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Google following the old Microsoft strategy again

> Hot on the heels of Apple’s subscription service announcement, Google has lifted the curtain on its own offering that will allow publishers to set a price for recurring content delivered via your Google login. The payment system is called “[One Pass](http://www.google.com/landing/onepass/),” and it allows publishers to offer not only subscriptions, but also metered access, “freemium” content, and even individual articles. So far, One Pass seems more flexible than [Apple’s offering](http://arstechnica.com/apple/news/2011/02/apples-in-app-subscriptions-if-we-bring-in-subscribers-we-deserve-a-cut.ars), and the company will likely take a much smaller cut from publishers than Apple will.
via [arstechnica.com](http://arstechnica.com/web/news/2011/02/google-counters-apple-subscriptions-with-more-flexible-one-pass.ars?utm_source=rss&utm_medium=rss&utm_campaign=rss)
This new “One Pass” offering is a classic example of Google following the old school Microsoft business strategy. Favor big business over the consumer, the thinking goes, and you win, because you’ll get all the content deals and Apple will have nothing. The consumer won’t have a choice but to go where the content is.

The problem with that thinking in 2011 is that today’s consumer is much more spoiled than he or she used to be. Devices like the iPod and iPhone have taught consumers that a pleasant computer experience is possible. So they’ve started to demand it. And Apple’s ability to keep its prices in line with competitors means that they don’t have to pay a premium for it, either.

So siding with publishers instead of customers is not going to help Google out any more than Plays for Sure worked out for Microsoft in the music business. The content will go where the people are, not the other way around.

Ultimately, the publishers will go where they will make more money, and, 30-percent cut or not, they’re more likely to make money with Apple right now. Because Apple is the only one selling any tablets.

Until the competition can significantly beat Apple on price, nothing is going to change this.

The only thing that can stop Apple from getting away with this new publishing policy is a “good enough” $200 – $300 tablet. So far, that doesn’t exist.

Streaming from my own computer? Why would Apple do it that way?

> Instead of trying to provide everyone with cloud storage, I believe Apple will use MobileMe as the brain of the cloud service,” he said. “The actual storage will be on our individual machines. In effect, in the cloud.
via [appleinsider.com](http://www.appleinsider.com/articles/11/02/14/apples_new_mobileme_cloud_will_rely_on_self_storage_for_streaming_rumor.html)
What would the advantage of doing it that way be? Is Apple too cheap to provide some hard drive space? Why would I want to have to keep a computer running myself, and hope my connection doesn’t crap out on me, when I could just stream everything from a much more reliable source: Apple’s own servers?

I don’t get the logic in this one.

More people who are wrong about the iPhone sibling

> The main idea is that the iPhone nano would rely on the cloud to such an extent that the device wouldn’t really have *any* local storage to speak of, outside of a streaming buffer. This would of course go hand in hand with a MobileMe / Lala-powered streaming music service, and result in significant component cost savings (flash memory is still pretty spendy).
via [engadget.com](http://www.engadget.com/2011/02/14/the-iphone-nano-to-forgo-local-storage-common-sense-says-no/)
Do people actually use their phones everyday? Anyone in San Francisco or New York City will tell you that an iPhone with no storage is a useless brick. There are simply too many places where you don’t have adequate coverage to keep even an audio stream going.

Besides, streaming everything over the air would INCREASE the cost of ownership of an iPhone, because you’re paying for data by the Gigabyte. If Apple wants to make iPhone more affordable, taking out the storage would literally be the dumbest thing it could do.

Flash RAM is not a cost saver for Apple, anyway. They get RAM cheaper than anyone on the planet, because they buy so much. So yes, this phone will probably have LESS RAM, mostly to save space, but it will almost certainly not have less than 8GB.

More on the iPhone nano rumors. I still think most people are missing the boat on this one.

> Phone users on tighter budgets have been shunning the pricey iPhones in favour of less expensive models which have Google’s popular Android software,” the report said. “Apple will now hope to lure away customers from the likes of Nokia.
via [appleinsider.com](http://www.appleinsider.com/articles/11/02/14/apple_distracts_from_mobile_world_congress_as_iphone_nano_rumors_continue.html)
This quote makes no sense. For starters, until very recently, no Android phone was cheaper than Apple’s $100 3Gs. Especially once you factor in data costs, which are the same for all smart phones. And secondly, there’s no evidence to support the notion that anyone has “shunned” the iPhone. Its market is still growing.

Initial upfront cost is not the barrier to entry. Android was only successful last year because of cheap knockoffs in China and the Verizon situation in the US.

Android’s golden age is over. HP, Microsoft/Nokia and Apple will attack Android from all sides and stunt its growth this year. No one wants to relive the era of monopoly rule by a software dictator. Not even Microsoft.

“Apple will now hope to lure away customers from the likes of Nokia.” Now that part is true, I think, but not for the reasons this person thinks. Nokia will be focusing all of its efforts on Windows Phone 7, and Apple will flank it with a low-cost, “feature”-like phone and attack the other manufacturers in the last stronghold they still have.

Now, when I say Apple’s new iPhone sibling will be a “feature” phone or a “dumb” phone, keep in mind, I don’t think it’ll suck. It’ll be the nicest, coolest, sleekest feature phone the planet has ever seen. But it won’t be a cannibal to iPhone 5 sales. It has to have some differentiation from the standard iPhone if the two different models are to co-exist side by side. And like most Apple products, it will start off with minimal features, then evolve into a more capable device over time.

See my earlier post for why I think the new iPhone sibling model has to be something other than a small iPhone 5.

The iPhone nano: It's not what you think

I’ve been thinking about this “iPhone nano” rumor that’s been resurrected by the Wall Street Journal this week. On one hand, the WSJ has had an impeccable record of getting Apple rumors right recently. So it’s hard to discount the rumor as nonsense. On the other hand, this rumor has been around since the day after the original iPhone was announced, and it hasn’t come to pass yet. Plus, lots of smart Apple bloggers like John Gruber are rightly questioning the idea of an iPhone that’s actually smaller than the current iPhone. Make the screen smaller, and the app experience will surely suck. Don’t make the screen smaller, and there’s no way to make the phone much smaller than it already is. So what would be the point?

I think the problem here is that people are focusing on the ‘nano’ part of the rumor. The smallness. The idea of branching the iPhone into a family of products is, in itself, obvious and easy to understand. There’s more than one Mac. There are a variety of iPods. Why wouldn’t Apple do this with the phone? But smaller?

What if smaller weren’t the point? What if smaller were a side effect, not the reason behind the change?

Clearly, there’s no one phone that will please everyone on the planet. Sooner or later, if Apple wants to keep grabbing more people and keeping its competitors from catching up, it needs to market a different phone to a different kind of customer.

But once you accept that a family of iPhones is possible and probably eventually likely, you then need to ask, what would the differentiating factors be on different iPhones? Macs are split between desktop and mobile, pro and consumer. iPods are split according to different storage capacity needs, extreme portability for activities like running, and price.

When the iPod nano was introduced, Apple was making a grab for the flash storage market for portable music players. Yes, the nano was capable of being smaller, because it didn’t require a hard drive, but that was a convenient marketing point to focus on. The real thing that made the nano a success was the lack of a spinning hard drive. Suddenly, working out with an iPod became truly practical, because you eliminated skipping. So an entire group of people who were not interested in hard drive iPods (including the mini, which was already very small) suddenly started buying iPods. All the other flash-based players soon died a painful death.

When the iPod shuffle was introduced, it offered a limited iPod experience (no screen, but still synched with your iTunes library) for a very reduced cost. The only market for music players left that Apple hadn’t addressed had been addressed. Game over.

So then what about the iPhone? Who are the non-iPhone people? Are people not interested in the iPhone because it’s too big? What is it that stops those who don’t already have an iPhone (which is most people, by the way) from getting one? If you can answer that question, you can make some guesses about what an iPhone sibling might look like.

I put the the current crop of non-iPhone owners into three basic categories:

  • The iPhone isn’t available where I live or on my carrier of choice
  • I don’t need a “smart” phone; I just want to make calls
  • I don’t want to or can’t spend the money on an iPhone.

Apple has been working on the first category for the last four years. This group of people doesn’t require a different model of iPhone. They would be fine with the standard iPhone if it were available to them. By offering the iPhone in more countries and on more carriers, Apple has shrunk this category significantly. The Verizon deal earlier this year was significant not just because it essentially solved this issue in the US, Apple’s home market, but because it ended the notion of carrier exclusivity for the iPhone in general. Apple is now saying that any carrier that wants to do a deal and make the iPhone available is welcome to it. So this group will go away entirely as more countries and more carriers continue to come on board.

In the second and third categories, there is significant overlap. Many in the second category are using “I don’t need it” as an excuse to mask the truer “I can’t afford it” or “I’m too cheap to pay for it.” There are some, however, who I believe really do just want to make phone calls and a few other things. And some who are paranoid about being “connected” to the ‘net 24-hours a day. And some still who are technology-phobic in general. Many of these folks reluctantly get a cell phone “for emergencies only,” and thus would be silly to spend the money on an iPhone, no matter how cool it is.

For these folks, and the poorer folks, and the cheap bastards, there is little more Apple can do now to encourage the standard iPhone ownership. Many tech bloggers think this problem will solve itself eventually, as the world simply shifts over to smart phone use, but I think it’s more complicated than that. It will still be years, I think, before ‘dumb’ phones are no longer needed at all. Years, maybe, before they are even the less popular choice.

Like with the joggers and the iPod nano, this group of people needs a different model of phone altogether. And Apple thus far hasn’t built one for them.

So what does this model look like? The Wall Street Journal, following the rumor as it has always existed, suggests that the iPhone sibling (whatever the name may be, I assume that Apple will not necessarily call this one a nano) would be half the size of the current iPhone, and that it would be $200 and not require a 2-year contract like most phones. Would that address the core issue, though? A small iPhone with no contract? Seems to lack imagination a bit.

The biggest cost of owning a smartphone isn’t the initial upfront cost. And contracts don’t really bother most people, or else there would be more no-contract phones available. The real killer cost of iPhone ownership, of course, is the monthly data cost.

That extra $20 or $30 monthly charge, plus the requirement in many cases to tack on more minutes or text messages, is what is holding the vast majority of customers back from getting a smart phone.

So how does Apple change this? Well, they’re unlikely to get the carriers to start charging less for data. If anything, data keeps getting more expensive, with the carriers switching over to ‘tiered’ pricing models structured to look less expensive, but ultimately costing more for most users in the long run.

So how about this? Maybe the data is the “no contract” part of the rumor. Like the iPad 3G, you can pay for data only during the months you actually use it. Apple would have to convince the carriers to offer such a data plan, but AT&T, at least, has demonstrated interest in such a plan already on the iPad. This still wouldn’t require a different iPhone model, however. And it would only address the cost issue, and not entirely at that. You’d still have to pay quite a bit to get the most out of your device. Most people would still end up paying most months.

How about something more drastic? How about a phone that doesn’t get cellular data at all? Give the phone voice capability and WiFi, but when you’re not in WiFi range, you get no data. Sort of an iPod Touch that can make calls. Could be interesting, but now you have a crippled device; a device that feels like it should do more, rather than a device that is simpler on purpose.

Such a phone would still be more powerful and complicated than some would want, too.

So how about taking away the App Store? Sounds crazy, I know, but killing the iPod mini seemed pretty crazy, too. Stay with me.

What if Apple made a ‘dumb’ phone?

A phone with no App Store would not necessarily be a phone with no apps, mind you. Apple could design its own special apps just for it. All it would need is the phone app, an iPod app, an SMS app, maybe an alarm clock. And that’s it. Like the current iPod nano, the UI could look and behave somewhat like iOS, but it wouldn’t be iOS. At least not on the UI layer. It could offer some customizability, a great user experience designed specifically for it, but none of the advanced functionality of most smart phones. No email, even.

Now, suddenly, an Apple phone with a smaller screen and form factor starts to make more sense. This phone wouldn’t need to be smaller, but it certainly could be smaller. If you take away the iOS user interface and the third-party apps, you can change the form factor without killing the experience. You’d still have a touch interface, of course, but a more simplified one. And you could charge far less for such a device upfront, and charge less per month as well.

A small, sleek little dumb phone that would be the envy of most cell phone users, if not iPhone owners.

This phone would have no appeal for me or any current iPhone owners. But Apple already has us, anyway. It would have no appeal for Android or RIM users, but future “smart” iPhones will take care of that in time. This phone is all about everyone else.

Rather than waiting for the iPhone to switch everyone over to a smart phone mindset, Apple could make the world’s best dumb phone. While its competitors scramble to match the iPhone feature for feature, Apple could make a phone with fewer features and kill what’s left of Motorola’s, HTC’s, LG’s, Nokia’s, remaining business. Game over again. And all of those new dumb phone customers might just eventually become smart phone customers. Why not get them attached to the brand in the meantime?

In the midst of all the rush to copy the iPhone, all of the other phone makers have stopped innovating the dumb phone. This is an opportunity that has Apple written all over it.