Monday, 24 January 2011

BSkyB buying The Cloud

Intriguing story in the Sunday Times business section this weekend about BSkyB buying The Cloud. Sky is already a major player in UK broadband through its LLU-supplied double play, but the addition of The Cloud's national urban network of Wi-Fi hotspots gives it an intriguing mobile play.

Two thoughts come to mind:

1. This is a simple hedge against future charges levied by mobile operators for streaming mobile video
2. This is Sky testing the waters for a future move into mobile telephony. Digital Dividend spectrum will be auctioned in the UK in 2012 and Wi-Fi networks play an increasingly important role in the economics of MNOs

Sky announce their results on Thursday, so confirmation of the deal will probably occur then - if it does then this marks the first major move of what promises to be a fascinating year for TMT in the UK.

Friday, 14 January 2011

Machine 1 0 Humanity in Jeopardy!

I know it isn't machine learning in any real sense, but I'm very much looking forward to IBM's Watson taking on the human masters of Jeopardy! next month. Semi-smart machines like Watson will revolutionise call centre systems over the next decade, improving front line customer service across all platforms and reducing the Developed world's dependence on outsourcing... not to mention being a whizz at punning!

Friday, 7 January 2011

Facebook valuation/ IPO - too much hype, not enough cash?

There's alot of press about the $50B value that private trading has put on Facebook. I have a couple of thoughts on it, which are begining to crystalise in a view that the valuation is inflated by 2000-esque dotcom hype.

Firstly, the small portions of Facebook being sold off to Goldman Sachs et al are not based on efficient market prices - instead, they are based on the buyers' desire to own the in-thing before they miss out. Now, I can understand entirely that no one wants to miss out on the next Google (market cap currently hovering just under $200B), but I can't help but think that Facebook is an entirely different animal.

The great thing about Google is that it appeals to everyone. At its heart it's very simple - a clean, simple and accurate search engine. So consumers love it and use it in huge volumes, increasingly as a landing page into the web (a significant proportion of queries are now web addresses, sans "www."). Therefore advertisers love it and Google makes money hand over fist.

Now, with Chrome, Android and the forthcoming Chrome OS, Google owns the landing page into millions of mobile phones and tablets. All of this front end is supported by the largest IT infrastructure in the world.

Contrast Facebook, which is an in-browser (or in-app) experience. It is disintermediated by Google and Apple (and equivalents) on every platform. On mobile, its ad-model is compromised by the rise of mobile app platforms from Apple, Google et al that sit infront of it on the device. Furthermore, its customer base is not universal.

Although 500M people have Facebook profiles, I wonder how many are truly active and from that active base, how many are in purchasing classes. It's a teenaged phenomenon Personally, I have a Facebook account (and Myspace, as it happens) and used to be an active user, but soon became tired by the instrusive applications and "targeted" adverts. Now I use Twitter, Flickr and SMS, with email reserved for work.

And this is my issue with Facebook - it isn't a universal tool in the same way as Google. It's just one of many communications and contact management tools and not even a particularly popular one when judged against switched voice, SMS and email. Its monetisation method is also weaker than the platform providers, because it lacks direct access to the features of the device it runs on - not a problem for Apple Mobile Ads or any Google/ MS/ Nokia equivalent. Its great for Playfish and the other application providers and reasonably useful as another channel for advertising. And that's all.

Don't take this as me thinking Facebook is in any way doomed. I'm sure it will eventually be a profitable business of multi-billion revenue scale. It just won't be as cash generative as the big boys and could even end up like SkyPE - a flash in the pan... I certainly wouldn't pay a slice of $50B for it...

...more interesting to me is the rumoured LinkedIn IPO. Since I use that a lot, I'm thinking of buying in. At least then I'll have a tiny amount of control over my personal information :).

Thursday, 6 January 2011

A thought about how HMV can turn around its fortunes and a little bit about Microsoft

I've been trying to get my head around the news that HMV are struggling - closing 10% of their stores in order to avoid breaking their debt covenants. It's not news that the shift to digital and increasing popularity of Play and Amazon hurt the traditional retail model, however I can't really understand how it can drive a retailer like HMV - a near-monopoly player on the highstreet to the verge of bankrupcy.

I think the fundamental issue is that the core HMV stores provide a commodity retail experience - pile-em high and sell-em... not cheap enough. I don't buy CDs and games from HMV anymore, because the experience is so horrible - I'd rather get them from Amazon in bulk.

Contrast this with Waterstones (also owned by HMV). Much to my surprise, I've started buying my books there again after nearly a decade of Amazon. Why? Because Waterstones stores provide a personal recommendation service instore, whether through the little cards they place on the shelf-ends or from knowledgeable staff. I can't get that on Amazon and frankly, I'm becoming increasingly irritated by their "Matt's store" algorithms, which seem unable to see past the last item I viewed.

What does this mean for high-street media retail? Well, I suspect that it needs to become more niche - one stop shops like HMV aren't attractive to an increasingly fragmented customer base, able to search, discover and consume the things they like on an ever-more targeted basis. HMV already does this with it's Fopp subsidiary - perhaps it should consider breaking up the megastores into 3-4 boutique-like smaller units, each aimed at a specific demographic and offering a cross-media range targeted at them. That targeting could also extend online and via HMV's under-used loyalty card scheme. So that's what I'd do, if I were HMV.

One other thing that caught my eye today was that Microsoft will produce a version of Windows for ARM. Sounds like a good plan although I disagree with their implication that the personal computer will become less important - I think the personal computer will become more important and less distinguishable from other computing devices. In the future, I believe, the only difference between devices will be their form factor.