[Product] is [not] an [incumbent market leader] killer

I think I summarized a significant number of headlines.  I find these extremely unuseful.  I agree it’s a good idea to compare a new product to an old, incumbent.  However, what is not useful (to me at least) is to compare them in a black and white modicum.   It’s most prevalant with two products –  Google Search and the iPhone.  Every new company that has focus on search is compared to Google, and labeled as a Google-killer, or not.  Cuil was victimized by this.  Wolfram and Bing are newer examples.  For the iPhone, it’s the Blackberry Storm or the Palm Pre.

While most of these companies didn’t mind the publicity (at least before it started), it’s not fair for anyone involved.  the iPhone and Google Search were paradigm shifters.  When both came out, they transformed user behavior, and forced others in the market to follow suit.  The fact that we have to label something an x-killer means that it probably failed at killing x because it instantly reminds everyone of x.  Did anyone call the iPhone a Razr-killer?  Or the Google an Altavista-killer?

The other issue – not being a killer does not preclude success.  I would have a legitimate argument that Verizon is doing better than AT&T with the Storm.  Verizon sold 500,000 units the first month, and 1M units in the first two months (compare that to the iPhone 3G, which sold 2.4M in the first three months).  Verizon, for one, probably pays a significantly lower amount to RIM than AT&T does for the iPhone exclusivity.  Second, the margins for the network have to be MUCH better on Verizon.  Check out the recent AdMob metrics report – while  RIM represented 17% of smartphone sales, they only represented 9% of HTML traffic measured by AdMob.  Compare that to Apple – 8% of smartphone sales with 43% of the traffic.  The actual difference is probably worse – the report uses 2008 sales data as a proxy of  current market share.  Anyways, this defines success from the network perspective, not the consumer perspective, but I think it’s important that we keep that in mind (and as a consumer on AT&T’s network, I can tell you that more phone sales, especially iPhone sales, is ruining my experience and is about to drive me to another network).

One interesting article to check out – apparently we did miss that Google was a killer until it was already popular.

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Hybrid Car Sales Trends

I was listening to the Forum on KQED (our local NPR affiliate) yesterday, and they started talking about gas prices and vehicle demand.  One of the guests on the show discussed consumer behavior, and how it changed as gas prices changed.  Specifically, she stated that compact and hybrid vehicle sales dropped with changes in gas prices – she was adamant about this.  So I looked around for some data and found the following post somewhat useful.

In the article, they claim hybrid sales dropped 45.5% in April 2009 (year-on-year, compared to April 2008).  Pretty shocking headline.  They even show the percentage of hybrid sales of total vehicle sales, but it’s quite useless.  So I took their hybrid data, and compiled it with two government sources, NIPA for auto sales, and EIA for gas prices.  Looking at the raw data, I can see how the KQED guest could look at hybrid sales and be quite disappointed at consumer behavior:

Hybrid Sales Compared to Gas Prices

Hybrid Sales Compared to Gas Prices

However, it’s critical to measure the percentage of hybrids COMPARED to auto sales.  That seems like common sense to me.  Here’s the graph:

Hybrid Percentage Compared to Gas Prices

Hybrid Percentage Compared to Gas Prices

The second graph paints a significantly different story.  Auto sales increased in early 2008 as gas prices began to increase, and then dropped as gas reached its peak.  Not sure what explains the drop in hybrid sales – though it could be an anomaly, or it could be that non-consumer sales persisted through the peak and most of these are non-hybrid sales.  Either way, it doesn’t seem like there’s a ton of correlation between the data.   We often hear about how consumers react to market conditions with immediacy – yet in this case, it’s just not true.

PS – if you’d like the raw data, please email, happy to send it over.

Update:  Thanks to a coworkers suggestion, I derived the correlation coefficient between the two graphs.  For the entire period, the correlation between the percentage of hybrid sales compared to gas prices is .64, or moderately correlated.  However, the hybrid market was not mature in 2004-5, so it’s a bit inaccurate.  Comparing to 2006 onwards, the correlation coefficient is .25, i.e. there’s no correlation whatsoever.

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Voice-enabled Mobile Apps – Use your phone safely while driving

I use my phone a lot.  I’ve had a smartphone since the Palm Treo 600, and have grown more and more dependent on my mobile device since then.  I use it for phone calls, texting, google maps, reading news/rss feeds, MLB gameday audio, yelp restaurant reviews, and much more.  As the devices became more powerful, I found myself using it more and more often – even while driving.  Instead of looking up the location of a restaurant ahead of time, I’d just wait until I was closeby, and out comes the blackberry.  Instead of calling folks and telling them that I was running late, I’d text them.  Most of the time, I’d think nothing of it.  But then the LA-train texting accident happened (among other texting-related accidents), and I realized exactly how dangerous it was.  

Yet, even then, it still proved very difficult for me to stop the occasional driving text or lookup.  However, California recently passed a measure that makes it illegal to text while driving (a very, very smart law).  Enter voice-enabled mobile apps.  I’ve downloaded Vlingo, Tellme, Yahoo oneSearch, and Google Mobile, all of which are voice-enabled.  Google’s voice recognition only works for Google search queries, so it’s not very useful.  Tellme (recently bought by Microsoft) is solid for map lookups.  If you’re on the go, instead of typing “Pauline’s Pizza, SF”, you can say it, and it will display the results (which still requires a dangerous glance away from the road) and allow you to easily map it.  Tellme also allows for voice-prompted calls.  

Vlingo, however, is the best offering.  Their voice recognition, while still needing improvement, is impressive (Indian names do not work super well, I’m tempted to give all my friends very common English names in my phone book.  Or maybe I cannot pronounce Indian names correctly).  The program allows you to call friends, SMS text (accurately), google search, launch applications, and more.  It’s great – I can text and drive legally!   It would be useful if it would allow searches within Google Maps (my favorite GPS app), but I’m sure that will come soon enough.  Vlingo’s technology also powers Yahoo’s oneSearch application, which only allows for lookups – i.e. it’s quite useless (it should at least work with Yahoo Maps).

All the apps could use work in playing back audio results.  Vlingo will replay SMS texts before it sends them out (thus avoiding awkward misses in the voice transcribing), but it needs to support playback of queries and location searches to avoid dangerous glances away from the road.

Vlingo has been around for awhile, but they recently upgraded and it’s voice-recognition is now much more usable compared to the rest.  Yes, it costs $17 (they have a limited free version) – but that’s nothing compared to the enhanced safety (I rarely need to look at my phone now, it’s all voice-recognition).  All the other apps are free, so I highly recommend trying/using at least one of these if you own a car- you never know when you’ll need it.   Or you could just avoid using your phone altogether while driving.

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A plug – TiEcon 2009

I won’t often plug personal things, but I’ve been helping put together some of the panels for TiEcon this year, and spent a ton of time doing it, so I’m just letting you know.  TiEcon is focused on bringing entrepreneurs together – last year there were over 4,000 attendees.  That’s the largest entrepreneur conference in the world, and it’s right in our back yard in Santa Clara.  If you are remotely entrepreneurial, this is a must-attend event.  Some of the speakers include Tony Hsieh (Zappos), Reid Hoffman (LinkedIn), Brad Smith (Intuit) and many more.  The panelists (there are a ton of parallel panel discussions) include numerous venture capitalists (including one of my partners at Opus), lawyers, bankers, and successful entrepreneurs.  There are many ways to network (i.e. Power Connect), which you don’t often find at conferences.

I volunteered as a co-chair of Business BootCamp – a series of 6 workshops that will leave attendees with specific skills and tools.  The workshops consider the practical aspects of managing a company such as funding, cash flow, building teams, scaling sales networking and creating buzz.   And the workshop leaders are all great and have experience leading sessions like this in the past.

The conference is next Friday and Saturday (May 15th and 16th).  I hope to see you all there.  Oh, and the best part – if you want to save $220, use the code “TIE-FRIENDS”.  Enjoy!!


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Definition of Pandemic

At this point we have all heard about the swine flu that’s starting to emerge around the world.  However, one label that has been thrown around without much thought is “pandemic”.   It’s an interesting development in our Twitter world where the signal to noise ratio has increased by orders of magnitude, and we tend to sensationalize and exaggerate (it’s like the old telephone game, except multiplied).  Information spreads, and it’s hard to know what’s accurate, but people continue to spread it.  Don’t get me wrong, I love Twitter, but if one were to go search twitter for any variation of swine flu, they would be terribly misguided and most likely freaked out.  Anyways, here’s the WHO definition for an influenza pandemic:

An influenza pandemic occurs when a new influenza virus appears against which the human population has no immunity, resulting in epidemics worldwide with enormous numbers of deaths and illness. With the increase in global transport, as well as urbanization and overcrowded conditions, epidemics due the new influenza virus are likely to quickly take hold around the world.

Fortunately, we have not reached this stage yet (last count 20 official deaths according to the CDC, 149 according to Mexican officials, though it’s unclear why there’s such a large discrepancy).  It’s important that we keep some perspective.  Here’s a helpful illustration by WHO that gives some clarity as to where this rates:

My question is this – if we did not have tools like Twitter and Facebook, would the flu news spread like it did?  And if not, would that necessarily be a bad thing?  Or is it a good thing that we all know?  On one side, folks are probably doing things like washing their hands that they should always be doing.  The counter-argument is that misguided information often leads to normal folks to become hypochondriacs and burdening our health care system with unnecessary visits.

I love the way twitter has spread the flow of information, but in my opinion, there’s a a big problem with how we  separate the wheat from the chaff, and I think that if a startup can attack accordingly, there’s a huge opportunity.

UPDATE:  Just saw an extremely relevant XKCD cartoon, which would be funnier if not so true.

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Amazon continues to impress

Amazon releases their earnings this Thursday, and while most of you probably heard about the controversy regarding Amazon (#amazonfail) last week, what you may have overlooked in all the hubbub was the astonishing 300,000 Kindle 2’s sold in the less than two months since it’s release.  That’s over a $100M in revenue from a single item.  Amazon is expecting to sell 800,000 overall for 2009 – over $280M in revenue.  Absolutely incredible.  Oh and don’t forget the Kindle leads to higher margin book sales through wireless delivery.  So it got me thinking, if there was a executive of the year award (I blame the NBA – it’s award season there), Jeff Bezos would have to be considered one of the frontrunners, right?  Just for kicks, here’s a revenue comparision against their biggest competitor EBay (I guess I have to continue with my proclivity towards graphs):

Amazon vs Ebay Revenue

And stock performance (take with a huge grain of salt, very different companies, and BBuy is signifcantly bigger than the rest with their $40B+ revenue) over the past 6 years compared to Best Buy, Circuit City, Barnes & Noble, Ebay, and the S&P:

Amazon Stock Comparision


And while their commerce side is continuing to grow, their transformative cloud offerings, AWS, could dominate their revenue within 5-10 years.  AWS is currently recognized in the “Other” category on their quarterly reports (last figured at $131M in Q4 2008).    Anyways, who knows what will happen Thursday, but Bezos has definitely impressed me.

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Online news sources – please start charging me

It’s not often you hear someone ask to be charged for something they currently get for free.  But I’m asking.  The reason is simple – advertising alone cannot sustain quality news publications.  I look at two of the more successful online-only news publications – Politico and Huffington Post, and both are supported by private investors.  That doesn’t scale long-term.  The WSJ, on the opposite end of the spectrum, has something north of 1M subscribers, each paying north of $100/year – that’s $100 million a year.  

I’m not sure why some of the newspapers continue to stay free.  Nando started in the early 90s as one of the first online publications and they were free.   But they closed shop in 2003.  Let’s look at the NYTimes as an example – they get 15 million uniques per month.  According to comScore (via Alley Insider) they had 173 million unique page views / month in October 2008.  Assuming some growth and round numbers, let’s say they get 200 million / month.  At a generous $20 CPM rate, that’s $4 million / month, or $48 million a year.  That’s not a lot of money.  They would only need to convert 480,000 uniques into paid subscribers (3.2%) to get to that total via subscriptions.  

And that actually assumes they would completely charge for the site.  Check out the WSJ Online, it’s actually pretty solid even as a free website.  They do a great job with mixing paid/unpaid content, and they use advertising as well.   In fact, check out the comparisions for the two websites:

Anyways, NYTimes and other online news publications, if it means you will continue to improve and grow as an organization, please start charging me.

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US Auto Market Trends

I’m not an expert in the car industry.  However, with all this talk of government bailout money and the Big 3 (actually big three is wrong, should be more like the Floundering 2), it has me thinking about what we taxpayers are investing in.   We keep hearing sales numbers are at record lows, but I never see anything that goes back more than 15 years (Quick aside – I hate when news outlets fail to give us context for “historic” events like this.   Reminds me of baseball, when announcers and statisticians give us inane facts like first guy to steal his 20th base on a prime numbered day.  Why should I care?  Give me context!).  So I compiled some data myself, using  freely available info from the Bureau of Economic Analysis (under the US Department of Commerce) national income and product accounts (NIPA).  The following is a chart indicating total unit sales of autos and trucks since 1948, in millions of units:


Vehicle Sales and CPI

Vehicle Sales and Price Index


And here’s the same data but split into domestic and  foreign sales:


Domestic and Foreign Vehicle Sales

Domestic and Foreign Vehicle Sales


I also mapped the motor vehicle price index in the first chart to give a perspective on the relative cost.  Quick caveat – price indices (especially those related to something as evolving as vehicles) do not perfectly account for quality improvements, but it at least gives some perspective.  

What does this all mean?  The number of autos sold has been steadily decreasing since the 1980s. Domestic autos are doing terribly, steadily decreasing since the 1970s.  What masked this problem was the emergence of trucks as an alternative in the 80s (ironically this came soon AFTER the oil crisis in the 70s), but truck sales dropped significantly with the huge spike in gas prices last year.  Essentially US manufacturers bet the house (and now our money) on truck sales and had nothing to hedge if fuel prices rose.  Long-term truck sales are in question; I highly doubt they return to the late 90s/early 2000s “great truck rush” (my term) level due to the relative price of gas and the overall global  environmental movement.  

The overall market has capped out (not increasing), both in units sold, and in relative price.  So why are we talking about pouring more money to revitalize the automakers?  There’s a macroeffect going on here, and more money is not going to solve it.  I understand there are huge political (and economic) ramifications to letting any of these automakers fail, but my hope is that the Obama team will require wholesale structural changes on many levels.  

The only way to grow in such a market is to have a revolutionary technology advantage (i.e. an electric car, which again they’re probably behind on, though the Chevy Volt seems interesting), not an incremental advantage.  Selling a car with 10% better mileage will not change these trends, (don’t forget that US automakers are already behind the auto technology curve from their years of indulgence with trucks).  And the current executives there have not demonstrated any foresight whatsoever, so I have no faith in their ability to execute in this market.  These new products don’t need to fill a large market immediately  – they just need to grow enough to prevent some of the bleeding, and hopefully it will dominate (much like trucks in the 80s/90s).  I hope that a vast majority of the money we invest goes directly into technology innovation, and that everything else either be maintained at a basic level or completely abandoned.   Sure it’s a risk, but I’d rather us spend our money risking on technology rather than seeing it slowly disappear in the sinking market.  It would be like a startup but with very strong and established manufacturing and distribution at their disposal. 

Quick note – The US Department of Transportation estimates the average vehicle lifespan to be 13 years, or 145,000 miles (I wish I could track this historically).  I wonder if increased lifespans contribute significantly to the decreases.

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Palm can win the battle, but it needs more than a phone

I’m very excited about the new Palm Pre that’s coming out hopefully before the summer.  As an avid Blackberry user, I’ll be the first to admit to its serious limitations compared to the iPhone in usability.  However, I ended up buying the Bold, and not the iPhone, because I hate being at the mercy of one company (or man) – i.e. I liked the openness of the Blackberry, even if it compromised the overall user experience.  However, with webOS, it seems we can get the best of both worlds – openness and sexiness (sure, Android is out there, but I think it is lacking in several areas – both hardware and software).

Now, I haven’t played with the phone, nor have many folks, but based on what I’ve seen and heard, this phone is pretty slick.   Even if it lives up to all our hype (which admittedly is high), it may not be enough.  The iPhone will be two years old this summer, and they most likely will release a 3rd generation device, and who knows what that will have (removable battery, anyone?).  And they released a third version of their OS (in case you haven’t seen the details, here’s a good, short, and amusing summary on the updated OS and how Apple “invented” copy/paste  and MMS).  Oh, and Apple is selling several million iPod Touches per quarter, and it uses the same OS – in fact, this is probably the leading reason why there is so much developer attention to the platform.   Let’s just say there’s a lot of catching up.  

And I think there’s one way they can do it.  Make webOS the de facto platform for ALL types of mobile devices by creating multiple types of devices that support it, or better yet, by licensing it out at an extremely subsidized cost.  The obvious option is a PMP / iPodTouch-like device, which will allow users to cheaply purchase a near-Pre equivalent (minus the phone) at a much lower price.  This is essential (why not seek a partnership with Amazon and become their mobile content delivery platform of choice for video, music, and maybe even books?  Sony just announced they will work with Google Books so Amazon might feel a slight tinge of pressure, and Amazon has demonstrated openness to supporting devices outside the Kindle with their iPhone App).

But what about cameras?  Or navigation systems (even in-dash)?  Or appliances (which are becoming more and more connected)?  Or remotes?  Then it becomes much more interesting to developers to build interesting apps.  If Palm can build multiple non-Phone devices, well then even better.  But the key is they need to propagate their platform and make it more ubiquitous than Apple’s.  Palm has clear advantages over Apple (multitasking, significantly easier programming language, keyboard), but in order to exploit them, it will need to create an ecosystem outside just phones.  Anyways, I’m cheering for Palm to succeed.

Note – I am currently long Apple.

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How can AT&T be selling new phones?

So quick post – I went to the AT&T store in SF the other day to complain about my phone (literally 4 dropped calls in a 5 minute span while driving made me alter my workout plan and drive straight to the store) after weeks (probably months) of issues with “Call Failed” and such.  After waiting 20 minutes while customers ahead of me were buying new phones, they took me.  And I complained about the recent issues, and they told me, to paraphrase, they are aware of the network congestion issues and are working to resolve it.  Translation – you’re SOL and there’s no way we’re going to do anything for you.  She did ask me for where the calls were dropping (it’s a start), but I started to think – if they are having issues, then why in the world are they selling new phones, especially in the exact area where they are having issues?  In my work, we often hear the phrase “carrier grade” specifying a high level of reliability – but if anyone from AT&T asks me about carrier grade, I’ll tell them it just means you have to work most of the time but it’s okay if you drop service half a dozen times in a 30 minute drive.  I don’t know how AT&T is getting away with this stuff, but count me as completely miffed.  I’m glad Blackberry (at least according to rumors) is focusing less on them and more with Verizon and T-Mobile.   Apple, it’s your turn next – abandon AT&T, at least until they get their act together.

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