Wak Oentoenk

Google Base: Is eBay really the target?

There has already been a ton of commentary on the “leak” of information about Google Base, a Google service in development that would let people post their content on a Google database. Most of the speculation I've seen has positioned Google Base as a classified ad service that would let people sell things online, competing with eBay.

But that’s not what I read into the service. What I think I see is a freeform database, a free-of-charge data publishing service. Right now if you want to post information to the Internet, you need to create a website or post it on someone else’s site. I think this Google service would make it a lot easier for people to share content if they want to. That in itself will drive the placement of more information into the online world, which is a basic Google value.

To me, the most interesting commercial opportunity around Google Base would be if Google tied it to a payment system, so people could charge for the content they post. That would turn Google Base into a self-publishing platform for software developers, artists, authors, and other content creators.

If I’m right, the real target isn’t eBay or the classified ad services, but the commerce engines that content creators have to license separately today if they want to sell their stuff online. I think Google could do a lot to streamline that process, and the result would be a lot more sales of specialized content online. Speaking as someone who has a side business of creating content (consulting reports and a book on the way), I think a Google service like that would be hot.

I have no idea if Google’s planning to create this sort of commerce engine, but it’s what I’d do if I were in their shoes.

Helio talks the right story

Helio is the new name of the MVNO being created by SK Telecom and Earthlink. The name itself isn’t worth a posting (although I’m always happy when a company successfully gets a new brand, considering how hard it is to get legal clearance). But I like the story Helio’s telling about its target market.

Helio says it’s going to target young people with phones enhanced for music, games, video, and other entertainment. I like that they claim they’re working on both the hardware and the software together, because that’s the right way to create a successful mobile device. And I know from the research I’ve been involved in that there’s a substantial market of young people who are willing to pay extra for phones that also keep them entertained. But there are two catches.

The first (and it’s an important one) is that most of these young people, because they’re young, don’t have a huge amount of spare cash. It’ll be interesting to see how Helio balances the budgets of its target customers against the high revenue it says it’ll generate.

The second catch is that, although many young people do want phones that entertain them, most of them are not at all willing to pay extra for technology for its own sake. The products have to be iTunes/iPod-quality, or Helio won’t live up to expectations. This is sometimes a hard task for Asian companies, whose domestic markets are a little more willing to buy gadgets just because they’re cool.

Still, I hope Helio can pull it off.

A modern marriage proposal

This has almost nothing to do with mobile computing, but I think it's cool and wanted to share it. A longtime friend and co-worker of mine proposed to his girlfriend this week. Like any good technologist, he found a Web-assisted way to do it. Check out his marriage proposal website.

By the way, she said yes.

What does Google want?

I’ve been doing a lot of networking in the last couple of months, meeting new people and getting in touch with old friends and co-workers. It’s fun to have the time to share ideas again, after being heads-down with Palm for six years.

Most of the conversations eventually come around to the question, “What does Google want?” It’s a great topic because Google has enough money, and is ambitious enough, that it might be planning to do almost anything. Google is also deliberately coy about its intentions, creating a sort of giant corporate ink blot test. Our theories about it may say more about our own desires than they do about Google itself.

Here are the three leading theories I’m hearing:

Theory 1. Google wants to control the ultimate OS. In this perspective, Google views Microsoft as its most important competitor/target, and is carefully executing a long-term plan to make the Windows/Office monopoly irrelevant. By creating more and more programming interfaces to its services, Google is causing applications development to gradually shift away from the PC’s APIs to those embodied in servers on the network. Windows doesn’t necessarily disappear, but it stops being the control point for computing innovation.

It’s kind of like Sun’s old slogan, “The Network is the Computer,” except in this case someone’s actually making it happen.

Some people view Google’s recent semi-endorsement of Sun OpenOffice as proof that Google’s trying to undercut Microsoft Office. You can get a fairly enthusiastic account from InformationWeek.

Theory 2. Google wants to destroy all the carriers. In this view, Google’s main priority is to take over the transport of content and information, rather than just organizing it. Every company that distributes content and information -- phone companies, television networks, cable companies, and so on -- is a target as Google seeks to deliver everything through the Internet.

The prime exhibit in this theory is Google’s purchase of dark fiber resources. Combine that with Google’s experiments around video downloading and Google Talk, and you can draw a scenario in which Google uses the Internet to take down all of the middlemen who carry all of our entertainment, information, and communication.

I think this scenario is especially appealing to many people in Silicon Valley because of the visceral dislike that so many of us in the tech industry have toward carriers of any sort. I should probably do a whole article on why this is, but the short summary is that carriers get in the way of things that many tech companies would like to do. A lot of people in Silicon Valley would be very happy -- like, fall of the Berlin Wall happy -- if the carriers just disappeared some day.

Their hope is that Google’s going to make it happen.

Theory 3. Google is making it up as it goes along. Those of us who have worked in large, visible companies know how good people on the Internet are at making up conspiracy theories. At Apple and Palm I used to shake my head in amazement when some commentator came up with an amazing master plot that linked several completely independent things our company was doing, and presented them as a single conspiracy.

We were never sufficiently clever or organized enough to pull off most of the plots that were attributed to us. Sometimes big companies do things because there’s a plan, but just as often they do them because of internal politics or random unconnected ideas. In my experience the broader the supposed conspiracy, the more groups and business units it links, the less likely that there’s an actual plan.

Amid all the rumors about Google, one thing I know to be a fact is that it deliberately hires the best computing graduates in order to keep them off the street. Google’s founders came out of academia to steal a march on the search leaders, and they’re very worried that someone might do the same to them. The easiest way to prevent that is to hire all the brightest computing grads and put them to work. It doesn’t really matter what they do, as long as they do it for Google rather than someone else.

In this view, much of Google is more like a huge research lab rather than a traditional company. Sure it’s experimenting with VOIP and video downloading -- it experiments with everything. But that doesn’t mean all the experiments are controlled by a single master plan.

This theory isn’t nearly as popular online as the others, but I heard it from a very experienced consultant and technologist in the valley (who I won’t name because it might screw up his ability to do business with Google). It’s also the theory I believed -- until recently.

My opinion: It’s theory number 2.

What turned me around was Google’s recent proposal to blanket San Francisco with WiFi. Although the Google proposal is far short of a formal bid, the fact that they made it at all says a lot to me. They’re willing to put their brand and reputation on the line for a huge fixed infrastructure of wireless base stations, and all the customer support headaches that would go along with them. That’s a much different business model than Google has used in the past, and it’s not something a company would ever propose lightly. There’s no way this is a random experiment.

Now for my speculation. I don’t think Google would do this only for the Bay Area, and I don’t think local advertising would produce enough of a return on investment to justify the cost and risk associated with creating one of these networks. I think it’s a trade-up play -- you give away the 300 kbps service and then charge for a series of add-on services on top of it. Voice telephony (replace your landline), and video download (replace your cable TV company) are two obvious ones because there’s an established market for both of them that Google can cannibalize quickly. Plus of course they’ll trash the DSL business.

If I’m right, we should expect to see Google start dabbling in the creation of other services that it could drive over this network. They should also offer to un-wire other cities in the Bay Area.

Unfortunately for those who want the cellphone carriers to go away, I think the current technical limitations on WiFi phones -- standby battery life a tenth of a cellphone -- will make the wireless voice carriers the last domino to fall. But I believe Google is truly gunning for everyone else.

The myth of the smartphone market

Who will buy smartphones? And what are the “killer” features?

One of the most common themes among people watching the mobile market is the quest for the ultimate device. “Which is the one everyone will buy in the future?” reporters ask me. Discussion boards have endless debates over the relative merits of the Treo, Blackberry, Microsoft Smartphone, and so on. The underlying assumption is that at some point we’ll see the emergence of one converged killer device that gets universally adopted.

I’m not sure why we’re all looking for one ultimate winner. Maybe it’s a hangover from the PC market, where one basic design did dominate the market. (Please, no angry messages from Mac or Linux users -- I was at Apple for ten years and I’m not ever going to write off the Mac. But you gotta admit there was a winner, folks.)

Anyway, I think the PC market is not a good analog for the mobile world. We need to cast aside our PC assumptions, including the assumption that there’s going to be a single unified mobile market.

At PalmSource we did a lot of research on mobile customers and what they want. The basic outlines of what we found were released to the public, so it’s okay to talk about them. Here goes:

About 60% of mobile phone users in the US and the major European countries are unwilling to pay extra for anything other than basic voice and SMS. In the US they typically take a cheap phone with a low-cost service plan, while in Europe they tend to be on pay as you go plans that let them limit their billing very carefully. They’ll even turn off their phones sometimes to limit the number of calls they take.

If you give them a phone with free features, they’ll accept it, of course. But what makes them distinct is that they won’t pay extra to use those features.

For an example of this effect, look at the high sales of subsidized cameraphones, and compare that to the low number of people who pay to send lots of MMS messages containing those photos.

Maybe someday it’ll be possible to coax these people into doing more, but they’ll be the last adopters, so you can forget about selling them anything advanced right now.

Three value-added segments

The good news is that about 35%-40% of mobile phone users are willing to pay extra for additional features beyond voice and SMS. With worldwide mobile phone sales running at well over 600 million units a year, that means you could sell more than 200 million advanced phones a year. Not a bad market, and far beyond today’s sales of smartphones, which are running at somewhere between six million and 25 million units a year depending on how generously you define smartphone.

Unfortunately, these people don’t all want the same advanced features in their phones. They split into three different market segments, each about 12% of the population, with very different needs and demographics. I think there are probably also a lot of sub-segments within each of the major segments.

The first segment is a group of people I like to call communication enthusiasts. These are extroverts who live to communicate with other human beings, and they’re often in people-facing jobs like sales and business development. To picture this user, think of the best sales representative you’ve ever met, warm and enthusiastic and always ready to chat.

These people are willing to pay for any advanced phone feature that’ll help them communicate better. E-mail, short messaging, IM, video calls, whatever. I think they’re the main people buying Blackberries and Treos.

The second segment is information enthusiasts. These people are a little more introverted, and tend to be in information-heavy jobs like medicine, law, and research. They need a tool that helps them manage all that information. Think of a doctor, trying to keep track of patient records and reference information on thousands of drugs.

The information enthusiasts will pay extra for features that extend their memory and help them work with information. Databases, larger screens, reading PC documents, and running lots of third party apps. Right now I don’t think anyone’s designing an ideal mobile phone for them (the Motorola A780 is the right hardware, but disastrously wrong software). Today a lot of these people buy handhelds instead.

The third segment is entertainment enthusiasts. These users are younger people (late teens and twenties) who want to keep their fun lifestyles even as they enter the workforce. They’ll pay extra for enhanced entertainment features -- music, games, video, fun messaging. They don’t have as much money as the information and communication users, so they can’t pay as much for their phones. There’s some evidence that this market sub-segments into game enthusiasts, music lovers, and so on.

The Danger Hiptop is aimed squarely at this demographic (check out the Snoop commercials), as is the Motorola Rokr (although at a price of $250 to hold only 100 songs, I am deeply skeptical of how well the Rokr will sell).

The misguided drive for convergence

In reaction to these different needs, a lot of people in the industry are trying to create an ultimate converged device that has features appealing to all three groups. So you get smartphones dolled up with e-mail clients, MP-3 players, and loads of information management applications.

These typically don’t sell well, for two reasons. First, unlike a PC, when you add features to a mobile device you pay a heavy price. If a PC gets a little heavier, or uses a little more power, no one will even notice. But do that to a mobile device, and it may suddenly become too heavy for most people to carry, or its battery life may become too short. Tiny differences in specs can create surprisingly huge changes in sales.

The second reason why “Swiss Army Knife” products don’t sell well is because most mobile customers are intensely practical. They buy mobile products like appliances, to do a specific job. All of the most successful mobile products are associated with a particular task that they do well. They may be capable of doing more, but there’s always a lead feature that they excel at. The iPod is fantastic at music acquisition and playback. The Blackberry is great at Exchange e-mail (and stinky at almost everything else). And the original Palm Pilot excelled at calendar and address book.

As far as I can tell, the only place where Swiss Army Knife mobile products are popular is in the online discussion forums that we all read. We technophiles, we few proud pioneers, are utterly out of touch with the needs and desires of normal mobile customers.

There is no smartphone market

What all this means is that there’s no unified smartphone market. Instead, there are a series of markets for phones that are smart at particular tasks. The way to win is not to create one ultimate device; it’s to create a series of products that are great solutions for certain customer groups. The market’s a series of rifle shots, not a shotgun blast.

So the best analogy for the mobile device market isn’t PCs, it’s cars. There is no car market, there’s a market for sports cars, a market for SUVs, a market for sedans, and so on. If we think of the mobile market the same way, we’ll all have happier customers and we’ll sell a lot more products.

__________

Additional reading: Here are a couple of third party reports that explore elements of the smartphone myth. Unfortunately, you have to pay to read these reports, but if you work in a company that can afford it, the investment is worthwhile.

Jupiter Research: How to Succeed in Wireless Without Really Converging
A nice overview that, regrettably, doesn't dig into details on the value-added segments.

Forrester Research: Segmenting Europe's Mobile Consumers
This report is from 2002, but the findings are still valid. It's the best overview you can get, and at $700 it's a deal compared to a lot of other studies.

Nokia's new e-mail phones

Nokia’s newly-announced e-mail phones are interesting, and I think one of them could be very successful.

The three new devices come with a bewildering array of mail client options, including RIM, Good, Visto, Seven, and Nokia’s Business Center (which I believe is the software that syncs directly to Exchange). I wish I’d had a mail client on the market, they probably would have licensed from me as well.

I think the client that matters most in the short term is RIM, because a lot of companies and operators have standardized on the RIM server and have been asking for RIM-compatible devices. Unfortunately for Nokia, in the US what they’ve been asking for is RIM-compatible Windows Mobile and Palm OS devices, and Nokia’s devices are on Symbian, which has basically no traction in the US.

I’m very pleased, though, that they didn’t try to tart these things up with a bunch of multimedia features. The people who want e-mail phones are, for the most part, very distinct from the people who want entertainment phones. Look at RIM -- they’re a crummy device for almost everything except e-mail, and yet they’re the leader in the category. If I had my choice, I wouldn’t have even built cameras into the Nokia devices, but many operators require cameras these days, so Nokia probably had no choice.

Anyway, the three devices are the E60, a candybar phone; the E61, a minitablet with keyboard; and the E70, which has a flip-over keyboard. I don’t expect much from the E60 -- an e-mail phone without a keyboard is like a bicycle without handlebars. (Yeah, I know they exist, but how well do they sell?)

The E61 is being compared online to the Treo, but actually it’s a pretty slavish RIM Blackberry clone, just like the Motorola Q and the HP Mobile Messenger. I guess it makes sense to target RIM’s ID, since Blackberries outsell the Treo by a wide margin. But all of these RIM-like designs are too wide to be held comfortably in one hand by many people, and I think that’s going to be a barrier to wide adoption. It’s not really a comfortable replacement for a mobile phone.

The device I like best is the E70, which picks up the flipover keyboard design of the Nokia 6822. The cool thing about this design is that when the keyboard’s closed, it looks like a regular mobile phone and you can hold it to your face fairly comfortably. But when the keyboard’s open, you have a pretty roomy keyboard in which you can type easily with two thumbs. It’s much roomier than the Treo’s keyboard.

Downside: You can’t type one-handed while strap-hanging on the subway.

The thing that bewilders me about the E70 is that it’s triband instead of quad band. That means you can’t travel with it and be confident that it’ll work around the world. E-mail phones are professional road warrior power tools, and you need to make the user confident that they’ll be well connected wherever they go. The Treo is quad band, and I assume Palm will make an issue of that when selling against the E70.

Nevertheless, the E70 impresses me. I think typing will be faster on its keyboard, and the RIM client will be a big selling point (assuming it works, a big if). I think it has good prospects in Europe. Will its advantages be enough to overcome US IT managers’ distaste for the Symbian OS? That’s going to be an interesting one to watch.

About this blog...

Mobile Opportunity is a blog on the technology industry, with a special focus on mobile and wireless. During my six years at Palm and PalmSource, I was constantly surprised by the disconnect between what we believed in the mobile industry and what our end-user customers thought. The pain this causes to companies and customers is immense. The mobile data products and services we create fail more often than they succeed, and customers are often frustrated by products that almost, but not quite, do the things they need.

The name of this blog is a bit of a stretch, since I don't pretend to have all the answers on what the real opportunities are in the mobile marketplace. But this is my effort to help figure it out. I hope that by comparing notes we can all get a little smarter. Your comments are welcome; this needs to be a conversation.

Note: This is one of two blogs I’m running. The other, Stop Flying Blind, is focused on business strategy.

[March 29, 2006: Sorry for the repost of this old message. I'm finally re-launching the Stop Flying Blind weblog, and wanted to update the link to it.]