The Real Meaning of the Fire Phone

People have been asking my opinion of the new Amazon Fire Phone, but I’ve had a lot of trouble answering. My first reaction was overwhelmingly blah. I’ll be curious to try it, and maybe then I’ll feel better about it. But right now it seems to me like a bag of interesting features rather than a coherent product. (Quick, what do faux 3D imaging and a year of free mail order shipping have in common? Absolutely nothing.) Plus it’s available from only one mobile operator, and the pricing isn’t low enough to get anyone excited. I’m delighted anytime a major company tries to innovate, but I can’t imagine this phone having a huge impact on the market.

Many others are neutral to downright hostile. BGR wrote, “Amazon innovated in all the wrong places.” (link). And CNN said, “if you're happy with your iPhone 5s or Galaxy S5, there's no compelling reason to change” (link).

So why did Amazon build this product?  Ben Thompson made a good case that the phone is designed to strengthen Amazon’s relationship with its lucrative Prime customers (link). I’m sure that’s part of the motivation. But if that’s the only goal, wouldn’t you price the phone very low to grab more customers, the way you did Kindle? And as Ben himself noted, there are many other things you could do to more directly recruit Prime customers. For example, many of the Fire Phone apps could have been released separately for Android and iOS. Wouldn’t that be a better way to serve Prime customers? Rather than trying to rip people away from their iPhones and Galaxies, why not just co-opt them through some apps that run on their current phones? What Amazon’s doing is like selling your own line of sofas as a way to distribute slipcovers.

And so I go back to wondering why Amazon did it. Imagine you’re Jeff Bezos. You have a fairly stable relationship with Apple and many other phone companies at the moment; why turn yourself into their blood enemy for a product that that won’t move the needle in sales?

To me, the Fire Phone reeks of experiment. I think Amazon’s testing something, and the experiment is important enough to spend a ton of money and create a lot of competitive hostility. After thinking about it a lot and trying to look at the world through Amazon’s eyes, I think I can guess why the Fire Phone would be strategically important to Amazon. I believe it’s not about the phone market; it’s about the evolution of mobile commerce and the future of Amazon itself.

To explain why, I have to give a bit of background on mobile commerce. For online retailers, the single most frustrating thing about mobile technology, especially smartphones, is that it people using it don’t buy a lot of stuff. They’ll browse in your web store and use your shopping app, but when it comes time to buy they often don’t purchase. The industry rule of thumb is that a good commerce site on a personal computer will convert about 3% of shoppers to buyers (in other words, for every 100 online shoppers you make three sales). The conversion rate for smartphones is a third of that, about 1%.

In an industry that would kill to improve conversion by a tenth of a point, that drop from 3% to 1% is horrifying. Many commerce companies have spent years trying to fix it, and through incredible effort and careful experimentation it is indeed possible to increase the mobile conversion rate. In my day job at UserTesting that’s one of the things I help companies do. But it’s a slow process of incremental fixes, and in the meantime mobile web use is growing explosively. Here’s the nightmare scenario for an online retailer:

—What if the next generation of internet users moves to smartphones and wearables faster than we can figure out how to fix mobile shopping?

—What if, as people move to mobile, the conversion rate for our whole business drops from 3% to 1%?

—And most disturbing for a category leader like Amazon, what if the low conversion rate on mobile is a sign that the online store itself is not a good fit for smartphones? What if some new mobile technology or app makes online shopping obsolete, just as online stores have been making traditional retail stores obsolete? What if Amazon itself is the next big tech dinosaur?

Don’t laugh. Platform transitions in tech usually make the old category leaders obsolete. Read about Lotus Development or Digital Equipment Corporation if you don’t believe it.

That existential threat is the kind of thing I’d expect Jeff Bezos to worry about. It’s a huge change that comes from an unexpected direction and could cut the heart out of his business. What’s worse, by the time the threat becomes obvious it’ll probably be too late to respond to it.

So the time to act is now. Amazon needs to dive into mobile and figure out what the shopping experience would look like if you built it into a phone from the ground up.

If that’s Amazon’s motivation, then the Fire Phone is really all about Firefly, Amazon’s instant-buying technology. I think the question being tested is whether you can completely replace a web store with a properly configured phone. What if, instead of going to an online store to buy something, your phone itself became the store? What if, instead of searching for the thing you want to buy, you could just take a picture of it, or scan its barcode, or say its name? 

Amazon everywhere. Futurist Paul Saffo put it this way: “Firefly allows Amazon to invade every store in every mall on the planet and turn it into a de facto showroom for Amazon” (link). I’d go even further. I’d say Firefly is an effort to turn the entire world into an Amazon store.

If Amazon makes that phone first, it takes another big chunk out of Walmart and Target and eBay and every other retailer out there, physical or virtual. If someone else makes it first, Amazon itself is in mortal danger.

I think that’s why Amazon had to make a phone. It needs to test and tune the integration of mobile hardware and software in the purchasing process, and that would not be possible on someone else’s phone. It also doesn’t want to share the data it’ll collect with any other phone vendor (especially not one allied with Google), since that could be the key to the future of the whole company. 

From this perspective, the rest of the Fire Phone announcement makes more sense. You need to toss in a few sexy features, like the semi-3D screen, to attract some users. The price doesn’t have to be low because Amazon doesn’t want to sell a gazillion phones. One carrier in one country is enough because Amazon’s not pushing for world domination yet. It needs just enough users to give it a robust experimental base. Then it’ll observe, and it’ll learn, and it’ll tweak the experiment, and it’ll learn some more.

And then, when it gets the formula right, we’ll see the real Amazon phone. I’d expect it to be more aggressively priced and much more broadly available. I wouldn’t be surprised to see Amazon also release Firefly apps for other phones at the same time. By that point Amazon’s priority won’t be secrecy, it’ll be rapid domination.

Or maybe the experiment will fail. Maybe Amazon will learn that there is no magic way to turn a smartphone into a store. In that case it’ll quietly make the phone disappear, write off the losses, and move on to other priorities. Hey, it’s just money, and we all know how Jeff Bezos feels about that.

What it means for the rest of us

Do you remember back when Google was just getting started in smartphones, and there was widespread speculation that Google would give away a phone with free wireless service? The idea was that the things Google would learn from the user were worth more than the cost of a phone service plan. That idea faded away as Google focused on co-opting rather than destroying the mobile industry, and as it realized that it couldn’t make enough money from phone users to pay for the service.

It might be time to revisit that scenario. If anyone can figure out how to make a free phone pay for itself, it would probably be Amazon. Even if it can’t give away a phone for free, it might be able to offer steep discounts, putting the rest of the phone industry at a huge disadvantage. If you’re Google or Apple, you don’t have the sort of retail back end that Amazon does, so you can’t directly match that strategy (although Google might try). A better option is to team up with the other companies threatened by Firefly. Perhaps you create a Firefly-equivalent app and open it to connectivity with anyone else’s online store in exchange for some sort of revenue sharing.

That approach requires heavy skills in alliance building. Apple might be able to pull it off, but they tend to work exclusively with a small number of subservient partners. Google could try for a broad alliance -- it likes to do everything big -- but I doubt it has the focus and consistency to create a lasting partnership of equals with large numbers of companies. (In that vein, it’s meaningful that Google started on a path similar to Firefly back in 2010 with Google Goggles, but killed the product a few weeks before the Fire Phone announcement because it was “a fun feature, but also a feature of no clear use to too many people” link).

So Amazon’s potential strategy plays to the weaknesses of its biggest competitors.

I wonder if Apple might be willing to build a long-term partnership with Amazon, instead of competing against it. In addition to cooperating on mobile commerce, Amazon could help Apple with its portfolio of online services, a constant weakness of the company. Steve Jobs would not have done it; I think Tim Cook might.

If you’re an e-commerce company, you should investigate the Firefly APIs. It looks like you can plug into the Firefly system to make your own offers when a user scans an object. You’ll still need to convince users to install your plugin, but at least this will give you options. Besides, you need to learn how this new shopping paradigm works.

If you’re a bricks-and-mortar retailer, I think you shouldn’t waste time worrying about people using your store as a showroom for Amazon. You can’t stop that anyway. Instead, look at how you can enhance the shopping experience by embracing smartphones. To give one example, what if every product in your store had a QR code that took a smartphone user to your page for that product, with additional information, FAQs, and special offers? I’d love to have that in one of the box box retail stores where you can never find a sales rep. You’d enhance the shopping experience and maybe intercept shoppers before they turn to Amazon. Plus you’d get data on what people actually do inside your store.

I’m kind of surprised that Apple and Google haven’t already built a QR scanning app into their mobile platforms. It’d be a logical way to partner with retailers and get leverage against Amazon.

If you’re another mobile phone vendor, such as Samsung, you should talk with Amazon about integrating Firefly into your phones in exchange for a cut of the revenue. Better to embrace the company now than to risk competing against a heavily-subsidized Amazon phone in the future.

And for anybody who deals with mobile, the Fire Phone is a reminder that we’re just getting started. Although we talk of smartphones as a maturing market, we’re barely beginning to learn how mobile devices will change our lives. We stand in the foothills of the Himalayas. The biggest mobile opportunities, and the biggest disruptions to today’s businesses, are still ahead of us.

What Happened to the Surface Mini?

Well, that was disappointing.

Microsoft’s heavily-rumored mini-tablet (link) was a no-show at the Surface event this week. If this had been an Apple announcement, I’d just say the Internet got carried away with itself. But the source of the rumors was the very reliable Mary Jo Foley at ZDNet (link), who’s almost a house organ for Microsoft official leaks. So what happened?

It’s possible that Microsoft leaked the rumors deliberately in order to smoke out Foley’s sources, but I don’t think Microsoft would have put Qualcomm in the story if that were the case. Most likely the product was real, and the announcement was canceled just recently.

Bloomberg says Microsoft execs Stephen Elop and Satya Nadella lost confidence in the product and decided to pull it at the last minute (link). That would be a typical move for a new management team – you always look to kill a few of your predecessor’s projects to put your own stamp on the organization. The reasoning that Bloomberg gave didn’t make sense, though. The report says the mini-tablet was canceled because it didn’t have enough differentiation. A tablet optimized for note-taking and equipped with a stylus would have been heavily differentiated, so that doesn’t wash.

More believable would be if the company is leery of launching any new product that depends on Windows RT, the ARM-based version of Windows that can’t run normal Windows apps. RT has failed to achieve significant momentum in the market, and I could see Elop and Nadella being very cautious about risking another RT-based product flop. More prudent to pull it now, ship the Intel-based jumbo Surface tablet, and do a minitablet later, if at all, based on Windows Phone. The jumbo product won’t change the world, but at least it won’t embarrass Microsoft.

If that was the call, it’s a prudent decision that totally misreads the market for mobile devices. RT was a bad choice for full-sized Surface tablets because they are too close in price and size to notebooks. No Windows user wants a notebook that won’t run Windows apps. But a minitablet could have been sold as an information appliance, for which full Windows app compatibility is much less important.

This situation illustrates why the tech industry has so much trouble creating truly new device categories. Small startups have trouble scraping together the money necessary to do a really different product. Doing it right often takes on the order of $20 million, more than you can easily raise from VCs or Kickstarter. Big companies have that sort of money, but they’re usually risk averse and would rather stick to established categories of product. Which is what Microsoft just did.

Ah well, the net impact is that Microsoft has now whiffed twice on the minitablet market, once with the twin-screen Courier product and now Surface mini. I wonder if they’ll get a third chance.

I’ll also be interested to see what the last-minute cancellation costs Microsoft. If they were close to launching, there will be parts and manufacturing contracts with big cancellation fees. Presumably Nadella will be doing some sort of restructuring of the company in the near future – new CEOs always do – and the writedown, if any, can be buried in that.

Meanwhile, someone at Microsoft is probably sitting on a roomful of Surface Mini prototypes that are headed to a shredder. I have one humble request: Could you please slip one of them to me?

Is Microsoft About to Announce an Info Pad?

The reports leaking out of Redmond are intriguing. Tomorrow (May 20, 2014) Microsoft will reportedly announce a “Surface Mini” tablet, a touchscreen device in the same size class as an iPad Mini but equipped with a stylus and note-taking software (link).

Most of the press reports have focused on the chip vendor (link) and comparisons to the iPad Mini, but what most of them seem to miss is that this may be a new category of mobile device. The Surface Mini as described in the reports sounds very much like an info pad, a tablet optimized for managing business information and taking notes in meetings.

That product opportunity has been evident for at least ten years. It has a very distinct customer base that is more interested in business productivity than in playing games or listening to music. When I was at Palm, we studied the market closely, and later I tried to pull together a startup to build one (that evolved into Zekira, the software startup I’m working on now).

Although you can use an iPad for business functions, a device optimized for notes and business productivity could be far more compelling than an iPad for that particular usage and for those particular customers. But the price has to be right and a ton of little features have to be done correctly. And you have to market it properly, so it looks like the ultimate replacement for the paper notepad rather than a debased iPad. The right product is an appliance for business info, not an iPad that happens to have a stylus.

I’ve written about the info pad opportunity in the past. You can read about it here.

Is this the vision Microsoft’s shooting for? Will it get the details right? I’m more intrigued by this announcement than by anything else Microsoft’s done in years. Stay tuned.

The Uncomfortable Truth at the Heart of Mobile Gaming

I was at a developer conference earlier this year, and the discussion came around to a certain very popular pattern-matching game. I was surprised by how much hostility I heard.  “That thing,” one developer fumed, “is just a slot machine.”

At the time I chalked it up as jealousy. Sure, many mobile games have random elements, but the best ones also require a lot of thought. That’s nothing like a slot machine.

But as I learn more about mobile gaming, I start to see the developer’s point. Most people outside the game industry don’t realize that free-to-play games, by far the most successful mobile game category, are often supported financially by a very small number of users who pay extravagantly for power-ups, extra lives, and in-game currency. The whole point of many successful free-to-play games is to identify these “whales” and extract as much money as possible from them.

The discussion of this process at mobile conferences is sometimes uncomfortable. Non-paying players (the great majority of a game’s users) are often dismissed as meat to be fed to the whales. An intense amount of thought goes into not just identifying the whales, but determining their individual psychology and the best techniques to pull more money from that particular type of person. Players are tracked in as much detail as possible, including exactly which promotion they responded to, what their purchasing pattern is, and any other details the developer can glean from them. Every aspect of the game is crafted to maximize revenue extraction, including minute changes in graphics, button designs, and subtle changes in game play. Anything that creates even a small fraction of one percent change in a conversion rate can mean the difference between a successful and unsuccessful game, so the pressure to constantly refine everything is immense.

At its recent F8 developer conference, Facebook gave a great overview of this process. You can view it here.

At several recent conferences, I’ve heard developers say they’re starting to realize that there seems to be no upper limit on the amount of money you can extract from some users. Do you think offering a bundle of power-ups for $50 is outrageous? Create a bigger offer at $100 and you’ll make even more total revenue.

This process of systematically designing games to extract revenue, and targeting offers at the biggest whales, makes many game developers uncomfortable. In an excellent essay on Gamasutra, Mike Rose wrote, “Free-to-play games aren't after everyone for a few dollars -- they're after weak people in vulnerable states for hundreds, if not thousands.” (link)

Many game developers take issue with that statement. They point out that there’s nothing wrong with accepting money from people as long as they’re in control of their actions. Some people just plain like playing mobile games and are happy to spend money for a better gaming experience. What’s wrong with letting them pay? Besides, if a console gamer buys an Xbox for $300 and a bunch of games worth $700, we wouldn’t call the console industry exploitative. Why should mobile games be any different?

But the discussion at the conferences sometimes sounds a lot like gambling executives trying to talk their way around the problem of compulsive gambling. And sure enough, there are efforts to create an ethical code of conduct for free-to-play game developers, defining how far they can and cannot go to pull money out of a customer (link). You don’t usually get a code of ethics for an industry unless it has a potential ethics problem.

Meanwhile, what’s very clear is that successful free-to-play game development is much more about science than art. I think many game developers were drawn to the field for the art -- they want to create the most engrossing, glorious game experience they can; the game equivalent of a blockbuster movie. I think about the awesomeness that was Marathon and Myst on the Macintosh, or the surreal weirdness of Badland on iOS (link), and that’s the sort of pure mind-bending joy that I want from a mobile game. The idea of systematically altering that experience to extract another purchase from 0.5% of the users feels fundamentally wrong, and probably explains some of the developers’ complaints.

But rather than dismissing their complaints as frustrated idealism, I think it’s a good idea to listen and think about where the industry is going. I think the code of conduct is a very good idea; without it, we could easily end up with government regulation of free-to-play gaming, and I can’t imagine how that could be effective without destroying the category altogether. It would also be a very good idea to develop other new revenue streams to support mobile gaming. That’s why I’m always interested when someone like Facebook claims they can fix mobile advertising. You may not love the idea of mobile games becoming like commercial television, but I think we’d all be a lot more comfortable pushing an occasional ad at every user rather than trying to extract $1,000 from 0.5% of them.

It’s Time to Pay Attention to Facebook

Considering how big and successful Facebook is, it gets surprisingly little respect in Silicon Valley. Although everyone acknowledges the company’s size, it’s usually viewed either with hostility (among the small but intensely vocal group that cares deeply about privacy) or mild indifference (by everyone else). It’s not usually seen as a leader capable of changing markets, let alone driving the cutting edge of anything. The widespread dismay over Facebook’s purchase of 3D goggle maker Oculus VR was a great example of this attitude: the company’s not viewed as a good home for innovation.

So I was very interested when Facebook laid out a strategy for mobile last week that is not just adequate, but actually sounds quite smart, and could potentially make a big difference in the mobile industry. Of course the success of any strategy depends on how well it’s implemented; the history of the Valley is littered with cool-sounding strategies that failed or were never seriously tried (link). But if Facebook’s actions match its words I think it could change the competitive dynamic in the mobile industry, and in the process make life a lot better for independent app developers.

Facebook’s problem

The mobile tech world is dominated by proprietary platforms. Apple and Google both run controlled ecosystems in which they decide the key features and reserve the right to remove other companies from the field of play. Apple is a bit more controlling than Google, but they both manipulate their platforms to maximize their profits and prevent other companies from becoming too powerful.

This is nothing new in computing history. On personal computers, Windows and Macintosh are both proprietary platforms. In fact, one of the few recent examples of a huge open platform in tech is the web. No single entity controls the features of the web or who can play on it. This helped produce a host of big web companies, like Google and Facebook and Amazon, and a wide array of customer choice. The downside has been poorly coordinated user experiences, and platform innovation that moves at a glacial pace because it has to go through standards committees.

The proprietary mobile platforms have been great for users and developers in many ways. Apple and Google push each other to add new features and device categories, and the app stores on both platforms have led to an explosion of third party software. However, there’s a downside, especially for developers. They have to spend heavily to adapt their products to iOS and Android. Their apps are commoditized by the structure of the app stores. Apple and Google both take an excessive cut of the revenue the apps do get. And if an app category starts to become too popular, there’s a very good chance that Apple or Google will build it into the platform and crush the third parties.

As a result, the app economy in mobile is far smaller and weaker than the web economy on the desktop. To a big web company like Facebook, that’s very threatening. Facebook’s business on the web depends on it being the hub of your social interaction, which it analyzes to target advertising customized for your interests. On mobile, Google is working hard to build its own social features into Android, and the whole idea of a single social hub is threatened as social features are built into a wide range of mobile apps. Although Facebook’s latest apps on mobile have been far more successful than its first efforts, it’s still at risk of being walled off by the platform vendors on one side while it is nibbled to death by a hoard of developers on the other side.

So the question for Facebook is what its fundamental role will be in mobile. Can it find new ways to capture social information for use in ads? Can it create standards that give it a stable power base against the platform companies? And can it find a way to leverage the swarming strength of the little app companies?

The Facebook Platform

At the F8 developer conference last week, the company announced a series of new services and APIs for mobile developers that could give it a much deeper role in the mobile app ecosystem. The announcements included:

The Audience Network, an ad network that’s supposed to let developers tap into Facebook’s mobile advertising revenue stream. App developers are hungry for revenue, so this could be very important if it works. I’ll come back to this below.

–An API called AppLinks that makes it easy for mobile apps to pass commands and data between each other, and to and from web servers. I’m still learning all the API can do, but I think it has the potential to let mobile apps work together in a variety of creative ways. As some others have pointed out, it also lets Facebook’s mobile apps integrate more seamlessly with other social sharing apps, potentially positioning Facebook as a hub for mobile social activity (link).

–A mobile Like button that developers can easily integrate into their apps. This will help developers publicize their apps, but it also gives Facebook data on what sort of apps you use. That can be mined to target advertising (are you seeing a pattern here?).
Hosted developer services, under the brand name Parse, that help developers store data, compute, and process notifications in the cloud. Parse offered those services before, but the free tier has been expanded, in some cases by as much as 70x. It would be great for developers if Facebook set off a wave of price competition among back-end service companies.

–A promise of API stability, which would make developers more willing to invest in Facebook technologies.

Expanded user controls over the information that is shared when someone uses Facebook Login. This may reduce the number one fear that users have of Facebook Login: fear that the app will post unwanted messages on your behalf.

–A big, no-obligations offer of free services for small developers, with free ad credits and other services from Facebook plus other services from several third party companies. (Full disclosure: one of those free offers is from UserTesting, where I am the mobile strategy guy.) If you’re a small developer I think you’d be foolish not to take advantage of it. To learn more, go here.
The overall message was developer love from Facebook. As Mark Zuckerberg put it, “my goal for our culture over the next ten years is to build a culture of loving the people we serve....We want to build a platform that's reliable for you.” (link)

Will it work?

Taken as a whole, the announcements are a coordinated effort to make mobile developers more successful, and at the same time give Facebook a much more central role in mobile computing. But that’s just a story at this point. I’ve seen many great tech strategies fail utterly in implementation. What matters is the details of how Facebook will pursue its plans, and how hard it will try to make them work. Here are four key issues to watch:

How well will the Audience Network work? Facebook claims that its mobile advertising is double the effectiveness of other mobile advertising. Basically, Facebook knows you better than anyone else, so it can target ads more precisely, making advertisers pay more money for them. The new Audience Network will let third party developers place those targeted ads in their own applications. So if a Facebook member uses an app that’s in the Audience Network, he or she will see Facebook-selected ads in that app. Developers can also customize the look of ads to match their applications, making the ads less jarring for their users.

In the desktop world, many websites and web apps succeeded because there was enough advertising money available to support software and content companies. That hasn’t generally been the case for mobile, because the payments per mobile ad are low and because overall spending on mobile advertising has been depressed. If Facebook can change that dynamic – a huge if – it might change the economics of mobile apps fundamentally.

I cannot overstate how important that would be for mobile developers. Today they struggle with commoditization in the app store, and freemium pricing policies that too often feel like bait-and-switch schemes. A stable, substantial advertising revenue base could change everything. But it depends on many unknowns: Can Facebook convince advertisers to pour more of their ad budgets into mobile? Will the targeting work? And most importantly, how much of that ad revenue will Facebook share with developers? Facebook wouldn’t answer that question at F8, so I can’t tell if the Audience Network is a potential breakthrough or a tease.

Will Facebook stay committed?  Facebook’s execs said all the right things about supporting developers – we’ll maintain our APIs, help you grow your business, meet with you regularly, and so on. It’s everything a developer could wish for: a big powerful company that’s agnostic about OS and wants third party developers to thrive.

It all sounds great, but hearing Facebook talk about developer commitment is a bit like hearing a French president swear loyalty to his wife. Facebook embraced developers once before, when it encouraged them to build games and other apps on top of its desktop platform. The resulting surge in Facebook apps helped to crush MySpace. But once that battle was over, Facebook gradually lost interest in developers. The company didn’t even hold developer conferences in 2012 and 2013.

So it’s reasonable to ask: Is Facebook committed to the long term this time, or is this a tactical maneuver that’ll end as soon as Facebook is more established in mobile? I think in this case Facebook’s long-term interests are more closely aligned with developers. But does Facebook itself understand that?

Will Facebook become a predator in apps? Microsoft once had an incredibly vibrant third party app economy on Windows. But in its drive for revenue growth, the company eventually turned predator, trying to take over almost every major app category: graphics, antivirus, accounting, etc. That strangled application investment on Windows, and drove developers into the web. In many ways, you can trace the decline of Windows to the time when Microsoft turned against its own developers.

Here’s Mark Zuckerberg on his attitude toward developers, in a conversation with Wired:

“We’ve always believed that there were going be a lot of different ways to share content, and that we were never going to build all of them ourselves. We try to build the most important ones. But on top of that, you’re going to see dozens of other apps that developers build that each use the Facebook login, Facebook to share, the mobile “like” button, push notification from Parse, app installs through Facebook, and Facebook monetization tools in order to turn their apps into businesses.”

I would feel so much better if he’d said “hundreds of thousands” of developers instead of “dozens.” But maybe he doesn’t want to sound threatening to Apple. Which brings me to the fourth issue:

Can Facebook walk the tightrope with Apple? Google and Facebook are mortal enemies. The Facebook Audience Network reinforces that; both companies want to be the dominant ad supplier on mobile, and only one can win. But Facebook’s position relative to Apple is much more ambiguous. Today Apple is willing to cooperate with Facebook, allowing it to operate more or less freely on iOS, and partnering with it when appropriate. Mostly the two companies stay out of each-others’ way. With Facebook now advocating cross-platform APIs and positioning itself as a powerful hub for mobile advertising, will Apple continue to take a benign view of the company, or will it start to systematically restrain Facebook on iOS? If that happens, it’ll be much harder for Facebook to establish standards. To use a military analogy, Facebook really shouldn’t get itself into a two-front war. It needs Apple as an ally, or at least a neutral.

I think there’s a good case for Facebook and Apple to work together against Google, but that would require both companies to restrain their egos. That’s not easy to do in Silicon Valley. Mark Zuckerberg’s next big test may be his diplomatic skills.

The bottom line: Will Facebook be a facilitator or a predator in mobile?
What is Facebook’s vision for its long-term role in mobile? Does it want to be like Amazon Web  Services, facilitating a robust ecosystem with lots of apps, and taking a small revenue cut from many of them; or does it favor the Windows model, in which it treats developers like a field of vegetables, to be harvested as soon as they start to ripen? We can’t tell today, and Facebook itself may not know yet. So it’s too early to judge what Facebook’s new strategy will mean for the industry. But I think one thing is clear: what Facebook’s doing in mobile is important, and it could change the rules. The company can’t be ignored.

Introducing iPierce

Confidential documents obtained from Apple indicate that, despite all the rumors, the company’s first entry into wearable computing will not be a watch. Instead, Apple plans a line of intelligent body piercings, collectively known as iPierce.

The first iPierce devices will be an eyebrow ring and a navel barbell (which Apple calls a stud). Both include a microphone, speaker, Bluetooth LE, WiFi, motion sensor, GPS, 4 MP camera, four gigs of RAM, and a lithium ion battery. The ring also includes a small low-power laser (more on that below), and the stud has a USB connector that enables it to be tethered directly to a smartphone or Mac. The eyebrow ring weighs one ounce, and the navel stud two ounces. The small size and light weight of the devices was made possible by a custom A7 processor, designed by Apple, that incorporates the CPU, memory, and radio controllers on a single die.

The iRing, as Apple calls it, will come in a single model, but can be customized with interchangeable colored gemstones created at Apple’s new sapphire factory in Arizona. There will be three models of iStud: a star, an Apple logo, and an adorable little kitty playing with a ball. All were designed by Jonathan Ive and each is carved from a single piece of surgical steel.

The iRing can also be installed in the ear or other fleshy appendage, but the iStud unfortunately cannot be worn in the tongue due to interference between the low-power radio and a user’s dental fillings. In early testing there were three cases of minor burns caused by inductive heating of the user’s fillings when they coupled with the radio frequency of the WiFi transceiver. Apple is researching ways to implant a small external antenna that would enable iStud to safely operate inside the mouth.

One of the breakthrough features of iPierce is that the devices don’t need to be charged. Special piezoelectric chips in the device convert the user’s body motions into electricity and trickle-charge the battery. In most cases, that is enough to keep the device charged, but if power becomes low the devices can also digest the user’s blood cells to produce additional energy. This will not have a noticeable effect on the user unless they use a lot of WiFi, in which case they might become slightly anemic. For this reason, each iPierce will come with a bottle of iron pills. The pill bottle was designed by Jonathan Ive and was carved from a single piece of brushed aluminum.

The software

All iPierce devices come bundled with the standard applications you’d expect: messaging, notifications, ringtones, relational database, and an app store. iPierce is controlled through a combination of Siri speech recognition and gesture recognition (for example, raising your eyebrow is equivalent to a swipe up on iPhone).

The iStud includes a color-changing LED that illuminates when the user receives a call or message. It flashes red for text messages, green for phone calls, and blue for App Store updates. The other colors are reserved for use by developers. There is also a vibration mode for use for use in libraries and other quiet settings.

The low-power laser in iRing can be used to display a screen image directly on the user’s eyeball (since the name Retina Display was already in use, Apple calls this technology iEye). One interesting application of this technology is that if a user has two iRings (one for each eye) they can automatically superimpose an image over anything that the user doesn’t want to see. For example, a large Hibiscus plant can be superimposed over an overflowing trash dumpster. Apple has written software that automatically detects any social media post that has a spoiler to a television show listed in the user’s Preferences, and replaces it with a quote from Hunter S. Thompson.

Apple says third party developers are working on iEye apps that will completely replace the user’s surroundings with synthetic environments. For example, a user could choose to live in a Lord of the Rings environment, with his or her friends replaced by characters from the movie, licensed through the App Store. For an extra fee, you can even make Siri talk like Gollum. ("Nasty little hobbitses wants to find a restaurant, do they? Siri never gets invited to eat at restaurants. All the hobbitses say is 'Siri calculate the tip.' Next time Siri sends you to a Taco Bell with a dirty bathroom.")


iPierce devices will be sold and installed only at Apple Stores. Apple has quietly trained more than three thousand store employees in how to install iPierce, assisted by a custom piercing device that I’m told resembles “a highly instrumented staple gun.” The staple gun was designed by Jonathan Ive and was carved from a single piece of titanium.

Like the iPhone battery, iPierce devices are not removable. But users will be able to buy screw-on upgrades.

Background and future plans

The iPierce project originated in 2009, when a super-secret team at Apple working on a smart watch presented their first prototype to Steve Jobs. I’m told by a contact at Apple that Jobs was aghast. “He shouted, ‘That’s the stupidest idea I’ve ever heard. Nobody wears watches anymore. I’d rather have a nail driven through my head than wear a watch.’” 

When the team returned to its confidential off-campus location in Sunnyvale, CA, it realized that no one was sure if Jobs’ last comment was hyperbole or an instruction on the product they should build. The team decided it was safest to assume it was an order, and switched their work to body piercings.

"We leaked the plans for a watch as a decoy," my Apple contact told me. "We figured we could probably get Google and Samsung to waste $50 million each working on a clone. I've got a bet with a friend that if we plant a rumor that we're working on a smart airplane we can make Google buy Boeing."

Now that iPierce is finally near completion, Apple's next wearable initiative will be iTat, a line of touch-sensitive LED tattoos. When paired with an iPierce, these tattoos could be programmed to display photographs, movies, games, and of course could also be used as a flashlight.

Posted April 1, 2014

Eight other April Firsts on Mobile Opportunity: 
2013: The truth about Google Street View
2012: Twitter at Gettysburg
2011: The microwave hairdryer, and four other colossal tech failures you've never heard of
2010: The Yahoo-New York Times merger
2009: The US government's tech industry bailout
2008: Survey: 27% of early iPhone adopters wear it attached to a body piercing
2007: Twitter + telepathy = Spitr, the ultimate social network
2006: Google buys Sprint

More Thoughts on Facebook/Oculus

In yesterday’s post on the Oculus acquisition (link), I focused on the idea that Facebook sees virtual reality as the future of social networking. I was skeptical of the Oculus deal because I see VR as a more fundamental change with much broader implications to the industry.

There is an alternate view, as a commenter on the post pointed out. Let’s assume for a minute that Mark Zuckerberg actually does understand the potential for VR to be far more than a communication technology. As I wrote last year (link), I think 3D displays combined with 3D printing and gesture interfaces can be the foundation of sensory computing, the next big computing revolution as important as the graphical interface revolution of the 1980s. Maybe Mark sees that, and the deal is really about him buying Oculus to remake computing, with Facebook just the vehicle he used to make the deal.

If so, bravo.

The companies that should be driving this new revolution are Microsoft and Apple, but computing incumbents are usually too wrapped up in their existing businesses to spot the next generation. Maybe it takes a relative outsider like Mark to see the potential. And in this case, it’s an outsider with oodles of money. Which is good news, because the new world of sensory computing will need a lot of investment to get it started.

When building a computing platform business, you have to hit a very careful balance between creating infrastructure that no one else can build, and leaving opportunity on the table so that others will invest. A successful computing platform is not a singular entity; it’s an ecosystem that wraps the platform vendor, developers, partners, and users into a network in which everyone invests and everyone benefits from the synergy between the parts.

In this world, the platform vendor is a bit like the conductor of an orchestra. You don’t play the instruments yourself; you make sure they all come together to make beautiful music.

To make sensory computing happen, Oculus will need to focus on four areas: technology standards, interface, economic model, and management.

Technology standards. Someone needs to define how the apps, software extensions, and accessories in the sensory computing world will communicate with each other. For example, how does a gesture recognition tool like Leap Motion communicate with the Oculus hardware and with applications built for it? Oculus needs to take the responsibility for creating the communication standards and APIs, and needs to write the sample code that will make it easy for developers to integrate them. This can’t be left to committees or the open source crowd. Committees are too slow, and open source is too chaotic.

Oculus also needs to write drivers. Lots and lots of drivers, to integrate its systems with the rest of the computing world. Most engineers hate writing drivers; they are boring and difficult and no one ever comes up to you and says, “killer keyboard driver, dude.” As a result platform vendors usually try to leave that detail to the open source community. But that doesn’t work, because volunteer open source developers are even less likely to do unsexy work. Building a platform without drivers is like building a city without sewer pipes. Mark, this is where your money will come in handy. Hire a bunch of good driver developers and put them to work interfacing Oculus with everything.

Some of the first drivers you need are 3D printer drivers. Make it easy for people to create in 3D and bring their creations into the real world.

Interface. Imagine the Mac without menus and windows and icons. A new computing paradigm needs new interface standards: how do we grab objects in a virtual world, how do we control the device, how do we move ourselves around, and how do we do all of that without inducing motion sickness (one of the biggest complaints from early users of the Oculus Rift hardware)? There’s some very subtle and challenging work to be done here. Oculus and its software partners have made a good start in the area of gaming (for example, how do you separate where you’re looking from where you’re shooting from where you want to move?) That same level of thinking needs to go into all aspects of sensory computing.

Economic model. The platform vendor needs to make sure that the people creating accessories and apps for the new platform have a reasonable chance to make money. The platform does not need to guarantee profit for everyone, but the good apps and accessories must have a reasonable chance to rise to the top and be rewarded. The App Store, for all its flaws, accomplished this on iOS. Facebook failed very badly in this area with its platform; it’ll have to do much better for sensory computing to succeed.

To go along with that economic model, you need evangelists: marketing/business managers who know how to recruit and motivate partners and developers. If Oculus had a staff of evangelists in place, they would have fanned out yesterday to explain the deal with Facebook and make sure it didn’t cause developers like Mojang to turn away.

Management. To run all of this, Oculus needs experienced people who have created platforms before and know how to avoid all the mistakes you can make along the way. This is a specialized area of knowledge, and not something you can learn on the job. Platform management is a skill set that doesn’t exist in either Facebook or Oculus today, and it’s also not available in Irvine, where Oculus is based. But it is available in Silicon Valley, 300 miles to the north.

The biggest challenge of all is figuring out how to make all of these changes and additions without overwhelming Oculus and losing its beautiful energy and vision and focus. I watched Palm turn from a spunky innovator into a bloated bureaucracy, and I don’t wish that fate on Oculus.

Some of the work, like driver creation, can be done in parallel without too much disruption to the core of Oculus. But many of the other changes reach into the heart of the company. It’ll take unusually skilled and patient management to implement all these changes. Mark Zuckerberg doesn’t have the time to do this, and I think Oculus doesn’t have all the bench strength it needs today. One of Mark’s key moves in growing Facebook was hiring experienced managers to supplement his skills. I think Oculus needs the same thing.

The big question

What does Mark Zuckerberg really want to do with Oculus? At this point there is enough contradictory information out there that you can read anything into the deal. But the most hopeful quote came from Oculus CEO Brendan Iribe, who described the early discussions with Zuckerberg (link):

“We showed him some of the internal prototypes, and he got so excited about the vision of what we were doing and about the potential that this is truly the next computing platform. He actually said that to us. And it’s like, ‘Wow! We are looking at this whole thing being just that gaming platform. But tell us more, Mark.’ And he started to describe it, and we started to believe it too. And we started to relate it to a lot of the experiences we were having.”

I’m still very skeptical about the risks in the deal, but computing desperately needs new leadership and ideas, and I hope the combination of Oculus and Zuckerberg will deliver them. I want to believe.

Facebook, Ego, and Oculus Rift

When a big company is still controlled by its founders, its greatest strength is that it has the resources and the freedom to do almost anything, regardless of the shortsighted fears of investors. That’s also its greatest weakness. Case in point, Facebook.

I can rationalize reasons why Oculus VR is a good fit for Facebook, but I think the official explanation for the deal is pretty thin. To me, it says more about Facebook’s ego than it does about a coherent long-term strategy. Deals like this between dissimilar companies have a long history of failure in Silicon Valley; to make it work, Facebook will need to be skilled in some areas where it has little experience. The company is also creating important new competitors to itself, in ways that echo Google’s Motorola acquisition. I’m a huge fan of Oculus Rift, so I hope the deal ends better than the Motorola one. But history makes me skeptical.

Why Facebook wanted Oculus

Facebook’s explanation is that virtual reality is a new platform that, like mobile, could revolutionize social interaction. Facebook says it wants to be at the leading edge of that 3D social revolution, rather than trailing it the way it did mobile. That makes sense superficially, but the more you think about it, the shakier it sounds as the reasoning for this particular deal.

First of all, if you believe VR is a new platform, it’s not clear why you need to buy a hardware goggles company. It’s not like Oculus Rift is the only pair of 3D goggles in development. With Facebook’s market strength, it could have set a set a software standard and easily gotten it adopted by all the 3D vision companies. A small minority investment in Oculus would have been enough to secure their support. If you wanted a play in social VR, why not snap up SecondLife? Linden Lab has invested more than a decade in building software infrastructure for social VR, and would have cost a lot less than $2 billion.

Maybe you feel that the hardware and software have to be developed together. That’s a very Apple-like attitude, and therefore trendy in Silicon Valley. There have been persistent rumors that Facebook was working on its own phone. Maybe Facebook decided that it was too late to join the phone business, but it could get a jump on everyone else 3D.

But if hardware-software integration is the key, you’d want to drive deep integration between Oculus and Facebook’s software. You wouldn’t promise to run Oculus as a separate company, which is what Facebook claims it’ll do.

I think the real reason not to buy something like SecondLife is that it’s no longer trendy. Nothing smells worse in Silicon Valley than a company that failed to live up to its over-the-top hype, and the hype for SecondLife was astonishing about seven years ago. Oculus, on the other hand, is still at the takeoff stage in the hype cycle. It is the subject of a cult in the PC gaming community. The company promised to hit a sweet spot of affordability and quality for VR, and hardcore gamers embraced it enthusiastically through one of the first blowout Kickstarter campaigns. Although Oculus wasn’t mainstream news, there are literally millions of Oculus Rift-related videos on YouTube, most of them from enthusiasts drooling over the prototypes.

The cool factor. So by buying Oculus, Facebook makes itself cooler. The trouble is, it makes Oculus less cool. The enthusiasts who embraced Oculus because of its perceived authenticity and deep ties to the gaming world are appalled at the thought of it being owned by Facebook, which is seen as the poster child for lame low-res social gaming. It’s as if Motel Six bought the Ritz-Carlton. The Verge has a nice roundup of the angst here. My favorite quote:  “even Microsoft would have...been better than Facebook.”

Fear of missing out. I wonder if another motivation behind the Oculus purchase was the fear that if Facebook didn’t act, someone else would buy the company. If you feel VR is important and if Oculus is a leader, then maybe you buy it just so you don’t get closed out. The big VCs who invested in Oculus have a playbook for acquisitions, and it usually involves creating competitive bids, or the fear of them, to drive up the price. If Facebook was afraid that a competitor might buy the company, it might have felt the need to make a deal fast at an aggressive price.

Fighting Google. I think the primary motivation for the Oculus purchase was competition with Google. Both companies are led by ambitious technophile founders, and both have more money than they can count. Google has a cool new thermostat company, lots of neat special projects, and a very strong play in mobile that it is leveraging to push its own services, to the potential detriment of Facebook. Google also has a smart glasses initiative. Now Facebook has its own headgear, and the hottest new technology in gaming. The social aspect is important, but I think Facebook just wanted to be a bigger, more dynamic player. As Harry McCracken put it over at Time, “the world's biggest social network is no longer satisfied with just being a social network.” (link).

Isn’t it interesting how companies impose their own mental paradigms on technologies? Google looks at glasses and sees a way to search and consume web services on the go. Facebook looks at goggles and sees a new means for social communication.

That’s exactly what scares the fans of Oculus. They wanted the next great gaming experience, not a communication tool.

Risks of the deal

That brings us to the dangers in the Oculus deal. Let’s start with the thing not to worry about: the money. Facebook has more cash than it can possibly spend. An acquisition like this is just a way of recycling some of it. It’s kind of like Japan Inc. buying golf courses in the US in the 1980s. They had to do something with the money.

What I’m worried about are the odds that the deal won’t live up to Facebook’s lofty expectations. Let’s start with the risks to Oculus.

Loved to death. Whenever a big company buys a little one, there’s a big risk that the acquiring company will smother its new acquisition to death with enthusiasm. Everyone in the parent company is excited about the sexy new partner and has great ideas on how they can work together. There’s no way for the acquired company to deal with even a small fraction of these new ideas; usually it was working flat out just to do the basics prior to the deal and has no bandwidth for anything else.

Often the acquirer will be aware of this mismatch, and authorize the acquisition to hire a bunch of new employees to deal with the overload. But then the acquisition finds itself consumed by the hiring process, and its capacity for work actually goes down while the new employees are hired and trained. Usually first hiring priority has to be given to the parent company’s own employees, meaning the acquisition gets flooded with the parent company’s culture and business practices, and loses much of the distinctiveness that made it valuable in the first place.

To avoid smothering the acquisition, senior management in the parent company has to rigorously limit contact with the acquisition, and allow it to gradually staff up and grow into its new role. Does Facebook have that sort of discipline? So far it’s saying the right things, but the proof will be in actions, not words.

Arrested evolution. I’ve seen this happen over and over again. New device paradigms, if they succeed at all, usually create their own new usage patterns that nobody can predict in advance. To put it another way, we don’t know what the killer app for VR will be yet. Oculus is still in early beta on its first product, so it hasn’t had much opportunity to learn from the market. Chances are that when it ships, it’ll find that customer reactions pull it in directions it didn’t expect. Features that the company expected to be hot will go by the wayside, while something they casually tossed in at the last minute will turn out to be the biggest differentiator. A nimble startup can usually pivot to follow these discoveries. Will Facebook be open enough to let Oculus find its own way in the market, even if that leads it away from Facebook’s core business? If so, it would be a rare big company indeed.

Dealing with developers. Although Oculus and Facebook agree that its long-term future extends beyond gaming, I think it’s fair to say that unless the company is successful in gaming it may not be able to branch to those other markets. Success in gaming means recruiting developers to support Rift. Oculus had a lot of momentum prior to the acquisition, but we’ve already seen one developer (Mojang, the creator of Minecraft) decommit because of the Facebook deal (link).

I don’t think Mojang is necessarily an opinion leader among hardcore gamers, but Facebook’s history with developers worries me a lot. At one time, in the race to defeat MySpace, Facebook embraced developers enthusiastically. It made itself a welcoming platform for them, and many companies, especially game creators, jumped in enthusiastically. But although Facebook offered a lot of technical support for developers, it never put much effort into helping them make money. It was almost as if the company lost interest in developers once MySpace was out of the way.

I’m not saying that Facebook deliberately mistreated developers, but I think it never understood that a successful platform has to be both technically cool and financially rewarding to developers. Facebook never made the economics of its platform work, and as a result its developer base withered way. Some of the survivors switched to mobile instead and became leaders in the new generation of mobile games. To this day if you get them talking in private they’ll tell you about their lingering distrust for Facebook.

Facebook seems a lot more comfortable evangelizing developers to use its login and advertising APIs, rather than creating an economic and technology platform that makes them successful. But that won’t be enough to make Oculus a winner. If Facebook is serious about VR as the next big paradigm, it needs to change itself to embrace VR developers and help them succeed as businesses. Will Facebook learn how to take care of a platform business? Or will it take orders from tiny little Oculus in this area? To me, that’s one of the most important unknowns in the Oculus deal.

Indigestion. My other concern is that Oculus could create internal and external problems for Facebook. Working on VR may pull Facebook’s attention away from other, more pressing competitive threats. To me, the most important near-term challenge to Facebook is the rise of the Asian messaging networks that combine free short messaging with games and other online services. The acquisition of WhatsApp was meant to counter that, but Facebook still has to figure out how it’ll be integrated with the core company. Do Mark Zuckerberg and his management team have enough time and brain juice to figure out how to integrate both WhatsApp and Oculus?

Buying Oculus also creates potential new enemies for Facebook. Until the acquisition, companies like Sony and Microsoft had good reasons to view Facebook as a potential partner in their struggles against Google (remember, Microsoft owns about 1.6% of Facebook). But Oculus founder Palmer Luckey has been outspoken in his criticism of both PS4 and Xbox, saying they don’t have the power to do proper VR. And he has speculated about building mobile wireless chips into the Rift goggles, making them a long-term competitor to the smartphone (link). How will Apple feel about Facebook buying a company that says it’s going to make the smartphone obsolete?

When Google bought Motorola Mobility in 2012, I saw the shock and fear it generated in the Android licensee base. Even though Google eventually sold off most of Motorola, those companies will never again fully trust Google. I don’t think Oculus is the same level of shock to Facebook’s allies, but I suspect they’re now asking themselves whether they can trust Facebook as a partner in the future. That could hurt Facebook in ways it doesn’t even imagine today.

So I’m hopeful because I believe in the potential for VR, but I’m also very worried. For the Oculus deal to work, Facebook needs to understand developers much more deeply, exercise self-restraint organizationally, and navigate a very tricky landscape of allies who are now also competitors. None of those skills are particular strengths of Facebook today.

I hope they can learn quickly.


Edit: There's an alternate view of the deal: What if Mark Zuckerberg really does want to make Oculus into the next generation of computing, not just a social extension? That creates another set of challenges, which I discuss here.

Google the Conglomerate: After Nest, No Industry is Safe

I’ve spent many hours trying to puzzle out Google’s product plans. What’s the logic behind Google Drive, how does Motorola fit in a software company, and on and on (link). But with the acquisition of Nest, I think I’m going to stop looking for a single product strategy. I believe Google’s mission statement to “organize the world’s information” is no longer a meaningful guide to its actions. To me, the company looks less and less like a unified product company and more and more like a post-modern conglomerate.

The idea behind the “Internet of Things” is that network connectivity is moving into almost everything. If that’s Google’s investment thesis, it could rationalize an investment in almost any industry. Appliances? Absolutely. Shipping and logistics? You bet. Phosphate mining? OK, maybe not that. But any category of products that have electronics in them is fair game, as are any services that rely on data management. That’s going to be most of the economy.

You’re left with no grand product plan, other than the strategy of any conglomerate: Move into hot categories where we can apply our skills and expertise.

If that’s the case, we’ll need to evaluate Google’s strengths and weaknesses differently. We should worry less about the overall grand plan, and more about the management structure of its businesses, the skills of its general managers, and the efficiency of the support staff behind them. In other words, will Google be more like GE or like HP?

Here’s the key question: Does Google know how to manage itself this way? Does it have the right culture, processes, and team strength to run a conglomerate? Does it understand its weaknesses, and have a plan to fix them? For example, maybe the acquisition of Nest is less about its products and more about getting a team that knows how to apply high technology to a low-tech device category (link).

No industry is safe. The answers are crucial to many people. Investors obviously need it to understand whether Google stock is a good buy. VCs need to understand what categories of companies Google might buy. Competitors need to anticipate what Google might do next. And more broadly, the leaders in most industries should ask whether Google is now a competitor to them.

Wearability is Not Enough

I want to believe.

The forecasts for wearable computing are remarkable. The headline in Wired declared, “Wearable Tech Will Be as Big as the Smartphone,” but the article went even further:

“We’re...seeing an explosion of these devices on the market.... A new device revolution is at hand...wearable devices are poised to push smartphones aside.” (link)

So wearables aren’t just a new market, they’re the replacement for the smartphone.

The article acknowledges that may seem like an outlandish prediction, but argues:

“It may seem laughable to suggest that people will soon neglect their iPhones in favor of amped-up watches, eyeglasses, rings, and bracelets. But then again, 10 years ago it seemed laughable to think that people would use their smartphones to email, surf the web, play games, watch videos, keep calendars, and take notes.”

Just for the record, ten years ago the PalmOne website told people they could use their Treo smartphones to do e-mail, surf the web, play games, watch live TV, keep calendars, and yes, take notes. It didn’t work as well then as it does now, of course, but people weren’t just thinking about doing those tasks on smartphones ten years ago, they were doing them.

It makes you wonder if Wired’s editors are all under age 25 or stricken with a tragic case of group amnesia. But I digress.

I’m a gadget guy. I love devices, and I especially love the emergence of a new computing platform, because it creates so much opportunity for developers and so much innovation for customers. So the idea of getting in on another new platform is incredibly enticing to me. If you work in technology, it should be exciting to you too.

But precisely because a wearable revolution would be so enticing, we should be super-careful that we don’t get swept away by optimistic groupthink. For every computing revolution I’ve lived through, I’ve seen several others that arrived decades late or fizzled out entirely.

So while my heart wants to drink the wearable Kool-Aid right now, my head says to step back, think about it, and ask if the foundations really exist yet for a new computing revolution.

So far, my head is winning. I do believe wearable computing has a bright future, and in some vertical markets it’s already taking off. But is it the successor to the smartphone? Not now, and maybe not ever. Here’s why.

Two fatal flaws

I think there are two big problems with wearable computing today. First, the term is a catch-all, not a category. Second, even if you get the definition right, I think we haven’t yet found the killer app.

What is wearable computing, really? The term is kind of self-referential: wearable computing is computing gear that you wear. It attaches to your body or clothing, like a pair of glasses or a watch or a brooch. But those are extremely different form factors. I’m a Google Glass user and I’ve followed smart watches ever since Fossil worked on its late, lamented Palm OS watch in the early 2000s. Watches and glasses are completely different beasts, with different usage patterns and very different strengths. Grouping watches and glasses together in a single category makes as much sense as grouping together missiles and cargo planes and calling them flyable devices. The label is factually correct but meaningless in terms of predicting how the market will develop.

So rather than talking about a wearable revolution, we should be asking if there’s a smart watch revolution or a smart glasses revolution coming. When you look at the world that way, it gets a bit less exciting, because you see the weaknesses in each category of product.

Will wearables eat the smartphone? The tech industry is always full of predictions that some new type of device is about to swallow another one. It’s called convergence, and I’ve been hearing about it ever since the late 1980s, when Apple strategist Ken Lim started talking about it.

But there are always many more convergence predictions than actual convergence events. In an example of successful convergence, home stereo systems used to consist of separate modules: disc player, amp, tuner, etc. They eventually converged to a single unit for many buyers.

On the other hand, for decades many computer manufacturers predicted the imminent merger of the printer and personal computer. Converged computer/printers were promoted heavily in Japan, and several prominent efforts were made to bring them to Europe and the US. They all failed. Today PCs and printers are still separate devices.

Why do tech products sometimes converge and sometimes not? The general pattern is that devices converge only when the merged product is a fully-functional substitute for the devices being replaced. So smartphones rapidly killed the PDA because they could do everything a PDA could. Printers and PCs never converged because making a combined PC and printer required some pretty heavy compromises on the quality of the printer. Instead, printers merged with scanners and fax machines, which did not require major compromises. The only place where converged PC-printers got serious traction was Japan, where desk space is sometimes at such a premium that people were willing to accept a lower-quality printer in exchange for a smaller footprint.

So, for smart glasses or smart watches to replace smartphones, they have to be able to take over all of the functions of smartphones, without a major loss in functionality. Can they do that? Absolutely not.  The screen is too small on a watch to browse, and smart glasses lack the touch controls that would let you control a browser or sophisticated app.

Even more importantly, neither device has the battery power needed to function as your full-time phone. In fact, today most of them rely on the smartphone to give you wide-area connectivity when you’re on the go. In other words, they are smartphone accessories, not replacements.

I can imagine a future wearable product that could do a lot more. You could browse the web or run a complex app if the glasses or watch had a full gesture-driven interface (something like Leap Motion, not the awkward stem-swiping interface of Glass). And eventually batteries will become powerful enough that a small one fitting in a watch or glasses could power a cellular radio for a full day. But that will require at least several years of development, plus a significant breakthrough in battery chemistry that can’t be forecasted. We’ve been waiting for it in smartphones for more than a decade; don’t hold your breath. By the time it happens, we’ll have bendable screens, and we’ll be able to create smartphones that collapse down to the size of a roll of LifeSavers candy.

So the real competition to a smartphone-replacing watch or pair of glasses is probably a smartphone so small that you can wear it on a cord around your neck or wrist. Everything eventually gets small enough that it’s wearable, and yeah I guess you can call that a wearable computing revolution. But it won’t happen this year, it won’t happen next, and we may all be quite a bit older and grayer before it becomes practical.

Where’s the killer app? If glasses and watches can’t replace a smartphone in the foreseeable future, the other way they’ll get broad adoption is if they do something else that a smartphone can’t do at all, or cannot do as well. This is the way most major computing platforms get started: They enable something new and compelling, people buy them for that purpose, and the devices then branch out into other usages. Mainframes started as military calculators. PCs started as word processing and spreadsheet machines, BlackBerry started as an e-mail pager, and the iPhone started as a phone that could also browse well and play music.

What’s the compelling, broadly appealing usage that could drive adoption of a smart watch or glasses? So far I don’t think there is one.

I’ve been playing with Glass for weeks now, and have put a lot of apps on it. It’s a bold experiment, I applaud Google for trying it, and there are some things I really like about it. I had tried camera glasses before, but without a screen you couldn’t tell where the camera was pointed. People often move their eyes rather than their heads, so a camera focused straight ahead often doesn’t show what the user is looking at. Because there’s a screen in Glass (and a surprisingly bright, readable screen at that), you can see exactly what you’re photographing. The sound playback also works surprisingly well (sound recording sucks in a noisy environment).

But for me, the negatives outweigh the positives. Battery life is very short, and the user interface based on swiping the stem of the glasses is alarmingly nonintuitive and limited (it’s like trying to have a conversation where you can only say “yes” or “no”). The spoken commands work a bit better, but I’m not comfortable speaking to my glasses in public, and I doubt most other people will be either.

But the biggest problem is that none of the apps I’ve seen so far makes me want to wear Glass on a regular basis. The apps are vaguely interesting, and the geek in me enjoys playing with them. But I’m not getting the sort of big revelatory feeling I had when I first used PageMaker on the Mac, or when I first browsed the web on an iPhone.
We have seen some traction for wearable devices in vertical markets, especially sports and health. Smart watches and other wearable fobs are a great way to track your exercise, and sports goggles are a cool way to make videos of your ski runs. It’s very telling that these devices have sold well on their own, without any need for hype or even a heavy marketing budget. That’s what happens when you find the right app -- it takes off on its own.

Unfortunately, fitness is too narrow a vertical to carry a platform to the takeoff point. You may get nice sales for the company that made a device, but the installed base of devices won’t get big enough to attract a large group of third party developers who then create the apps that take the device horizontal.

The main horizontal usage for wearables that’s being advocated today is notifications. You can configure Glass to show incoming messages, and most of the smart watches can display things like caller ID for your smartphone. The idea is to let you consume (and send) small amounts of text and images without taking out your smartphone. To save a few seconds per notification, you have to pay for a separate device, learn to use it, and remember to recharge it every night.  Will the benefit exceed the cost and hassle for tens of millions of people?

It’s been tried before. Does anybody remember Spot, the smart watch platform Microsoft promoted in the mid-2000s? You could configure the watches to give you notifications, headlines, and messages, and they didn’t even require a smartphone because they received notifications from sideband FM broadcasts. Despite a hefty Microsoft investment and several licensees building devices, Spot went splat in the market.

That does not mean notification wearables are destined to fail forever. Many tech product categories fail repeatedly before they succeed. But Spot did prove, very decisively, that just adding notifications to a wearable device won’t drive demand. There’s some additional step of clever software, improved user interface, or integration with other products that’s needed to make the app a killer.

If it can become a killer at all.

So the reality is that today’s forecasts of a wearable explosion are based on faith, not analysis. If you believe a wearable killer app is coming, then it’s easy to convince yourself that many millions of these things will be sold. I want to believe that too. But I think I need to see the app first.