New Killer Apps?

Barron’s has an interview with Pip Coburn of UBS Warbug, who also identifies possible new technologies emerging over the next few years. But none of them will make a near-term dramatic impact. Says Pip:

A lot of people want to believe that the 45-year run of the integrated circuit is still alive and well, and that we just have to wait a bit for it to recover. But I don’t think that’s right. In a recent report, we went through 18 possible candidates for the next disruptive technology and sketched out where we thought they were relative to “tipping points,” where adoption accelerates. (See chart.)

We looked at all the usual suspects, plus a few others that we get asked about fairly often. We wanted to lay out two things: how close those technologies were to tipping points, and the size of each market. And we concluded, with 85% conviction, that if you look out five to seven years, there isn’t going to be new technologies to save the IT market for investors during that period.

There’s the question of whether people want to change the way they are doing things. Are you solving a problem for someone, or are you just coming up with something cool? My thinking is that you need people to feel they’re in a ‘crisis’ to change their habits. So is anyone in a crisis today if they don’t buy a Palm Pilot? Most people, no, a few people, sure. If people don’t have broadband at home are they in a crisis? Some people on the margin, yeah. A lack of home networking isn’t much of a crisis yet. Having a tablet PC? Pretty much no one on the face of the Earth considers it a crisis if they don’t have a tablet PC. The difference between luxury and necessity is between our ears. In 1975, no one had to have a Betamax. Ten years later, everyone had to have a VHS recorder. It’s a cultural adoption process. Usually, it isn’t the technology — usually the technology can do the job more so than not. Then prices come down. Then people have to ask why they’d buy, which is where the rubber meets the road. We sold 400 million cellphones last year. Why? Because my mom could figure out how to use that pretty darn quickly. The PDA is much more difficult. Wi-Fi is more difficult for most people.

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Profitable Netease

Netease is one of the three leading Chinese portals (with Sina and Sohu). Its been a remarkable turnaround story – a couple years ago, all three were being written off for dead. Now, all are raking in the money and profits. FEER writes about the secret behind Netease’s success and profits – “It’s managed to make money from its 96 million users”, via an increase in ad revenues, mobile data services and online games.

The biggest share [of revenue] — 48% — comes from mobile data services. Here’s how they work: Users go to the NetEase Web site and subscribe to have information, such as news or weather, sent to their hand-phones via short message service, or SMS. They can also download ring tones and icons, and subscribe to dating and SMS chatting services. Payment is deducted from the user’s mobile-phone account. NetEase keeps 85% of the revenue and China Mobile, the mainland’s biggest mobile-phone carrier, gets the rest. The system eliminates the problem of on-line payment in a country where credit cards are rare. “NetEase’s turnaround is clearly driven by its ability to charge via SMS and have a commercial relationship with its customers,” says Duncan Clark, an analyst with Beijing-based consultancy BDA China.

The result: “In August 2001 the Nasdaq-listed company’s stock price dropped to 53 U.S. cents, more than 96% below its initial offer level of $15.50…A reported $8.3 million net profit and 23% jump in revenues during the first quarter of this year has helped propel the stock price above $20. It closed at $26.67 on May 5.”