Google – threats and opportunities for the Future

I was having coffee with a contract recruiter for Microsoft recently and he mentioned he had just been in New York meeting with some of the Microsoft Advertising folks. He mentioned they were kind of down as when they went looking for business (I can only assume for Bing), things were not going so well. As it turns out the ad agencies only wanted to talk with one company: Facebook.  It makes total sense.  If I were wanting to place ads I would much prefer Facebook to search providers such as Google or Microsoft.  The reason being simple, unlike a search engine where I do my search and click my link.  In Facebook I log on and stay.  And judging by some of my friends they are on Facebook a whole lot.  This is a big threat to both Google and Microsoft, but primarily Google.  Microsoft has a lot of other business groups that generate revenue (Windows, Office, Server and Tools etc..), and Bing frankly has been a cost sink hole.  However for Google the avenues are not as plentiful. Facebook poses a challenge to the future of the company, that is well worth getting excited about.

There is no doubt the traditional Google business is under threat.  The very business landscape that Google pioneered is shifting as companies look to spend their ad dollars in places where the perceived monetary return is greater than ad words.  Facebook will be a big test to that business, as will Twitter.  Don’t get me wrong Google has been nothing short of amazing.  It’s end of year statement in December showed a company with over $37 billion in revenue.    This from a company that was incorporated in 1998.  When I started at Microsoft it was already 16 years old and talking of its business units in terms of its first billion.  The fear for Google, from the start has been, is Google a one trick pony?  Can it take sits enormous revenues and invest those in other web-based services to generate new streams of revenue.  There is some hope on the horizon in this area.

The good news for Google lies in the success of its mobile platform, namely Android and the mobile search business.  In our increasingly on the go and mobile society the opportunity for new revenue streams in the mobile search business is immense.  If you go by one Gartner report mobile search revenue will grow worldwide to over $20 billion by 2015.  Based on last years earnings Google already generates $2.5 billion in mobile ad revenue.  Google has been very successful in getting mobile handset providers to adopt their Android platform as the mobile OS.  Premier providers like HTC and Samsung have been major advocates of Android both for the smartphone, and in the case of Samsung its tablet offering.  If there is one note of fear, it is the amount of mobile ad revenue generated from Apple’s iOS platform.  Apple and Google are direct competitors in the handset space, so how long Apple chooses to ship Google’s search as a part of its standard offering of apps with both the phone and tablet is open to debate.  I am sure Microsoft just waits in the wings waiting to provide Bing as the default search offering for the iPhone.

The other bets will be the continued growth of Chrome as a browser and internet platform.  Chrome continues to increase market share ( Use Chrome as my default browser).  This is significant as the browser war is the battle fr the internet OS.  Today we have four to five players: Chrome, Internet Explorer, Firefox, Safari and Opera.  In my view it will come down to three as we are already seeing Mozilla people leave the Firefox camp and Opera is still very small in market share.  The other three combined have close to $200 billion in the bank, so I feel safe in choosing them to fight the last battle.  This is an area where I feel Google is well positioned as they don’t have a PC OS.  Apple has its MacOS and Microsoft Windows.   It can be a big advantage to not have a legacy mindset in the industry.  Hardware manufacturers have introduced a “PC” without Microsoft Windows.  A Chrome Netbook was released.  The reviews were mixed as it is a bit different to have a Netbook with no hard drive.  Thus your experience is dependent upon connectivity.  It is too soon for this device, but if you envision a world where we have ubiquitous connectivity you can see the writing on the wall.

As you see, primarily, Apple has taken the lion share of the tablet market place a new thing is happening.  The Windows growth rate over in Redmond is slowing and in some quarters shrinking.  The big concern here is not just Windows, but down the road Microsoft Office.  Luckily for Google they have been investing in the desktop productivity space with Google Docs.  It is not a bad bet on their part as when you are competing against a product with 90 percent market share the only way is up.  Given the large cash hoard that Google has they can commit to this space for the long-term and with the rise of tablets and, if we believe, the disk less netbook then the outlook for Google Docs long-term is fairly bright (I wrote about Google Docs in a previous post).  They can charge far less than Microsoft and still make billions.  It will not be an easy task however we can see the paradigms for the  future of how we consume technology changing.  One thing for certain in the information age is nothing is forever.

This is the new paradigm we have entered into as the web seems to build up companies overnight into social phenomena’s.  Especially with web-based services like a Google, Facebook, Twitter or Groupon where nothing is manufactured.  There is no physical output.  No handheld device.  No PC.  Just a bunch of services out in cyber space.  The fact that Google has become a $37 billion business in a little over 13 years is truly amazing.  Facebook pre-IPO already is generating $3.7 billion in revenue.  The internet is creating a velocity of business we have not seen before.  The ability to communicate and spread the word of whatever is new and cool is what makes the technology space the most exciting industry on the planet.  For a company like Google to continue its path of success it will constantly have to adjust and seek new business opportunities.  As long as you have smart people envisioning the future, you can determine your own destiny.  Ball is in your court Google.

Good Night and Good Luck

Hans Henrik Hoffmann March 20, 2012

Facebook IPO – The new tech bubble…not quite

With the hype leading up to the Facebook IPO there is the beginning of a lot of discussion around a new Dotcom boom and bust. Just like we had back in the late nineties. Though I can see the similarities I don’t think this is going to be like the last tech boom. I believe we have come along way since the bubble and I view this upcoming tech bubble with a lot of optimism and I think with good measure.  But Wall Street, like any other media outlet love,s a good story and history always provides us a window into the future. But in the end there are a lot of reasons for my optimism around this new tech boom.  But before we move forward Let’s  consult history and what it taught us.

In the tech boom and bust there were a lot of things that went wrong, but maybe most notably was a loss of common sense.  A lot of discussion was around new business models and throwing away the old all due to the internet.  Though this was most certainly true it did not mean we replaced balance sheets, income statements and cash flow.  Second, as exciting as the internet was, the infrastructure was simply not in place to support some of the grand ideas.  Yes we were laying down fiber that would cir cum navigate the globe many times over, but most people were still connecting via a 28.8 modem with ungodly slow connection speeds.  The initial Application Service Provider (ASP) model was a precursor to Software as a Service (Saas) or what we refer to as the cloud today.  Your Facebook experience would have been very different and don’t even think if adding photos.  Another thing that was interesting was many companies you could not figure out what they did, it was like Wang computers all over again.  The classic was the Razorfish founders being interviewed on 60 minutes, nit being able to answer the question, “What is it you do?”  It was like asking Bob Dole, “Why do you want to be President”.  Just think Mark Cuban made billions all because he wanted to stream Indiana Hoosier basketball over the internet.  The sucker there was Yahoo, who bought a pile of nothing.

I am optimistic this time around.  Exactly for the two reasons I outlined above.  Today we have a viable and always improving infrastructure for the internet.  Not just via lanline support but wireless connectivity has improved in leaps and bounds beyond what we could have anticipated.  We can thank the iPhone for making the wireless internet an enjoyable experience.  We can now view so many applications and services wherever whenever we want.  Services like Netflix, which will destroy the need for a DVD player in time.  New services are springing up all the time to further improve and enhance our online experience.  Though a lot of videos I stream through YouTube still need to be viewed in the Flash player within the browser, more and more video contents is being done in HD and allowing me to view full screen.  Within the next five years that will simply be the norm.

More importantly many of the IPO’s filed of late have business models and real revenues.  It’s not a promise of a better future, because the future is now.  The idea that old business models are, well old is not exactly true.  A solid income statement and strong balance sheet still matter.  In the case of Facebook they are starting to capitalize on their status as a “place to hang out” on the net.  The filing with the SEC already shows a company that makes $3.7 billion a year.  In a recent coffee I had, someone had met with the Microsoft Advertising team in New York.  the word in the street was that companies looking to spend online ad dollars wanted to deal with Facebook.  Back in the dot-com days you did not hear stories like that and certainly did not see revenue like that in the SEC filing.  It was always just a promise of a brighter future.  With Facebook the word one the street is they are set to grow and grow fast.  When you consider how much time people spend on Facebook versus Google or Bing there is more than just hope.  Advertisers want to spend with Facebook.  Facebook just needs to execute.

Many of the companies pre-Facebook have been impressive LinkedIn, Pandora, Zynga, and Zillow.  Are they Facebook?  No but with such a huge captive audience who is.  They are, however, companies with existing business revenues and opportunities to build on what they have.  This then just becomes a question of vision and execution.  It is by no means guaranteed.  Some I am not sure they are thinking big enough and attracting the audiences they have.  Pandora, as much as I love, needs to think of themselves as digital entertainment and not just music.  But the opportunities are there as we have come a long way since the original dotcom boom days, where we had grand idea just not the infrastructure or platform to execute those ideas.  We have those now.

There will be challenges along the way and as I have said before when America gets excited it starts to see riches, and a bubble will be born.  Our gold rush mentality makes it so.  We will over value companies and do so until basic economics takes us back to earth.  There will be those who time the market and capitalize on its excesses.  We call them Mark Cuban,the numbers of what happened in that transaction for a pile of nothing are staggering.  Mr. Cuban’s company Broadcast.com, generated $13.9 million in revenues in 1999.  It was sold in 1999 to Yahoo for $5.9 billion.  I don’t think this time around well see those type of valuations as business fundamentals will rule during this go around.  But the opportunities to cash in for a great profit will be there again.  Hopefully most will have learned this time around when to cash in.  Only god knows how many paper millionaires we had the first go around.  I met many of them and saw their egos rise and then fall back to earth.  The thud was rather distinct.

Good Night and Good Luck

Hans Henrik Hoffmann February, 7 2012

Apple, Apple, Apple…

Though Steve Jobs has left us and leaves a tremendous legacy and hole to fill, he obviously left a great pipeline of products in place for Apple. Earnings for the quarter at Apple blew past every analysts expectations.  They just seem to keep coming with quarters that seem beyond belief.  As reported on Cnet, during the period, Apple posted $46.33 billion in revenue and a record profit of $13.06 billion. iPhone sales jumped 128 percent year over year to settle at 37.04 million units, while iPad sales rose 111 percent to 15.43 million units. Apple’s Macs got into the mix, too, soaring 26 percent to 5.2 million units sold.  Those are huge numbers and daunting for anyone competing against Apple.  If we break them down one by one it’s interesting to see the challenges for those competing and what to expect and do next.

Looking at the iPhone sales the number is staggering.  They sold 37 million units of primarily the Apple 4s, not 5 but 4s.  The 4s was what we used to refer to as a “dot” release, not a major release. Just a release with minor enhancements like Siri.  To put in perspective Nokia has announced they have 1 million Nokia Lumia 710 in the channel.  That is not in consumer hands but just to resellers.  Apples number reflects units in people’s hands.  The other thing is due to Apple’s channel that is pure money back to Apple.  With Nokia they get most and pay back a small percentage to Microsoft for the OS.  Then there is Google with Android, which is an indirect model as the hand set manufacturers keep the money and Google looks to make money via apps and mobile search.  The units of Android phone is impressive but to date it doe snot have the bottom line impact of Apple’s iPhone.  That could change as the mobile web grows and mobile ads increase the revenue to Google’s bottom line.  Though Microsoft Bing is challenging traditional search, Google seems light years ahead in mobile search.  With a major release from Apple due in 2012 with the iPhone5 could they beat 37 million?  One can only wonder.

Tablets are the fashionable device of the moment.  They have been since Apple made them so.  Steve Ballmer said “they will never sell those things”.   They sold over 15 million units in the quarter.  Though there are Android tablets I have not seen the excitement for Android Tablets like I do for Apple’s iPad.  The iPad seems to be playing its own game, in the short-term that could change with newer revs of Amazons Kindle Fire and further down the road with Windows 8 tablets.  The challenge for the competition is they may be talking about exciting new releases but no one I know of is putting their purchase decision on hold to wait for an Android or Windows 8 tablet.  I expect for the next 2-3 quarters that Apple to rule this domain, unchallenged.  The question will be how far in front they will be when a competitive alternative enters the market.  We will likely see a iPad3 this year, probably before Windows 8 Tablets hit the market, no one is waiting.

An interesting area of growth for Apple is its “old” business of Macs.  They sold 5.2 million units in the quarter an increase of 26%.  That is at the expense of Microsoft Windows.  Apple with around 10% market share is in an enviable position as they are not the leader and can only grow their market share.  As Microsoft Windows Revenue has flat lined (it’s still in the billions in terms of revenue) and Apple is enticing more and more developers to its platform you are seeing the first significant threat to the Microsoft crown jewel in over twenty years.  It’s interesting that it is coming from a competitor whose environment is considered very closed.  I think many people felt the most likely threat to Windows was going to come from the Open Source community in some variant of Linux.  But with Apple’s success in Smartphones and Tablets I can see the traditional Mac business was going to follow and it has.

With all this success it has led to that great American problem.  What do you do with $98 billion sitting in the bank?  When I was ta Microsoft we had (and they still do) usually upwards of $30-$40 billion in cash.  It would seem with Apples cash they could do almost anything they want, but in actuality it is a bit of a capitalist’s dilemma.  The obvious thing to do is return money to shareholders in either a quarterly dividend or one time payment.  They could also do a stock buy back, with  a market cap over $400 billion this could further drive the stock up benefiting shareholders.  They could do acquisitions, but Apple has never done the big multi-billion dollar purchases of tech companies.  I am not a big fan of these anyway as in the short run they slow progress down and when complete the industry has moved on.  It takes a couple of years for full integration, look at Microsoft’s acquisition of Skype for $8 billion and we have yet to see the fruits of this hit the bottom line.  It’s not a bad problem to have but the one thing that is for sure is they will have to do something as sitting in all that money does not seem a viable option, nor will shareholders allow for it.

Apple is truly in a state of grace.  It seems even when they do wrong, as in the previous quarter, they rebound.  It would be easy to see a future where we all are using Apple products, luckily tech and society do not work that way.  There will come a time when younger generations will not think Apple s cool as their parents think it is.  We are in a time when tech trends start with the teenagers and young adults.  Do I see a time when younger generations say “wow Microsoft or Dell is cool”.  Right now I am having a hard time believing that scenario will ever happen.  More likely it will be a young fresh start-up similar to a Facebook or Twitter.  When will this happen?  All I can say for sure is the next 2-3 years it is not likely to happen and the Apple strength will continue.  There are exciting horizons with iCloud and AppleTV.  But as I am fond of quoting Bill Baker, “The future comes slowly, change happens quickly”.  This will be the case with Apple as well but in the meantime let us just enjoy being, “Wowed!”.

Good Night and Good Luck

Hans Henrik Hoffmann January 30, 2012

CES 2012

Well this has been the week of the big Consumer Electronics Show (CES) in the glamorous city of Las Vegas.  It is a show, sad to say, I have never been to but would love to go someday.  Still with today’s interactive technologies it is pretty easy to follow from far away.  The great thing about CES is that it gives consumers a window n how they might spend their money in the upcoming year.  Or not.  Last year was a big year for 3-D TV’s, but I don’t think consumers were ready to give up their new LCD or Plasma screens just yet to experience 3-D at home.  This year promises a whole host of new gadgets and who knows what will be the biggest.  But it is always fun to hear what the big industry players are planning.  Even more exciting can be the young start-ups.

This year, as always, CES started with the keynote from Steve Ballmer, the loud and proud CEO of Microsoft.  Of course the big news had already broke, this would be Microsoft’s last CES.  This was the last chance to see Steve.  It was a draw and then Steve went on to present, uh, well, nothing really at all.  Most of which he talked about had already been announced in previous talks about Windows 8 and Windows Phone.  The biggest announcement was really that Nokia was coming back to America with the Lumia 900.  It is sad to see Microsoft leave the event.  I am not thrilled that they have chosen to do big releases via internal style events and over the web.  My preference is in person events but I may be a bit old school in that thinking.  The problem I have with over the web is it usually means at a desk at work where there are many distractions.  Such as Bob’s vacation or Steve i snot happy at work or..well you get the picture. You may see higher numbers but how many people are really engaged in what they are hearing and seeing?  In any case we bid Microsoft a fond farewell.

Google Executive Chairman Eric Schmidt participated in a “pseudo” panel.  Not sure what kind of panel this was intended to be as it sounded like a group of Google partners just nodding their heads to everything Eric said.  But there were some valid discussion points, mainly the idea of ubiquity between connected devices.  Just think of it this way..walk around your home and see how many devices, appliances etc have digital displays.  You would find dishwashers, washer and dryer, clocks, stereo’s, etc..They should all be talking to one another and to the cloud.  And according to Eric they should be built on a foundations of, drum roll please…Android.  To be clear this idea is nothing new.  Microsoft had this idea of Microsoft @Home over ten years ago.  Novell had its embedded systems technology(NEST).  But like so many things in technology it is not predicting the future, it is timing the future.  As Eric points out with mobility and wireless pretty much everywhere making this “connected” home is much closer to reality.  Google is taking the lead.  Lets see how soon others begin to follow.

The term Gorilla Glass was new to me but it made a splash as Sony showed a Viao made out of Gorilla Glass v2.  First question o I want a laptop made of glass?  It will be a little bit heavier, but the environmentalist in me asks the second question: Is it recyclable?  IN any case they did show hat this glass could withstand 120 pounds of pressure making it fairly durable.  Given how often I drop things this is a good thing.  From a pure aesthetics standpoint it would seem you would be able to do some pretty fancy stuff with color.  I think more than anything this highlights advances being made in the materials that make up our technology toys.  A good thing and though not “sexy” now it will be in the future.

When we look at the best in show winners there, as usual is some interesting stuff.  Kudos to Nokia for coming through with the best smartphone of the show the Nokia Lumia 900.  The Asus Memo 370T Tablet running Android and priced for $250.  It has 16bg storage, oh how far we have come.   The features are nice and with those low price points it makes total sense.  I found the best software app, Bluestack interesting.  It brings all 400,000 Android apps to Windows 8.  It used to be the other way around, with competing platforms looking to run Windows Apps.  Remember Apple had dual OS capabilities.  If you want to be a real old-timer who remembers IBM OS/2 v2.0 with the Windows Subsystem?  To be fair these type of subsystems traditionally ran slow and were painful.  I would hope that Bluestack brings something new to the table and is…fast.  Which it should be ok at since Android Apps for phones and Tablets are not like running Microsoft Office.  Size matters.  One thing to note Bluestack is not yet in beta.  Murmur.

My summary of what I have read and followed about CES is there was a lot of focus on Tablets.  A lot of new and upcoming releases tied to Windows 8 and Android.  The one thing I am interested to see when Windows 8 Tablets roll out is cost.  It seems like Apple has staked out the high ground and Android the low ground, and both have lots of applications.  Is the middle ground a viable place to be? On the TV front I think we are waiting for the next big revolution.  Google did some talk about interactive television, however we are not there yet.  Apple has been strangely silent of lat  in this topic.   But I expect them to bet big on Television.  I do expect in the next 2-3 years for this to be a huge focus of CES.  The interesting question and one of great anticipation is who will lead.  Overall though this was not a great year at CES as there was no break through announcements.  No technology that came out and said this is what will be big in 2012, right or wrong (think 3-D TV).  Looking at the products it was more claims of, “This will be a big improvement on what currently exists”.  Take your pick, Tablets, Smartphones, mobile gaming etc…Next year will be bigger with Windows 8, though I don’t hear of anything ground breaking coming from Redmond…yet.  But what we want from CES is not an upgrade but something that changes how we experience life.

Good Night and Good Luck

Hans Henrik Hoffmann January 13, 2012

Windows Phone..where are we today

Mobility is always one of the topics I like to write most about as I find the world fascinating. From the carrier networks and billing systems down to the actual consumer devices. I was at Microsoft in Bldg 117, home of Microsoft Mobility, when the first Windows Phone was released. I had every Windows Phone OS from v1.0 on up to 6.5. I won’t go through the whole history, but needless to say, things started to fall apart for the Microsoft Phone business after the release of the Apple iPhone.  With the latest release of Windows Phone, code-named Mango and the flowering relationship with Nokia, Microsoft at long last seems in a position to compete with Apple and Google.  However so far Windows Phone, despite every positive reviews seems to be at a cross roads.

Recently former Microsoft Windows Phone GM, Charles Kindel on his blog wrote about his thoughts as to why, despite in his view, WP7 is a superior product, sales were so lack luster.  Though I don’t agree with all his points some are very valid.  He highlights four areas of the mobile eco system. They are as follows:

  1. Carriers
  2. Device Manufacturers
  3. OS Providers
  4. Users
  5. Developer **

As noted in his blog he intentionally left the developer community off the list, but I shall add it back in.  So there you have it 5.

Carriers are kind of the Mitt Romney of tech, he wants to be popular to the conservative base of voters but he is not.  The carriers want to be like Silicon Valley, but they are not.  Telco execs are closer to Depends than Huggies.  Silicon Valley kids are definitely in the Huggie category.  Carriers at the end of the day own the last mile to the customer.  Any service for mobile devices will run through them.  They get us all connected.  It’s exciting stuff.  That being said no one gets excited by their carrier.  High School kids do not say they are cool now that they have Verizon Wireless.  Kids are excited by the device and  the functionality it provides them.  Voice and data plans are a necessary evil.  The only talking points are quality of service and the cost of the service.  But make no mistake these old boys wield a lot of power and would like nothing better than to be recognized as “cool” for it.  If you want your device sold you have to play with them…unless you are Apple which managed to dictate their own terms.  This leads us to the next category.

Device Manufacturers do some of the really cool stuff that make the handsets we buy..well cool.  But how do carriers select which handset they will place in their storefronts and promote?  Well we have two different approaches.  One is very monolithic and takes control away from the carriers.  That of course would be Apple.  Apple s the only device manufacturer that I can think of that was able to dictate how their phone would be sold , which at first was sold exclusively through AT&T.  Steve Jobs knew he had broken new ground when Apple created the iPhone.  It was a leap-frog step in mobile phones.  He knew it and he negotiated it.  AT&T sold voice and data plans for the iPhone, but Apple got the rest, including the App Store.  All AT&T could hope for was that the iPhone would drive more subscribers to their network.  It did.   a lot of new subscribers.  On the flip side is Google and what they have done with Android.  Buy a mobile OS, leverage open source and let device manufacturers create.  It was a good plan that gave some leading handset manufacturers cool software so that they could compete and sell against the iPhone.  Quickly HTC went from being a dominant Windows Phone shop to a dominant Android shop.  Other handset manufactures fell quickly into line such as Samsung and Motorola.  Device manufactures had the flexibility to innovate and not have to adhere to a rigid set of software design practices.  Charles Kindel highlighted this in his blog and I am in strong agreement with him on this.  Microsoft has not done this and it has caused friction with device manufacturers. The carriers liked this model as it was less friction between the carriers and device manufactures.  It gave carriers more variety to sell and also more inexpensive devices. Cost was an area where Google could innovate and compete with Apple.

For the providers of OS’s there are primarily three: Apple, Google and Microsoft.  Apple is a walled garden or prison cell, which ever analogy you prefer. Google is on the flip side as it pursued more the open source model and courted developers heavily to their Android platform. I flatter Microsoft by putting them here as they are around 2% in terms of market share, but they have over $30 billion in cash so I guess I should.  Operating systems, whether they are on a tablet, laptop, phone  or other don’t matter as much as the makers would like to think.  But they do enable our experiences so to minimize them would also be wrong.  Really Apple is a soup to nuts shop so they own hardware and software design,  Google and Microsoft differ in approach and cost.  Google has a better developer model and doe snot cost.  Microsoft is less open and does charge for the OS to hand set manufacturers.  In my view these two things will slow down their progress in the market place and to get to a substantial market share is going to be a hard journey.

Users in the end decide where they want to invest their money.  Sp much of what they invest is not necessarily for cool features and cutting edge technology.  It is for how the product makes them feel.  Don’t get me wrong all the technical stuff is very important in making the end product successful, but at the end of the day users want to feel good.   Apple has been far and away the best at this.  Android is good, but it is a cheap alternative to Apple.    Though Charles Kindel claims the Windows Phone is the best bar none, it is hard to substantiate when it’s hard to find anyone (as of yet) who owns one.  My view is tainted toward the positive as I live in Seattle so I have plenty of Microsoft employees happy to show me all the cool features.  Note to Microsoft employees here.  Stop showing features and hand the phone to whomever you are talking to, so they can “experience” the phone.  Feature demo’s are for geeks.

Finally we come to developers.  The are the Windows Phone is weakest in.  Remember Steve Ballmer saying, “Developers, Developers, Developers” .  Apparently he forgot.  Recently Apple hit 500,000 applications, Google has a few hundred thousand.  Microsoft announced they hit 50,000..  Apple amazed me as they used Object C as the development language for the  iOS.  I sold C compilers in the early nineties.  It seemed dead.  However after the release of the iPhone it went from dead to one of the top ten programming languages.  Developers g where the money is.  The development language they use is secondary.  Google use of open source made sense, since the open source community is a whole lot of developers at heart.  It’s a large community so leverage their brain power.  Which brings us back to the Microsoft developer.  Who is Microsoft asking to write Windows Phone apps?  Simple the large and robust Microsoft developer community and yet they are still not even visible in the rear view mirror of Apple and Google.  Why?  For starters mobile apps are simple and cheap.  It is based on a high volume lower margin principle.  Plus a lot of Microsoft developers are not targeting consumer apps.  One of two things has to happen.  Either Microsoft has to create enough consumer demand for Windows Phone to bring developers over to Microsoft or they need to attract non-Microsoft developers to the Microsoft brand.  Not easy but it has to be done.

In the long run I expect that Microsoft will pour enough money into Windows Phone to drive some success, but how much and what is deemed a success is to be determined.  I think short-term it makes more sense for Microsoft to go after Google and Android as Apple has extremely high consumer satisfaction.  A recent study cited 85% of Apple iPhone users would buy Apple again.  Android is ow cost but it is also in danger of fragmenting as the OS layer as more handset manufactures modify the OS , thus creating apps that are compatible on some devices but not all.  This needs to happen fast as Android sales are sky rocketing.  Microsoft and Nokia will have a successful launch and Windows Phone will increase in market share (how much?!?), but the next big question will be can it create and sustain momentum?  Though Charles Kindel claims the Windows Phone is the best mobile phone on the planet, that does not translate into success.  Technology is littered with products that were deemed the best and yet failed to catch on.  It is early for Windows Phone 7 and Microsoft is way late to the game.  Their key partner, Nokia, is making a last stand with the Microsoft mobile platform.  In the mean time Apple and Google have not slowed down.  It seems impossible to overcome.  But what does Microsoft have to lose except for ….the future.

Good Night and Good Luck.

Hans Henrik Hoffmann –  January 9, 2012