Over 12,000 views and 64 comments later, the consensus in this Branch thread is that we’re not in a “bubble”. Maybe the “bubble” side wasn’t fairly represented fairly, or maybe we’re just really not in a bubble.
The one thing we all know for certain: more “bubble” posts are coming our way. No one, it seems, can help themselves. You can be wrong a million times, you just have to be right once. Everyone wants to be the one to “call it”.
Earlier, First Round Capital’s Josh Kopelman tweeted out a link to a post he wrote, rounding up “bubble” posts. It’s even funnier when you realize when he wrote it: 2007. And he has “bubble” talk going back to 2004. The best line comes from 2006:
I feel like when I quit email for a month last year, people were mostly envious of me being in a position to do so. But it’s hard to imagine anyone who would want to quit the entire internet. And for a year, no less.
The internet is simply too important and deeply woven into modern life — so much so that you’re often using it now when you don’t even realize it. It would be much easier to quit using a car or watching television or using credit cards. Think about that for a second.
In my month away from email, I didn’t miss it at all. Not for one second. Unfortunately, it’s a necessary evil of the modern world. But the internet is different. My guess is that in his year away, Miller will come to realize more and more that the internet is nothing if not one of the greatest achievements in human history.
It’s going to be a hell of a lot harder to live life without it.
I’m sure there will be a killer book deal on the other side though!
When I started out as a tech blogger, I was pretty green but didn’t realize it. I thought that because I had been following tech news closely for a couple years, I was all set. I thought I knew what I was talking about. Five years later, I look back and many of my old posts and cringe. How could I not know this? And this? And that?
My single greatest asset as a tech blogger now is context. If something happens with Apple tomorrow, I’ll be able to weigh in in a compelling way because I know much of the history of the company. The same is true with a handful of other companies.
But big tech blogs want it all. They want writers to cover news that they’re in no way qualified to cover. That’s why there’s so much re-writing. It’s not so much laziness, it’s just the only way some people can quickly do homework on a story — “well this guy said this, so it must be true.” Unfortunately, it’s often this type of re-blogging all the way down.
And no one stops it because the way the system currently works, speed and pageviews matter much more than accuracy.
Dash is dead-on here. It’s another way of framing the point I was trying to make here.
Every few months, a big story comes out proclaiming that we’re in another bubble. It reminds me of the “downfall of Apple” nonsense — everyone wants to be the first to correctly “call” what is inevitable (that Apple will fall at some point, as all companies do — and that the tech scene will be hit by hard times again, as all scenes are).
Dixon nails each point that should actually be considered now when talking about a “bubble” in our space. Instead, we often get no facts in these bubble stories, just a bunch of vague fear mongering. The same kind we got a year and a half ago. And a year before that. And a year before that. Etc.
I can’t think of another example of a company seeing revenue rise that much while seeing profit fall almost the exact same percentage.
The race is on for Amazon to get to Walmart scale, where margins do not matter. But it’s getting to be a bumpy ride because of things like Amazon’s adventures into hardware.
The company made $13.18 billion in revenue for the quarter, but only $130 million in profit. That’s less than the right side of the revenue decimal point. And the profit continues to go the wrong way.
On the bright side, at least they didn’t actually lose money (as they keep warning they might). Next quarter, they’re projecting anywhere from $40 million in profit to $260 million in loses. Even if they beat the range (which they should), they’ll still be inching closer to $0.
And what happens if Google is actually able to undercut the Kindle Fire in price with their Nexus tablet?
Both posts were extremely controversial when they were published. But looking back, they sure seem to be pretty spot-on (well, except for the iPhone 5 part, just sub the iPhone 4S in there). Android was “winning” in the U.S. market because the iPhone was only on one carrier, and not even the largest carrier.
This should not be controversial now. It should be viewed as fact, as the numbers indicate.
But in what may be a shock to some of you, I’m not nearly as bearish on Android right now as Yarow (and by extension, Raymond James analyst Tavis McCourt). I think Android will be fine because Apple will never fill every market need.
Apple is smartly focused on China right now, which has a quickly maturing middle class. But I can’t see them competing with all those ultra-cheap phones that Android can enable — why would they?
In the U.S., I think the iPhone will continue to dominate as the single most popular device for the foreseeable future, but Android as a whole will hang around as a popular alternative.
Probably around late summer every year going forward, iPhone sales will dip ahead of the expected new device and some Android manufacturer will find a way to capitalize, rising the entire ecosystem’s share as a result. But it will always be short-lived. The new iPhone will come along and crush it.
Remember too that the iPhone isn’t even on all four major U.S. carriers yet, something which T-Mobile clearly isn’t too happy about. Hard to see how that doesn’t change this year.
While many people are linking to Forrester Research CEO George Colony’s “Apple = Sony” post (fine, I will too), I’ll focus on Josh Lowensohn’s breakdown of said post (which is actually longer than Colony’s post).
Lowensohn, like myself, apparently read the post and wondered what the point was. Colony wasn’t saying anything new. Nor was he diving deep into something that many people are wondering (can Apple continue to thrive in the post-Jobs era?). Instead, “Colony, to a great extent, is following the classic formula of the provocateur,” Lowensohn notes.
Exactly. Apple just had another massive quarter (the 2nd record-breaking one in a row under Tim Cook, mind you). Someone has to be the contrarian to soak up the pageview glory. Colony, it seems, took one for the team.
Some will charge me with doing the same thing about Microsoft the other day. But I actually look at the numbers and the trends and draw a conclusion (in 5 years, Microsoft will be an enterprise company, not a consumer company).
Colony does none of that. Because Apple’s numbers support nothing beyond the company being basically unstoppable. So Colony turns to sociology.
The upside (for him) is that if he’s right and can boast about it in the future (as I so often love to do). Maybe it helps his company (“Hey, that guy knows what he’s talking about — remember the Apple = Sony post?”). The downside is that if he’s wrong no one will remember a sub-500 word blog post about a topic a thousand others wrote first.
What about this? What if Apple isn’t like Sony? Or Polaroid? Or Disney? Or even Apple circa 1985? What if this Apple is completely different?
At best, that wouldn’t be an easy sub-500 word post. At worst, it would be a boring post without much to say.
Everything fails. It’s just the way the world works. Maybe Apple falls in 3 years. Maybe in 5 years. Maybe in 20 years. Maybe in 50 years. Maybe in 100 years. No one stays at the top forever. It’s the easiest prediction in the world to make because eventually, you will always be proven right.
But after two absolutely insane quarters for the most successful company in the world, why predict it now?
Because the actual data points in the opposite direction, but everyone is bored with reading how Apple is just destroying everyone else. You know, the truth.
Continuing on the Apple margin kick, this is arguably the craziest thing: as Horace Dediu points out, Apple’s operating margin was so high last quarter that it surpassed the margin of both Google and Microsoft.
As a reminder, Apple is (mainly) a hardware company while Google is (mainly) an advertising company and Microsoft is (mainly) a software company. That is not supposed to happen.
Things are not nearly as bad for Nintendo as they are for Sony, but this is obviously not good:
Nintendo will report on Thursday its first ever operating loss, after estimating a 45 billion yen deficit for the business year just ended.
I will always have a soft spot for Nintendo. In my opinion, they have by far the best game IP ever created. It’s not even close. And that’s why, as much as it pains me to say it, I think Nintendo will eventually have to head down the Sega path and move on from hardware to focus solely on software.
It’s well known that Mario/Zelda/etc creator Shigeru Miyamoto has no intention of letting this happen — like Apple, he strives to set the entire user experience through hardware and software — but it’s hard to see Nintendo focusing on gaming hardware and continuing on. Maybe they pull and Apple and fully reinvent the company, but there’s a reason why such transformations don’t happen often.
On the flipside, maybe I’m letting my dreams blind me a bit. I really, really, really want Mario and Zelda and Donkey Kong and all the other great Nintendo properties on iOS devices.
Remember when Charles Arthur looked at the numbers based on early court documents and extrapolated that Google may have made 4x off of the iPhone versus Android? Remember when some jumped on it as likely being bullshit? Looks like he wasn’t far off at all.
As you’d expect, Google is still trying to spin this, but the court documents don’t lie. In 2010, Google itself projected making $278.1 million off of Android. Of that, $158.9 million was expected to be on ads versus just $3.8 million from app sales. They were making much more off of the iPhone.
And the overall projections may be high if the horribly off projections Google had for Android Market music sales are any indication. Reports Nilay Patel:
Google was also planning on boosting all these numbers significantly with its music service — Rubin listed “behind on music, video, books” as one of Android’s “lowlights” — and predicted that it would do $738m in music revenue in 2011 and nearly $1.5 billion in 2012. Those numbers have proven to be hugely optimistic…
I’ll say. Google still doesn’t even have a deal with Warner to sell their music. They’ve been trying to get that deal for a full two years now and have failed for a full two years now.
This is a smart way to integrate with Pinterest while they work on a proper API — it’s similar to how some apps passed photos to Instagram before they had a proper mobile write API (which is still limited to Hipstamatic, I believe).
I get the feeling that Pinterest write API access for mobile will be huge. Huge as in, a lot of startups are going to integrate it before they worry about something like Google+. It will be Facebook, Twitter, Pinterest.
By now you’ve seen the numbers. Just in case, the keys:
Revenue: $39.2 billion
Profit: $11.6 billion
iPhones: 35.1 million
iPads: 11.8 million
Macs: 4 million
iPods: 7.7 million
The first stand-out number is the 35 million iPhones sold. Before last quarter’s insane 37 million sold, 20 million had been the previous record. Hard to fathom that Apple almost matched their record this quarter (which was a non-holiday quarter and a week shorter than last quarter).
But the real stand-out is the 47.4 percent gross margin Apple hit for the quarter. When they were at 44 percent last quarter, company executives went out of their way to note that they probably wouldn’t hit that type of margin again. Instead, they shot past it.
The reason is likely because the iPhone accounted for a larger portion of Apple’s revenues since the new iPad was only on sale for a couple of weeks last quarter (and older iPad sales dipped leading up to the new one). The iPad has a worse (but still very healthy) margin than the iPhone.
In other words, it would be hard to imagine the margin continuing to rise. 50 percent sounds impossible. But then again, 47 percent sounded impossible.
"Microsoft Is The Best!" — Unnamed Microsoft Employee
Earlier today, I wrote an anti-Microsoft post. Actually, it wasn’t so anti-Microsoft, I thought I was decidedly fair. My thesis was basically that Microsoft was done in the consumer space, but that they’d continue to do well as an enterprise company going forward.
Essentially, they’d follow the IBM path. Nothing wrong with that. IBM is still a great company, they’re just different from what they once were.
For some reason though, all anyone cares about is the consumer space. And, let’s be honest, Apple now owns it. If it’s not clear to you now, it will be in a year. Or two years max. It’s just the way it is.
In five years, Microsoft will be known as an enterprise company. That’s not controversial in my book, it’s just an observation on where things are headed.
The smoking gun as it relates the API copyright issue came in a March 24, 2006 email in which Rubin said he didn’t see how Google could open Java without Sun since Sun’s owns the intellectual property and the brand.
Maybe Google just retroactively open sourced code they didn’t actually have the right to? Makes total sense. “Open” knows no bounds!
Maybe someone should copy Google’s search algorithms and open source them. Google probably has some IP there, but, you know, whatevs.
A ton of people I know seem to be bitching about this (as it was just forced upon everyone). IMO, the new design is better than the old one (just look as Jason Crawford’s side-by-sides at the end), but change is hard and all that.
The reality is that both designs pretty much blow. Gmail itself has become a big nightmare. As a backend for email, it’s awesome. As a web app, it’s awful.
This post should have actually been titled “Why Facebook Needs To Build Their Own Phone”.
Everything I hear indicates that Facebook’s once big HTML5 dreams keep getting pushed and pushed and pushed. It’s a noble cause, but it’s also one they have to take up, since they don’t control the key platforms: iOS and Android.
All the finger-crossing hasn’t worked. And Facebook grows impatient. Building their own browser may be the first step. But eventually, the phone will have to come.
Sad day. I still have my prototype Chumby from several years back. As Nilay Patel sort of hints at, it’s interesting to think that Chumby would have been an awesome Kickstarter project. As a company though, apparently not so much.
I remember Kickstarter first really coming on my radar two years ago when Diaspora, the would-be open Facebook alternative, shot past $50K in crowd-sourced funding.
They would eventually raise over $200K — the power of the Internet, and all that.
Oddly enough, looking back, it now reminds me a bit of The Hobbit. When Bilbo finds the Ring, you think: oh magic ring, kind of cool. But actually the Ring is the story, you just don’t realize it at the time.
Everyone, including myself, focused on Diaspora. Kickstarter was the story.
The Pebble watch has now raised over $5.5 million dollars on Kickstarter. The original funding goal was $100K. It still has 28 days to go.
"This feels like just the beginning," says Captain Obvious.
Overall, a good quarter for Microsoft. Revenue was up 6% year-to-year thanks largely to the Server & Tools Division and the Business Division (read: Office).
In other words, the quarter was driven by the enterprise side of the company.
Windows growth was up only slightly (4%), but that’s probably to be expected as Windows 8 nears. And Microsoft specifically called out the strong enterprise growth there as well.
On the full-on consumer side of things… the Entertainment & Devices Division (read: Xbox) saw revenue decrease 16% year-to-year. That’s not good. While Xbox was the top-selling console for the 15th straight month, the company cited a “soft gaming console market”.
For the quarter, the division actually swung to a loss — $229 million in the red.
A new Xbox can’t come soon enough for the company. And it’s not gonna happen until next year.
But hands-down the best part of the release is this:
The Online Services Division reported revenue of $707 million, a 6% increase from the prior year period, and operating loss improvement of approximately $300 million.
"Operating loss improvement". That’s one way to put it.
In English, the Online Services Division continues to bleed: it lost $479 million last quarter. An improvement, yes — but mostly thanks to less costs. Revenues were only up $40 million.
The division has not posted a profit since 2005.
Update: While Microsoft has set up a Windows Phone Division, for financial purposes, the devices are reported under the Entertainment & Devices Division (but the numbers aren’t broken out). It’s certainly possible that high Windows Phone costs contributed greatly to the E&D loss.
Update 2: As Mary Jo Foley points out, it was indeed the greatly depressed Xbox 360 sales that led to the loss.
Verizon sold 6.3 million smartphones last quarter. The quick breakdown using my math skills:
3.2 million iPhones.
3.1 million non-iPhones.
Android is still winning by some metric, I’m sure. Ridiculous phones sold with styluses, perhaps? Wait, no, that’s AT&T.
Also note that 3.2 million iPhones is a drop from the 4.3 million iPhones Verizon sold last quarter — which isn’t a surprise given that last quarter was the holiday quarter and the first quarter the iPhone 4S was on sale. These numbers seems in line my iPhone sales prediction.
But, as Eric Slivka notes, the iPhone 4S also went on sale in China and on China Telecom for the first time last quarter. This may offset the holiday drop-off in the U.S. We’ll find out next week.
Nokia, the undisputed king of mobile just a few years ago, has posted a $1.7 billion loss for the quarter.
Some of it was restructuring costs, but a lot of it was the ever-increasing competition (meaning Apple and Samsung, basically the only two phone makers actually making money).
Nokia expects these types of losses to continue into next quarter as well.
Even more troubling is CEO Stephen Elop, the ex-Microsoft executive who has tied his company’s fate to Windows Phone, talking about the Lumia, the first true flagship phone of the partnership:
We have launched four Lumia devices ahead of schedule to encouraging awards and popular acclaim. The actual sales results have been mixed. We exceeded expectations in markets including the United States, but establishing momentum in certain markets including the UK has been more challenging.
Did you catch the nut behind the sugar-coating? “The actual sales results have been mixed.”
Chris Dixon on the increasingly popular notion that startups are working on features instead of big ideas:
One thing these critics need to be careful about is that, as Clay Christensen has long argued, many important new inventions start out looking like toys.
He argues that Twitter is a great example of this, which it is. 5 years ago, the consensus of many — particularly those in the tech blogosphere — was that Twitter was just about the dumbest thing ever invented. Today, it’s a fundamental communication protocol for hundreds of millions around the world.
I’d go even further — back to the founding of Apple. At the time, people considered personal computers to be niche of the market at best, a toy at worst.
Apple is now worth $600 billion dollars and has fundamentally changed the world a few times over the past 35 years.
Hell, this guy thought the iPhone was little more than a toy just 5 years ago.
Oddly, this seems to always want to breakdown into a hardware versus software argument. Which is silly.
Things that change the world tend to sneak up on us all. If they were obvious enough to be immediately recognizable, everyone would be working on them. You have to start somewhere.
To its many fans, Apple is more of a religious cult than a company. An iToaster that downloads music while toasting bread would probably get the same kind of worldwide attention.
Don’t let that fool you into thinking that it matters. The big competitors in the mobile-phone industry such as Nokia Oyj and Motorola Inc. won’t be whispering nervously into their clamshells over a new threat to their business.
First, Apple is late to this party. The company didn’t invent the personal computer or MP3 player, but it was among the pioneers of both products. Yet there is no shortage of phones out there. There are already big companies that dominate the space, all of whom will defend their turf. That means Apple will have to fight hard for every sale.
Yet Apple has never been good at working with other companies. If it knew how to do that, it would be Microsoft Corp.
Lastly, the iPhone is a defensive product. It is mainly designed to protect the iPod, which is coming under attack from mobile manufacturers adding music players to their handsets.
It won’t come from the iPhone. Apple will sell a few to its fans, but the iPhone won’t make a long-term mark on the industry.
I’m absolutely flabbergasted. Where to begin? Nokia Oyj?!
Hindsight is 20/20 and all that. But come on. What a huge jackass. If he had said the exact opposite of everything he said, he would have been much closer to the truth than he was.
Twitter’s decision to implement the Innovator’s Patent Agreement could not have been an easy one. While it’s refreshingly straightforward and an obvious crowd-pleaser, it potentially puts the company in a bit of a vulnerable position. What if no one else adopts the policy? They’ll stand alone with their pants partially down.
While I haven’t yet talked to anyone at the company about the decision, my sense is that they made the call using a simple principle: do the right thing.
While obvious, it seems that companies are rarely guided by simply doing the right thing. Legal departments get in the way. Or investors get in the way. Someone gets in the way. What’s right isn’t often what’s “smart”. And that’s a problem on multiple fronts.
When I tweeted about the upsides of this decision earlier, many people were quick to point out some of the practical problems. What struck me is how all the problems mentioned were derivatives of fear. Fear of others. Fear of change. Fear of dying.
The number one reason not to implement the IPA seems to be the fear that one day things could turn south and then your patent portfolio becomes your main asset — either as a commodity for sale (see: Aol) or as a weapon (see: Yahoo).
That is such a losing mentality. I’d bet any company not willing to implement something like the IPA due to those thoughts is more likely to fail. Failure is quite literally on their minds!
With the IPA, Twitter is taking the opposite stance. They’re betting that rather than having the fallback option to sell their patents at the highest possible price or suing others with them, they’re going to continue to win. And they’re going to continue to innovate.
And if things go wrong, they’ll go down with grace, not with the cowardice that Yahoo is currently showing. But again, things are less likely to go wrong because they’re not busy dwelling on things going wrong.
I think Twitter will find that doing the right thing will pay dividends. It’s hard to imagine a better tool for recruitment in this day and age. True innovators can do what they do best at Twitter without fear that their work will be misappropriated in the future. And in an age of growing concern about the power and intentions of Google, Facebook, and Apple, the broader startup space will look more favorably upon Twitter.
This, of course, isn’t the end of software patents. But it is a practical solution to a problem that was quickly spiraling out of control.
After the initial high-fiving is done today, the cynics will come out and say this was purely a marketing maneuver. Or that it actually won’t change anything. But that talk is a disservice to what Twitter has actually done here. They’ve gone out on a ledge that others haven’t been willing to go out on — and that some never will.
They’re doing the right thing, which isn’t nearly as easy as it sounds.
How long until Yahoo sues Twitter claiming they patented the IPA idea years ago?
Twitter has drafted up what they’re calling the Innovator’s Patent Agreement (IPA). With it, the company is promising to only use their patents as the actual inventor intended — read: defensively, not offensively.
The IPA is a new way to do patent assignment that keeps control in the hands of engineers and designers. It is a commitment from Twitter to our employees that patents can only be used for defensive purposes. We will not use the patents from employees’ inventions in offensive litigation without their permission. What’s more, this control flows with the patents, so if we sold them to others, they could only use them as the inventor intended.
Excellent news. Twitter is promising to implement the IPA later this year and says that it will apply to all their patents past and present. Yes, this means things like Loren Brichter’s pull-to-refresh (which he’s excited about).
Hopefully other startups large and small will follow Twitter’s lead here. It would be really excellent if larger companies (*cough* Yahoo *cough*) did as well, but it’s hard to see that happening given the current state of things. This is a movement that will have to start from the ground up.
Apple’s stock took a dip today back below $600 a share. Some are citing concern that carriers will cut the subsidies they pay Apple for the iPhone as the reason for the drop.
There hasn’t been much in terms of tangible evidence that this is even a possibility, but the writing does seem to be slowly appearing on the wall. The carriers are all still extremely profitable and they do very well selling the iPhone, but they do better on a per-device basis selling other phones because of the subsidy they must pay Apple.
Because the iPhone is the most popular single device across the carriers, they’re all seeing certain numbers slip as a result. The question becomes do the three U.S. carriers with the iPhone (Verizon, AT&T, and Sprint) have enough leverage to push back and make Apple take a lower cut?
I don’t know, but I do know the leverage they will try to use: Android.
But the fact that Apple has a fourth carrier, T-Mobile, chomping at the bit to pay them the same subsidy, doesn’t speak well for this strategy. Collectively, they all still need the iPhone more than Apple needs any one of them. So unless they team up (collusion?) to put Apple in a position with no carriers willing to pay them what they want, I just don’t see things changing.
Sadly, I still think the carriers will keep on screwing with customers (rate hike here, rate change there) before they screw with Apple.
Philip Elmer-DeWitt looks across the field to find that the bets on how many iPhones Apple sold last quarter range from 26 million to 44 million (!).
To put things in perspective, during Apple’s last quarter — the holiday quarter — the “holy fucking shit" quarter — they sold 37 million iPhones. By far a record — nearly double the previous record.
By my count, 13 analysts (both profession and independent) on Elmer-DeWitt’s list think they’re going to sell more than that record number this quarter. Wow.
My sense is that a number of analyst believe this will be the case because Apple actually sold more iPhones in Q2 last year than in Q1. But remember that the Verizon iPhone was first introduced into the market at the time, juicing sales.
I have no real insight here, but my guess would be closer to 30 million iPhones sold last quarter. That would still be 10 million more iPhones sold than Apple’s second-best iPhone quarter ever (Q3 2011). In my view, the 37 million blowout happened because of pent-up demand due to the delayed release cycle of the iPhone last year.
I simply can’t imagine Apple beating that number until the next iPhone launch, but I could be wrong. And if I am, I shudder at the thought of what numbers Apple is going to post in a non-holiday quarter.
Good article by David Carr on the weirdness of the situation that is the DOJ suing the major book publishers and Apple — which helps Amazon, the once (and likely future) domineering player in the space.
Carr’s key line:
That’s the modern equivalent of taking on Standard Oil but breaking up Ed’s Gas ’N’ Groceries on Route 19 instead.