Tag Archives: Apple

Motivating Siri

For many reasons, Apple’s entry into a category tends to stimulate broader consumer technology press consideration. Watch is a great recent example, where Cupertino’s entrant was neither the first, most featured, nor most affordable.

Today Mark Gurman broke the rumor broke that Apple would introduce “Proactive”1 at WWDC, something that looks a lot like Google Now – a cool technology that’s been in market for years.

The contrast between today’s Siri and Google Now is so stark that it’s arguable they are different categories. Whereas Siri is like an obedient and (mostly) charming servant who is fluent in a narrow range of things (and happy to search the web for everything else), Google Now tries to go far beyond that to anticipate what might information be helpful in any given moment. What kind of admin would you prefer: the one that was mostly competent when you ask for something very specific, or the one that’s proactive (clevah)?

But there’s a fine line between an admin with a bias for action, and one that pesters. Don Draper probably doesn’t want to be interrupted when he’s sleeping it off. Getting the delivery of proactivity right is tricky. Again the Watch is a good example: once people were wearing a notification endpoint on their body, the normal volume of notifications were overwhelming to many, and a frequent early complaint.

I’ve always thought Siri’s passive approach (tell me what you want) limited it to scenarios where voice input was both more efficient and socially acceptable – like in a car. Google Now, is not bounded nearly as much. This data would support that:

Google Now vs. Siri vs. Cortana

Google Now vs. Siri vs. Cortana (Source: PhoneArena, April 2015)

Much as Android gives Google easy access to personal information in your Gmail, Google Calendar, search history, Google Maps, etc., it looks like Apple is ready to use its access to their analogues in iOS, OS X, iCloud to offer something that goes far beyond what they’ve had. Siri is getting off his/her duff.

I think another interesting angle here is Apple’s ability to promise — quite credibly, since they make their money off hardware and transactions — that its version of a Personal Assistant will not be there to sell you ads.

Perhaps it’s coincidence, but I think the recent presence of Watch in the endpoint mix makes the timing great for Proactive’s introduction. Even though the notification tuning was poor out of the gate for Watch, the device’s location and haptics give Proactive a much richer canvas.

It’s possible that Apple’s control of its atoms and pixels gives it chance to introduce a far more personal Personal Assistant.

1 Is it me, or does that name sound like an acne med?

 

If the iPhone were a car, what kind would it be?

A4interior

My vote: an Audi A4. Why? High-endish design and performance but not out of reach for a large group of people in the markets they serve. Technology infused brand. Not exotic. Not a spaceship. Dieter Rams would probably approve.

The dam burst this week with rumors that Apple has jumped into the car making fray. Some of it was sparked by images of weird, sensor-encrusted minivans driving around parts of the Bay Area. There were also reports of Tesla and Apple aggressively poaching staff from each other. But the real confirmations came from the WSJ and Reuters, including reports of 100+ Apple people already working on it, with Tim Cook apparently having giving the green light after (presumably failed) M&A conversations with Elon Musk.

The other rumor is that this will be an automatically driven car (which both Google and Tesla are reportedly working on). Perhaps, but I think a robot car is a much more difficult concept for people (and regulators) to embrace than, say, an electric. Just imagine how drivers in Boston would treat one of these robot cars when it doesn’t respond well to one of their crazy ass moves. Naturally, these robot cars would do real well in this.

Of course, Apple has been in the car “business” to varying degrees for years. A small industry of connectors, chargers and mounts has grown up to make the use of phones in cars a bit more convenient (and, maybe, safe). Apple Maps is a major driving use case, as is much of Siri (which still seems odd to use in public when one has two hands available for typing). Perhaps most directly there are Apple’s various efforts at integration, from putting a physical button on the steering wheel to invoke Siri, to full blown CarPlay — essentially an Apple approved in car screen experience (example from Ferrari here).

But making an Apple Car, or an Car, is something else entirely.

It’s one thing to be the maker of a tool that’s distracting a driver. It’s another to make the 3000 lb. vehicle that’s going 80MPH. It’s one thing to make sure that iPhone batteries don’t catch fire. It’s another to crash test a car. If I go into an Apple Store with a defective iPhone, they’ll just give me a new one (because they’re selling 575 per minute per day). Impossible with a car. It’s one thing to adapt an already high design Apple Store to sell watches, and another to stock, sell and maintain cars (electric or otherwise).

For a company with infinite resources, one hundred people qualifies as a toe in the water. Reuters used the term “studying.” For fun, let’s assume that an Car in some form is full go.

One option I suppose is for Apple to do what L.L. Bean did with Subaru, a kind of trim package on an otherwise well established product. Partner with a manufacturer that can provide a chassis + body with sufficient quality/performance to match well with an Apple experience built on top. It would arguably need to be near best of breed but capable of selling very broadly. The supplier would also have to be willing to subordinate its brand to Apple’s. I don’t see a long list of candidate partners, let alone it being a compelling product.

Another option of course would be to go full on Tesla mode, offering a car that is 100% Apple. This appears to have been Tim Cook’s Plan A, and apparently Musk didn’t like the offer (note to self: buy TSLA).

While they have enough cash parked offshore to buy both BMW and Daimler, I just don’t think that Apple would bother with a company whose assets and expertise are mostly around internal combustion engines and everything needed to support that. I can’t see Car Version 1.0 being anything other than an electric vehicle.

And merging a legacy car company with Apple would make the Google:Motorola deal look trivial from a culture fit perspective. Yuck.

So what does that leave? I think Apple may have to build this one from scratch. If the iPhone theoretically maps to an Audi A4, will Car v1.0? I don’t think so. I think they’ll take a page (actually quite a few) from the Tesla playbook, and initially bury the costs of their learning curve in a very expensive category of car. Something like a BMW i8. Could they sell 5,000 Cars/year @ $150K apiece (a tidy $750MM business in year one?). Easily. The question would be whether they could build them.

 

Curious about Spotify’s economics and impact on musicians?

Great Mashable piece on Spotify, centered to some extent around Taylor Swift’s withdrawal.  But it also looks at artists at much different levels of currency and celebrity.  Key quote from Betty Who

“Getting paid is really hard now because now you don’t make money off of music — you make money off of everything else that isn’t music,” she added. “It just intensifies this idea that celebrity is more important than art, which is the part that bums me out because I’ll make money going to an event but I won’t make money making a record. What I care about is how people felt about the record. But any platform I can get my music on and shares it and makes sure that people hear it I’m down for.”

I thought well before Apple bought Beats that it should have used some of that hoard of offshore cash to buy Spotify, but I wonder whether Apple’s close relationship with the music industry, and artists, kept it from rushing into the streaming business.  The economics for artists are brutal. I do hope Chris Cornell’s ideas about Spotify (and probably iTunes/Beats) fronting artists money to produce music comes true…artists get the support they need, but there are fewer middlemen.

Apple having to walk a very fine line in China

Is this “just” the Chinese government being forced to snoop in a new way, or is this industrial harassment? Probably a little of both. Nevertheless, Apple has full throttle access to the major carriers now.

Gee, wonder who has inside influence at Qihoo:

Many web browsers, like Apple’s Safari, Google’s Chrome and Mozilla’s Firefox, flashed a warning to users that a so-called encryption certificate that is supposed to identify who is on the other end of a web session should not be trusted. That indicated that users were inadvertently communicating with the attackers, rather than iCloud. In effect, the hackers stepped into the middle of the online conversation.

Mr. Sutton noted that Qihoo, a browser offered by the Qihoo 360 Technology Company that is popular with Chinese Internet users, did not flash a warning to users.

via China Attack Aims at Apple iCloud Storage Service – NYTimes.com.

Apple Watch Bits 10.18.2014

Full disclosure: I like mechanical watches, and have since I was a little kid. My Uncle Fritz had an Omega Speedmaster that he let me wear a bit when I was eight and living in Germany. I own a couple of nice automatics: both beautiful, wildly inaccurate, and daily doses of non-digital “old” tech.

Having now digested the watch’s introduction and read a fair bit of very smart analysis (in particular @Gruber, @GTE’s Debug Podcast, Horace’s War of Attrition, Benjamin Clymer’s great post on Hodinkee) a few things strike me about Apple’s massive new play:

  • I want one, even though it will be a Version 1.0 of something for which I have adequate substitutes.  At this point it’s not 10x better than anything, so congrats Apple.
  • I like the stainless line the best, even though when I jog the weight will feel like I’m running with a Rolex. On the other hand, since I’ll need to bring my iPhone to have GPS and Spotify, maybe I’ll just leave the watch at home. Will Beats introduce a BT headset before the watch arrives?
  • As the reigning priests of “focus” and saying no, Apple may have managed to do something incredible: appeal both to watch snobs and to young people who haven’t felt compelled to put a clock on their wrist. The expensive materials and finishing; the slightly-visible-when-worn engraved text on the bottom; the super high quality bands; the moon phase and solar system watch face “complications”…all nods to fashion and mechanical nerds and important to people who like to express themselves with watches. Apple Pay with a wrist wave; heart beat messaging; Taptic engine; Camera View Remote; health sensors…all tech nerd certified, and perhaps enough to get young people wearing watches. Nice pincer move.
  • Did they actually “miss” the holidays? On one hand, this seems like something they would have avoided at all costs, given that the watch is the most purely consumer device they’ve created since the iPod, and the holidays will be the dominant selling season. On the other, maybe they think Holiday 2015 is the big blow out, and they want to take the time necessary to have a sense of demand by “edition”. Why build 10,000 rose gold watches if you may not sell them?  But all that said, I bet they did miss their original plan.
  • To the extent there is a native watch app business for iOS and Android, I think this may widen the fragmentation gap between iOS and Android.
  • Listening to Horace Dedieu’s Critical Path podcast, the watch’s likely margin structure is very robust. I guess this should be no surprise. Apple revenue is ~$40B a quarter right now, and attractive markets — that are both big enough to matter, and where they can differentiate — are rare. Why jump in with a strategy that’s low margin?
  • Apple left a lot of open questions of course (ahem, battery life). But I think perhaps the single biggest question mark for me is the extent to which people will buy accessories, and whether the device will be upgradeable.
  • Apple has never been shy about charging shocking amounts for plastic accessories, and I’ve no doubt that their bands will have healthy margins, across all price points. I bet the “Milanese Loop” will go for $399 at 80% margin. The “elastomer” bands will yield nice margin (I’m guessing a $79 price at 90% margin).
  • My curiosity about upgrades is driven by the fact that a hunk of gold shouldn’t be obsolete in two years:

1) Why would they have a completely “resin coated” system on a chip if it wasn’t designed to be handled and swapped out by somebody who doesn’t need jeweler’s tools? In two years, you go into the Apple store, and simply swap your S1 for the S3.

2) Do we think that the industry and Apple will improve sensors, or invent new ones, within the next few years? I do, and wonder whether the whole sensor pack can be swapped out. This is more of a reach, but it seems like a pretty core piece of the platform that people are writing to.

  • If you believe that there will be an upgrade business, then Tim and team had to make a really nervy call on the shape/dimension of the watch two plus years ago, knowing they’d be constrained by it for years.
  • And if you believe this, Angela will have her work cut out for her to reengineer the Apple retail experience. I guess it’s possible that Apple would leave the distribution of $10K gold watches to luxury retailers: it would seem weird and awkward to have this bling being sold side by side with what are essentially tools. On the other hand, I’m not sure that Apple would want to sacrifice the hundreds of dollars of margins needed to feed the Wempe and Tourneau’s of the world.

From a financial contribution standpoint, it could be remarkable. Here’s a very amateurish estimate of prices, costs and resulting margins:

awatchmargins

 

If one assumes low single-digit, but growing, penetration of the current iPhone base, then we might see something like this on the top line:

awatchrevenues

 

 

Tim Cook is fond of pointing out that “only Apple” can do the kind of hardware:software integrated design and business model that’s distinguishes its product line these days. The Apple Watch strategy may be far and away the best expression of this to date.

  • Silicon design to yield 24-hour battery life well ahead of the competition
  • Form factor discipline in screen size, sensor uniformity, watch housing, etc. to enable upgrades, accessories and a homogeneous platform for app developers to target
  • Retail innovation, including online configuration, that allows for efficient delivery of an incredible variety of offerings

Even if upgrades are not in the plan, I’m excited to see if they can execute this incredibly ambitious strategy.

How liberating to be a fan of Apple products, and not worry about AAPL

Nothing like a good stock bloodbath to clear one’s mind.

Yes, AAPL this morning is down about 11%, having shed the equivalent market cap of one RIM plus two Nokia’s in a few hours.  This despite having reported perhaps the most impressive quarterly company performance in the history of such things.    $23 Billion in quarterly cash flow from operations.  A current asset hoard nearing $140B.  And that will grow by about $250M today.

Apple made more money in December than AMZN has over its entire life.

Given that AAPL is very broadly held, I wonder how many people are no longer able to really separate Apple’s product and stock performances?  How many people are using an iPhone and worrying about whether this product is going to be able to generate stable margins over time?  Probably not many in the scheme of things:  iOS is truly, widely held.

Full disclosure: I shed my AAPL holdings.  It’s not that I’ve lost faith in the company.  I did this because AAPL, like any equity, is exposed to manipulation, emotion, and stock traders and analysts who care little about the holistic company health/longevity/products.  I just don’t want to stomach the thrash right now.

The problem is, somewhat ironically, the same as what Bill or Steve (I forget) once pointed out back in the day at Microsoft:  to double our stock price, we’ll have to grow a Wal-Mart.  Similarly, Apple would need to grow an Exxon.

Apple is going to continue to be an incredible cash pump, unless they fail to execute in a pretty comprehensive way.

  • Smartphone penetration of the overall phone base has a ways to go, and there are no signs of iPhone churning materially to Android.  Samsung is filling the vacuum fast, but I’ll begin to worry when real people (not droidists who stalk Apple chat boards ready to pounce) are dumping iPhones en masse for Android.  Could iPhone volume double at full penetration?  Maybe, though at what gross margin.
  • Tablet penetration is in its infancy (potentially): they sold 20M iPads in the quarter, and I think the addressable installed base will eventually be probably 500M+ devices.  Will volume here double?  Probably?
  • Apple has several not so stealthy Trojan horses in the gaming race (Touch, iPhone, AppleTV).
  • Speaking of TV, the “hobby” continues to grow nicely, and at this rate (2M units in the holiday quarter), they will have an installed base approaching 20M by the end of the year — even without some more disruptive play they may be cooking.  One can easily see this at 50M in a few years, and thus a massive player.
  • Then there’s wearable computing, home automation, automobile aftermarket devices, payments (iTunes competing with Square, Paypal, etc), and the massive PC installed base which will convert slowly over time.

They do need to get their Maps, Music and Intelligent UX (Siri vs. Google Now) houses in order.  Not tomorrow, but they need to show a competence here I haven’t seen.

But I’m excited to watch this develop as a consumer, not as a shareholder exposed to every stupid rumor.   Wouldn’t it be amazing if Apple eventually went private?

iOS 6 maps: mostly accurate for me, a little too cute at times

I use driving directions on my iphone pretty frequently.  Seattle is a city on a grid, so I don’t when in town, but almost invariably on a business trip with a rental it comes in handy.  I’ve been using TomTom’s iPhone app, generally with great success.

All of these apps have data accuracy issues, it’s just a matter of degree.  TomTom almost got me killed (well, I was driving too fast) on a back country CT road that it thought was actually still there, but years before had apparently been blocked off because of a new (great) golf course.  If you look up the same section in Google Maps, it’s pretty clear the Old Stone Road ends:

Apple, likely because it uses TomTom data, has the same inaccuracy (Old Stone Road does NOT go through as it appears below, but ends with a pile of logs in the woods) that almost got me killed:

Like many people, I’ve had mixed results with Apple maps so far.   Not poor, just mixed.  Some examples:

  • I used it quite a bit for turn by turn driving directions in San Jose last week, and I’m happy to report the maps were accurate and the system worked well for the most part.  Granted, that was Apple’s back yard.
  • I had some minor issues with the route selection UX, especially selecting starting and ending points.  It just didn’t seem very intuitive, though once I “got it” it was very efficient.  I ended up going to a place I’d already been that day.  Minor problem that will get fixed fast.
  • It’s unclear whether the TxT directions are taking into account traffic, but in my case they seemed to, attempting to route me away from the obvious exit — suspicious advice I ignored, and then promptly wound up in bumper to bumper that I hadn’t expected.
  • The dotted red line design for showing where traffic is heavy is a bit precious in the TxT.  It’s one thing to have something very subtle when one is just using maps.  It’s quite another thing when you are behind the wheel, and only glancing at the maps in traffic.  I think the colors need to be more pronounced, even to the point of messing up the feng whatever they think they’ve achieved.   I do like that they’re only marking up where there’s bad traffic: no reason to clutter it up with green for good traffic — unless nothing at all indicates, erroneously, that there might not be any data a section of road.
  • I used it again last night going from Seattle to see a concert in Puyallup (short review of Train may come), and it worked like a charm, recalculating seamlessly when we got off the route for a quick coffee.
  • One more thing about clutter removal: I know it makes for a busy display, but I actually like it when TomTom tells me a) how much time is left in my trip, and b) the time I’ll arrive.  Yes, I can do the math myself, but it’s a convenience.   Apple hasn’t bothered to implement either yet.

I do think that Apple’s business rationale for shipping the product before it’s complete and hyper accurate is sound.   Apple and Google benefitted from each other for years — Google got an enormous amount of data, and Apple got a top quality mapping app — but that obviously isn’t a viable strategy now for Apple:  Geo spatial stuff is a strategic asset, key for everything mobile, and Apple rightly doesn’t want a competitor a) owning that core component, and b) delivering them second rate functionality (which they’d begun to do with iOS vs. Android).

Apple needs to take the pain, collect data fast, and do the grunt work (sometimes manual).  They can afford it.  I expect the maps will get better very quickly, especially where there is great iOS density.