May 13, 2005 – Emergic

Microsoft’s New Mobile OS Puzzle

The Pondering Primate (TPP) had a puzzle up in the context of Microsoft’s new Mobile OS. First, read this story. TPP’s question: “There’s one sentence in this story that could have enormous consequences, do you see it?”

I got the answer right (see comments 15 and 16 on TPP’s site). Give the puzzle a try. My answer is below.

For anyone interesed in mobile technologies, TPP’s blog is a fantastic read. I would strongly recommend setting aside a few hours and going through all the posts on the site. It is a fascinating glimpse into what the future holds.

So, my answer was this:

I think it is this sentence: “One of these is integrated support for Wi-Fi short-range wireless connections, now available for smart phones rather than just Pocket PCs.”

This sentence has huge ramifications for the telecom industry…VoIP becomes standard into MS smart phones. Voice revenues evaporate (or become flat rate) for cellcos. They have to now think data/value-added services to make money.

TPP response: “That’s disruptive thinking.”

Wireless in South Korea and US

John Battelle has an interview with Sky Dayton. the “EarthLink founder Sky Dayton helped connect our PCs to the Net. Now he wants to put Korea’s version of wireless broadband on our cell phones.”

All along he’s been guided by two ideas: You don’t have to own infrastructure to sell service, and customers care about applications, not technology. That’s why EarthLink and Boingo thrived while rivals spent hundreds of millions of dollars on Internet backbones and Wi-Fi routers, only to go out of business.

For his latest venture, true to form, he’s renting out space on cell-phone networks to give American customers something that South Korea has had for years: high-speed Internet access over a 3G (third-generation) wireless network and sophisticated handsets packed with the latest technologies. While DSL is fast and Wi-Fi is fun, both tether you to a limited area. 3G truly puts the Internet “in the air,” as Dayton likes to say. EarthLink, where he is still a board member, and Korea’s SK Telecom are putting $440 million into the new venture, SK-EarthLink, for which Dayton will serve as CEO while it prepares for a launch of service this year.

A quote from Dayton: “The applications that SK has built are a glimpse into the future — live video on a handset, multiplayer games, and location-based services. To provide those kinds of services, it created a huge infrastructure: billing, video streaming systems, gaming, mapping systems, all that stuff. We’re bringing that over lock, stock, and barrel and plugging it into the U.S. cellular infrastructure.”

Online does not Cannibalise Offline

Fred Wilson writes: “Online does not cannibalize offline, it turbocharges it.”

Here are my proof points:

1 – The South Beach Diet. The book was doing ok. Then the publishers cut a deal with Waterfront Media where Waterfront paid for the rights to create subscription based online newsletters with diet tips. Waterfront then went into the paid search market and bought a huge amount of keywords around the south beach diet theme and drove a ton of traffic to the South Beach Diet website where they sold these online newsletter subscriptions. Guess what happened? Sales of the book took off. It turns out that all this online advertising, which the publisher was not paying for and in fact got paid for, were having a huge crossover effect on the sales of the book itself. The Wall Street Journal did a very good piece on this story several years ago. I am not going to take the time to go back and find it, but I assume if you are a subscriber, its in the archives.

2 – Seth Godin’s Books – Seth regularly puts his books in pdf form on the web for free months before his publisher releases them in print. Sounds crazy, right? Wrong. The viral spreading of the pdf version of the book creates buzz, word of mouth, and thought leadership for Seth’s book. When he releases them in print, they go to the top of the charts for business books. Read Seth’s books and blog for details on how this works.

Put your content online. Let it go where it wants to go. It won’t hurt your offline business, it will help it.

The Next Wave Of Videogames

WSJ writes:

This week and next, the three big hardware makers are expected to unveil new versions of their game consoles. First up is Microsoft Corp., which this week launches a marketing campaign to try to persuade people they need the latest version of its game console, dubbed the Xbox 360, which is expected to hit store shelves in time for the holiday shopping season. The pitch: Games with highly realistic images and more-elaborate online capabilities that will allow players, for instance, to download new weapons and other content.

Next week, Sony Corp. and Nintendo Co. are expected to reveal their plans for introducing successors to the PlayStation 2 and GameCube, respectively, both anticipated sometime next year.

It is all part of the prelude to next week’s Electronic Entertainment Expo, or E3, the annual gala where game publishers tease retailers and competitors with previews of the titles they hope gamers will snap up at Christmas.

ContentSutra for India’s Digital Media News

Rafat Ali has launched a website focused on India – ContentSutra. As he explains it:

[The] new site focused on the Indian digital content market.

“Sutra” is a Sanskrit word and literally means a rope or thread, but colloquially means a link. For us, this means a link to the Indian content market.

ContentSutra is aimed at digital media professionals in U.S., Europe and around the world, looking to expand, invest, or better understand the Indian market — media executives; content producers; technology vendors; entrepreneurs; venture capitalists; attorneys; policy makers; the works.

Among the topics we cover:
— Mobile Content;
— Piracy;
— Digital Bollywood;
— Digital Content Business Models;
— Digital Media-related Technologies;
— International Partnerships;
— Digital Media Successes, Failures, & Challenges;
— Internet/Broadband Content;
— Related Government Policy

We’ve hired S Karat, a veteran business-tech journalist based in New Delhi. He has covered the Indian digital technology and content market for almost 8 years now.

TECH TALK: The Coming Age of ASPs: Hagels Analysis

John Hagels book Out of the Box (published in 2002) has an extensive discussion on ASPs, what the early companies did wrong, and how it can be done right. He writes: ASPs in many respects presented a false start in the efforts to break out of the enterprise straitjacket. In particular, few of them adopted Web services architectures as their technology platform. Instead, they attempted to build businesses on the Internet using traditional technology architectures. This proved a significant flaw in the early ASP model.

Hagel first outlines the ASP promise:

Capability Leverage: ASPs offered the promise of access to world-class capabilities from specialized providers, rather than an enterprises having to develop them internally.

Economic leverage: Many ASPs claimed to reduce substantially the total cost of ownership of enterprise applications by providing customers access to large-scale and highly specialized (and therefore presumably lower cost) operations and facilities.

Speed and Flexibility: Since customers would forgo the time-consuming tasks of hiring specialized operations staff, preparing facilities, and installing complex application software on their premises, ASPs appeared to be able substantially reduce the extensive lead times involved in implementing enterprise applications.

Hagel then discusses the ASP reality:

Product Complexity and Lack of Flexibility: Traditional enterprise applications were designed to meet the complex needs of a large enterprise. Small- and medium-sized enterprises rarely needed the full complex functionality embedded in these applications. As a result, the applications proved unwieldy in smaller enterprises they were slower and more complicated than necessary. [Also,] applications designed using conventional technology architectures presented major challenges when businesses tried to customize them or connect them with their existing applications.

Product Performance Concerns: Within the firewall, CIOs had much better control over performance. Outside the firewall, they worried about both technical and corporate performance.

Vendor Performance Concerns: ASPs were new start-ups, with a very limited track record. CIOs found that ASPs had very limited operating history to provide reassurance that their management processes had been tested successfully in high-volume, mission-critical environments.

Challenging Vendor Economics: Customer concerns about ASP performance and the lack of compelling product benefits contributed to much higher customer acquisition costs than anticipated. Sales cycles were also longer than anticipated. [As a result,] ASPs found themselves caught in a potentially life-threatening economic bind.

Among the lessons learnt from the first wave of ASP failures:

Leverage is Essential but Not Sufficient: Companies must be assured that they will be able to trust the applications supporting their most important business activities.

Customization and Integration are Key: Customers will need more customization and integration over time, not less. Competitive pressures are forcing companies to develop distinctive approaches to the market, but also to customize these approaches to the needs of individual customers.

Business Focus Enhances Viability: The first wave of ASPs generally tied to do too much, especially in the early days…which had the perverse effect of increasing risk, rather than reducing risk.

Application Functionality Needs to Rapidly Evolve: [ASPs need to] easily develop new functionality in one part of an application without worrying about malfunctions of existing applications created in other areas. ASPs will also [need to] enhance functionality of existing applications by identifying creative new applications developed by others and plugging them into their existing applications.

Hagels key point: the Internet is not simply a new distribution channel. It often requires a fundamentally new set of products and technologies if a business is to exploit its full potentialWeb services architectures are the key to unlocking the full business potential of the Internet.

That is the starting point for rethinking ASPs. But theres a lot more to ASPs than web services. We also need to rethink the markets they address. We will begin by looking at whats sparked off the renewed interest in ASPs in the developed markets.

Next Week: The Coming Age of ASPs (continued)