Would Apple Want to Buy Sprint?

With the news that Sprint has agreed to buy $20 billion worth of Apple iPhones, and with Sprint having a market capitalization of about $6 billion, speculation will begin that it is well within Apple's potential to simply buy all of Sprint. 

That would cause Apple enormous channel conflict of course. In fact, Apple would not avoid much channel conflict even if it opted to create "iNet" using wholesale capacity leased from Sprint. 

Would Apple Buy Sprint?

Apple "Owns" Sprint

In a move that some believe could be a make-or-break move for Sprint, the company has committed to buy at least 30.5 million iPhones, even though it would likely lose money on the deal until 2014, according to the Wall Street Journal. The deal could represent a commitment of $20 billion at current rates, and Sprint has to buy the devices, whether or not it can sell them.

Apple was paid $632, on average, for each iPhone sold to mobile service providers  in its most recent quarter, according to Credit Suisse. Customers who are not happy with contract plans that allow mobile service providers to recoup the device subsidies can decide, and do decide, that a contract is a better value than paying full price for a new iPhone and avoiding a contract.

To sell that many iPhones, Sprint would have to double its rolls of contract customers, convert all of them to the Apple device or a combination of the two, the Wall Street Journal notes. 

Sprint virtually has to take some big risks as it attempts to get itself back on a growth track. As one of my sons would say, "Apple owns Sprint."

Inside Sprint's Bet on Apple's iPhone

What is Twitter, Really?

What is Twitter? Sure, it is a "social network," but lots of people also say blogs are social networks. Initially, the idea was that Twitter was Facebook in 140 characters. These days, most observers would tend to agree that Twitter is something different, which only raises the question of "what" Twitter actually is.

These days, some would say, Twitter might be seen less as a social network on the Facebook model, but something that is as much broadcast network as a "social network." Of course, these days all social networks seem to be "media" as well as the digital equivalent of any real world place where people casually hang out and talk.

These days, the term "information network" seems to be the accepted term. Dick Costolo, Twitter CEO, says “there’s this huge opportunity for us to surface all this great content.” The difference might be subtle, but it's a bit like the difference between "what you doing right now?" and "what's happening right now?"

The former is an example of personal communication. The latter is "media."

Will Twitter Become Profitable?

Social Media ROI is Tough to Measure

Return on social media investment is tough to measure, which should hardly be surprising. Any firm using multiple marketing and sales channels will have a tough time determining the relative impact of any single one of the channels, for example. 


Practitioners also measure what can be measured, which is not the same thing as a direct measurement of return, but only a proxy for such returns. It's still partly art, not fully science. But all marketing is equal parts art and science. 

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Digital Monopolies?

A "digital monopoly" can be a strange thing. An application, whether Facebook or PayPal or Google or iTunes can have external characteristics that resemble what might have been seen as monopolies in other earlier contexts.

But they are odd sorts of monopolies. They can be used "for free," so price gouging is hard to discern. There are other alternatives for all applications and devices, over time, so lack of choices is likewise hard to discern.

But in some quarters there is concern over such application "monopolies," even when traditional tests of consumer harm are virtually impossible to prove.

The rise of the digital monopolies

Should Amazon Buy Palm?

Amazon is rumored to be in “serious negotiations to buy Palm assets from HP. Some will question whether this makes sense for Amazon. Palm's webOS has been highly regarded, but has failed to get market traction.

Whether Amazon could do better, or whether it should not simply continue to use Android, are legitimate questions. But some might argue most of the value is in Palm's intellectual property portfolio.

And that could be important if Amazon believes it will, in the future, be competing with Apple, not with Barnes & Noble or eBay. As recent events have shown, IP ownership is crucial in the new mobile business.

Amazon's interest in Palm

Advertising is Revenue Model for Most Social Networks, So Far

Observers used to worry about how social networks such as Facebook, LinkedIn, Twitter and now Google+ would create a sustainable revenue model. So far, the answer has turned out to be "advertising." But there are some additional questions that arise from such asnwers. 


Sometimes it is hard to precisely figure out what business social networks are part of. 


Sure, at a high level, every business has the primary task of creating a customer. At a fundamental level, that's the "business" every business must master, with profits being the price of continuing to create and sustain those relationships. Beyond that, every discrete business can be categorized by its products, revenue models, technology approaches, geographies served, revenue and customer segments, among other potential taxonomic approaches. 


Google is a hard firm to characterize, for example. It makes its money from advertising. Normally, if you ask what sort of company makes its money that way, the answer is "media." But Google always says it is a technology company, not a media company.


There are reasons. Valuations of media companies carry lower multiples than technology companies. The content Google wants to index comes from content and media companies that aren't comfortable with the idea that Google is a competitor. So Google has a couple of good financial reasons for positioning itself as a technology company, not a media company. 


But Google is the biggest technology company you've ever heard of that makes its money from advertising rather than hardware or software. It's just hard to categorize. The issue isn't exclusive to Google. Is Apple a media company because it sells music, video and games? 


Is Amazon "just" a retailer now that it creates and sells Kindles, and sells magazine, newspaper, book, music and video content? 


Back to the original question, what is a social network? Social networks make their money on advertising. And what sorts of companies historically do that? Media companies. 

Social media revenue 

Eric Schmidt on Google's "Monopoly"

Google Executive Chairman Eric Schmidt raises an interesting point about traditional antitrust regulation and Google's business, by extension raising issues about any number of other leading firms in the software industry that actually do not charge users anything to use the apps.

Traditionally, the test has been harm to consumer welfare, through the mediation of markets where welfare is assumed to be a matter of choice, and choice is a matter of robust competition between firms.

But how does traditional antitrust thinking apply to a firm such as Google? It hasn't harmed any user by its existence, its products or its dominance of the search advertising business. Virtually all of Google's products in the consumer space, and many to most in the business space, are offered free of charge.

"So we get hauled in front of the Congress for developing a product that’s free, that serves a billion people," he says. "I don’t know how to say it any clearer: it’s not like we raised prices."

"We could lower prices from free to…lower than free? You see what I’m saying?"

Monopolies, or perceived monopolies, have in the past been regulated because regulators want to prevent consumer harm in the form of higher prices. Typically that requires a fact finding that such harm actually has occurred, not that it could potentially happen in the future. That's a tough case to argue in Google's case.

Groupon gets into online retailing

Groupon has launched Groupon Goods, moving for the first time into online commerce, at least for U.S. customers.

Groupon’s move into online retail might be seen as defensive in part, since Amazon recently has gotten into the daily deals business. As an offensive move, the addition of goods sales is not too different from what Groupon has to do already to sell its daily offers. In essence, Groupon still is selling a program to an advertiser, as the retailers handle all the fulfillment. Groupon sells a code that the buyer then enters on a retailer's online site

Groupon already has a formidable customer base with more than 35 million registered users, mostly from North America and Europe, as well.

Groupon gets into online retailing

Does the Sun Cause Climate Change?

In recent years, the idea that the climate is driven by clouds and cosmic rays has received plenty of attention. Despite quasi-religious insistence in some quarters, the theory is significant because it suggests the fundamental driver of "climate change" is the sun.

The notion sometimes is ridiculed, but recently we have seen potential evidence that even settled theories of major consequence are subject to new experimental evidence.
Einstein's famous equation E=MC2  is among the fundamental aspects of modern physics that would have to be revised if it turns out other scientists can replicate the recent finding of a sub-atomic particle that travels faster than the speed of light, as physicists at CERN recently have reported.

If "C" is off, it means that all nuclear physics has to be recalibrated, says scientist Michio Kaku, theoretical physics professor at City College of New York.


Modern physics is based on two theories, relativity and the quantum theory, so half of modern physics would have to be replaced by a new theory.


The point is that all scientific theories are just that: theories. When the evidence changes, theories have to change.

Interest in the idea that it is sun activity that explains Earth's dramatic changes of climate in the past is credited to Danish physicist named Henrik Svensmark, who first suggested it in the late 1990s.

Using satellite data on cloud coverage, which became available with the establishment of the International Satellite Cloud Climatology Project in 1983, Svensmark found a correlation between lower troposphere cloud cover and the 11-year solar cycle.


He proposed that cosmic rays initiate the formation of aerosols in the lower atmosphere that then form condensation nuclei for cloud droplets, increasing cloud formation from water vapor. Since low-level clouds increase Earth’s albedo (the amount of incoming solar radiation that is reflected back into space), more clouds mean cooler temperatures.

Svensmark claimed that this mechanism was responsible for virtually every climatic event in Earth history, from ice ages to the Faint Young Sun paradox to Snowball Earth to our current warming trend. Needless to say, this would overturn decades of climate research, and challenge the notion that human-caused activity is primarily responsible for climatic change.

The assertion will be met in some instances by quasi-religious opposition. But that opposition is just that: quasi-religious, not scientific.

Do cosmic rays set the earth's thermostat?

56% of Millennials Stream Video Weekly

According to online research provider Knowledge Networks, 56 percent of Millennial Internet users stream video on a weekly basis—twice as many as among boomers. Millennials also are four times more likely to watch video via mobile than boomers.

Although the 13-to-31 age group may be leading the charge, digital video viewing is increasing among web users of all ages. Knowledge Networks research indicates that monthly use of an alternative method for movie and television viewing increased from 26 percent in 2010 to 35 percent in 2011. Use of streaming video rental services has doubled since 2010, and so has video viewing using internet-connected video game consoles and on mobile devices.

Net Neutrality Wasn't a Story in 2011

"Network neutrality," believe it or not, was among the marketing trends that consultant Gini Dietrich thought in October 2010 would highlight 2011. She was dead on about some things, correct about the direction of others, but some would argue missed the mark about one or two, including network neutrality.

Among the clear correct calls, she argued that "content, content, content" would be key. "All companies should become media companies," she said.

Some of the other trends weren't so pronounced during the year, though partly correct in terms of direction. Dietrich mentioned heightened Federal Trade Commission scrutiny of the "blogging" world. That was correct to an extent, but has not, and some would argue will not, take a further step.

Dietrich argued that "next" in 2011 would be rules "around ethics and how we approach traditional journalists and bloggers." That didn't happen, and some would argue, will not.

Some of us would argue that Dietrich flatly misunderstood the "network neutrality" issue, both in timing and implications. She argued that "being able to write a blog post at 6:00 in the morning and post it two hours later and letting it reach audiences around the world for free will be gone." That's a common argument by supporters of strong versions of network neutrality, but is mistaken. The Federal Communications Commission has operated for years on some fundamental "Internet Freedoms principles" that enshrine consumer access to all lawful applications. Internet Freedom principles

"Consumers and innovators have a right to send and receive lawful traffic--to go where they want, say what they want, experiment with ideas--commercial and social, and use the devices of their choice," the Federal Communications Commission clearly has said. "The rules thus prohibit the blocking of lawful
content, apps, services, and the connection of devices to the network." In other words, non-blocking of lawful content already is policy, and already has been enforced by the Commission, on the couple of occasions when it even became an issue.

But there is another important issue that people become confused about, namely the need to manage traffic on any network to ensure the best possible performance for all users, especially when networks get congested.

"The rules recognize that broadband providers need meaningful flexibility to manage their networks to deal with congestion, security, and other issues," the FCC continues to believe. Some people have experienced "all circuits are busy now, please try your call again later" messages when trying to make a landline telephone call.

More have simply found they are unable, from time to time, to make a mobile call, either. Those are examples of lawful network management. When the network gets overwhelmed with admission requests, it simply blocks some attempts until the congestion is alleviated. That is neither illegal nor illogical.

Much of the confusion about network neutrality flows from not distinguishing between the "unimpeded access to lawful apps" and the "need to manage a network for congestion." Some network neutrality supporters argue that an ISP should be forbidden to manage its traffic demand in any way to optimize network performance. That can have several unpleasant implications for end users.

Congestion management on the Internet, or any Internet Protocol network (and all networks are becoming IP networks), typically involves some sort of blocking or delayed response at times of congestion. The networks "slow down" and some connection requests simply "time out." If ISPs cannot establish any priorities for traffic, then everything randomly slows down.

That isn't a major problem for email or web surfing, which will simply be "slower." Random lags in packet arrival are highly disruptive for video and voice, and both media types will be carried on all-IP networks, everywhere, in the near future. In principle, the best end user experience would be provided if, under congestion, priority is given to voice and video bits, while email, web surfing and software update packets are delayed.

Strict network neutrality rules would prevent that practice. There are some business practices issues of concern, such as ISPs favoring their own content over content supplied by rivals.

But that already happens, all over the Internet, as content delivery networks such as those operated by Akamai optimize content for faster delivery. It is not "equal treatment." That is the whole point. Akamai and other content delivery networks charge content providers money to expedite delivery of their packets. There are potential legitimate restraint of trade issues posed by packet prioritization. But content providers do this today, all the time.

In the future, when all traffic is carried over IP networks, there will be clear end user issues. Are you willing to pay for voice or video services that randomly fall apart, or do you expect some reasonable quality standards? Without packet prioritization, it will not be possible to ensure that the voice or video services a customer has paid for can actually be delivered with minimum quality levels. Calls will become garbled and then suddenly disconnect and video will freeze.

The point is that end user access to all lawful applications is not the issue. Whether quality measures can be taken, especially for latency-sensitive applications such as voice, online gaming, video or video conferencing and many transaction processes related to shopping and banking, is the issue.

The other issue is that all IP networks are shared. So what should an ISP do about the fact that a very small percentage of heavy users can disrupt quality of service for the 97 percent of other users who have to share a network? Right now, the way ISPs deal with the issue is to set a quota for total usage, and then throttle the few heavy users when they exceed the quota of usage. It's a crude way of managing heavy usage.

Some would argue the better approach is to allow users to decide whether they'd rather pay some premium so that, under heavy congestion, they'd get priority access, much as content and application providers now can pay Akamai to expedite packet delivery.

The confusion about network neutrality is widespread, and for good reasons. But the issue is not a matter of content access or freedom of speech. All networks have to be managed. All networks can become congested. The issue is how to preserve end user experience when that happens. Some network neutrality proponents say "do nothing." Few network engineers or architects would agree that is a wise choice.

Trends for 2011

Little "Virtual" About Facebook Credits for In-App Sales

The only thing that is "virtual" about Facebook Credits used to buy merchandise inside games played on Facebook is the store of value. Software developers can sell goods inside their games, and then be paid in "real" currency. Since July 1, 2011, Facebook has required all game developers that sell goods through the site to use Facebook Credits for the transactions.

When developers go to convert Credits into cash, Facebook gets 20 percent of the transaction amount. Credits are used to purchase items such as movie views, or tickets to concerts. In principle, that is analogous to Apple taking a 30-percent slice of all retail sales from iTunes.

But there are other angles. Facebook also allows users to exchange gift cards for Facebook Credits through Plastic Jungle. The value of the gift card, less a fee of about eight percent, gets translated into Credits added to a user's account.

Likewise, Shopkick allows users to earn "kickbucks" just for walking into participating shopkick retailers like Best Buy, Macy's, Sports Authority, American Eagle and SIMON Malls and turn them into Facebook Credits. So far, with the exception of the in-app purchases program, the other programs are ways to turn "real" currency into Facebook Credits. Only developers can actually export Facebook Credits back out to the real world as real world currency. But you get the point: there is some potential here for blending virtual and real currencies more seamlessly.

Nothing Vitual about Facebook Credits

Klout vs. Kred in Social Media Analytics

Social media metrics are difficult, and measuring "social influence" is no exception. You might say "it is all about the algorithms" used to mine lots of different data to create a picture, and some think the effort is flawed to begin with. But social influence measurement is one of those analytic processes marketers seem to be asking for, which means the tools likely will be used. Right now "Klout" is the tool many have heard of.

A new service is being launched by social media analyst PeopleBrowsr will launch early in October, and promises an open application programming interface.

PeopleBrowsr says the Kred algorithm’s data will be fully transparent and accessible using the API, which means that once it’s launched we’ll have insight into how influence gets measured.

It is argued that influence-guessing services like Klout are more about vanity than they are about really identifying reach and influence. But it's the sort of think marketers keep wanting to know.

Klout vs. Kred, the new Social Media Influence Metric

Amazon's New Kindle Fire Claims a Clear Niche

“Why should somebody buy this instead of an iPad?”


Up to this point, even the answer "it's cheaper" hasn't been possible, since most other devices actually cost as much, or more, than an iPad.


Amazon's Kindle is the first device that answers the question, and it is not about "speeds and feeds."


 Both the iPad and the new Kindle Fire are gateways to a rich content ecosystem.

That’s the difference that other tablet makers missed. Motorola, Samsung and Research in Motion have essentially been chasing the iPad on specs, building the best tablet they can manage at the same starting price of around $500. Watch Jeff Bezos introduce the Kindle Fire

The Kindle Fire is the first device with a good answer. It is much cheaper than an iPad and offers a digital content ecosystem that rivals Apple’s (fewer apps, but more books).

Also, Amazon built an alternative to the iPad, rather than a direct competitor. That's why some might say the Kindle Fire is something different. It is sort of an iPod "touch" content consumption device with a more-usable screen, that is optimized for multiple content types, including reading books and magazines, video and audio, plus web browsing.

Amazon's Kindle does not compete with iPad