All That I Know (About Technology)

A rumor started to circulate early yesterday that Apple and Microsoft are engaged in discussions over the displacement of Google search on the iPhone. According to BusinessWeek (source), Apple is considering using Bing as the search engine on the iPhone. The reasons that the authors gave for this move included:

• This was a financially motivated decision. Microsoft was offering Apple a bigger revenue slice of the advertising pie for incorporate Bing than Google.
• This was an effort to thwart Google’s recent jump into mobile. It seemed that Google was moving in on Apple’s territory with their introduction of the Nexus One device.

While some may buy into this rumor, there’s very little reason to believe it. Here’s why:

Apple is in the business of designing beautiful devices with exceptional user-experience for the consumer market. Google has dominant position in the web search market. Google reached this point by creating a simple, user-friendly search engine so having Google Search on the iPhone makes for a perfect match. While Google may not want to share more of their search revenue, they’ve bowed to the pressure of News Corp owner Rupert Murdoch when he proclaimed in November 2009 that Google was stealing his paid content (source) and that he would switch to Bing if he had no other option.

Regarding the competitive threat, there are two reasons that Apple may not be worried. First, John Paczkowski of AllThingsDigital wrote about a rumor that Microsoft is planning to release a Zune Phone in the next couple of months (source). In case you’re wondering, this rumor originally surfaced back in late 2008 (source) but this is the FIRST time that there’s thought that the phone will be pink. Currently, there’s no proof that Microsoft or any other phone/mobile OS marker is going to magically recapture Apple’s market share with their mobile offering. This rings true considering that Nexus One sales estimates reached a paltry 20,000 in the first week of offering according to mobile analytics service Flurry (source). If the Zune rumor is taken as fact, then Microsoft is a rival to Apple as much as is Google so there’s no real rush/need to switch.

In my opinion, it feels more like Apple is playing a good game of chicken with Google and Microsoft is just caught in between.

Earlier this year, the Wall Street Journal released an iPhone app called the iPhone Mobile Reader. The iPhone application allowed users to access premium content that was only available to paid print and digital subscribers for free (source). But as of October 24, 2009, content is no longer free.

I spoke with the online circulation desk and learned that WSJ.com digital subscribers now have to pay $1 per week or $52 a year to access the content via the iPhone Mobile Reader. Print subscribers can access the content for free while non-subscribers have to pay $4 a week.

It should come as no surprise that the Wall Street Journal has decided to charge for their content. A report this week by the Audit Bureau of Circulations showed that newspaper sales have dropped by more than 10% in the past 6 months in comparison to the same period last year (source). There are two other major factors that are making matters worse:

• Newspapers are seeing a slide in advertising sales (Gannett recently reported a 28% drop in advertising).
• Subscribers are accessing their news content online. They are also expecting to access that content for free, like they currently do with video content from the major television networks.

As a fan of The Wall Street Journal, I can understand the newspaper’s desire to squeeze a few more dollars out of their shrinking pool of subscribers. However, I’m disappointed that they have decided to tack on a “convenience” charge to access their content via the iPhone, especially if you’re already a digital subscriber. Why can’t they simply use my WSJ.com credentials to authenticate me and give me access to the content that I’ve already paid for? While I can use my current credentials and mobile Safari browser to visit the WSJ.com website, the experience is just not user friendly. I think that it is absurd to pay a premium twice to access the same content.

I’m hoping that this experiment will follow the way of NBC’s futile attempt to improve the bottom line by having Jay Leno at the 10 PM timeslot.

Financial information for publicly traded companies always provides a wealth of information, especially if you’re searching for clues as to where the technology is going. That’s why I love looking at quarterly earnings announcements from big technology companies, like Apple, IBM, Google and Microsoft.

Last night, Apple announced their 4th Quarter 2009 earnings and reported that their quarterly revenue hit almost $10 Billion dollars. [If you're trying to gain some perspective on these numbers, you should consider that Microsoft recently posted revenue of $13.1 Billion for the same quarter (which ended June 30th, 2009).]

I ran across a few interesting stats in the earnings report and the analyst call transcript:

• 7.4 million iPhone handsets were sold in the past quarter, a rise from 5.2 million iPhones sales in the prior quarter.
• Nearly 21 million iPhones were sold in the fiscal year, which ended in September 2009.
• There are more than 85,000 applications for the iPhone in the iTunes store.
• iPod sales were down nearly 8% for the quarter to 10.2 million units.
• iPod Touch sales also grew strongly during the quarter, up 100% year over year.

What does this mean to Technologists?

POINT #1: Apple is in a dominant market position.

They’ve reached this position via the introduction of the iPod and the iTunes Store. Over the years, everyone and I mean everyone (eg: Amazon) has tried to develop an interface with music library/music store capabilities but none have been able compete with iTunes.

POINT #2: Demand for apps in a packed iTunes apps store remains strong.

Soon after the introduction of the iPhone, Apple established a Developer Program that allowed technologist to create custom applications for the iPhone platform. The program required developers to pay a fee to distribute their application in the apps section of the iTunes store. The apps were valuable to iPhone users because they could personalize their device and be more productive (eg: I can check my Starbucks card balance and the weather while listening to my favorite song). But Apple also limited the number of apps by instituting an application approval process that required new apps to be vetted before they were made available to the public. By restricting the iPhone platform (that is in wide demand), they further fueled the fire of marketers who wanted to interact with these iPhone device users.

POINT #3: Exclusivity agreement with AT&T has driven iPhone innovation.

Apple launched the iPhone in the US by establishing an exclusive relationship with AT&T. While the relationship has received plenty of criticism (source), the exclusivity agreement has benefited Apple in that they were able to focus on a single platform and deliver innovative features for that platform. They avoided marginalizing the features of the iPhone by not having to deal with integration issues that come with having to support a device on the networks of multiple carriers. Additionally, the infrastructure investment has driven AT&T to improve their customer support by providing a more robust network for a smart phone devices.

BOTTOM LINE:

Apple provides a growing platform with a broad user base. Developers that are considering mobile applications will first need to build for the iPhone if they want to have the broadest reach. But because of the fierce competition, developers have to recognize that their app has to stand out in an already crowded market place. The good news is that Google and other competitors (aka, Microsoft) are courting developers to their mobile platform because they recognize the importance of mobile. One effective strategy that developers can employ is to look for alternate mobile platforms as a means of getting some initial buzz. By establishing a foothold in these platforms, Developers can build further recognition for their application on the iPhone platform. As part of this strategy, developers will have to utilize a platform that allows them to code their application in one language that can be compiled into a language that’s compatible with each platform. [NOTE: each mobile platform requires different programming languages/programming skills]. Otherwise, they will not be able to create and distribute their application in a timely manner.