Apple is now like Alphabet and Microsoft – it’s core product is ex growth

By | Apple | One Comment

The wires this morning were full of stories about Apple’s Q2 results. iPhone unit sales were down 16% on the year ago quarter and there is widespread speculation that the growth might be over. We talked about it a bit in the office earlier on and whilst a few of us think the iPhone 7 might have something cool about it that could revive growth none of us think there’s much further for the iPhone to go. It’s already been improved through nine versions since 2007 and there simply isn’t much left to do.

iPad and Mac computer sales were also down and there’s little reason to hope for a return to growth in either of those two product lines.

Alphabet and especially Microsoft, the world’s second and third most valuable companies have been in this position for a while. They have responded by pushing into whole new areas to generate revenue growth, but with patchy success. Microsoft had massive hits with the Xbox and enterprise software, but missed with Bing, MSN, and mobile. Google has a similar record with Android and Google Apps counting as big hits, but repeated misses on social. Meanwhile both companies have newer projects aplenty.

Facebook, the world’s sixth most valuable company has arguably moved into a similar position recently and is making big bets like Oculus and Whatsapp (although the latter is arguably an extension of its core business).

Historically Apple hasn’t made many big acquisitions, which is why the world was surprised when they bought Beats for $3bn. Going forward I expect their M&A strategy to become more like the other tech giants, because without bold plays their revenues and profits will decline and their share price will suffer. Badly.

If I had to guess I would say many of these acquisitions will fall into their ‘services’ category, which is Apple’s one area of growth right now. It’s where Beats sits and cross selling services to their loyal customer base is a very obvious thing to do.

Will device and OS proliferation break the app economy?

By | Apple, Google, Mobile | No Comments

Jerry Bowerman wrote an interesting article on Techcrunch yesterday arguing that device and OS proliferation is driving the cost of supporting apps up to unsustainable levels.

The evidence cited is that corporate departments spend $40bn per year on apps, more than twice consumer spend, and that they are reaching aggressively for “create once, run anywhere” solutions.

If apps aren’t the future, you might be wondering, what’s the alternative?

Jerry says:

a future where something like “on-demand apps,” as I call them, work on every device and can be centrally managed by the corporation without going through a proprietary app store


My issue with this argument is that the problem statement is much stronger than the solution. I see our companies struggling with the costs of maintaining Android and iOS apps, a problem made worse by the app store gatekeepers demanding platform specific functionality or design in return for featuring, so I buy into that. I also crave a world in which distribution is more meritocratic, as it was on the open web, so I would love to see Apple’s AppsStore and Google Play lose their duopoloy. Finally – app based shopping isn’t great, in general, for ecommerce and marketplace startups and a resurgence of the mobile web would help the startup ecosystem.

But identifying problems only gets us so far. The app economy is only going to break if there’s something better to replace it. Jeremy points to corporations using HTML5 and thin native app wrappers when they need direct access to a hardware sensor, but we’ve been talking about that for years and I see no sign of HTML5 apps making inroads into the consumer space. In fact I think the trend is the other way.

Perhaps where apps are going next, and this is certainly what Apple and Google hope, is to disappear into the OS. That’s what’s going on with Google Now On Tap and Apple’s swipe left from the home screen (see this post from Benedict Evans for more details). However, whilst these developments are exciting from a consumer convenience point of view I’m not sure that they will help app developers reduce their overheads or address the discover problems I list.

I remain hopeful that open standards will triumph in the end, but I’m no longer sure that they will.

As an aside, whilst half of Jeremy’s post is about open standards on mobile, the other half is about what it takes to be a visionary. I love his comment on timing:

Both men [George Lucas and Ken Williams] are wicked smart and naturally curious, two characteristics often attributed to visionaries. What people often miss, however, is that they are both brilliant businessmen. They understand you can have too much vision, seeing a far-off future that won’t come true within the right time frame. As an entrepreneur, the challenge is funding from where you are today until enough customers agree with your vision that they pay for your expenses. You need to know where you are on the vision timeline.

Will we persist with two mobile app ecosystems?

By | Apple, Google, Mobile, Uncategorized | 5 Comments

In the Apple App Store and the Google Play Store we currently have two vibrant mobile app ecosystems. Going back a few years the prevailing wisdom was that network effects would ultimately make this a winner takes all markets and that over time users and developers would eventually coalesce on a single platform. That was the lesson we all learned from Windows in the 1990s.

Then more recently people have been saying that both the ecosystems are large enough to be self-sustaining and that Google and Apple have both ‘won’.

That view made sense to me. Both ecosystems were growing and Apple’s dominance at the high end meant that developers mostly built for iOS first giving them sustainability in the face of Android’s faster growth. That’s part of the reason I ditched my long term allegiance to Android and bought an iPhone earlier this year.

Now new data from Apple and Google compiled by Benedict Evans is an early indication that the duopoly might not be stable after all (caveat: this analysis is based on a small number of datapoints and may be subject to large rounding errors).

IOS Growth Slow

The news is that iOS growth looks like it has stopped – Apple App Store revenue has flatlined at $10bn. Meanwhile Google Play Store revenues are continuing to grow fast. Extrapolating the trend lines for the last year suggests that Play Store revenues could overtake App Store Revenues this year.

There are many more Android devices out there and hence the revenue per device is significantly lower on Android, but there too the gap is closing.

For developers gross revenue on the platform and average revenue per device are key numbers and if/when the Play Store passes the App Store on these metrics I expect increasing numbers of developers will choose to go Android first, which will bring users across and further accelerate the growth of Play Store revenues. That in turn will encourage more developers to switch and we may see a repeat of the Windows movie from the 1990s when the winner takes all.

And I will have to switch back to Android.


Thoughts on my Apple Watch

By | Apple | No Comments


I’ve had my Apple watch for two weeks now and I am starting to like it. For a good week I was saying to people that it’s just ok, but over the last couple of days I’ve been getting more value from it. That said, I’m not at the point where I would recommend it to others.

As a watch it works well. Nine times out of ten the screen comes on when I tilt my wrist, and that’s enough not to be annoying. The battery comfortably lasts a day and might last two given that it usually has 50%+ charge when I go to bed. I have my screen set up as in the picture above and like being regularly reminded about my next meeting.

The bits I like the most though are alerts and the speech recognition.

I have nearly all alerts turned off on my phone and even fewer on my watch, but I’m responding more to the few I do have more now that I can do it quickly from my watch. In practice that’s mostly text messages and on a private social network my friends and family use called Togethera (I’m an investor).

And the speech recognition works amazingly well. When I dictate text messages I take care to speak clearly, but the result is accurate nearly all the time. This is the feature I show people when they ask about the watch and they are always amazed. It is similarly good for maps, but I don’t use it because there’s no Google Maps app yet and Apple Maps doesn’t do it for me.

That said, I stop short of recommending the watch because I’m not sure these benefits are worth the price tag and because it can be very slow, is hard to learn and suffers from lots of bugs. Another negative is that I don’t use many of the apps, in fact I think Togethera might be the only one. I’m sure all of these negatives will be addressed in software upgrades and future hardware releases and I suspect that more and more of us will wear smart watches over time.

However, at this point I’m thinking we will need better hardware before smart watches spawn many startup opportunities.


Apple is now a phone company

By | Apple | One Comment

Screen Shot 2015-04-28 at 13.57.42

Apple released their results yesterday after another blockbuster quarter. You may remember that in Q4 they reported the largest corporate quarterly earnings of all time. Without the Christmas bump last quarter was always going to be less, but it still came in as the company’s second best quarter ever.

What I hadn’t realised is the extent to which they’ve become a phone company. As you can see from the chart above iPhone revenues were 3x all their other product lines combined. I see Mac computers everywhere and would have guessed their sales were rising faster than they are.

I wonder if we will see watches on the chart next quarter..

Note: the other surprising thing for me in these results was the extent of Apple’s business in China. Chinese revenues are up nearly 3x over the last two quarters, have passed sales in Europe and are now nearly 80% of revenues in the US.

More detail on Techcrunch

A cambrian explosion in AI – but how will new services surface?

By | Apple, Startup general interest | One Comment

Dag Kittlaus, founder of Siri, wrote on Techcrunch yesterday to predict that A Cambrian explosion in AI is coming. He notes that there has been “massive uptake of assistant services spurred by Apple’s Siri, Google’s Now and Microsoft’s Cortana” but says these services are still in their infancy. The missing piece is an ecosystem of services that work with these assistants. That would enable the Holy Grail of an assistant that intelligently finds and uses whatever apps or services we need for a given task – just like in the movie Her from earlier this year.

Need a babysitter for tomorrow night in a new location? The assistant should know the age of your kids, find a service that matches your price profile and then make a reservation, maybe asking you to confirm first.

I have just been looking for a babysitting service in a new location, and it wasn’t easy, so that that sounds very exciting, and I very much look forward to it becoming a reality.

However, it’s not clear to me how the discovery process will work. Healthy ecosystems have some way for quality to float to the top. Examples include ranking or voting systems as we see in Product Hunt and Stack Overflow, algorithms that incorporate user signals e.g. Page Rank, and manual system that takes user feedback as a core input e.g. the app stores.

The whole point of assistant services is that they choose services for us. In the babysitting example above I don’t want the assistant to come back with three options and make me choose, I want one option that I’m happy with. Before I trust the assistant I might want to hear about second and third options to make sure I’m getting the best, but I imagine I would stop bothering with that pretty quickly.

However, if assistant systems make the choice for us then user signals are limited to feedback given on the service. New services, by definition have little if any feedback, making it unlikely that assistants will recommend them and that innovation would suffer. That’s one nightmare scenario. The other is that the assistants only recommend services which have a relationship with whoever wrote the assistant – i.e. Siri only recommends services that have built a relationship with Apple.

In my view app store owners already have too much influence over which apps we use, and that runs counter to the original promise of an open internet. My fear is that assistants, wonderful though they will be, will worsen this problem.

App store discovery a little less broken?

By | Apple, Google, Mobile | 11 Comments

It’s a common refrain that the process by which apps are found or discovered is broken. Discovery and hence download volumes are driven more than anything by ‘app store placement’ and by being ‘featured’, both of which seem to be more down to the whim of Apple and Google than the merit of the app. What we need is an equivalent of Google’s Page Rank, but for apps. That way good apps would float to the top and discovery would be more meritocratic. That would be better for startups who often have great products but lack the resources or the networks to curry favour with Google and Apple.

The current discovery process isn’t completely broken, in that Apple and Google do take the quality of the app and it’s popularity into consideration, but it isn’t right. Consider these stories. Two similar stage startups that we are close to have recently been playing the App Store game with Apple. They both networked hard to get close to the right people at Apple, developed features that Apple suggested they should and then held back release of those features in the hope of getting promoted. One got promoted in a big way (Stylect) and the other got only a low placement in an App Store category with little traffic. Neither knew until the day of the promotion. That can’t be the best way to do things.

However, Apple and Google are both heavily invested in the status quo. Their app stores earn them a lot of money and are a protective moat for their mobile phone businesses. So I’m not expecting things to change quickly. Thus I was surprised to read this morning that app store competition is increasing. Tomasz Tunguz has found that app store volatility has increased substantially over the last twelve months which indicates that new entrants are doing better and that discovery is getting less broken.

That’s a little bit of good news for startups in an area where they don’t usually get much. I like to think that one day we will have an open system on mobile, but until we do life will be harder for young companies than it needs to be and we will get less investment and innovation in mobile than we could.

An ‘iPhone moment’ for wearables may be close

By | Apple, Healthcare | 8 Comments

The wearables industry at the moment can be likened to smartphones in the pre-iPhone era. As it was with Nokia Communicators and Blackberrys, quite a few people have them but the experience is generally not very satisfactory and the mainstream isn’t buying yet. In large measure I think that’s because most of them don’t do much more than count steps and step count data isn’t that interesting. Heart rate, galvanic skin response, and accurate motion data are on the roadmap for all sorts of wearables companies and they hold out the promise of realtime data that is useful on an ongoing basis – e.g. to monitor stress levels and alert you before you realise yourself. These could be game changers in the way the iPhone and Apple App Store changed the smartphone game.

The other thing that could change the game is a big push from Apple. Judging from their new ad for the iPhone 5s embedded below that support is upon us.

As an early stage investor I’m excited by the potential for new wearables startups. I think backing companies at the concept stage with enough money to get them through a Kickstarter campaign is an interesting play.

The Android vs iOS paradox facing startups

By | Apple, Mobile | 4 Comments

Benedict Evans wrote an interesting yesterday about Android fragmentation (tl:dr 75% of devices that hit the Play Store run Android 4.x meaning Google has reduced the impact of fragmentation, additionally they’ve sidestepped the issue for their own services by moving them out of the OS and into a software layer that can be updated over the air). However, the point I want to bring out is his list of the issues startups should consider as they choose whether to develop first for iOS or for Android:

  • Apple’s homogeneity means things behave in predictable ways reducing development costs
  • Android has a much larger addressable market – people who can afford $50 devices up to $600 rather than just $600
  • Anything on the bleeding edge won’t work predictably on many Android devices
  • There are more early adopters on Android than iOS

As Benedict notes, this leaves developers facing the paradox that the open platform is harder to hack and forces startup CEOs to make the trade off between keeping dev costs and time to market down on the one hand and reaching more early adopters and a larger market on the other.

Most startups we see opt to go iPhone first because that allows them to maximise the speed and efficiency of learning.

I love my Android phone and I’ve always thought that as Android gains market share over iOS more startups would start to develop first for Android and I would stop having to wait months for new apps to come my way. I’m now thinking my wait will continue.