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Industry

The Most Interesting Fact About the Apple Watch

Regarding the pricing… did you notice it too?

The low-end price is $349, but the high-end price starts at…? Not $9,000. Not $9,995. Not $9,999.

$10,000.

They rounded up the price! Even luxury brands like BMW round their prices down.

What is the last mass-market product you can recall that was priced like that? This is a very interesting marketing move since people will now “round up” the value of an Apple Watch.

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Industry

PSA: Stop Releasing Hobby Bitcoin (or similar) Projects for Your Own Good

You’re in serious legal jeopardy if you release a virtual currency project into the wild, and not because the currencies themselves are legally murky. Rather, because you are liable for any wrong-doings that might arise from the use of your product or service.

Corporations exist to shield their owners from legal liability. If you pay money to a company and then that company goes bankrupt before giving you your money’s worth, the owners and employees (unless they’re doing criminal activity on purpose) are not personally liable for your loss. On the same principle, if a software developer at Visa makes a mistake and Visa gets hacked, the software developer isn’t personally sued by the shareholders (s/he may be fired, though). The banks, merchants, or consumers impacted might sue Visa, but none of the employees are having their homes repossessed.

Now look at your project. Are you a high school student with a coin-bot that nearly got hacked? Maybe a student developer who made a hobby wallet that was emptied? Or maybe another hobby project stored on a $5/mo shared hosting service? Count your blessings you weren’t sued or prosecuted. If you release something *personally* and your negligence (or bad luck) makes you lose your user’s money, NOTHING is shielding you from them or the law. You are 100% fully legally liable for what happened. It doesn’t matter that it was a bug or that it was “just a hobby.” If somebody put $10k in your online wallet project and you lost it, you’re on the hook.

So far, it looks like cases like these are largely being blamed on the community of users trusting the services. That will eventually change. All it takes is one angry user who lost grandma’s retirement funds to turn a person’s life upside down.

I think it’s great that there is payment innovation happening right now. And I really support developers doing cool side projects. But before publishing projects that move *real money* around on *your personal servers*, think about whether or not it makes sense that you first setup basic legal protections for yourself.

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Industry

Browser Wars… Wait, That’s Still Going on Right?

Rewind 5 years (to 2006). Ask any self-proclaimed nerd what the browser market shares were. Market share stats were like the stock market ticker of the Internet Nerds. Everybody knew about it, and everybody cared.

But what’s the market shares today? Did you know that IE is below 50% by most measures? Did you know that Chrome ate up Firefox’s market share? And what’s Safari’s market share if all the iPhones and iPads use it?

You probably don’t know.

Because, who cares.

5-10 years ago, it mattered that IE had 70+% of the browser market because it directly influenced what was possible as an application developer. But mobile changed all that.

Mobile browsers ended up being the adoption wedge for HTML5 and alternatives to Flash thanks in large to the fact users — and developers — treated mobile as separate from regular browser apps. What a blessing in disguise: it let everybody start over. And once the mobile stuff got popular and apps broke, people blamed the bad mobile browser (“My ghetto Blackberry won’t load Facebook right!”) instead of the website. It was the perfect storm to force everybody to start adopting HTML5. Add in CSS/JavaScript standardizing tools (Modernizr,  jQuery, GWT, etc.) and developers didn’t even have to do cross-browser testing for simple stuff.

Maybe this is a bad thing to admit, but I haven’t bothered testing in all browsers for a year or two now. Stuff just breaks less often. IE7 is “good enough,” and the other browsers work 99% of the time. Thus, the only time I bother checking browser compatibility is if I’m doing something super complex or a user complains.

Good job, Internet. Ya, the evil Microsoft IE empire is still around, but we won the war and nobody even noticed.

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Industry

Social Payments: the Future is Unified

Physical credit cards will soon be a thing of the past. Is the rest of the US startup industry ready?

The next real-world cash-replacement could be powered by Facebook, Google, Apple, Square, Intuit, Paypal, or some other company hiding in the wings.  There are a few obvious names in there, and then there are a few left-field ones to some people. This post isn’t about how those left-field plays could happen. I simply wanted to explain how the landscape is changing.

There’s a convergence happening right now between social, payments, and e-commerce. Imagine this predictable future:

You buy some coffee at Starbucks. You take out your phone and swipe it at the terminal. Your [insert phone app name here] Bucks (from here forth known as: “Phone Bucks”) are deducted from your account. Your purchase is optionally posted on your Facebook/Twitter stream. You get highly-targeted Groupon-clone notice for a Starbucks coupon redeemable online immediately. You decide to buy it using your Phone-Bucks — no signing in, no additional authorizations — by clicking a button.

We’re talking about a future where your online wallet (today, known as Paypal, Facebook Credits, etc.) follows you into the real world and ties directly into your mobile phone. This represents a single unified wallet. And it makes sense. That’s the future. That’s where we are headed now. I’ve been watching this trend happen for the past few years, and it’s exciting to finally see some big players waking up to this reality. Which players are the closest to achieving this? In this order:

1. Facebook – Due to its large install base (virtually all smartphones) and an existing currency platform (Credits), they are best positioned to move into the real world. And they recently made a huge move indicating a desire to do exactly this (creating a subsidiary is the first step in buffering liabilities that come with real-world payments).
2. Square (or Intuit depending on how things play out) – They would solve this from the other direction: they have a stronger real-world presence, and moving into the digital space might be easier than vice-versa.
3. Google – They will approach this from the platform (Android) by opening it (Google Checkout 2.0) up to developers and creating an ecosystem. They also recently stole a key exec from Paypal, so you know they’re serious.

It’s my belief that any startup entering the e-commerce landscape right now needs to make sure they are thinking about this convergence. To get big valuations, I think a startup needs to not only understand these trends but be the first to market in the new paradigm that will be coming (really soon!). This convergence will create an opportunity for new players to emerge and destroy existing leaders. All mobile startups around commerce, Groupon, Paypal, and even the advertising arm of Google are probably already adjusting to these trends. Is your startup?

Think about it.

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Industry

The Destruction of the Head Hunting Industry

This is a random thought that just popped in my head.

With information becoming increasingly available, I’ve been thinking that the headhunting business will go through a major destructive phase in the next few years. There are two things the Internet changed:

  • Better distribution of information on job openings
  • Better distribution of information on candidates

Definition: For those of you who are unaware, head hunters are professionals that search for employees and pair them up with open positions in companies. In a typical scenario, a company will pay a recruiter (head hunter) a fee that equates to 2-3 months of that employee’s yearly salary. Companies pay this because recruiting employees is expensive. I’ve done a lot of hiring in the last few years, and I know how time consuming it is to review hundreds of resumes and then interview. A head hunter is basically an outsourced HR department. Additionally, candidates often approach head hunters who re-post job openings in various job boards.

And there’s a third trend that will come based on increasing information available to the public:

  • Automation of job and candidate pairing

A long time ago, I was business partners with a man who was formerly a head hunter. I remember him telling me how wonderful the internet made his job. He told me that when he was my age, recruiting meant shaking a lot of hands, memorizing every face and name you ever met, and storing large piles of business cards. For him, recruiting was now about posting jobs on Craigslist and Monster and referring the candidates. To him, he was still the gatekeeper. These days, anybody can be a headhunter with a little Internet know how.

head hunter productivity chart
head hunter productivity goes up first, then down (we are in the middle stage now)

However, sites like LinkedIn can change all that. The one true value proposition that headhunters provide is that they serve as matchmaker. But as more information is available and technology improves, this process should become more and more automated. For example, right now, LinkedIn has job postings. On its own, it’s just a new competitor to Craigslist, but what makes things interesting is that LinkedIn also has the data points to find all of the candidates out there that might fit the job requirements — without anybody lifting a finger.

Right now, the information stream is mono-directional: job postings (and recruiters) broadcast information. The goal is a bi-directional system where seekers fill out their requirements (a.k.a. their resumes) and both sides let the system do the matching. This can only work if both sides have maximum information about the other. Think of it like a dating site for job seekers. It’s a hard problem to solve given the time-sensitive nature of job searches, but it’s an inevitable outcome as more and more information centralizes onto the Internet.

5AM thought of the day.

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Industry

Google’s Real Goal Behind All Their Free APIs

Ever wonder why Google gives away so many web-developer tools? Tools that otherwise seem like complete money-and-bandwidth-pissing schemes (notice how most of these don’t directly show ads):

This is all about obtaining browsing behavior in a long term bid to increase ad efficiency. Nothing else.

  1. It is not about making things more “open”
  2. It is not about making web development easier
  3. It is not about making an online operating system
  4. It is not about competing with Microsoft
  5. It is not about making the Google brand more ubiquitous
  6. It is not about showing ads in new places

If any of these above things happen, they are a (likely planned) side effect. For example, if a particular API makes something easier, that is good because it will encourage other developers to adopt it as well. But as I will explain shortly, the commonly held beliefs about Google doing Good or Google making the web more open are simply not the reason for these initiatives.

If you notice, all of their APIs use JavaScript. This means all of their APIs have the ability to note what computer a given request is coming from. This means that on top of your search preferences, they can eventually begin to correlate your browsing habits based on the sites that you visit that use Google APIs.

For example, if my blog were to use a YouTube embed, it would be possible for Google to read a cookie originally placed on your machine by YouTube and correlate it as traffic coming from this site. This means they can uniquely track every YouTube video your computer has ever watched since the last time you cleared your cookies. YouTube is just an example because most of Google’s APIs are far less obvious to the end user. For example, the unified AJAX libraries could be used by a good half of the “2.0” websites out there without impacting performance (and in many cases would make the sites load faster for the end user). But because everything is going through Google, it’s possible (although I’m not saying that are) for them to track which sites you visit.

If this isn’t extremely valuable information, I don’t know what is. Don’t forget that the AdSense API is, in itself, a means for Google to track every website you’ve ever been to that uses AdSense, and for a way for Google to know exactly which type of ads interested you in the past. Once they know what sites you visit, they can surmise what a given site is about, and then determine, for example, what sort of products would interest you.

It’s the classic advertising chicken and egg problem: If I knew what my customers wanted, I could sell it to them, but they won’t tell me.

…And Google found the chicken. For the time being, they haven’t started using this information (at least noticeably), but I am sure they will as market forces move to make competition in that area more necessary.

Say goodbye to privacy. =( Oh wait, I’ve been saying that for quite some time now.

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Industry

Maybe Google Wanted to be Sued: YouTube and Plan B

No matter how you spun it, a lawsuit was waiting to pounce on YouTube. And when the lawsuit came, it would be from multi-billion dollar media conglomerates. Worst of all, people feared it would trigger a landslide of more lawsuits. Even still, Google bought YouTube. And now the billion dollar war has begun.

I wondered: Maybe Google actually wanted to be sued.

Backroom Discussions

First of all, in a perfect world, no, Google wouldn’t want this. And Google, hoping that the world is close enough to perfect, did buy YouTube. But somewhere during discussions, someone must have asked, “How is this different from Morpheus and Kazaa? Won’t we be sued into oblivion?”

The smart lawyers at Google probably mentioned something about the DMCA, but honestly, would you want to buy a company that would be hated, constantly, by the very people who own the content that keeps you afloat? Or better, how will such a site remain #1 if there is a (Edit: added link) unified effort by content owners to either displace or destroy you? Most of all, media companies, who have significant clout and money, wouldn’t let YouTube host their content for free without a fight. There was more to this purchase than meets the eye.

No matter how you look at it, the purchase came with a lot of legal risk. I believe nobody at Google is surprised that Viacom is suing and wants $1 billion, A.K.A. most of the sum Google paid for YouTube. This is all part of the expected road map in owning YouTube.

So plan A was to hope people would be nice and look the other way. That worked for a year so far, and Google hoped it would continue. Plan B was to get sued.

This isn’t any ordinary “get sued and win” plan. Waiting to get sued so you can win in court is a defensive move for most companies. But for Google, this is preemptive. This is about Google defending YouTube, instead of YouTube defending YouTube.

Why Getting Sued is a Preemptive Strategy

Let’s pretend that YouTube was not bought out because talks got delayed. Then realize that it would have probably been sued a lot sooner by a lot more people. Investors would flee and nobody would want the company now. If YouTube goes broke, that would have likely pushed Myspace Video to #1, giving News Corp a huge edge since it happens to own Fox Entertainment. Myspace Video would become whatever was in the best interest of Big Media. Probably a DRM infested piece of crap that sued its users for uploading copyrighted material.

Myspace is #2(Edit:) If you don’t think Myspace would have hopped into the throne, you may want to see this recent report that shows how Myspace video is #2 in the video market. And as the trend goes, Myspace is actually losing share in the video market (3% between December 2006 and January 2007). Seeing as how 16% of all YouTube traffic comes from Myspace, you can’t say YouTube isn’t causing serious harm to Myspace videos, keeping it from becoming #1.

On the other hand, if YouTube didn’t go broke and fought the lawsuits, imagine if they had lost. Myspace Video gets to keep whatever edge it has, but virtually every other video site on the Internet becomes illegal overnight. Thousands of user records and IP addresses would get subpoenaed, and video sharing dies in one fell swoop.

Why Does Video Sharing Matter to Google?

What’s the next big thing on the net? Video. Google cares what happens in video sharing because it wants a slice of the video ad market. It doesn’t want to just be in the market, it wants to own it like it owns text ads. But that’s not the whole answer.

Google bought YouTube because it wanted to make sure of three things:

  1. Google has first dibs for video ads on the biggest video site on the Internet
  2. YouTube remains legal
  3. Expand and protect current fair use related provisions involving copying intellectual property

The first point is obvious, and the second point feeds into point #1.

But the third point is the most important for Google. If YouTube were to lose a lawsuit for hosting intellectual property, it would severely weaken Google’s position in a variety of current and future endeavors. Any aspirations Google has of someday crawling and indexing video content (nope, they don’t have this technology yet) would now be in legal limbo. It would also potentially re-introduce new arguments against their Google Image Search. And their book search program might suffer a similar fate once the YouTube precedent settles in. Google, being a company that spiders and indexes (stores) massive amounts of copyrighted information, would now be in serious legal jeopardy.

YouTube is Google’s Future

Thus, Google not only threw money at YouTube: it threw its lawyers at YouTube too. Google’s lawyers are some of the most well-versed copyright lawyers in the world since so many of their lawsuits deal with that issue.

The goal here is simple. Google wants to own the #1 video sharing site (completely legal), own 100% of the ads on that site, and clarify many currently-ambiguous copyright issues in their favor. If all of that goes as planned, the $1.5 billion paid to YouTube was a small price to pay. But if they had never gotten involved, the potential losses were far greater than a billion or two. Since Google has a market capitalization of over $130 billion, even a dip of 1% means losses of over $1 billion. But if entire sections of their business model became legally uncertain, you can bet they’d lose a lot more than 1%, especially with their insanely high P/E ratio (the ratio between what their stock is worth and how much they make).

By fighting a lawsuit, Google gets to prove the legitimacy of Internet video distribution – something that will probably never flourish under the “old media” regime. Unfortunately for them, the DMCA protects site owners from liability of what its users do — or at least that’s the general interpretation. Letting YouTube fight this battle alone with their own lawyers might have resulted in a very public and unnecessary loss that would have crippled Google’s video ambitions and possibly caused collateral damage to a bunch of related industries (especially search). This would have forced everybody to play by the conglomerates’ rules, and taken anyway any guarantee of Google getting any cut of the video ad pie. Video sharing needs this clarification before it can move forward. And if Google legitimizes it, they will have the biggest video site on the web for their video ads to play.

So let’s ask ourselves again: would Google pay $1.5 billion so it can fight the lawsuit on behalf of YouTube? Now that I think about it, it seems like a wise long term move.

Update

9:01AM 3/22/2007: I’m on Slashdot. I think I survived the Slashdot Effect!

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Industry

The Future of iPods

In another blog prior to this one, I wrote about a prediction I have for iPods. Because I plan on fully retiring that blog in the near future, I thought I would port the post here to keep the prediction alive. Note: I wrote this post long before the recent flurry of iPhone headlines.

Here’s my prediction: The next iPod will be the new hook Apple will use to enter the cell phone market.

A little history:

  1. First Apple introduced an iPod. It played music well.
  2. Then Apple introduced color iPods with photo capabilities. A mostly useless upgrade, but still cool.
  3. Then Apple introduced a video iPod. Suddenly portable video became a hit.
  4. Then Motorola introduced the completely shitty Rokr iTunes phone. Nobody cared.

The reason why no cell phones have been successful with music playing integration is that the two tasks require use input methods that are starkly different. Making calls requires a number pad and the ability to browse through a phone book. Sending text messages requires typing abilities. Browsing music, on the other hand, requires volume control, music selection, and play control. Let’s not forget the entire device must be able to sync the music files too. Dumber people in the past have speculated Apple would release a phone iPod that had an old fashioned digital number dial type of thing that would superimpose over the click wheel. Wrong. Dead freaking wrong!

Let’s fill in the gap. Recently there have been very prominent rumors about a new version of the video iPod that has a giant touch screen with a digital click wheel that only appears as necessary. Sounds cool, right? Now you’ll be able to enjoy videos more than ever! But wait, there’s more.

Apple’s newly rumored screen-only interface is the key. No, not because they can superimpose numbers over it when you’re in “phone mode.” Like I said above, wrong! Rather, because when you go into “phone mode,” the click wheel disappears and is replaced by a cell phone style keyboard. That’s right. The new all-digital front panel allows Apple to overcome the problem of mixing two different devices with completely different input methods. The new iPod will simply drop the click wheel if you aren’t doing a music or video related action. It’s genius.

Imagine an iPod that has a small, albeit low-quality, speaker that allows you to use the iPod as a phone as well as hear your movies. Imagine newly upgraded iPod earbuds that allow you to make and receive phone calls without ever taking your iPod out of your pocket, all while simultaneously pausing your music. Imagine a phone where your ring tone could be any song you own.

Apple won’t be pushing this new idea forward any time soon. The world is not yet ready for an all-in-one device. But the day will come. The current big personal electronic devices are:

  • Camera
  • Music player (iPod)
  • Movie player (iPod)
  • Cell phone
  • PDA
  • Internet device

It’s clear that some devices are best left independent. Apple won’t want to make their pristine products murky by adding mediocre peripherals such as a crappy 3.0 megapixel camera; not to mention such a hardware extension will probably compromise the sleekness of an iPod. That said, cameras are likely off the list forever merging with the iPod unless they can integrate it without messing up the smooth curves on the device.

Apple could go another route by integrating Internet access, but I predict that Internet access has too many geek-only issues such as security that may confuse or annoy consumers — Apple will probably never merge Internet access with the iPod. However, they may integrate wireless networking functionality to allow syncing with iTunes on a computer located nearby. And maybe, just maybe, on some random whim, Apple could integrate Internet access simply to allow direct purchases from the iTunes store. However, a consumer who can’t trial samples of music is less likely to buy anyway, so, again, I predict Apple probably won’t introduce this feature in order to protect its “just works” iTunes music-purchasing experience.

Before the cell phone is introduced into the iPod, I predict Apple will test this different-interface idea by introducing a new sub-feature into the iPod that will make use of it. Potential applications are:

  • Ability to sync with your iCal program (PDA integration). This would introduce a new task managing/calendar interface.
  • A different interface to browse photos.
  • The ability to edit music tag information (such as artist or song name).

Apple will be careful about this. They will avoid the (noob) trap of creating 18 different interfaces for 18 different types of situations. Likely, there are only a few types of visual interface layouts they will introduce:

  • Buttons (like on a web page)
  • A number pad like on a phone
  • Yes / No / Cancel dialog

I predict this will be introduced in early 2007 and polished by year-end. Tell me I don’t sound right.

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Industry

YouTube and Google?

Techcrunch just covered the possibility that Google is looking to buy YouTube for $1.6 billion.

I think this acquisition makes a lot of sense. While it was pointed out that Google would be unafraid of the copyright issues, I think another reason why the acquisition is a safe bet is that Google can support the infrastructure and bandwidth costs. Owning YouTube would not be a significant strain on a company’s hardware resources. Seeing as Google seems to have a genuine interest in the video market, signified by the presence of Google Video — which was NOT a free-time-project-gone-gold — I’d say this acquisition has a lot of potential to be true.

If the future of the web is in streaming media, owning the current #1 player would be the smartest way for Google to maintain their edge. What’s surprising is how little speculation there was of this acquisition until this post. It seems like a completely random shot in the dark.

I will say that the acquisition doesn’t sit right with me 100%. Google is not a content provider, and owning YouTube and investing $1.6 billion dollars pretty much guarantees they MUST focus on being a content provider as well as an ad broker. Perhaps they’re starting to realize that in order to keep Microsoft off their toes they need to own some of the content as well? Of course, then they’d be competing with AOL, Yahoo!, and MSN for content, but having YouTube certainly would help in that race.

Of course, this all assumes the rumor has any substance.