Software, Interrupted

Research firm Nielsen has released its top advertising trends for 2010. Not surprisingly the leading trend is the ability to measure activity that merges online and offline purchasing behavior, addressing the fact that users have expanded options for how they consume content and how they interact with brands.

Nielsen data shows that "time spent on each of the three screens--TV, PC and mobile--is increasing. In particular, the consumption of video content is on the rise across all platforms."

Top advertising trends for 2010

1. Optimizing media convergence is a top priority
2. New models emerge to take advantage of smartphones
3. More cross-media ad campaigns surface
4. Commercialization of social networking hubs increase
5. More interesting and interactive online ads appear

The challenge with advertising mediums such as video (TV more so than online) is that they require users to not only be interested in the product but remember it when they are making a purchasing decision. This, of course, is why online advertising has proven to be such a lucrative model. Consumers, in theory, can be served an ad and then perform some kind of action, such as buying a product online.

Nielsen asserts that for consumer packaged goods, "purchasing decisions in 2010 will be affected by factors such as brand innovation, retailer assortment, proliferation of store brands, and healthy eating preferences." With the exception of healthy eating (maybe eco-friendly tech is the comparison?), the technology industry won't be dramatically different.

Large brands like Oracle, Hewlett-Packard, and Microsoft must continue to innovate (brand innovation), more start-ups will join the fray (retailer assortment), companies like Dell will offer more services to support their hardware business (proliferation of store brands) and maybe electric cars become the healthy eating of the tech world.

What remains to be seen is which advertising trends are the most efficient and cost-effective. Social networking has been largely aggregated onto a few major sites such as Facebook and MySpace, while other niche sites garner far less traffic (though potentially more per-user dollars.)

The biggest opportunity is to make people actually like seeing advertising. Despite all of the hype and success around ads, I've yet to meet someone who claims to just love Internet ads. We all accept ads as a part of our lives online, so there is certainly an opportunity for more interesting online ad formats.

It's no secret that Windows Mobile has hit a rough patch as the iPhone and Android-based smartphones have take center stage. Recent statistics from AdMob shows that Windows Mobile market share of Web surfing was way down during the past 12 months--more than 70 percent year over year.

Any number of people postulate that Windows Mobile will be dead, some say as soon as 2011, unless Microsoft figures out a way to not only make the operating system better but to convince users that they should care.

On the New York Times Bits blog, Steve Lohr wrote earlier Thursday on analyst Mark Anderson's comments suggesting that Microsoft abandon their consumer efforts entirely--that the company has lost the battle for consumers:

Except for gaming, it is 'game over' for Microsoft in the consumer market. It's time to declare Microsoft a loser in phones. Just get out of Dodge.

I'm not a huge fan of Windows Mobile, but Microsoft certainly can't give up on smartphones and really has no alternative but to make a big move in the mobile operating system space. And Windows Mobile is not nearly as bad as many people think--if you don't believe me, check out these results from mobile blog jkOntheRun.

I recently toyed with Windows Mobile phones at both Verizon and AT&T stores and I could absolutely see the appeal of the common desktop functional paradigm if I were a Windows user. But consumers are fickle and don't want to add an OS decision into their buying process. They just want the phone and its applications to work and be easy to use.

There remains a huge opportunity for Microsoft to take its dominant position and make Windows Mobile truly great, even if it means walking away from the status quo. And while that's not typically the Microsoft way, the company has shown with Bing that it can make those kinds of decisions (as well as less-positive choices.)

There are two very simple moves Microsoft could make that would not only shake up the whole market, but also build a path for the future:

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IBM is continuing its investment in cloud computing with a new lab in Hong Kong, expanding the presence of its IBM China Development Laboratory (CDL), the company's largest with more than 5,000 developers on staff.

The laboratory builds on the e-mail technology of Outblaze Limited, a Hong Kong-based company whose messaging assets were acquired by IBM earlier this year and incorporated into the Lotus brand. The new lab claims to be the first of its kind in Hong Kong and shows both the importance of global development teams and IBM's focus on growth in emerging markets, a user segment that is theoretically more adaptable to different methods of application consumption and likely well-acquainted with browser-based applications.

Overall, the fourth quarter of 2009 has seen several interesting cloud-related announcements from IBM, including the LotusLive service that launched in October and already claims more than 18 million active users. Big Blue also launched the Cloud Academy program designed to help educators and students pursue cloud-computing initiatives and better take advantage of collaboration technology in their studies.

IBM has taken a leading role in the development and adoption of cloud services while other large vendors such as SAP, HP, Oracle, Sun and Microsoft have all made cloud-oriented announcements with few proof points that their efforts will be successful. There is no certainty that IBM will be successful either, but the company has at least made consistent progress in both technology and user adoption.

IBM representatives told me that the company will continue to focus on delivering "the most reliable and secure cloud services" architected to meet the needs of consumers as well as their mainstay enterprise buying audience. Totally logical, and still surprising that the other big vendors haven't figured out how to attract their core user base to cloud platforms and services.

The cloud remains a bit of an anomaly in the tech world, dominated by Amazon, an e-commerce site, while stalwart IT vendors like Microsoft continue to take baby steps toward mainstreaming their efforts.

My blogging colleague, James Urquhart, wrote this week about Microsoft's new business unit that merges its cloud and on-premise server group into one development team, which makes sense, at least in theory.

Practically speaking, Microsoft is way behind the curve and has a lot of ground to make. I've written in the past that the opportunity is theirs to lose, and it's hard to see how they plan to win, even with this new structure.

Goldman Sachs' latest IT spending survey is out and it looks a tech-spending recovery is on the way for 2010. To a large extent, the data suggests not so much that spending is dramatically higher, but that it has normalized at pre-recessionary growth rates, rather than contracting as it has over the past several months.

Goldman is cautiously optimistic about 2010 spending, noting that much of it depends on the macro-economic environment driving more business spending. And while most areas will see growth counter to 2009's downward spiral, some areas such as off-shore development will feel significant retraction.

Regardless, the sentiments are positive and dramatically different than Goldman's report from November 2008 where IT spending was in a total death spiral. What a difference a year makes.

A few key points from the report:

• With recessionary buying cycle clearly through the trough, the remaining question centers on the pace of recovery for 2010.
• Infrastructure, application development, and systems integration remain top spending areas, especially as CIOs start to consider newer technologies such as virtualization and cloud computing.
• There is pent-up demand in hardware most notable, positive for storage and server/PC refresh.
• The appetite for offshore services appears to be below trend at current levels.
• HP, NetApp, CommVault, Red Hat, Riverbed, and Salesforce.com are notable names showing positive upward momentum in our latest survey.

In software, Red Hat and Salesforce.com showed strengthened results with VMware and Citrix remaining top of mind, which Goldman believes to be a good indication of internal and external cloud deployments gaining momentum.

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The Nintendo Wii remains a force to be reckoned with in the video game world and new survey statistics along with new revenue streams suggest that Nintendo has still has something up it's sleeve.

New survey data from Lottay, an online wish-list and gift giving site, shows that the Wii and its associated accessories will regain momentum during this year's holiday season.

The Wii and Wii-related gear were wished for twice as much as the Sony PS3 and Xbox 360 combined though 38 percent of people wanted something other than products--namely cash, and in one case, Satan (I assume for a visit, not as a full-time family member.)

And while a wish, or a request for a gift, is no guarantee that a product will actually sell, there is a dearth of exciting gifts for this holiday season, leaving room for the Wii and other less-new products to be successful.

Just a few weeks ago, Electronic Arts CEO John Riccitiello commented that the "Wii platform has been a little weaker than we had anticipated" but Nintendo of America's executive vice president of sales and marketing Cammie Dunaway was extremely positive about the current sales and the future growth.

But, the focus in the U.S. remains on selling more titles and accessories, not branching out into additional services such as we've seen with Microsoft's Xbox Live, which provides access to Facebook, Twitter, and Last.fm through the console.

Services supporting the Wii are much more sophisticated in Nintendo's home country of Japan, where the company previously launched an advertising program to turn family time into a commercial endeavor and a catering channel that lets users order food from a variety of vendors directly through the console, delivered directly to their front door.

This weekend Nintendo added to the Wii's variety of interactive offerings, with a paid video download service for Japan. "Theater no Ma" will offer a range of movies, anime and other paid content from providers including Walt Disney and Sesame Workshop.

Downloading rental content onto game consoles and set-top boxes has been common in the U.S for awhile, but the reason this service could prove meaningful in Japan is because Nintendo researchers previously found that 87 percent of Wii users use the console on the biggest screen in the house, which is still the one in the living room.

My previous post about mobile data sync brought in several public comments and many more private e-mails from various companies asking for perspective on how the leading mobile platforms will compete in the sync space and whether or not start-ups like Funambol can compete.

More than anything else, the leading mobile devices--the iPhone and BlackBerry, are marketed more effectively than any other platform, especially Windows Mobile, which by all counts should be the leader.

It's not that Windows Mobile is so terrible (you can decide for yourself), but that Microsoft hasn't done enough to make users want to use it.

In a conversation today, I learned a bit about Microsoft's My Phone service, which I had previously never heard of, and also a bit about Palm's strategy in relation to making the Pixi a device of choice for the younger set. Minutes later, the two worlds collided when I hit the My Phone site and came across this image of bitter irony.

It's an ad for a Palm product that doesn't run Windows Mobile, or work with the Microsoft service, running on the MSN ad network, prominently displayed on the My Phone page. It confused me so much that I actually clicked on the ad to see if the services were somehow related.

There definitely is some logic from the Palm side--i.e. getting users to their devices, but this is an interesting failure of contextual advertising for Microsoft, allowing a direct competitor dominate the banner ad on their service page. Really, neither side benefits from the ad placement and considering the woeful state of both businesses, one would hope they care enough to not embarrass themselves and at least keep competitor ads off of their own sites.

While neither Windows Mobile nor Palm will be totally dead any time soon, if I'm on Apple's iPhone team, or working on Android, I wouldn't be too worried.

As consumers increasingly purchase sophisticated smartphones such as the iPhone, BlackBerry, and Droid, they are developing expectations for how these phones allow contacts, calendars, e-mail, and social networks to remain in sync across all their devices.

One of the big challenges is that users don't always maintain the same source of inputting data--they switch from browser to desktop application to smartphone as their data access and entry point, introducing many variables into the data chain. And data integrity will only get more complicated as more applications become browser-based and keep no local data storage.

Most enterprise users have a local store in addition to the cloud storage, something that I still find puzzling from the T-mobile Sidekick outage, where consumer data that should have been in multiple locations (or at least present on the device) was thought to be lost.

The most common sync services are not provided directly by the mobile operator. Generally this is a good thing, as the more you can dis-intermediate the carrier, the more control you have over your data. But because the sync services are provided by others--notably Microsoft, Google, and Apple--you end up locked-in to their data structures as well as whatever privacy and data management issues that might arise in relation to advertising or other usage of your information.

Today, you can fairly easily sync your mobile device with most common online e-mail and PIM services although the BlackBerry, Droid, and the iPhone differ in their approaches--or at least in the visibility of how they work. For example, you can sync with Gmail and other services on the iPhone, but it rather perversely requires the Microsoft ActiveSync protocol.

By controlling the address book, Google and Apple effectively lock-in users to their sync service, leaving the carriers and devices to be easily replaced (minus the cancellation charges.) The user would barely notice the difference, aside from the sticker on his phone that says AT&T or Verizon.

Mobile operators do not want to cede control of the address book to Google or Apple, but they are late to the game and do not yet have sync solutions of their own. As a result, they are scrambling to add this functionality, but building a sync solution that works with all different devices and email services is no easy task, thanks to the widespread problem of device fragmentation in the industry.

One option is to deploy a white label solution, like the open mobile cloud sync offered by Funambol. Funambol CEO Fabrizio Capobianco told me the company has been approached by many of the top mobile operators, with several of them looking to setup sync services for their customers. They all recognize the issue, and according to Capobianco can turn to Funambol as a way to quickly bring a high-quality solution to market.

With all the different players in mobile sync, users will begin to question who owns their data. Enterprise users, in particular, should have privacy concerns about trusting their data to someone else. In the case of Android users, there is a growing anti-Google sentiment, and if Google already owns your email, calendar, and search queries, do you really want them to own your phone contacts as well?

Microsoft released on Thursday a new position paper, "Privacy in the Cloud Computing Era: A Microsoft Perspective," that includes information about the remote storage and processing of personal information.

Privacy and security concerns continue to be a primary argument that cloud naysayers use against storing data and applications on the Internet. Big IT vendors and service providers like Microsoft and Hewlett-Packard will sooner or later be forced to take the cloud seriously or risk missing out on the whole next wave of IT consumption. And their large enterprise customers will expect them to offer cloud services with the appropriate levels of privacy and security measures in line with their business needs.

The interesting thing about this paper is that Microsoft takes surprisingly minimal responsibility for the data it will manage:

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With the launch of Windows 7 many signs point to the fact that Microsoft seems to have gotten its operating system engineering in order. That's obviously good news for its OS business unit and also good news for PC manufacturers and software companies that develop for Windows.

A rising tide of Windows adoption is not a bad thing for the technology industry in economic terms but it doesn't yet do a lot to enhance the way we use computers and applications in our every day lives.

The main problem is that Windows 7 reinforces a desktop centric-paradigm for 93 percent of the market and continues to exert a certain level of misguided design principles in the way the system handles data and file structures. And while it's a giant leap forward in terms of customization, visual effects, and security there is a missed opportunity in the cross-border approach of combining the desktop and cloud services.

Cloud-based applications and storage are still so nascent that Microsoft could jump in and usurp much of the power and market share while shoring up its cloud story for the future. Having the dominant desktop landing pad gives Microsoft a huge advantage over upstarts--even Google and Apple, if it can focus on integrating the services.

Here are a few ways Microsoft could assert its dominant desktop position to compete with Google and Amazon as a cloud player:

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