Posts tagged Disrupt
Yahoo CEO Marissa Mayer and Facebook CEO Mark Zuckerberg discussed many subjects including logos, growing users, smart investments, mobile, PRISM, and even superpowers. Here are six interesting topics Mayer and Zuckerberg discussed at Disrupt.
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No one but patent trolls—entities seeking to profit from patents they don’t actively use in making products—likes the current US intellectual property regime. Inefficient and outdated, the US patent system, in particular, frustrates innovation more than it fosters it.
Things may be on track to get change, Red Hat CEO Jim Whitehurst told ReadWrite in an interview. As Brazil, Russia, India, and China—the BRIC economies—boom, they will begin to exercise a profound influence over IP, even in established markets like the US or Western Europe.
It’s just not clear if they’ll change it for worse or for better.
The Best Defense Is … A Good Defense?
Sadly, while no one seems to love the current US patent regime, everyone feels compelled to participate. It’s like we’re reliving the nuclear arms race.
Even Red Hat, an open-source software company whose explicit policy is that “software patents generally impede innovation in software development” and “are inconsistent with open source/free software,” actively acquires patents, though it argues (as does most everyone else) that its patents—550 issued with another 1,200 patent applications pending—are purely for defensive purposes, to protect it from lawsuits rather than pursue other companies in patent litigation.
Explaining this inconsistency, Whitehurst argues that “as a public company we have no choice but to act within the broken patent system to protect our customers and the open-source communities in which we operate.”
Whitehurst further avers that “when we’ve settled patent disputes, we’ve never just settled to protect Red Hat and our customers, but also have ensured we simultaneously protect the open source communities that might have been impacted by them.” (The Firestar settlement is one example.)
Keeping Defensive Patents Defensive
Fine and good, but how does a company like Red Hat keep its defensive patents defensive? Given that every public company is ultimately only a hostile takeover away from losing control of its patents, is there actually any way to acquire patents with real assurance they won’t be used offensively in litigation?
While not completely airtight, Whitehurst’s response is better than most. Red Hat’s patent promise precludes a successor from asserting Red Hat’s patents with regard to open-source software, at least as to the functionality of the software that existed at the time of the acquisition of Red Hat. At that time, the acquirer could prospectively revoke the patent promise.
Fading American Influence
It’s a good attempt to minimize harm from Red Hat’s patents, but it may eventually matter far less than it does today. That’s because, as Whitehurst notes, there’s no guarantee that the US patent system will continue to guide the technology industry.
Intellectual property is simply an opinion, Whitehurst asserts. It’s a policy that we use to try to maximize innovation. But because it’s merely policy—government policy—and not some objective truth implanted on our brains by the cosmos, there’s no reason to think that other governments won’t disagree with the US approach. For example, in India software is not patentable. Different governments provide different opinions on what IP means.
This hasn’t mattered very much to date because US consumption dwarfs that of other countries. She who has the biggest economy wins, and can dictate IP law to any who wish to do business with her. But as other countries become larger consumers, their opinions will start to matter as much as ours over the long run.
Ready For Chinese Patent Law?
Consider, for example, the relative annual growth rates of various economies. China and India are on a relative tear compared to the US and Japan:
- China: 7.5%
- India: 4.8%
- United States: 1.4%
- Japan: 0.9%
Which means that while the US still consumes more than any other company, and hence gets to call the shots in IP policy, that may not last:
According to Whitehurst, it’s not at all clear whether this trend will lead to more stringent or more open IP laws. Some countries believe that IP helps grow their economies, while others think it hurts them. China, for its part, has essentially modeled its IP regime on the US, while Brazil and India favor open source and are more likely to say that IP should be shared.
In sum, it’s too early to tell whether we’ll end up with a better or worse global IP system. The only thing we can say with some certainty is that the growing economic clout of the BRICs will impose significant changes. As Whitehurst points out, we’re already seeing this in how different IP regimes have ruled in the ongoing legal spat between Apple and Samsung. Expect this to get a lot messier over time.
Image courtesy of Shutterstock.
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To be a successful startup company, you don’t always need to enter the biggest, sexiest industry you can find. Some of the most interesting startups these days are finding ways to disrupt what is old, stodgy and stagnant.
Take a look at the most recent TechStars Boston class. Of fourteen companies, about a third of them are targeted towards disrupting old industries rife with inefficiency, old business models and decades-old practices. These industries – manufacturing, pharmaceuticals, government, real estate and farming – have not fundamentally changed in years.
These are not your typical startup accelerator-driven companies. TechStars Boston has tried in recent years to focus at least parts of its classes on companies that may not fit the typical notion of a tech startup, looking for companies, ideas and founders that have intimate knowledge of how disrupt an industry that others may ignore.
“We love stuff like that. We love it when it is not sexy, something that has been very stagnant for a long time,” said Katie Rae, managing director of TechStars Boston, in an interview with ReadWrite. “Because, and you can bring algorithms to it, a whole bunch of different software products to it and people are blown away.”
Three companies from the most recent Boston class highlight how a startup can have a huge ceiling disrupting industries that haven’t changed in decades.
Do you have any idea what it takes for most of your food to reach your dinner table? Probably not. And you don’t really want to know either. The human food chain is stuck in a logistical mess of shipping and receiving, where food can travel thousands of miles before it lands at grocery stores and restaurants. Millions of pounds of food are loaded into cargo containers every day and shipped across the world.
Instead of shipping those cargo containers, why not just leave them where they are and grow food in them? That is what Freight Farm does: use shipping containers (like the ones you see 18-wheeler trucks carrying) and rig them to be self-sustaining farms. Using solar energy, water filtration, sensor monitoring and the cloud, these containers turn into automated high-growth farms that take up less than an acre of space.
What is a company like this doing in a TechStars class? It is not exactly “tech” per se…
“I would consider Freight Farm tech-enabled but it is in an interesting realm of hardware, software, old industry, disruptive. We like things like that,” Rae said.
Tech-enabled is the key phrase. Not every startup needs to be led by geeks writing algorithms on dorm room walls. Real-world industries can take the type of tech that coders and developers have been working on for years and turn it towards real world solutions, like feeding your community.
When Freight Farm came to TechStars, it was led by a group of entrepreneurs that had been working on rooftop garden models. They realized that type of business wasn’t scalable. Rae and the rest of the TechStars selection process (which includes Angel investors and venture capitalists) recognized the idea, the drive of the team behind it and began thinking of business models. As of last week, Freight Farm had already raised $450,000 in revenue.
The pharmaceutical industry is huge.
And basically broken.
Gone are the days when you had your neighborhood pharmacist that knew exactly what medicines you were supposed to take, at what time and how often they needed to be refilled. The corner pharmacist and apothecary have been replaced by big chain groceries and the likes of CVS and Walgreens. How do you fix a massive industry that is more interested in getting people to take drugs than providing care for them?
Take it to the Internet!
We often think the Internet makes us more impersonal. We are separated by physical distance, interacting through a computer from our homes or offices. Yet, the Internet now can be the place where we receive the most specialized and personal of information. What can be more specialized and personal than your prescription medicines? Pill Pack gets to know you, the drugs you need and when you need them through its website, then ships you a package with everything you need. The “pill pack” is kind of like a large dispenser where your prescription drugs are dolled into individuals days of the week and you can just rip it off the reel when needed.
Pill Pack is going for the top of the spectrum of pharmaceutical brands. It wants to be synonymous with pharma-care, just like Coca Cola is synonymous with soda. Its founder, TJ Parker, grew up in a pharmacy – his father was a pharmacist – and knows what it is like to provide personal care on a human level. Again, it is not a tech company, but technology makes it possible. That is one of the reasons Rae and the TechStars team loved the idea of Pill Pack.
“For those of us under 55 or 60 (years old), we don’t realize that the primary care physician that used to coordinate all of your medications is basically gone. So, something like Pill Pack could actually be really beneficial for that industry,” Rae said.
Manufacturing has grown in such a way that new business developments have been folded into old practices. Machines run at certain times and at certain specifications, with little consideration for waste or inefficiency. LinkCycle attempts to streamline that process with data science, giving manufacturers tools to better streamline their workers and machines with an app that can be carried around by a factory manager on an iPad. The app can manage scheduling, machine utilization, process control and equipment upgrades.
For instance, if a machine would be cheaper to run at night, LinkCycle will tell you that, saving thousands in utility costs.
“The willingness to pay is super high because either the cost savings or increased sales for them are enormous. All those dollars drop to the bottom line. So, the customers are happy,” Rae said. “LinkCycle is a perfect example of that.”
Team Focused, Industry Experts
What traits do companies like LinkCycle, Freight Farm and Pill Pack share? Each has a team behind it that intimately knows the industry it is trying to disrupt. These are not entrepreneurs sitting in a SoMa coffee shop looking for where the money is. These are company founders that care about changing how businesses work, making the world more efficient and have the expertise to do so.
Rae says that the keys for successful startup companies trying to disrupt stagnant industries starts with the human passion and expertise. It then comes down to how big the industry is and the type of market the company is trying to sell to. Manufacturing and big-pharma? Ripe for disruption. Online CRM solutions or social photo apps? Not so much.
“Selection is about the human beings,” Rae said of the process of choosing what companies make it to TechStars Boston. “Every single one of these, we fell in love with the founders, we fell in love with what they cared about and thought the industry was big enough and then we fundamentally think they are so different.”
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It’s a huge year for TV’s future. Yet for all the excitement about Web-first soap operas, data-driven programming and the disruption of broadcast, the Internet TV “inflection point” that 2013 has become is just the beginning. A Trojan horse is slowly rolling into town, and it’s bursting at the seams with data. Wheeling it along is none other than Google.
Indeed, if the data-fueled success of Netflix’s House of Cards is as crucial to TV’s future as many believe, what Google is most likely planning will make the transformation we’ve witnessed so far look like early innings in a very long ball game.
First, though, a caveat: Google has said almost nothing about its plans for taking on the TV market, and I don’t have any new inside information to offer on that front. What follows is instead a giant thought experiment — a plausible (to me, at least), fact-based extrapolation of just how thoroughly Google could disrupt the TV industry should it put its mind to to it. And should users consent to its plans.
TV’s Future Hinges On Content, Data and UX
Whatever TV looks like in the future, it will be built atop three crucial components: content, intelligence and user experience. A fourth element, known as actually making money, hinges heavily on the “intelligence” part — which is to say, data.
The industry is collectively still figuring out the user experience part. Apple is rumored to have “cracked” the interface problem, but until Steve Jobs’s prophetic words find a home in reality, we’re stuck with the puzzle’s most promising pieces: the likes of AirPlay, Roku and a small army of creative video app designers.
That leaves the content and intelligence parts, which are what Netflix is purported to have mastered with House of Cards and what Amazon hopes to mimic with with its own Internet-first TV pilots. Hulu has taken its own stabs, but has yet to score a House of Cards-sized hit.
For the last few years, Google’s YouTube has also invested quite heavily in original, TV-quality programming for Internet audiences. It, too, is still trying to find its Kevin Spacey. But it’s likely only a matter of time before everybody’s buzzing about the new show on YouTube, much like we’ve long chattered about double rainbows and finger-biting babies.
Google will find its killer content. It will do so in part by leveraging the very thing that gives the company an advantage in just about any space it enters: all that data.
YouTube: A Burgeoning Trove Of User Data
An absurdly funny standup routine by Louis CK? Thumbs up. A mini-documentary about 3D-printed guns? Consider the “Watch Later” button tapped. Every music video I ever wanted to see? YouTube has them too, and designating my favorites is effortless. With every tap of each of YouTube’s buttons — thumbs up, add to a playlist, watch later and, most importantly, “play” — I’m feeding fresh data to the world’s biggest video site. Which, in turn, it uses to build out personalized recommendations, not unlike the special sauce Netflix used to wipe out Blockbuster.
Of course, the data on Netflix’s servers is a bit more useful when it comes to recommending long form, Hollywood-caliber video to its users, since that’s what Netflix specializes in exclusively. It’s the type of knowledge Google will presumably get better at building as its selection of professionally-produced video expands.
What Google Knows – And Will Know – About Us
In the meantime, Google is building out a much richer profile of its users than Netflix and Hulu could ever dream of creating.
Outside of YouTube, Google knows a great deal about us. Just how much it knows varies depending on how heavily you use Google’s services — and how finely you tune your privacy settings.
For me, that data includes my browsing history (across devices), email, documents, voicemails, eight years of search queries, detailed location data from Maps, a limited view of my schedule from Google Calendar (I mostly use iCal) and a smattering of other data points from the more than 25 different active services tied to my Gmail account/ And I’m not even an Android user.
These services don’t all swap data freely — and my Google Drive may well contain no information that’s of value to YouTube. But collectively, these services build out a rather richly-detailed general profile of who we are, what we do, where we go and what we enjoy. In theory, YouTube has the capability of knowing not just what Netflix knows — what we watch, when we skip, how we rate — but also quite a lot about who we are in general.
In the future — if Google’s master plan unfolds accordingly — this will all be buttressed with social insights. As its social efforts ramp up, our list of Gmail contacts becomes much more informative: who’s in which circles? What do they +1? Who do I trust?
Google+ is still the exclusive domain of early adopters and media geeks, but in time the company intends for it to become a viable alternative to Facebook and will eagerly ingest all of the social data points that come with that distinction. You can catch an early glimpse of how Google intends to use social data in the next iteration of its Maps interface, which will leverage your social connections to provide recommendations about where to go next. Think Google Now for your physical location.
How Google Could Use This Data To Win At TV
Similarly, we may one day see Google Now for TV. That is, anticipatory content recommendations fueled by your viewing history, social connections and insights inferred from a complex tapestry of data points from across services and devices.
Recommendations are important (indeed, cracking this code certainly helped put Netflix in a position to win with House of Cards), but they’re only the beginning of what’s possible when television is fueled by very, very big data. As its video efforts ramp up, Google — like Netflix before it — will be able to factor in mountains of user data to determine not just what to recommend, but what content to buy the exclusive rights to, or even produce outright.
Unlike other Internet TV shows, these new premium productions will sit within the world’s biggest repository of online video. Sure, much of it is garbage, but the sheer scale of the material it has on hand increases Google’s ability to smartly serve up relevant, worthwhile videos to people who come to check out its new shows. Not to mention how easy it would be to rope YouTube’s casual, cat video-watching users into clicking the play button on their next big TV-style program. House of Cats, anyone?
In the fall, Nielsen is going to start factoring Internet viewing stats into its decades-old TV-viewing measurement methodology. It’s a move that’s widely viewed as being both long overdue and symbolic of where TV is heading. If you ask me, Nielsen isn’t going far or fast enough to stay relevant. The further companies like Google move into the TV space, the less sense the old, panel-based methodology for tracking makes sense.
In a recent post on the Monday Note, Frédéric Filloux argues that the sample-based method Nielsen uses to track Web user activity is ripe to be upended by Google’s far more sophisticated mechanisms, which even go so far as to use statistical pairing to filter out repeat visitors that may be coming to the same site from multiple devices. Filloux is referring to Web tracking, not TV viewership — the traditional part of which Nielsen is uniquely capable of measuring.
But his argument carries over into the realm of online video and usage, which Google is far better at measuring than Nielsen is. As more viewers turn to the Internet for what we’ve historically referred to as “TV”, Google’s method — and what it means for potential advertisers — becomes a lot more attractive than Nielsen’s.
When it comes time to monetize those shows, all that big data will be just as useful. This is, of course, Google’s specialty. The company that figured out how to make billions by serving contextually relevant ads to people searching the Web is probably well-positioned to do the same with the future version of what we once knew as television commercials.
What Stands In The Way
Just because Google has the algorithmic capacity to acquire, smartly deliver and monetize rave-worthy content on a disruptive scale, that doesn’t mean it will. If this indeed what Google plans to do, it’s going to have to clear some hurdles.
Then there’s the content issue, which is huge. YouTube already houses a massive amount of video, and Google likely has the intelligence to find its own House of Cards. But when it comes to hosting premium, TV-caliber content, Google is still playing catch up.
As Tim Carmody pointed out recently, Microsoft is much better positioned to win the living room than Apple is, primarily because Microsoft has managed to pull together the most compelling selection of content. (The same argument applies if you substitute Google for Apple.) That includes not just video games like Halo and Gears of War but online video sources and live TV available directly from cable providers.
With the XBox One, Microsoft also takes a pretty compelling stab at the interface problem. It doesn’t eliminate the hand-held remote, but rather augments it with voice control and gesture-based interfaces that make us feel like we’re truly living in the future.
To win at TV, Google is going to have to learn from products like the XBox One and incorporate a level of polish and attention to the user experience as its done with its more recent Android versions and handsets. If Google can create the Nexus 4 or set top boxes, loaded up with with a bulletproof UX and a wide selection of supreme-quality content, the Apples and Amazons of the world will have some catching up to do. And the traditional players will be screwed.
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Google is useful and the value of Google gets continually reinforced to consumers, day in and day out. Ultimately, a new search habit will only arise if Facebook’s Graph Search can deliver at the intersection of high utility and high frequency.
View full post on Search Engine Watch – Latest
Yesterday’s Gmail outage was not just another pain. Out-of-control code also brought down some Chrome browsers, hurting productivity for those affected. As the boundary between cloud services and native clients blur, enterprises cannot afford this kind of instability any longer.
Monday was not a fun time to be a Google user. For about 40 minutes yesterday afternoon (on the East Coast), Gmail service, as well as Google Drive, experienced scattered outages. Reports indicate that personal Gmail accounts may have been more affected than Google Apps accounts.
Curiously, at nearly the same time, many Google Chrome users started reporting that their browsers were doing full-on crashes – very much a problem, since their browser of choice was actually now killing all of their Internet-based tasks. It was also weird, because Chrome, like most current browsers, tries to sandbox individual tabs so that if a bad script gets loaded from a faulty page, that tab will hang and not the whole browser. To have the entire client crash was trouble.
The Whys And Wherefores
The two failures may have been unrelated, though it’s not clear. The Chrome browser issue was caused by a problem with the Google Sync service — the feature that enable Chrome users to sync their preferences and bookmarks across machines.
According to Chrome developer Tim Steele, the back-end Chrome Sync servers experienced problems because of a load-balancing configuration change in their quota management system, a change that turned out to be wrong and ended up forcing the Sync service to throttle itself back.
Steele’s comments seem to imply that it was not the Gmail outage that caused the Chrome browsers to die, but perhaps the Sync problem that spread out to other services, like Gmail.
“That change was to a core piece of infrastructure that many services at Google depend on. This means other services may have been affected at the same time, leading to the confounding original title of this bug ['When Gmail is down, Chrome Sync crashes Chrome'],” Steele wrote. “Because of the quota service failure, Chrome Sync Servers reacted too conservatively by telling clients to throttle ‘all; data types, without accounting for the fact that not all client versions support all data types.”
Hence, crashing Chrome browsers and perhaps some downed Google services, too.
The Enterprise Impact
In the grand scheme, this was not a huge problem. Depending on where you were, the issue cleared in about half an hour, and not every Chrome browser tanked, since not every Chrome user has Sync activated.
But the implications of this event are a little alarming. Here we have a situation where a change was made to complex software in the cloud and it immediately rippled right out to users. That change appeared to touch other services. Even if Gmail were unaffected by Sync’s problem, there is still the disturbing issue of browsers going down.
It’s reasonable, if irksome, to expect a cloud service to go down once in a while. It’s part of working in the cloud. But to have a rich client installed natively on your machine crash too, thus preventing other work while waiting for the original service to restart?
To an enterprise IT shop, which should (and usually does) test the heck out of any software before releasing anything to production, this is the opposite of what should happen. Enterprise procurement and configuration is often months behind the consumer market precisely because they don’t want cutting-edge software in the building to torque their employee’s machines.
Cloud-based apps like Google and Office 365 can change that sense of security in a heartbeat.
It’s not feasible to advocate the cessation of cloud-based tech. The benefits of cloud computing are too big to ignore. But if Google wants to be a serious enterprise player, it must find a way to properly test its configuration changes before they go live.
Now that the company is charging for Google Apps for Business, that becomes even more paramount. When money’s involved, the stakes get a lot higher.
Image courtesy of Shutterstock.
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With TechCrunch Disrupt SF 2012 in full swing this week, it’s only a matter of days before a new winner is crowned. We decided to check in with previous Disrupt winners to see how they’ve fared since their victories – and try to determine how it means to ace a high-profile startup contest.
Startup contests like TechCrunch Disrupt can generate a lot of hype and interest, but does that translate into any lasting benefit for the startups involved? Sure, winning brings monetary benefits – TechCrunch Disrupt offers $50,000 – which never hurts, but does participating really help a startup succeed? And does winning a key contest really predict eventual success? To find out, we caught up with the winners of the four most Disrupt events:
New York, 2012: ÜberConference
What It Is: Audio conference calls aren’t going away, so Firespotter Labs’ ÜberConference made them less sucky. By removing login annoyances (“Can you text me that code? I’m on my cell!”), adding visual controls and giving you something productive to do with your mouse and keyboard while sitting on hours of endless calls, ÜberConference actually makes audio calls cool again.
How It’s Doing: Uberconference is killing it. Just a month after taking home first prize at Disrupt, Firespotter won $15 million from Andreessen Horowitz and Google Ventures. The company is hiring for several open positions, most of them in engineering. iOS, Android and paid versions of the service are due soon, and UberConfernce can monetize its already-solid feature set, prospects look good.
San Francisco, 2011: Shaker
What It Is: Shaker’s founders are betting that users will want to hang out in virtual spaces (starting with a bar called Club 53), represented by avatars. If this strikes you as a little like Second Life, you’re not alone, but the folks at TechCrunch and $18 million in venture funding believed Shaker offers something more than just another chat room.
How It’s Doing: Most avatar-based chat environments have been notoriously anonymous, quickly degrading from social discovery to Leisure Suit Larry. Shaker removes the anonymity by tying profiles to your Facebook account, helping users to meet others with common interests snd form real relationships. Promoters (at this point, mostly bands) sponsor rooms, and Shaker works its magic on the back end to segment the rooms so you’ll actually bump into people with shared interests beyond the band.
For now Shaker remains a bit of a ghost town. As of September 10, there were only two events on the calendar: a Foo Fighters Tribute party with 226 RSVPs, and a “Hangout” the following Sunday with 37. Still, Live Nation has signed on as a promotional partner, which could help Shaker attract the users it needs to really take off.
New York, 2011: Getaround
What It Is: Getaround is AirBnB for car rentals. Owners can list their cars during downtime, allowing drivers to rent them by the hour. Drivers can place up to five requests, and the first response wins the business. One price covers rental cost, background checks and insurance. Owners get a monthly payment for their car, drivers get to drive whatever they want while saving money, and Getaround takes a cut from the middle without having to maintain its own inventory. The concept is a win-win-win.
How It’s Doing: So far, it seems to be still growing. Getaround has signed up thousands of cars, and it’s hiring for aggressive expansions into new markets. The startup’s most recent venture is Getaway, a long-term rental service for drivers who need a car for a week or longer. But over all, the car-sharing market has a long way to go before becoming mainstream.
New York, 2010: Qwiki
What It Is: Qwiki is a slick, simple, online application that lets users create video presentations in their browser. The interface is extremely simple, and and even a total noob can throw together a slick-looking video in less than five minutes.
How It’s Doing: Qwiki works great for last-minute school presentations or fashion retrospectives, but as others have pointed out, it has yet to become the transformative application its founder promised. To date, Qwiki hasn’t disrupted much of anything, but recent ties to more mainstream media outlets coould help change that.
Even the hottest startup needs a little time to change the world – or make a billion dollars – so it’s a little early to pass final judgment. But so far, at least, the four most recent Disrupt winners are all still in business – and not every startup can say the same.
At the same time, though, while some have gotten funding, none has come close to changing the world or a transformative financial event for founders and investors. And plenty of other startups – ones who didn’t win startup contests – or doing even better.
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Apple has never been shy about bringing change to complacent industries. Its products have reinvented music distribution, mobile phones and, with its new mapping app, GPS navigation devices in cars. It may be time for a new sector to sound the alarm: Apple appears to be maneuvering itself into position to challenge Visa and Mastercard like no company has before.
The prospect has intrigued analysts for a while. In May, JP Morgan analyst Mark Moskowitz floated the idea of “iPay,” a hypothetical mobile-payment platform that Apple was in position to develop. Although Moskowitz saw no evidence of an iPay platform in the works, he was optimistic that Apple would move in that direction, given that the Apple Store app – which lets shoppers check themselves out of an Apple Store with their iPhones – was a small step in that direction.
This week, Apple took another step toward mobile payments when it introduced its Passbook app for iOS devices at the annual World Wide Developers Conference (the announcement starts about 93 minutes into the keynote address.) Passbook aggregates a variety of commerce-related items such as digital coupons, stored-value cards, loyalty points, movie tickets and boarding passes into an easy-to-navigate app. It doesn’t handle credit card transactions. However, it should be a relatively trivial matter to link Passbook to the iTunes account that every iPhone or iPad owner must set up before downloading music or apps to their Apple devices. (For more on the current state of Passbook, see Don’t Call Apple’s New Passbook Feature an E-Wallet – Yet.)
In the keynote, Apple revealed a statistic that hints at its potential to shake up the consumer-credit industry: The company has 400 million active accounts in iTunes, each with a valid credit card number. Four-hundred million is a substantial number, an installed base that any online-payment system would love to have (hello, Google Wallet!). Using near-field communications, in time the iPhone could replace the plastic credit-card as the way iPhone users pay for lattes, groceries or impulse buys. In short, iTunes may be about to graduate from a way of buying apps and music to a way of buying all kinds of things.
That could only be good for Visa and MasterCard, right? After all, the credit card processors would benefit from an increased volume of transactions. But they may not be entirely pleased with an increased volume of transactions from Apple, given the way iTunes handles payments for 99-cent apps and $9.99 albums. Apple aggregates purchases made over several days into batches, reducing the per-transaction fees that it pays to Visa and Mastercard. It gets away with this because, well, it’s Apple.
If Apple really wanted to disrupt the credit card companies, it could bypass them entirely, building its own online-payment infrastructure and offering discounts or other incentives to those who choose it for iTunes and other payments. Apple has the cash stockpile - $97.7 billion by some estimates - to do this. It also has the network infrastructure, and it could work directly with banks to strengthen it.
Would Apple take such a radical step? There are good reasons for Apple to create its own iPay-style platform. It would let the company keep for itself the money it pays to Visa and Mastercard in transaction fees. And it could expand its core hardware business with a new product line: point-of-sale terminals for millions of cafes, restaurants and retail shops.
On the other hand, creating an iPay platform that bypasses credit card companies is fraught with complexities and obstacles. Few companies have even bothered trying, PayPal being a notable exception. Most services, such as Google Wallet, are content to offer a front-end interface that lets users plug into the incumbent credit giants.
To pull off such an ambitious plan, Apple would need to persuade many of its 400 million iTunes customers to trust it to handle payments for everyday purchases. Passbook may be an experiment to test consumer behavior around making non-iTunes transactions on iPhones. But more importantly, Apple would need to navigate the complex world of financial regulations, not just in the U.S., but in every country where it offered iPay.
The announcement of Passbook got Wall Street analysts wondering again about the likelihood of iPay. JP Morgan’s Moskowitz called Passbook a clear precursor to iPay.
Apple doesn’t seem impatient to turn Passbook or iTunes into something big like iPay. But the company’s technology has sprawled into so many other industries that it already has many pieces in place to become an overnight player in online payments. If it ever made such a move, the consumer credit card could go the way of the GPS navigation device.
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Apple revolutionizes stuff. It’s practically conventional wisdom in the tech world that, even if they’re not first in the game or necessarily even the best, the Cupertino-based giant has a tendency to make a noticeable impact. They didn’t invent the MP3 player, smartphone or tablet, but they sure have redefined all of those products. Even if this tendency is strong, it’s not necessarily always how things play out. For an example, look no further than the Apple TV.
Today, the company set their sights on textbooks, an industry Steve Jobs himself described as being “ripe for digital destruction.” True as that may be, is what Apple planning to do in the space really all that disruptive?
There’s no doubt that giving authors dead simple tools for publishing their own interactive e-books is a big deal. As Nieman Journalism Lab’s Joshua Benton so effectively outlined earlier this week, creating a “Garage Band for e-books” could do to book publishing what the advent of the blogging platform did for short-form self-publishing on the Web. And it’s also true that the immersive, interactive experience of learning from the kinds of digital textbooks Apple demoed today has far more potential than print ever did.
If the company’s efforts are going to help revolutionize textbooks and education, it’s going to be some time before that happens, and they’re not going to do it alone.
Costly and Not Cross-Platform
Apple released the second version of its iBooks app for iOS today, which includes access to the new textbook titles. One thing the company did not announce is that the app is coming to other platforms. Granted, the iPad is still the leader of the tablet market, but Android is slowly catching up and Amazon just released a device geared toward content consumption that costs less than half of the entry level iPad. And it’s growing fast.
Of course, Apple ultimately wants to sell more of its hardware, but if it really wants its textbook initiative to truly take off, it will have to develop apps for other platforms, just as Amazon has done with its Kindle apps.
Another barrier to widespread adoption of this model is the cost of the iPad. It starts at $500, which is not something every American family can afford, especially with an economy in flux. With hundreds of “pages” of content, 3D interactive graphics, embedded video and other bells and whistles, we have to imagine these books aren’t particularly light on file size. As the books accumulate over time, alongside other content stored on the iPad, the 16 GB entry level model may no longer cut it, making it an even more expensive investment.
Not Aimed at the College Market (and Did We Mention the iPad is Expensive?)
The cost issue might be mitigated somewhat if the initiative were not targeted exclusively at high school students.
At least for the time being, Apple’s digital textbooks are targeted primarily at high school students. That fact alone presents a few roadblocks to the initiative being truly disruptive. For one, not every high school student in the United States can afford a $500 tablet device. Apple may well end up dropping the price when they launch the iPad 3 in a few weeks, but even then we’re probably still talking about a several-hundred-dollar gadget. Many middle and upper class families can afford that, but kids in inner city schools and other low-income areas, some of which can barely afford enough paper textbooks, aren’t going to be learning from iPads anytime soon.
For college students, investing in an iPad or similar device to replace textbooks makes simple economic sense. A single semester’s worth of textbooks can easily approach the cost of an iPad. If the e-books available on the device are drastically less expensive than their paper counterparts, it would be foolish not to make the digital switch. Of course, how dramatically prices would drop remains to be seen.
Apple is Partnering With Big Publishers, Not Killing Them
College textbooks are enormously, obscenely profitable for the the companies that print them. In fact, they’ve come up with all kinds of creative ways of milking more money out of students. Textbooks about ancient history will be revised and re-issued every other semester and the company will package supplementary CD-ROM’s and other digital learning materials, using them as a justification to jack up the price.
To get its new initiative off the ground, Apple is partnering with major publishers like McGraw Hill, Pearson and Houghton Mifflin Harcourt. For the high school market, perhaps those companies can afford to agree to a $15-per-book price tag. But when it comes to higher education, publishers are unlikely to allow a $180 biology print textbook be replaced with a $15 e-book. That would cut into their profits pretty dramatically. At the same time, interactive e-textbooks can’t be resold once they’re used, so perhaps the publishers can be convinced that their e-book revenues will be replenished on a semesterly basis without fail.
Interestingly, at the same time that Apple has unveiled major partnerships with textbooks publishers, it also unleashed what appears to be a powerful, easy-to-use publishing toolkit for producing those books. If independent authors manage to create enough competition, it’s possible that bigger publishers will have no choice but to play ball with Apple’s preferred pricing for textbooks.
Apple’s Not the Only Player
There’s little reason to doubt that a decade from now, the classroom and the tools in it will look very different from what students are accustomed to today. The textbook is indeed one of the educational tools that is most in need of a digital makeover. When paper textbooks are finally a thing of the past, it won’t have been Apple’s efforts alone that got us there.
For one, education is already being blown wide open by the Web. The mere concepts of “the lecture” and “the textbook” begin to look antiquated in light of things like Khan Academy, Wikipedia, Wolfram Alpha, iTunes U and MIT’s Open Courseware.
Apple is also not the first company to try to re-imagine the textbook for a digital world. The so-called “smartbooks” offered by e-textbook startup Inking are in some ways more advanced than what Apple is bringing to the table. Other companies already active in this space include Chegg and Kno, as Audrey Watters points out on Hack Education.
Indeed, Apple is anything but the first entrant into this space. Not that that’s stopped them in the past.
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