their respective platforms; however, the split side of this is that effort is that some large companies will look to free themselves from said control by creating HTML5 instances of their own products.

On the mobile end, the Microsoft/Nokia will get some real traction with Windows Phone becoming a strong third player in the mobile market. Apple and Android will continue dominating the market with Microsoft still being a distant third. RIM’s position in the market will substantially worsen and will either be sold or go into bankruptcy.

Enterprise cloud strategies will continue to grow, leading to a growing divide between companies that can get efficiencies through the use of cloud computing and companies that are kept by different regulatory frameworks from being able to realize the financial gains offered by such model.

3D will be a hot buzzword, with the introduction of consumer-oriented 3D scanners and 3D printers that will push the idea of scanning and printing your own plastic parts. This will lead to some controversy around the concept of 3D objects piracy popping up in the media, with little actual evidence to back those fears. On the 3D projection end, we will see the rise of designer 3D glasses and the first glasses-free 3D television hitting the market, as we as a few consumer-grade 3D cameras. At the same time, we will see more and more technology to upscale 2D to 3D, in an attempt to develop a larger consumer market for 3D technology.

On the PC end, netbooks will disappear as a category and the hot new trend will be to offer thinbooks that mirror much of what Apple is offering with the Macbook Air product line.  Solid State Drive will aso increasingly become standard on new computers and we will see Apple actually announce they are getting rid of traditional hard-drive in all their product offerings. This will lead to their being able to announce that all their hardware can now run for at least 7 hours on a single charge.

Any which way, we will be revisiting those predictions at the end of the year and see how well (or badly) I did. I wish you, dear reader, a very happy new year and look forward to a continued dialogue in 2012.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The 2012 Crystal ball. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Kinect and the gesture based world

Last year, Microsoft unveiled the Kinect, a revolutionary new device that allowed Xbox 360 users to use their bodies as the way to interact with computer games. With the Kinect, Microsoft solved a substantial interface problem that had been slowing down the success of any computing-intensive efforts on the TV screen: How does one increase functionality on a large screen without requiring more complex remote controls.

It was already a given that computer keyboards and mice were not the way to interface with a large screen, as the added complexity they added to a living room setup were making for a more annoying user experience than simple TV remotes. In a world of users being already annoyed by the proliferation of TV remotes.

By introducing a mode of interaction that allowed to get rid of contact with the screen, either through a remote control or by directly touching it (a mode that works for smaller screen like phones or tablets but gets more complex when the screen is larger and thus farther away from the user), Microsoft created a whole new interaction language for computing devices and has made it possible to grow substantially beyond the traditional mode of interfacing with a computer interface.

The kinect interface is something that was predicted as far back as the early 1990s, when AT&T ran its now famous “You Will” TV ad campaign in the United States, and was later popularized by Steven Spielberg’s 2002 Minority Report movie. The idea of gesturing in the air took substantial hold in the collective consciousness and when the iPhone and iPad were introduced, people looked at that multitouch model as the answer.

But there has long been a challenge as to how to deal with larger screen. It is difficult to consider users stepping up to a 42 inch (or larger) TV screen and touching the surface of the screen in order to get what they want. So the next challenge became how to get rid of that last piece that stopped the users from interfacing. Nintendo first advanced the idea by putting a sensor in the joystick to the Wii.

 But the Wii still required some component to interface with the system. The real genius of the Microsoft solution was that it did away with every interaction components. In returning to a basic approach using only our bodies, Microsoft created a model that will continue to impact computing for decades to come.

Siri and the voice-driven world

Meanwhile, Apple had also been considering how to get rid of direct touching of a device. Their research led to an innovative company that was doing interesting things in voice-related controls: Siri, Inc.

Upon seeing the company, Apple promptly acquired it, realizing that the approach Siri was taking to voice-enabled interfaces was one of the next components of the future of computing.

There has been many other efforts at doing voice-controlled interfaces, dating back to the 1990s and it has long been assumed by the mainstream that voice-controlled interfaces were the way computing was headed. In Stanley Kubrick’s “2001: A space odyssey”, we all met HAL, a computer that could handle conversations with human beings with some disastrous effects for the human. With the possible exception of Star Trek, the ability for a computer to carry on a conversation with a human being has generally been presented as a disastrous thing for humanity: a long strand of movies showed computers and robots (basically humanoid computers, as far as movies are concerned) have shown that the ability to carry a conversation with a human being is the first step to a computer deciding to rebel against his owner. Whether it is HAL in 2001 (1968), Delos Control in West World (1973), Master Control Program in Tron (1982), Edgar in Electric Dreams (1984), or Skynet in the Terminator franchise (1984, 1991, 2003), humanity always seems to be endangered by talking computers.

When technological fears are represented in media forms, they merely represent the farthest the imagination of a society can go when it comes to imagining the peak of what is possible with technology. So computers being able to carry on conversations have long been a holly grail of the computing world… and now Apple owns something that may point to the right approach.

A question as to whether this type of technology will become more than just something that can be found in Apple products is going to turn not on technical merits but on juridical points as Apple may have locked up most of the potential roads forwards by patenting substantial portions of the space. Unless they decide to make the technology available to others, it may find itself locked into the Apple ecosystem with no way to get out for a long period of time.

However, Apple’s competitors including Google and Microsoft will probably consider this an important enough space to attempt to go after it with all their might. As voice driven interfaces have long been seen as a high mark on the technological and technical advances scale, those companies will not want to be left out of what may be the next big thing.

Lessons in hidden complexity

What Siri and the Kinect have in common is that they have managed to package up a lot of complexity into what appears to be a very simple solution.

The Kinect includes infrared projectors, an infrared camera, a video camera, motion sensors, several microphones and motors to track individuals and enough processing power to handle audio and video recognitions into a sleek black bar that sends infrared light all over a room, records where the light is not showing and based on that makes some guesses where bodies are located while at the same time tracking audio and video cues to direct whatever program is being used with it.

Siri records what its user says to it, sends the recording to a server which turns that recording into text it translates it into actionable material before identifying the right information database to retrieve information from,  getting the necessary information, packaging it into a file that will be read back by the device and sending that file back to the phone (all this in a matter of a few seconds).

The big secret in the success of these offerings is that they do not scream about all the innovation and complexity. In fact, they go out of their ways to hide that complexity and there is a lesson here for most startups: it is not because things are complex that you should display them as such; quite the contrary, as new companies should address complex problems and go as far as possible to shield users away from that complexity.

Disappearing devices

The other important thing to pay attention to here is that we are seeing the increasing disappearance of the interface. In the early days of computing, the keyboard was the way to enter information into a machine (I know some will gripe that there were punch cards before that but I’m talking about the modern era of computing); that was eventually augmented by other devices like the mouse and touchpad, which remained the dominant form of interaction with computers over almost 3 decades; more recently, we have seen a more direct interaction with screens as touch interfaces have gained prominence on new form factors like mobile phones and tablets. Each step of the way, we are seeing the friction between a user’s input and the computer’s response slowly fritting away, with less and less being between the user and the device.

But in each case, the interaction was between the user and the computing device itself.

With whole-body and voice interfaces like the Kinect and Siri, that last amount of friction is disappearing and we may be entering a new era of ubiquitous computers, where the computing devices just disappears. I think the current direction of those technologies points to a potential future where we could see the iphone nano, a new screen-less version of iphone that would take the form factor of a simple pair of headphones with no extra wires. All interactions would be handled via voice command with hardly any need for a screen.

Meanwhile, in the living room, your TV will be both voice and motion aware, turning itself off when no one is in the room and completely controlled without requiring any physical remote control (something that will guarantee high acceptance as the proliferation of remote controls in the living room has become a modern annoyance).

That future is not too far away. As an eternal optimist, I would put its promise at somewhere around 5 years from now but as a realist, I also need to warn that it is likely this could take as much as a decade to reach the mainstream. So get ready for new interfaces and if you want to beta test the future, grab a Kinect or a new iPhone 4S: they are the first of many such devices that will populate our world within the next decade.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Beyond touch interfaces. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Mark Andreesen and the IMG tag

The evening of February 23, 1993 was mostly unremarkable around the internet. But on that evening, a brash young man by the name of Marc Andreessen sent an email that would drastically alter the course of history. In order to fully understand what happens there, one has to think of the internet prior to that day.

Before that message made its way through several mail servers, the internet was a mostly text-based medium. HTML, the source code for the web, may have linked to images but the idea of mixing images and text was not part of the internet experience. In fact, the idea of mixing anything just didn’t exist: a movie stayed a movie and was linked to independently but embedding it into a page was a concept that would not come to fruition until several years later.

Sound, images, moving images, text were all living in separate silos. Yes, they could be linked to but they mostly worked as dead ends as they could not move forward from there (think of a browser that would link images instead of having them embedded into the page and when you got to that image, your only available navigation would be to move back). And because they were mostly dead ends, they forced the web into a relatively hierarchical model. Text was free to cross-link but other media were not.

Andreesen’s stance was that they would implement the tag as proposed and were sending it to be discussed as part of a future implementation of the HTML standard (remember that, at that time, HTML was not yet a standard).

Netscape proprietary approach and forward motion

A few years later, Andreesen would continue on the same course with the company he co-founded, Netscape, pushing for new extensions to the HTML standard and then extending the browser even further. With every new browser introduction, Netscape would push out new features.

With much of the internet being widely open and standard-based, Netscape’s introduction of new things at a fast and furious rate rankled some of the early maintainers of the web. There was widespread worry that Netscape was “breaking” the web through its use of non-standard implementation. Among some of the things Netscape would introduce over this period would be things we cannot imagine not existing on the web.

For example, Netscape was the first to introduce web-cookies, which not only gave rise to the kind of tracking that most of the advertising industry relies on but also simplified and sped up the way in which pages could be customized or logins were remembered.

https, which is used to ensure that communication between your web browser and a remote server is encrypted so no one can break into it, was another such innovation, which gave rise to e-commerce and e-banking.

And then, there’s Javascript. In December 1995, Netscape announced Javascript as a programming language for the web that could run either on a server (but only on Netscape’s brand of web servers) or on the client. The world of programming was in a furor over the announcement, calling the language a horrible kludge and generally being unhappy that they had not been consulted to make the language more pure.

Every step of the way, developers started adopting Netscape’s innovation, giving rise to sites showing a “Best viewed with Netscape” icon. This, in turn, led the Netscape browser to be the most used web browser on the Internet, at some point being used for nearly every 8 or 9 out of 10 web page views on the internet.

Most of Netscape’s inclusions eventually made it into other browsers as they tried to capture market share from Netscape, and eventually, most of those innovation were standardized, ensuring their continuation moving forward. Netscape’s leadership and willingness to stand up to the rest of the industry in order to move forward may have eventually led to its death as a company but its impact is still felt daily.

Microsoft and AJAX

One of the companies that tried to mimic Netscape’s strategy was Microsoft. In order to make its web browser, Internet Explorer, more relevant to developers, Microsoft tried to introduce changes that were mostly proprietary to its web browser. Among those was a technology called ActiveX, which was Microsoft’s proprietary approach to plug-ins. Trying to differentiate its Office suite and Exchange server, Microsoft introduced the XMLHTTP ActiveX component, which allowed web applications to become much more interactive, in 1999.

Whether it was hatred of Microsoft or lack of awareness, the technology did not really get widespread adoption until Jesse James Garrett named the technology AJAX, for Asynchronous Javascript And XML.

The lesson in this is that to break a standard is not enough to get things moving forward. A way to brand that standard so it becomes easily understandable to a wider public goes a long way to garnering support for new technologies, whether they are standardized or not.

HTML5 needs a posse

Previous history points to progress on the web being largely made because people were willing to take a stand and move things forward, standards be damned. But it seems that few are willing to move things forward in a drastic way. To date, complete support for existing standards has been a challenge and it seems there is some level of calcification around breaking new ground.

The wonderful set of underlying technologies making the core of what we know as HTML5 may not be perfect but it’s the best thing we have so instead of crying about the poor implementation of this or that component, instead of asking why it’s missing certain pieces, let’s go out, as developers and stretch the limits of what is possible in a browser.

Break new ground and break old browser. Once you’ve done so, ask the others to implement the features you’re leveraging.

To implement in a standard-compliant way may be smart if you want to cater to the masses but if you want your app to be exceptional, you have to be willing to take the hits. Go ahead and break new ground by looking forward instead of staying to the shores of yesterday’s standard compliance.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Pushing beyond standardization. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Will Google become the new Microsoft? Today, I present the case that would answer this in the affirmative.

A branding problem

Google has become synonymous with search and that was great for the company when search was its main business but with company growth came expansion into new markets like office suites, mobile, and video, the company may have a problem explaining what it brands stands for. John Battelle put it best last April:

you could argue that Google still means a great search environment. But the brand also means far more. It’s the brand which stands in opposition to the iPhone — the Android Pepsi to Apple’s Coke. The same is true in the office suite — Google Docs are the Pepsi to the Coke of Microsoft’s Office. Google Chrome? The Pepsi to Internet Explorer’s Coke. And there’s a ton more — photo sharing, blogging platforms, social networking, ecommerce solutions, enterprise platforms, media (YouTube, Knol, etc.).…well you get the picture.

And Google = Search doesn’t cover all that.

Google has grown to be much more than search in the same ways as Microsoft in the late 1990s had grown to be so much more than Windows and Office. And it is faced with the same difficulty of highlighting what its own brand stands for.

A messaging problem

Going beyond the brand, however, is also what sits at the core of Google’s message. Google’s mission, per its corporate site, is phrased as follows:

Google’s mission is to organize the world‘s information and make it universally accessible and useful.

Under this model, where would something like Google+ fit? What about Google chat? They are social tools that provide a lot of value and should be part of Google’s offerings but neither of those tools really help organize the world’s information nor make it universally accessible and useful (for example, isn’t the whole point of circles in Google+ to limit access to information instead of making it universally accessible?)

Similarly, in 1997, Microsoft’s stated mission of a computer on every desk and in every classroom had failed to envision the rise of non-computer devices and created an on-going perception of Microsoft as a computer-centric company. While it has made tremendous inroads in the non-PC world (example: The XBox), the company still hasn’t been able to shed the image of Microsoft as a computer company, which may account for its difficulties in adapting and telling the world about its tablet and mobile devices ambitions.

So as Microsoft is mostly seen as a PC-centric company with a little extra stuff, Google is seen as a search-centric company with a little extra stuff.

Microsoft has retooled its mission statement with a noble, if hazy goal:

Our mission is to help people and businesses throughout the world realize their full potential.

To be honest, I’m not sure of how the Xbox and its accessories fit under that mission but it doesn’t matter as people have failed to even adopt this concept as embodying microsoft.

Hard time getting heard

The challenge that arises out of this messaging problem is that when new products are introduced, the early adopters have a hard time taking the effort seriously while the mainstream still looks to consume those new offerings. For example, a fair amount of skepticism has arisen in the tech community regarding Google’s effort in the social media space. Google+ was first seen as an interesting toy but soon lost the mindshare of early adopters. However, Google has opened the doors to the public and is growing its social network at an impressive pace.

That Google is failing to articulate how Google+ fits into its overall business is but one of the challenges it faces. With Facebook and Apple as the new darlings of the media and digerati set, Google’s attempt to be a more “social” company has been ridiculed by many, present company included and it has made it more difficult for Google’s nascent effort to be taken seriously.

In the same way, Microsoft’s early foray into the gaming world was seen as an odd pastime but something that would eventually be killed as only companies with names like Sony, Nintendo, or Sega could possibly understand that market. A decade later, it seems clear that Microsoft’s move was a brilliant one, putting it in a strong position in a more consumer focused market and reaping billions of dollars as a reward for that risky move.

While Apple often positions its new offerings as a radical departure from anything that existed before, companies like Microsoft and Google have been more focused on presenting their offerings as an evolution of things they’ve done before. But because people’s perceptions are grounded in the company’s respective monopolies, they have a hard time seeing the transition and dismiss the efforts as flawed.

Assaulted on all sides

The late 1990s might have been the top years for Microsoft: it had successfully completed one of the largest operating system transitions in history, and was starting to show progress on its internet effort. Internet Explorer, then in its 4th iteration, was finally seen as a serious contender to the dominating Netscape browser (at the time, Netscape commanded an 80–90% market share) and the company unveiled the XBOX in 2001. On the dark side, an on-going anti-trust lawsuit made its way through the court system, eventually forcing the company to make some drastic changes.

The next decade, however, saw the rise of web-based applications, mobiles and tablets, making the OS a less important part of the technology stack and thus pushing Microsoft to become a less crucial player in the industry.

It seems this decade will see a similar type of history repeating itself for Google.

Its search and advertising business are dominant today but Microsoft has made in-roads with Bing, its own search offering. Meanwhile, Apple may obviate the need for Google altogether with Siri as it introduced a radical new way to handle search on a mobile device (and with the majority of Google mobile searches coming from iOS devices, the search giant has to worry about this intrusion).

On the advertising front, Google’s database of intention, which leveraged search results to better target ads to consumers is being rivaled by Facebook’s social graph, which leverages what the social network knows about people and their friends to offer a new form of advertising that could be substantially more personalized than anything Google could offer. Meanwhile, other players are leveraging the information sharing of users on networks like Twitter and Facebook to get a better sense of user sentiment and target ads accordingly.

On the mobile end, Google has established its operating system as the top one by number of handsets being manufactured but risks abound as the company is looking to acquire Motorola, one of Android the device manufacturers. This acquisition will most definitely have a chilling effect (and people at some of Motorola’s competitors have said as much behind closed doors), giving Apple a chance to expand its own market share into a domineering position or giving Microsoft a chance to relaunch its mobile offerings in a way that would first make it a viable third player and eventually could lead it to become one of the top 2 players (note that Apple’s position, as far as I see it, will not be threatened).

In video, Netflix and Amazon are increasing their collections, offering quality content at a low price and therefore putting some potential pressure on YouTube. As more general content become available, it could be that YouTube will have more difficulties growing.

Then, there is the matter of being treated as a monopoly. I suspect it’s only a matter of time before someone finds a reason to bend government regulators ears as to how Google abused its power in the search business. It won’t matter whether the allegations are true (as it didn’t matter when Microsoft was accused of abusing its monopoly position), once the claims are made and the lawsuits are launched, the perception of the company as a big bad wolf will be forever cemented.

Meanwhile, Google will continue making large amounts of money (probably billions) on its current offering but may find it hard to show the general public how it is relevant today. A question regarding its future success will however find its root in whether Google can continue to be relevant in the online advertising business (it is, after all, its core business) or find new revenue lines to replace declining advertising revenue. The answer to  THAT question will define Google’s future.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Google is the new Microsoft. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Desktop and the Web as one

Much has been written already about how Microsoft is trying to be all things to all people by offering a single operating system for both tablets and computers. The company announced an operating system that marries a lot of the tablet experience as presented by the likes of the successful iPad, and the many other contenders for the crown currently on the market, with what has more traditionally been known as a windows PC.

Along the way, Microsoft has introduced Metro, a new way to interact with Windows that brings much of the tile-based experience they first unveiled with their Windows Phone 7 operating system. Like them or not, tiles are Microsoft’s attempt at getting a spot at the mobile table and they are now taking this mode of interaction from the phone to tablets and PCs. The Metro UI is probably the single largest change in the way Windows has looked since Microsoft unveiled Windows 1995, an operating system that was a significant user-interface departure from its predecessor.

Lost in the commentary has been the fact that tiles are programmable using HTML, CSS, and JavaScript, three core technologies used by millions of developers around the world. With this, Microsoft is basically saying that the languages that power most of the user interfaces for the web should be the languages that power most of the user interfaces for Windows. This is both a radical departure from mainstream thinking (although Palm tried to go down that route with WebOS) and a return to the source for Microsoft.

Looking back, looking forward

In 1997, I had the privilege of being among the people selected as launch partners for Internet Explorer 4. As such, I was able to see the product evolve from idea to release, seeing along the way many false starts and ideas that did not make it into the product. One of the most intriguing idea at the time was that of replacing the UI shell with a web browser one, essentially allowing for HTML  widgets to run directly on a user’s desktop.

I was smitten by the feature and heartbroken when I learned that it would not ship for reason that went beyond the technical. Around the same time, Microsoft was in a major war with Netscape and rumors of an anti-trust lawsuit being launched against the company were swirling. At hand was the idea that Microsoft’s ability to tie the web experience to its near-monopoly on operating systems gave it an unfair advantage in the marketplace.

While it is true that Microsoft had the leading position in the operating system, there was little evidence of the success that resulted from it tying other components to it: its web browser offering were poor and had made little headway in the marketplace, where the Netscape browser held a significant lead. So there was little evidence that just tying two products would help lift both. It wasn’t until Microsoft started matching features with other successful browser that their offering started gaining traction.

But none of this mattered in the fall of 1997 and the idea of integrating a user’s desktop with the web was either too ahead of its time or seen as too risky by the legal departments at Microsoft. The net result was that when Internet Explorer 4.0 came out, the feature to connect web and desktop had been reduced to a way to push content to the browser and potentially use it on screensaver, an offering that fell far short of the promise.

Moving forward almost 15 years, Microsoft is no longer seen as a threat on the technology market. The antitrust lawsuit has made the company tentative in its offering, often staying as far away from controversy as it can. The new darlings of the technology world have taken over most of the mindshare that was held by the Redmond giant and only a few faithful follow what the company is about. It is not a significant player in the mobile phone market at this time (this title is split between Apple, with its iPhone line, and Google, with its Android ecosystem) and many see the tablet market as one that is making the personal computer, the very arena where Microsoft is king, irrelevant.

So the house that Bill built had to do something dramatic to regain attention. It had to offer an operating system that would meet today’s users’ needs, an operating system that could compete, in terms of setting the agenda, with the much smaller iOS and OSX produced by Apple.

Along the way, I suspect that somewhere in Redmond, some of the people who had tied the web and the desktop in 1997 started talking about how this could be their time…

… and the result is the Metro UI:

OSX Xeroxing or not?

Many of the Apple zealots have pointed to the Metro UI and the fact that Microsoft can still run a more traditional Windows look in parallel as a showcase of why the company will “fail” in the market. They present this as a example of Microsoft being unable to make the tough decision of separate offerings for separate computing devices. They highlight that Apple is much smarter in its approach because it has decided to create two operating systems: OSX for traditional computers, iOS for everything else.

So I think it’s fair to assume that no one can say that Microsoft is looking to copy Apple here. I think it’s OK to point out that Apple fans have basically said that the idea of marrying a mobile experience with a PC experience is not terribly smart.

That being said, it’s also interesting that Microsoft and Apple seem to be sharing a view of the future. And that view seems to say that smaller, single purpose applications bought from an online store will take over your whole screen, scraping away any piece of the visible interface. For Apple, this is best manifested with the version of OSX they most recently released (Lion) which offers the experience I described above and tries to marry some of what the company has learned from iOS with what has traditionally been seen as their computer operating system.

So the idea of an App store is definitely something where Microsoft is following Apple; the idea of running apps in full screen with no vendor interface is also something where Apple had the lead; the idea of bringing tablet and phone-like behavior to an operating system is something Apple has claimed as its own.

So the only question remaining is really: should we have separate operating systems for separate devices or should we have a single operating system that can be used for multiple devices. For Microsoft, the answer is now the latter; for Apple, the answer to date has been that OSX is for computers and iOS is for everything else. My question to Cupertino might be about how long it will be before they decide that one OS is sufficient for both computers and all other devices.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Windows 8 is Microsoft’s bet on the future. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

An inexpensive patent bet

In his note announcing the acquisition, Larry Page made it clear that a lot of the acquisition was due to Motorola’s strong patent portfolio. At the current time, the company holds 17,000 patents and has filing for another 7,500.

Earlier this year, Carl Icahn, Motorola’s largest shareholder, estimated that the patent portfolio alone could be worth $4 billion. In June, Apple, Microsoft, and RIM banded together to acquire 6,000 patents from Nortel and keep them out of Google’s hands: the pricetag on that acquisition was $4.5 billion. This means that the consortium had paid about $750,000 per Nortel patents. If you were to apply the same number to Google’s acquisition of the Motorola patent portfolio, the price tag would be $12.75 billion. It is interesting to see how this number is extremely close to what Google ultimately offered for Motorola.

But it gets better…

Motorola Mobility, the unit Google is acquiring, has $3 billion in cash on hands, reducing the price of the overall deal to $9.5 billion and dropping the per patent price to just under $560,000 per patent, assuming none of the filed patents are accepted or under $390,000 per patent if you assume that Motorola will get all 7500 filed patents approved.

… and realize this is all based on a $0 valuation of the rest of Motorola’s assets.

So what’s in there? In order to get a better understanding, one just has to look at some of the patent-related lawsuits Motorola has filed in the mobile space. For example, last October, they assessed that Apple had violated 18 specific patents in areas like WCDMA, GPRS, 802.11, wireless email, location based services, device synchronization, etc…  The next month, they sued Microsoft around things like an online marketplace, map services, video coding, etc…

So the company has a set of patents that are covering large areas of what we now know as the smartphone space but that’s not all.

The handset business

A lot of people are going to focus on the fact that Motorola has a healthy mobile handset and accessories business. This business has been valued at about $3 billion and generated $3.3 billion in revenue in the last quarter. That business covers handsets, as well as accessories.

If Google were true to its word that it wants to continue working closely with its partners in the Android ecosystem, it might have to reconsider the handset unit as part of the asset mix it’s offering. A way to handle some of this could be through divestiture, by selling off some of the parts or exchanging them for patents, if that’s what Google is after.

For example, the company could hand off the accessories business (bluetooth headsets, etc…) to HTC, which has traditionally been a strong player in the manufacturing of such devices, in exchange for a guarantee that the company would continue developing on Android and/or some of the patents the company may have acquired in its recent deal with S3. The company should also look to sell Motorola’s manufacturing divisions to HTC, which could merge them into their more traditional contract manufacturing offerings.

The company could also sell the handset unit to Samsung in exchange for a similar deal.

Google would then be able to consolidate the patents and protect all companies in the Android ecosystem and avoid any potential channel conflict in the process.

The TV business

Another noteworthy part of this acquisition is the TV set-top business, which has been valued at $2.5 billion in the past but is also seen as having a value of near $0 in this acquisition deal.

Through acquisitions, Motorola has become the leader in providing boxes that connect cable and satellite broadcasts to television. In the US, for example, they are part of the duopoly with Cisco in the TV set-top box business.

This creates ample opportunities for Google and its floundering Google TV offering. Through this acquisition, the company now has a chance to control a large part of the future access to the living room. It won’t happen quickly but I would not be surprised if GoogleTV started showing up as part of cable package offerings over the next few years.

Along this path, Google acquires a large amount of relationships with cable TV providers which may help it in ts quest to deliver YouTube content to more people.

Winners and Losers

A deal of this size is so disruptive that it engenders its own set of winners and losers.

I would say that, at first glance, the big winner on this is obviously Google and the big loser is Apple. With this deal, Google has gone on a full assault on the Cupertino-based giant (which, just last week, became the most valuable company in the world.)

First, the cold war between Google and Apple has now gone hot: Motorola and Apple were involved in several lawsuits prior to this acquisition and I assume that Google will not back down from those.

Secondly, Google is not only going after the mobile business but gets to be disruptive to the movie and TV business (due to the set-top unit) and could potentially thwart Apple’s burgeoning AppleTV business while at the same time undercutting iTunes in the video space.

It is unclear as to whether Microsoft and Nokia are either winners or losers in this deal.

Microsoft could end up a winner if Samsung and HTC decide to spend less time on Android and use Windows Phone as a hedge. Or it could be a loser if it turns out that integrating hardware and software is the key to success in this market (the company acquired Danger a few years ago and was unsuccessful with its own handsets).

Nokia could be acquisition targets for Microsoft, which could make them winners moving forward. Or Google could offer free phones, killing both Microsoft’s chances at selling an independent OS and Nokia’s chances at selling many Microsoft-OS based phones.

RIM and HP (due to the Palm unit) strike me as the biggest losers in this market. Neither of them has a strong footing in the marketplace and today’s announcement seems to further strengthen the Android position, giving them less room to maneuver. Furthermore, the rich patent portfolio Google is acquiring may mean that the two companies will have to pay more royalties to a business that has been killing them. Either way, the future is, at best, uncertain (if they were to license their OS out, they may have a chance).

Conclusion

Today’s announcement substantially reshapes multiple competitive fields. The effects will be felt in both the mobile and living room spaces for months and years to come. It’s a bold play by Google but also one that is pretty conservative because the benefits accrued as a result of this acquisition are substantially larger than the price tag (let’s not forget that, considering Motorola’s cash reserves and revenue projections, Google is bidding less than 1x Motorola’s yearly revenue on this).  This deal seems like a real game changer with little or no downside for Google.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Google Acquiring Motorola. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Many Questions

The mobile market is basically broken out in a 2 + 2 configuration: Android and iOS are the two contenders you can’t do without, while RIM and Microsoft are the two you might want to keep an eye on. Looking at this through the lens of limited resources, it makes for tough choices. If you only have resources for one platform, which should it be? If you have resources for more than 2, should you also try to reach a third platform (and if yes, which one) or should you pour more investments in the first two?

In order to better make those calls, one must assess the market position of each of the players and place some bets as to where those players will be in 12 months. While interesting from an intellectual challenge, it can be emotionally wrenching from a company standpoint as some of the bets you make today could help turn your company into a winner or loser.

App or web?

Mobile apps seem to be the largest trend here. While many new apps have come up over the last few years, there doesn’t seem to be much discussion of mobile web offerings. Curiously, the internet seems to be splintering into javascript-heavy apps running on users’ computers and mobile applications of the same apps running natively on mobile devices.

With HTML5, a lot of the benefits that mobile apps could offer seem to disappear: whether it is access to geo-location capabilities, local caching so the app can run when there is no signal, or even access to hardware capabilities like a camera (something Google is trying to bake into future versions of HTML), there appears to be an increasing array of possibilities that would ensure some parity between web-based offerings and apps-based ones.

However, the web has a few challenges to overcome. For starters, local notification, or the ability to throw some type of alert flag when the application is not running, is not available in web apps. One-click billing is not built-in by default. Access to local hardware devices is also limited. But ultimately, the problem web apps are going to encounter when compare to local apps have nothing to do with technology.

The main value of an iOS or Android app over a web app is largely a marketing issue. To a lot of thought leaders, the web is seen as yesterday’s invention and apps are seen as the current hot trend. To launch a web app in 2011 is seen as similar to trying to launch a CD-based offering in 1995: maybe interesting but probably not, and more likely outdated than up to the latest trend (or to put it in more brutal terms, it would be seen as “dead,” as per the criteria highlighted in Om Malik’s excellent post on the subject.)

Furthermore, the presence of an app in the respective app stores by Apple, Google (and now Amazon) represents marketing channels which cannot be matched in the open web. As restrictive as they are, those channels can represent a substantial advantage for new product offerings. The presence of your apps’ icon on a user’s phone is also another marketing marker that is hard to be matched by web application: yes, it true that bookmarks can be presented alongside applications but few users know how to do that and even fewer actually do make those links.

If an app is launched on a platform like iOS and Android, it gets more publicity than if it launches as a mobile web-based offering. This, by the way, is something I see as a reason for concerns in the long terms as it means that most of the debate is now centering not on a more open world but on one as to which walled garden is better: Apple’s or Google’s?

As a strong supporter for a more open web, I find myself conflicted: on the one hand, I see that getting into those walled gardens is bad for the web as a whole; on the other hand, in order to run a successful business, I have to be in those walled gardens. Almost a year ago, I covered this as Apple is the new China and things have gotten worse since, as Google is following a path similar to Apple. But in the end, one has to be realistic: the only way to influence this debate is to become successful enough that your voice gets amplified: so playing in the walled gardens is imperative for any new mobile company that wants to succeed.

iOS or Android first?

With apps as an obvious first step towards development, the next question in the decision tree is Android vs. iOS. Here, there are confusing signals in the marketplace: on the one hand, one can talk about market size and see that Android is becoming the most used operating system in the mobile world. On the other hand, one can see the fragmentation of the Android market as a developer’s nightmare.

Assuming the fact that most startups have limited resources, one could safely make the bet that a less fragmented market is easier to launch a successful product on and thus developing for iOS first would make the most sense. That is generally the rule that most developers follow and I want to challenge that rule.

According to Apple, there are over 350,000 apps in the app store. By comparison, the Android market has over 100,000 apps. So one can safely say that there are roughly 3 to 4 apps on iOS devices for every app on Android devices. Today, the path of most applications is to establish themselves on the iPhone, get the adulation of the Apple crowd and then move to migrate to Android devices.

This generally means that apps which were successful on the iPhone benefit from a lift when they finally make it to the Android marketplace as Android users are curious to see what all the hubbub was about. This situation has led to a situation whereas both top 10 lists are dominated by apps that first saw the light of day as iOS ones.

But what if one were to apply the amount of effort that goes into crafting a well-received app for iOS into developing a similar app for Android first? What if a company were to decide to prioritize its efforts on developing the best app for Android devices? All things being equal, a great app developed for iOS would have to be better than over 350,000 apps while a similar app being developed for Android would have to be better than 100,000 apps.

When looking at those numbers, combined with the fact that the Android marketplace is exploding, it seems that Android development makes more sense when first getting out the door but there is yet another catch.

Free or Paid?

Paid apps seem to fair better in the Apple world than in the Android world. I don’t know if it is due to the demographic profile of Apple users vs Android users (remember that Apple tends to market itself as a premium brand, probably creating a user community that is more affluent and more free-wheeling with its spending) but the fact of the matter is that if you are marketing a paid app, this is something you have to consider.

So if your monetization model is purely centered o selling apps, you may be better off using Apple’s offering (as long as you can figure out how to build a successful business 99 cents a time.)

On the other hand, few apps with hybrid strategies (social, web, mobile) are offered as paid ones. A few examples like Facebook, Twitter or LinkedIn all seem to show that app that also work as web-based platforms are generally free (as platforms though, they have created opportunities for others to market paid apps on top of their services). If your app is a social web app, the Android market seems to be a better place in the short run.

The key to this positioning will have to be around your company’s ability to present itself as breaking the mold. By going against the grain, you are likely to suffer the ire of Apple fan-boys but the ensuing controversy may get you marketing views you would not have gotten otherwise.

Danger to Android

Today, Android is indeed a fragmented market. So development for that platform is more complicated than development for iOS, where one only has to worry about 2 phones (iPhone 3GS and 4).

The challenge Google now has is balancing its openness while making it easier for developers to deal with the multitude of changes. Its recent efforts in trying to tighten up regulation of the platform can cut both ways. Developers on the Android platform should keep an eye on the impact of those efforts on carriers and device manufacturers support. If Google tightens the screws too much, it could lose some of the momentum it has built and give companies like Apple and Microsoft a chance to establish leadership in the space.

The second tier

Today, developers have to develop an offering for both the Android and iOS marketplace. Once they’ve done so, the next strategic question is whether to put any effort into RIM, HP (aka. Palm) or Microsoft’s offering.

If I were to follow the points above, logic might dictate that the smaller the platform, the better the way to shine out. However, at the current time, those platform look too small to cater to today. The recent announcement from Nokia may point to Microsoft becoming an emerging platform again but  the actual switch is not due for another couple of years. At that point, the marketplace may look radically different again.

So at the end of day, my recommendation (and what we’re betting on at Keepskor) is Android first, mobile web second, iOS third, and then figure out the next step.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title iOS, Android, and the mobile web. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The post-PC world

Since the early 1980s, the personal computer has been sitting at the core of people’s experience with technology. But several trends have chipped away at that dominance for the last few years, first with the rise of dedicated devices with computer-like attributes (eg. ereaders and MP3 players), then with reintegrated devices that brought several of those features back together in a more portable form factor (smartphones and tablets).

Along that curve, Microsoft and Intel found themselves in an increasingly difficult position, largely trying to hold on to the legacy platforms that sourced the largest portion of their revenues while unsuccessfully trying to find ways to play in the new world.

Along the way, the two companies grew farther apart. In late 2004, I had called for Apple to move to Intel chips, a call that was met with derision by most people at the time because they thought Intel would never do anything that could run counter to Microsoft’s worldview. A couple of years later, Apple and Intel did make the move, creating what was possibly the first wedge in the Wintel cartel.

Last month, Microsoft made an announcement that was probably similar in terms of overall strength, looking to ARM processors as the future, and moving to a space where their reliance on Intel processor was relegated to the back of the bus. It wasn’t entirely clear at the time but one could see that the Wintel alliance had been hobbled and could possibly die off soon (in related news, HP announced this week that it would consider running its webtop OS on PCs).

Meanwhile, it was only a year ago that Intel and Nokia announced a strategic partnership, where they would merge their OS platforms. The intent there, I suspect was for Intel to start pushing its own chips into Nokia devices, allowing them a play they had longed for in the mobile space.

Yesterday’s announcement from Nokia that it would abandon its own OS effort and focus on Windows Phone 7 probably infuriated some people at Nokia.

Why Winkia will work: Developers

Of course, there is a lot of doubts about the partnership. High level partnership have a tendency to fail (in fact, Horace Dediu has shown Microsoft’s particularly bad track record in the mobile space).

But I disagree. Earlier this year, I argued that Microsoft would acquire Nokia for its distribution footprint. At the time, I did not elaborate but here’s how I see things working.

For starters, let’s look at areas of strength and weaknesses. Microsoft still has a large development community used to developing with its toolset and aching to get into the mobile space. With Windows Phone 7, that crowd now can use the same skills, programming languages and development kits they have been used to for years to create for years.

But the challenge that was presented to date was that there were no users of Windows Phone 7. While the operating system has generally been well received by critics, there has been precious few apps developed on top of it to date. Part of the reason for this, I suspect, is that there isn’t really a built-in public for those apps yet so many developers are waiting on the sidelines. In fact, this is something that people at Microsoft were painfully aware of, as they are now starting to explain to developers that the deal will bring a larger public for their apps. In a recent blog entry, Matt Bencke, Microsoft’s General Manager for Developer and Marketplace in the mobile space, said:

In simplest terms, this alliance can dramatically increase the customer base for Windows Phones, and, by extension, your apps and games. […] For example, Nokia already has strong relationships with operators in more than 190 markets. Nokia also manages an application marketplace that delivers 4 million downloads per day; a channel that will complement the existing Windows Phone Marketplace experience to bring Windows Phone developers and Nokia customers together.

[…]

From a tools and platform perspective, we’re working to make it as easy as possible for developers to take advantage of this new opportunity.

So the message they send here is clear: more people to use your apps and you can use the same tools you know already. This is bound to help create a market where lots of new apps will end up being created in a Windows Phone 7 environment only.

Why Winkia will work: Footprint

So how big is the marketplace we’re talking about? Well, before we enter this arena, let’s make a few key assumptions: growth in the mobile space is largely coming from the smartphone category. In fact, the entry of sub-$100 android phones is basically going to kill the concept of smartphone altogether by just gobbling up the regular phones and pushing the trend to every phone becoming a smartphone. So the game here is for the whole pie instead of a smaller portion.

So how does Nokia do in that space? The Symbian operating system, the one the company is abandoning, was on 37.6 percent of smartphone devices in the last quarter but Nokia overall marketshare in the mobile space was 28.9 percent.

How does it compare to others?  In the OS game, Nokia has a 15.1 percent lead over Android, its next nearer competitor (Apple comes in 4th, behind RIM) and an 11.3 percent lead over Samsung in the overall mobile space.

Meanwhile, Microsoft was nowhere to really be seen, with a mere 4.2 percent of the OS market, coming in above “others” in the OS category.

If the tie-up had happened last quarter, the combined team would hold first place with above 40 percent of the smartphone market, almost double their nearest competitor (Android) and almost triple Apple’s own offerings.

With that large a footprint, any developer will have to think about supporting those devices.

Furthermore, Nokia has a long-established relationship with phone carriers around the world (while I have not checked the data, I would be ready to venture that there isn’t really a phone carrier out there not carrying some Nokia phones). That kind of network will be hard to defeat moving forward.

Why Winkia will work: Patents

When he unveiled the first iPhone, Steve Jobs made it clear that there was going to be a huge legal fight in the mobile space.  During the unveiling, he highlighted that oncoming fight in the following way (emphasis is mine):

We have invented a new technology called multi-touch. It works like magic, you don’t need a stylus, far more accurate than any interface ever shipped, it ignores touches, mutli-finger gestures, and BOY have we patented it!

[…]

We filed for over 200 patents for all the inventions in iPhone and we intend to protect them

Apple later sued HTC and Motorola over some of those patents.

Meanwhile, Microsoft has not been shy in suing some companies over patent infringement relating to Google Android. The operating system from Google continues to be challenged in court, the most recent lawsuit coming from Oracle over alleged infringement of Java related patents.

So all and all, the mobile game is one dominated by patent fights. In the lead-up to this week’s announcement, Nokia’s CEO was touting its patent portfolio as something to look at. A story on AllThingsD put it as such (emphasis is mine):

Friday’s investor meeting will also address other aspects of the company, including its services strategy, its plans for its Navteq navigation unit and its plans to leverage its huge patent portfolio.

Between Microsoft’s patents in the mobile space and Nokia’s, I suspect we are soon going to see some lawsuits emerging from the new partnership and going after different aspects of the iPhone and Android devices (though I suspect Google will be the first target, with the iPhone being left for later).

Conclusion

Between Microsoft’s strength in the development community, Nokia’s strength in the hardware and distribution realm, I would venture that we may be seeing the beginning of a major shift in the mobile landscape. Both of the partners are quite strong and I would not be completely surprised if they were to both be able to reverse their fortunes in the mobile space. I also would not be totally surprised if, at some point down the line, Microsoft were to announce that it is taking over Nokia and folding it in. An interesting thing is that the cut in the overall market capitalization of Nokia after the announcement has now left it in a position where Microsoft could buy it in cash if it felt like it.

However, there are still a few things to be ironed out. For starters, Microsoft has just tied its OS to one partner and may have difficulties convincing other players to build mobile phones. Expect Samsung, LG, and HTC to stop investing in Windows Phone 7. So if Nokia fails in regaining some momentum as a result of this partnership, it may take with it Microsoft’s hopes in the mobile space.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Winkia rising. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Some people have argued that its death was foretold by the introduction of the iPhone a the iPad but I would say that those were only components in a trend that has been going for a lot longer.

What is ubiquitous computing?

In the late eighties, researchers at the famed Xerox PARC research started thinking about the implication of the computer disappearing. In their views, information from computers would start melding into the surroundings without being thought of as part of a computer. In that sense, they saw the world we now live in 20 years ago.

Think of how you’re reading this. It may be on a computer, a tablet (like the iPad), a e-reader (yes, TNL.net is now on the Kindle), a mobile device (blackberry, android, or iPhone), or a TV. Each of those items provides a screen that can be connected today to access information from the Internet.

The increased numbers of sensors in our world is only furthering this trend. For example, at their most basic level, you have barcode on supplies in the grocery store. Every time these bar codes get scanned, their presence is translated into bites on a machine somewhere, to be tabulated and presented. You don’t generally think of the cash register at your local supermarket as a computer but it is one.

Your telephone (either wired or wireless) also provides tremendous amounts of data about you and what you’re doing. For example, your phone company probably has as good an understanding of your social graph as facebook does since it tracks who you call, how often, and for how long.

In New York, as in a lot of European cities, subway trains now have sensors allowing anyone to see where trains are, and get some estimate as to when they’re coming. Once again, bits of information presented in a computed form on a screen like this (Hat Tip to Second Avenue Saga):

Source: Second Avenue Saga

So information now surrounds us in a number of ways. This means that the computer, as an information device, will lose its prevalence since there are now other ways in which we can access the information.

But how will we interact with it?

Bye Bye Keyboard, Bye Bye Mouse

People in the mobile camp will argue that touch is the way to interact with information. The answer is correct but only partially so. While touch is the most efficient way to interact with a screen you hold (as proven by the iPad, iPhone, and now most smartphones), it is not so good when it comes to screens you are not holding. Steve Jobs, in the introduction of the new Macbook Air, said so himself.

So what is the rest of the world to do in order to interact with those other screens. Some solutions, like the new Android TV, look to interacting with those with new remotes that look like keyboards. They want to bring more of the computer to those other screens. For example, Google TV devices offer a wide range of keyb0ard-like remotes.

This is the wrong answer because the majority of consumers are not interested in that form factor (I am talking from experience here as I have a computer connected to my television with a Logitech DiNovo Mini keyboard and it has failed every single person who has come in. I’m the only one who can really get a show started on there.)

However, the right answer comes from a player everyone has all but dismissed: Microsoft.

A resurgent player

It’s been a rough decade for Microsoft. Badly singed by an Antitrust lawsuit, the company has become hesitant and tentative in its approach to the new post-PC world. It has also been saddled with a tough anchor: Windows. The problem Microsoft has is that it continues to hang on to the belief that everything needs to tie up to that platform.

And in doing so, it fails at most of its new efforts.

But there is one division at Microsoft that has somehow managed to avoid that curse: the gaming division. The Xbox has been a success because it hasn’t been saddled with the Windows background. The group threw out that mantle early on and developed a series of machines that were performing well in the environment they were designed for: the living room.

And now, they’ve introduced Kinect, a device that I would call as revolutionary as the iPhone was in the mobile market.

Source: Wikipedia

The revolution comes from the fact that the device introduces a new way to interact with a computer: without any physical devices. Their tagline (“You are the controller”) represents a brand new approach in defining interfaces for devices: whether it is voice or motion, the user is now brought closer inside the computer.

Extent the kinect to the next generation of screen and you now have non-portable computing devices you will interact without having to touch them. Wave your hand in the air and you can manipulate objects in those devices.

The end of the drive

This week, Verizon showed off their  technical prowess by showcasing how they could move files at a 10Gbps. To give you a sense of how fast that is, most computers today only operate at 100Mbps so what Verizon accomplished is roughly 100 times faster than the fastest network most people have experienced. The most advanced computers available on the market tend to top out at 1Gbps: they usually can move files at those speeds on local network but it’s rare to find networks that are connected to the internet at these types of speed. So what Verizon demonstrated is the future, a future where a 2 gigabyte file can be transfered in less than 5 seconds.

A few weeks ago, I told TNL.net readers that we were witnessing the beginning of the end for local storage. However, since then, I’ve come back a bit on that idea: local storage will continue to exist but mostly for caching purpose. In a world where you can move several gigs in a few seconds, it is more efficient to move data to the cloud, where it can be accessed from any device.

The rise of Work Computers

Based on all these trends, there is a more limited need for PCs. While the Personal computer was a great transitional device to the ubiquitous computing world, it is a device which suffers from some limitations.

For starters, there are the input methods. There is a clear reason why Apple didn’t make their devices any smaller than 11 inches and touted the fact that the Airbook had a full size keyboard: our hands don’t get any smaller.  So the keyboard and mouse, as entry device are gated by this fact and will be stuck in that mode for as long as we live.

But most people will not need a keyboard or mouse in the future. Except where text is concerned, the existing computer is getting close to having run its course: writers will keep using them (until the point where voice dictation software is good enough to replace the need for a keyboard) and programmers will continue to use a keyboard as an input device to program. Most every other people will interact with the devices either via direct touch (like the iPad) or via motion (like the Kinect).

Those uses will be primarily for “work” or pro-sumer type of purpose and other people will not have computers at home.

One gating factor: Power

The main challenge for most devices will, however, continue to be how to power them. To date, there has been some improvements in the battery space but those are not moving as fast as the rest of the technology world.

And we’re becoming more demanding of our devices.

For example, most smartphone users complain that their device lasts only a day or so on a full charge. But think of a decade ago. Back then, a device with a 1 Ghz process, 10–20 Gb of disk space, and about 128 Mb of RAM might have worked on a battery charge for about 2 hours. Those were powerful laptop back then but we didn’t seem to expect them to run all day.

Today, there is a lot of work going on around trying to get more out of the batteries we have and companies like Apple have worked on reducing the amount of power a device may ask from a battery: for example, the Macbook Air is a marvel in trying to figure out what to remove in order to ensure the devices squeezes more out of the battery.

Will the work computer disappear?

The last bastion of the computer will be the office. At this time, it is difficult to imagine people gesturing in front of their computers as a way to interact with them. More likely, tilted touch displays will become the new norm in offices (and by tilted, I mean that the screen would be on the desk at an angle of no more than 20–25 degrees). Those types of changes will take some time to make their ways into cubicles and may force business to even rethink the concept of the cubicle. The ones that have already will get a head start on their competitor.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Goodbye PC. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

This week’s announcements of pricing around the Google TV offerings, combined with some of the first deliveries of AppleTV boxes, have kicked off a new salvo in the war for the third screen.

TV and web pre-history

Before I go into more details as to why I think this is important, I need to give newer readers some background in the history of the many failed attempts to merge the web and television.

In the early 1990s, in an era that is considered mostly pre-internet (that is, before the internet became mainstream), then vice-presidential candidate Al Gore talked about the “information superhighway,” a concept that highlighted a universe where most interactive data would move to your television. The TV screen has always been the main screen in American household and, unless you were a computer geek, that was largely the case in the early 1990s.

As the 1990s moved on and the commercial internet moved to the center of public consciousness, there were several attempts to marry the internet and the web (12 years ago, I was even involved in a failed effort at creating a standard web model for bringing TV to the web). The basic idea, at the time, was to bring TV content to the web and enhance it with some extra juicy bits from the web. This meant, for example, being able to push web content that would provide more info on a broadcast (for example, related news stories). The concept wasn’t new in that it had been embedded in a lot of British television since the 1970s as teletext, passing extra content as part of a broadcast.

Set top boxes wars

At the time, a group of engineers and product managers who had worked for Apple left the company and started a new offering called WebTV. WebTV was a new type of set-top box allowing its users to surf the web on their television. The company also introduced a set of specialized tags that web developers could use to create pages that were formatted to fit this new TV paradigm.

Others looked to the same concepts and, in the late 1990s, the set-top boxes became a new competitive arena for distributing content in a digital form (In order to disclose my biases, I must point out that I worked on a consulting basis for Nokia’s set-top boxes group, an effort that ended up having an impact on some of the thinking behind podcasting)

WebTV networks was acquired by Microsoft and much of its technology ended up in the Media Center edition of Windows, which powered the next wave of TV/web marriage.

Starting with Windows XP, Microsoft offered a Media Center edition of their Windows platform. The idea was basically Windows, on your TV. Unfortunately, the assumption that the PC experience could translate to a large screen proved to be mostly wrong (this, by the way, is a mistake that Microsoft also made on mobile devices, assuming, until recently, that the windows metaphor could transport itself to other experiences).

As the dotcom boom led to a dotcom crash, much of the intentions to merge the web and TV disappeared. The concept of converged content moved from the web to gaming stations as a delivery mechanism  (in fact, around 2006–2007, I was considering the Sony Playstation as an attempt to get BluRay to defeat HD-DVD instead of an actual delivery device). In the midst of a 3-way war between Sony, Microsoft, and Nintendo for gaming supremacy, Appled announce its first foray into the TV space with iTV (later to be renamed AppleTV). While they didn’t look at games as a space at the time, their model of attaching a device to the TV was no different then than the model they have today: the set-top box as a way to buy content from Apple. In that sense, the fact that the company hasn’t changed direction points to their belief that this is the right model (though I personally think that, in the long run, they will end up opening the marketplace further, in a fashion similar to what they did with the iPhone).

Internet Everywhere: 5, 15, 50

Over the last few years, as more video content has become available, the internet has moved back to being discussed as a delivery mechanism for many types of devices.

I call that the 5, 15, 50 paradigm, since internet content is now being offered on devices that have 5 inches screens (mobile devices), 15 inches screens (computers), and 50 inches screens (televisions).

Netflix has had pretty good success with their strategy of getting their player integrated in a lot of devices, thus allowing their content to be streamed pretty much everywhere if a connection is available.

Apple vs. Google

But now that the war is moving to that new ground, two players in the computer and mobile space have decided to fight for that corner of our digital lives: Apple is re-tuning its AppleTV box to be more competitive on a price level and Google is gearing up for a larger attack on the living room. In this case, however, I think that Apple has an early lead with some critical flaws.

The reason I believe Apple has an advantage here is that their offering, from a product standpoint seems to balance the right feature vs. price compromise. The Netflix and YouTube offerings are no-brainers but the reliance on iTunes as the delivery mechanism for your pictures and movies is annoying: I think that’s a critical flaw in that most people do not want to have to turn their computer and iTunes on in order to have access to that content. Apple should offer a way to attach a network drive (maybe a modified version of their time capsule) on which a user could drop pictures and movies, leaving them there for use from the Apple TV (or mac, iPhone, and iPod) at any time.

Google, on the other hand, is introducing a product that is just a more modern version of WebTV. And I’d warrant that, at this time, the keyboard interface approach is the wrong metaphor for the big screen. The keyboard on the first devices (Logitech Revue and Sony Internet TV) to follow the Google strategy are just too big (as the owner of a Logitech DiNovo Mini, the keyboard that’s modified for logitech’s enhanced offering, I can tell you that most normal people get confused by such an offering). This, in itself, would not be a killer as Boxee has demonstrated, with the remote for their boxee box, that a remote can have two sides, allowing for the complexity to be simplified.

Keyboard aside, however, GoogleTV will have a problem the price point ($299 for the Revue), which is too high for most consumer. Considering that Apple is pricing the AppleTV at $99, consumers may question what they get for the extra $200. Geeks like myself may end up buying something like the GoogleTV box but I suspect that the vast majority of the public will not.

Meanwhile, the incumbents in that space (cable companies, as well as Microsoft, Sony, and Nintendo) are not sitting on their hands and smaller players (Roku, Boxee) are looking to get a share of the market too.

The next set of battles will be waged for your living room and they are gearing up to be interesting as, for the first time in a very long time, TV may become more about the consumer than it is about the advertisers.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The revolution will be televised. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The attacher: Microsoft

The primary view of the attacher is that it has a solid product and now tries to attach every new effort to that product, making it increasingly unwieldy as the product now has to support legacy and new approaches to servicing customers.

For example, for a long time, Microsoft’s insistance that everything be tied to Windows looked like it might be a winning strategy.  But, over time, the strategy started falling apart. Sure, Microsoft’s tying of the browser into its operating system made it relevant for the internet era, but eventually new players (Firefox, Chrome, Safari) emerged and, because it was so deeply embedded into the operating system, Internet Explorer had a longer update cycle, leaving it increasingly vulnerable and forcing it to loose marketshares.

In the same way, Microsoft’s insistance that its mobile offering be more like Windows left it with an incompatible user interface for mobile device. By the time the company decided that it would toss away the concept of toolbar and icons, it was already too late and Microsoft has ceded developers’ mindshare to Apple (with iOS) and Google (with Android).

Rare in startups

A precondition for a company to become an attacher is that they have something to attach to. In other words, they already have an existing product that has been successful and on top of which they are trying to bolt something incompatible. In a way, I would argue that this is also what Apple does with iTunes, a product that may have a new logo but does so much more than music that its moniker seems incorrect.

However, I would say that the attacher is, in the long run, a losing strategy. It shows that the company is unwilling to let go of past successes, which may now work as an anchor around their feet, leaving them with less room to grow and adapt.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Which company are you: the Attacher. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

• The attacher is generally a company with a successful product. The company then tries to attach everything it does to that product, eventually losing out as the market evolves.
• The pusher finds the edge, goes beyond it and, when the inevitable push-back happens, pulls back a little. Having pushed beyond the edge, it starts the cycle again.
• The tinkerer creates products through extensive user testing and trust the data religiously, tinkering with the product based on what the data says.
• The refiner looks at a product category and offers an improved product by cutting back instead of adding.

Each of these models provides value to the market but ultimately, the best companies might be the ones that are willing to take on all of those features depending on time and context. In the following entries, I will go into details as to each of those models, providing example of leaders and startups that follow them.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Which company are you?. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The Cultural Impact Cycle

Most successful companies go through a 6 steps cycle where their cultural impact on society as a whole can be felt. For my purpose, I call it the mindset cycle and it works as shown in the figure below:

Alphaworld

In Alphaword, the first step, a few early adopters are aware of the company and its products and test them out. This is generally a stage most companies do not get out of.

There are many reason for companies not getting out of this space. Their product could be bad; their product could be targeted at the wrong market; their product could be too early in the market; the company might have failed to explain its relevance to users; etc…

Ultimately, the main reason a company gets out of this stage is that its team has done a very good job executing on the implementation of a product and company strategy, creating value for its investors, and delivering even more value to its users.

Those that make it out will be prosperous and those that don’t will die.

The Land of Mass Adoption

The land of mass adoption then represent a steep climb as a company starts getting noticed by people outside of the technology world and non-technologists start using the application.

The majority of companies that made it out of alphaworld spend a very long time in that area and can profit by targeting niches without having to move on to the next stage.

The land of mass adoption is an area where companies are forced to shed some of their more technical attributes (or hide them away) in order to appeal to a mass audience. The mass audience is not as forgiving as people in alphaworld so the company has to properly adapt to the market. It’s a great balancing act where the company has to show early adopters that it can continue delivering cutting edge for them while talking to the mainstream and figuring out the right timing and hand-holding to get mainstream users to start using some of those new attributes.

Mainstream Mountain

Mainstream mountain is where most companies want to be. At that point, a company achieves great economic success and is at close to the peak of its cultural relevance, impacting not only its own product but the industry it’s in. Very few companies achieve that stage and even fewer stay there for a long time. The great majority of people look to the company as the main provider of direction and believe it can do no wrong.

In the 80s, IBM was there with its personal computers. In the 90s, Microsoft was there with its Windows operating system and Office Suite. In the first decade of the 21st century, the spot was held by Google with its dominant search engine, online advertising model and YouTube video site.

Apple is currently at the apex of mainstream mountain, having redefined the PC industry (computers as consumption), the music industry (digital as default) and the telecom industry (phones as computers). Facebook, with its social network is currently climbing that mountain, having become the largest site in the world, built solely on the back of relationships.

Unfortunately, it is almost impossible to stay in that arena and the fall seems to eventually come for most companies.

Disgruntled Hills

In the disgruntled hills, the public perception of a company starts to turn. What was one seen as a benevolent force for good is now being questioned. People start questioning whether the company is holding too much power and the mention of anti-trust comes up more often. Early adopters start looking for alternative providers and any misstep by the company is seen as a major example of how flawed the company is. Over time, the mass start turning their back on the company, reluctantly using its products but no longer imbuing them with the kind of magic attributes they granted to the company.

At this point, it seems the company starts having problems pleasing customers. No matter what it does, the public looks to the company as only protecting its own interest and not those of its customers. The company can claim that it loves its customers but suspicion seeps in and people get cynical about such claims.

I would venture that Google is currently in that stage as people start worrying about its dominance in the search space while making fun of its attempt at trying to get more social so it can go back to mainstreaming mountain. Questions around its privacy practices, mentions of antitrust around search and advertising, and other negatives seem to be applied to it with increasing frequency.

Canyons of Cultural Irrelevance

Of course, Google doesn’t have to worry as much as Microsoft, a company now steeply going down the hill of cultural irrelevance. At that stage, a company’s product are no longer seen as relevant to large swath of people.

Companies that reach this stage were once seen as the most important companies in the world. Oftentimes, such companies also suffered legal setback as they were taken to court and found guilty of monopolistic practices. Such was the case for IBM in the 80s and Microsoft in the 90s.

To say that a company is in that space is not the same as saying the company cannot be profitable. In fact, Microsoft an IBM are still very large players with established customer bases and diversified product portfolios. But their impact on the industry is mainly felt when they acquire a company positioned in one of the earlier mindset stages. Their ability to deliver internally-created product to an audience that finds a particular attachment to such products seems hindered and the companies take a cautious approach, offering product that attempt to mirror features created by other players (eg. Zune v. iPod, Windows phones vs. iPhones, Microsoft Kinect vs. Wii).

This stage can last decades or even centuries but, at that point, the company is no longer having a significant impact on consumers’ mindsets.

Plains of Corporate Death

In some cases, a company can flash through a lot of the earlier stages, be seen as extremely relevant for a while and then disappear because their products and ideas are no longer valid in the marketplace at all.

This is a case where companies have cash or assets that are no longer valuable in any ways (eg. Buggy Whip manufacturers) and, in those cases, companies completely fold and return money to their shareholders, stopping to exist due to cultural irrelevance.

Few companies enter that stage as the previous one allows them to morph into something different (eg. Nokia comes to mind, changing from being a fishing boots manufacturer to a phone company; or WPP going from being a wire and plastics company to one of the largest advertising groups in the world).

Takeaway

There are many stages in the cultural impact of successful companies but ultimately, every large tech company has found itself displaced and replaced. Today, Apple sits at the apex of the tech industry, having achieved economic and cultural dominance, but the Antennagate brouhaha (around claimed issues that the iPhone 4 antenna fails when the phone is held without a bumper) and the gizmodo incident seems to point to some anxiety within the early adopter community. Perception of the company appears to be turning and, for the first time since Steve Jobs came back to Apple, there seems to be some level of unhappiness with its products. Will the release of free bumpers help the situation? Only time will tell.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title 6 Stages of Cultural Impact. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

10. IBM acquires PwC Consulting

In 2002, IBM acquired the consulting arm of Price-Waterhouse for US$3.5 billion. The move helped solidify IBM’s position in the consulting business and helped it move away from being a hardware and software manufacturer and more into the higher-margins consulting arena. The deal was very favorable to IBM in that it was able to acquire the company for less than 1 time revenue.

10.b PayPal acquired by Ebay

When Ebay acquired Paypal for US$1.5 billion, the move seemed to be a very risky one. Why would an auction house want to get an emerging payment system that really didn’t seem to fit much with its business model.

Ultimately, the deal has turned out to be quite a good bet as Paypal is now the engine of Ebay’s growth. In fact, most of the value of Ebay now resides in a payment system that has left many financial institution envious of its reach.

9. Lenovo acquires IBM’s computer division

In 2005, the company that had launched the personal computer revolution into the office changed hand as Lenovo, previously a local chinese computer manufacturer with no real global footprint, acquired IBM’s personal computer division for US$1.3 billion. The deal established Lenovo as a global player in the PC market and heralded the arrival of Chinese companies on the global scene.

8. Verizon acquires MCI

In the 1990s, MCI became one of the largest players in the telecommunication business, acquiring and rolling up small regional telephone companies and internet backbone operators. The problem, however, was that most of the growth it demonstrated on paper was based on fraudulent statements and accounting tricks that ended up with the company filing the largest bankruptcy on record at the time (this has since been superceded by other bankruptcies).  Verizon acquired the company in 2005 for $US 6.7 billion, picking up one of the largest internet backbone operator in the process.

The deal, which had come on the heel of SBC’s acquisition of AT&T, was the last one in the landline telecom consolidation that left most of the country’s telephone and internet infrastructure under the control of either AT&T or Verizon.

7. Microsoft / Yahoo partner on Search

Sometimes, the importance of a deal has move to do with the disruptive effect it has on the parties involved than the successful outcome it may represent. Such is the case of the Microsoft/Yahoo partnership which came after years of discussions between the two companies. From 2005 to 2007, Microsoft attempted to quietly acquire Yahoo but the reluctance of Yahoo’s leadership at the time left those calls unanswered. In February 2008, Microsoft decided to take the discussion to a whole new level by making an unsolicited takeover bid of $US44.6 billion in cash and stock in early 2008. The goal was to combine the two companies into a combined one that could compete with Google. Over the next quarter, the two company would battle publicly, with Microsoft eventually giving up on its attempt.

For the next year and a half, Yahoo went through major upheavals due to its refusal to take Microsoft’s offer and the negative impact it ended up having on its market capitalization. With a new CEO installed, Yahoo then went on to agree to outsource its search business to Microsoft, taking it away from the business that had initially served as the foundation of the company. While the link-up has not been completed as of this writing, the disruption that all those negotiations created for the two companies allowed their chief rival, Google, to consolidate its hold on the markets that were at stake. As of this writing, the market share of search held by a combined Yahoo/Microsoft partnership has dropped substantially from where it was when the Microsoft bid was initially made.

6. Weblogs Inc. acquired by AOL

Weblogs Inc. was founded by Jason Calacanis (and Brian Alvey) as a network of blogs, including the popular engadget, which was run by Pete Rojas (also the founder of Gizmodo). When AOL bought the company, in 2005, the price was rumored to be around US$25 to US$30 million. At the time, some felt AOL had overpaid. Today, some feel Weblogs Inc. sold for too cheap.

The reason I would consider this deal significant is that it was the first major deal involving blogs (some would argue that Google’s acquisition of blogger fit the bill but my counter to that was that blogger was a blog tool company while weblogs inc. was a blog content company). Because AOL, an arm of Time-Warner at the time, was a large corporate entity, this acquisition legitimized blogging within the corporate world and made it easier for any subsequent blog-related deal to happen.

In the next entry, we will look at the top 5 on the list. Some of them may surprise you.

Update: Part 2 is up.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title 10 Tech Deals that defined the decade — Part 1. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

It has a relatively low but highly dedicated audience and is garnering good press both in the blogging community and the mainstream media.

The service is suffering from growth related issues which force it to be down at unexpected times but users put up with it because of its supposed transformational nature.

The service allows people to build things on top of it, offering external parties a greater chance to generate revenue than the company providing the service.

And, establishing further proof that service is going to be important in the future, a lot of mainstream stars are establishing presence quickly, only to slowly abandon those points of presence after a while.

But those stars are no different from most of the service’s users, which tend to abandon it only a month of two after trying it out.

What is that service called?

If you said Twitter, you are clearly reading this in 2009. But, only two years ago, the answer would have been Second Life (something I learned first hand, having been part of the hype around it back then).

of course, I have no doubt that this post will probably receive a high amount of flames because supporters will tell me how Twitter is different. But is it?

The Coral Reef

I’ve always had an affinity for Dave Winer’s Coral Reef analogy. However, even the coral reef analogy seems to eventually break down, leaving people like Winer to think of ways to move out (in a way, Winer fell into the same trap with Twitter as Scoble did with Friendfeed).

The issue here is that a lot of energy gets poured by developers into supporting an ultimately closed system. While artificial coral reefs exists, they are generally part of the larger ocean and tend to be pushed into creation by sinking boats or subway trains. But an important distinction is that the creator of an artificial reef is generally present at the creation but then lets the ecosystem take over and doesn’t try to control anything.

In the tech field, the best analogy for an artificial coral reef would be opening sourcing an important source of code (for example, the apache web server) or making a set of protocols or ideas open to all (eg. HTML or RSS) without requiring that the implementor cede any control to the party which made the code or idea available. Today, you can fok the httpd server if you feel like it or you can adapt parts of HTML or RSS to your heart’s content.

Fauxpenness

But there’s a different set of ecosystems out there that becomes more of a venus flytrap of technology. I would describe this as fauxpenness:

Fauxpenness: Calling a system or platform open while it is, when more closely scrutinized, under the tight control of its provider.

Fauxpen system (or fauxpen platform): a system or platform that claims to be open but, upon closer examination, isn’t.

It’s the kind of approach that pretends to be open but provides some level of lock-in.

In 2006–2007, we saw that happen with SecondLife, as many developers (myself included) built software code that could run within the SecondLife world but was ultimately stuck there because you could not run it outside that world and/or run SecondLife servers on your own machines.

in 2007–2008, we saw that happen with the F8 Facebook platform, which locks your applications inside of Facebook and, while many developers have pushed to force the company to open up, tends to stay there. In 2007-today, we’re seeing the same thing with Twitter, which allows you to build whatever you want on top of it but doesn’t decentralize their approach, leaving developers potential slaves to the whims of the company. The same is true of the iPhone, which provides unusual access to the phone operating system and allows to develop interesting software on top of it but still keep developers away from being able to access basic things like calendar information via an SDK.

The endless cycle

Interestingly enough, it’s not an unusual phenomenon in the technology world. It works like this:

It happened with SecondLife; it happened with F8; it will happen with Twitter and it will happen with the iPhone at some point. It appears that the natural course of locked API is to get to a point where the developers get so annoyed that they decide to go look somewhere else.

But there’s hope.

Breaking Free of Fauxpenness

Because of the lock-in, it is possible for companies to break free of the cycle. In order to do so, two things need to happen:

• First, the company needs to find a way to establish a business model that does not require lock-in
• Then, the company needs to start removing the lock-in components it offers.

I’m not saying that either of those step is an easy one. In fact, few companies have successfully managed them and, even when they do, the developer community will keep asking for more.

For example, Microsoft’s history is one of establishing initial lock-ins, weeding out the competition and, when its lead is established enough, relaxing the choke-hold it has on the developer community and playing a little nicer until it tries to enter another market. That was the case with Windows; it was the case with Office; and it is the case with IE today.

IBM also took the same approach, initially being a provider of proprietary systems and slowly, over the last 15–20 years, moving to become one of the largest supporters of the open source movement.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Fauxpenness. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

A bit of history

In order to understand the importance of the current shift, one needs to study a bit of history. Since the dawn of the personal computer era, applications have been written and running largely on the user’s desktop. In the mid-90s, Sun Microsystems co-founder John Gage started claiming that “the network is the computer.” Marc Andreessen, co-founder of Netscape, the leading browser company at the time, was claiming that Netscape would “reduce Windows to a set of poorly debugged device drivers.”

However, due to limitation in terms of bandwidth and computer power, this vision didn’t come to be until well into our current decade. Today, individuals still mostly use Windows, even if most use it primarily to launch their web browser.

In more recent times, the availability of always-on, higher speed internet access, has allowed companies like Google to start offering more powerful websites, which took on features of full-fledged software applications. Leveraging technology that first saw the light of day in the 1990s (Flash was born in 1995 and XMLhttp, which powers AJAX applications was created by Microsoft in 1999), those applications started offering compelling competitors to existing products.

One the leader in that revolution has been Google. First with the release of Gmail and then with the release of Google Apps, the company has been working on offering online version of tools like email, word processing, spreadsheets, and presentation software. Leveraging its establish power in the advertising space, Google has figured that, by offering document and email management features to its users for free, it could create extra advertising inventory that it could then resell.

So Gmail, Google Docs, and Google Apps were born. Since they were consumer focused products, presenting them as products “in progress”, complete with a beta stamp and an advertising-based model. Jeff Jarvis warrants that such act was not only bourne out of humility but also as a  call to collaborate. This week, however, the company decided to shed the beta logo for most of its applications.

With its direct language to IT manager and its message emerging from the enterprise group, Google is making it clear that this announcement is not targeted at the consumer space. In a sign of growing business maturity (most software company attempt to appeal to the enterprise space as they get older and need to develop more predictable financial groundings), the company is now trying to appeal to the enterprise space, aiming its offerings towards a space that has traditionally been controlled by Microsoft (with its Office Suite) and, to a lesser extent, IBM (with its Lotus division offerings).

Poorly debugged device drivers?

But Google realizes that much of what it does is dependent on the continued goodwill of the different operating system providers and browser suppliers. Were it not for web browsers or operating systems, Google could not exist. Last year, the company started reducing that dependency by introducing its own web browser, named Chrome. Chrome was actually quite interesting in terms of browser development as it was the first browser to treat each window session as a separate application, ensuring that if one web page failed, the other tabs would not. This could be seen as something not completely unlike the way an operating system (or kernel, etc) doles out memory and CPU power to each of the applications it deals with and orchestrate who gets what.

The unstated strategic goal of the Chrome browser is to help reduce the dominance of Internet Explorer in the online space while providing Google with more of a say in terms of where web standards were heading (I’m sure some people will try to debate that point but, if Chrome is not intended as an Internet Explorer competitor, why is the only “official” version of the browser a Windows one, with no such offering on OSX or Linux?)

Chrome is not only an attack on Microsoft’s browser dominance in the web space but also an attempt at ensuring that neither Microsoft NOR Adobe get control of the future of web applications. Google’s CEO Eric Schmidt knows how trying to fight Microsoft can distract a company from very real threats by other unexpected contenders: he did come from Sun Microsystems and Novell before joining Google and saw, first-hand, how those two companies saw their focus on unseating Microsoft’s dominance in their respective areas blinded them to the threat that Linux came to be to both of them, ultimately dooming each of the companies’ efforts without Microsoft having to do too much.

So, as a veteran of the OS wars, Schmidt is now being careful in balancing its entry in the space. On one hand, he doesn’t want to offend existing partners like Apple and the open source community. On the other hand, he needs to ensure that his company’s offerings are actually going to appeal to hardware vendors. The OS will ultimately be little more than the minimum required to make the Chrome browser run. That means it will include an IP stack, some basic drivers to interact with the keyboard and screen (or a way for companies to offer those) and a UI that will be a full screen version of the Chrome web browser.

The description of the OS, as stated in the press release, describe it as such:

Google Chrome OS is being created for people who spend most of their time on the web… without wasting time waiting for their computers to boot and browsers to start up. They want their computers to always run as fast as when they first bought them. They want their data to be accessible to them wherever they are and not have to worry about losing their computer or forgetting to back up files… Even more importantly, they don’t want to spend hours configuring their computers to work with every new piece of hardware, or have to worry about constant software updates.

Put quite simply, this is a web browser with the basics to make it run online and offline (the offline components probably being based on Google Gears (already built into the Chrome browser) or some HTML 5 offline approach). Users will not really store much on their computer but everything will be sitting on Google’s servers, accessible from anywhere. Operating system upgrades will happen automatically in the background and everything will run in the browser. For those people expecting to run Firefox (or any other application) on this thing, sorry… it won’t happen.

Google’s view is that everything will run online and all data will be stored online. In technical terms, this is called sending information into “the cloud.”

However, there’s the question of how to plug components in there. I suspect that Google will lean heavily on its partners to release any device related drivers through the equivalent of an online application store, similar to the app store on the iphone, where Google controls the experience in terms of what gets installed on the user’s desktop and can recall or upgrade an install if needs be. The idea being that the hardware device does not need much power as most everything is coming from the web.

Developers will not be allowed to develop anything that runs on the machine itself:

For application developers, the web is the platform. All web-based applications will automatically work and new applications can be written using your favorite web technologies. And of course, these apps will run not only on Google Chrome OS, but on any standards-based browser

With these few words, Google is taking the same approach as Apple first did when itintroduced the iPhone: don’t look to us to provide you with any SDK, the web is the platform. Build your application using HTML 5 and all will be OK. This basically means that right now, Google either has no intention to provide an SDK or will keep it accessible only to select partners who want to integrate with their OS. They will first provide access to the device makers and then, over time, will create an SDK and an app store that they may even be willing to share with partners by white-labeling that store to sweeten the deal for any partner willing to install the OS.

The reason I suspect this would be part of the strategy is that pricing will not be a heavy deciding factor in whether partners will adopt the new OS and Google desperately needs the new OS to be implemented as widely as possible.

Many have said that cost was a large part of their strategy but I suspect it cannot be: Consumers have already been trained to consider the operating system as a freebie or low cost tool. On the windows side, consumers see the OS as something that comes with their machine, not something they buy separately. This effectively brings the price to 0. Even Mac users, who generally tend to be more willing to pay for products offered by Apple, were grousing at pricing on OSX, forcing the company to take a deeply discounted approach when offering the next version of its operating system for about the price of dinner and a movie. And pricing has proven to be a contrarian indicator in the netbook market, as consumers decided to pay extra for the Windows XP version of devices that also offered the same hardware at a lower price point with Linux.

Interesting timing

Having established that the company is looking to get more control of its end to end experience, one big question is why do it now? Why not do this, for example, at their developer conference, as they did for Google Wave? Why announce something that will not be available in the near term?

My suspicion here is that part of the reason for this vaporwave release is that Microsoft is about to unveil a series of cloud focused initiatives at its WorldWide Partner Conference next week: those offerings will include a major push for their cloud platform, Microsoft Azure, along with announcements regarding the Gazelle project (their own browser as an OS offering), and Office 2010, a substantially revamped version of the popular suite that will move collaboration and synchronization front and center. At its core, the revamped Office suite will not only include the existing components and features of older version but its guts will have been rebuilt with some DNA acquired as part of the acquisition of Ray Ozzie’s Groove Networks and its offerings.

I suspect that Groove and Ozzie have Google shaking in its boots. Much of Google’s strategic message is that it is more collaboration friendly than Office and, by leaving one’s documents on Google’s servers, one doesn’t have to worry so much about revisions and versioning. With Office 2010, Microsoft is fixing these problems and telling corporations that while Google’s message is nice, your proprietary information will be sitting on Google’s server. How about getting the same type of functionality but keep the documents on your own servers. Because most corporate IT department tend to be paranoid when it comes to their corporate data, the Microsoft message will resonate better.

So Google is not starting to position itself in the consumer market, hoping that applications which can run in the consumer world will eventually help tear down the corporate walls (to date, few corporations have adopted Google Apps and, if Microsoft offers a competitive product, I suspect it could remain that way for at least a decade). Having to do something, they have now decided to attack a core tenet of the Microsoft empire: its windows OS division.

The battle lines are now drawing:

• Google is asserting that the world runs solely within a browser and all application logic is in the cloud; Microsoft will assert that substantial amounts of complex tasks require the power of the desktop and the cloud is there primarily as a tool for collaboration and synchronization.
• Google is asserting that desktop PCs are merely thin clients; Microsoft is asserting that desktops are still the center of the computing experience.
• Google is asserting that the net is safe enough a place to leave all your information; Microsoft is asserting its not.
• Google is asserting that developers don’t want to run applications natively on a machine; Microsoft is asserting that the tightest integration happens at the OS level.

Each company is presenting a different vision of the cloud. I can’t say which is right as both offering compelling advantages and substantial flaws but I can highlight one important feature: in the future the software you are running will be connected to the internet most of the time and still be able to work when offline. And in that future, I suspect that the notion of software as a product you buy will probably disappear, with software as a rental model becoming the emerging approach. And I also believe that this is the beginning of the cloud OS wars.

Update: As expected, Microsoft sends out its reply.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The Cloud Wars. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

So the first prediction I will make is a purely personal one and more of a promise than a prediction: 2009 will be a year when more new postings will emerge from TNL.net.

Macro-economics

I do not share the optimism of many other people in the technology field when it comes to macro-economic factors and their impact on the technology field. My view is that the first half of 2009 will be much worse than the last half of 2008 and that the second half of the year will, at best, look like the first half of last year.

I suspect that the financial picture will get more constrained over the next fiew months as banks start feeling the impact of a consumer-led credit card crisis as individuals try to save their houses by maxing out the credit card instead and eventually reach the end of the credit limit, unable to repay.

In the broader economy, the current credit crunch will continue to have an impact on all industry and I suspect this will lead to large companies first encouraging voluntary layoffs, followed by further job cuts. This will translate into a larger impact on the retail sector, which is still larger than it ought to be under the current condition. Expect more consolidation in retail, with some large players closing shop altogether.

Start-ups

I don’t think it’s very hard to predict a wave of start-up failures this year. However, this will not be anywhere near as bad as it was during the first dotcom bubble because the current crash is not seeing inflated VC investments as its core. The level of investments in web 2.0 companies never reached the excesses we saw during web 1.0 so I suspect that many start-ups will float away with more of a wimper than a bang.

Established Web Players

Some of the more established web 1.0 companies will have a rough year.

I would not be surprised to see Yahoo no longer running as an independent firm by year end. My suspicion is that it will either be combined with AOL as part of a complex transaction that will spin AOL out of Time-Warner and combine with Yahoo (a combination that I suspect will leave all involved hopeful for the best at the start of the transaction and disenchanted with the result by year end) or, should the stock price drop lower, I would not be overly surprised if Rupert Murdoch were to swoop in and pick it up to combine Yahoo with other News Corp. Interactive properties (including MySpace).

eBay is another company that will have a rough year in 2009. Much attention will be paid to it as Meg Whitman, the company’s former CEO makes a gubernatorial bid in California and many will point to her leadership there as either an example of success or failure, depending on which side of the political spectrum they stand on. Meanwhile, eBay’s auction business will continue to crater and more of its revenue will come from its PayPal and Skype subsidiaries.

Amazon will survive the retail downturn and may actually emerge as a winner in the category. As more retail consolidates, Amazon’s rich data-mining abilities are making it the Wal-Mart of the online world and I expect it to see growth in the retail space as smaller players fall off by the wayside. Furthermore, its diversification, with the company also offering some of its infrastructure via web services for a low fee will pay off as more startups will move their operations to the Amazon cloud as part of some cost savings efforts.

Meanwhile, Microsoft will continue to sputter along in the online space, possibly picking up the search business from Yahoo but ultimately ending the year without any significant gains in the online space. Hopefully, by then they will have released Windows 7, which may undo some of the reputational damage the company suffered after the release of Windows Vista.

In the next entry, we’ll look at the media space and how those macro-economic changes will have an impact on that.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title 2009 Predictions: Intro. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Strategic Position

Google lives on the web. Most of its application need a web layer in order to operate and, if it were to find itself in a position where the access to their application where to be compromised through the equivalent of a strategic man in the middle type of attack, their business would die off. So, if Microsoft, which currently still controls around 70 percent of the web browser market, were to decided to change their code to impact how Google applications function, Google would be in deep deep trouble.

Because Google realizes that the browser is sort of their achilles heel, they had to make a play into that space. The first thing they did was help the creation of an alternate offerings, by giving large subsidies to Microsoft competitors like Apple and the Mozilla foundation, largely dolled out as revenue for traffic generation through the search box. See, one of the thing not too many consumers are told about is that the search box in Safari or in Firefox are actually paid placements: Every time a user uses that box to perform a search, a little bit of revenue goes back to the browser creator. So that’s great because it allows those alternative browsers to develop and, as long as Google is people’s preferred choice anyways, no one is complaining.

Of course, there are certain issues with the arrangement: a lot of the people who have installed Safari or Firefox don’t like online ads and some developers were happy to provide tools allowing those users to remove ads from web pages. Google wasn’t too thrilled about that but it found the issue mostly OK as long as the arrangement didn’t hurt its advertising cash cow too much.

But over time, this model created a problem. The feature was tested by consumers who, having seen too much of their screen real estate polluted by ever larger ads, liked what they saw. And, as ads became smarter and started to target users individually, it spooked consumers. Being able to block certain ads became a product differentiator and started to cause some problems to Microsoft.

So, with IE8, Microsoft is starting to claim that it will help users and one of the trial baloons it has been floating is that the user may have more control over what ads they can see and possibly may be able to block some ads.

For Google, that’s not too happy a development: the idea of being able to provide free products is based on the fact that Google is really and advertising company with a side business in search. And if the advertising is blocked, then Google’s whole business model falls apart.

So now, Google needs to regain some level of control. For many years, it’s been going after bits and pieces of the Microsoft empire: a little bit of the office suite over here (Google Apps), a little bit of the enterprise space this way (Google Appliances), a little extra screen real estate (Google Widgets), an alternate application distribution network (Google Pack)… but the premise behind most of their offerings was that life was now in the “network cloud” (basically recalling Scott McNealy’s old “The Network is the Computer” concept with 2.0 flavor).

With Chrome, Google is now trying to bypass most of Windows. There’s still a few things that Windows will be allowed to do for now (connecting to the Internet, managing the communication layer) but it seems that this is the farthest Google has gone into addressing Microsoft head on. In the mid-1990s, Marc Andreesen, then at Netscape, said he wanted to relegate Windows to being just a set of basic libraries and, with this offering,  Google is trying very hard to do so though I am sure you’ll never hear them say so.

Will it work? I don’t know. At first glance, I’d say that their challenge will be to get the software installed on a lot of machine. For all their past efforts, it looks like it may take a while. Once they have gotten Google Chrome installed, the next thing will be to move up to a default setting. That will be another challenge.

What I suspect is that the company will soon offer a customizable version to cable and phone companies to ensure that they choose Chrome over Internet Explorer. And one thing I’m pretty sure about is that whatever happens, Google will ensure that ad blocking software will not work on Chrome.

Memory Management: Marketing or Truth?

One of the things that leaves me scratching my head is whether the memory management Google claims as an important piece of its offering is actually based more on marketing messages than reality. Buried in the developer’s menu is an item that supposedly offers a view into the memory and CPU usage of Google’s new browser. Yes, the browser feels fast so it’s clear that there are a number of improvements there but what is that costing in terms of memory. Here’s what the browser reports:

What you’re seeing here is the browser running two plain HTML pages and an instance of a richer web-based application (Google Reader, which, according to this, accounts for 40Mb of memory space used). Where I get a little puzzled is when I looked at what Microsoft reported through its task manager:

The same 5 processes appear (but since Windows only knows them as running as chrome, it can’t identifty which is which but the numbers are very different: Chrome reports an aggregate memory use of 96,300K while Windows reports an aggregate memory use of 121,544K or 25,244K more. To be very honest, I don’t know which number is correct but, with only 3 tabs open (and the tabs I have on here are the minimum I have open at any time), I don’t find it very reassuring to see this type of gap appear. Will it get worse as I add more tab? I don’t know but it’s something worth investigating.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Google unveils web-based OS. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Strategy: Hardware? Software? Service? Partnership?

Let’s take a look at the players in the “smart phones” market: Apple, Nokia, Microsoft, RIM (blackberry),  Linux Mobile, and Palm. Sun used to have a Java Mobile but it seems to have dropped off the market, in terms of device market share. And then, there’s the new pretender to the crown in the form of Google, with its Android OS offering.

How do they stack up in terms of Hardware? Operating System? Service Offering? Well, here goes:

A first glance at this table seems to reflect some of the player’s pre-existing biases. Microsoft is known for its software business so that’s where it put the most weight; Google is all about free software to power their services; RIM and Palm do a hardware software combo; Apple throws its weight behind a fully Apple controlled experience.

However, there are a few caveats: For example, while Microsoft is in the space primarily as a software provider, it also owns Danger Inc., makers of the Hiptop. And while Palm has its own software, many of its devices are powered by Windows Mobile.

But apart from those exception areas, it appears that strategies are organized across four business models:

• OS only: This strategy is preferred by Sun and Linux. The model here is to provide an operating system that can be used by others. For Sun, this strategy has largely failed as substantially less than 1% of all handsets around the world is powered by their OS. Linux, which really was the first open source mobile OS has captured about 4 percent of the global smart phone market to date. Microsoft is the big leader in terms of that strategy, with its Windows Mobile OS currently powering about 12 percent of all smartphones around the globe.
• Software + Service: All this leaves us with Google and their Android offering. Much of the commenting today is that the move Nokia just made was aimed at the fact that Google had an “open” operating system. But what Google is really trying to do is provide an operating system that melds OS and services. Either that or they are in the OS only camp. Either way, they are not playing in the same space as the iPhone or Nokia (see triple play below).
• Hardware + Software: This model is preferred by RIM, makers of the Blackberry, and Palm (especially with their inexpensive Palm Centro line). This strategy works best if you want your device to be focused on few use scenarios: The blackberry is first and foremost a portable email station; Palm devices are first and foremost PDAs. This orientation comes from a past where the device wasn’t initially intended as a phoe but morphed into one.
• The triple play (ie hardware/software/service): This is the strategy currently used by Apple with the iPhone: they provide the hardware, the software, and a set of services (me.com, iTunes, Software store) on a complete package.  Through recent acquisitions, Nokia has been moving in this direction: while they were traditionally a hardware player, they started adding services to their devices. With today’s announcement, they’re also getting some control over software.

So looking at this, it becomes apparent that while many are pointing to Nokia going after Google, it may not be the target. Since Nokia does service and hardware already, getting more control over its own OS is probably an important move.

Open Sourcing

I can already hear some readers snickering: Symbian’s been open-sourced so Nokia does not have control. Let me make something very clear: the gold rule (“he who’s got the gold makes the rule”) applies to Open Source as it does in other areas. While it won’t get exclusivity, Nokia, having paid $400+ million to open source Symbian will be considered “more equal than others” by the Symbian foundation, I’m sure.

But why open source? If we look at the players mentioned above, their position on open source and their market share, the picture becomes clearer:

Looking at the market share date, Nokia’s move doesn’t seem to make sense: They currently control 65 percent of the market, why would they bother? But here’s the thing: There’s this newcomer called Apple and they didn’t exist 18 months ago: they now have 7 percent of the market and are growing.

If I’m a Nokia executive and I’m looking at this data, I start worrying. So what do I do? I look at competitive advantage: initially, I try to compete with cooler devices (the Nseries) and while it stops some of the bleeding, it doesn’t appear to fully halt the competition. So I start looking at services as a way to stabilize revenue (Maps, Music, Games) but that doesn’t stick. Then I realize that my problem is the operating system: I’m stuck with that alliance of partners I have but they’re slowing me down. So I have to take over. But I can’t do that by just kicking all of them out. So I acquire and open source.

The open source move fills three strategic objectives:

• I get to keep partners still involved but get them to agree to my taking charge.
• I get other people to improve my code and/or developing FOR it, thus allowing me to counter a potential Google threat if it ever materializes.
• I get to look more “open” than Apple and will use that in my messaging

The Future: Collateral Damage Then Status Quo

Of course, while it works out great for Nokia, there is a little bit of collateral damage:

• Sun’s offering, while interesting had already sunk largely into irrelevancy so they’re no longer a player.
• Palm OS, was teetering on the edge but now it’s pretty much cooked.
• Linux, while still having teeth, will probably see its market share dwindle as its unique selling proposition (more open than others) is gone.

So that’s unfortunate but what does it do to the rest of the market. Well, in fact, it looks like today’s events wont’ have much impact: Palm, Linux and Sun represent about 5 percent of the market. With Apple at 7%, RIM at 11%, Microsoft at 12% and Nokia at 65%, it looks like the market will stay pretty consistent. The remaining 5% will be carved out by the existing players and by Google’s entry into the market. Nokia will remain at the top for now.

Potential events that could have a more disruptive effect: a Microsoft/RIM partnership (or outright acquisition) which, when integrated would give Windows Mobile a 23% market share. But short of such a move, it looks like the situation will mostly stay at status quo for the time being.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title No Changes in Mobile. You can follow him on twitter here or receive his weekly newsletter by subscribing here.