Monday, February 28, 2011

Good month for Mark Zuckerberg

February was a memorable month for Mark Zuckerberg. The hype for “The Social Network” is over without further embarrassment. With the movie out on video, three minor Oscars and Zuckerberg’s uneventful appearance on Saturday Night Live, that story is over.

Meanwhile, earlier this month the 26-year-old Facebook CEO gained positive recognition as the only Silicon Valley mogul under 40 invited for a private dinner with the President — as immortalized by the official White House picture.

Obama dinner

This follows a January where Facebook’s bankers cleverly raised $1.5 billion in an oversubscribed private placement (boosting its valuation to $76b) by ignoring SEC concerns and going to overseas investors (and Goldman’s internal funds.)

Yes, the movie didn’t put Zuckerberg in the best light, but as Salon notes, the most sophisticated viewers can separate fact from fiction:
Moreover, we don't go to movies to learn about history, or at least we shouldn't, since the history taught in the movies is even more ludicrous and shot through with present-tense ideology than the history taught in schools. … I probably know more about Facebook and the Early Middle Internet Age than I did before I saw "The Social Network," but that stuff isn't the source of the film's appeal. It's an energetic and straightforward work of American pop storytelling, a soapy, gossipy tale of young people behaving badly and class-based infighting at America's most elite university.
It’s obviously not news that Harvard boys (or young men more generally) want sex. Decades ago, one would not expect that Jerry Brown’s trips with Linda Ronstadt (or Steve Jobs’ evenings with Joan Baez) were limited to talking politics.

Merc columnist Chris O’Brien feigned outrage at the treatment of Zuckerberg, Facebook, and Web 2.0 at the hands of Hollywood in a “hatchet job”:
Technology, it argues, is giving rise to a generation of people who are lost and shallow, in danger of losing touch with their humanity. As you might imagine, I couldn't disagree more: Technologies like social networking are expanding people's relationships and actually helping us better connect with the rest of humanity.
This is a silly argument: the generation (particularly Zuckerberg’s male contemporaries) was already shallow and self-centered before Web 2.0 technology came along.

O’Brien quotes two outraged so-called social media experts:
"What they did was make a movie that completely marginalizes social media," said … an assistant professor. …

"It reflects what film critics think about social media," [a professor] wrote in an e-mail. "They should own those attitudes rather than project them onto this generation. "
(Of course, these academics make their careers selling the idea that social media is a transformational technology that renders obsolete any previous technology or societal movement — just as I did for my research on open source software or mobile phones.)

Pirates of Silicon ValleyIt’s pretty clear the movie isn’t going to change people’s view of entrepreneurship one way or the other. Yes, it’s a bigger soapbox than usual: Zuckerberg got a Hollywood Oscar contender at the peak of his fame — as opposed to Steve Jobs and Bill Gates who had to settle for a TV movie made for TNT two decades after their respective debuts. But unlike a multiyear TV series like Perry Mason or ER, it’s a onetime impression about a career or profession that will fade over time.

If Silicon Valley wants a more favorable impression of its business, perhaps it can commission a weekly series. Although “Social Network” screenwriter Aaron Sorkin did such a good job fictionalizing Washington DC political wonks, his extreme technophobia suggests that he’s unable to understand or empathize with hardworking technologists on the left coast. But certainly California has enough underemployed scriptwriters who would jump at the opportunity.

Tuesday, February 22, 2011

Microsoft finds products trump business models

With its smash hit Kinect, Microsoft found itself with a conundrum: it was such a great sensing device that researchers and hobbyists wanted to buy it even without buying an Xbox 360.

Normally a smash hit is not a problem. But gIven the Kinect had the same razor & razor blade model as the Xbox, people buying it without buying Xbox games meant that the MS was not making the margins they hoped for.

For a while, Microsoft was fighting the hackers. I argued they shouldn’t fight, they should switch:

Microsoft is missing a significant market opportunity by not being open to third-party enhancement of the Kinect hardware. Although the volume will not be as big as for a hit game — as predicted by Karim [Lakhani] and his research — third-parties will identify markets and solutions that Microsoft never anticipated.
Sure enough, Microsoft has seen the light. On Monday, Microsoft announced it will release a noncommercial SDK for the Kinect in the spring:
While Microsoft plans to release a commercial version at a later date, this SDK will be a starter kit to make it simpler for the academic research and enthusiast communities to create rich natural user interfaces using Kinect technology. The SDK will give users access to deep Kinect system information such as audio, system application-programming interfaces, and direct control of the Kinect sensor.
The timing is right for Microsoft to continue to deepen its ties to industry. With Nokia pulling back from university research alliances — and Apple, Nintendo and Sony abdicating the fight — the Kinect win is a rare example of success at a time of decline for its core businesses and its chronic failure to win share for cellphones.

Wired observes:
Microsoft was particularly impressed by the University of Washington’s research into telerobotic surgery. Researchers at the university hooked up a Kinect to a PHANTOM Omni Haptic, a stylus-based device that gives resistance feedback to the user, to build 3D models that the user can actually feel.
So hand it to Microsoft to (as I suggest) work on building a platform around the successful Kinect technology, rather than protect its otherwise conventional razor (console) and razor blade (game) business model.

Wednesday, February 16, 2011

Google vs. Apple distribution price war

The first year of the tablet wars went entirely to Apple. Apple has the market share, installed base, the mindshare and the superior product. Most projections have Apple crushing the competition again this year, albeit by a lesser margin.

However, Apple needs to take seriously Google’s latest salvo in the tablet content distribution fight. If Apple hopes to keep the iPad the dominant tablet — in a way the iPhone and Macintosh never were and never could be — it needs to take this attack seriously.

Apple won many fans among software developers for its convenient app store in exchange for a 30% commission. But its proposal to extend commission to newspaper, magazine and all other subscriptions has been highly unpopular, and some have questioned whether this is really tenable in the long haul.

Then on Wednesday, Google said it would only take a 10% cut for its One Pass content store, a direct attack on Apple’s pricing model. (Isn’t competition great?) Although online distribution is a low value-added commodity — with oliogopolistic competition — I think Google can hold a 10% margin, because both Apple nor Amazon tend to prefer margins better than that.

If most of the online tablet media goes through such services, then Apple can make plenty of money on a 10% margin. The problem is protecting its margin for other App Store products. Already, publishers and developers have been trying to bypass paying Apple — using Apple to distribute free apps and trying to charge outside the app. Apple closing the loophole is fair — it deserves some compensation for its distribution — but its plan to keep 30% is not.

So will apps be 30% and content be 10%? Will everything be something in between? Will Apple be in denial about the price war until its share drops below 50%?

Apple already seems to have lost the book distribution fight. iBooks was stillborn, and I can’t see how it will ever catch Barnes & Noble, let alone Amazon or Google. Are magazines and newspapers the same distribution channel as books? I don’t think anyone can say for sure.

Apple was reasonably aggressive in responding to Amazon’s efforts to abolish DRM on music downloads, so I expect we’ll see their answer on or before the rollout of the iPhone 5 this summer. Will they protect their margins on the assumption they can hold the market another year, or will they respond aggressively to protect every bit of market share? That I can’t predict.

Monday, February 14, 2011

Dumb providers of dumb pipes

The Financial Times reports that European mobile phone operators plan to hold a meeting next week in hopes of charging content providers for delivering data traffic. As the paper so dryly put it:
told the Financial Times that there could be “no free lunch” for the content providers.

Franco Bernabè, chairman of the GSMA, the mobile operators’ representative body, told the Financial Times that there could be “no free lunch” for the content providers.

Mr Bernabè, who is also chief executive of Telecom Italia, Italy’s leading telecoms company, highlighted how fixed-line and mobile operators were spending billions of euros upgrading their networks to cope with the rapid growth in internet video traffic.

He complained that content providers were “heavily using our networks but just don’t contribute to the development of our networks”.
I understand that operators resent the failure of their walled gardens and are in denial about being consigned as commodity providers of dumb pipes.

If it’s too expensive to provide network access, why don’t they charge more? OTOH, if they start reaming people for data access, who in the heck do they think is going to pay to use their networks?

Perhaps in some of the countries a cozy duopoly holding two-thirds of the market hopes to forestall competition by striking a common position against content providers and consumers.

However, in most countries there is usually one desperate challenger seeking market share who will do what they can do to gain a foothold. There are also operators hoping their LTE networks will provide new traffic and revenues, as well as Wi-Fi and other substitutes available.

Finally, there’s this little matter of the mobile Internet — as the iPhone proved, it’s the whole reason people buy smartphones in the first place. So if people can’t get access to the free Internet, why would people want a smartphone? Goodbye free Internet, say goodbye to ARPU.

In short, this plan of the operators is a dumb idea. I wonder how quickly it will take for the operators, content providers, regulators, consumer advocates or the business press to figure this out.

Saturday, February 12, 2011

Marks to market: buy low, sell high

I normally don’t write about stock prices, because my interest is successful company strategies, on the assumption that prices will eventually work out.

However, I would encourage all investors to read Jason Zweig’s Intelligent Investor column in Saturday morning’s Wall Street Journal. Five minutes changed how I think about investing forever.

The Most Important Thing: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing)The nominal premise of the column is to review two books, Safety Net by James K. Glassman (co-author of the 1999 tome Dow 36,000) and also The Most Important Thing by Howard Marks.

Glassman says the asset classes he recommended in 1999 were wrong, but now he has it right. Either way, stocks are better investments than bonds in the long run.

Marks disagrees. We all know about avoid market bubbles, but the implications are more invidious than that. As Zweig summarizes Marks:

Riskier assets don't necessarily offer higher returns, Mr. Marks says; they only appear to do so. "It's really simple," he says. "If risky investments could be counted on for higher returns, then they wouldn't be risky. And if investments weren't risky, then they probably wouldn't appear to promise higher returns."

By chasing the potential for higher return in riskier assets, investors drive prices up. Under the classic definition of risk—how widely the returns deviate from the average—that alone doesn't make assets more dangerous. But by Mr. Marks's common-sense definition of risk—"the likelihood of losing money"—rising prices are pure investment poison. The higher and faster prices go up, the farther and harder they have to fall.
It’s easy to find an example of this. In the 1990s US stocks exploded, while in the 2000s the market went sideways for a decade. Are the businesses less attractive as going concerns? No, what’s changed is the market sentiment.

The (Nobel prize-winning) capital asset pricing model — calculating risk-adjusted returns — assumed that riskier investments will be discounted and thus provide a bigger potential upside. Marks says that only works if market sentiment hasn’t pushed up the price of that investment (or investment class).

So theories of efficient markets, risk-adjusted returns, and modern portfolios have to take a back seat to a much simpler and older investment theory.

Buy low, sell high.

In other word, go back to Dogs of the Dow, Value Line, or other value-based investment strategies. That means missing the run-up in Apple shares (other than the first few years of Jobs II), but also not riding Microsoft, Intel and Nokia down over the past decade.

Friday, February 11, 2011

Nokia and Microsoft: winners and losers

There is plenty to say about Nokia’s decision to phase out Symbian in favor of the-operating-system-formerly-known-as-Windows-Mobile.

Nokia CEO (and Microsoft veteran) Stephen Elop had already prepared the troops with his “burning platforms” memo, lambasting his new employer for how it failed to respond to the iPhone and Android challenge.

Nokia’s problem is that it never got software. It created Symbian so that it Microsoft would never take over handset profits the way it did on the PC. It outsourced key software development to Symbian and then continued to peddle its cursor-key S60 platform the in the face of Apple’s groundbreaking GUI phone.

Now it has partnered with Microsoft, a company that certainly is competent at software, but has yet to prove that it can execute on mobile software. Elop has jumped off the burning oil platform into a ship that’s adrift and has a hold filled with water. (Today its stock fell 13% in response to the news.)

Who are the winners and losers?


  • Microsoft. Even if Windows Phone never goes anywhere, it gets a user base for Bing on the handset.
  • Nokia. Despited hundreds of millions in side payments from Microsoft, it transitions from the world’s most popular smartphone platform of the past decade (albeit one in sharp decline) to the 5th most popular platform. It adopts Windows Phone 7, which has a 2% share in the US smartphone market, half that of the older Windows Mobile 6.
  • Symbian and MeeGo developers. After following Nokia in its QT-everywhere strategy, they are now officially orphaned.
  • Current Windows handset vendors. Presumably Windows Phone becomes a captive Nokia platform (the only kind it likes) and Samsung, Motorola and Sony Ericsson abandon their limited sales of Windows phones into US enterprises.
  • Research in Motion. The distant and long-rumored hope of a Microsoft acquisition as an exit strategy is now gone.
  • European network operators. Instead of key mobile Internet decisions — APIs, apps, app stores, search, bundled apps — being made by two American companies, they now will be made by (at best) three American companies.
Meanwhile, the Silicon Valley duo will continue their march forward to displace all comers — Apple with a plurality of profits and Google eventually achieving a majority of the market share.

The sign of a troubled company is multiple Hail Mary passes in a row. Nokia bought Symbian and made a half-hearted effort to establish an open source project (three years too late). It told developers to abandon Symbian APIs in favor of QT APIs that could enable a transition to MeeGo. And now it declares its future to be a platform that many have already written off.

All this because it doesn’t want to join the commodity free-for-all that is Android? In his memo, Elop told his troops
Chinese OEMs are cranking out a device much faster than, as one Nokia employee said only partially in jest, “the time that it takes us to polish a PowerPoint presentation.” They are fast, they are cheap, and they are challenging us.
Nokia needs to fix its execution rather than throwing more Hail Mary passes than even Doug Flutie ever completed.

Update 9am: Michael Mace sees the Nokia-Microsoft tieup as like the Apple-IBM alliance 20 years earlier to create Taligent: similar in that execution will be the key, but different in that today Nokia has bet its future on the success of the alliance.

Wednesday, February 9, 2011

Girls: stick to it!

As happens every year around this time, I returned to my daughter’s (now former) elementary school tonight to help with the science fair. When it was founded seven years ago it had less than 30 project, but this year it drew almost one third of the school with 150 projects — so big that they had to split it across two days. Tuesday was K-2 and Wednesday was 3-5.

After running the fair for three years, this year I just had to show up and lead a team of 11 volunteers to judge 26 3rd grade projects. As always, it was very gratifying to help these young kids out.

After all the prizes were handed out and all the pictures were taken, I was gobsmacked by the pattern: all the first place winners were girls. This was not a coincidence.

We hear* how girls don’t stand a chance in math/science/engineering education and careers. Programs like Girls Go Tech (the girl scouts) and Dare 2B Digital try to reach them in K-12 while the Anita Borg Institute and Society for Women Engineers try to support them once they’re grown ups.

And yet, here in the extreme southern suburbs of Silicon Valley, it’s girls winning the elementary school science fair. At my daughter’s middle school, girls are disproportionately represented in the most advanced math track.

At this age, girls have an advantage: they are more serious students, less fidgety, more compliant and likely to study. As judges, we saw the effect of these two factors, plus one more: they are more social and better at ease talking to people, which means they are more convincing when they explain what they did in the science fair project.

Sociability and communication skills are important for bench scientists or engineers, but not necessarily the most important skills. They are crucial for managers, sales and marketing types. So if Silicon Valley, California and the US are going to incubate more successful technology-based firms, we need these girls to stick to it and enter the tech company workforce.

In my own case, my middle schooler is debating between becoming an elementary school teacher (little kids are so cute) and an engineer. (She won’t be following her dad into computers: “Programming is boring: I liked the finished product, but that’s about it. I like making things.”) It will be a decade before we know for sure which one will win out.

* Actually, according to NSF statistics, women accounted for 50.5% of US undergraduate science and engineering degrees in 2006 , up from 39% two decades earlier. They are the majority in life sciences, social sciences and psychology. (Quelle surprise!) They are also a healthy 41-42% in physical sciences and earth sciences. The only areas where they are low are math/computer science (26.8%) and engineering (19.5%)

Photo of the 5th grade winner of the 2011 Simonds Science Fair courtesy of Nicole van der Hulst.

Tuesday, February 8, 2011

The Hubris of Ken Olsen

Ken Olsen, founder of Digital Equipment Corporation, died Sunday. Unlike many famous people, his obituary emphasized his successes rather than his mistakes.

The Ultimate Entrepreneur: The Story of Ken Olsen and Digital Equipment CorporationAnd certainly the accolades were well deserved. DEC invented the minicomputer and with it an entire segment of the computer industry, one that propelled it to become the second most computer company in the world — more dominant than anything the British, Germans, Japanese (and even the French) could throw at it. Some say DEC was the first successful VC-backed computer startup.

For growing his company from 0-$8 billion in revenue in three decades, 25 years ago Olsen was dubbed “America’s Most Successful Entrepreneur” by Fortune magazine. He was greatly admired by the smart people who once worked for him and his once-great company, including Microsoft’s Gordon Bell (the inventor of Windows NT), Dan Kusnetzky and Robert Mitchell. A Boston radio station interviewed the author of his 1988 biography.

Still, Olsen made two great mistakes, which is why he was eventually forced out from DEC. Unlike Steve Jobs, was no second act, neither for Olsen nor for DEC, which was later purchased at a firesale price.

The first was ignoring the PC. He had democratized the computer by making $500k (later $100k) workgroup computers, but didn’t see how the toy PCs could ever replace it. I can’t blame him — I spent 1979-1986 as a DEC ISV and it took me several years to take PCs seriously, although I eventually quit my secure job to become a self-taught Macintosh programming expert.

The Innovator's Dilemma: The Revolutionary Book that Will Change the Way You Do Business (Collins Business Essentials)More than a decade later — in his 1997 treatise on disruptive innovation — Clay Christensen argued that DEC couldn’t compete in PCs because the PC scale, distribution and cost structure were incompatible with large computer business.

Maybe that was true, but I think DEC and Olsen had a more fundamental problem. In a 1988 Smithsonian interview, Olsen still didn’t get it:

Q: When the personal computer came, truly to be on their desks at home, at work, how did the advent of the microcomputer effect your business? And how did you see it and how did you respond to it?

A: … We saw in the early 70's that it was going to be easy for people to make computers. The type of computers, we had made more powerful than this one, were going to be able to be made by anybody very simply and very cheaply. … The PC itself was a component to the network. We made some PC's designed to be part of the networking but the general PC market was not for us. There were too many people in it and it turned out to be true. At one time I think there was 500 or 700 people making PC's. Anybody could build them. You could build them in your basement. That was not for us.

Q: Was there doubt about that decision? Or debate about that decision?

A: No, because you see our goals were clear and when anybody can do it and there's nothing particularly unique that we can contribute, it's clear it's not for us. Now we had PC's demonstrated here long, probably long before anybody else did. Individually people would make them. But we very formally decided that was not what we were going to do. It would basically be a very good decision.
DEC was late to the PC, but still earlier than Michael Dell. For years, it could have bought Compaq, but instead in 1998 Compaq bought DEC (and was in turn bought by HP in 2002).

But the second-order problem was that Olsen and DEC never understood how to do semi-open strategies. It made piles of money in the 1980s from its VAX/VMS architecture, as the only minicomputer maker with decent software. Then Unix came along, commoditizing system software and allowing any hardware company to sell its computers to the DoD and other large customers.

DEC responded by rebranding its proprietary OS “OpenVMS” — a marketing oxymoron if there ever was one. In the meantime, Scott McNealy enjoyed a 20-year run at the semi-open, semi-proprietary Sun Microsystems, which produced enterprise technology that was simpler than DEC’s but better suited to customer expectations of increasing openness.

As has often been noted, successful firms, entrepreneurs and CEOs are often prone to hubris. Past success brings feelings of omniscience or invulnerability — or at least a belief the old ways will always work.

In this century, Apple, Google and IBM have all done a good job of executing semi-open strategies. Like DEC, Microsoft delayed too long in opening up. Fortunately for Microsoft, its core business is declining far slower than minicomputers 20 years ago, so it still has a chance to pull things out.

Monday, February 7, 2011

Lon Doty, 1940-2011

A week ago, the management faculty at SJSU got an e-mail informing us of the death of Prof. Lon Doty. The details emerged from the loved ones as the week progressed: he had gone in for surgery on a Friday night, and on Saturday afternoon he took a nap, never to wake up.

The obit in the Mercury News said he left behind two sons, five grandchildren, a girlfriend and an "ex-wife and friend.” It also listed the two degrees — a BS from Northwestern and an MBA from Wisconsin — that were listed under his picture in the department directory of adjunct faculty.

His death came out of the blue for all of us. Many middle aged men let themselves go to pot, but Lon didn’t appear to be one of them. The obit said that he was a former Marine captain and Vietnam-era pilot. Four decades later, he certainly had the toughness.

Unfortunately, I didn’t know much about Lon, even though he was in the office next door for a couple of years. Yes, he was gruff and taciturn, but mainly I was conforming to the caste system that separates us PhD-holding “permanent” faculty from the lowly lecturers.

Of our adjunct faculty, Lon was the one I most wanted to get to know. His rare comments suggested a hard-nosed pragmatism that academics often need to hear. (Apparently he brought that pragmatism to his role as a director of a Fremont-area homeless shelter.)

Now he’s gone, and I’ll never hear what he had to say, or the story of what he did in the decades before joining SJSU. Life is short, and some doors close when you least expect it.

Sunday, February 6, 2011

Super Bowl winners and losers

Another Super Bowl is over, and again my attention was on the commercials rather than the game — as has been true every year since 1995. (That a nice kid from Chico via Cal won MVP tonight was an added bonus for sitting through all the commercials).

One thing I found amazing was all the mediocre ads for which the sponsors paid $2-3 million a pop. Some of these were recycled ads — ones that had already run before. (Why???) Others were just plain ineffective, like anything featuring a Doritos bag.

Fox didn’t have to pay for its house ads, but the opportunity cost was huge as most of them failed. At last, in the 4th quarter the network used its time effectively with two understated parodies. The first was a House M.D. ad that was a knock-off of the famous Mean Joe Greene Coke ad. And then the famous-for-15-minutes star of some show named “Glee” started her ad seeming like a beneficent Oprah (giving away Chevy cars to students) until she confessed she it was a plot to ruin their amateur status. Fox Sports also had some good house ads for its Daytona TV broadcast.

Of course, anyone watching a 3.5 hour football game is going to get burned out on even the most clever ads after a while. But my favorite of the evening was the 60-second Audi ad in the first quarter, variously termed “Release the Hounds” or “Kenny G.” The parody worked on multiple levels, it was engaging, it had unexpected twists, and it had a coda.

I also liked two of the top-rated ads I saw mentioned in various polls. One was the Darth Vader ad for Volkswagen, and the other the Bridgestone “reply all” ad. Both would resonate strongly with techies here in the valley.

Among the ads for mobile devices, the average results were better. In the Android vs. iPhone OS battle, the score was 2-1. While no “1984,” the Motorola ad for its Xoom tablet was certainly catchy, as was (to a lesser degree) the Sony Xperia ad aimed at gamers.

However, when it comes to surprise value, Verizon Wireless beat them all with a very inexpensive ad showing off the iPhone 4 and bringing the return of the Verizon guy.

Still, it was amazing how many lousy ads there were, including most of GM’s $10+ million in Super Bowl spending. (The Lassie parody was the notable exception). Chrysler’s attempt to wrap itself in the flag drew headlines but not heartstrings — recalling Samuel Johnson’s line that “patriotism is the last refuge of a scoundrel.”

The beer ads were also surprisingly flat. The exception was the Stella Artois ad featuring Adrien Brody (of the Pianist), outplacing multiple ads by sister brewery Anheuser Busch. (Many viewers also seemed to like the year-old Bud Light “asteroid” ad, but somehow I missed it live.)

Meanwhile, ads that would have been effective at other times got lost in the clutter, including most of the movie ads. With car chases and spaceships and explosions blurring together, it was hard to remember which movie was which, although I recall there was some movie coming by Steven Spielberg as well as movie-izations for at least two cartoon superheroes, Thor and Captain America.

Finally, what was really impressive — impressively awful — was how bad the websites were for showing the ads. I visited FoxSports (MSN), USA Today, Wall Street Journal, the YouTube AdBlitz, Hulu and Spike. I tried to use each site to search, browse, vote and hotlink, but most seemed to foul it up royally.

The WSJ site at least allowed voting, but their format required only one yes and one no vote overall. USA Today was glad to let me vote as long as I compromised my Facebook privacy and spammed all my friends (no thanks). On Hulu, I never could get the vote buttons to show up on screen.

The only site that worked as advertised was Spike’s, associated with the forgettable Viacom cable TV channel of the same name. It allowed me to navigate easily and link any video that I liked. In a few cases, I found official (or bootleg) copies of the ads on YouTube, which at least were quick to find and even quicker to bookmark.

How hard is this, folks? These companies had a year to prepare their website design and most failed the test. It seems like there are some new media VPs that should be encouraged to find other employment.

Update Monday 8:30am: I enjoyed the irony of the Groupon Tibetan restaurant ad (raising money for The Tibet Fund), but did not realize they were doing so as they plan to enter the China market. The Beijing bureau chief of Forbes notes this is 2-for-1 offensiveness, angering both Tibetan activists and their Chinese oppressors.

Wednesday, February 2, 2011

Open platforms and semi-open standards

For unexplained strategic reasons, last month Google said it didn’t want the semi-open H.264 video codec supported in its Chrome browser, but was favoring its semi-open WebM codec instead. This meant that the most popular HTML5 video format would not be available for Chrome users.

Not available, that is, until the intervention of an unlikely savior. Today Microsoft announced that it is supporting H.264 on the three main Windows browsers: its own IE9, and via plugins for Chrome and Firefox. The latter two make use of the extensible browser platforms that their respective open source sponsor created to encourage third party support (albeit not originally intended to help Microsoft.).

(Apple remains firmly committed to H.264 and HTML5 on both Mac OS and iPhone OS, as part of its pointed rejection of Adobe’s Flash.)

As a Mac guy, I rarely agree with Microsoft on standards battles, but I think they’re dead right on several issues.

Here are a few excerpts:

A Web without video would be a dull Web and consumers, developers and businesses want video on the Web to just work. As an industry we know this and have, until recently, been on a path to make this a reality with HTML5 by integrating video into Web pages more natively using H.264.

We’ve been clear from the first public demonstration of IE9 that the community deserves a reliable platform for delivering video as part of the modern Web.

  • IE9 will play HTML5 video in the H.264 format. Why H.264? It is a high-quality and widely-used video format that serves the Web very well today. We describe many of those reasons in blog posts here, here, and here.
  • Any browser running on Windows can play H.264 video via the built-in Windows APIs that support the format. Our point of view here is that Windows customers should be able to play mainstream video on the Web. …
Although predictably snarky (as it is about all things Microsoft), The Register noted the significance of Google’s action and Microsoft’s response:
H.264 is the mostly widely used video-playback codec on the web, but Google said in January that it was removing support for H.264 from future versions of Chrome.

Google said its resources would now be directed towards "completely open codec technologies," as the giant's goal is to enable "open innovation" on the internet. H.264 was built by Apple, Microsoft, and others, and is licensed by MPEG LA.

Future versions of Chrome will support only the royalty-free WebM codec that was owned and open sourced by Google last year, and the Ogg Theora codec.
As someone who’s been studying standards wars for more than 15 years, I think the Microsoft people are exactly right. The correct answer for web standards is choice and competition — just as we have choice and competition for cars, TVs, laptops, tablets and smartphones.

Accessing web pages is not like playing back 8-track tapes: it’s easy for a modern computer (and perhaps even a modern tablet or phone) to support multiple browsers.

I have four browsers installed on my MacBook Pro: Safari, Camino, Firefox and Chrome. Mainly I use them because I want to group a different set of pages for different windows, but sometimes I find that printing or browsing works better on one that the other.

Whatever its motives, Google attacking H.264 by banning it from its browser platform is the same idea as Microsoft trying to kill Java by discouraging its availability on Windows. It’s up to vendors to make their case to customers — both content providers and content consumers. Eventually the formats will shake out, but competition will force the codec providers to offer the best price and performance they can.