Given the early mission of the internet to democratize information, it’s somewhat surprising that we don’t see more nonprofits operating in the tech space. Wikipedia is the strongest example of what that model might look like. In New York, The Driver Cooperative (TDC), is trying to launch a ridesharing app that would get closer to a nonprofit model:

When it rolls out to the pub­lic ear­ly next year, TDC will become New York City’s first work­er-owned rideshar­ing plat­form — owned by the dri­vers them­selves, rather than by big investors and exec­u­tives. Its founders’ brazen idea is that TDC can actu­al­ly gain a com­pet­i­tive advan­tage over Uber and Lyft — sav­ing mon­ey and fun­nel­ing those sav­ings back to dri­vers — by doing away with the most exploita­tive prac­tices of that dom­i­nant duop­oly. ​The way the [Uber] mod­el is orga­nized is extrac­tive. It takes out the mon­ey and doesn’t give back much. Imag­ine a com­pa­ny that doesn’t have any prof­its, but has cre­at­ed bil­lion­aires,” Lewis says. ​That mon­ey comes from drivers.”

TDC hopes it can also change the cost structure which could make them the low-cost provider:

By com­bin­ing the pur­chas­ing pow­er of all the mem­bers, they hope to low­er expens­es on costs like gas and insur­ance — expens­es that Uber and Lyft dri­vers must han­dle on their own. They project that this should all add up to 8 – 10% high­er earn­ings for dri­vers on every ride, even while being able to beat their com­peti­tors on fare prices. And if the coop has any prof­its left at the end of the year, they will be paid out to dri­vers as dividends.

It is very difficult to compete against an entrenched company in winner-take most markets. Being able to offer a comparable product at a lower price helps. Taking on nonprofit status could help companies achieve that. So as more markets mature, we might see competitors arise more frequently as nonprofits.

Here’s the full article on TDC.

This week Square introduced preorder and pick-up services. On the surface this service should help expand the business opportunities for small businesses. It might also help level the playing field for small businesses that compete against multi-channel retailers who currently offer similar services.

The offering is borne out of the increasingly blurring lines between digital and analog commerce. Once well separated and siloed retail channels, online and brick-and-mortar are continuing to come together such that consumers can toggle seamlessly between the two.

The service also introduces some interesting questions – namely which sectors are most likely to take advantage of the service. I haven’t seen any data that provides a distribution of square users, but personal observation is that a fair amount of taxis utilize square. Coincidentally, a digital preorder-like service fits their business model quite well.

There is a confluence of conflicting forces underpinning mobile today and the outcome will define the mobile experience of tomorrow.

Here are two of this morning’s announcements:

  1. Snapchat announced they were adding video chat and instant messaging
  2. Foursquare’s move to split their app services into two separate apps

On the surface, these may seem like inconsequential developments but they speak forcefully to how the mobile user experience is evolving.

In a recent interview with Mark Zuckerberg, he was asked about the work Facebook’s Creative Labs is focused on.  Creative Labs is an internal Facebook team assigned with “crafting new apps to support the diverse ways people want to connect and share.” In other words, Creative Labs is tasked with leveraging (and one might even say cannibalizing) the popularity of Facebook to ensure the company remains relevant on mobile. Here is an excerpt from the interview with Zuckerberg:

“So Facebook is not one thing. On desktop where we grew up, the mode that made the most sense was to have a website, and to have different ways of sharing built as features within a website. So when we ported to mobile, that’s where we started — this one big blue app that approximated the desktop presence.

But I think on mobile, people want different things. Ease of access is so important. So is having the ability to control which things you get notifications for. And the real estate is so small. In mobile there’s a big premium on creating single-purpose first-class experiences.

So what we’re doing with Creative Labs is basically unbundling the big blue app.”

Jon Steinback, Foursquare’s VP of product experience, describes their decision to break existing Foursquare services into separate pieces as follows:

“I think mobile forced this fundamental switch. We were born in mobile but we were born in this idea that each mobile app was kind of like a web property bundled up for mobile. And as mobile usage has broadened and evolved you get individual experiences instead. You open an app to do a specific task and not as a gateway to a large complicated experience.”

Foursquare – one of the original mobile-first companies – is breaking services into separate stand-alone apps. Facebook, who in addition to beginning to build a suite of stand-alone, single-purpose apps (starting with Paper), is also acquire siloed apps. Last month it was Whatsapp and late last week the Finnish fitness tracking app Moves announced they had been acquired by Facebook. At the same time, you have companies like Snapchat – also a mobile-first company – expanding into adjacent service categories within their existing app structure.

Among other things, these moves speak to user engagement. In the early web environment – when our web experience resided exclusively on the desktop – user-engagement was primarily focused on length and depth of engagement. How long did a user stay on your web property and how deep (ie number of pages) did they go. But this traditional measure of engagement might be changing. Foursquare found that breaking well-defined services into separate apps led to shorter, but more frequent sessions. Frequency is become a key metric for mobile engagement.

Historically, when a large company like Facebook would acquire a smaller company it would integrate the intellectual property (most importantly the team).In some instances, the larger acquiring company might move users over before closing down what had been a competitive service to one of the larger firm’s offerings. Google has a long history of both shutdown companies they acquire but also integrating them into core Google offerings. The Blogger team was bought and brought over. Grand Central ultimately became Google Voice. And earlier this year, Google shutdown Bump – an app it had acquired last Fall. There are thousands of similar examples from Google, Apple, and a long host of companies both inside and outside of the tech industry.

But this model is changing – especially when it comes to mobile. This year Google acquired Waze and Nest. Both are continuing to operate on a stand-alone basis and likely will for the foreseeable future. And despite the generally held fear that Facebook will amalgamate all future acquisitions into the “big blue app,” Facebook continues to operate Instagram as a  stand-alone app.

In mobile we are are seeing conflicting evolutionary paths. The question remains why consumers appear to gravitate towards single-purpose mobile app experiences? Is it driven by time constraints and therefore developing mobile apps that are used for shorter (though more frequent) sessions is the key to success in mobile? Is it being able to launch a specific app “solution” quickly, perform a small finite number of operations, and exit the app as quickly as you entered? Or is it driven by the general inability to multi-task on a mobile device like we can on a PC?

While both of these drivers are likely in play, I think the answer is found more broadly in how mobile has evolved. This also begs the question if single-purpose apps are the steady-state for the mobile experience. If not, should we expect consolidation of apps over time and should we expect to see app service offerings expand? It is worth noting that consolidation is a strong element of industry structure. Most industries consolidate as they mature. This has been true in nearly every sector – from automotive to defense to aviation to consumer tech. More, this consolidation happens at every level of the supply chain. There are not only fewer automotive manufacturers today, there are also fewer tire manufacturers and  fewer gasoline system providers.

Many mobile apps – and certainly a majority of the successful ones – were built with a single purpose in mind. But this is because many of these mobile-first solutions were designed to provide newly discovered “needs” that developed as a result of having an always-on connected device in your pocket. The need created the service rather than the service being ported to the platform. Companies like Instagram, Flipboard, Pulse, Square, Rovio, ZeptoLabs, and yes Foursquare and Snapchat, were born “mobile first” and typically started with one core solution in mind. One of the big reasons we see so many mobile apps with just a single well-defined solution is because consumers are interested first and foremost in a first-class experience and these companies originally set-out to provide a single offering to resolve one well-defined problem.

But as mobile matures we are seeing a number of these mobile-first companies explore changing business models. Many of the early mobile-first companies, such as Shazam, are in the process of exploring how they can expand their growth opportunities. Companies typically expand either (1) geographically, (2) within their segment (vertically), or (3) by entering adjacent segments (horizontally). While many mobile-first companies started with a well-defined solution in mind, they will eventually expand offerings in order to produce growth opportunities. While it might be true today, it doesn’t have to always be true that mobile applications can only do one thing and one thing well. For example,  if Spotify had a strongly integrated Shazam-like feature then I would probably abandon the stand-alone Shazam app.

I’m not suggesting an unbundled mobile experience isn’t what consumers want. But we are very early in the evolution of mobile. The mature mobile platform will look very different than our current nascent mobile platform and right now conflicting forces are pulling in rather opposite directions.  

Yesterday I posted a few thoughts and my predictions for Apple’s fiscal Q2 results.  Here’s my follow-up with some additional thoughts on the market implications and where we go from here.

I had predicted Apple would sell around 37M iPhones in the quarter. Consensus was calling for 38.2M. Apple blew away not only the consensus estimate but every estimate in the panel. 43.7M is a huge number given expectations. I’ll discuss the implications as I see them below.

The consensus estimate for iPad sales for the quarter was 19.3M. I predicted 17M and there was only one estimate from the panel of forecasters below mine. The actual figure was 16.3M – about 15% below the consensus estimate and about 4% below my forecast.

Total Device Growth
One of the most telling charts from my slide deck (see below), is the year-over-year growth in total device volume. It was 0.6% last quarter and 0.7% this quarter. Despite incredibly strong iPhone numbers, total device growth is near zero for a second consecutive quarter. In other words, revenue growth has come because of compositional shifts and not because of aggregate unit volume growth. While I haven’t heard others tout this figure, this is at the heart of Apple’s needed growth strategy. They are a hardware company (at least for now) that needs to growth unit volume.

Apple grew revenue by roughly $2B in the quarter from the year-ago period. This was nearly all driven by iPhone sales which represented $3.1B in revenue growth. The decline in iPad sales during the quarter resulted in a revenue loss of $1.1B. iPod revenue declined by about $500M while revenue from iTunes increased almost that amount. iPhones now represent 57% of total revenue while the iPad share declined to 17%. The share of revenue derived from iTunes increased from 8% to 10%.

But Apple’s quarterly results are more than just an iPhone story – they are a China and Japan iPhone story. Total revenue from China increased $1B from the year-ago quarter – representing about half of the total revenue gains. Revenue from Japan increased $800M. Revenue gains from China and Japan represent 93% of the total revenue increase from the year-ago quarter. Japan’s share of overall revenue grew by 21% from the year-ago quarter while China’s share of revenue grew 8% for the same period. The total share of revenue derived in the Americas declined by 3%.

I wrote yesterday:

To beat consensus, I think Apple will need to have shipped more lower-end models (4S and 5C) during the quarter. This will show-up in the average price of iPhones sold during the quarter. But it will also point to traction in emerging markets – places like China and India – so I think Apple will tout this fact if it materializes. Geographic expansion is how most large companies grow (think Coke and Pepsi) and Apple will need that within their arsenal in addition to any new product classes (read: wearables) or service sectors (read: streaming services, mobile payments) they might enter over the next two years.

And the results tend to suggest this. The average price of iPhones sold during the quarter is down 6% from the prior quarter. The geographic revenue figures combined with the strong iPhone unit volume results suggest the quarter was defined by iPhone sales internationally – though not all were emerging markets.

My prediction for iPad sales were not only directionally correct but also the most accurate of any forecaster in the panel of forecasters. Yes, Apple attributes much of the decline in iPad sales to channel inventory shifts, but those channel inventory shifts are driven by changing demand. I wrote this yesterday about the tablet market:

Lower tier and lower priced tablets have continued to gain momentum as the market has matured. These tablets are getting better and in an expanding set of use cases are “good enough.” Moreover, tablet ownership in the US is approaching 50 percent. Households are holding onto tablets longer or buying secondary and tertiary units for the household.

I still believe this is an accurate portray of the current tablet market. Moreover, Apple faces tremendous competition in the Chinese tablet market from white box Chinese manufacturers. Given that much of Apple’s revenue growth in the quarter came from China, I imagine Apple struggled to grow tablet sales there while at the same time tablet sales were likely declining in other markets (especially the US) for the reasons mentioned above. At the same time, the average price of iPads sold during the quarter increased about 6% from the previous quarter suggesting to me that Apple is potentially gaining a stronger grasp of the high-end tablet market while at the same time conceding share of the overall tablet market (the classic Innovator’s Delimma at work).

Ben Thompson argues to not “give up on the iPad” and while I think his arguments are generally valid, I think they are potentially misplaced. I believe more innovation will “appear” in the tablet market as the device segment continues to mature and new use-case scenarios are born.  Academic research suggests it takes something like 7 years before the productivity gains of a new device are realized. We are still squarely in the experimentation stage of devices. But I would question Ben’s assumption of the iPad singularly as opposed to the broader tablet market. As I mentioned, secondary and tertiary use-case scenarios might not call for a high-end (read: high price point) tablet.














Here are some historical slides that I’ll update once the results are in later today. 

A Tax haven is a essentially a jurisdiction (often a country) that has taxes, tax rates, or other legal structuring that provides a lower total tax burden than other jurisdictions. The ability to lower or remove a give tax burden provides an incentive for  companies or individuals to establish a presence in these jurisdiction in order to reduce or remove the imposed tax burden of the jurisdiction for which they might currently be domiciled within. This creates tax competition across jurisdictions as these jurisdictions seek to attract businesses and and individuals. As Wikipedia puts it “the central feature of a haven is that its laws and other measures can be used to evade or avoid the tax laws or regulations of other jurisdictions.”

The same aspects that drive corporate entities and individuals to establish a presence within a given jurisdiction because of tax differentials are starting to play-out when it comes to data management. Since the revelation of and concerns around spying from the National Security Agency (NSA) and other concerns of governments’ surveillance of the Internet more broadly both within the United States and other countries in the world, companies are taking a more proactive – and public – examination of where data is stored. As Nick Wingfield and Mark Scott wrote for The New York Times, “in an interview with The Financial Times, Brad Smith, Microsoft’s general counsel, said the company’s customers should be able to “make an informed choice of where their data resides.”

I posit in the coming years we will begin to see countries compete to provide privacy over stored data in many of the same way that countries today are competing to provide attractive tax environments and incentives to entities.

We are pushing into a fully digital world. This was first driven by digital device adoption over the last decade and that digital device adoption is subsequently being followed by the broad digitization of our physical surroundings.  The digitization of everyday objects is driving the digitization of all information. This information isn’t just the historically analog information found in places like books and magazines for which we are busy digitizing today, but is more fully encompassing of all information. The shift to digital is improving – and in many cases making possible for the first-time – the capture of this information. Information that might have existed, but wasn’t being readily captured in the analog world.  Recording information on data streams like our steps or heart-rate in continuous time are only really possible in a digital world. In this blog I’m going to start a new series that looks at some of the things now possible – and in many cases only possible – in a digitized world.

Prior the Super Bowl last week featuring the Denver Broncos and the Seattle Seahawks, Boeing – which was previously  headquartered in Seattle and still maintains major operations there – flew an invisible “12” in the skies over Washington in recognition of the Seahawk fans and the support they provide the team as the proverbial “12th Man.”



Deflationary price pressures have definitely been evident in the sensor market where motion sensing for example has dropped from over $7 an axis of motion capture in 2005 to around $0.50 an axis of motion capture today. With wearables – and especially with fitness trackers – sensors are a key element of the hardware solution. A move into wearables is a natural move. Input prices are down, demand is up, competition will compress prices and correspondingly margins which all combine to create an attractive business environment for whitebox manufacturers. Perhaps more importantly many of the OEMs have gained important experience with key components over the last few years as they’ve manufactured whitebox tablets and smartphones.

But unlike tablets, hardware isn’t the only element of the solution. For tablets, whitebox OEMs could turn to Android for an essentially of-the-shelf operating system, but no such option really exists for many of the wearable categories. Whitebox smartwatches can run Android, but today most fitness trackers are using proprietary operating systems. The fitness and activity tracker segment is currently the biggest segment of wearables and the most likely place for whitebox OEMs to enter. The fitness and activity tracker segment is currently dominated by the likes of JawboneFitbit, and others and saw many of the major consumer electronics manufacturers like Sony and LG enter the category earlier this month at the 2014 CES.

But the use case scenario for tablets are starkly different than for wearables. While the value-add of activity and fitness trackers lies partially in the hardware and especially within the hardware design, it primarily resides in the algorithms that drive the recommendations delivered to end-users. The interface and mechanisms for delivering these recommendations combined with the algorithmic-derived recommendations themselves have become the key differentiation for fitness trackers. I suspect that should other wearable categories breakout, it will require the proverbial “killer application” and that application will be driven by the algorithm and interface part of device and not but inexpensive hardware. To be successful in the wearables space, OEMs will need to deliver a holistic and full 360 solution that delivers a rich interface driven by meaningful algorithmic-derived recommendations.

Increased rates of digitization are leading to tech design changes that enable dynamic customization of the user experience. Take for example SwiftKey, an Android app that replaces the default Android keyboard on your device. Swiftkey learns not only what you say and how you say it (including across multiple communication channels like SMS, email, or Twitter), but also the physical way in which you say it. Always hitting the wrong key? SwiftKey will reshape the keys to improve the accuracy of your typing. As Ben Medlock, SwiftKey’s cofounder and CTO put it, “A new range of tools are required to solve a new class of problems that didn’t exist 10 years ago.”

I call this new class of tools transformative computing. As hardware becomes software, or rather what were once hardware features become software features, the change of these features from analog to digital allows changes to the user experience to happen in continuum rather than in a stepwise process which is what was required when hardware had to replace hardware. In the case of SwiftKey the physical keyboard has been replaced by a digital keyboard which allows change to be dynamic and continuous based upon user interaction with the device.

Transformative computing also impacts services. Look at how services like Netflix try to provide unique, customized recommendations to each user within a subscription. The recommendation engine (ie the algorithms) can be applied to each viewer ultimately because the entire experience is digital. Video games like Far Cry 3 are also building in more robust dynamics that cause elements of the digital experience to change based upon what the user does within the game. But some of the most interesting early applications of transformative computing is happening when analog hardware features are replaced by its digital counterpart.

The ‘sensor’ization of consumer tech plays a key role in enabling transformative computing.  Nest Thermostats for example utilize embedded sensors to adjust settings that historically would have needed to be physically adjusted by users. The Eversense thermostat can pull down the GPS coordinates from your phone and make adjustments based upon your proximity to your home. The Jawbone up features an idle alert that will alert you if you’ve been sedentary too long and the smart alarm feature is designed to wake you up when you are in a stake of light sleep around a pre-specified time. The forthcoming explosion of gesture, motion, and voice capturing capabilities that is now being embedded into devices will digitize a myriad of hardware features into software features. These features push forward the growth of transformative computing.

The push towards more personal devices also aids the move towards transformative computing. As we move from utility devices like shared desktop computers to personal devices like individually owned and used smartphones and tablets the customization of the user experience becomes more pronounced. A number of apps are starting to appear that provide a contextual user experience.

A couple of days ago the Wall Street Journal reported terrestrial radio is playing fewer hit songs more frequently (see Radio’s Answer to Spotify? Less Variety) driven by research showing that “listeners tend to stay tuned when they hear a familiar song, and tune out when they hear music they don’t recognize.” In the same article, the WSJ reports Mediabase data showing “the top 10 songs last year were played close to twice as much on the radio than they were 10 years ago.” This in contradiction to the fact that terrestrial radio remains the most frequent source of music in the U.S. and still the primary way consumers discover new music. A few thoughts on the impact digitization is having on radio listening:

  1. Digitization allows more granular audience measuring including the use of Portable People Meters
  2. Digitization allows for digital playlists that allow users to easily repeat play the same song. I’m going to refer to this as “binge repetition” – the act of listening to the same song or a series of songs over a short period of time.  This is an expansion of the original mix tape. Digital makes it easy and therefore exacerbates the practice.
  3. Digitization allows the use of algorithms to aid discovery. While this remains low relative to the national listening audience, it is certainly growing. Pandora for example reports 76.2 million active listeners with 1.58 million hours of listening a month and roughly an 8.6 percent share of the total U.S. radio listening. Spotify reports one billion playlists and 24 million active users.
  4. Digitization has moved the niche listeners to peripheral digital services like Pandora or Spotify where choice within those niches are deeper. As a result, terrestrial radio is left with a more well-defined audience.

Other thoughts? Leave them in the comments…

Sensors are combining with sensor to create sensor arrays. These sensor arrays are combining with computing power to solve complex problems and create complex systems.  The next big step is to combine these complex systems across a wider user experience. This is happening in a real and measurable way in many places, but especially inside the vehicle. Ultimately, this is how we’ll end up with fully autonomous vehicles – complex systems will combine with a large number of complex systems across the entire vehicle experience.

All of this will happen through starts and fits.  Hybrid periods I like to call them.  Here’s the next hybrid period I’d like to see:

My GPS system knows the speed at which I am traveling and also knows the speed limit for the road on which I am traveling.  But right now this information isn’t conveyed to other complex systems in the vehicle – like cruise control. Cruise control is evolving with developments like adaptive cruise control. Utilizing cameras on the front of the vehicle, these adaptive cruise control systems are now able to adjust to vehicles or other objects you are approaching at speed. If (read: once) my cruise control system has full access to my GPS system it could then adjust my speed to some function of the speed limit of the road on which I’m traveling. I could for example always travel the speed limit even though the speed limit is changing as I come into, through, and out of towns and other speed restricted areas.