Archives for January 2011

Following a blowout quarter and entering a year where most expect Android to take over the world, Eric Schmidt is out at Google. It’s a bombshell that raises a ton of questions and speculation.

There’s no question in my mind that Schmidt was no longer welcome — perhaps also no longer comfortable — as CEO. Nicholas Carson says he was not always in charge anyway.

Why is this happening at all, let alone now? A lot of us wonder if this will result in Google being more or less “evil.” I don’t know enough about the company or its leaders to decide that right now, but I do believe that Google has finally become image-conscious, and the “evil” controversies of late play into that. I also think the founders are concerned enough about the company’s focus and direction to make this change.

2010 was a rough year for Google’s image. As head of the company, Schmidt was beyond unapologetic, and borderline obtuse when discussing Street View, your driving privileges, and your privacy in general. PC World has a nice recap, nearly all of it from the last ten months.

Even Schmidt’s parting words were eye-opening until reading Scott Austin’s flashback. In the worst case it’s just another awkward comment from a Ph.D. with a history of making awkward comments. Either way, I find it representative of Google’s current PR problems, no thanks to the CEO.

And what of Sergey? The announcement says he “will devote his energy to strategic projects, in particular working on new products,” but features no quotes from him. While it’s not unusual for technical folks to roll their sleeves back up, this arrangement strikes me as what I’ll call “the Wozniak treatment”: thanks for getting us here, now go play in your lab and don’t worry about anything else.

I think focus has become a big issue. Google is an engineering-driven organization that publicly announces more doomed products in a year than most companies do in their lifetimes, all ostensibly in the name of research and creativity. Perhaps the stated goal to “streamline decision making” refers to inefficiencies at a lower level that led to these failures. To me, Google’s decision making needs more no’s; I haven’t decided whether or not this is what they mean by “streamline.”

In the meantime, the flagship product is suffering. Bing is rapidly gaining share (at Yahoo’s expense… for now) while Google search takes shots on quality and relevance. The Groupon incident suggests that Google is starting to get uncomfortable with its one-dimensional cash cow: yesterday’s earnings report shows advertising steadily hovering around 96% of annual revenue. It would seem that way too many hours are being wasted while there’s real business to be done.

Is Google in trouble? Hardly, as the quarterly results tell us. But I don’t think Larry and the board believe everything is right either, and I don’t think they want to wait until the trouble is big. If that’s what we’re seeing here, then I think it’s very good for Google’s future.

Not satisfied with its polarizing about-face on net neutrality, this week Google threw away previous investments in H.264 and fully endorsed its own WebM format for native HTML5 video in Chrome.

There’s no question that this is a shot at competing platforms — iOS most of all — but this is bigger than just Google vs. Apple: this is Google vs. Everybody.

Google is now acting like the #1 mobile operating system vendor that many people expect it to be by the end of this year. Android’s growth is fueled by an onslaught of handset models from numerous OEMs. Video playback performance will be important on all of these devices, and dedicated hardware is a big part of that.

If H.264 becomes and remains the dominant codec, then Google needs to convince all of its partners to bundle H.264 decoder hardware in order to preserve a competitive video experience on Android. It cannot, however, guarantee them favorable licensing terms, because it is not a licensor in the H.264 patent pool. Android and Google could end up with a problem on their hands if OEMs hesitate or get hit with lawsuits.

Enter WebM/VP8. By overseeing both the technology and policy, Google has much more power to insulate its partners, and thus the entire Android platform, from disruptive patent or license disputes. If all goes well, it could go a step further and require Android OEMs to include VP8 decoder hardware from a (hand-picked, of course) list of vendors, guaranteeing a minimum standard of video playback on all Android devices. Google could even acquire one or more of these vendors for good measure.

Why dump H.264 entirely? Why not hedge your bets, especially if H.264 is working right now? Google says “our goal is to enable open innovation;” what it in fact means is “we prefer patents we own.”

There are plenty of fringe benefits as well. If WebM wins out, then rivals like Apple and Microsoft will have wasted tons of time and resources on H.264, wound up way behind the curve, and best of all, fallen directly under Google’s sphere of influence.

Obnoxious? Absolutely. Evil? I don’t think so. Google is taking an opportunity to shift the long-term future of mobile computing in its favor, without concern for short-term disruption. Sounds like another company I know.

The wrinkle, as many have pointed out, is that as long as Google continues to embrace Flash, nobody will even bother to look at WebM: they’ll just keep pumping out Flash video. Note, though, that Adobe is on the WebM/VP8 bandwagon. If future Flash authoring tools favor VP8, the codec will slip into agency, corporate, and media offices just like H.264 did. Google’s continued support for Flash may slow WebM delivery via HTML5, but it could very well accelerate penetration of the underlying VP8 codec.

It’s always your friends who stab you in the back. Android and Chrome will eventually have the market muscle to apply the knockout blow. That’s going to be a bad day for Adobe.

iPhone has come to Verizon. Looking back, its success despite nearly four years of exclusivity to a carrier many see as inferior has been very impressive. But those days are over now. There are plenty of questions. First, let’s revisit the obstacles to this event presented here last May:

Simultaneous Voice and Data. Being a CDMA phone, this product will not make calls and consume data at the same time. I really thought this was a deal breaker; perhaps it was for a while. But the Android onslaught, combined with the “not here yet” status of LTE, likely forced Apple’s hand. According to this chart from Horace Dediu, iOS subscriptions on AT&T are plateauing. Apple needed to move. Get ready for AT&T to pound this difference in its iPhone ads.

Features and Services. Apple Outsider, last May:

iPhone either works the same on Verizon as it does everywhere else, or not at all.

Phil Schiller, January 11:

We want the experience to be the same for every iPhone user.

Verizon’s FAQ set off shovelware worries Tuesday morning, but we’ve since learned that the Mobile Hotspot feature is simply a carrier-specific setting in the Settings app. You’d better believe Verizon wanted to vandalize the home screen. Apple, unsurprisingly, won that round.

The App Store is another interesting wrinkle. Verizon almost certainly wants a say in app approval — many assume AT&T has had such influence over the years — but the last thing Apple wants is for certain apps to only be available on one carrier. This was probably a point of contention leading up to the deal, but it’s likely been resolved now.

Retail. The retail problem I cited is solvable, and Apple has had a long time to think about it. Ultimately, it was just time to end the wait.

Branding. The only Verizon logo you’ll be seeing on this phone is in the status bar, where “AT&T” used to be, in non-italic Helvetica Neue. They couldn’t even get their signature V up there, and I bet they’re pissed.

This whole development is, without question, big for both companies. Some people were surprised by Steve Jobs’ absence; if those people can recall the last time Jobs took second stage at someone else’s press event, I’m all ears. But Apple did just about everything short of that by sending Tim Cook and Phil Schiller to New York. This isn’t a new product, but it is still a very big deal to Apple.

There’s already plenty of fallout and speculation: Where are the plan prices? Where’s the iPad? Will the next iPhone show up at the same time on Verizon as on AT&T?

What interests me the most is that we now have a straight up carrier war on our hands: the same exact product on two rival networks. This is decidedly different than the Android model, which has flooded the market with different phones, running different software, tied to different providers. You can’t get a Nexus S, or a Droid Pro, or HTC Evo on your choice of carrier. AT&T and Verizon now get to compete, apples to apples (pardon the pun), for real. How many “upgrade eligibility” and cancellation fee tricks will come out of the woodwork now that a true threat of abandonment exists on both sides? How will Apple walk the tightrope of integration requests from each partner? How nasty are these commercials going to get?

Grab your popcorn.