Earlier today, I was reading Joshua Topolsky’s editorial on This is my next about Apple’s “mistake” in turning their back on the Web and I kept stopping. I disagreed with basically everything.
First of all, his entire argument is based on what I believe to be a fallacy: that Apple is going to completely turn their back on Web support for iCloud. I have reasons to believe this is not the case, as I stated last week, and reiterated today. Others have since chimed in with similar notions and a bit of evidence to the contrary. While Apple may not have anything to say about web support for iCloud apps right now, let’s revisit the situation in a few months.
Beyond that, there is no denying that with iCloud, Apple is placing a very strong emphasis on native applications versus Web-based applications. You could argue this has been the case since the initial release of the App Store in 2008 (remember in 2007 when developers were told to make Web apps for the iPhone?). But I absolutely agree that the message seems more clear than ever: native is the way forward.
But as his argument progresses, Topolsky seems to do what many of us now do: interchange the meaning of the words “Web” and “Internet”. He bemoans Apple turning their back on the Web (that is, the World Wide Web — HTML documents linked together) and argues that Apple still doesn’t get and cannot compete on the Internet as a result.
I woud argue that Apple is attempting to redefine at least a part of what the Internet is with iCloud. In fact, I already have argued that.
Further, I applaud Apple for not taking an approach to the Internet that is more or less creating another Google Docs clone. Or Flickr killer. Gmail replacement. Facebook eater. Etc.
Topolsky seems to want Apple to attempt to do those things — even though, as he rightly points out, when they have tried to compete in similar ventures outside of their wheelhouse, like social, we get Ping — or syncing, we get the first iteration of MobileMe. So instead, Apple is doing what they do best: re-imagining the way things are done.
Apple is not afraid to venture forward on something while thumbing their collective nose at the conventional wisdom of the “right way” to do it. They take a concept and cut it down to its essentials and re-work an idea from there. That is why they are the most successful tech company on the planet right now. They set trends — or reset them, if they have to — they don’t follow them.
When most people (meaning the vast majority of the planet, not you and me) think about the Web, they still view it a bit of a wildcard in many ways. There’s a reason Microsoft Windows and Office are still making so much money. It’s certainly not because they’re the best products out there that are the most convenient to use at the best price. Many businesses don’t yet fully trust the Web, and neither do plenty of consumers. Apple has an opening to take what consumers trust, native apps, and infuse them with the Internet in a way that most people will not even realize.
iCloud will enable a new class of Internet apps, but many people (like Topolsky, for example) won’t even consider them Internet apps because they won’t be Web apps. Instead, the way they seamlessly keep everything up-to-date behind the scenes may as well be magic.
They will just work — better with an Internet connection but just fine without one (and better again when one is available). Unlike the Web, Apple’s Internet for these apps will be one you hardly ever think about — if at all. It will just exist in the background. To plenty of consumers content to play in Apple’s ecosystem (Mac, iPhone, iPad, or iPod touch), that will sound fantastic.
But again, I don’t view Apple’s emphasis on native over the Web as anything against the Internet itself. Nor do I believe they do. For what they see works on the Internet already, Apple is doing something somewhat uncharacteristic (at least in recent times) for them: they’re partnering up. Hence, Twitter/iOS integration.
I would argue that the move is brilliant. Had Apple tried to create a “Twitter killer”, we all would have laughed. Instead they’re leveraging what Twitter has already proven to be good at (social, syndication, etc), and tying it into what they do well (mobile, devices, user experience).
Topolsky also glosses over the fact that every iOS device (and Mac) has a Web browser built-in. In fact, as Apple is always quick to point out, they’re largely responsible for the code behind both their own and Google’s popular browsers (WebKit). Despite some paranoid theories to the contrary, Safari is not going away. And Apple is not going to stop you from accessing whatever you want on the Web through it.
Apple is not anti-Internet, they just believe that they can serve it to users better as a backend to their native apps rather than through a frontend in the Web browser. I don’t think that sounds so crazy at all. What sounds crazy is the notion that Apple has to compete with Google and Microsoft on document editing tools on the Web just because that’s what everyone else does.
And how has battling Google on their own turf — the Web — worked out for Microsoft over the past several years? Not so good.
Apple is simply making the argument (and a bet) — and I believe rightfully so — that native still trumps the Web when it comes to applications. Yes, the gap is closing, but it will take a long time to fully close — particularly in mobile. Hell, even Google’s own actions acknowledges this — that’s the reason Android exists!
Further, while it might annoy many people, Apple is in the business of selling products. They do this both by making the products themselves attractive, and by making the services that run on them attractive. It’s symbiotic. Apple focusing on Web apps would not help sell more iPads. This should be far from shocking.
The reason why this approach works for Apple is because when they make these products and services, they generally make them better than everyone else. Topolsky seems to argue that they should separate some of these services from the products and focus on the Web for the betterment of everyone. I would argue that they cannot do this. It would undermine the cohesion that makes their products so great.
“You know, if the hardware is the brain and the sinew of our products, the software in them is their soul,” Jobs said during his WWDC keynote address. Do those sound like the words of a company that is going to focus on software that can run anywhere?
The Web has given us the idea that software should be able to run anywhere, on any machine. And that’s great. But that’s not Apple. And love it or hate it, that’s not the bet they’re going to make.
But it’s a mistake to think that they don’t get the Internet as a result. With iCloud, they’re setting out to carve their own piece of it. “At long last, the brains in Cupertino seemed as if they were set to fully embrace the internet and its inherent, omnipresent power,” Topolsky writes before arguing that they haven’t actually done that. I would argue that this is exactly what they’re doing. It’s just that the front-end Web is not the entire Internet. Somewhere, we lost sight of that.
And that may not be a very popular thing to say, because the Web is open and open always equals good, right? Sure, but sometimes closed environments lead to products that are better than just “good”. And consumers tend to flock to such products — until something better comes along (as it always does). The fear that Apple’s relatively closed system will somehow lock us in forever is irrational.
Meanwhile, the notion that the Web should be the only way to use and approach the Internet is dangerous — and decidedly un-open. Such thinking would stifle innovation — innovation like iCloud.
If and when Apple does offer iCloud web apps, much of this may sound overblown and/or moot. But the underlying tension is real. Apple does believe that native apps backed by the Internet will best pure Web-based apps for the foreseeable future. It’s a big bet, but it’s not as crazy of a bet as some may have you believe.
In his headline, Topolsky asks, “can you win if you don’t play?” Yes, by changing the game.
If you are reading TechCrunch you probably already realize this fact: Flavor-of-the-month consumer Internet companies have a way of hogging the spotlight. If you didn’t, we conveniently published some evidence of it yesterday.
But that reality predates us by at least a decade. In 1999 when the world talked about Silicon Valley, they usually meant sexy dot coms. The fascinating new reality of being able to do anything from buying groceries to downloading music instantly online was phenomenal (if ephemeral), and everyday consumers tended to miss the far larger, equally disruptive and frequently more sustainable businesses being built in enterprise software and telecom.
But Wall Street didn’t: Larry Ellison of Oracle eclipsed Bill Gates for a short time as the richest man in the world, Sun Microsystems and Cisco Systems were two of techs biggest out-performers of the era and the billions invested in telecommunications made the dot com cash look like chump change. Venture capitalists didn’t miss it either: Substantially more money was put into telecom companies in the run up to the dot com bust, lulled by a sense of false assurance that at least these overvalued companies had “real assets” that could be liquidated if need be.
In 2005 when people were writing headlines about “the return of Silicon Valley,” a lot of people working in technology were justifiably irritated. After all, tech behemoths like eBay, Yahoo, Oracle, Intel, Hewlett-Packard never exactly left. Silicon Valley and the tech industry in aggregate was several orders of magnitude bigger than it was pre-Internet bust, even with all the lost jobs and delisted companies. Veterans griped about sites like TechCrunch and ValleyWag making sweeping statements about the Valley, but really only reporting on a comparatively small-money resurgence in the then tiny consumer Internet space.
That focus on the sexy, social, consumer Web over everything else has only gotten more pronounced as those many of those one-time flavors of the month like Facebook, Zynga, Twitter and Groupon have become bonafide giants. The difference is that now the divergence in attention actually makes sense.
But it’s not necessarily between consumer and enterprise; it’s between old and new tech. It just looks like it’s all about consumer, because we just haven’t seen that many big new enterprise companies yet. (Plenty are building steam, and just keeping it quiet. Others just take time to get traction because traction is represented by paying customers, not just eyeballs.)
I’ve been thinking about this a lot the last few months. Once was during a conversation with Jon Swartz, the veteran tech reporter at USA Today. We were swapping war stories about having to report on big personalities like Scott McNealy and Larry Ellison and Tom Siebel back in the day. And he asked, “What ever happened to those huge personalities?”
Sure Ellison is still around, but he rarely does press and, sadly, his antics are even rarer. And the prickly-but-genius Steve Jobs has morphed into a comparatively boring do-no-wrong deity in popular Valley consciousness. There are few others left to even inspire. The biggest tech companies in the world used to be lead by outrageous visionaries. Now they’re mostly lead by boring businessmen so media trained they couldn’t say anything interesting if their life (or stock prices) depended on it.
It hit me again a few months later when I was talking to Peter Thiel about the state of publicly traded tech companies. We talked about embattled companies like Microsoft, Hewlett Packard, Yahoo and Cisco that can’t seem to do anything right except hang onto core cash cow businesses. These companies have all either had recent CEO changes or investors are calling for them. In the case of Yahoo, both are happening.
I asked Thiel if anyone could really change these companies’ fortunes or if they were just destined to be value stocks, their best days behind them. He said, “The problem is these big tech companies are just like banks now; all they do is print money. And that’s boring. What would you do as CEO? You could just massively fire people who pretend to be innovating and maximize that cash. Think about it– 90% of Google’s projects don’t make any sense. But [these companies] have [all] identified themselves as technology companies. It’s a big part of their self image.” He continued, “(Running these companies) is just not fun. People are too unfair on Carol Bartz. Yahoo is arguably in a tougher position than old media”
And it hit home again a few weeks ago during the All Things D conference during Marc Andreessen’s talk where he outlined many reasons why there isn’t a bubble in tech. More substantial than his rationale of the fact that everyone is freaking out about a bubble means we’re not en masse buying into one was his point about price-to-earnings ratios of the large tech companies. At the time, he noted that Google’s was 13.7, Apple’s was 12, Microsoft’s was 7 and Cisco’s was 7. Some of those are up since his talk, but they still hover between 9 and 15. “That’s what steel mills trade at when they are going out of business,” he said. “Essentially Android is being valued at zero. The public market hates tech.”
I agree that the P/Es of Apple and Google are somewhat puzzling. Let’s set them aside. For the rest of big tech, the market reaction isn’t necessarily without reason. Big tech–the publicly-traded companies that still control so much of our digital lives and the returns of venture capitalists via endless acquisitions–haven’t been giving the markets much to get excited about for years and it’s getting worse, not better. Worse: They’re not giving employees and customers anything to get excited about either.
This was also pronounced during the entire All Things D conference. I don’t in any way mean what I’m about to say as a knock on a competitor. All Things D is a phenomenal event and the only conference I cover these days other than our own. And while I think no one beats TechCrunch at giving startups a place to debut and assembling the biggest names in the venture-backed ecosystem, All Things D’s annual event rules when it comes to bringing together the big names in big tech. This is a conference, after all, that gets Jobs to appear on stage with Bill Gates. And, yet, most of the big tech names trotted out this year — while worthy of the slot by resume– were just utterly boring to listen to.
Nearly everyone I talked to in the hallways remarked on the vast difference in energy and content between the new guys on stage represented by Twitter’s Dick Costolo, Groupon’s Andrew Mason, Square’s Jack Dorsey and Andreessen and, well, nearly everyone else who spoke. Each of the old-tech guard sat on stage, made semi-amusing jokes, and justifications for why they are still relevant and why they’ll get better.
Eric Schmidt’s dour opening keynote that explored all the areas the still comparatively mighty Google has stumbled turned out to be the perfect table setter. Few of the others were as candid, but the same sorry-we-sucked-for-a-while-but-we-swear-we’re-getting-better justifications were there. Steven Sinofsky of Microsoft talked about how the new version of Office is more Apple-y…if only all the silos in the company can agree to get behind it. Leo Apotheker of HP explained why HP would still win in tablets and why consumerization of the enterprise would benefit HP, not say, a company great at building consumer experiences. Shantanu Nayaren of Adobe said the whole war over Flash with Apple was overstated, but fortunately other vendors would eventually beat Apple anyway so it didn’t matter. Stephen Elop of Nokia talked about how Microsoft’s operating system would suddenly make Nokia a smart phone powerhouse. And finally, the conference fittingly closed with AT&T CEO Ralph De La Vega answering every angry volley from Walt and Kara about its loathsome network with justifications for why if we only give them the T-Mobile acquisition, all will be fixed. Is anyone buying any of this?
It wasn’t the problem of the conference’s appeal. As a competitor, I’d love if that were the case. But realistically who in big tech would have been more riveting? You can’t have Steve Jobs every year. Meanwhile, there were plenty of people in the audience I would have rather heard from, including senior executives of surging companies like Facebook, One King’s Lane, and Yelp.
Is it any wonder there was such a frenzy around LinkedIn’s IPO? At least it’s a new script. It’s like when you used to be bored in class and a bird flew in the window and everyone went nuts. A bird probably wouldn’t be that exciting if you were outside playing frisbee.
It didn’t used to be that way. Big technology companies used to do interesting things and if not, many had cowboy personalities to make boring businesses interesting. But who wants to be head of a Nokia or a Microsoft or a Cisco or a Yahoo now? All of these companies have powerful entrenched user bases that aren’t going anywhere, and they’ll all make that justification anytime an analyst complains about their growth. Great. But their businesses are irrevocably declining if not in actual users, in terms of market influence and ability to recruit anyone talented. They can’t do wildly innovative things because stabs at innovation have failed so many times. They are in a total duck-and-cover mode. Who wants to be in duck-and-cover when a world of lucrative startups are exploding into the public markets?
In the last boom era, the publicly traded technology companies were also surging. Cisco’s John Chambers was nicknamed the Pied Piper of Wall Street. Today he is fighting for his job, along with Microsoft’s Steve Ballmer. In fact, their biggest selling point may be that so few great leaders want their jobs, and there’s no natural successors in the wings. Those people have all left for other opportunities. (There goes another one with always-the-bridesmaid-never-the-bride Ann Livermore’s departure from HP.) Then there’s Yahoo: The company so siloed and dysfunctional it’s made Terry Semel, Jerry Yang, and Carol Bartz– three respected leaders with totally different skill sets– each look incompetent. These companies have all essentially become Novell.
Out of the entire tech universe, three legacy companies have stayed as relevant as any startup: Apple, Amazon and Netflix. All three are testaments to visionary founders with a strong will who aren’t afraid to utterly disrupt their companies and cannibalize their own businesses.
The only other legacy tech public company I’d put near that camp is Oracle. And the reason that Larry Ellison outmaneuvered his entire industry? By predicting what is happening now: That the IT revolution was over. That tech was no longer a differentiator for his customers. It was merely table stakes to being in business, like having desks, power and phone lines. He argued the answer for growth was a sheer land-grab of already installed customers who would pay ongoing maintenance and upgrade fees until seemingly the end of time.
Back then everyone said Ellison was wrong. Top business schools wrote new case studies on why tech still mattered, software-as-a-service startups argued they could still unseat Oracle in big deals, and truckloads of experts said that hostile takeovers in the software world would never work because the integrations would be too messy and those companies’ real assets– programmers– would all leave. But Ellison was right. (Although I’d argue at some point a new generation of software will unseat Oracle and its acquired parts. It’ll just take a lot more than the first wave of software as a service companies had to offer.)
In previous decades of Silicon Valley companies were building a new industry, so almost all tech companies had growth potential. Now there’s a stark line between mature technology and technology that is still growing in aggregate. They are simply different industries. Arguing this is still one industry; that all of the companies who make technology are investing in change is like saying any company with a Web site is an Internet company.
As this discrepancy widens between 1990s era tech and today, I was reminded of an interview Thiel did several years ago with CNBC where he was asked what large cap tech names he was bullish on. He answered that other than Google there were no large cap tech names, because companies like Intel and Microsoft are inherently anti-technology companies. Their success, he said, is rooted in the status quo. The best of all possible worlds for them would be the global technology user base never adopting anything new. CNBC’s anchors looked confused at this concept. Microsoft isn’t a tech company? Not too long ago, Microsoft was *the* tech company.
But Thiel was right. Too many of the companies that built out the IT revolution and Silicon Valley are “technology” companies in name only now. They aren’t disrupting anything, they are doing the opposite. They are desperately clinging to the status quo. They still have massive amounts of cash, massive installed user bases that won’t be switching loyalties anytime soon and those are really the only two reasons they still matter. To fuse Thiel and Ellison’s arguments: They are banks whose job is to print money paid by people who are slow to change their digital habits. Even our parent company AOL is funding its radical turn-around largely off of people who don’t know they no longer have to pay us every month for a subscription to the World Wide Web. (I’ll at least give Tim Armstrong credit for being interesting on stage.)
But it’s even more true now that huge, lucrative opportunities have sucked anyone remotely talented out of those companies. At least people were wary of working at a startup back then. Now it seems risky not to be at a startup. LinkedIn and Facebook alone have proved social media wasn’t a fad. These companies, along with Twitter, Zynga, Groupon and others, are legitimately the most interesting stories in the American business world today, as they play central roles in global political uprisings and represent some of the most anticipated stock market debuts of the last decade.
We can point out Groupon’s shortcomings and risks every day: The stock will still be in high-demand when it debuts. Because the reality is there are only a handful of companies actually inventing new technology and businesses among the biggest public traded tech names today.
The sooner we realize this is no longer one industry, the sooner we can stop the silly bubble comparisons to 1999 and get a handle on why these issues will keep popping. We all want something that’s actually growing and disrupting and inspiring. Silicon Valley and the start up world has gotten to enjoy a lot of it over the last ten years, and Wall Street is sick of just watching.
Jon Stewart Tackles the <b>News</b> of the World Scandal
But before Stewart could expound on his point, correspondent John Oliver presented him with a recap of Rupert Murdoch's News of the World scandal--a friendly reminder that the British will always find a way to out-shame ...
Jon Stewart Tackles the <b>News</b> of the World ScandalPhone Hacking: Rupert Murdoch's Leadership Of <b>News</b> Corp Comes <b>...</b>
LOS ANGELES — As investors punished News Corp.'s stock again on Monday, questions arose anew about the leadership of its chief executive, Rupert Murdoch. The phone hacking scandal in Britain now threatens to engulf top ...
Phone Hacking: Rupert Murdoch's Leadership Of <b>News</b> Corp Comes <b>...</b><b>News</b> Corp Launches $5B Stock Buyback – Deadline.com
This could provide some pop for News Corp shares, which have declined more than 12% over the last five days as the News Of The World phone-hacking scandal mushroomed. The company says this morning that its board of ...
<b>News</b> Corp Launches $5B Stock Buyback – Deadline.combobby ferguson grants
Jon Stewart Tackles the <b>News</b> of the World Scandal
But before Stewart could expound on his point, correspondent John Oliver presented him with a recap of Rupert Murdoch's News of the World scandal--a friendly reminder that the British will always find a way to out-shame ...
Jon Stewart Tackles the <b>News</b> of the World ScandalPhone Hacking: Rupert Murdoch's Leadership Of <b>News</b> Corp Comes <b>...</b>
LOS ANGELES — As investors punished News Corp.'s stock again on Monday, questions arose anew about the leadership of its chief executive, Rupert Murdoch. The phone hacking scandal in Britain now threatens to engulf top ...
Phone Hacking: Rupert Murdoch's Leadership Of <b>News</b> Corp Comes <b>...</b><b>News</b> Corp Launches $5B Stock Buyback – Deadline.com
This could provide some pop for News Corp shares, which have declined more than 12% over the last five days as the News Of The World phone-hacking scandal mushroomed. The company says this morning that its board of ...
<b>News</b> Corp Launches $5B Stock Buyback – Deadline.comEarlier today, I was reading Joshua Topolsky’s editorial on This is my next about Apple’s “mistake” in turning their back on the Web and I kept stopping. I disagreed with basically everything.
First of all, his entire argument is based on what I believe to be a fallacy: that Apple is going to completely turn their back on Web support for iCloud. I have reasons to believe this is not the case, as I stated last week, and reiterated today. Others have since chimed in with similar notions and a bit of evidence to the contrary. While Apple may not have anything to say about web support for iCloud apps right now, let’s revisit the situation in a few months.
Beyond that, there is no denying that with iCloud, Apple is placing a very strong emphasis on native applications versus Web-based applications. You could argue this has been the case since the initial release of the App Store in 2008 (remember in 2007 when developers were told to make Web apps for the iPhone?). But I absolutely agree that the message seems more clear than ever: native is the way forward.
But as his argument progresses, Topolsky seems to do what many of us now do: interchange the meaning of the words “Web” and “Internet”. He bemoans Apple turning their back on the Web (that is, the World Wide Web — HTML documents linked together) and argues that Apple still doesn’t get and cannot compete on the Internet as a result.
I woud argue that Apple is attempting to redefine at least a part of what the Internet is with iCloud. In fact, I already have argued that.
Further, I applaud Apple for not taking an approach to the Internet that is more or less creating another Google Docs clone. Or Flickr killer. Gmail replacement. Facebook eater. Etc.
Topolsky seems to want Apple to attempt to do those things — even though, as he rightly points out, when they have tried to compete in similar ventures outside of their wheelhouse, like social, we get Ping — or syncing, we get the first iteration of MobileMe. So instead, Apple is doing what they do best: re-imagining the way things are done.
Apple is not afraid to venture forward on something while thumbing their collective nose at the conventional wisdom of the “right way” to do it. They take a concept and cut it down to its essentials and re-work an idea from there. That is why they are the most successful tech company on the planet right now. They set trends — or reset them, if they have to — they don’t follow them.
When most people (meaning the vast majority of the planet, not you and me) think about the Web, they still view it a bit of a wildcard in many ways. There’s a reason Microsoft Windows and Office are still making so much money. It’s certainly not because they’re the best products out there that are the most convenient to use at the best price. Many businesses don’t yet fully trust the Web, and neither do plenty of consumers. Apple has an opening to take what consumers trust, native apps, and infuse them with the Internet in a way that most people will not even realize.
iCloud will enable a new class of Internet apps, but many people (like Topolsky, for example) won’t even consider them Internet apps because they won’t be Web apps. Instead, the way they seamlessly keep everything up-to-date behind the scenes may as well be magic.
They will just work — better with an Internet connection but just fine without one (and better again when one is available). Unlike the Web, Apple’s Internet for these apps will be one you hardly ever think about — if at all. It will just exist in the background. To plenty of consumers content to play in Apple’s ecosystem (Mac, iPhone, iPad, or iPod touch), that will sound fantastic.
But again, I don’t view Apple’s emphasis on native over the Web as anything against the Internet itself. Nor do I believe they do. For what they see works on the Internet already, Apple is doing something somewhat uncharacteristic (at least in recent times) for them: they’re partnering up. Hence, Twitter/iOS integration.
I would argue that the move is brilliant. Had Apple tried to create a “Twitter killer”, we all would have laughed. Instead they’re leveraging what Twitter has already proven to be good at (social, syndication, etc), and tying it into what they do well (mobile, devices, user experience).
Topolsky also glosses over the fact that every iOS device (and Mac) has a Web browser built-in. In fact, as Apple is always quick to point out, they’re largely responsible for the code behind both their own and Google’s popular browsers (WebKit). Despite some paranoid theories to the contrary, Safari is not going away. And Apple is not going to stop you from accessing whatever you want on the Web through it.
Apple is not anti-Internet, they just believe that they can serve it to users better as a backend to their native apps rather than through a frontend in the Web browser. I don’t think that sounds so crazy at all. What sounds crazy is the notion that Apple has to compete with Google and Microsoft on document editing tools on the Web just because that’s what everyone else does.
And how has battling Google on their own turf — the Web — worked out for Microsoft over the past several years? Not so good.
Apple is simply making the argument (and a bet) — and I believe rightfully so — that native still trumps the Web when it comes to applications. Yes, the gap is closing, but it will take a long time to fully close — particularly in mobile. Hell, even Google’s own actions acknowledges this — that’s the reason Android exists!
Further, while it might annoy many people, Apple is in the business of selling products. They do this both by making the products themselves attractive, and by making the services that run on them attractive. It’s symbiotic. Apple focusing on Web apps would not help sell more iPads. This should be far from shocking.
The reason why this approach works for Apple is because when they make these products and services, they generally make them better than everyone else. Topolsky seems to argue that they should separate some of these services from the products and focus on the Web for the betterment of everyone. I would argue that they cannot do this. It would undermine the cohesion that makes their products so great.
“You know, if the hardware is the brain and the sinew of our products, the software in them is their soul,” Jobs said during his WWDC keynote address. Do those sound like the words of a company that is going to focus on software that can run anywhere?
The Web has given us the idea that software should be able to run anywhere, on any machine. And that’s great. But that’s not Apple. And love it or hate it, that’s not the bet they’re going to make.
But it’s a mistake to think that they don’t get the Internet as a result. With iCloud, they’re setting out to carve their own piece of it. “At long last, the brains in Cupertino seemed as if they were set to fully embrace the internet and its inherent, omnipresent power,” Topolsky writes before arguing that they haven’t actually done that. I would argue that this is exactly what they’re doing. It’s just that the front-end Web is not the entire Internet. Somewhere, we lost sight of that.
And that may not be a very popular thing to say, because the Web is open and open always equals good, right? Sure, but sometimes closed environments lead to products that are better than just “good”. And consumers tend to flock to such products — until something better comes along (as it always does). The fear that Apple’s relatively closed system will somehow lock us in forever is irrational.
Meanwhile, the notion that the Web should be the only way to use and approach the Internet is dangerous — and decidedly un-open. Such thinking would stifle innovation — innovation like iCloud.
If and when Apple does offer iCloud web apps, much of this may sound overblown and/or moot. But the underlying tension is real. Apple does believe that native apps backed by the Internet will best pure Web-based apps for the foreseeable future. It’s a big bet, but it’s not as crazy of a bet as some may have you believe.
In his headline, Topolsky asks, “can you win if you don’t play?” Yes, by changing the game.
If you are reading TechCrunch you probably already realize this fact: Flavor-of-the-month consumer Internet companies have a way of hogging the spotlight. If you didn’t, we conveniently published some evidence of it yesterday.
But that reality predates us by at least a decade. In 1999 when the world talked about Silicon Valley, they usually meant sexy dot coms. The fascinating new reality of being able to do anything from buying groceries to downloading music instantly online was phenomenal (if ephemeral), and everyday consumers tended to miss the far larger, equally disruptive and frequently more sustainable businesses being built in enterprise software and telecom.
But Wall Street didn’t: Larry Ellison of Oracle eclipsed Bill Gates for a short time as the richest man in the world, Sun Microsystems and Cisco Systems were two of techs biggest out-performers of the era and the billions invested in telecommunications made the dot com cash look like chump change. Venture capitalists didn’t miss it either: Substantially more money was put into telecom companies in the run up to the dot com bust, lulled by a sense of false assurance that at least these overvalued companies had “real assets” that could be liquidated if need be.
In 2005 when people were writing headlines about “the return of Silicon Valley,” a lot of people working in technology were justifiably irritated. After all, tech behemoths like eBay, Yahoo, Oracle, Intel, Hewlett-Packard never exactly left. Silicon Valley and the tech industry in aggregate was several orders of magnitude bigger than it was pre-Internet bust, even with all the lost jobs and delisted companies. Veterans griped about sites like TechCrunch and ValleyWag making sweeping statements about the Valley, but really only reporting on a comparatively small-money resurgence in the then tiny consumer Internet space.
That focus on the sexy, social, consumer Web over everything else has only gotten more pronounced as those many of those one-time flavors of the month like Facebook, Zynga, Twitter and Groupon have become bonafide giants. The difference is that now the divergence in attention actually makes sense.
But it’s not necessarily between consumer and enterprise; it’s between old and new tech. It just looks like it’s all about consumer, because we just haven’t seen that many big new enterprise companies yet. (Plenty are building steam, and just keeping it quiet. Others just take time to get traction because traction is represented by paying customers, not just eyeballs.)
I’ve been thinking about this a lot the last few months. Once was during a conversation with Jon Swartz, the veteran tech reporter at USA Today. We were swapping war stories about having to report on big personalities like Scott McNealy and Larry Ellison and Tom Siebel back in the day. And he asked, “What ever happened to those huge personalities?”
Sure Ellison is still around, but he rarely does press and, sadly, his antics are even rarer. And the prickly-but-genius Steve Jobs has morphed into a comparatively boring do-no-wrong deity in popular Valley consciousness. There are few others left to even inspire. The biggest tech companies in the world used to be lead by outrageous visionaries. Now they’re mostly lead by boring businessmen so media trained they couldn’t say anything interesting if their life (or stock prices) depended on it.
It hit me again a few months later when I was talking to Peter Thiel about the state of publicly traded tech companies. We talked about embattled companies like Microsoft, Hewlett Packard, Yahoo and Cisco that can’t seem to do anything right except hang onto core cash cow businesses. These companies have all either had recent CEO changes or investors are calling for them. In the case of Yahoo, both are happening.
I asked Thiel if anyone could really change these companies’ fortunes or if they were just destined to be value stocks, their best days behind them. He said, “The problem is these big tech companies are just like banks now; all they do is print money. And that’s boring. What would you do as CEO? You could just massively fire people who pretend to be innovating and maximize that cash. Think about it– 90% of Google’s projects don’t make any sense. But [these companies] have [all] identified themselves as technology companies. It’s a big part of their self image.” He continued, “(Running these companies) is just not fun. People are too unfair on Carol Bartz. Yahoo is arguably in a tougher position than old media”
And it hit home again a few weeks ago during the All Things D conference during Marc Andreessen’s talk where he outlined many reasons why there isn’t a bubble in tech. More substantial than his rationale of the fact that everyone is freaking out about a bubble means we’re not en masse buying into one was his point about price-to-earnings ratios of the large tech companies. At the time, he noted that Google’s was 13.7, Apple’s was 12, Microsoft’s was 7 and Cisco’s was 7. Some of those are up since his talk, but they still hover between 9 and 15. “That’s what steel mills trade at when they are going out of business,” he said. “Essentially Android is being valued at zero. The public market hates tech.”
I agree that the P/Es of Apple and Google are somewhat puzzling. Let’s set them aside. For the rest of big tech, the market reaction isn’t necessarily without reason. Big tech–the publicly-traded companies that still control so much of our digital lives and the returns of venture capitalists via endless acquisitions–haven’t been giving the markets much to get excited about for years and it’s getting worse, not better. Worse: They’re not giving employees and customers anything to get excited about either.
This was also pronounced during the entire All Things D conference. I don’t in any way mean what I’m about to say as a knock on a competitor. All Things D is a phenomenal event and the only conference I cover these days other than our own. And while I think no one beats TechCrunch at giving startups a place to debut and assembling the biggest names in the venture-backed ecosystem, All Things D’s annual event rules when it comes to bringing together the big names in big tech. This is a conference, after all, that gets Jobs to appear on stage with Bill Gates. And, yet, most of the big tech names trotted out this year — while worthy of the slot by resume– were just utterly boring to listen to.
Nearly everyone I talked to in the hallways remarked on the vast difference in energy and content between the new guys on stage represented by Twitter’s Dick Costolo, Groupon’s Andrew Mason, Square’s Jack Dorsey and Andreessen and, well, nearly everyone else who spoke. Each of the old-tech guard sat on stage, made semi-amusing jokes, and justifications for why they are still relevant and why they’ll get better.
Eric Schmidt’s dour opening keynote that explored all the areas the still comparatively mighty Google has stumbled turned out to be the perfect table setter. Few of the others were as candid, but the same sorry-we-sucked-for-a-while-but-we-swear-we’re-getting-better justifications were there. Steven Sinofsky of Microsoft talked about how the new version of Office is more Apple-y…if only all the silos in the company can agree to get behind it. Leo Apotheker of HP explained why HP would still win in tablets and why consumerization of the enterprise would benefit HP, not say, a company great at building consumer experiences. Shantanu Nayaren of Adobe said the whole war over Flash with Apple was overstated, but fortunately other vendors would eventually beat Apple anyway so it didn’t matter. Stephen Elop of Nokia talked about how Microsoft’s operating system would suddenly make Nokia a smart phone powerhouse. And finally, the conference fittingly closed with AT&T CEO Ralph De La Vega answering every angry volley from Walt and Kara about its loathsome network with justifications for why if we only give them the T-Mobile acquisition, all will be fixed. Is anyone buying any of this?
It wasn’t the problem of the conference’s appeal. As a competitor, I’d love if that were the case. But realistically who in big tech would have been more riveting? You can’t have Steve Jobs every year. Meanwhile, there were plenty of people in the audience I would have rather heard from, including senior executives of surging companies like Facebook, One King’s Lane, and Yelp.
Is it any wonder there was such a frenzy around LinkedIn’s IPO? At least it’s a new script. It’s like when you used to be bored in class and a bird flew in the window and everyone went nuts. A bird probably wouldn’t be that exciting if you were outside playing frisbee.
It didn’t used to be that way. Big technology companies used to do interesting things and if not, many had cowboy personalities to make boring businesses interesting. But who wants to be head of a Nokia or a Microsoft or a Cisco or a Yahoo now? All of these companies have powerful entrenched user bases that aren’t going anywhere, and they’ll all make that justification anytime an analyst complains about their growth. Great. But their businesses are irrevocably declining if not in actual users, in terms of market influence and ability to recruit anyone talented. They can’t do wildly innovative things because stabs at innovation have failed so many times. They are in a total duck-and-cover mode. Who wants to be in duck-and-cover when a world of lucrative startups are exploding into the public markets?
In the last boom era, the publicly traded technology companies were also surging. Cisco’s John Chambers was nicknamed the Pied Piper of Wall Street. Today he is fighting for his job, along with Microsoft’s Steve Ballmer. In fact, their biggest selling point may be that so few great leaders want their jobs, and there’s no natural successors in the wings. Those people have all left for other opportunities. (There goes another one with always-the-bridesmaid-never-the-bride Ann Livermore’s departure from HP.) Then there’s Yahoo: The company so siloed and dysfunctional it’s made Terry Semel, Jerry Yang, and Carol Bartz– three respected leaders with totally different skill sets– each look incompetent. These companies have all essentially become Novell.
Out of the entire tech universe, three legacy companies have stayed as relevant as any startup: Apple, Amazon and Netflix. All three are testaments to visionary founders with a strong will who aren’t afraid to utterly disrupt their companies and cannibalize their own businesses.
The only other legacy tech public company I’d put near that camp is Oracle. And the reason that Larry Ellison outmaneuvered his entire industry? By predicting what is happening now: That the IT revolution was over. That tech was no longer a differentiator for his customers. It was merely table stakes to being in business, like having desks, power and phone lines. He argued the answer for growth was a sheer land-grab of already installed customers who would pay ongoing maintenance and upgrade fees until seemingly the end of time.
Back then everyone said Ellison was wrong. Top business schools wrote new case studies on why tech still mattered, software-as-a-service startups argued they could still unseat Oracle in big deals, and truckloads of experts said that hostile takeovers in the software world would never work because the integrations would be too messy and those companies’ real assets– programmers– would all leave. But Ellison was right. (Although I’d argue at some point a new generation of software will unseat Oracle and its acquired parts. It’ll just take a lot more than the first wave of software as a service companies had to offer.)
In previous decades of Silicon Valley companies were building a new industry, so almost all tech companies had growth potential. Now there’s a stark line between mature technology and technology that is still growing in aggregate. They are simply different industries. Arguing this is still one industry; that all of the companies who make technology are investing in change is like saying any company with a Web site is an Internet company.
As this discrepancy widens between 1990s era tech and today, I was reminded of an interview Thiel did several years ago with CNBC where he was asked what large cap tech names he was bullish on. He answered that other than Google there were no large cap tech names, because companies like Intel and Microsoft are inherently anti-technology companies. Their success, he said, is rooted in the status quo. The best of all possible worlds for them would be the global technology user base never adopting anything new. CNBC’s anchors looked confused at this concept. Microsoft isn’t a tech company? Not too long ago, Microsoft was *the* tech company.
But Thiel was right. Too many of the companies that built out the IT revolution and Silicon Valley are “technology” companies in name only now. They aren’t disrupting anything, they are doing the opposite. They are desperately clinging to the status quo. They still have massive amounts of cash, massive installed user bases that won’t be switching loyalties anytime soon and those are really the only two reasons they still matter. To fuse Thiel and Ellison’s arguments: They are banks whose job is to print money paid by people who are slow to change their digital habits. Even our parent company AOL is funding its radical turn-around largely off of people who don’t know they no longer have to pay us every month for a subscription to the World Wide Web. (I’ll at least give Tim Armstrong credit for being interesting on stage.)
But it’s even more true now that huge, lucrative opportunities have sucked anyone remotely talented out of those companies. At least people were wary of working at a startup back then. Now it seems risky not to be at a startup. LinkedIn and Facebook alone have proved social media wasn’t a fad. These companies, along with Twitter, Zynga, Groupon and others, are legitimately the most interesting stories in the American business world today, as they play central roles in global political uprisings and represent some of the most anticipated stock market debuts of the last decade.
We can point out Groupon’s shortcomings and risks every day: The stock will still be in high-demand when it debuts. Because the reality is there are only a handful of companies actually inventing new technology and businesses among the biggest public traded tech names today.
The sooner we realize this is no longer one industry, the sooner we can stop the silly bubble comparisons to 1999 and get a handle on why these issues will keep popping. We all want something that’s actually growing and disrupting and inspiring. Silicon Valley and the start up world has gotten to enjoy a lot of it over the last ten years, and Wall Street is sick of just watching.
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