Anyone innovating?

1 10 2015

First off, I’ve been a bit quite on the blogging front for a little while – sometimes real work takes over and it’s hard to get motivated to post a meaningful blog….

So, I’ve sat through two rather dull technology events the past few weeks. First off Apple really did disappoint with their new releases, nothing new there at all. No, tell a lie, I did quite like the pressure sensitive screen feature on the new iPhone. It’s quite innovative, but its value is really hard to justify. Would I upgrade to the new phone because of that? Nope, but that doesn’t mean millions of “fans” wont, quite the contrary really. The second event was that of Google. Now this was awful. Dull devices and nothing new at all….

One thing though that I did notice in both events is the desire to copy innovation from a company that apparently is uncool and hasn’t innovated since the late 90s…Yeap, Microsoft. It seems that Microsoft new approach to a single OS across all devices is starting to pay off. Mix that with the Surface Pro range of devices, and there is a real movement in the market towards “hybrid” tablet/laptops. This is clear to see by the launch of the iPad Pro and some new Google option (its name is awful and reminds me of a fax machine). The Google copy though is blatant. The device looks like a Surface Pro all day long….

Why copy?

It seems that people are starting to realise that they can have a single device that acts as their tablet, but can also be their tool of choice when it comes to productivity. Business IT departments have started to realise this and now it seems are some of us consumers. I myself use a Surface Pro 3 to replace my laptop and my work desktop PC. It works brilliantly in both environments, especially with the Docking station. I also use it as my “tablet” machine that does find its way to the sofa – where it is of great use like most tablet devices.

With this in mind, both Apple and Google have to be aware that maybe “mobile” only tablets have a shelf life, after all, can both companies really expect businesses and consumers to continually shell out for multiple devices when one could do the job of three? I think there is an awakening that actually, Microsoft has been the innovator in the past 18months, and with its Windows 10 OS and launch of Surface Pro 4 coming any day now, that there could be a real market shift away from dumber tablets towards tablet/laptop hybrids. If that’s the case, Microsoft is a long way ahead of the game here, with both Apple and Google only offering lightweight mobile Oss on their devices.

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Will HCE revive NFC mobile payments? No.

18 03 2014

As of late there has been a lot of press coverage regarding HCE (Host Card Emulation), which in a nutshell allows devices to make NFC based mobile payments without needing the mobile operators secure element on the device. Both VISA and MasterCard are backing this new approach, in the hope that finally, they can kick start mobile payment offering with NFC, effectively locking merchants back into the card schemes for mobile. Google is also heavily behind HCE, because they need a way of getting their Wallet distributed on actual devices and networks. Google has already had a rocky time with NFC, supporting it, then ditching it, only to now attempt to bring it back to their offering through HCE.

There are many companies pinning their hopes to HCE, touting their solutions and the promise of mobile payments. But is HCE really the saviour of NFC based mobile payments, or is it simply the same old issues dressed up in a new party frock?

 

Secure NFC in the cloud

Effectively HCE allows secure details to be stored in the cloud. This makes a lot of sense if you want to bypass the mobile operators and effectively quash their mobile payment offerings (ISIS in the USA and WEAVE here in the UK). But does it actually add any value for the consumer or for the merchant? Is there actually any real difference? The answer is pretty much no.

If you are using the solution in its pure form, then your phone (no matter how it gets details, from the cloud or a secure element on the device) will broadcast card scheme data to the merchant’s terminal. No matter what that data is, it is being broadcast and is data that is used to complete the payment. This is actually very powerful if you are looking for mass distribution, potentially. I say potentially because though there are businesses accepting NFC contactless payments, they are still small in their numbers. In addition, the merchant still has to opt into accepting contactless payments – and it is worth noting that contactless payments in pure card form are not the same as contactless payments using your mobile phone. In many cases the “handshake” is different requiring businesses to invest yet again in contactless for mobile phone. Do we really think SME owners will continue to invest in technology for zero benefit to their business?

So does HCE make any difference here? No…

 

Availability

HCE and NFC are only available on Android based devices (and not all of them). Though Windows Phone 8 supports NFC, it is locked very much into the Secure Elements, so no HCE support there. If we then look at the most successful mobile smartphone out there (iPhone), we should note no NFC or HCE support (and it doesn’t look like there ever will be). So with this in mind, you are only available to customers on 1 of the top 3 mobile platforms. Though many will say that Android has the lion share in the mobile world, it’s worth noting that they are a distant third in their share regarding mobile web being used. This indicates that the majority of Android users are not embracing all the features on their smartphone, and as such, these probably are the same users that will not look to be early adopters of any form of mobile payment.

Essentially, the consumer base that could potentially look to HCE and NFC payments is quite limited.

 

The customer experience

Many articles will talk about adding value into the mobile phone payment option, but when we do this, any distribution advantages you may have due to card schemes and contactless being accepted vanishes. You may ask why, but the fact is that the acquiring banks (the people who actually operate those contactless card devices) will not be accepting data regarding a discount, or loyalty scheme. To be blunt, they simply can’t accept that data as it’s meaningless to VISA, MasterCard, the Acquiring bank and the customers bank. So in order to accept that data, the mobile payment provider needs to sign the merchant up to their particular version of mobile payments, in order for them to enjoy any added value. Therefore the argument for NFC as an open loop environment using card scheme rails doesn’t fly.

So what does HCE bring my customers in terms of experience over what they have currently with a card. The answer is nothing, unless I buy into a particular vision of HCE by a particular company, and if I am going to do that, I may as well look at alternative payment solutions, that save my business money.

 

Payment processing costs

Do these decrease with HCE? Nope, the poor old merchant is still paying full wack for their card processing, and maybe in some situations more. They will be paying for more expensive NFC based infrastructure on a monthly basis too, so mobile is now costing businesses more to accept. That’s simply not good news for any business owner.

 

HCE a game changer? Nope…

To make mobile attractive to businesses it must be cheaper for businesses to run, maintain and it must bring some added value to their business. It also needs to be available to the vast majority of my customers, so that means available to the top 3 mobile operating systems (Android, iOS, Windows Phone). HCE simply doesn’t stack up on any of these basic business needs. It’s more expensive and provides no added value.

Mobile will no doubt be a game changer in the payments world, but it will not be changed by solutions that look to the same old rails dressed up in a pretty new mobile dress. It will be companies that offer real added value through mobile services, and companies that deliver savings back to businesses with large reductions in payment processing fees.

So if you are a small business, look to see what alternative payment solutions out there provide you with the added value and services you want to move your company forward, helping you increase sales and increase your profitability? It’s an exciting time, and a chance for businesses to break away from the old and embrace the new more productive world.





Payment Security. Has it been forgotten?

8 11 2013

People may think I’m not being serious with this post title, but I really am. These past few weeks yet more examples of security not being taken seriously in the payments market have emerged. It started with an article I read on Finextra regarding Google bypassing the secure element on an Android phone for NFC based transactions. It’s the launch of HCE (Host Card Emulation).

 

HCE and NFC

I’m not going to go into too many details and technicalities about it, but my own take on the whole situation with HCE, NFC and Google is that Google and the card schemes are changing the rules in which payments are supposed to be made. They are doing this to better fit with their own solutions, and to potentially lock out ventures like ISIS in the US and WEAVE here in the UK and at the risk of security.

There are strict reasons behind PCI compliance and the use of EMV (secured chip and pin to most of us) and it seems that these are now causing issues for Google and others, so instead of looking for real solutions they change the rules. A great take on this can be found on finextra here

 

QR/Barcodes in transactions

These are the choice of many payment solutions out there, including my own companies CloudZync with Zwallet. However, QR and Barcodes are easy to create, especially static ones, so using these for passing payment information has to be taken into consideration, and I would never allow an authorisation of a payment to be made just because a valid code has been scanned. Yet I have witnessed many solutions out there now that do this…

With Zwallet we always make sure the consumer is involved in the authorisation process fully, so we keep intelligence in the process at the cost of 1 second in the transaction process. For me, 1 extra second making a payment is well worth it to aid in security. (I would like to point out that Zwallet transactions are still dramatically quicker than typical card based transactions, even with the added 1 second for security).

 

Security underlying cause for concern?

So what is the underlying cause of security concerns with payments? What really causes so much effort to go into technology a trying to patch security issues or catch fraud post a transaction? The answer is the actual card scheme itself and the infrastructure behind it.

Let’s be real. Cards are amazing. For the last 40 years they have steadily dominated the way in which most of us pay for goods and services. But, has security increased much in that time? A little is the answer. There is a lot more technology backed behind it, but fraud is back on the rise again, so we must ask ourselves why. And the answer is simple, cards were never designed for the digital economy. Everything that we do to utilise the card infrastructure is a cludge, a patch/hack in tech terms. All this technology and security to try and secure something that is very insecure, 16 digits on a card, mixed with two dates and 3 digits on the back.  If we lose control of those details then a fraudster can do whatever they want with our cards, and that’s why so much is invested in fraud detection post a transaction and so much is invested in risk management.

My fear is, while card based transactions using Chip and Pin remain ok, the way we use cards digitally isn’t so secure. Throw into the mix mobile payments and companies actively trying to utilise card details in their solutions to make payments, and holes start to appear. In essence, trying to use technology to secure something that by its nature is not secure causes all sorts of issues. And though great lengths to make things much more secure are possible, the costs behind these rack up.

No matter how you try to secure card details, or to what lengths you go, the fact remains that the infrastructure for cards requires those simple card details, and fraudsters are becoming increasingly intelligent, innovative and capable of getting their hands on those details and using them.

 

The security solution

The only real secure option is to start with a blank sheet of paper for payments and wake up and realise that the digital economy requires payments to be carried out on an infrastructure that is designed for digital transactions from the ground up. It also MUST include more human elements in the process and not just require everything to be automated.

Real intelligence still remains with the consumer and the business. By removing them from the process more and more, we may make the payment process a little quicker, but we increasingly make it less secure. After all, the process of me having to know my PIN to make a payment is far more secure if I have lost my card, compared to just waving my card in front of a reader and making a payment.

These are the reasons behind the security approaches we have at CloudZync, the reasons why we make sure the consumer has to actively be involved in the purchase process and actively have to authorise each and every payment. If we remove them too much, then there are more gaps for fraudsters to exploit.

I’m not saying everything can be 100% secure, it simply can’t, and intelligent innovative fraudsters will always find a way to exploit processes and technology, but we must actively make it as hard as possible, and currently, in the race to stamp authority on possibly the payments method of the future, security seems to be being overlooked…That is a great concern of mine, and should be a great concern for each and every consumer out there and business owner…





September, a big tech month…

4 09 2013

Ever since Apple started making big announcements in September a few years back, it’s become increasingly popular to be the month of big tech news. Samsung copied Apple a few years back and started making their announcements just a few days before Apple, and often September is the month we also get some form of announcement from Google and or Microsoft. September 2013 has been no different.

 

Samsung announcements

These have been pretty odd affairs in recent years, and to be honest, I’m not sure they have been that successful. This year we are talking wearable technology and specifically smart watches. Are these the next big thing? Hmmm. I’m not entirely sure, if technology on your wrist was really going to take off, I think my Casio watch with calculator was quite a “killer” back in the late 80s. I heard a great quote today in relation to wearable technology, “people only wear something that looks good”. That means it needs to look equally as good as something like a Rolex, Tag or Omega watch before it really really has appeal. Let’s face it, no matter what the best looking tech company in the world has to offer (which is Apple not Samsung), I’m convinced tech on my wrist won’t get better looking than that produced by brands like Omega.

Obviously there will be a market for wearable technology, I just don’t feel it will be something the masses adopt, especially when we think how much bigger phones are getting (not smaller). Wearable technology like a watch will not replace my smart phone, so why would I have it?

If you are thinking about Google glasses for example, then again, this kind of tech has other pitfalls. For one, if you already wear glasses I’m not sure the tech even works for you. If you, like me, hate having things distract your eye, then again the tech is not going to be for you. Throw on top of that the fact the glasses don’t look great (and there is a massive market in laser eye corrective surgery so we don’t have to wear glasses) I start to think a lot of this is tech for tech sake…

IMHO, wearable tech may have a place, but its not for the masses and no one should be seeing this as the future and the replacement of the phone, not at least a fair few generations (try 15)…

 

Apple’s big do…

Every September the online media get excited, and I read so much about what will Apple deliver, and what we expect from Apple, and oh, this is what we think this invitation means…I am still amazed at how much coverage a simple invitation gets, and that’s before anything has been announced. Only last night I caught some tech news on the TV and the breaking news was the Apple invitation that had been sent out with colour spots on it! I mean, really, is this massive tech news, especially compared to what really was the ground breaking story of the month, Microsoft purchasing Nokia!

That being said, we are expecting some new form factor iPhone 5s. Now I am not sure how much new tech, if any the new iPhone will have, but it no doubt will be received with a lot of excitement, that’s what brand Apple receives no matter what these days. I personally don’t think we will be seeing anything major in this latest version of the iPhone 5, some colour options, maybe a little more configuration, but there wasn’t any real innovation with the iOS 7 refresh, so don’t expect anything on the hardware front if the OS didn’t offer anything new.

 

Microsoft and Nokia

No matter what Apple or anyone does in September 2013, the big news must be that of Microsoft purchasing Nokia’s devices division. This is a massive shift away from Microsoft’s original vision, that Microsoft delivers software only, not hardware. This shift may have been on the cards, and for some time – since the Nokia announcing it would go all in with Windows Phone – I’ve been stating it’s only a matter of time before Microsoft buy Nokia.  I think further clues should have been taken from the Surface tablet release. Surface may not be doing as well as Microsoft would like, but it’s been a bold move by them, and is basically a statement that “Microsoft no longer has confidence in OEMs to deliver the hardware and the design to best show off Windows technology”. In many ways I have to agree with this. It should also have been clear that Microsoft would need a devices arm after Google purchased Motorola. That makes Google, Microsoft and Apple now all in the mobile phone devices game, which must be a concern for makers like HTC and Samsung, since they have the hardware but rely on software from other sources. Perhaps they will be moving into the software game (I hope not, but you never know).

It’s also not a bad time for Microsoft to really get aggressive with mobile. It’s had some good news as of late, Windows 8 has gained some traction and now commands a greater market share than Mac OS X, and Windows Phone has moved into 3rd regarding smart phones.

Though Microsoft are now well and truly in the hardware game, I firmly believe that Microsoft will continue to license its software and that Windows Phone will be available to OEMs such as Samsung, HTC and many more, because after all, software is still Microsoft’s core business. What it means though is Microsoft can now ensure there are devices in the mobile and tablet market places that can compete in terms of design, performance and build quality with those delivered by Apple. By ensuring this level of design, it forces OEMs to deliver the same, or surpass Microsoft’s efforts, or simply become irrelevant.

Many people may claim Microsoft is a dying company, that they haven’t done anything in years, blah blah blah and that Nokia is dead and should have gone with Android. To me, these are statements from people who don’t understand the two companies, don’t understand business and require glasses when it comes to looking into the future. These are probably the same people who said Apple is dead only months before the launch of the iPod.

Microsoft is still a massive powerhouse, and don’t think that Windows is a poor operating system. Just spend a few days being totally open minded and use Windows 8, on a PC, tablet or phone. The OS is far from perfect, but it really makes sense. The user experience is very slick, the capabilities of the OS is far more powerful than any of its competitors and Microsoft provides development tools that are simply second to none. Throw into the mix its Windows Azure operating system, its dominance in the business world and you can start to see that Microsoft may know after all how to become popular with the consumer again. If you don’t believe me actually try the OS with a fresh mind. On a mobile phone, the experience is second to none it really is, but I appreciate the look and feel is not for everyone, and nor should it be or ever be. Mobile phones are personal devices, and as such an element of personal taste will always come into play. The big problems for Windows 8, be it on the phone or tablet, is the lack of relevant apps in the market place. Size of the app store means nothing, most apps available on all the platforms are really a waste of time, but what kills Microsoft is currently the lack of “expected” apps. I really believe Microsoft has got to get paying some companies to bring their apps to Windows 8, be it phone or tablet. Only then, once consumers know they are getting at least the same apps on a Windows device will they make the switch…

 

So, Microsoft and Nokia, a single OS with no compromises across all devices, on hardware that is reliable, looks good, performs well and is innovative, that’s visionary, that’s big thinking. Now all Microsoft has to do is win back love from developers (which its more than capable of doing) and it really is back in business with the consumer…Oh, and controlling your own hardware surely will be a big tick in the additional profits column (if all goes well, if not a rather big drain).





iPhone 5: What Apple got right

13 09 2012

September 12th was the big day and Apple finally showed us their new iPhone 5. However there wasn’t anything there that many of us didn’t know about already, such was the extent of leaks leading up to this event.  So far the reaction to the event is one of underwhelming acceptance…It seems that Apple hasn’t been an innovative company for some time now, rather everything they do is playing catch-up with other people’s ideas and innovations while attempting to maximise and squeeze yet more revenue from their current customers. This, Apple does exceptionally well at…

iPhone 5, it got no NFC right at least: Picture from engadget

Catch up on the iPhone 5 launch event here at engadget

So while there are many blogs, articles, reviews out there that show what’s wrong with the iPhone 5, and there is quite a list, I am going to focus on something they did get right, and that flies in the face of all the technology journalists, who on this subject often show they know nothing about technology and or business combined…Apple got it right when they opted NOT to include NFC in their device.

 

No NFC for the iPhone

While many reviewers are saying this is dangerous omission I have to say it’s highly sensible. If you believe what tech journalists are saying, then we should all be making NFC enabled mobile payments pretty much now, and they have based this belief not on fact, rather on marketing gumph from a few companies out there, VISA, Google and a bunch of phone networks. What they all fail to take into account is that customer experience is being put ahead of practicality, security and cost. In the real world, this means most businesses will not be using it.

The payments industry is pretty much in a mess, there is nothing wrong with the customer experience of using cash or cards, yet there is a common belief amongst businesses and customers that they should be able to make payments with their mobile device. This has lead to endless different approaches to mobile payments, almost all of which centre around NFC capabilities. However, let’s just think for a moment. Cards are not secure things; we know this by how easy it is to make fraudulent transactions, especially in a digital age. NFC is not a secure form of communication, VISA even state this in their own Patent applications. So put the two together and you get…A great demonstration of how we can use mobiles to make contactless payments, but ultimately a nightmare for merchants with endless costs and charge backs, essentially fraudsters saying “don’t mind if I do”. No wonder most merchants say “no thank you”….

Other phone manufacturers may have embraced NFC in their devices, but even then, each manufacturer and device OS uses it in different ways. Just because your device supports NFC doesn’t mean it supports contactless payments. We see this mess with Googles own Wallet only being able to support the one bank card, its own pre-paid card having to be pulled and you not being able to use your Google Wallet at a typical contactless payment point. Throw in the fact that the phone carriers want a bit of the NFC action and you can quickly see how messy this environment is. Sure it’s competitive, but it’s competitive because no one is doing the same thing and everyone is arguing over who owns what part of an NFC based transaction. Even Microsoft’s Windows 8 phones support NFC based transactions, but you need to get yourself a secured NFC SIM with your card details on it. Not exactly lending itself to you simply adding all your payment cards to the device. But this is because the phone carriers want some of the payment transaction action, and it’s a way to stay friends (at the detriment of practicality, customer experience and security).

I haven’t even spoke about costs of supporting NFC for the merchant, which essentially means new hardware, firmware, support and maintenance for that hardware and perhaps updates to their POS if they want to distinguish between a chip and pin card transaction, signature, card not present, or contactless payment, even mobile contactless payment.

So while so many seem to be singing the praises of NFC and perhaps mentioning concerns that the iPhone 5 doesn’t have NFC, I would say no NFC for Apple is a wise move. Apple usually only embrace a technology once it really has proved itself, so not to deter from the customer experience of using their devices. NFC is no different….As a reviewer of the iPhone 5 there are many areas of concern, lack of NFC is for sure not one of them…





Grasping the tech giants business models

20 07 2012

It’s rare that I bother to post about business models, economics or company balance sheets, and that’s simply because I don’t find them half as interesting as what’s going on with technology or methodologies. However, for the past 12 years these sorts of things have taken up almost 50% of my working time, and can be interesting from time to time, especially when you look at the tech giants, Apple, Microsoft and Google…

In an earlier post I blogged about the worrying trend for “free” services from the web, and how that business models that were built purely on advertising can be fraught with danger, and essentially only work well for the very few (for Google it works massively well).  However, today I want to look at Apple, Microsoft and Google in terms of their business models, how they differ, where they are similar and their financials to understand the companies better and to understand where we could be heading…

 

Business model

Each one of the big three has their own unique business models when you look at them in broader terms. Apples business is about delivering premium luxury devices mainly, running them with its own software and being tied into its own ecosystem (pretty much exclusively). Apple doesn’t really provide any software services, or software that we buy and run on any old device, rather everything is focused on its own platforms and own devices. One of the big benefits here is if your brand is strong (and Apples is very strong at the moment) then you can command premium rates and rake in larger profits because you control everything, the software, the hardware, the ecosystem even to an extent the distribution channels. This model is a massive earner potentially, but relies purely on your brand being un-equalled in the eyes of the consumer.

Microsoft on the other hand is purely software and software services (well almost purely). Microsoft delivers is software to consumers and businesses alike, it charges licenses for these and subscription fees for its services. Anyone can purchase Microsoft software and services, and most of them will run on any platform, including Apples MAC and iOS. This business model relies on your software and services delivering to the customer’s requirements, but does open up the enterprise as well as the consumer. It also allows Microsoft to enter so many different software market areas, and there pretty much isn’t an area where Microsoft isn’t present. Though each individual sale is nowhere near as profitable as an Apple sale (as Apple sells the hardware too) it is none the less highly profitable and due to its diversitiy, allows Microsoft to support other areas of its business with ones that are doing well. These types of services, aren’t quite brand dependent, rather are feature and function dependent.

Then we come to Google, Google is all about marketing, selling you a marketing services via its search. Everything else Google does is related to gaining more information to increase the value of those marketing services that it sells to SMEs and large corporations. This is again a very profitable business model, but depends 100% on people using your search services, in order to show value for your marketing services. If Google’s search is seen to be not as good as a competitor, or looses market share, then the value of its marketing business also drops away – which puts pressures on every other aspect of the business.

So do we see any cross over? Well the companies do share common grounds, and that is in the entertainment and content consumption area. At the moment, Apple is a little more mature here than the others, but essentially both Microsoft and Google are playing catch up in delivering content through their ecosystems down to their customers. Microsoft has marketplace (which is still branded Zune in some areas), Google has Play and we all know Apple as iTunes.

In addition, both Google and Microsoft appear to be now dabbling in the hardware arena a lot more too. You could argue Microsoft has always dabbled, especially when the company produced the modern mouse as we know it, keyboards etc in the early days. They also deliver the XBOX and now, perhaps, Surface tablets too. So is Microsoft trying to increase its revenues by controlling hardware too? Probably not, though XBOX is now a profitable business for them, this exercise is about showing Microsoft products can be related to high end devices. Google though has got into this more seriously, delivering their own tablets and purchasing Motorola. I personally think this is more about ensuring its OS is running on devices that tie back to its search than about actually competing in the hardware arena or with Microsoft directly for OEMs love…

 

Experiences and current position

The Apple business model relies on belief that their brand delivers a better experience. This is the situation currently for the masses; hence they are the biggest player here in many ways in mobile and tablet. However, this wasn’t always the case. The Apple experience was poor back in the 90’s, I’m sorry it really was, not matter what anyone says. I remember using them at Uni and I will be honest, the UNIX machines delivered an experience I, and pretty much everyone else, agreed with was better than the Apple. Don’t be fooled that people flocked to MS just because, we all used Windows 3.11, 95, 98 etc because it was a far superior end user and business user experience (even with the blue screen of death).  You could also do so much more with the Windows based PCs, networking, support more peripheral devices etc etc.

Apple didn’t die though; instead it reinvented itself with a great experience on a tiny device, the iPod. That experience was and still is, far better than its competition, and it was that experience that led to us consumers looking at just what else Apple delivered. Apple really seized the day here, and improved everything they do 100%. Their devices always looked funky, but now they looked really top of the range, sleek, fast and designer. Throw in their improved operating systems (and a change at the core) and things started to look up. The iPhone moved this on from the iPod, and in many ways Apple defined what we see as a smart phone today (though they weren’t the first, even Nokia had prototype devices that looked like and behaved like the iPhone, they just were stuck on Symbian and never got them to market – shows poor forethought that). The iPhone experience was second to none (even though it lacked in features at first), and that experience is what drove customers to Apple. At the same time, people were getting fed up with the blue screen of death, and the viruses that now plagued Windows machines (and you can’t blame them). In many ways the Apple experience was now superior to that of Microsoft’s. With that experience and belief in place, the Apple business model really did and does flourish…

But are things starting to change again? Well maybe not just yet, but there is a real perception that they could, with many pundits and market watchers believing that Windows 8 across all devices could start to show a better experience to that of Apples on all those devices. Who knows, if that does happen then the pendulum will no doubt swing back to Microsoft away from Apple. The difference between the two companies though is their ability to thrive through poor consumer sales or customer perception…

Microsoft’s brand with Vista hit a real low. Yet the company still managed to rake in big profits, and that’s because of the numerous other businesses Microsoft runs. Microsoft has a highly successful business and server division, and that income keeps them strong even at a time of Vista. Essentially Microsoft can weather storms better than anyone, due to their business model and the diversity of their software and services. If indeed the masses of consumers start opting for devices running Windows 8 over Apples own devices, then Apple will be hit far harder than anything Apple has done to Microsoft in the past 10 years. It’s interesting that both Bill Gates and Steve Jobs see/saw Apple as a premium product and the masses opting for Windows devices, if this again becomes the case in mobile and tablet, then the quarterly incomes that we see posting from Apple will be slashed, none the less they will still operate at a very handy profit on every device they sell (something Google must learn at some point you would think).

 

Financials

By far and away Apple rules here. Though Q2 figures aren’t out for 2012, Q1 figures for Apple have the company posting record revenues of $46b, these up from $26b in the same quarter a year ago. That shows that Apple is moving from strength to strength and quickly. 58% of those revenues come directly from device sales, keep that in mind, such as iPhones, iPods, iPads and Macs. Almost all devices Apple produce have defined the market and command massive market share, with the exception of the Mac, which in desktop market share is a tiny player.  What’s interesting is that Apple doesn’t have any areas where the company loses money, and that’s why it’s such a strong company.

In second place we have Microsoft with its own record $18b for Q2 2012. Though the company had to write off a $6b investment in an advertising company (which meant Microsoft’s first ever loss), the company looks to make around the $6b each quarter, almost none of which comes from device sales. Microsoft is sitting on assets of excess of $121b up from $108b just 12 months ago so it’s a rich company that is growing in every area – though some are running at a loss. Microsoft makes money from a number of software and services divisions, but these also end up supporting many other software and service divisions that run at a loss. Bing for example has never managed to get close to profit, yet Microsoft plug away at it, and even Bing is heading in the right direction. Microsoft does play a very long game with these divisions, and it has the cash reserves and the income to be able to do that…

Finally we have Google, who also posted record quarter revenue, this time of around $12b. Interestingly enough Google makes no money from so many ventures, but its core business model allows them to still operate at a nice profit and command such sales. Almost everything Google makes comes from marketing…

 

Long term projects

Microsoft has always led the way in R&D investment, and it seems to be ramping this up. Many could argue the company has been stagnant for many years, which could be true. However, Apples re-emergence has meant Microsoft needs to up its game if it wishes to remain a big player in the home, and that’s exactly what they appear to be doing. Microsoft plays a very long game, and is prepared to give its businesses a very long time to move into profit, think XBOX and the entertainment divisions which now operate at very healthy profits, that wasn’t always the case. Bing may be losing Microsoft money each quarter, but it is losing less money than it was each quarter. The whole thing here is that Microsoft is involved in so many different areas which many of which aren’t profitable…Yet…

Apple on the other hand has been very fortunate. Not only were they fortunate to survive (with some cash from Microsoft there too) they stumbled along for many years offering not much innovation and poor experiences. However, that all has changed dramatically. Since the iPod and the additional revenues that brought in, Apple has invested and innovated, carving out not 1 but 3 market places for itself to dominate.

Google has always been the golden company of search, however mobile is a real challenge for them, delivering their marketing services down to devices. Here Google search isn’t as strong as it is on the desktop or as effective at delivering adds, so Google has to have a strong mobile presence with Motorola and Android to safeguard its core business.

 

Conclusion

All the tech companies are growing, and that’s due to us consumers demanding more from the internet and from our devices and software. The mobile and tablet marketplace is quite new, and it’s where the tech companies need to do battle, and will do for the coming years.

Mobile for Apple is the linchpin of their business, the iPhone and the iPad command massive market share and is charged at a premium. Any dent into the perception of the user experience or brand itself will hurt the company massively since it depends so much on device sales.  Likewise new competitors in this market place who gain market share from Apple will have a big impact on Apples financials (though Apple is simple so strong at the moment it’s hard to see).

For Microsoft, it must grab more market share in mobile and tablets to ensure it remains relevant in the consumer marketplace. Though Microsoft is strong in so many business areas, such as business and server, it is aware that for the consumer marketplace, it needs to get a good hold in mobile and tablet, hence the big push with Windows 8.

Finally, Google needs to retain a large market share in mobile to ensure it grabs enough user data and can deliver its own core marketing services to users. If it cannot do that well for mobile, then Googles business model becomes very fragile indeed.

I personally think that the next few years will be interesting. I’m excited by Windows 8 and the one OS for all devices – to me it makes sense and as a consumer that one experience across everything, that seamless usage between all those devices while not compromising on the things I want to do with them makes a compelling case and delivery of a better experience. If Microsoft gets it right, and its marketplace store continues to grow and deliver the content we as consumers want, then Microsoft will no doubt be delivering a superior experience and will start to grab market share in mobile and tablet. This will lead to more record quarters from MS I’m sure, and that will in turn lead to far more R&D and new divisions it starts that run at a loss for a long period of time too, until they too make a profit.

Apple has, and will always have, a strong loyal brand following, so though I don’t see Apple holding onto its massive market share in mobile and tablet, its future remains very bright. Apple will command a premium and will have customers flocking for its products. The company makes very good profits on all its devices and most of its businesses, so the company seems set for many years to come.

My concern is for Google if I am honest. Though the company is growing, the mobile war is far more important to them than anyone else. If Android loses market share, then the number of people relying on Google services for search will drop (especially as more of us use our mobiles).  This means their core business revenues will take a knock. The Motorola deal for Google is so important, if Google can make money from actual devices, while gaining greater data and ensuring its browser and search services are delivered to devices, it can retain its core revenue. The problem is, their business model relies on Android success, and if companies like Samsung start selling more Windows Phone devices, then Google almost becomes dependent on Motorola’s success. If that is the case, has Google got time enough to try and build that brand to compete with the likes of Samsung, and more importantly Apple?





Will Mobile kill free services?

31 05 2012

Sorry to be blogging about Mobile again, but at the moment it’s my main focus of work….In this post I want to have a quick look at the problem mobile presents to companies that live, and potentially die based on advertising revenues.

 

The advertising model

The biggest player in building their business solely on advertising revenue is without doubt Google. Almost everything it does is based around gaining more information on us users, so that it can effectively deliver adverts back to us in a better fashion, so we are more likely to click on them, and Google gets paid. The more clicks, the more Google earns and can even charge. It’s this model that allows Google to deliver pretty much all of their services, and software (Android springs to mind) for free, all funded by charging for adverts. Don’t kid yourself that Google delivers services for free because it’s a loving, don’t be evil company. Most of the things Google deliver for free are there to help Google gain more data so they can advertise more effectively. Mobile is a great example, and one of the reasons Google purchased Android, so they had a mobile presence to locate us and advertise based on geographic locations.

Google isn’t the only company that lives by charging for adverts, there are many businesses out there, small and large, especially online, that make their money mainly from delivering adverts. How many times do you go to a website and there are adverts delivered on it? How many times do you read a blog with adverts delivered on it? Quite a few. Even Facebook only makes money because it charges for adverts that are delivered on the website to us users.

So what happens to companies if they cannot effectively deliver adverts any longer?

 

The Mobile Problem

Currently Facebook is becoming rudely aware of this problem, so much so that its newly floated stock is now trading almost $10 down on its launch. Why? Well it’s all to do with the company’s ability to monetize and take advantage of its 900m user base. You see, on Facebook the website (used from a desktop) we have adverts constantly being shown to us. These are tailored ads, based on what I like, what I talk about, my own personal status, and as such Facebook can charge for these. However, if I use Facebook on my mobile phone, these ads simply aren’t there. The concern is then, with so many more of us using our mobile phones as our primary device to access the web that companies won’t want to pay for adverts if no one is able to see them. This basically means Facebook can no longer deliver ads effectively.

This problem isn’t limited to Facebook. Think of those free apps we have all downloaded that have ads being displayed. They are free because the ads are paying for them. But how much space do those ads take up, and typically you can only see one single advert. The problem is that ads jar the mobile user experience, they don’t fit in well and the user finds themselves scrolling to see the actual content they use the app for. I for one have un-installed 5 or 6 apps now where I simply got annoyed with the adverts.

Don’t think though Google is exempt here. Using search on your mobile is fine, and Google still can display its sponsored links there, however, a chunk of Google’s revenue is displaying ads on other peoples websites, blogs etc. As more of us turn to mobile to access the web, these adverts start to disappear, and therefore so does Google’s revenues from these ads. The next mobile problem is that many of us prefer Apps over a browser experience on our mobile phones. This means we start to not even search using websites like Google.com, rather we use an app. I for one use the Bing app, the user experience is far better than visiting the mobile website version, and it integrates with other tools and functions, such as QR code scanning, voice and local scout (which delivers search results local to me and includes such things as local restaurants, points of interest etc.) This means the only adverts I have any chance of seeing are those sponsored links that come back in a handful of searches.

With all this in mind, can the likes of Google even see revenues falling as it too struggles to deliver ads down to mobile devices? Sure, Google has a big enough market share of search to survive, but can it charge enough to then keep subsidising so many of its ongoing projects, and even worse, the number of failed projects that have cost millions which are raking up?

 

End of free services?

We have got used to so many free services online, Search, Social Networks, watching videos etc. All these things cost money, and currently so many of them are funded purely by the ability to deliver adverts to us online. Mobile really does threaten that model, if you can’t successfully deliver a number of ads down to user’s mobile device, then why will a business advertise with you? If revenues start to fall, then how long is it possible for companies to make losses on all these free services? Google subsidises everything it does based on adverts, but if those revenues can no longer support everything Google does, will we start seeing services getting switched off, or having to pay for them? No doubt Google search will survive, but the question is can Google afford to deliver everything else it does for free?

For the likes of Facebook, the mobile threat is even greater; it really does present a problem. Keep in mind that if this is true of Facebook, a company with some 900m active users, then it will be for any business that is built on advertisement revenues. Mobile really could be the death of free services online, unless companies can figure out a new way to deliver adverts back down to our mobile devices. That’s tough, especially since ads ruin the user experience currently. At the moment, mobile could be the grim reaper for so many free services.

…We shall see….