The iPad 2

Will the Original iPad Soon Be Much Cheaper?

Apple released the second iteration of their iPad tablet yesterday, and much as was expected, the changes were mostly incremental. Aside from the integration with the very cool Airplay, there were not too many iPad 2 features to get the tech bloggers typing.

Apparently the real changes are coming with iPad 3, rumored to be coming in the fall.

But after the release yesterday, I found myself excited by something else entirely – what would be the price of a first generation iPad a couple of months from now, when the new version is widespread and selling well? And I don’t think I am the only one thinking this way, in fact, Apple’s aggressive and consistent release schedule has created a brand new market for its superseded products.

Take the iPhone 3GS, which AT&T recently began selling for $49 (coupled to a 2 year contract). AT&T are yet to release any sales data for phones at this new price, but a phone that originally went on sale at over 4x that price can be bought just 18 months later, for a price you would expect to pay for an average Motorola clam shell. For AT&T it makes sense – the average value of a customer using an iPhone is higher than other phone types – the expensive data plan being one key point of differentiation. Why not lure new customers in with the iPhone brand, at a subsidized price, and reap the benefit of their spend on the network over time?

Its a great practice for Apple too. No matter how great your forecasting, most manufacturers over-produce, particularly when building a range of blockbuster products, as Apple has been since the launch of the first iPod. Offering excess older generation product at a lower price point, and with clear differentiation, creates an opportunity to acquire a less trend conscious, more price sensitive customer who otherwise might feel alienated by such a forward-focused company.

The iPod classic is a great example of this – at $249 its just $20 more than the cheapest of the new shape iPods, but yet it has a memory that is a full 20x bigger. The difference is merely the form factor, with the older version lacking the slender looks of its successor.

One critical note here – we must differentiate between products that stand alone (iPod), and products that require a contract (iPhone). Its considerably easier to heavily reduce the upfront price of a piece of hardware when you know that you have a guaranteed stream of usage revenue following in its wake.

But most of all, this pricing trend makes sense for the consumer. $49 is a tremendous price for a technically advanced product which is every bit the match of its newer, flashier brother, with the exception of a front facing camera. For those that are prepared to forego the bragging points of always having the latest gadget in their product arsenal, the savings are significant.

One can only assume that Apple will pursue the same policy with the iPad – the critical question is what the price will be. The issue is clouded by the availability of on-contract/off-contract versions, but is it possible that we might see a wifi-only iPad for under $200? I, for one, will be buying if we do.

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Over the past year, I have become increasingly interested in the local services flash sale (often referred to as group buying) space. What was effectively the “internet-izing” of the long established coupon industry has rapidly become the hottest area of the internet now, driven by its tangible revenue streams and extraordinary margins.

I started building Gilt’s play in the space, Gilt City, with Kevin in September last year, and have been blown away by the growth it has shown since launch. I have also observed a massive crowding of a space that a year ago was almost empty – the launch of 22 competitors in New York alone, countless vertically-focused plays and a $1.35B valuation. Just last week, SecondMarket reported that in Q2, options and shares in Groupon were generating the most buy-side interest among investors in illiquid assets.

And then this past week, something really interesting happened. Yelp started to offer daily deals, through the businesses it already manages listings for. I have no idea why it took them so long to get into the space, but I am glad that they now have. In many ways, Yelp has the ultimate offering, coupling deals with quality content and reviews, enabling would be deal-purchasers to learn more about the business before committing to the purchase. Their recent opentable integration pushes the utility even further – at Yelp, you can find a restaurant, secure a deal and book a table all on the same page. Couple this with their already-established local sales team and its existing network of users (33M at the last count) and Yelp has the potential to be a category killer.

But yet there are some serious challenges to the Yelp model. Yelp needs a high volume of deals to keep users returning, which means deals that can live on the site over time. This will push their vendors towards more evergreen deals – “2 for 1 drinks between 5 and 7pm” – rather than the true one-time-only value that Groupon and Gilt City offer. These types of deals will rarely represent the same value as something available for a short time in the flash format, and Yelp will need to be careful that offers don’t quickly become second-rate and stale.

I have always felt that offering contextual relevance was the key to long term success in this business – the ability to put offers in front of users that have the ultimate relevance to their demographic profile, their location or the interests and needs. Yelp has this in droves – a user searching for “Restaurants in Murray Hill” is absolutely going to want to see special offers at restaurants in that neighborhood.

There is one other player that specializes in this highly tuned form of contextual relevance too, and that’s Google. Google has been tinkering around with its local offering for some time now, and local deals could be the answer. Google could (should) be aggregating deals from the multitude of players across the US and feeding them into relevant search results – it could even project them on to maps. Pushing the thinking down the Adsense route, Google could even develop a self-service platform to enable any small business to upload their best offers, to be displayed where most relevant right across the Google network. I think that Google poses a considerable threat to not just Yelp but the market in general.

So what does all this mean for Gilt City? I do think there are truly defensible positions in this market, and Gilt City is rapidly cornering one. Gilt City offers high end products and services from vendors who care about their reputation. It offers unique experiences that are crafted just for Gilt, and pushes them to an audience that has been tuned to expect this type of quality by the core Gilt business. It’s our own form of ‘contextual relevance’.

For everyone else? Find your own form of unique ‘contextual relevance’ and command your niche as quickly as possible.

It is going to be fascinating to see how the market shakes out, but I predict an unsophisticated, middle-of-the-road, giant and a select few focused players staunchly defending their corner.

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The company introduced version 2.8 of AbiWord together with the AbiCollab Web-based collaboration platform, enabling real-time document editing, online document storage and document sharing. It also converts documents from major document formats like Word.

The organization notes on its Web site:

Our source code is carefully written so that AbiWord will run on virtually any operating system with a minimum of time spent on porting. This combined with our support for internationalization (the ability to run AbiWord in many languages) gives AbiWord a massive potential user-base… Currently we run on most UNIX systems, Windows 95 and later, QNX Neutrino 6.2. We also have a MacOS X native port available.

The application and collaboration suite will be increasingly attractive to large organizations (like the city of Los Angeles) looking to get away from the aggressively-priced Microsoft Office suite but uninspired by existing alternatives like Google Apps (which Los Angeles did pick). That said, the lack of spreadsheet and presentation software is a serious drawback.

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NetSuite follows in the footsteps of Salesforce.com and CODA, which have also recently introduced cloud-based ERP suites for the burgeoning services sector.

NetSuite CEO Zach Nelson, who rang the closing bell at the New York Stock Exchange on Tuesday, explained that services companies needed a product tailored specifically to their needs, as opposed to customizing a product that had been originally created for manufacturing companies. “There are very different processes for companies that sell things, as opposed to companies that sell time,” he said.

Nelson said that the new SaaS service, NetSuite OneWorld SRP, gives global services businesses comprehensive real-time visibility, integrated financials, resource optimization and services management from corporate, to subsidiaries, down to the individual project level across geographies, currencies, and tax jurisdictions.

The product includes automated multi-currency management, built-in support for international tax and compliance, and revenue recognition management. The application also includes global dashboards and reports that combine financial and operational project drivers (such as utilization, profitability) for projects, subsidiaries, geographies and at the corporate level.

But as opposed to tracking a piece of inventory as a traditional ERP application would do, the SRP application can track employees, projects, time and other elements of a services-oriented business.

Nelson demonstrated the different views of the same order seen by a company’s CEO and by a sales representative, as well as an iPhone app with reports redesigned to make the best use of the iPhone’s rectangular form factor and flick technology for moving from one report to the next.

The new service is the result of a joint effort between NetSuite and Open Air, a project management software vendor that NetSuite acquired in 2008. Both existing Open Air and NetSuite customers can log on to the new service using a single sign-on, Nelson said.

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But that was never in Google’s plans. Google looked at the wireless market from an objective distance and saw what is obvious to everyone: the carriers make money — and generate their highest margins — with services, not devices. And they charge ridiculous amounts for simple stuff like call forwarding, while being unable to provide truly useful services like speech-to-text. And no matter how much money consumers spend, they still can’t control the length of the messages they record or what the whole experience is as callers.

Now Google has gone and fixed all that with Google Voice. The most recent twist is that customers can keep their current phone number and still get many of the services provided by Google Voice, including:

• Online, searchable voicemail • Free automated voicemail transcription • Custom voicemail greetings for different callers • Email and SMS notifications • Low-priced international calling

Customers who pick a new Google number get these features too:

• One number that reaches you on all your phones • SMS via email • Call screening • Listen In • Call recording • Conference calling • Call blocking

Cost? It’s free.

And as Microsoft’s CEO, Steve Ballmer, is fond of saying, “It’s tough to compete with free.”

Google Voice is still a tiny smear on the windshield of the carriers’ revenue dashboard, but as it spreads beyond enthusiasts to the public at large, the carriers will be hard-pressed to continue charging for basic services when they can’t even match what Google offers.

It’s no wonder AT&T asked the Federal Communications Commission to investigate Google — and while Google isn’t a carrier and thus shouldn’t be subject to the same regulations as the telcos are, Google is taking advantage of a loophole lawmakers never considered; that with the convergence of IP and traditional telephony, you don’t have to own pipes to provide telecommunications services.

The answer for the telcos isn’t regulatory relief, however. It’s thinking about their customers. If they’d been doing that to begin with, Google wouldn’t have been able to swoop in with a better service that’s free to boot.

And while it’s free, it’s still a huge win for Google. Why? Because while one side of Google is busy organizing all the world’s information, the other side is busy getting the whole world online as often as possible, for as long as possible. Google’s main business is and always will be paid search ads. It’s proven itself smart enough to not try to shove ads at customers every which way — the company really does think about customers first — so, to compensate for that restraint, has made it its mission to keep customers online as much as possible.

Google Voice is another way to do that. And it’s sucking the highest-margin business right out from under the carriers.

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Android, iPhone Ad Update

My favorite new attack ad on TV these days is the one from Google’s Android featuring the catchy MoZella tune, “Magic (Oh Oh Oh),” as a background, and a wonky list of features that the ‘iDon’t” doesn’t.

There’s also the semi-deceptive “There’s a map for that” ad from Verizon Wireless that uses iPhone’s “there’s an app for that” marketing slogan to chide AT&T (the exclusive wireless carrier for the iPhone) for poor service in many parts of the country.

Not to mention the cringe-worthy Microsoft ads featuring self-styled “tech-savvy” consumers who pick a PC over a Mac because they want to pay for computing power rather than branding.

I’m all for being entertained, and I have to admit the iDroid ad gets me on a number of levels (especially the MoZella level), but I wonder how many iPhone users worry about the app store’s development platform. And that’s what ultimately worries me; that the tech vendors are more concerned with their rivals than their customers.

Since it’s the baseball playoffs, we not not only get the tech ads, we get the car ads (along with the Howie Long smirk): two industries seemingly headed in opposite directions. I say seemingly because I worry when all someone has to say is how much worse their rival is. When a company starts denigrating the competition, it usually means it’s run out of ways to beat its rivals with actual product or service improvements.

I do realize that attack ads are also a way of highlighting differences and informing consumers of the merits of one brand when compared to another. But what starts out as a good strategy inevitably gets distorted by clever ad agency nabobs, and you end up with ads that make fun of the manliness of Ford owners or the flightiness of Mac owners.

What you see in many cases is that attack ads become a substitute for actual innovation or attention to customer needs. Sometimes, like with the car industry and Microsoft, the attack ad is the last refuge of the lame; in other cases, however, the ads can create a false sense of superiority within the corporate culture. Android is just getting started, so I doubt the ad is a reflection of incipient lameness. But just so the folks at Google don’t start down the wrong path: consumers don’t fall for Magic, they fall in love with good products. In other words, don’t get high off your own snark.

And kudos to the dude who trashes Howie Long’s misogynist ad with this video:

httpv://www.youtube.com/watch?v=CItLHD6lPNk

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Somewhere in June, however, Twitter stopped growing, at least according to Compete. The same thing happened to Facebook at the exact same time; at first we’ve attributed the traffic numbers to the summer slumber, but now that Compete’s numbers for September are out, there’s no doubt that both Facebook and Twitter are no longer growing, at least in the eyes of the (admittedly US-centric) Compete.

Big deal? Maybe not for Facebook, which, as Schroeder notes, is already pretty huge. Maturity happens.

Twitter, though, is another story. It has cracked the national consciousness in a big way, but not yet in a good way, necessarily. You could even argue that the Twitter backlash today is stronger and more rooted in reality than the Twitter backlash of early 2009.

Twitter used to be fairly misunderstood as a way for people to tell their friends what they had for breakfast. Now they understand that it’s also a way for Miley Cyrus to get too much attention, Jim DeMint to destroy his mainstream credibility and Antonio Cromartie to complain about the food at Chargers’ training camp.

You’d think this is a good thing, but it’s not. People like to lurk and stalk their favorite celebrities at a safe distance, but it doesn’t mean they want to emulate their every pratfall and disgrace. And while Twitter allows zealots to echo the quips of their political heroes, most of us are simply more and more turned off and tuned out to the ravings of the lunatic fringe.

Companies are just now beginning to understand the value of social media (like Twitter) as a way of listening to and communicating with their customers, and that too is leading savvy consumers to keep away from yet another corporate listening post. The same may not hold true for Facebook, but maybe that’s because Facebook really is a way to communicate with friends meaningfully.

With Facebook, my status update hangs around a bit; I see comments to the comments I make to my friends’ status updates; I can play games, and chat. Twitter doesn’t have those features. Shouting may be getting old. Anyway let’s hope so.

[Image source: Photo by luc legay via Flickr]

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Calling themselves the Enterprise Advocates, the self-styled software superheroes describe themselves as

a highly visible group of like minded people who ‘bat’ for the buyer side in the buyer-vendor relationship [and] draw on more than 100 years combined experience, backgrounds as diverse as Gartner, Forrester, PwC, Deloitte and Sony Playstation.

The self-styled defenders of the helpless include former Forrester analyst Ray Wang, former PwC and Gartner analyst Vinnie Mirchandani, as well as independent consultants Oliver Marks, Dennis Howlett and Frank Scavo, and plan to blog on behalf of beleaguered enterprise IT folks everywhere, hoping that their combined voices will have more power than if they go it alone.

Most of these guys have their eyes on traditional enterprise software vendors like SAP, Oracle and Microsoft – and, most notably, their onerous maintenance contracts – but Scavo also keeps an eagle eye on software-as-a-service vendors like Salesforce.com, which boasts that it offers more cost-effective services thanks to its multi-tenant architecture (which means the cost of developing a single instance of the application can be shared by all customers).

But even while SaaS vendors depend on keeping customers happy because they’re selling an ongoing subscription rather than a hunk of software for a lot of upfront cash, customers need to deal with occasional service outages, maintenance windows and complex integration issues. That’s where Scavo plays a role, as he says, “Just cuz you’re SaaS doesn’t mean you get a pass!”

In other words, denizens of the multi-tenant software world get their association lawyer.

[Image source: Photo by kevindooley via Flickr]

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Salesforce.com and Cisco unveiled a partnership around call center technology that should help Cisco learn how to sell to smaller companies while providing Salesforce with a telephony application to complement its online software.

Salesforce, which last year introduced its customer service application, is now piling on new features, including the ability to embed comments on Facebook to an on-line knowledge base that can be used by customer service agents to respond to customer help requests, and a way to intercept and deal with customer queries on Google, Facebook and Twitter.

This new partnership with Cisco means customer service agents can also answer phone calls through their Salesforce.com application, which at the very least reduces the number of applications those agents have to juggle simultaneously.

The irony is that partnership represents a bigger step for Cisco than it does for Salesforce; it’s just a bell (not a whistle) for the Salesforce application, but representative of a big step forward for Cisco, a name more familiar to stock brokers and data center administrators than to line of business managers and call center agents. But as with its acquisition of video conferencing giant Tandberg last week, Cisco is desperately trying to make inroads into what it sees as an extremely lucrative communications market.

The Tandberg deal (and the acquisition of consumer video gadget Flip) helps Cisco fill holes in its product line-up, but the tie-up with Salesforce.com will give it more brand recognition among the general business public.

Customers will be buying the call center application from joint Salesforce-Cisco sales teams, who will split the $250 per user/per month revenue down the middle. The pairing of sales reps from the two companies is also sure to help the traditionally enterprise-focused Cisco learn a lot about selling to smaller businesses.

[Image source: Vlima.com via Flickr]

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