On predictions

It’s that time of year, here’s mine:

1. Kiva will break $100m in loans
2. Microsoft will buy Facebook
3. Google will buy Delicious
4. Microsoft will buy what’s left of Yahoo
5. Jerry Yang will leave Yahoo for good
6. Steve Jobs will step down as Apple CEO
7. Social networking will crack its business model
8. Google’s share of online advertising dollars will fall

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On neglect

I’m neglecting the blog. We’re getting to the point where more of my time is being spent on the company plus I have been following the US elections so I haven’t been looking at the tech press so much. I was going to write another post about Jerry Yang’s plaintive cry for a Microsoft takeover but it is getting tedious. He should just quit but nobody else would do much better with Y! They need a Steve Jobs – Yahoo version and that person does not exist.

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On Yahoo dying

I haven’t written about Yahoo for a while because there is nothing to write about. Yahoo is dying.

Mike Arrington reported the latest stock drop, it now stands at $13 after turning down $31 from Microsoft. With the markets in turmoil everything is down good and bad. But while most tech stocks will come back stronger Yahoo will not make it.

The basic problem is management. As CEO the buck stops with Jerry Yang. He is not a leader and it shows. He is constantly looking over his shoulder and conducting reviews. In this position a leader should know what needs to be done, have a plan and get on with it.

You can get away with muddled management in a truly great company. I don’t have that much more faith in Eric Schmidt, the money machine was in place when he got on board and he has done not much except ride it. Google has such a great business that it doesn’t matter that the rest of their plans go off half cock. You can’t get away with it in a company that is in trouble. Great leaders can turn around ailing companies. Look at Steve Jobs, Apple was on the floor when he went back, arguably in a worse position than Yahoo was in when Yang took back the reins, and it skyrocketed after he went back. Say what you like about him but Steve Jobs knows where he is going, when he went back to Apple he didn’t need 100 days to sort it out. He knew what to do before he arrived.

On Steve Jobs

When an unusually gaunt Steve Jobs unveiled the 3g iPhone last month speculation about his heath started again. In response to a recent query Apple released a statement saying that Jobs’ health was a private matter. Some think otherwise and argue that since Apple’s performance is so tightly bound up with Jobs that he is public property as much as his company.

I disagree. Jobs is a private individual and the state of his health is a matter for him. It is common knowledge that he had pancreatic cancer which was successfully operated on in 2003. If Apple shareholders were sufficiently concerned about his health then they could have sold when that procedure became public knowledge and no doubt many did. Those who held on can have no complaints. They know Jobs’ history of illness and they know Apple is a secretive company. If they don’t like it they can sell their shares. Some complain this means selling at a loss but anyone buying shares in a company knows they can go down, if they do not they should not be trading stocks. If you want steady, risk free rises stick to Treasury Bills.

Jobs was responsible for a remarkable turnaround in Apple’s fortune and has made its shareholders very rich. When Jobs took over in 1997 Apple’s share price hovered under $5, at their recent peak in Jan 2008 Apple shares touched $200. Apple’s share price cannot keep climbing at this rate. The company hit a grand slam with the iPod and it will not repeat that success with the iPhone and Apple TV, the problem Apple shareholders have is that the assumption it will is already priced into Apple stock.

Right place, right time

The iPhone will be a success in its niche – high end mobile devices – but it won’t break out the same way the iPod did. The iPod rode the convergence of a number of factors; the emergence of filesharing, the expansion of broadband internet which facilitated the massive transfer of small files and mp3 compression which allowed music files to be shrunken to a tenth of their size. All that was required to complete the revolution was a small, cool, easy to use music player with equally beautiful software. These were Apple’s strengths, Jobs spotted the trend, bet the company and won. This will never happen again. At least not to Apple. The stock is already too high, swollen by the expectation that Apple will reign supreme.

All CEOs are human, Steve Jobs has his strengths and weaknesses and people who invest in Apple know what they are. If they are nervous about the future the answer is simple: sell.

Pic: Danny Novo

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On a greener Linux

More trouble for Microsoft as it emerges that Linux servers take 12% less energy than Windows Server 2008. This is another straw in the wind for Microsoft. With energy prices as high as there are any company which can take 12% off your costs is an attractive alternative. MS is being assaulted by different competitors, large and small, from all sides in all its core businesses. It’s response? Buy an ailing Yahoo. Not good.

Microsoft isn’t dead (yet)

When Paul Graham mooted the death of Microsoft the impressively named Don Dodge replied with a post pointing out that MS revenues grew by $4bn to 2007. I looked at the MS earning releases which place a lot of emphasis for future success on Windows Server 2008 and the entertainment and devices division. No mention of Vista which is looking increasingly like a bust. Whilst revenues have been growing MS is sailing into a world which for the first time looks like they will face serious competition in all of their core products.

Microsoft’s historic strength was operating in markets with almost no competition. For years nobody produced a serious alternative PC OS or enterprise suite but both of those games are changing rapidly. And as these products will be increasingly browser based MS won’t be able to pull the trick which doomed the competition for Office. Of course they could fiddle with IE to make the MS alternative work better but with Firefox and Opera out there this strategy would more likely result in companies ditching MS altogether. MS brass realise this even if Dodge doesn’t which is why they launched the Xbox and it is also behind their move for Yahoo. MS thinks if it can diversify and get some of that sweet cherry pie of advertising all will be well. Comforting but wrong.

Dodge cites the Apple/MS desktop stats to claim MS has a good position in search. This is a total canard. Apple has 6% of the desktop market but they are doing something innovative and different with that 6%. MS has 10% of the search market with a me too product. He also cites Windows mobile, which is awful and faces serious competition from a number of different competitors, not least Google’s Android. On balance I’m closer to Graham on this one.

Skate to where the puck is going to be

When Steve Jobs talks about Apple strategy he quotes Wayne Gretsky: skate to where the puck is going to be. MS skates to where the puck was 15 years ago then persuades itself that’s where the puck is. The emergence of the Internet spooked them and they didn’t respond well. First was the laughable attempt to usurp the Web with MSN, then there was Netscape.

Ironically, going after Netscape was the worst move MS ever made. Netscape was always vulnerable because they never cracked a reliable business model. They were built on sand whereas Google is built on rock solid revenues. Looking back, by destroying Netscape MS harmed itself. It may have removed a short term competitor but by crushing a company with huge natural vulnerabilities it lulled itself into a false sense of security and tied itself up with regulators for the next ten years.

While I don’t agree with Graham that MS is dead, I think it is in a downward spiral and getting out of it in its current state looks less likely by the day.

On mainstream users

Apart from my co-founders and I, none of my friends are technical. Technically I’m non-technical too, the only programming language I ever started to learn was html and I gave up fairly quickly. While this is a disadvantage for a founder in that I can’t program anything myself it also means I don’t have the curse of knowledge. I have more of an idea of how a mainstream user sees the Internet.

For example, here is a complete list of technology companies people have heard of:

Microsoft
Yahoo
eBay
PayPal
Napster
Google
YouTube
Skype
Apple
Nintendo
Sony

And here is a comprehensive list of technology company founders people have heard of:

Bill Gates

I was having a conversation with a friend and when I mentioned Steve Jobs, my friend asked who he was. This person has two iPods and a general interest in technology but he still had no idea who Jobs was. It surprised me because I see him as one of the most famous people in the world. But then I’m into tech.

It made me realise what mainstream users care about is having products that are easy to use and that work. So the iPod is famous but the man behind it isn’t. What got me thinking about this topic was finding out more about Persai and realising it relied on RSS. I don’t have any stats but I guess the percentage of people using RSS is minuscule. I installed it for a while and it just wasn’t any use to me. Either I search for stories on Google news or I go straight to the blogs I like.

I had the impression that Persai was some kind of browser plug-in which could track likes and dislikes to serve more relevant results than Google. The fact that it is built on top of RSS severely limits its potential adoption. I assume they have plans to take it beyond RSS but if not I smell trouble.

On apples and berries

This week Research in Motion announced the Blackberry Bold. I don’t really care too much about the specs, I assume smartphones pretty much do the same thing on top of the basics – email, music, photos, web browsing etc. The two things which count the most for me are design and battery life. I don’t know anything about its battery but this thing looks good:

The early Blackberries did not. I’m sure they functioned perfectly well but it is clear nobody really cared what they looked like. And in the early days it didn’t matter as Blackberries were the only show in town when it came to portable email. More genrally mobile device design has been absolutely shocking. Motorola phones looked ok but the UI is awful, at least it was when I had one and I never went back. Nokia are getting better but still put out some terrible looking devices like the E61 and Prism range.

There is one simple reason for the recent focus on better mobile design: Apple. Jobs-era products are always beautiful and when Apple entered the market they set an exceptionally high standard with the iPhone. People can harp on the lack of 3G which is a dealbreaker for most people in Europe. I would never buy a non-3G smartphone, in fact I doubt whether a smartphone lacking 3G can be described as such but this is a temporary problem. In his keynote announcing the original iPhone Jobs said the stumbling block with 3G was battery life and once they had sorted that out the iPhone would have 3G.

RIM had already started tidying up their act in anticipation of Apple’s entry with the Pearl and Curve. With the Bold they have opted to stick with the keyboard which is the Blackberry’s main distinguishing feature. I think this is a good call, RIM have managed to evolve the design of the Blackberry in a way which has struck a good balance between capturing the sleekness of an iPhone in a device which is still recognisably a Blackberry. If they had gone the whole way to a iPhone style touchscreen they would have lost. When you start to play your opponent’s game you are dead because you can never be the original. A Blackberry without a dinky keyboard is not a Blackberry. The name itself comes from the way the keys make the device look which underlines the importance of design.

Everything flows from good design. The reason facebook is better than MySpace is that it has far superior design. Pages on facebook are clean and uniform whereas MySpace is an eye popping mess. Facebook has deteriorated with the proliferation of external apps leading to attempts by the company to simplify things again. I don’t think there is much mileage in being ‘the new facebook’ but it would be inetresting to see what would happened if someone launched a new social network with a simple design and minimal features.

On our statup we hired a designer before even a developer. When the developers did come on board I emphasised the importance of our design. I wanted it to be stark and different as I think there is no value looking similar to every other website, in startups if you are not radical you are dead. Why would anyone switch to something that is 5% better than the incumbent? Design is not all of this but it is part of it.

The Modernism exhibition at the V&A had a big influence on me, in particular the work of Ladislav Sutnar. When I wrote the design spec for our site it was Sutnar’s influence that I emphasised, in particular the simple shapes and the almost monochrome, sixties look – the banner for this blog is a Sutnar design. The V&A summed up Modernist philosophy as:

Modernists had a utopian desire to create a better world. They believed in technology as the key means to achieve social improvement and in the machine as a symbol of that aspiration. All of these principles were frequently combined with social and political beliefs (largely left-leaning) which held that design and art could, and should, transform society.

I am struck by the paralells between Modernism and web startups. I recognise the tendency of startup founders to proclaim their companies as changing the world. This is rarely true on an individual company level but together we are all part of the patchwork of ideas which make up the web and put together the impact is undeniable both in commerce and beyond.

Barack Obama is rasing more small donations than any other candidate in history to the extent that this is now his main source of funding. This is a far better way than reliance on large corporate donors or state funding. Another example is Kiva which has used the web to connect people in the first world directly to those in the third world. Microfinance is a much more efficent way of redistributing wealth as it makes a direct connection between people and ultimately it is trade, not aid, which will bring an end to poverty. And it is the web which is helping make it happen.