Apple, Acer, Asus, Schumpeter

"Schumpeterian" times of "creative destruction" seem to be upon us. Note a recent ChangeWave poll on PC purchasing. You wouldn't be surprised to learn that Apple ranks number one in customer satisfaction. 

You might be shocked to learn that Asus and Acer rank second and third, above Sony. As satisfaction rankings are about value and price, something is going on here. 

Apple doesn't win because of its price. Asus and Acer play there, but I think something more profound is going on. 

Both firms have created a new value position in the market with their hot-selling netbooks. Prior to that, both firms had staked out positions in the value-priced notebook segment as well. But it is probably the netbook that will have the greatest implications for Asus and Acer over the next couple of years as each attempts to establish a retail brand. 

It isn't simply that their netbooks sell at retail for a bit less than $300. It also is that the value of a netbook might be higher than the notebooks it is intended to "complement or replace."

That's disruptive, at least for PC retailers. What isn't clear yet is whether netbooks will be disruptive in other ways. It is clear that lower-end PCs and higher-end mobile phones are heading for each other.  In fact, Acer already has unveiled a line of smart phones. 

Content, Distribution, Attention: What is King?

Many years ago, as a graduate student in managment, Herbert Simon was taught to us as a theorist with a lot to say about the way human beings in organizations behave. These days, he returns anew as a theorist whose work informs us about the logic of digital media. 

"What information consumes is rather obvious: it consumes the attention of its recipients," Simon once said. "Hence a wealth of information creates a poverty of attention, and a need to allocate that attention efficiently among the overabundance of information sources that might consume it."

In a world where so much content exists, the key problem now is "getting noticed." That tends to mean "distribution" is less important than in the past. Think of a past world with limited outlets for radio, TV or print content, so unlike our present world where there is almost no physical distribution barrier, while the true barriers essentially amount to affirmation by audiences. To use the overworked phrase, "users rule."

One doesn't sell, one invites. One doesn't push, one pulls.  "Attention" scarcity also puts a new perspective on the old debate about whether "content" or "distribution" is king of the value chain. "Both" or "neither" are equally good answers in a world of content abundance where the objective simply is "attention."

Across consumer markets, attention is becoming the scarcest, and so most strategically vital, resource in the value chain. Hence marketing now becomes both tougher, and more necessary, and more attention now is shifting to "inbound" rather than "outbound" marketing, pull rather than push. 

Since the business foundation for much of media is marketing, media are bound to change. So are lots of other things. If you think about it, Google's page ranking mechanisms continue to emphasize "linking," which is seen as a proxy for "attention." 

It's interesting how a theorist you once "met" in one context now seems so relevant in an entirely-different context. 

Use Enterprise Sales to Drive Consumer Web Apps?

It might sound counter-intuitive, but at some observers think Web-based software products not only can span enterprise and consumer user segments, but can leverage enterprise deployments to spur consumer penetration.  Some even think Web apps specifically seen as consumer tools can be sold directly to enterprises with little or no modification. 

That is roughly the reverse of what has tended to happen in recent years as the normal technology transmission belt has been inverted.  But the process would be something of a return to past adoption patterns, in roughly the same way that "software as a service" and cloud computing now "returns" us to an earlier era with some resemblance to a mainframe or centralized model of computing.

In the past, software and hardware innovations tended to be "discovered" in the universities then commercialized first in the enterprise buyer segment. Over time the price and feature set would be "de-tuned" for the mid-market, with adoption then spilling over into the small business market and then sometimes even in the consumer market. 

Now some observers say targeting the enterprise "edge" can stimulate buying in the broader consumer market. 

What is different, and might enable this to work, is that Web apps are much easier to adopt in an enterprise environment. Less customization is needed. Also, the user interface, designed for consumer use, tends to require less training, again reducing the hassle factor for adopting in an enterprise environment.

Volume Discounts Wrong for Social Software?

Volume-discount pricing structures are the norm in the computer and most other businesses. 

But Julien le Nestour, an adviser, investor, and manager at Schlumberger, argues that for some "products" such as social networking, value grows as users grow ("network effects"), making the value of an application with 70-percent use much more valuable than an application with 10-percent usage.

But under typical volume-pricing practices, buyers pay more for the less-efficient than for the highly-efficient "product." So pricing should invert. Discounts should be offered for low-penetration use, and rising prices for high-penetration use. 

If customers extract more value (higher returns) per user as the number of users increases, yet pay an ever-decreasing price per user (which is VD pricing), value and price have diverged. 

41% of U.S. Internet Users are "Social"

Researchers at eMarketer estimate that in 2008 nearly 80 million people, 41 percent of the U.S. Internet user population, visited social network sites at least once a month, an 11 percent increase from 2007.

By 2013, an estimated 52 percent of Internet users will be regular social network visitors, according to eMarketer.

80% of Broadband Users Prefer Traditional Video Viewing

Parks Associates research finds 80 percent of broadband users in key European markets prefer traditional video viewing to online viewing. Depending on how you want to spin it, that is a glass half empty or half full. 

“Broadband has transformed video viewing habits in Western Europe, where over 20 percent of broadband households have watched a film or TV program online in the past six months,” say researchers at Parks Associates. 

European consumers are adopting online viewing habits with some reluctance, however, Parks Associates says. For all the countries surveyed, the U.K., Germany, Spain, Italy, and France, over 80 percent of broadband households prefer a more traditional option for viewing video, including going to the cinema or watching a DVD. 

Many consumers are watching video online only because of the availability of free content, both legitimate and illegitimate, the researchers note. 

Broadband to the Farm?

About 57 percent of U.S. farms had Internet access in 2007, up about seven percentage points since 2002, and 58 percent of U.S. farms using the Internet in 2007 bought high-speed Internet access, according to the U.S. Department of Agriculture. 

In 2002, the Census found that half the farms in the country were connected to the Internet in some way, using either broadband or dial-up services. 

So 33 percent of farms in 2007 purchased broadband connections.  Penetration likely is higher now, though most observers think rural broadband, to say nothing of use by rural farmers, remains lower than usage by urban or suburban customers. 

Researchers at the Pew Internet & American Life Project say 55 percent of homes now buy broadband access, up eight percentage points since 2007. If rural use grew at a comparable pace, farm use of broadband could now stand at 41 percent. 

The other angle is that farmers in the West have the better access than the rest of the nation to high-speed Internet, the Department of Agriculture indicates. Nationally, 31.3 percent of farms in rural counties had broadband connections. In urban counties, by way of contrast, the survey showed almost 40 percent of farm operators had high speed Internet connections.

The rural West led the nation with 38 percent of farms reporting access to high-speed Internet. Of the states in the Rockies, Colorado had the highest percentage of farms with broadband access with 47.9 percent, about 45.4 percent higher than the national average. 

New Mexico was the only state in the West (including Hawaii, California and Alaska) that had rural farm broadband penetrationlower than the national average.  

Statewide, 43.2 percent of farmers had access to broadband, 10.4 percent below the national average. 

Nationally, 31.3 percent of farms in rural counties purchased broadband connections. In urban counties, nearly 40 percent of farm operators had high speed Internet connections.