Apple and Google: The board is set and the pieces are moving....

This has got to be creating heartburn in Redmond. In a late announcement (at least on the east coast), Google CEO Dr. Eric Schmidt is joining Apple's Board of Directors. Now let's see. The most popular search engine on the planet now will have some influence on the company that has so far dominated digital music (and soon movies as well). And oh, by the way, the CEO of that company happens to be the largest shareholder in Disney/ABC/ESPN as well. Suddenly, having a monopoly on corporate desktops doesn't seem quite so, well, so much a ticket to world domination. Oh my.


What can we expect from this development? My prediction: nothing. Despite the potential for spying all kinds of conspiracy theories in this move, my guess is that this was just Jobs and company saying, "Hey, Eric is a smart guy and knows a lot of what's going on in places that Apple isn't. We could use his advice." But if nothing else, this shows that the battle for the consumer living room and desktops isn't as one-sided as conventional wisdom would suggest. After all, the combined market capitalization of Disney, Apple, and Google is about the same as the market cap of Microsoft. And with $30 billion of Microsoft's capital committed to stock buybacks for the next year or so, these three companies will have influence and dollars that can shape the future of media, entertainment, and the Internet. And that's good news for everyone -- except Microsoft shareholders.

Technorati Tags: Apple, Eric Schmidt, Google, Media, Microsoft, Music, Opinion, Steve Jobs, Stocks, TV

The best presentations ever

I'm not sure if I agree with all the choices here, but KnowHr.com has a great listing of the top 10 best presentations ever. Certainly it includes the greats: Steve Jobs, Martin Luther King, Larry Lessig, Malcolm Gladwell, and others. But I'd add Hans Rosling at the 2006 TED Conference, who explains 50 years of trends in world health and development in 18 minutes of animations, and Sir Ken Robinson who uses wit and humor to articulate the need for creativity in education.

A notable point: all these people have something important to say that they care deeply about. I would argue that while a good presentation doesn't require that, a great one does. If you are bored with your subject matter, your audience will be too. Often we focus too much on how we present material, when we should be focusing on what we are saying as well.

Technorati Tags: Communications, Marketing, Passion, PowerPoint, Presentations, Public speaking, TED

Microsoft and Toshiba line up against Apple's iPod

Crunchgear.com confirmed from FCC filings that the first Microsoft Zune music players will actually be rebadged Toshiba Gigabeats.. Now, it's no big surprise that Microsoft isn't making its own hardware, but Toshiba isn't exactly a contract manufacturer like Foxconn or Flextronics either -- it has its own brand and marketing. So why would Toshiba be willing to suppress its brand in favor of Microsoft's in such a strategic market?

To answer that question, we have only to look back about a year or so in the next-generation high-definition DVD wars. When Blu-ray appeared about to apparently sign every known hardware manufacturer and studio to its Blu-ray DVD player, both Microsoft and Intel went against the tide to sign up with Toshiba's HD-DVD player. Now Microsoft may have done this simply to avoid giving support to its gaming enemy Sony, but Microsoft rarely does any type of public business deal without asking for something in return privately. Our bet is that Microsoft called in this favor from Toshiba to have something to sell for the Christmas 2006 holidays.

Which leads to an interesting question: if the Microsoft Zune is just a Toshiba Gigabeat, which was already a Microsoft music licensee, what secret sauce is Microsoft adding that will make Zune a success when Gigabeat sales have been, well, lackluster. Perhaps we'll find out in November. But as with the XBox launch and Sony's PS3, leaking the device and specs in advance is just going to make marketing it that much more difficult.

On the other hand, since Toshiba is the supplier of 1.8-inch hard drives to Apple for its iPods, the revelation that Toshiba products will be competing directly with the iPod may have repercussions. I'll bet that Apple is calling other hard drive suppliers this week asking how many 1.8-inch hard drives they could supply for Christmas. After all, last year Apple sold 14 million iPods just in the Christmas quarter. This year's target is undoubtedly even bigger. And after innumerable bruises from prior battles with Microsoft, Apple won't assume that its competitors will play fair.

Technorati Tags: Apple, Gigabeat, Hard drives, iPod, iTunes, Marketing, Microsoft, Music, Toshiba, Zune

Amazon.com's EC2 hosting service: technology diworsification

Amazon.com just announced its new Elastic Compute Cloud (EC2) virtual hosting service. This is a system that allows any user who opens an Amazon Web Services account to simply upload a Linux disk image to Amazon's servers (i.e., in the Internet "cloud"), and Amazon will execute that Linux image on the user's behalf for USD$0.10 an hour, plus bandwidth and storage charges. In essence, Amazon has jumped into the hosting business, big-time. My guess is that they are using virtualization technology such as VMWare or the like to make this economical, and there's no question the technology statement this makes is very cool and exciting.

But from a marketing and branding point of view, this is such a bad idea I don't know where to start. To cite investing guru Peter Lynch, it's a classic example of "diworsification"; getting into new businesses that make your existing business worse.

Let's dive into this by asking some simple questions about the types of images I might upload to Amazon. Read along with the Amazon terms of service if you like and check my thinking.

1. Can I upload a Web site that competes with Amazon?" It appears this is both legal and appropriate to the terms of service.


2. Can I upload a system that hosts a discussion group critical of Amazon and its products?" Yup, that seems within the terms of service too.


3. Can I upload a system that hosts a legal pornography site? Here, I think that section 8 under Participation might play out: "8) If your Application is determined (for any reason or no reason at all, in our sole discretion) to be unsuitable for Amazon Web Services, we may suspend your access to Amazon Web Services or terminate this Agreement at any time, without notice." But there is no explicit clause against serving pornography provided it is legal in Washington state and not judged legally obscene.

Clearly, this service is going to require some policing on Amazon's part. And since the URLs associated with these services have Amazon Web Services addresses, cases where they don't police the content well could tarnish the Amazon brand.

But the bigger marketing issue is simply this: how will services hosting help Amazon's business? Through this one entry, Amazon has just sent a message to HP, IBM, Earthlink, and others that it wants a piece of their hosting business. And what does this have to do with selling more books, toys, and electronics? Almost nothing.

Amazon.com has fallen into a strategic trap. Instead of investigating more and better ways to serve its retail customers, it has decided to focus on being a technology company instead, presumably because technology companies often command higher valuations. This EC2 service (even the name is geeky) will distract the company's energy when it should be gearing up for a tough fourth quarter selling season. Amazon survived the dot com bust because people could understand its business and its competitive advantages in retail. Moves like EC2 will make that understanding much harder now.

Technorati Tags: Advertising, Amazon, Diworsification, EC2, Marketing, VMware, Web services

Coming soon: Sizing US Marketing 2006

Blackfriars currently has our Q3 marketing survey in the field. No surprises there; we do surveys every quarter. However, this is our once-a-year expanded survey, which is large enough to do some broad vertical industry analysis and to represent a good cross section of US business overall. The result: in September, Blackfriars will release our second annual Sizing US Marketing report, probably titled something along the lines of Sizing US Marketing 2006 (duh).

Unlike last year, though, we will not be issuing this as a separate report. Instead, we'll be combining our normal quarterly benchmarking data with our vertical industry analysis and sizing. That means our Q3 report will be chock full of marketing data including:

• Projection of US marketing spend overall for 2006. Last year's number was more than $1 trillion. Our hypothesis: this year's marketing spending will be less.


• Analysis of marketing spending for the six large US industries.


• Identification of which industries spend the most in twelve different categories of marketing spending such as offline advertising, online advertising, Web site and Internet media, and nontraditional marketing. Particularly interesting will be the new breakdowns around online marketing spending of various types. We can say already that based upon the survey data we've seen, our numbers will be much larger than most other estimates we've seen of online spending. The big question we have is "how much larger?"

Sizing US Marketing 2005 was our biggest selling research report ever. We fully expect our 2006 report to be equally as popular. We'll provide an opportunity for pre-orders in the first week of September. Meanwhile, if you have knowledge of your company's marketing budgets, please complete our Q3 survey now, and you'll get a free copy of the report when it is published in September!

Technorati Tags: Blackfriars, Market research, Marketing, Marketing measurement

Xbox 360 cannibalizing XBox more than Sony game sales

[Comparison of video games sales in dollars before and after XBox 360 introduction; original analysis and data available at the Seattle Post Intelligencer.]

Todd Bishop over at the Seattle Post Intelligencer has a fascinating analysis of the Xbox 360 and the game market, nine months later, based upon third-party games sales data. One of his observations is particularly interesting:

You can literally see the user base shifting from the original Xbox to the Xbox 360, with the two Microsoft consoles basically splitting the sales volume that was associated with the original Xbox in the previous year. This appears to support the conventional wisdom that much of the Xbox 360's initial market would come from existing Xbox users who upgrade to the new console. The question here is how many new gamers and PS2 users the Xbox 360 will be able to attract in the long run.

Now, we can't read too much into this analysis, since it excludes sales of games from the console manufacturers (although Todd is looking for the data to fix that). But looking at the spreadsheet, one point becomes fairly clear: XBox 360 games sales growth is mostly coming at the expense of XBox game sales, not from Playstation game sales. In fact, over the past nine months, XBox game revenue from both XBox 360 and XBox sales from third parties has only increased $113 million. That's a pretty small revenue increase, given that Microsoft's XBox division lost more than $1.5 billion during that same nine months. And by the way, Microsoft views this effort as being so successful, that it has tapped the XBox leaders for its Zune entry into digital music as well.

I think these results may illustrate a marketing myth. The myth is that a company with deep pockets can buy its way into a market and later dominate it through market share. The problem is that even deep pockets eventually become empty, and then the business has to actually make profits. But a business built on subsidization rarely has the marketing or the management culture to actually turn a profit, resulting in losses until the shareholders pull the plug.

As Sony launches its Playstation 3, Microsoft will head down this path by responding with XBox price cuts to "hold onto its market share gains." But the real test of those market share gains will be whether they actually create profits for the company. Based upon the this initial data, those gains may actually be losses.

Technorati Tags: Games, Gaming, Marketing, Microsoft, Playstation 2, Playstation 3, Sony, XBox 360

Sony's new design motif: transparent LCD borders

Sony just announced it's latest all-in-one TV/PC, featuring a transparent border around the LCD panel. This motif is now becoming a recurring design element for Sony. It started the trend with its original XBR plasma displays, continued it with their new Bravia XBR2 and XBR3 LCD TVs, and now it is showing up in their PCs. I have to say, having the hard disk and wireless LAN lights suspended in the transparent frame without any visible wires is very cool. Sony's packaging designers deserve serious props for their work.

But to be completely fair, the transparent frame isn't original to Sony. Anyone remember Apple's original LCD iMac shown below?

Technorati Tags: Apple, Bravia, Design, iMac, Marketing, Sony, XBR

Sony's Playstation 3 leading pace set by Microsoft last year

Game Informer reports that the final development kits for Sony's Playstation 3 have been delivered to developers and has some nice pictures of them.. It's nice to see these units now in developers' hands. I faulted Microsoft last year for waiting until July to deliver its first development units with final development units to arrive a few months later (i.e., September/October). Sony seems to be ahead of Microsoft's schedule for last year by about a month.

Some of this appears to be a strong risk management program at Sony. There are still a lot of manufacturing pieces that have to come together for Sony to meet its launch schedule for the PlayStation, but Sony appears to have more backup plans than Microsoft did. For example, I remain concerned whether IBM can manufacture enough cell processors, but Sony is also making the parts, so they aren't completely at IBM's mercy for that part. The high-definition Blu-ray disk drive is also a high-risk part, but by the time PS3 ships, the Blu-ray drives will have been in production for nearly a year, and the software for them will have been shipping for about four months. And Sony recently shipped the 50 gigabyte Blu-ray media, meaning that all the pieces are now in place.

The launch of PS3 in November is by no means a slam dunk; there's still a lot that can go wrong. But from where I sit, Sony experience in launching products well is starting to show. And combined with what I think will be a killer Christmas season of LCD sales for Sony, that bodes well for Sony's future -- and Sony's stockholders.

Technorati Tags: Blu-Ray, Games, Gaming, IBM, Marketing, Microsoft, Playstation 3, Sony, XBox 360

Don't buy terror marketing, part II

I noted last week the extreme odds against US citizens actually being injured or killed by a terror attack, and how current coverage of terror seems to be more a fear, uncertainty, and doubt marketing campaign than news coverage. This week, I read two articles that reinforce that view. Both are about binary liquid explosives that have stripped all air travelers of toothpaste and shampoo for the foreseeable future.

The first was from Dave Farber's "Interesting People" mailing list, a list I used to follow faithfully back in the Internet days before the Web. This article by Perry Metzger takes the data that's been released and tries to think through the process of actually achieving an explosion on an aircraft using the materials discussed in the news. The short answer: unless the alleged terrorists have made some entirely new discoveries in chemistry and packaging, it doesn't work. The problem: compounds made out of peroxide and concentrated sulfuric acid that has enough power to explode, well, like to release energy in all kinds of other ways as well.

Now, they could of course mix up their oxidizer in advance, but then finding a container to keep the stuff in that isn't going to melt is a bit of an issue. The stuff reacts violently with *everything*. You're not going to keep piranha bath in a shampoo bottle -- not unless the shampoo bottle was engineered by James Bond's Q. Glass would be most appropriate, assuming that you could find a way to seal it that wouldn't be eaten.

So, lets say you have your oxidizer mixture and now you are going to mix it with acetone. In a proper lab environment, that's not going to be *too* awful -- your risk of dying horribly is significant but you could probably keep the whole thing reasonably under control -- you can use dry ice to cool a bath to -78C, say, and do the reaction
really slowly by adding the last reactant dropwise with an addition funnel. If you're mixing the stuff up in someone's bathtub, like the guys who bombed the London subways a year ago did, you can take some reasonable precautions to make sure that your reaction doesn't go wildly out of control, like using a lot of normal ice and being very, very, very careful and slow. You need to keep the stuff cool, and you need to be insanely meticulous, or you're going to be in a world of hurt.

So, we've covered in the lab and in the bathtub. On an airplane? On an airplane, the whole thing is ridiculous. You have nothing to cool the mixture with. You have nothing to control your mixing with. You can't take a day doing the work, either. You are probably locked in the tiny, shaking bathroom with very limited ventilation, and that isn't going to bode well for you living long enough to get your explosives manufactured. In short, it sounds, well, not like a very good idea.

An article by Thomas C Greene at The Register reaches a similar conclusion for many of the same reasons. However, he lays the blame on security consultants and politicians watching far too many episodes of "24".

So the fabled binary liquid explosive - that is, the sudden mixing of hydrogen peroxide and acetone with sulfuric acid to create a plane-killing explosion, is out of the question. Meanwhile, making TATP ahead of time carries a risk that the mission will fail due to premature detonation, although it is the only plausible approach.

Certainly, if we can imagine a group of jihadists smuggling the necessary chemicals and equipment on board, and cooking up TATP in the lavatory, then we've passed from the realm of action blockbusters to that of situation comedy.

It should be small comfort that the security establishments of the UK and the USA - and the "terrorism experts" who inform them and wheedle billions of dollars out of them for bomb puffers and face recognition gizmos and remote gait analyzers and similar hi-tech phrenology gear - have bought the Hollywood binary liquid explosive myth, and have even acted upon it.

But the Hollywood myth of binary liquid explosives now moves governments and drives public policy. We have reacted to a movie plot. Liquids are now banned in aircraft cabins (while crystalline white powders would be banned instead, if anyone in charge were serious about security). Nearly everything must now go into the hold, where adequate amounts of explosives can easily be detonated from the cabin with cell phones, which are generally not banned.

Bruce Schneier, author of Beyond Fear, has probably the best characterization of what is going on.

Banning box cutters since 9/11, or taking off our shoes since Richard Reid, has not made us any safer. And a long-term prohibition against liquid carry-on items won't make us safer, either. It's not just that there are ways around the rules, it's that focusing on tactics is a losing proposition.

It's easy to defend against what terrorists planned last time, but it's shortsighted. If we spend billions fielding liquid-analysis machines in airports and the terrorists use solid explosives, we've wasted our money. If they target shopping malls, we've wasted our money. Focusing on tactics simply forces the terrorists to make a minor modification in their plans. There are too many targets -- stadiums, schools, theaters, churches, the long line of densely packed people in front of airport security -- and too many ways to kill people.

Security measures that attempt to guess correctly don't work, because invariably we will guess wrong. It's not security, it's security theater: measures designed to make us feel safer but not actually safer.

This security theater we are being sold isn't just marketing, it's bad marketing, since anyone can do a little research and prove it false. The product being sold to the public is fear, subservience, and control. Don't buy it. I don't.

Technorati Tags: Marketing, Security, Terrorism

Using Long Tail data to find revenue opportunities

Jakob Nielsen has a fascinating article about using Long Tail data to predict lost opportunities for acquiring ad revenue on Web sites. He argues strongly for the use of logarithmic scales to find issues of this type, which he terms "drooping tails." Log charts are indeed great tools for finding places where expected exponential growth just isn't happening. But I think this is the first time I've seen them applied sensibly to Web sites and revenue capture (i.e., business development). Cool idea.

Gee, I wonder if I can get Google Analytics to display such a graph?

Technorati Tags: Analytics, Google, Long tail, Marketing, Jakob Nielsen, The Long Tail, Web analytics

Nomination: best video ad for a book

Random House UK has done a bang-up job of creating a video ad for Chris Anderson's book, The Long Tail. And overall, the marketing campaign for the book has yielded terrific results. The book made the top 10 of the New York Times Bestseller list, although it has since fallen to #14. I'm sure The Long Tail Blog didn't hurt. This just reinforces the data point from our research that says that marketing dollars are moving to online and nontraditional forms of marketing. Said another way, marketing efforts in many specialized niches add up to a large business result. Hey, that's actually a long tail argument, isn't it.....

But it also illustrates a much more mundane bit of data that marketers should remember: books are durable and effective marketing programs. Of all the traditional media at the moment, books are one of the few holding their own against online and electronic media types. Seth Godin did much to create his marketing consultancy by writing the book, "The Purple Cow", and selling it directly to business people. And at the very least, writing a book guarantees you some free advertising from the likes of Amazon.com and Borders.

but kudos to Random House UK for actually spending money to create a video ad for the book and releasing it as Creative Commons components. The Creative Commons license means that others will be allowed to create their own mash-ups of the content, thereby creating a buzz marketing effect. With so many high tech marketers who are always trying to lock up their intellectual property and content, it's terrific to see someone in traditional media who understands the power of letting content be free for re-use. Watch out; book publishers will be entering the free software market next.

Technorati Tags: Books, Buzz Marketing, Free software, Long tail, Marketing, Random House UK

Stunted marketing in video games

The New York Times noted over the weekend that the video game industry has an image problem and only itself to blame.. From the article:

Think about it. If someone asks you what you did this weekend, and you respond, “Ah, I was kind of tired and just hung out at home and watched a bunch of movies,” that’s normal. If you say, “Ah, I was kind of tired and just hung out at home and watched a bunch of sports on TV,” that’s normal. But if you say, “Ah, I was kind of tired and just hung out at home and played a bunch of video games,” that is simply not a normal adult response in most social circles.

People in the game industry are fond of blaming the mainstream media for that reality, and it is certainly true that most media outlets treat games as a fringe activity rather than as a dynamic part of the modern entertainment landscape. But in that sense the media is only reflecting broader society’s view of games, at least in this country.

As a whole, most game companies do not seem to recognize that rather than whining all the time about how misunderstood it is, the industry itself has the power to change how it is perceived. That means marketing itself much more broadly and, as Mr. Moore so aptly put it, moving beyond the boys in the bedroom.

Innovators like Nintendo get it. Most of the industry does not. The danger, of course, is that if the game industry continues on its current path, games could end up like comic books in this country: perpetually marginalized and derided as a frivolous diversion for children. (In Japan, by contrast, it is totally normal to see middle-aged businessmen reading graphic novels in public.)

I couldn't agree more. Too much of the video game industry is focused on exactly one genre: first-person shooters. And entertaining though those might be, they will never capture more than about 10% of consumers, if that. Meanwhile, millions of consumers are looking for entertainment other than just how quickly and efficiently they can blow their friends and enemies away. And if gaming consoles and game makers won't give that to them, they'll do something else, like watch TV or chat on the Internet.

Nintendo has the right idea in re-inventing the game controller to focus less on "twitch" button reflexes and more on the types of motions used in real-world activities. And innovative new games like Dance Dance Revolution have proven that other genres can succeed. The question is whether the games industry can evolve its marketing to address more than the niche it grew up with. So far, the answer to that question has been no. Let's hope that 2007 is the year when the answer becomes yes.

Technorati Tags: Games, Gaming, Marketing, Nintendo

Forget terror plots: you're more likely to die of a car accident, drowning, fire, or murder

Who said that the government doesn't understand marketing?

With yesterday's terror plots, everyone seems to be readily accepting that they should throw away their liquids, pack their laptops and iPods in their bags, and stand in multi-hour security lines. But as Ronald Bailey at Reason Magazine points out, that's because the threat of terror has been promoted to be much more significant than the probability of your being affected by it.

... according to the National Safety Council this means your one-year odds of dying in a car accident is about one out of 6500. Therefore your lifetime probability (6500 ÷ 78 years life expectancy) of dying in a motor accident are about one in 83.

....

What about your chances of dying in an airplane crash? A one-year risk of one in 400,000 and one in 5,000 lifetime risk. What about walking across the street? A one-year risk of one in 48,500 and a lifetime risk of one in 625. Drowning? A one-year risk of one in 88,000 and a one in 1100 lifetime risk. Even if terrorists were able to pull off one attack per year on the scale of the 9/11 atrocity, that would mean your one-year risk would be one in 100,000 and your lifetime risk would be about one in 1300. (300,000,000 ÷ 3,000 = 100,000 ÷ 78 years = 1282) In other words, your risk of dying in a plausible terrorist attack is much lower than your risk of dying in a car accident, by walking across the street, by drowning, in a fire, by falling, or by being murdered.

Cognitive scientists have known for years that people don't always make rational choices; that's one of the tools of the marketer's trade. We want consumers to make irrational choices, like buying an iPod as a fashion statement rather than for its music playing ability or purchasing a luxury car because of the perception it will project a better image of ourselves. We craft messages and images that fuel those perceptions. And most of the time (not always), we use aspirational messages to drive sales, not dark, unreasoning panic.

In most times of crisis, government's role is to reassure the public and to act to address the true threats to public safety. Given just how much publicity this latest terrorism event has received compared to the actual odds of it affecting our lives, we must ask the question: is this outcry justified or is the risk of terrorism being marketed to the public for political gain? Are we truly at risk, or are we being sold FUD - fear, uncertainty, and doubt? Based upon these odds, it's looking more and more like the latter.

Ronald Bailey wraps up the article better than I could:

It's easy to overreact when an atrocity takes place—to heed those who promise safety if only we will give the authorities the "tools" they want by surrendering to them some of our liberty. As President Franklin Roosevelt in his first inaugural speech said, "The only thing we have to fear is fear itself— nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance." However, with risks this low there is no reason for us not to continue to live our lives as though terrorism doesn't matter—because it doesn't really matter. We ultimately vanquish terrorism when we refuse to be terrorized.

Technorati Tags: Government, PR, Probabilities, Risk, Terrorism

Three tantalizing bits of Apple news foreshadowing future growth

My Web reading this week produced three tantalizing bits of Apple news that may have big implications for where Apple is going in the not-so-distant future. Check these out:

1. According to The Inquirer, Apple's new Mac Pros are now dramatically cheaper than comparable Dell Precision desktops. To quote directly from the article:

This is quite incredible. Any major OEM has trouble matching pricing with Dell, considering the massive volume discount Dell gets from Intel. But Apple aren't only matching them on the lower specs, they're thrashing them on the higher specced systems - relatively huge margins of pricing difference.

You have to wonder what sort of discounts Apple are getting from Intel, and if this is why Dell is now holding hands with AMD.

What this means: Apple is working hard on eliminating business objections to buying their gear. One of those objections was always price, and the myth that Apple's products were more expensive than PCs was always fueled by the fact different processors and components were being compared. Well, now those days are over. And given Dell's problems in customer service, innovation, and growth lately, business customers are looking for good vendors to keep costs down. This bodes a bump in Apple market share may be coming -- fueled by business sales of all things.

2. Over at Macintouch, a reader notes that
VMware is good for more things than running Windows on Mac OS X -- it works the other way around as well.
Again, from the article:

Q: Will it ever be possible to run Mac OS X Server on non-Apple hardware in VMWare instances enterprises may already have set up?

A: As far as they can tell from conversations with Apple, absolutely not.

I hope it's obvious that Dave's answer is patently absurd. He's denying a commonly-known internal truth to appease Apple.

It _is_ more than "possible." Been there, done that. As a VMware employee at the time x86 Macintosh was released, I can assure you VMware Workstation 5.x could run the MacOS X in a virtual machine within days of the x86 MacOS developer release.

However, when the first intrepid technologist announced his success running MacOS on the on the company-wide internal funlist, the response was a clamoring for a copy of the Macintosh virtual machine.

Immediately the VMware legal-eagles scoured the fine print, and it was determined that running a MacOS VM on non-Apple hardware was not withing the parameters of the Apple Software License. Internal discussion was utterly squelched. Even hallway conversions were discouraged by some managers.

Thus the MacOS VM was never made available, even informally to internal VMware enthusiasts. Yet it exists. It _is_ possible to run Mac OS X Server on non-Apple hardware in VMWare.

What this means: Everyone has been assuming that the VMware beta announced at WWDC would just be to run Windows on Macs. Fine. But as this reader points out, virtualization can and has allowed Mac OS X to run on non-Apple hardware. While I don't expect this to be a mainstream application, it means there's a very interesting "try before you buy Apple" marketing opportunity to businesses. Apple could give a business considering buying XServes a VMware image of Mac OS X to try out on their existing Windows or Linux servers. They can test software and compatibility features of the system before they have to commit to lots of Apple hardware and software.

3. Finally, the Associated Press has an article saying that
The DVD Copy Control Association is about to provide processes and permissions to write movies onto blank DVDs.
As the article notes:

A film industry group is set to remove some of the procedural hurdles that prevented the legal recording of movies onto blank DVDs in a further sign that Hollywood studios are preparing to expand what consumers can do with downloadable movies.

Under rule changes expected to be finalized soon by the DVD Copy Control Association, retailers could create movie jukebox kiosks with which customers can select, say, an obscure title and burn it to a DVD on the spot.

Online merchants, like Apple Computer Inc.'s iTunes Music Store, could start to allow video downloads to be transferred onto DVDs.

What this means: People often forget that one of the bits that differentiated the iTunes Music Store when it launched from other online stores was that Jobs negotiated with the music studios for the rights to write CDs of purchased music. The fact that this was legal and allowed -- albeit only up to seven times for a given playlist (thanks for the correction, MacDailyNews) was a real breakthrough and certainly fueled iTunes music purchases. After all, once your music was on CD, you could enjoy it in your stereo system, in your car, and pretty much anyplace that could play CDs. Now, we're approaching the point where the same process will be legal for movies. And you can bet that the iTunes Movie Store will be first in line to provide that capability. Oh, and by the way, some of those DVDs are going to be Blu-ray high definition ones, too.

So what do all three news stories mean? They mean that:

1. Prices aren't going to be a barrier to Apple growing market share.


2. Apple has technology that could allow it to both sell Mac OS X and more Macs to businesses, and


3. Apple will soon have the ability to sell consumers real DVDs of movies that they write themselves.

With new video iPods, consumer computer and entertainment platforms, and a killer processor roadmap over the next year, Apple executives shouldn't even care what the strike prices on their options are. They're going to be in the money.

Full disclosure: I do own some Apple stock myself.

Technorati Tags: Apple, Blu-Ray, Dell, DVD, Pricing, Steve Jobs, VMware

Fun project for summer vacation: have your kids build their own Linux PCs

Today, I'm taking a break from marketing topics to blog about a fun project my kids, aged 13 and 10, and I have been engaged with this summer. They decided not to go to summer camp, so I suggested they do something else educational: build their own computers.

Now, I know this may sound like heresy. As most regular readers know, both our business and home are entirely Apple-based. But one of the factors that pushed me over the edge was seeing some of the very cool results and applications available nowadays with Ubuntu Linux. It's no Mac OS X, but it does have a ton of great applications. And for kids who have lots of time to spare, being able to customize, tweak, modify, and create new uses for their computers is a huge draw.

I said this was educational, so I imposed some constraints on the project. Each boy was given a budget of $300 to buy all the parts, including LCD displays, but not including hard disks (turns out I had a couple that were about to be surplused, so I supplied those at no cost to them). They got to allocate how much money they spent on each part, but I supplied reasonable estimates for what they should expect to pay for the parts. Here's the breakdown I gave them:

Item	Cost
LCD Monitor	$100
Motherboard and processor	$80
Case	$25
Keyboard and Mouse	$15
Memory	$50
Optical drive	$30
Total	$300

It took a lot of online shopping via Pricewatch.com to stay within this budget. But despite the plethora of vendors represented at Pricewatch, we ended getting nearly everything from just two vendors: NewEgg.com, and SuperGoodDeal.com. Both were helpful, provided great service, answered questions, and were generally a huge help. Further, consolidating our order with just a couple vendors reduced shipping costs as well. The product reviews on NewEgg.com I found particularly helpful in trying to figure which parts to buy and which ones to avoid. We actually blew the motherboard and processor budget at NewEgg.com, because they offered an AMD Athlon 64 and motherboard bundle for $99. But that provided so much bang for the buck, we couldn't resist, and we made it up by simply borrowing some keyboards and mice for a while until we can get a couple at flea markets.

Finding 17" LCD monitors for $100 turned out to be the toughest challenge. We turned to two other vendors for these who had particularly good deals. Those were at PC Connection (since expired) and eCost.com, both of which required rebates to keep the price down, a discounting technique I really don't like. But after a couple missteps (one of which was that we got OEM processors that didn't have bundled cooling fans, which I promptly purchased to avoid destroying the processors), all the parts arrived on Monday, and the boys set to work building under my supervision.

Can 10- and 13-year-old boys build their own computers from parts? I'm proud to say, the answer today is absolutely yes, provided they have some step-by-step guidance from an adult. One of the machines booted up flawlessly the first time, despite having had to mount and unmount the motherboard no fewer than five times to get it aligned perfectly on its standoffs. The other refused to do anything when we pushed the power switch. We promptly went and read some troubleshooting guides which recommended we retrace our steps remove the motherboard from the case, and try running it outside the case. When we did so, it powered on, showing that it had been shorting against the case. So with a little bit of debugging the second computer came up this morning.

One of the nice bits about Ubuntu Linux is that it comes as a "live" CD. That is, you can boot from the CD, test your hardware, and run the operating system all without actually touching your hard drive. So both computers did that, and then the boys used the one-click install to load it onto their hard drives. So fifteen minutes later, both boys had working systems with OS, browsers, email, office software, and a host of brand new games to play with. They are thrilled, and will probably be entertained by those systems for the rest of the summer (and year).

This wasn't a project for the faint of heart or someone who expects warranty repair for everything. Documentation was sparse at best. This was particularly a problem at the very beginning, when we had to open the cases. We spent a full hour just trying to figure out how to open one of them. At nearly every step, there was some bit of lore that required researching to make sure we didn't mess up the systems. These ranged from issues like the heat sinks and fans mentioned above to jumper settings on disk drives to how and where to connect the front panel switches of the case. But with every challenge, a bit of research on the Web usually yielded a reasonable answer. And that and some trial and error made it all work.

This project took about three weeks from conception and parts ordering to working computers. But I think the feeling of accomplishment and technical confidence the project has given my kids will last for years. The computer -- which as much as anything today is a symbol of our society -- has changed from a black box into something they could learn about, understand, and master. And best of all, when they go back to school and their teachers ask them what they did with their summer vacations, they'll answer, "Oh, I built my own Athlon 64 computer!" And best of all, they won't have to borrow my machine to write the essay either.

Technorati Tags: AMD, Athlon 64, Build-it-yourself, Computers, eCommerce, Education, Flat Panels, Gadgets, LCD, Linux, PCs, Platforms, problem solving, Processors, Rebates, Technology

VMWare trumps Microsoft for Mac OSX Virtualization

In the wake of Steve Jobs tweaking of Microsoft's Windows Vista yesterday (e.g., "Redmond, start your copiers") at the World Wide Developer's Conference, Microsoft has decided to get in a swing or two of its own. It has now officially killed VirtualPC for the Intel Mac. This follows its announcement in January that it couldn't predict how long it would take to port this virtualization software to the Intel platform, which led us to recommend that Steve Jobs give Diane Greene, CEO of VMware a call to see if she might have a few resources to throw at the problem. Well, he did, she did (as was represented by the announcement yesterday that VMware will be available for MacOSX) and Microsoft is taking its ball and going home.

Isn't it funny how little $635 million VMware (at least that was its price when it was sold to EMC) has more resources than Microsoft? This is the power of niches. For Microsoft, the VirtualPC business is a rounding error on their balance sheet. For VMWare, this IS their business, and they make real money at it. The result: Microsoft just threw away the millions of dollars it spent to acquire Connectix, the maker of VirtualPC, since most of the buyers of that software were Mac users. At the time of that purchase, speculation was the value of the purchase was really about incorporating virtualization technology into Windows Vista. But with Windows Vista shedding features like dandruff to make its ship dates, those speculations will likely come to nought.

So here's a question for readers: What are your feelings about your needs for virtualization? Does any of this matter to you at all? Take the poll and see the results!

Technorati Tags: Apple, Mac OS X, Macintosh, Microsoft, WWDC, Steve Jobs, Virtual PC, Virtualization, VMware, VMWare

Apple WWDC keynote plays as expected

Last week I noted that everyone should ramp down expectations of seeing new iPods or media deals at Apple's World Wide Developer's Conference this week, since doing so would waste those announcements on a less-than-optimal audience.

Well, the keynote is now over, and it played as I predicted. We got new dual-dual-core (yes, that's right, quad processor) Mac Pros, dual-dual-core XServes, and a lot of new details on Apple's new OS, Leopard, coming next spring to a Mac near you. Yes, there were cool little surprises, like the new Time Machine feature for versioning every file on your system.

I'm sure we'll hear more about lots of these cool Leopard features as its release gets closer (remember, it's still as much as nine to twelve months away -- spring 2007 covers a lot of ground). But Steve Jobs' reality distortion field seems to still be working well. Who else would make backup and restore sound sexy?

Technorati Tags: Apple, Leopard, Mac OS X, Mac Pro, Xserve, Steve Jobs, Time Machine

McKinsey says TV advertisers are paying more for less effective messages

Advertising Age has some bad news for TV advertisers and media buyers. It's all in the lede of the story:

A study is about to give Madison Avenue a fresh pummeling: McKinsey & Co. is telling a host of major marketers that by 2010, traditional TV advertising will be one-third as effective as it was in 1990.

That shocking statistic, delivered to the company's Fortune 100 clients in a report on media proliferation, assumes a 15% decrease in buying power driving by cost-per-thousand rate increases; a 23% decline in ads viewed due to switching off; a 9% loss of attention to ads due to increased multitasking and a 37% decrease in message impact due to saturation.

This is a story that has been running for years, but it's only now beginning to hit home. CMO's are spending more money for less reach on TV, and it's all because they don't want to get out of their comfort zones. Until people get a grip on the tyranny of too much, we're going to see more companies follow GM and Ford into losing billions of dollars by not being efficient in how they reach and communicate with their customers. Maybe McKinsey will have better luck convincing them.

Technorati Tags: Advertising, McKinsey, TV, Tyranny of too much

The latest ultra-low-power reading medium: It's called the book

Chris Anderson, author of The Long Tail which we highly recommend, has compiled some impressive statistics about the ongoing meltdown of hits in the mainstream media business. He has stats showing that TV, music, radio, DVDs, and newspapers are all showing lower interest by consumers. And his data about Internet advertising echos our data, being up significantly over last year.

However, he does have one bit of surprising data in his list though: book sales are up slightly for the year over last year. And no, it's not just because he published a book; interestingly, this year hasn't really had any blockbusters like The DaVinci Code.

I can't cite any real drivers for book sales being up, but anecdotally, I'd have to say he may be onto something there. I know my Mom and her friends have become used book table addicts (these are tables in supermarkets that sell used books for $0.50 or $1). And my local video store in town has just added gently used books to the front of the shop and is displaying them ahead of even the latest DVDs. Is it possible that book reading is becoming fashionable again?

I often talk about changes in technology that reshape industries. But it's easy to ignore the fact that technology has changed the book publishing business as well, and substantially reduced the costs of book production and distribution. eCommerce has reduced the barriers to entry for small book publishers too. The result: the economics of publishing books is actually getting better over time. So even as we continue our charge toward the paper-free society (which, as someone once wisely noted, is arriving about as fast as the paper-free bathroom), good old-fashioned books may be demonstrating their timeless appeal to consumers.

Technorati Tags: Books, Marketing, Publishing, Publishing 2.0

Google proves itself pragmatic on content creation

We noted earlier this week that some Internet portals including Google were looking at paying for news content. The Wall Street Journal notes today that Google is licensing Associated Press content for an unannounced service. Just shows that Google understands the value of professionally created content aggregated under a single powerful brand. It certainly reinforces our call from earlier this year that Google is a media company poised to dominate the next media cycle in an age of scarce attention.

The interesting question is what is the unannounced Google service? My take: Google is going to do a user-generated editorial content and voting site akin to NewsVine.com using Associated Press feeds as seeding material. And with Google's advertising network and clout, it could be big. Very big.

Technorati Tags: Branding, Business, Google, Publishing, Publishing 2.0

Apple's marketing: dealing with bad news well

Apple yesterday announced it is going to restate some of its results because of stock option irregularities. Bad news, no question. But you have to give the company credit. They didn't wait for SEC Chairman Christopher Cox to come calling and ask for their records. This was the result of the company's own investigation started back in June. So while it's a bad situation, Apple got the information out in the open quickly, and did it itself. That's proactive marketing of bad news. Yeah, they'll take a hit in the market for the next few days. But I don't expect to see any long-term damage here. They're trying to clean up their books and do it right.

We won't know the full effect of this investigation until Apple reports its next quarterly result, which will be late according to the story. I'm betting that Apple's actual earnings won't change more than a penny or two. Why? Do the math. The company reports the largest option grants, and while Apple stock is volatile, it isn't that volatile that backdating of options is going to have a huge effect on earnings for the volumes of options it granted. As almost all of the stories noted, Steve Jobs options expired worthless, even if he was granted restricted stock to replace them. So I can't see how option grants of that type are going to account for hundreds of millions of dollars of charges necessary to move the earnings by more than a penny or two. Shaw Wu at American Technology Research agrees with me.

On a more positive note, Apple also recognizes that there is potential for marketing its brand in its service as well as in its stores. Ted Lee reports the response he got when he fired off a letter to Steve Jobs complaining that Apple service was not going to be able to get his MacBook back to him in time for the World Wide Developer's Conference this week. Well, one of Steve Jobs' personal assistants (he has many) grabbed the message and ran with it, and Mr. Lee should have his laptop back today. The point? Mr. Lee has blogged the experience, and his blog now has 764 votes for the story on the front page of Digg.com. Not a bad return for the marketing investment of a couple phone calls.

The bottom line: These two stories prove why today Apple is worth more than Dell. When bad news hits, Apple gets it out. When people complain, they look into issues and try to deal with them. Yeah, they've still got some issues to work on, like not suing bloggers just trying to get a scoop. But this one company still markets what it stands for better than any other firm in high tech.

Full disclosure: I have a small long position in Apple stock, which I might add to if the stock drops enough.

Technorati Tags: Apple, Customer service, Marketing, Options

Ramp down your expectations for Apple's Developer's Conference

With Apple's World Wide Developer's Conference (WWDC) bearing down on us next week, it's good to start thinking about what we're going to see. Just about everyone is expecting Core 2 Duo and Xeon-based Mac Pro computers, probably in both two and four core configurations. We'll certainly see a lot of previews of Leopard, and we might see XServe's as well. For a nice roundup of some more speculative thinking, Other World Computing has some interesting speculation on Leopard being able to run Windows applications natively.

But in my opinion, anyone looking for iPod and media announcements is going to be disappointed. Why? Marketing. This is a software developer's conference. The target audience is therefore, well, developers. And while those in the know of the Apple culture understand that any Steve Jobs keynote is worth watching for surprises, Apple also wants maximum bang for its announcement buck. Another point: it's August. Much of the professional press is either just getting ready to go on vacation or just getting back from one. So announcing iPods or movie deals at the WWDC just would be a waste of announcement mojo.

So what will happen? If you're in the professional Apple watcher's ranks, start checking your mailbox regularly. Somewhere in there in the next month, you should see an invitation to one of Steve's famous special events, to be held in September. That's where you're going to see new consumer digital hub devices as well as announcements of movie deals for iTunes. My prediction: not only will we see video iPods, but we'll see iPhones, and our first all-in-one Apple HDTV system. And speaking of that, did anyone notice that Samsung already built an all-in-one 40-inch LCD with Windows XP?

So despite great anticipation driven by the Scobelizer, don't get too wrapped up in what Steve Jobs does and doesn't say next week. He's the best high-tech marketer on the planet. And the first rule of a marketer is to always keep the customers wanting more. And there's plenty of time to ramp up demand for the Christmas shopping season.

Technorati Tags: Apple, HDTV, iPod, iTunes, Macintel, Macintosh, Marketing, Movies, Music, Steve Jobs, TV, WWDC

Large Internet companies testing cable TV business models?

SeekingAlpha's David Jackson noted that the San Jose Mercury News claims Google and Yahoo are quietly agreeing to deals that compensate some of the country's top news organizations for their content and help drive more traffic to their Web sites. This follows an article earlier in the week in the Wall Street Journal noting that Walt Disney's ESPN has been charging a few broadband Internet service providers, notably Verizon and Charter, for the rights to carry its ESPN360 service.

What does this all mean? It means that a few businesses are dipping their toes into cable TV-style pay-for-content models on the Internet and seeing if the water is warm or too cold.

Now the Google/Yahoo model actually makes some sense and follows a model illustrated on cable TV by CNN and Reuters. Many people don't realize that much international video footage on CNN is actually shot by Reuters and sold to CNN. CNN adds editorial, marketing, production, and distribution to the cable networks, who pay CNN enough in subscription fees and advertising to compensate both Reuters and CNN nicely.

More alarming, though, is the recent deal by ESPN to restrict content to specific Internet providers under an exclusive pay-for-content deal. Should these deals become widespread, it ties the availability of content to the wire over which it travels. While this may sound innocuous at first glance, if it became widespread, it would lead to a balkanization of Internet content. Suddenly, it might be necessary to have a Verizon Internet connection to watch ESPN, but a Comcast one to watch HBO. And because of the need to wall off exclusive content, suddenly one of the primary values of the Internet -- namely, the ability to access any service from anywhere and on any device -- would be destroyed. This deal is probably the best argument possible for network neutrality legislation to avoid fees like this being imposed on customers in bundles rather than being chosen a la cart.

So short story: the topic is complicated. The Google/Yahoo story feels reasonable; remember, they did a very deep deal with AOL too involving buying their stock and revenue sharing. The ESPN deal, though, I find rather alarming, because it promotes turning today's Internet innovation into a walled garden of gated content. Let's hope the marketers at ESPN realize that restricting their market to specific service providers is not the way to grow their business.

Technorati Tags: Cable, ESPN, Google, Internet, Network neutrality, Publishing, Verizon, Yahoo