Prediction of RIM = RIP, confirmed, at least in US

About 18 months ago I got into a heated debate about the future of Blackberry (RIM) in the US market. I claimed back then that Blackberry had already lost the race. That BYOD, the ecosystem built around the hardware, and the convergence of work and play on phones all pointed to Apple and maybe even Android winning the race as top 1-2 players. My friend being a lawyer at a larger company thought I was crazy: "Black berry is secure, the keyboard is fantastic, the apps are all oriented to the business person."

My opinion then has only hardend since. Android and ios devices are exploding in corporations and dozens of startups are helping with the rapid migration from RIM only environments to the multi-device environments that are emerging. RIM, you cannot expect people to have a fun phone at home and use a boring one in the office. People want to use the same device for email and for taking pics of the kids.

The final nail in the coffin is the DOD's imminent approval of iOS 6+ and Galaxy products. Blackberry, if you've lost your only remaining foothold (government), especially in the highly secure DOD environment, you are unfortunately done. At least in the US.

Enterprise Security is Hot! (again)...and why CXOs should care.

Security is easy and tempting to ignore. It's generally a cost center, and until there's a problem, off the non-IT management's radar. So it generally is ignored by management outside of the IT departments. However, highly publicized attacks like the State sponsored hacking of the New York Times, Stuxnet, and attacks on major companies, has created a renewed emphasis on Enterprise Security. Coincidentally, Enterprise Security is hot again in "the valley".

But the reasons Enterprise Security are hot in Silicon Valley are the confluence of Cloud-based services, Big Data, and explosion of internet connected devices. Startups focused on the intersection of these trends are particularly interesting. Here are some examples:

Risk I/O: In a chat with Ed Bellis, founder/CEO of Risk I/O, we discussed the multiple alarms/data being spit out by security appliances/software/services. Their approach is to connect these various data flows into a more coherent & prioritized single web interface to help the IT dept figure out what to focus on. The side benefit of doing this, is the accumulation of data from multiple clients and the precognition that can emerge. What the #(#$*&! am I talking about? Imagine you're a financial institution in Argentina. By aggregating data (anonymously) Risk I/O can predict where you will see the most problems, and how to prioritize your security patches/solutions. Big Data meets Security.

Vorstack: Co-founder/CTO Andreas Haugsnes has latched on to the fact we are virtualizing all aspects of services. Services, the network (more than $3Bn has been spent acquiring SDN companies like Nicera), and now security. Instead of physical appliances, why not virtualize security for SaaS and other services? Untold combinations of solutions can be quickly brought up and tested, leading to an increadibly fast, responsive, and unique set of solutions for today's cloud-based services. Cloud meets Big Data meets Security.

So OK, let the IT people figure this out, right? WRONG.

As CEO, CFO, CMO, security is now a part of your business. It can be a passive, reactive liability or a pro-active, value-creating asset. JP Morgan recently won a security award for tackling fake email (phishing) attacks on its customers. Using Agari's SaaS solution, they have effectively cut billions (yes, billions) of fake emails sent by criminals with the JPMorgan logo being sent to their customers for the sole purpose of stealing/infecting a user's account/computer. Think of it: your clients are getting emails with your logo, and it's completely fake. This is a brand management and business issue as much as a technology problem. How can you have a conversation with your clients if they don't even trust your emails? By taking on this problem in a systematic way (CMO & CISO working together), the end result was a technically efficient solution, with the benefit of Brand Goodwill & customer trust increasing. This solution is now a Marketing asset, and consumers now have more trust and more likely to respond to JPMorgan's outbound communication.

The time of simply stating "If you are concerned about the authenticity of this message, please click here"  <actual text from my Chase credit card email!> is over. CMOs need to take control of the company's reputation, COOs need to control and show steps being taken to mitigate service interruptions due to security lapses, CFOs need to state the risks inherent in the business results due to possible intrusions/takedowns. CEOs should go on the offensive by clearly demonstrating a commitment to better security and an understanding of the increased importance of security in an ever more interconnected and complex landscape. Ignore security at your own peril!

Viddy, part deux

I wrote a blog about a month ago suspecting that Viddy's numbers were a result of how Facebook was counting users and its viral implementation of their API. Looks like Business Insider has picked up on the drop both Viddy & Socialcam have experienced in a new article: http://www.businessinsider.com/socialcam-viddy-user-numbers-2012-11

It's just so critical to look at actual usage numbers (for example, how many users are generating video clips? how many are using Viddy's app on a daily basis? etc).

Japanese Manufacturers (nearly), bankrupt. Why?

I've been emailing with a close friend about the sorry state of Japanese electronics companies. Panasonic, Sony, Sharp, and even smaller companies like Olympus have all announced heavy re-structuring and huge losses. Based on several conversations I've had in the recent past with employees at these companies, I told my friend I wouldn't be surprised if a major Japanese electronics company ceased to exist by the end of 2013. 

How could these companies, some of the largest companies in the world, be crashing so hard? My hypothesis is that they've stuck to HW manufacturing with near complete ignorance on the services side of the equation. Electronics HW is just becoming a means to internet services. Japanese do internet services horribly, & Chinese manufacturing is approaching Japanese quality at a fraction of the cost. Voila. 

Don't claim to be expert in this field, but seems to me that HW manufacturing (and firmware) skills are the near opposite of services skills. One reason why UI and menus are so horrible in Japanese electronics. And why Apple stands out as an exception for its abilities to put UI/ease of use *and* HW into a complete user experience. 

This also holds true in the US. Remember those really amazingly well put together Startac(TM) phones from Motorola? Horrible menus, but the HW was awesome. Or even take Microsoft as an example with Windows. Engineering (backwards compatibility, unwillingness to change things so as not to upset manufacturing partners/parts suppliers, etc) takes over vs strong user experience. In Manufacturing, Engineers have the upper hand. And these aren't your SW engineers, these are the firmware/HW kind. This is the land of "cost, stability, and robustness", not ease of use. If it costs $0.20 more per TV, then forget it. It's all volume, cheapest possible. So the services guys get no say, and each division in the manufacturer (esp Sony!) builds their own, incompatible, on the cheap, UI. There is a strong belief that a slightly better screen is more important than a better UI. 

Finally, they seem to share a strong sense for not needing to play with others, which is anathema to building good services. Sony only built for Sony services, for example. Note how their Playstation is still essentially a closed ecosystem. Microsoft only recently opened up its Xbox platform to other video services, and its popularity is exploding internationally. This is indeed a cultural thing where Japanese manufacturers built integrated supply chains (as did the Koreans like LG & Samsung). They then applied this culture to UI/services. So Samsung TVs work with Samsung apps, Sony TV with Sony apps, etc all in virtual silos - no good. 

They have recognized this, and seen success with Android on mobile devices, of course. They make the phones, and Google develops the OS/UI. But then old habits die hard. They of course can't help themselves and create their own versions of Android, mostly just screwing up the UI and frustrating users. All the while, they fret that they are ceding power to Google/Android, which is partially true. Then Google goes and buys a competing manufacturer (Motorola) and these manufacturers worst (imagined) nightmares are realized. Now manufacturers are scrambling for new OS platforms, all the while their HW margins are grinding down to $0, or much much worse (try $billions of losses). 

If these manufacturers spent even a fraction as much on UI as they do on HW R&D, they'd quickly see the return. That is, assuming they even exist. 

Netflix losing marketshare to Amazon

Netflix remains the runaway alternative TV provider in the US, but Amazon is growing at a faster rate, according to new research...and check out the low approval ratings.

US-based 451 Research regularly surveys US consumers about the non-traditional TV services for which they are paying. Netflix remains the market leader by a large margin with 82% of respondents paying for the service. However, that is down on the 84% recorded in February and comes as Amazon records large gains.
Amazon’s share jumped from 17% to 22% across the February-September period. Apple’s iTunes increased its share from 15% to 16% and Hulu’s premium service Hulu Plus’ share was up from 6% to 8%. There was a marked increase in the number of consumers paying for Amazon Instant Video and Netflix. The proportion paying for both services jumped from 14% to 18% across the period.
“While Netflix still holds the largest share by far of the paid alternative TV market, consumers continue to shift towards Amazon’s Instant Video service,” said Andy Golub of 451 Research’s ChangeWave service. “As Amazon’s TV and movie content becomes more competitive with Netflix, its popularity is surging among consumers.”
In terms of customer satisfaction, iTunes was the clear leader with a 35% approval rating. Netflix recorded a 23% rating and Amazon and Hulu Plus 22% and 20% respectively. Apple’s iPad took over Blu-ray players as the device used most often to watch streamed content.

Viddy...how many users do they really have?

As someone who's tracked and run Internet video startups, the massive growth of Viddy earlier this year impressed me but also set off my "it doesn't seem right" gut instinct. Now that I'm no longer heads down running www.synctv.com, I had a little time to really dig into this.

So how did Viddy go from 15,000 uniques/month* (quantcast) in March to over 1M uniques/month in April, less than a month later? I've seen this happen many times before, but not in the "create a video and upload it" space Viddy, Tout, SocialCam, etc play in. As interesting, how did Viddy crash so hard only a couple months later? Was it a fad? Did something else affect their popularity?

Video is not like photos. A picture is fast to upload and fast to "consume". Video takes a lot longer to create (at least interesting videos!) and take a lot longer to consume. As anyone who's posted a video knows, it's not easy to create an engaging video your friends/family/social network will actually watch.
So back to my question: how did Viddy grow and then shrink so fast?

I looked at a number of factors, and the most likely scenario I've discovered is this. Viddy's growth happened at the same time as their integration with Facebook's open graph API and when Facebook wasn't restricting how many layers of friends would be exposed to the video. Even better (or worse, depending on who you are), the various user tracking companies (Alexa/Quancast/Compete) seemed to count every single person who got/clicked the video as a Viddy "user". In other words, I upload a Viddy clip I made to Facebook, and all of my friends see this instantly. Then, if they click on the video, my friends' friends could (depending on your settings)  also show up as Viddy "users". As you can imagine, this leads to massive virality.

But should someone who's not even signed up or using Viddy be counted as a user? I argue that the only true users are those who either create content using Viddy's service and/or regularly use the Viddy site to view videos. Someone who get's a video they know nothing about shouldn't be counted as a Viddy user, should they? At the very least, knowing how many users are really using the site vs users who just got the video because of Facebook's API implementation, is important to measure Viddy's true growth.

Now how about that steep drop off? Well, interestingly enough, it also coincides with Facebook's tightening of its API virality. Viddy videos will now no longer penetrate several layers of "friends of friends", and voila...Viddy is back to a steady state of 60,000 uniques/month for the past 3-4 months.

So hats off to Viddy for getting investors to plow money into them based on...um...creative user numbers. They have a lot of smart people there, and now have a large rainy day fund. I'm sure they'll reinvent themselves and get those numbers up again. I just hope that next time, the growth comes from actual users of their service, not these amped up numbers.


*Yes, I know, all of these tracking services are inaccurate, inconsistent, etc. However, used as a rough traffic guide, they do the job...somewhat.

Citibank: politics before performance

I've seen this happen at growth-stage startups. A CEO/Founder focuses on getting the job done and not on politics. Out of jealousy/spite/ego, another Founder/Investor plays a political game, rounding up the board to push the CEO out. Deals are done, favors exchanged, and in the end, the wrong decision for the shareholders is made at the altar of political back room deals. 


Yes, no one should shed too many tears for Vikram Pandit, the ousted CEO of Citibank, but he accomplished a remarkable financial turnaround, paid back the gov't, and dealt with a large overhang of bad debt. After the earnings call, the management team planned to celebrate the good results. But... 




From the New York Times on 10/25/12: "Vikram Pandit’s last day at Citigroup swung from celebratory to devastating in a matter of minutes. Having fielded congratulatory e-mails about the earnings report in the morning that suggested the bank was finally on more solid ground, Mr. Pandit strode into the office of the chairman at day’s end on Oct. 15 for what he considered just another of their frequent meetings on his calendar.


Instead, Mr. Pandit, the chief executive of Citigroup, was told three news releases were ready. One stated that Mr. Pandit had resigned, effective immediately. Another that he would resign, effective at the end of the year. The third release stated Mr. Pandit had been fired without cause. The choice was his."

An even more brutal message was given to the COO, John Havens. According to the NYT: " 'Vikram has offered his resignation, and we would like to give you the opportunity to offer yours,' a board member said, following a script prepared by the board’s lawyers, according to several people with knowledge of the meeting."

Of course, it now comes out that the Chairman was passed over the CEO spot he badly wanted. Then he spent months building a case, bit by bit, on why Vikram should be pushed out.  Hmmm...Shouldn't the Chairman have spent time helping the CEO and figuring out the mess that is Citibank instead?  Yeah, I know...naive thinking that a high level exec would actually try to improve the company he's in charge of vs play political games. 

So back to startups. I've seen this game played all too often. Replace Board with VC/Angels, and CEO with founder. You get the picture. Sometimes kicking out out an intransigent founder may be the last resort, but I see this played out many times, only to have the company implode under the supposedly "pro-CEO". Sometimes, the founder even comes back to save the sinking ship. I"m sure Steve Jobs would have a thing or two to say about that!

Don't blame the market...it's oversight

In the end, my feeling is that market forces & capitalism didn’t fail us at all. Like Adam Smith recognized (and is conveniently overlooked by market fundamentalists, especially the chicago school of thought that so many republicans and clinton seem to adulate), the invisible hand needs close supervision. The markets did what they do best: create the best & fastest path to riches given the legislation and took advantage of the outdated regulatory system. 

I can’t blame the unethical & purposely deceitful workarounds wall street perpetrated in the name of short term self-enrichment at the expense of society. That’s what they will always do & we should expect it. Anything else is just naïve (like saying they will self-regulate: HA!). It’s governments responsibility to lay down intelligent (and admittedly imperfect but better than the alternative) rules to account for the greed & to make sure that the negative externalities are taken into account. Same thing goes for pollution, alternative energy, etc. 

An example of this is: several years ago, we should have had government state that by 2011 it will have 50% hybrids in its fleet. That would have encouraged manufacturers to develop hybrids since they know there is a guaranteed market. How they get there is up to the market, which is what it does so well. Another example: instead of the dumb-ass tax rebate we just had (which did near nothing), direct the tax breaks to education or some goal we want to achieve. The tax rebate simply went to TVs, electronics, etc: in other words usually a foreign made product that only produces at best a short term lift. Education is local & would pay back many times over by investing in our people. Market: how. Government: what.

What is clear to me (and has always been) that markets left to their own devices with little oversight will create monopolistic “winner takes all” systems that squeeze others & enrich the owners. These systems may be efficient but tend to be good for the owners many times at the expense of society/consumers.

Post literate society

I heard an interesting term on the BBC a couple of months ago and it's struck a chord. I can't get it off my mind, so hopefully writing this will purge the term for a while. The BBC reporter was commenting on the explosion of video all around us, esp on the internet. He said (paraphrase): "We are living in a post literate society".

Post literate? His point was that we went from pre-literate (in Western world), to literate (books), and now post literate (video). So I thought about the implications and whether I agreed. Some observations:

1) Video is more immersive, closer to how humans naturally interprete the world.
2) Books (generally)trigger more imagination since we visualize text. It's more "active".
3) Humans tend to retain visual images longer than text, especially children.

As an avid reader, the thought of a post literate society is a bit depressing. I'd like to think that reading is somehow more complex, sophisticated, and intellectual. Video is "lazy" and reading is "better". However, as Salman Khan shows in his TED presentation, having video as an additional element in education can make a huge difference. Video can tell stories in intimate ways and show us animations (like the formation of the solar system I just saw with my daughter).

Whatever the "cost" of having video encroach on reading, we need to recognize it also has it's own intrinsic value.