Most Consumer Devices More Like iPods than PCs

Parks Associates says more than 60 percent of U.S. tablet owners use the device weekly to listen to music. That is just one more bit of evidence that tablets are "content consumption" devices.


In fact, both consumer and business content consumption patterns appear to be changing as tablet and e-reader ownership grow fast. In fact, one might argue that tablets and e-readers are being adopted faster than any other consumer electronics or communications products of all time.

The share of adults in the United States who own a tablet of some sort nearly doubled from 10 percent to 19 percent between mid-December 2011 and early January 2012. That’s a doubling of mass market adoption in just 30 days, from a significant base.

The ownership of e-readers also surged from 10 percent to 19 percent over the same time period. Tablet ownership doubled in two months

That is an unprecedented growth rate for any consumer electronics device. Tablet ownership also had been on a strong adoption path earlier in 2011 as well, but doubling in 30 days from a base of 10 percent seems never to have occurred before.

And it appears that strong adoption is occurring both in the consumer and business markets.
Fully 51 percent of IT decision-makers surveyed by IDG say they “always” use their iPad at work (and a further 40 percent say they sometimes use it at work), IDG reports after conducting a survey on tablet use for work. Tablet business use

Though iPads seem to be used for a variety of purposes, content consumption seems to be a dominant business application, though significant percentages of business users also say the tablet displaces some amount of smart phone use as well.

Web browsing, reading and news consumption are the top three usage contexts identified by professionals worldwide.

Whether tablet ownership “revives” the print newspaper and magazine market remains to be seen. But it already is pretty clear that tablets and e-readers are changing the function of “reading.”

The survey suggests that tablet computing is transforming patterns of content consumption. iPad-owning IT and business professionals are rapidly migrating away from newspapers and printed books, toward digital alternatives.

Nearly three quarters of iPad owners say that owning an iPad has reduced the frequency with which they purchase newspapers and books. Whether that helps or harms print content providers remains to be seen.

What is very clear, though, is that tablets and e-readers are being adopted faster than any other personal device, period.Historically, 10 percent adoption historically has been an inflection point: it is the point in an adoption process that represents critical mass, after which adoption accelerates.

You’ll have to click on this chart to view it in more detail, but it is one of the most useful bits of historical evidence you can use to estimate how long it might take an application, service or device to reach 10 percent penetration of U.S. households, for example.

There are some caveats. Not every innovation succeeds. This chart only shows you what happened with the most-popular consumer electronics services and products.

The point is that it can take quite a significant amount of time, between three and 10 years, for a successful and mass-adopted innovation to reach the crucial 10-percent-of-homes threshold, which seems to be the point at which any innovation really begins to accelerate, in terms of adoption.  Consumer adoption patterns

Tablets not only reached that level in a couple of years, they then exploded, doubling from 10 percent to nearly 20 percent, in literally 30 days. That is unheard of.

Also, it appears that Amazon might be winning its bet that if it sold Amazon Kindles almost at cost, it could grow content sales substantially.

RBC Capital analyst Ross Sandler polled 216 Kindle Fire owners and concluded that Kindle Fire tablets are making Amazon more money than was originally expected. Sandler originally had estimated that each Kindle Fire unit would generate about $136 in content purchases over the useful life of the device.Content purchases on Kindle Fire

But Sandler’s most-recent survey of 216 Kindle Fire owners suggests content revenue might be higher than that.

The survey found that roughly 80 percent of users already have purchased ebooks, with 58 percent of respondents buying more than three e-books within the first two months of owning the tablet.

Averaged out, that’s five e-books per quarter, which nets Amazon $15 per Fire owner per quarter, assuming an average selling price of $10 for ebooks. That further implies revenue from e-books of about $60 a year.

About 41 percent of Fire owners also say they have bought at least three apps. This will put another $9 per Fire owner per quarter into Amazon’s coffers, or $36 a year of net revenue (after splitting gross revenue with content owners).

That implies possible gross sales of about $30 a quarter worth of apps, assuming Amazon’s share of revenue is 30 percent.

Those figures suggest annual Kindle Fire revenue of about $96 a year. Over three years, that suggests $288 of revenue for Amazon, even if users do not buy any video or audio products, which seems unlikely.

What Should Apple Do With All its Cash?

Apple is the fastest growing company in the S&P 500. Also, given the size of the company and the pace of it's growth, the S&P 500 would have next to no earnings growth without it.


Many would say Apple also is one of the strongest company growth stories, ever. Of course, Apple also has $100 billion in free cash, and that pile seems to grow with each passing quarter. 


Naturally, there are growing questions about what Apple should do about that cash hoard. Some say Apple should start paying a dividend. Others would say that is the worst thing Apple could do. It is a growth company, not a "value" play. Those characteristics draw different kinds of investors. 


Some would argue Apple has to remain focused on growth. In an uncertain environment, that cash is vital, many would argue. And though Apple has no history of making large acquisitions, it always is possible that Apple eventually will find itself facing growth challenges that require significant cash.


Some of us might argue that content acquisition is one such example. Eventually, somebody will "crack the code" on video streaming, and disrupt the existing video entertainment business. But that is almost certainly going to require ownership, control or at least access to the key sources of programming that represent value for millions of potential customers. 


So far, no contestant with the ability and willingness to disrupt the business has had such access. And money is the key. To be sure, we have been hearing about "interactive," or "on-demand," or  Internet delivery of TV for decades. 


But that's the thing about really-big changes in a technology-based business. They often take time. And it is quite common for an important innovation to build very slowly at first, then reach an inflection point where change is more rapid than most expect, especially given the slow ramp up. 


Some might argue that Apple will need much of that cash to disrupt the TV business, even as it continues to insist it simply is a partner in that business. 

Apple Still Dominates Business Tablet Buying

A ChangeWave survey of 1600 business technology buyers in the United States found that  22 percent expected to be buying tablets during the second quarter of 2012, and 84 percent will be buying Apple iPads. 

Though one never knows what will happen in the future, some competitors might fear the worse, namely that Apple has once again created a hot new product category that it will "own," in terms of market share. 


Since November 2010, iPad share of buying intentions has hovered in the 77 percent to 80 percent range, according to ChangeWave.

Data source: ChangeWave Research

The adage that "there is no tablet market, only an iPad market" is no longer as true as it was a few years ago. But it still might be fair to say there is an iPad market, and then a tablet market. When one supplier has 70 percent market share, it is analogous to the MP3 player market, which wound up being an iPod market, with some other providers. 

In 2011, for example, Apple continued to hold 78 percent of the music player market. That is what "terrifies" other competitors. Apple has more than once showed an ability to dominate a new consumer electronics category. 

The mobile phone market is more complicated, as Apple does not compete in the feature phone category. In the smart phone category, Apple has about 30 percent share, globally. 

More tellingly, Apple seems to be, far and away, the most profitable smart phone manufacturer. Right now, one has to wonder whether Apple has done it again, creating a new category which it dominates. 

PayPal’s Digital Wallet Will Change "Money"

“PayPal is changing," says  Anuj Nayar, PayPal director of communications. "We’re known as an online payments brand but this is all part of PayPal becoming an actual wallet.” And that's arguably understating PayPal's present ambitions, or potential impact. For the moment, PayPal wants to change the payment experience in substantial ways.


Sam Shrauger, Vice President of Global Product and Experience for PayPal, says that the new PayPal will feature flexibility with how you want to pay for an item in a store.


With the new digital wallet, you can buy something in a store, take it home and decide later how you want to pay for it. PayPal will offer a five to seven-day grace period for consumers to change their minds. 


Users might also be able to combine gift card or prepaid card payments with other forms of payment, not all so traditional. PayPal has talked about allowing payment using airline affinity program miles, for example.


PayPal wants to change the user experience of “money,” as customers use “stored value” to buy things in stores. In part, that will entail providing an incrementally-new form of payment, not to be confused with “method of payment.”

You might say “paying by waving a mobile at a terminal” is a new method of payment. But PayPal is looking at something different, namely a different form of payment that could mix sources in new ways and also create a new type of banking relationship.


Highly-successful mobile money systems will demonstrate clear value, for both consumers and retailers, it is clear. What already seems quite clear is that simply adding a new form of payment, namely the ability to link a credit or debit card account to a mobile phone, and then swipe the phone to make a retail payment, has limited incremental value, in most cases.


PayPal’s approach to mobile payments and mobile wallet therefore hinges on changing the payment experience in other ways. Among the more interesting approaches PayPal is taking is the separation of transaction from payment method.


For example, if a consumer wanted to use airline miles, in part, a coupon or gift card, in part, PayPal would create ways for consumers to do that. The retailer would still receive the “cash,” but PayPal might handle all the account management details needed to convert miles into cash, for example.


Many consumers have virtual “funds” used to buy groceries and pay bills. PayPal could enable users to “debit” specific accounts when shopping.

In other cases, when making a major purchase, a consumer might prefer to pay in installments, but not use a credit instrument. PayPal will enable installment payments. The merchant is paid upfront, but PayPal will essentially become the banker, allowing the user to pay over time.

There are other features related to shopping that will become part of the PayPal wallet, such as integrating shopping lists, searching for items and comparing prices. Take it a step further and then imagine an automated way to connect a list with location with availability, prices and then available time on your schedule.

PayPal is not about replacing a card swipe with a phone tap at point of sale. We are reimagining money to free it in its digital form, says Sam Shrauger, PayPal VP.

Intel Developing Web-Based TV Service?

Intel Corp. is developing an Internet-based TV service that it hopes to sell to U.S. consumers, a strategic shift for the chip maker that makes it the latest technology company to look at a foray in the pay-TV business, according to the Wall Street Journal.


Intel's interest in doing so is one more example of a firm deciding it wants to "move up the stack" in terms of end user value. Instead of supplying components to other retailers, Intel would vault up to become a service provider itself. 


Intel's "interest" does not mean it will succeed. As other contestants have found, content licensing, of the sorts of content most people want to pay for, is quite expensive. Intel doesn't appear to have any programming contracts locked up, nor is it even clear most major content owners want to do so.


In a phrase, "virtual" cable operators might lead to equally "virtual" profits. Incumbent cable, satellite and telecommunications companies pay nearly $38 billion each year to license TV channels. And that's just one of the revenue streams content owners reap. The networks also earn about $22.6 billion in advertising as well. 


Nor is it likely a new generation of "virtual" providers would be willing to sponsor "hundreds" of channels. Instead, they likely would focus on a smaller subset of highly-viewed channels. In other words, virtual distributors would represent less demand for network fare, not more, or even "the same amounts" of demand. 

If Intel simply wanted to create one more brand name among providers of "traditional" cable TV, it would have better prospects. Content owners, after all, are used to supplying their content to all sorts of distributors who use the standard subscription TV model.


Streaming, though, raises issues, notably the danger of destroying the older distributor model while a new model is built. Now, even that wouldn't be a big stumbling block if content owners were relatively confident that the new model would generate more revenue than the current model. But few seem to believe that. 


The Intel move is not out of character, in a sense. Intel has for some time believed it must gain a bigger foothold in the video entertainment business. In 2005, for example, Intel invested in Revelations Entertainment, a venture aimed at distributing movies over the Internet on the  same day they open in movie theaters.


Intel also recently invested in StreamPlanet, a company that provides a technology platform for video content owners and distributors to stream and monetize their content, for example. 


Intel Capital’s Digital has invested in a number of firms to drive its "SmartTV initiative." Intel hopes to create an ecosystem that includes home networking silicon, platform software, connected devices, and services. 


Intel is particularly interested in TV platforms operating systems, TV apps, social TV, and various video and content services including gaming, advertising, and audience measurement. 


Intel's recent investments include BlackArrow, Digital Chocolate, Exent Technologies, iControl Networks, Kabam, Kaltura, Transgaming, UIEvolution, Videon Central, Verismo Networks, and YuMe, for example. 

60% of Smart Phone Owners Shop from their Devices

Some 60 percent of smart phone owners used their devices for shopping during the 2011 Christmas and holiday shopping season, according to data from Nielsen. 

Those users are researching products and reviews, comparing prices, finding retail locations, and redeeming coupons. 

Nielsen’s metering of the smart phones of 5,000 U.S. volunteers participating in Nielsen’s mobile research shows that during the 2011 holiday season, the top retail apps and websites combined — Amazon, Best Buy, eBay, Target and Walmart — reached nearly 60 percent of smart phone owners. 

Among the more obvious conclusions is the notion that mobile commerce is beginning to blur the line between "brick and mortar" and "online commerce." It's all just becoming "commerce."

Video of Google Algorithm Change Meeting

If you're the kind of person who has to keep up with Google and search engine optimization, this video is interesting. 


It is an authorized Google release of an actual meeting where engineers considered a change in ranking algorithm. Even relatively subtle changes get intense scrutiny by the ranking teams, Google seems to want to emphasize. 


 The specific change discussed in this video improves spelling suggestions for searches with more than 10 words and it impacts only 0.1 percent of traffic. 


 Every change has a dedicated search quality analyst assigned to study the impact. This analyst is not part of the engineering team building the change, but instead offers a separate opinion on whether the change is good for users. he search team relies heavily on the results of experimental data to make decisions. 


During the meeting, we rely on detailed analyst reports including the results of click evaluations and side-by-side experiments. These reports can sometimes be more than 25 pages long. Launch reports include specific examples to illustrate broader trends in the data. 


Rather than manually change one example, our engineers look for algorithmic ways to improve millions of queries. earch algorithm improvements often rely on and impact many different systems, so engineers with expertise in different areas all need to come together to make the best decision for the user, balancing all the tradeoffs involved (relevance, spam, latency, cost, language impact).