Outside the Lines

On January 24, 1984, the Macintosh came into the world, starting the second major revolution in the personal computer industry. Steve Jobs and team took some lessons from Xerox PARC and created the first user-friendly, mass market computer.

By today's standards, it wasn't that user-friendly (some will remember disk-swapping with the original Mac, which had 128KB of RAM and a 400KB 3.5-inch floppy disk drive), but compared with Microsoft's DOS operating system, it was a major technical innovation.

The Macintosh at 25: 1984 - 2009.

The 128K Mac version of the graphical user interface, with icons, fonts, folders, audio and a mouse, started a new era of computing that hasn't yet run its full course. MacPaint, MacWrite, and eventually LaserWriter, PageMaker, and Photoshop led to a revolution in desktop publishing, and AppleTalk made networking relatively simple.

The Macintosh introduced typography to personal computers.

(Credit: Susan Kare)

After nearly 25 years, the Macintosh and its offspring, such as the iPod and iPhone, are still leading in terms of setting the pace for innovation. Mac sales climbed over the past several years, but still represent a small portion of overall PC sales and have slowed down recently. The iPod holds market share in its category and the iPhone has set a new standard for smart phones.

With the annual Macworld conference approaching, and Steve Jobs declining to participate in the proceedings, expectations are low for any major announcements.

Of course, the Mac fan sites and blogs are full of speculation about Steve Jobs' health, a new Mac Mini and iMac, a quad-core Mac laptop, new home servers, a cloud-based version of the iWork suite of applications, an iPod e-book reader, and a Netbook with a 7- to 9-inch screen.

Whatever Apple announces at Macworld, without Jobs spinning his reality distortion field onstage, the result will be less impactful. Nonetheless, don't expect the Mac faithful to walk away from Macworld without something to satisfy their cravings.

On this week's EIC Squared podcast, ZDNet Editor in Chief Larry Dignan and I debate whether Amazon.com's Kindle e-reader is the next iPhone.

That is a big stretch, especially given the way the iPhone has turned the smartphone business on its head, at least from a product design standpoint. The Kindle is a nice product, and Amazon could bring music, video, and other kinds of content to the device, but it's doesn't have the Steve Jobs touch.

In addition, all the talk about Kindle's skyrocketing sales doesn't ring true. If the Kindle were on such a hot streak, Amazon founder and CEO Jeff Bezos would be talking up the sales numbers. All I know is that I keep getting huge Kindle ads in my face every time I go to Amazon.

After a few hundred times, Amazon should figure out that I am not interested in the Kindle and should show me something that I might actually buy based on my history and the recommendation engine. That would certainly be a more lucrative way to use the front door advertising space.

Dear Amazon: Please stop spamming me with this advertisement when I visit your site. Show me something you know I might be interested in buying.

If you weren't aware, a war--more like a tug-of-war--is happening in the mobile space. The iPhone is quickly rising as the development platform to beat, despite its paltry share of market versus Nokia (Symbian), Java BREW, Blackberry and Microsoft Mobile. In addition, Google's fledgling open-source Android platform is also a challenger to the incumbents.

At a Mobile Web Wars Roundtable held by TechCrunch more than 20 mobile wonks discussed that state of mobile platforms (see the list of participants below). The purpose of the roundtable was to determine which mobile platform is best for developers. The iPhone has set a new standard for smartphones and most importantly developers are fawning over it, and iPhone users appear to be far more active users than those on other phone platforms. In the first few weeks of iPhone 3G more than 30 million applications have been downloaded.

Another iPhone advantage is that it takes the iterative model of Web development and extends it to the mobile client, said Jed Stremel, director of mobile at Facebook.

But the iPhone is not the universal answer from a business perspective. Loopt CEO Sam Altman said his strategy is choose a single platform (the iPhone) and if a feature becomes popular bring it to other platforms.

David Hornik and Tom Conrad

(Credit: Dan Farber)

David Hornik of August Capital said that he is excited about iPhone because thousands of applications were distributed after it launched--living proof of the viability of the platform. Like Facebook applications, VCs see some potential in funding in iPhone developers. Having the iPhone app store and not having to go through the carriers to access applications is a bonus for distribution. Omar Hamoui, CEO of AdMob, said the value of ads on the iPhone served by his company is three times other platforms.

But the iPhone doesn't have a sizable market yet, compared to Facebook or Windows, Hornik said. "It's not venture scale," he said. Venture capitalist Richard Wong of Accel made the case that there aren't any developers creating applications just for the iPhone today. "It's about finding the largest addressable audience," said Walt Doyle, CEO of uLocate. Yahoo supports everything under the mobile sun and reaches 600 million devices with its mobile services, according to Marc Davis, chief scientist for Yahoo's mobile group.

Mike Arrington, Bart Decrem, Jed Stremel and David Rivas debate iPhone vs. Nokia Symbian and other topics.

(Credit: Dan Farber)

The idea that the iPhone has invented or is reinventing the mobile Web is an overstatement, according to David Rivas, Nokia, vice president of Technology Management for S60 Software, citing Japan and Korea as far ahead of the U.S. in mobile usage. "The idea that there wasn't a mobile before the iPhone is absurd," Rivas said. He also defended Nokia's recently open-sourced S60 platform, saying that it has applications similar to what are available on the iPhone. On the other hand, it doesn't have the buzz or browser of the iPhone, but Nokia produces a phone every 14 seconds, garnering 60 percent of the market. Rivas was asked about a merging of Symbian and Android, and responded that there are no such plans.

Tom Conrad, CTO of music service Pandora, said that the iPhone is fundamentally better for streaming devices and as a multifunction device appeals to consumers in different ways than other phones. Regarding Google's Android platform, Conrad said, "I need Android like I need a hole in the head. The last thing I need from a technology standpoint is a platform that sits on top of buggy firmware, with hundreds of phone manufacturers and different screens."

Loopt's Altman gave Android credit for being more open and capable of running background processes. Jason Devitt of Skydeck gave RIM (Blackberry) props for getting email right and noted that Android has serious challenges ahead. "The biggest challenge for Android is that it is totally dependent on hardware manufacturers and for the carriers to deliver," he said. This is distinct from the iPhone and Blackberry approaches, in which the devices are completely controlled by Apple and RIM, respectively. Developers are taking a wait-and-see approach to Android, which lacks any user base currently.

In summary, developers are enamored of the iPhone and hope that Apple sells hundreds of millions of units, but they will spend their development time and dollars on whatever platforms have volume.

Mobile Platform War participants:

David Rivas, Nokia, Vice President of Technology Management for S60 Software

Walt Doyle, CEO Ulocate

Tom Conrad, CTO Pandora

Greg Yardley, CEO of Pinch Media CEO

Bart Decrem, CEO of Tapulous

David Hornik, partner, August Capital

Jed Stremel, Director of Mobile at Facebook

Guy Ben-Artzi, Founder of Real Dice and CEO of Mytopia

Jason Devitt, CEO of Skydeck

Gannon Hall, CMO of Kyte

Sam Altman, CEO of Loopt

Marc Davis, chief scientist, Yahoo mobile group

Omar Hamoui, CEO of AdMob

Richard Wong, partner at Accel

Andreas Weigend, former chief scientist, Amazon

Mike Rowehl, chief architect, SkyFire

Mary Ann Cotter, CEO Cooking Capsules

John Faith , GM and VP of Mobile for MySpace

In this week's EIC Squared podcast, ZDNet's Larry Dignan and I discuss the two big stories of the week--Yahoo hooking up with Google and the introduction Apple's 3G iPhone launch.

Jason Perlow has come up with a suggestion for Microhoo--a Windows Mobile-based "Y!Phone" mated with a Wi-Fi-enabled Zune and some combination of Yahoo and MSN online services. Of course, it would also include a camera, a 3G wireless service and, as a differentiator from the iPhone, an integrated slide-out keyboard and support for Microsoft applications.

(Credit: ZDNet)

Jason posits that a Y!Phone priced at less than $300 with carrier incentives "could be the device that everyone truly wants." However, he also points out that a winning product would need more "sex appeal" than the current 3G Windows Mobile phones. Most importantly, the Windows Mobile interface needs to be completely revamped to take on the iPhone and whatever the Google/open-source Android sect develops.

It's a grand idea, but it's hard to see Microsoft or Yahoo or the combined companies pulling it off in the near term. All the mobile device companies are learning from the iPhone, and will eventually come up with similar functionality. But duplicating the fit and finish of a Steve Jobs device will take way more than combining a reinvented Windows Mobile-Silverlight software, a redefined Zune, and Yahoo and Microsoft services.

Read Jason's post

Rubicon Consulting's survey of 460 iPhone users in the U.S. surfaced the obvious. iPhone users are are young (half under 30), tech savvy and, besides telephony, primarily use the device for e-mail, texting, and Web browsing.

In addition, about one-third of the survey's respondents said they carry a second phone, presumably for some business purpose or a second phone number. Ten percent of those surveyed have a RIM BlackBerry alongside their iPhone. iPhone users also are about 40 percent above the U.S. median in household income.

(Credit: Rubicon Consulting)

The iPhone, starting at $399, naturally appeals to an elite, hip, younger crowd with disposable income. In fact, iPhone goes together with BMW, an object of desire for those who can afford it.

(Credit: BMW)

Apple's brilliant "Think Different" ad campaign, which ran from around 1997 to 2002 around the Macintosh, was about changing the world, highlighting well-known artists, entrepreneurs, and scientists. The ads for the iPhone are just a model's hands and the object of desire, which is worthy of desire.

Apple CEO Steve Jobs has established himself as the personification of "Think Different." He and his team are changing the world of mobile computing, but they haven't reached beyond the elite. This is typical for new consumer electronics products and Apple.

So far, the secretive Jobs hasn't shown how or whether Apple intends to change the world with the iPhone and follow-on products. The One Laptop Per Child initiative should provide some inspiration.

(Credit: Apple, Dan Farber)

In the post I wrote about Rich Miner of Google saying that the Android mobile software stack will gain more users than the iPhone, several people commented. The general consensus is that Apple is the BMW of the personal computer industry and is the standard for innovation that its competitors, with far more market share, follow. Android is a non-factor.

The challenge for Apple is to keep coming up with proprietary products that fuel its business model, which is based on innovation and R&D around both hardware and software. Since Steve Jobs returned to Apple, the company has had a series of hit products that don't dominate markets (with the exception of the iPod) but appeal to an elite and influential minority. Even Apple's advertising makes the marketing from competitors look tedious and uninspired.

Apple's tightly bound software and hardware provides unique differentiation in a world of mostly undifferentiated PCs and mobile devices. RIM's Blackberry also has had success by controlling its entire product.

Microsoft has made progress with its Windows Vista operating system, and its OEMs (original equipment manufacturers) have created slicker PCs and laptops to run the software, but the Macintosh is still considered a superior product overall.

Jobs is clearly making the right choice for now not to license the Mac, iPhone, or iTunes software to hardware makers. Getting into a battle for OEMs with Microsoft, Google, Symbian, RIM, and Palm, etc. is a losing strategy at this juncture. The best mobile operating system and user experience doesn't necessarily win the deals, even with Steve Jobs as the chief negotiator. Microsoft is extremely capable in working with OEMs and developers, which is a key factor in building out a platform.

On other hand, it would be interesting to see what developers could do if Apple open sourced the iPhone software. The mobile Web experience is the new center of attention and R&D spending in the tech industry. Google's Android will be a good test case. If Android were to become successful, due to its openness and developer community, Apple would feel the heat. An army of smart developers with Google behind it could create a next-generation mobile Web operating system and application platform that challenges Apple far more than the current set of incumbents.

But Jobs is uniquely talented and a master of total product design. Handset manufacturers come up with dozens of phone designs per year, but haven't been able to duplicate the user experience of the iPhone. You could say the Nokia N95, the HTC Touch, and other smartphones have similar capabilities, but they don't match the slickness, pinching, and other capabilities of the Apple device despite its flaws (no 3G network and inaccessible battery, for example). The iPhone is also part of a family of personal devices that will become even more integrated.

Throwing open-source Android into the mix could give mobile device makers a better platform to take on the iPhone, but they will be mostly competing with each other for market share.

The iPhone will continue to be the BMW or Lexus of mobile devices, with modest share and lots of profit and envy from other mobile device makers. However, Apple could stumble, failing to keep up the rapid pace of innovation, but I wouldn't count on it as long as Jobs is in the house.

Will Android beat iPhone?

Speaking yesterday at the Emerging Communications Conference at the Computer History Museum in Silicon Valley, Rich Miner, Google group manager for mobile platforms, predicted that sales of Android-based devices will outpace those of the iPhone.

In other words, the iPhone will be unlike the iPod-iTunes combo when it comes to dominating a market.

Could there be an HTC iPhone?

Miner uses the Microsoft licensing and open-source models to make his case. "When you have devices out there from Motorola, HTC, Samsung, and so on, there's a much larger potential market on Android than for the iPhone," Miner said.

In other words, having a mostly closed device (except to the iPhone hackers)--with one manufacturer and one carrier per country, as well as applications tied to the Mac OS--is not a formula for creating massive demand. Apple will sell in the tens of millions in a market for smart communications devices that is in the billions.

It's the same dilemma Apple has faced over the years. Should the Mac OS be licensed to any reasonably qualified manufacturer? Clearly, Steve Jobs has proven that he can create a great PC business with 5 percent market share.

The Open Handset Alliance contingent of Google's Android is really going after the business of Microsoft, Research In Motion, and Symbian with its open-source mobile-software stack and applications platform, which makes Miner's remarks about the iPhone unsurprising.

Any one of the big players can beat the iPhone in market share, if Apple continues with its proprietary approach.

What if Apple does free the iPhone software and touch technology? Would it become the dominant mobile-device operating system and application platform? Talk among yourselves.

My former teammate and now editor in chief of ZDNet, Larry Dignan, and I continue our weekly podcast (formerly called "Between the Lines") covering the top headlines of the week. This week on "EIC Squared," we two square editor in chiefs discuss the iPhone's quest to seduce business users, some of the highlights from Microsoft's Mix '08 conference, and Facebook's new chief operating officer.