By Georges van Hoegaerden

I owe HP (Hewlett-Packard) a debt of gratitude; in the mid 70s (when I was 14 years old) the HP-41C, the worlds first alphanumeric programmable calculator is what sparked my interest in technology. From a beautiful but too quiet medieval village in Holland (Woudrichem) I wrote applications for it that won awards (and was paid in new accessories) and found a mental connection with some of the developers who wrote about their role (and hobbies) in a monthly newspaper distributed to all owners (think of it as a Facebook group before Facebook).

The members of the development team wrote passionately about their incredible innovations explaining why they designed the HP-41 the way they did, its extensibility, its use in space etc. I read that magazine and all other publications related to it from cover to cover. In my eyes, HP was synonymous with great design, groundbreaking innovation and flawless execution of marketplace models.

A lot has changed since then, not surprising since HP chose to move from a technology specialist to a technology generalist to keep Wall-street happy. With a big hammer it stuffs the market with massive marketing vigor and manages to stay just ahead of its competitors, for now. But HP has lost its vision, agility and enthusiasm to innovate and fundamentally change the computing landscape.

1/ Longevity by association doesn't work
HP never grew up to own a part of the evolving technology stack from hardware, to software to services (or better yet, the consumer experience) and still today is making little more than me-too gestures with large manufacturers to suggest they own a unique proposition in the application and services technology segments. HP has become a master of associating itself to many things it does not own or add value to (just like the behavior of the many parasites in our industry).

To give some examples: HP rode the gold rush of the PC evolution (driven by Microsoft) and then had to buy Compaq to win the battle in a market that is still 40% owned by no-brand suppliers. HP rode (and lost) the database war by buying a stake in Informix (rather than buying it) even though it sold more servers with Oracle as the primary database (HP's stance propelled Oracle bed-fellow Sun then). HP partnered with Apple to deliver an iPod with no value add, only to kill the program one year later. HP acquired Snapfish in the consumer photography space and never made any attempt to improve its convoluted photography strategy. Examples abound.

So, the key for HP is to own identify and own certain technology ecosystems (from beginning to end) and redirect its massive R&D budgets to build proprietary technologies that attach customers to HP and HP only.

2/ Lacks product vision and execution
Mark Hurd is a great operational CEO with a proven ability to optimize an engine so it consumes as little gas as possible, but sustainability comes from engineering new engines only HP can produce that run faster and better. Mark can continue to hold as many fire-side chats as he desires but that vision is unlikely to come from employees that have been with the company for more than twenty years. Innovation from within is likely to produce nothing more than the same.

With all of HPs fragmented and discombobulated assets in many segments such as document management, printing, imaging it should have developed by now a cohesive customer facing experience that ties these products together like Apple does with music. The company needs a CTO with business experience and an aptitude to fundamentally tap into continuously changing consumer behavior and be open to outside counsel rather than adhere to a stifling "process for investigating outside ventures to allow equal access to these firms and inventors."

3/ Treat people differently
For more than 10 years I've heard stories about how people took advantage of a one-sided aspect of "The HP Way", the ability to stay with the company for many years and move from one division to another to escape being confronted with the outcome of their own decision making. Some people left HP only to make three times the money as an independent consultant working for the exact same group. But "The HP Way" also describes a high level of achievement and contribution that because of todays large and hierarchical org-chart (with many dotted lines) is hard to measure and manage. HP needs to reorganize just once, not based on product - but simply based on ecosystems that align with customer experiences.

Many of HP executives have disclosed to me that the company does not have the engineering talent to build its own product strategy and that probably isn't helped by rampant stories of how HP (a profitable company that should not have a need to layoff employees) is now allegedly laying off people that have worked at the company for 20-years, challenging their severance payments and disallowing them to ever work for HP again. Can you imagine how fast that news spreads to Silicon Valley developers? Not too smart HP. No surprise that it can only attract the talent that favors a paycheck over a challenge.

Start with a compelling vision
But amazing things happen when you drive a company with strong leadership, vision and execution. As a CEO I have experienced that the original assessment of employees fundamentally change when they are confronted with visionary leadership. They wake up and become energized, feel part of a common cause. So, the way to optimize a business is not to simply layoff people but to deliver a compelling vision to which people can either subscribe or not. The employees that don't will walk themselves to the door, especially when you turn up the volume.

So, turning HP around is actually very easy. It requires the innovative mind that "believes nothing it hears but anything it sees". It requires a visionary who cares about nothing but customer adoption, and an ability to model a company towards its purchasing power. Everything else is simply irrelevant.

I know HP despises it when I reference Apple (only to whisper their name in a restaurant), but the company simply has a much better DNA than HP. It is not too late for HP to change but it should start by reading "How to compete with Apple" in order to assess whether it wants to make the real sacrifices that are inherent to innovation (rather than resort to business process optimization).

Call me for a fireside chat, Mark. I would enjoy repaying my debt of gratitude.

Tags: HP, Microsoft, CEO, Innovation, Integrity, Oracle, Apple

By Georges van Hoegaerden

Apple is fundamentally different from any other company in Silicon Valley, but certainly not perfect. Its photography strategy is flawed (in the same way its competitor's are) and its iTunes Store needs to adopt true meritocracy if it does not want to alienate the record labels (movie subscriptions anyone?), its wireless Networked Storage strategy needs work as well as Apple TV and the MobileMe service. But in many ways Apple is ahead of the pack but not immune to the inherent risks.

Here is how technology companies, such as HP, Dell, Nokia, Symantec, Cisco need to change in order to compete:

1/ Innovate from the top, then continuously out-innovate themselves
Innovation is about taking a look from the outside-in with a fresh perspective and the purity of a new-born. The way to innovate is using my mantra of "believe nothing you hear, believe anything you see" (SM), meaning, the only thing that matters is how many people that you want using your product, are using your product. Analysts are useless in this assessment, as they simply use artificial market definitions to tell companies what they want to hear. Once you define real innovation, the next step is to continuously out-innovate yourself, ensuring that the pace of innovation is untouchable by others, and thus sustainable.

2/ Build irresistible products
Many of the aforementioned companies are in the technology commodities business. I wouldn't want to be in the business of building a car where the rest of the auto business is forced to use the same engine. There is only so much a pretty exterior can do to hide the ugliness of aging underperformance. As the dependency on operating systems shifts from the desktop to the web, now is the time for these vendors to escape commoditization and build their unique web-operating-experience.

3/ Develop a unique experience and maintain it
Too many technology companies in the Valley are "stocking stuffers", they stoically stuff a "market" (see markets don't exist) as defined by analysts and predecessors with incremental point products to eek out a larger percentage market-share than their competition. They "trade" market-share numbers as if they are the currency, that is - until "market" definitions change. But products don't sell, the experience does. People buy an iPhone, iPod because of the ecosystem behind it. Additionally with the lifecycle of many technology products being so short - around 3 years - renewals by recurring customers are vital to sustain growth. A one off product that made a promise and told many lies is devastating to the renewal rate and even the return to the brand. So, the emphasis should be on the experience -say music or photography - and innovate from the top around those.

4/ Change the culture: incent continuos innovation, punish stability
Corporate culture is fundamental to creating sustained innovation and for many large companies that means the CEO needs to exhibit that exemplary behavior. (it is somewhat humorous to see how VPs often mimic even the dress code of their CEOs). CEOs whos core competency is operational efficiency (HP, Cisco, Dell) need a right-hand man with executive privileges to cut through the bureaucracy and fundamentally realign the company along new macro and micro economic differentiation. Divisions need to be realigned to match customer experiences (not product groups) and be reduced into a one-level hierarchy. That ensures there is no place for employees to hide.

5/ Invest in innovation
Innovation as defined by bullet 1 is sustainable, spending money on stuffing markets is not. But the advantage large companies have over external innovation sponsored by Venture Capitalists is that they can think big, they are in a unique position to redefine customer experiences that ties seemingly disparate products into a cohesive offering that is much larger than the sum of all parts. Unlike startups, large companies are uniquely positioned to focus on the value of disruption rather than be restrained by the cost of entry. Large companies can build solid platforms upon which an ecosystem of independent software vendors can thrive.

Most of Apple's competitors are now simply chasing the iPhone strategy or music strategy, as they've chased market leaders for so many years. But that will never work. Every company has its own core competencies and its challenge is to become the innovator in the category they can make theirs.

Tough choices lie ahead for the technology titans. Those that change will survive.

Tags: HP, Dell, Nokia, Symantec, Cisco, Apple, Markets, Apple TV, Eco-systems, VC, IPhone

By Georges van Hoegaerden

Every week I receive a new offer to convert my analog AT&T telephone service to Comcast's Voice-over-IP at a very affordable price of around $30 per month, combining Television, Internet and Phone (hence triple play) from a single provider. And I have been very close to switching over. But nothing makes it more clear to say no to them after having spent another frustrating hour at 5am in the morning on the phone trying to restore my repeatedly disconnected internet connection.

I do not usually use my own circumstances to highlight a vendor but this example emphasizes a much bigger issue: how destructive the experience can be to the acceptance of a product or service. Vendors need to learn that what sells is the experience, not the product or service.

Case in point. From the old days of Palo Alto's Cable CoOp (and MediaCity), the original provider of broadband some 10 years ago and final acquisition had landed my Television and Broadband service under one roof with Comcast. Fed up with receiving two separate bills for about 5 years I called in to Comcast to merge the two accounts into one. Four endless calls (one each month) and cumulative no less than ten hours later, I decided to throw in the towel and visit the Comcast store, one week before the inauguration. There, a helpful gal quickly assessed the situation, merged the two accounts and gave me a new cable-modem to serve my needs. Proud of my newfound face-to-face experience I returned home, installed the new modem and went on with life...so I thought.

Returning home from the inauguration in Washington DC a week later, expecting to relive the event we had witnessed in-person, I could not be more disappointed to find my Comcast DVR empty. A call in to Comcast led to the quick discovery and admission that they had disconnected ALL my cable activities by installing a physical terminator on the side of our house. Eager to reconnect and four hours later, with the help of a knowledgeable service technician my service was restored. Since then, consistently every month around billing time my service is being disconnected, requiring me to put in another 2 hour call to Comcast to repeat the saga and reconnect the service.

That gives new meaning to their Comcastic slogan, doesn't it. Needless to say I am not going to entrust Comcast with my phone service, or any other service.

But this case is symptomatic for many other consumer technology experiences we encounter.

We confirm again that:

• In this automated world face-to-face interaction still trumps phone support
• Customer relationship management does not come from an automated system (nor does it come from sales)
• Support is crucial to selling more services (or losing them) and should have profit and loss responsibility

But to Comcast specifically it proves it has no business in penetrating our life with consumer products of any kind. Let alone your most sacred connection to the outside world, your telephone. We named the Comcast DVR the most horrid consumer device ever built and combined with their incapable support provides for an unacceptable user-experience.

Just like AT&T in mobile telephony we expect (and demand) a consumer vendor like Apple to reduce Comcast to its core competency, providing nothing more than a reliable network connection.

I have high hopes for that new Apple TV coming our way soon, that with the help of the government mandate for cable-cards that is already in place, will make the choice for best-of-breed back-end provider very easy. I'll be the first one to take a hard look at the network provider.

Tags: Consumer, Experience, Comcast, CrM, Apple

By Georges van Hoegaerden

I am not going to add to the craze about Steve Jobs (Apple CEO) health rumors on the internet, and I seriously hope he recovers quickly and in excellent health.

Anyone trying to sue Apple or its board for inconsistent information, should back-off and be glad they are not faced with a similar diagnosis. One of my friends (much younger than Steve) was recently diagnosed with the same type of (a rare) cancer and is apparently being treated by the same doctor at Stanford. Having heard his stories first hand, I side with Steve that he cannot project with accuracy what is going to happen as 1/ what causes cancer is still fairly misunderstood (follow the cancer series on Charlie Rose and you’ll understand) 2/ his rare type of cancer (with about 8 known derivatives) is even less understood. So, give the man some space.

Steve has proven to be the best guy to ever run Apple, but that doesn’t mean the company can’t improve. Here is what I would do, given the chance:

1/ Making the current OS work “as promised”.
Snow leopard is on its way and without knowing any of the details the OS needs some fundamental improvements in Expose and Spaces that are simply not working correctly, those (and many other) flaws have been in OS X for quite a while and since it affects the user experience, that is simply not acceptable within Apple standards. It is clear, in many other areas, that the rapid pace of innovation in other areas has taken its toll on the focus on the OS. In addition, the OS needs an Applications Store similar to the iPhone App Store.

2/ Consumer OS, major OS overhaul.
It is time for Apple to define a new trajectory for the OS. The current OS trajectory is too technology centric and focuses primarily on local operating capabilities. Today’s use of computers requires a transparent blend between offline and online capabilities. I have formulated new specifications of what this new hybrid OS should look like, that is more powerful and easier to use (and gesture ready) than any of its predecessors. This new OS is a continuum of the iPhone experience yet dramatically exposes the increased power of a personal computer platform. This OS will provide similar experiences across the Apple TV, iPhone and computer platforms.

3/ Increased focus on digital photography.
Music and photography are the two most important applications consumers use. Digital photography needs fundamental new focus and a new application that manages photographs across offline and online repositories. Think of iTunes and the iTunes Store for digital photography. We have formulated the specs for these new capabilities. In addition, Apple should explore new camera technologies as well (for inclusion in later devices), the current dSLR vendors are leaving behind unique software opportunities that can improve the quality of images dramatically (even without changing the hardware).

4/ Put support in product group P&L.
Apple’s support is better than other vendors’, but a little better is simply not good enough. The organizational structure of Apple separates support from product groups, which, in every company, disconnects the product promise from its realities. I would make product groups responsible for their own support P&L, ensuring implementation of innovation is a closed loop. No longer will product groups be able to ignore the 5000+ complaints about a single bug in Apple TV, for example.

5/ Network backup (Time Capsule) needs an overhaul.
The Airport wireless base station is a fantastic, no hassle, device that just works. The backup capabilities with Time Machine that uses a USB connected disk (to the Airport) is fundamentally flawed. These networked storage devices have no fsck (file-system-check) built in that prevent disks becoming unstable because of lost network connections or other aberrations that can occur. Based on the documentation I assume Time Capsule also does not include fsck and is therefor also unreliable as a backup drive.

6/ Broaden adoption of Professional Applications.
Most of the professional applications for photography and movie editing simply provide tools to edit, requiring the operator to understand the often complex language and methodologies involved. But the power of professional tools becomes really obvious when the application provides methodologies that hide the underlying composition of tools. Through the use of styles, derived from a marketplace, both Aperture and Final Cut Pro can be dramatically enhanced to provide new capabilities that expedites new editing techniques for experienced users and enthousiasts.

7/ Implement movie rental subscriptions.
The iTunes store needs a movie rental subscription model to adopt the ‘old’ Blockbuster and Netflix model, many americans are used to. A fixed monthly rate allows you to watch a certain number of movies per month, perhaps with rollover credits to compete with alternative distributors that can’t follow due to their dependence on low-usage profits.

8/ Apple TV needs a tuner, make that two.
Apart from a new “front-row” user interface (supported by a new OS as described in 2), the Apple TV needs to embrace DVR capabilities. Similar to the iPhone and AT&T, Apple should take a swing at giving customers a better end-user experience (and integrated with iTunes content) with Comcast, or else threaten to take the business from under their noses. The cable-card mandate makes it possible for virtually any vendor to displace the current set-top-box and DVR experience, and I would bet customers would pay a premium to get rid of the Comcast experience.

9/ Build Apple TV server.
Longer term (preferably after a deal with Comcast) I would like to see an Apple TV with tuner capabilities feeding all my TVs, rather than having individual AppleTV and DVR tethered to each to TV. Record once, playback anywhere (for traditional and new media).

10/ Deep dive into enterprise server sales.
The enterprise server strategy of Apple is a mystery to me. Having built a couple of new business revenues in large business (Oracle, HP) and SMB segments (Symantec) I don’t see Apple apply the pressure that warrants building products for this segment.

Again, as a 15-year empathetic Apple user I would like nothing but to see Steve return soon and hope this blog will consequently void itself.

Tags: Apple, IPhone, Apple TV

By Georges van Hoegaerden

We spend a lot of time with consumer technology companies and developed the following rules for success:

1/ Undeniable benefit.
The majority of companies accept the path of evolution developed by the first entrant in that segment and use manufacturing optimization to drive down cost and price as the basis for greater customer adoption. While that is a viable business strategy for some, real disruptive innovation is less price sensitive as it triggers new behavior. New behavior in turn, taps into new allocation of disposable income.

So, rather than looking at the competition, technology companies need to have a sound strategy as to how they will reach 30% adoption rates of the total-addressable-market that the current vendors have not. Macro-economics, the buying decisions and experience beyond just the scope of technology are important to assess.

2/ Impeccable product quality and user experience.
Consumers are both demanding and often uninformed about the technology language that many vendors impose on the use of their products. The combination is a battleground from which only well developed products emerge. Simplicity is key (and too many usability options are NOT good).

Many technology companies develop products with an engineering centric view of the world, insufficiently realizing that no consumer wants to learn a new language to understand how to use a technology product. Consumer centric interfaces and methods are just as important as product intelligence.

3/ Great support experience.
Support is no longer just a painful cost center to a business, great support can be an asset that recovers the mounting cost of product returns and prevent market adoption issues from spiraling out of control. So, great support helps perfect product quality, but only if it provides a direct closed-loop back into development. Great consumer companies engage with their customers directly and get better at defining what a market-ready product really means.

Technology companies with thousands of entries in their support and third-party forums are ignoring free research that will make their product better. Support cost should be captured in the product P&L and managed by a single manager, responsible for R&D and support. Runaway support cost is often the result of a product that simply isn’t ready for prime-time.

So, macro-economics, product quality and product experience are the main ingredients to create success for consumer technology companies and in turn will provide incredible loyalty for the next version.

Tags: Consumer, Disruption, Markets

By Georges van Hoegaerden

Jupiter-Images finally sold to Getty-Images after a similar attempt in February of 2007. With estimated revenues of around $79M (when last tracked) and con-jointed debt of $95M with other Jupiter Media properties, Jupiter-Images sold to Getty-Images for only $96M in cash. Sounds like a fire-sale to me.

Imaging super stores make no economic sense, as described in this blog before.

1/ Images are like art. Taking preferences of buyer and seller into account, they preferably sell only once (or as few times as possible). No buyer wants that image to appear in similar publications and so every transaction is unique. Super-stores, however, are modeled to provide one-to-many sales transactions and are therefor NOT suited to support the image exchange marketplace.

2/ Except when images are produced on a commissioned photography basis (for example by Getty-Images staff photographers), the image super store actually does not own the image, it merely has a right to operate as a reseller. Nothing would stop a photographer from trading his images somewhere else, dramatically deflating the value of the super-store.

Fact remains that $22B of images are exchanged every year, most of it (90%) not through online transactions or the sum of all super-stores. This represents a big opportunity not many Venture Capitalists understand, as it is a market-play rather than a pure technology-play. But established companies may be able to build an iTunes of images to feed their ecosystem of products.

In the meantime, Getty-Images (now private again) keeps on puffing itself up like a puffer-fish. The question is: how long will it be able to hold its breath.

Tags: Photography, Getty-Images, VC, ITunes, Jupiter-images, Revenues, Private Equity

By Georges van Hoegaerden

When Facebook decided to integrate new application capabilities that were first available as a third-party application from a marketplace participant, they broke the cardinal rule of marketplace meritocracy. When Getty Images’ staff-photographers allegedly took new pictures similar to previously top-selling pictures from participants they too broke a fundamental marketplace rule. When Amazon.com optimized sales results based on margins requirements they too broke many of the free-market rules as described in “Look, but don’t touch”.

By calling themselves platforms or marketplaces those companies misled their participants and engaged in what I would characterize as false advertising. Not only did the suppliers expect to be treated equally and become successful based on a true meritocracy, buyers expected to get an untainted view of that meritocracy to make informed purchasing decisions.

Technology platforms need to obey to a simple macro-economic marketplace definition:

A marketplace connects unrestricted supply with unrestricted demand through an un-arbitrated and transparent exchange.

Marketplaces thrive because they support free-market principles, and as a result they level the playing field for all participants. No longer are unfair advantages for participants defined by geographic location, subscriptions, volume or other artificial boundaries, but simply by the value and the price of their products.

Here is what platform vendors, to maintain free-market principles and thrive, should stick to:

1/ Don’t employ sales people that sell marketplace content. Sales people give preference to specific content which violates the integrity of the marketplace. Sell the effectiveness of the marketplace mechanism instead.

2/ Don’t market specific content, but market the effectiveness of the exchange. Unfair advantage is an attribute of a premium market not a free-market.

3/ Don’t arbitrate. Anyone should be able to participate, participation fees (that anone in the target group can afford) are okay.

4/ Don’t hide sales results. Transparency of the effectiveness of the marketplace is crucial to invite new entrants on the supply and buy side.

5/ Don’t participate in the marketplace yourself. Clearly seperate yourself from the participants, platform vendors should just build the platform, not the content.

Technology companies that are building platforms should check out our cardinal marketplace rules and investors should measure their platform companies on the compliance to those rules. Investing in a premium market business is fundamentally different from investing in a free-market platform business. Funding requirements and use-of-proceeds differ dramatically.

I’ll make the point again that investors should understand macro-economics impact before they invest.

Marketplaces are not for-free and still support capitalism, but the money will be made by platform owners from a transparent margin on the exchange (and sometimes carefully applied advertising opportunities). Diligent consumer marketplaces achieve winner-takes-all participation levels and massive exchange volumes and revenues. eBay and the Apple AppStore are great examples of more disciplined marketplaces.

Because of the virtually unlimited global reach of the Internet we have an incredible opportunity and obligation to present the world with free-market platforms that treat all participants fairly and with respect.

Let’s stop whining about the authenticity of our presidents, and instead, as the creators of the technology industry show the world how we turn authenticity, embedded in our technology, into a massively sustainable advantage.

Tags: Platform, Amazon, FaceBook, Getty-Images, Photography, Macro-economics, Meritocracy, Marketplace, Markets, Premium

By Georges van Hoegaerden

Is the question that was posed to me recently. My short answer is: macro-economics.

1/ Apple technology is proprietary, all the way
Apple is creating a premium computing platform, rather than an open and commoditized one. Premium markets precede open markets and dish up much higher profit margins. Proprietary environments also allows Apple to control the differentiated customer experience.

2/ Apple is focused on lifestyle computing
Apple is focused on creating solutions to support our lifestyle - a massive addressable market - that consists of music, photography, video etc., rather than esoteric office software for people with lots of technology expertise.

3/ Apple is building an ecosystem
Apple is focused on supporting a differentiated ecosystem, rather than building competitive technology silos. The sum of all lifestyle components interacting with each other make it unique. The iPod remains competitive because of the iTunes store that is accessible through a (Mac) computer and vice versa. Their capabilities are tied to each other.

4/ Apple is building an unique customer experience
The experience of purchasing, innovative design, great product quality, and unique (in-store) customer support provides the evidence of a company that wants to please you.

There are many other differences, some of which also lie in a fundamentally different product development strategy. But top-level differentiation drives micro-economics.

Other companies face an uphil battle if they don’t compete with Apple at the macro level first.

Tags: Apple, Margin, Mac, Eco-systems, Proprietary, Software, Platform

By Georges van Hoegaerden

We can look at Microsoft and Apple and compare them strategically: Microsoft is the plumbing for a commoditized desktop computing market where Apple delivers a unique computing experience based primarily on its proprietary technology stack. Microsoft as the complacent market leader, Apple as the wannabe - fighting hard to win share. Apple, in tune with today's computing lifestyle as the innovator, Microsoft as the raw execution machine, buying innovation where needed.

But for me, in the shoes of an end-user, all of that is summed up in a simple way:
Type in CNN in Safari (without url etc, just as we wrote it here) and then type in CNN (again without any internet "grammar") in Explorer. Here is what you get:

Microsoft (standard installation Windows XP):


Apple (standard installation OS10.4+):


Bottom line: with Apple you get what you expect, with Microsoft you get spun into their web, literally.

Maybe this is Microsoft's tactic to produce page hits to compete with Google: any user that doesn't know how to type in a URL will be rerouted by default to MSN search. I call that cheating, Microsoft. But even with those tricks, you still need Yahoo!

Getting and keeping customers is about integrity and authenticity, not sneaky monetization techniques to squeeze every cent out of every visitor - leading them down the endless path of search. I am glad Apple is around and here to stay. There is nothing better than getting what you want, quickly.

BTW: talking about Microsoft's complacency, does it still not have anti-aliasing sorted out - or is that the big improvement in Vista?

Tags: Apple, Microsoft, Experience, Yahoo

By Georges van Hoegaerden

Since a platform is the technology foundation for a marketplace, platforms - to achieve extraordinary growth - need to instill the rules of marketplaces as we laid them out in our previous post.

But not all platforms are created equal and some self-proclaimed platform vendors do not adhere to marketplace principles. That could mean you as a provider think you subscribed to a meritocracy - with equal opportunity exposure - yet other participants (your competitors) get pay-to-play advantages. Potential buyers in that tainted market are actually shopping in a premium market, not the free-market they expect to be most economic and trustworthy.

Other synonyms of the same phenomenon abused in the technology industry include: ecosystems, exchanges, communities and networks which all serve identical needs in connecting disparate supply with disparate demand, something a premium market is unable to do.

Consumer companies understand the freedom of choice customers demand. Enterprise software and services vendors have long basked in the glory of premium markets and have a long way to go in order to truly build winner-takes-all free-markets, which in total size are often larger in size than the total size of premium markets in that category.

In the Enterprise space the majority of customers (roughly 80%) buying products or services deviate from its intended design and want to add on, integrate or correlate those off-the-shelve configurations with other ones. Enterprise customers often spend more money on customization than they spend on licensing fees for say, Oracle products. Hence the requirement for a true marketplace of additional enterprise components (check out Serena, great concept but marketplace execution and marketplace compliance - yet to be developed - will be the tell-tale of their real success). Salesforce.com's Appexchange seems to provide the best proximity to a free-market of applications we've seen, although we have yet to verify its integrity against the marketplace rules.

Developer programs from companies like Oracle (with OTN), Microsoft (MSDN) and others use surrogate models of marketplaces to mimic, but not truly deliver on its powerful benefits. Go visit their websites and you'll notice no mention of third party products. There literally is no marketplace, although Microsoft has a link to "a library", if you can find it.

Apple (with the iPhone Developer Network) is experimenting with its rules but apart from compliance to the free-pricing rule, its overall compliance to a free-market is minimal. And, today, they don't need to. Apple still has time to deploy some premium market tricks as long as Google with Android doesn't deliver on a real marketplace for developers early.

As a software provider you may need to run on and comply to a major vendor's technology, just don't assume a developer network, exchange or community will make you rich - not until the marketplace supports a true meritocracy. And for that, again, real marketplace principles need to be deployed.

Tags: Marketplace, Oracle, Microsoft, Apple, Google, Android, Enterprise, Networks, Eco-systems, Meritocracy

By Georges van Hoegaerden

Getty-Images pulled it off as we indicated would happen, and sold itself to private equity group Hellman & Friedman LLC in San Francisco (and the "network of the private equity group" which apparently includes the Getty empire) for a little over 2x revenues, assuming also an additional $300M in debt. Someone clearly felt that was an accurate price for its organic growth business: "Wall Street was paying more attention to the stagnating core business than to its emerging segments."

Indeed, non-organic growth is hardly ever a sustainable endeavor, lacks core competency and focus and often hides many skeletons in the closet. Now the fun part of discovering its real value starts, although the company does not forecast a lot of changes according to this interview with Jonathan Klein, Getty-Images' CEO and PDN. We could suggest a few fundamental changes along the lines of my blogs and then some.

But anyway you cut it, this will turn out to be good for photographers and the market. New competitors will spring up and VCs will now perhaps see the value in supporting imaging marketplaces. So for that, we need to congratulate Getty-Images.

Tags: Getty-Images, Investment Banks, Revenues, Wall-Street, Debt, Organic growth

By Georges van Hoegaerden

We could debunk every statement Getty-Images made with regards to its recent earnings call but we've essentially done so in our extensive blogs about the company. Apart from the negative outcome of the call, we instead want to highlight the systemic attitudinal problem of the company.

First off, Getty's success is based on the fact that it believes it can predict how images (or other media assets) are going to be used by the buyer. It continuously re-purposes images and image rights to meet a supposed buying trends it is never going to be able to predict. With massive changes in photography Getty has frequently trailed trends rather than enabled them. The usage of the image should be determined between seller and buyer, with Getty's infrastructure merely supporting that transaction.

Second, the usage and type classification in the earnings call is the kind of double dipping I've seen many companies in trouble do. There is a dramatic overlap between editorial, creative, rights managed, royalty free, royalty ready and a myriad of other popular image definitions. The sole metric of success for the company is number of images sold at what ASP, and at what cost. No Wall-Street investor will be able to make sense of the fog Getty has put up in the conference call to hide the fact that organic growth is miserable.

Third, Getty arrogantly describes their (lackluster) performance as the market trend, as if they are the market. No, Getty, the market of image usage is actually growing faster than you are able to support. The real news is that Getty is losing market-share.

The lack of transparency makes Getty-Images an un-investable business, both from a market and acquisition perspective. The bottom line from the call simply confirms that, forget about everything in-between.

Tags: Getty-Images, Growth, ASP, Wall-Street, Content, Organic growth, Investment Banks, Images

By Georges van Hoegaerden

While there may be some value left in Getty-Images, remodeling an "old-house" in this case appears to be much more expensive than building a new one. We just completed a formal business plan to build a real photography marketplace for less than $5M first round (est. $13M total, less than 1 fiscal quarter of Getty's capital expenditures, to shed light on Getty's inefficient business model).

The "body" of the Total Addressable Market is $22B / year, ignoring the size of the Long Tail of photography Getty-Images has no penetration in, we will. So, a $13M investment would yield $600M in annual revenues based on 30% market-share (even if we were to cover "the body" only). A darn good business, and best of all, it will help great new photographers get "free" and transparent access to buyers. So good karma too. The walled gardens of the imaging marketplace will be torn down. Call or e-mail me if you want to play.

Tags: Getty-Images, Free-market, Funds, Photography, Long Tail, Marketplace, Markets, Revenues

By Georges van Hoegaerden

Getty-Images appears to be having trouble getting sold for $1.5B according to an article in The New York Times today. Perhaps the 40+ investment banks on Wall street and an equal amount of large private companies that visited our website really took our Puffer Fish analogy to heart.

So what could be done with Getty-Images? The problem with finding an acquisition partner is Getty-Images' hybrid business model. For a technology acquirer the services business with staff photographers is a burden they will not want to swallow. On the flip side, very few other services companies than perhaps the Associated Press can find solace in the photographer factory that is an integral part of Getty-Images.

1/ Buy company at a decent value
2/ Separate content producer business from content distribution
3/ Privatize each
4/ Sell content production business
5/ Revamp content distribution

ad 1/ To establish a fair price I am eager to see the operating plan metrics separating content production from content distribution in order to find out to what extend both lines of businesses have suffered from being under one roof (there may be some opportunity hidden in there)

ad 2/ Content production is a business model that, in today's world, needs to be separated from distribution. With the internet in place as the conduit for distribution, very few company can still afford to compete with the content produced by a "free-market". There is some remaining value left in the production of "premium" content for a "premium" audience, in the same way the Associated Press is able to provide this service to a confederation or co-op of newspapers.

ad 3/ Build companies that focus on what they do best, one produces content - one distributes it. Not within a single company or P&L or board. Each with its own growth trajectory.

ad 4/ Just like in the "premium" production of news articles (where bloggers compete), the news media will require a "premium" production of editorial photographs that has some trust associated with it. Perhaps a deal can be struck with AP - or a new version of AP can be created with identical goals. Getty-Images already has established a large installed base of agencies who can lease resources on a subscription basis.

ad 5/ Long term, content distribution is where the money is. The Long Tail of photography is massive, much larger in total image exchange than any Super-Store will ever be. Thanks to the Internet. But to build an effective free-market, a core of premium supply is needed to create its initial pull, Getty-Images certainly has that. To make this new company a winner though, it needs to truly support free-market principles, something very few companies can pull off.

We'd be happy to assist in the assessment of the Getty-Images acquisition value along the lines of the aforementioned strategy and even more in the post-acquisition execution. Our passion for photography, the ever increasing reach of the internet, and the value produced by all photographers around the world creates a fantastic new opportunity.

Tags: Getty-Images, Wall-Street, Investment Banks, Associated Press, puffer fish, Hybrid, Business Model, Content, Premium, Bloggers, Free-market, Super-Store, Long Tail

By Georges van Hoegaerden

So, if you've read my blogs on the imaging market here .... why would you plunk down $1.5B to acquire an Image Super Store like Getty-Images (alias Getty).

Consider this:
1/ Non-agency images are always owned by photographers not by Getty
2/ Getty's assets can vaporize quickly, photographers can switch their assets to a better marketplace instantly
3/ The vast majority of images in the world are not transacted through Getty
4/ Getty qualifies premium photographers not premium images
5/ Getty needs to cannibalize its business model in order to meet the Long Tail market requirements
6/ Getty is diluting focus to higher margin media like film and music, fat chance
7/ Getty has the expensive overhead of an agency, with declining image ASPs
8/ Hundreds of new and competing sites indicate Getty's non-supremacy

There is value in Getty-Images, as an agency or as an image store, but I would not put two diametrically opposing business models on the same P&L. Neither one is worth $1.5B. The imaging Puffer Fish is about to deflate.

Tags: Getty-Images, Super-Store, ASP, Agency, Images, Photographers, Media, Margin

By Georges van Hoegaerden

The Puffer Fish of the imaging market, as described in my previous blog have large volumes of fleeting image assets. Yes, dear Wall-street analyst, they may have been experiencing double-digit growth temporarily but we believe that originates from non-organic growth and growth attributable to the incorporation of that non-organic supply into the global brand, in Getty-Images' case for example. If you keep buying stock photography companies you delight existing buyers with an ever increasing supply, but the novelty of that supply wears off real fast. In the end that apparent growth comes at a high cost. So witnessed by the most recent disappointing earnings reports.



Jupiter-images is literally pursueing an image super-store strategy, a copy of Getty-Images' strategy. They too have been buying stock companies. Stock companies strike deals with photographers to create a good looking selection. Yet most images have a value that is completely photographer agnostic. The value is in the photograph, not the photographer. So, a super-store of images by definition contains a small amount of sellable images.

But the real interesting fact about the imaging industry (and many related to it) is that all images have fleeting value, especially after they have been sold for the first time. Photography is the ultimate Long Tail market, with a very, very long tail and a tiny body. A great reason why any player with a "premium" imaging strategy is relegated to selling to very small and concentrated set of buyers.

Not unlike the music industry where we are used to buying music collections on CDs, a large part of the stock photography market still sells collections of photographs to artificially increase the number of images sold and the average sales price (ASP) per image. As a result, investors may think the ASP is somewhat stable and predictable and the value of the super-store may not be as grim as it seems. But Super-stores will never contain enough image variations to meet Long Tail demand. As a result, commissioned photography is still going strong.

Most photographers that produce sellable images still sell their images offline and commissioned. The ones that do sell online, literally use a total of hundreds of photo-sites today to tap into a Long Tail demand. All these factors are hardly evidence that Getty Images is indeed meeting the needs of the photography market.

On a side note: MacNN reported this week that Adobe has halted its stock photo library, perhaps it is getting ready to buy Getty-Images? I think they are smarter than that.

Tags: Getty-Images, Wall-Street, Non-organic, Stock, Earnings, Long Tail, Premium, Images, ASP, Adobe, Stock, Super-Store

By Georges van Hoegaerden

I have received a lot of inquiries from Wall-street personalities and companies due to the gracious blog posting in PE Week Wire on the imaging marketplace, so I wanted to dive deeper to clarify beyond just the financials.

1/ Getty-Images does not clearly distinguish between total addressable market and "market", probably to puff itself up as the owner of the imaging marketplace. More than 50% of (traceable corporate) images produced (by about 17,000 commercial Photography companies in the US) are generated by suppliers making less than $5M in revenues and have less than 10 employees. Very few of those (less than 1%) use Getty-Images as their distribution channel. In fact the majority of images sold in the world are traded offline, yes, offline (Getty-Images started its online presence in 2000, after going public on NASDAQ in July of 1996 and re-listing on NYSE in 1998). In addition, the peer-to-peer exchange of digital images, we estimate, is at least twice the size of the traceable exchange. It is quite irrelevant if Getty-Images is performing better than its peers, but Getty-Images by no means owns more than 10% of the addressable market. The risk for Getty is that a new kid on the block will be more successful in emptying out the market with a new business model, rather than outperform the existing players.

2/ Getty-Images is not a marketplace, it is a Super-Store in the economic sense of those definitions. A large part of the images in their store are produced by their own photographers (organic and non-organic) and sold to their existing, primarily agency customers. But the real definition of a "free-market" marketplace is that customer own their product which they sell, un-arbitrated and completely transparent, to buyers. Getty-Images charges exorbitant commissions (known to be in the range of 60%), which can't hardly be considered a marketplace transaction fee. It is suggested on the internet that Getty-Images plays unfair, even include changing photographs and forcing the original photographers to hand Getty-Images an additional 100% of the delta. True or not, that is not the kind of trust that makes anyone believe that Getty-Images will become a true marketplace.

3/ The photo acronyms are meaningless. Stock photography does not exist. It is an artificial definition, used mostly to identify a low priced photograph. But a "stock" photograph can be sold rights-managed, royalty free or exclusive and in the new world of publishing even be published as editorial. And therefor, being the leader in stock photography means absolutely NOTHING. Did you know an exclusive photograph is really not exclusive (it is only exclusive to a certain usage), that a buyer has no guarantee that the photo does not show up somewhere else. So, the only measure of success is how many photographs the company has sold and how many times over.

4/ Getty-Images has very restrictive policies to let users participate in their Super-Store, another sign it does not meet a true marketplace definition. WIth dSLR sales growing last year at 60% rate and 9B images produced on those cameras (18B cumulative dSLR images since 2003), Getty-Images is clearly not successful in monetizing the exchange of those images (even if you argue the majority of images have no re-sale value). The number of professional photographers is estimated to be around 36,000 according to PPA and D&B numbers. We believe Getty-Images falls short on counting the majority of those as their suppliers. We believe the unincorporated semi-pros that produce at least one sellable image to be much, much larger (cumulative roughly around 9M dSLR have been sold since 2003).

So, regardless from which angle you slice the business, Getty-Images by no means, has amassed critical penetration in the Total Addressable Market of image exchange. But if you artificially constrict the size of the market by calling it stock, rights-managed, royalty free, editorial or creative, perhaps you can swing it. Undoubtedly someone will buy into it.

Tags: Getty-Images, Corbis, Jupiter-images, PE Week, Wall-Street, PE Week, Images, Revenues, Stock, Super-Store, Cameras

By Georges van Hoegaerden

A Puffer Fish is a fish that blows itself up to dramatically change its appearance and size: not unlike Getty-Images (GYI), Corbis and Jupiter-Images (JUPM) in the imaging market. All three have hybrid business models that disguise the money they really make in the exchange of digital photography. But we know better, we've analyzed empirical data and studied their reports carefully.

That does not mean these "Three Bandits" are failures: Getty-Images is very successful as a photography agency (doing about $805M in revenues per year), Corbis is a very rich catalog of historic photographs stashed away in a bunker in Pennsylvania, slowly being digitized at a cost of about $25 per photograph (revenues around $250M). Jupiter-Images is the division of JupiterMedia, formerly a magazine publishing and events company, now morphing into a content acquisition company.

But they are not a successes either. Organic growth of these companies is well below the growth of the image exchange market and their combined market share is less than 10% of the image exchange addressable market. So, while the $1.5B asking price for Getty-Images doesn't sound outrageous (less than 2x revenues), what you're buying is an outsourced photography agency. Getty-Images is in essence a people factory with ever eroding profit margins.

Twenty years ago Getty-Images started with a $20M investment from grandpa Getty and has continued to purchased a wide array of photo agencies (hence the Puffer Fish) and large libraries of photographs that over time become stale rather than increase in value. The average sales price of those, primarily editorial, photographs is declining steadily (more so than creative photography), leaving the company with a large family of complacent celebrity photographers and mainstream content only the a select few publishing agencies are interested in.

With publishers (of all kind) looking for original content, the imaging Super Store approach (as described here) from the Three Bandits is fundamentally flawed. But the reason why we don't believe in the longevity of their business models (and their asking price) is that they ignore and suppress the massive influx of new digital photographers that create phenomenal high quality and original content most publishers would be dying to get their hands on.

So anyone buying these companies will soon find out how small Puffer Fish really are.

Tags: Getty-Images, Corbis, Jupiter-images, Photography, puffer fish, Photographers, Margin, Editorial, Super-Store

By Georges van Hoegaerden

I have received quite a few comments on my previous post (like this) on the imaging marketplace and I am making an attempt to clarify my condensed writing.

The market of selling photographs is fundamentally different than that of selling music, books or other goods. Rather than selling "premium" supply as defined by the number of people that buy the same product, the value of a photograph is defined by how little it sells (just like art). Fundamentally a photography superstore (like Getty Images, Corbis, Jupiter Images and even Digital Railroad) that sell the same image the way Amazon sells books yields the wrong value to the buyer.

A buyer doesn't want the photograph he is about to purchase see appear in deep circulation, yet a reader of a book makes a buying decision based on popular opinion (Oprah, iTunes) and purchases it too. Selling images (and art) requires an inverted superstore that derives its value from the massive distinctive images it sells. Coincidentally the imaging marketplace has changed dramatically from a monolithic market (between agency and pro-photographer) to a Long Tail of supply and demand (between anyone and anyone).

A fantastic opportunity lies ahead to create a new marketplace for photography that caters to new and high growth audiences. Don't get discouraged by the puffer fish of the imaging industry, that portray they own the market. They don't.

Tags: Getty-Images, Premium, Corbis, Jupiter-images, Digital Railroad, Amazon, Photographers, Monolithic, Free-market, Long Tail

By Georges van Hoegaerden

Two weeks ago Digital Railroad (a private digital photo aggregator, funded by Venrock and Morgenthaler) announced it was restructuring, cutting half of its employees and repositioning the company into a photo marketplace. Today Getty Images (GYI) is said to be looking for a buyer at around $1.5B, after its stock price is unable to recover for more than two years. And Corbis, well -- Corbis is being kept afloat by Bill Gates. Swallowing stock photography companies as fast as it can is Jupiter Images' attempt to boost its potential acquisition price, a strategy that didn't work so well for Getty Images. So, why are these companies not growing organically while the dSLR market that produces those images is growing 60% YTY and GMV of the image market is north of $22B.

Here is my take: the imaging markets consists of demi-cartels that produce "premium" supply that does not meet the requirements of an ever growing and changing market of buyers. No longer is the size of the buyer's market dictated by agencies nor is the new seller's market defined by the old definition of pro-photographers. As a result sell side content does not find enough buyers and the only way to make money is to make sellers believe that if their work is good enough, it will sell.....nice promise. Out of desperation most photographers post their images on multiple websites to get maximum visibility, a true testament of an inefficient market.

Getty Images is really a hybrid business, it has about 3,000 photographers on staff and does editorial projects for its main customers and in armored trucks if it needs to, providing news worthy photography on location. The side-business of Getty is the stock photography business which yields ever declining average sales prices for royalty free and rights managed photography. So, in essence, Getty Images was trying to become a "record" company with its own supply while on the side playing the independent party with a transparent image store; i.e. the "free-market" supply is competing with Getty's core business model. Over the years, many photographers have complained of unfair practices that gives better treatment to Getty's images than to the supply from individual photographers.

The Digital Photography market is in the same state as the music industry (albeit condensed in time) , premium supply doesn't turn out to be premium, demand has changed and the "record" companies in this space have no other option but to erode their premier status business model. I was right three years ago, let that be noted.

As for Digital Railroad, I doubt that they'll develop the macro-economic strategies that determine the success of any real "free-market" marketplace at this point. It would take a sizable investment in technology to turn a super-store into a "free-market". Adobe is rumored to be working on an image marketplace, but here too, the devil is in the details.

We don't need another Amazon.com of the photography business but a real free-market in which YOU the photographer and buyer make decisions on what transactions you want to engage in.

Tags: Digital Railroad, Getty-Images, Corbis, Startup, Jupiter-images, Premium, Photography, Amazon, Adobe, Stock

By Georges van Hoegaerden

Bose is a great example of a company that delivers a unique experience. I have had a few after sales experiences with Bose and they've all been very positive and consistent. Most recently I purchased the new iPhone adapter for Bose's QuietComfort 2 Noise Canceling headphone, only to find out that the adapter didn't fit my QC2 headset. After a call into Bose, we found out that 2 versions of the QC2 exist and the adapter packaging did not specify this distinction.

Clearly I was an early adopter of their Noise Canceling technology (I also own the QC1) but they did not punish me for it. With a little bit of tugging they offered to replace my 4-year old headset with a brand new set for free. Gladly my new headset arrived before a 5 hour plane ride to the east coast. Another experience like this with Bose came when I moved from Europe to the US about 12 years ago, I wanted to exchange my 901 equalizer with a 110 volt one (so I did not need to down-convert my 220 volt european equalizer). Again, here Bose offered to replace the equalizer free of charge.

Whether you like the sound of Bose is your own decision, but the flexibility of this, still private company to balance earnings with a sincere interest in keeping its customers happy is admirable. More fundamentally, successful companies understand that building a lasting brand means they pay attention to customer retention. Apple is doing similar things by turning part of their retail store into a support center. Great businesses don't look at support as a cost center but as a way to satisfy customer experience and have them coming back for more.

Tags: Bose, Experience

By Georges van Hoegaerden

My 3 year old daughter uses my iPhone to play music videos and YouTube videos and has not touched a PC (or better, a Mac) yet. With the same content available on either she's obviously seen me operate my Mac and looks over my shoulder now and then, but finds all the keys and even the "Magic-mouse" complicated. Clearly a usage experience is more important to her than shear processing power. Sounds familiar doesn't it? Nintendo anyone?

What I see in so many early business plans today is the old-fashioned notion of deep technology expertise, something most traditional investors still harp on. I see too many BMW engines being developed without attention being paid to the development of The Ultimate Driving Experience®. True, you can't build the driving experience without great engines, but BMW, like no other vendor understands that the total experience is the selling point. In the end, technology will become commoditized and its differentiation will be determined by the way it interacts with content, media, social network, end-users to create a well designed user experience.

Apple is another company that understands that focus on user experience very well. Its products are a piece of art, its function (to a novice) is at least competitive. Buying a Mac is an experience, and so is using it. A much better experience than buying a PC in every way. The box your Mac comes is even a work of art, the way it folds open, the new materials, everything builds to the experience. As a customer you feel special, owning an iPod with your name engrave on it and all your music in it. And that is what Apple customers are buying into: feeling special and appreciated. Attention paid to you!

Now every market segment has its own definition of user experience, so don't go do what Apple does before you understand how you can differentiate. But every software, service or content vendor should consider building a unique customer experience that in the end - sells more. It's a CEO level responsibility because it involves making sizable investments in complementary areas, not just a marketing ploy. The days of just selling a product are over.

Tags: BMW, Experience, Mac, Apple, Nintendo, IPhone, Startup

By Georges van Hoegaerden

While Sony, Microsoft and Nintendo show impressive results from a console perspective the game-play market today appeals to a very narrow demographic. Consoles are purchased by an age group 25-40 years old. While that demographic may be most capable of purchasing these consoles, we know from the types of games sold at roughly $50 per game that daddy plays more games than his children.

One could also argue that the most playful age range in our lives is from age 2 to 16 years old, yet the games and platforms provided do not meet that demographic. Fewer than 40% of teenage girls play any games, feeble attempts to turn existing games pink did not yield more sales, according to an executive at Electronic Arts.

So, rather than a deep dive in the existing game-play demographic, with even better graphics of game consoles, vendors should focus on a game-play experience that meets real market demand, removes the negative and vegetative connotation of gaming and instead exercises mind and body.

Nintendo has taken the first step of targeting a new game-play demographic and quite successfully so. Robbie Bach, president at Microsoft (who I recently spoke to) described his initial XBOX objective as building the best performing gaming experience. Sorry Robbie, wrong business objective. Sony is by far the leader in console gaming and has great opportunity; to lose or bolster its lead. Execution will be key, Jack Tretton will have his hands full on that one, but Sony's powerful assets in home entertainment should help.

While the console vendors battle it out on price and performance, we are seeing new entrants prepare themselves to enter the home entertainment demographic with new "game-play" propositions. The console vendors will see competition at a different level, Apple is just one of them.

Tags: Electronic Arts, Gaming, Xbox, Microsoft, Sony, Apple, Entertainment

By Georges van Hoegaerden

To quote Walt Mossberg of the Wall Street Journal at Consumer Technology Ventures last week, quality is an important pillar of success for consumer products and I couldn't agree more. Many times products are hyped with incredible promise (marketing) but the product either doesn't work as advertised, requires other services to be activated or simply is not ready (does Zune ring a bell).

From that perspective I am less happy that Apple (the only PC platform I have ever bought), is gaining popularity. Price pressure and popularity does not always do wonders to quality.

I currently use a 2-year old Powerbook G4 1.5Ghz of which the fan (right after the one year warranty expired) makes a noise like a sawing machine, and I had to reduce the speed of the processor to keep the fans from cooling. For work I purchased a $999 23-inch Apple flat-panel that produces stunning image quality and brightness, yet the ghosting of images on this expensive piece of equipment allows me to see which window was there 5 minutes ago. I expect the best from Apple and I am willing to pay a premium, but I am not willing to pay a premium for under-par quality.

Now, I am not picking on Apple because it is the worst performer in the consumer space, quite the opposite. Apple undoubtedly is the best performer in the business, but given that, Walt's comments make even more sense to me. Switching off of Apple is not an option for me, but griping is.

Update:
After unscrewing at least 20 screws on my out-of-warranty Powerbook G4 (directions courtesy of iFixit), I discovered that the reason why I had reduced the processor speed on my laptop for over one year and avoid the fan from coming on was created by, get this: a quality control sticker in the fan compartment that had come loose and was spinning along with the fan. A simple removal of the sticker solved the issue.

Tags: Wall-Street, Mossberg, Apple, Premium, Quality, Consumer, Images, Experience

By Georges van Hoegaerden

Did Cingular read my my rant about the ugly designs of Blackberry? The new 7130c from Cingular (not to be mistaken with the still ugly 7130 from other carriers) comes closer to what modern design for a PDA-with-phone should like like.

Having tested a ton of phones, PDA's etc over the years, the 7130c is a very attractive competitor to the bulky Palm Treo 650 and ... certainly more usable. The small dimensions of the 7130c cuts the size of the older Blackberry almost in half, a little thicker than the Motorola RAZR (which I love) and a bit taller, the 7130c still fits in the pocket of my pants easily. I like it so much, that I decided to get rid of my old Blackberry (on eBay) and my RAZR (although I'll keep it around, just in case) and combine two capabilities into one.

The 7130c with EDGE internet connectivity is actually fast enough to make it a delight to browse the internet (and visit the WAP site of CNN) and read e-mail, while waiting for the traffic light to turn green. The industrial design is good enough (not great) and appealing, the screen that is clearly visible in bright sunlight and adjusts automatically to your surroundings. This is absolutely the best screen I've ever seen on a mobile device.

Phone services are integrated into the PDA capabilities, but this part could be more intuitive. The heritage of the scroll menus from the Blackberry PDA platform complicates things beyond what is necessary. More 'special purpose' buttons would solve the problem. For now however, the Blackberry 7130c has become my new one-eyed king in the land of the blind.

Tags: Blackberry, EBay, PDA, Motorola, Cingular, AT&T, Experience, CNN, Design

By Georges van Hoegaerden

Internet security companies are the Jiffy Lubes of the auto industry, they require constant innovation to keep up with the changing product stack they attempt to optimize, but not own. Some companies achieve innovation through non-organic growth (Symantec), others build a set of urgently needed technologies that becomes bigger as customer requirements grow (Trend Micro, McAfee). But keeping up is a challenge, and I expect security companies and the stack owners to aggressively pursue acquisition strategies to round out and secure their own future. Stack owners (Microsoft, Oracle, IBM, Cisco) will become fierce competitors to security companies, if partnerships are not appropriate. Today's Security leaders need to change and look into new business strategies.

Looking at the security marketplace from a fresh perspective, I give the current marketplace a 1.2 grade on the following evolution scale.

Security 1.0: the internet is not secure by any stretch of the imagination, but neither is the conventional world. So, get over it. Security is also not an absolute science. Spam, Viruses, Exploits, Worms, Cross-site scripting etc. deliver a vast amount of opportunities to security companies that provide band-aids to the multitude and severity of security gaps. 83 Enterprise AntiSpam companies battle it out every day. Leaving it up to customers filled with fear, uncertainty and doubt to wade through a plethora of point products to select which one is best, and when. It's a jungle out there.

Security 2.0: a secure enterprise, shielded from some of the garbage on the internet, needs protection in the same way you secure your house. Depending on personal preferences that define the vigor and quality of security, securing the doors without securing the windows doesn't make a whole lot of sense. Security is really a risk management issue, a delicate balance in which no single piece of security, data type or communication channel prevails; the equilibrium of security techniques (AntiSpam, AntiVirus, AntiSpyware, Web Application Security etc.) needs to provides sufficient shelter and trust. Leading security companies need to move towards marketing that equilibrium and scope.

Security 3.0: while internal threats are becoming a force to be reckoned with, many security companies are developing a Security 2.0 strategy that incorporates content compliance and other technologies to protect company assets against the employees themselves. I believe security companies should focus on aggressively protecting against outside threats, yet stimulate and enable the internal exchange of information. Content compliance should be checked but not enforced. The integrity of your business lies in the hearts and minds of people, not technology. Moving on, Security 3.0 is a platform strategy consisting of a framework in which a multitude of vendors can provide plugins that separate threat detection from distribution. It will be a free-market in which the best technology will plug into a framework that allows this technology to be used on any type of information, in motion or at rest. I believe many stack owners and security behemoths will play a pivotal role in defining the key components of this security platform and new security specialists will define the new, and highly specialized, security threat detection capabilities.

Bottom line: plenty of acquisition opportunities continue to exist for emerging security companies as the incumbents and stack owners battle to own a large part of the security framework that is essential to instill trust with customers.

The size of after-market providers like Jiffy-Lube, AutoZone is larger than the market size of the car manufacturers, proving that after-markets will exist for quite some time. Security is still the after-market of the technology industry and I see no vendor changing that paradigm significantly today. New security vendors will continue to reap rewards and the incumbents will slowly move towards owning something they've never had, a technology (or platform) stack.

Tags: Security, Spam, Exploits, Jiffy-Lube, AutoZone

By Georges van Hoegaerden

Apple's latest Aperture software personifies how the technology industry fuels its own growth by creating new software that drives new incremental hardware requirements. Managing an increasing library of 16,000 photographs is what I do when I am not working or playing with my family. And when Apple's Aperture came out late last year, I jumped on the promise to manage those assets (or liabilities in some cases) more effectively. While I had the bottom-of-the-barrel of Aperture's hardware requirements, a not so shabby 1.5Ghz Powerbook, the expansion with 2Gbytes of memory and a 160Gbytes replacement hard-disk seemed a foregone conclusion. But not so fast, Aperture's performance that is. Even this configuration leaves you yearning for a large flat-panel, so the windows and photographs can be displayed in sizable fashion and with the clarity they deserve. An Intel Dual-Core wouldn't hurt either.

The bottom-line is, a two year old, top-of-the-line Powerbook is suddenly on its last leg. I can only wonder what upcoming updates of Microsoft Office, Adobe CS3, Dreamweaver and others will do to my geriatric Powerbook. Desktop software is still an important catalyst, fueling new hardware replacements in a slowing PC market. Software and services will live alongside each other for quite some time, in the interest of PC manufacturers and admittedly, end-users.

Tips for Aperture enthusiasts:
Two tips that will smooth a transition and took me two months to figure out: 1/ Remove all videos from the iPhoto library, Aperture will abort, in my case after 14 hours, if you don't. 2/ De-fragment your hard-drive after a successful import, or simply copy the main Aperture library to a backup disk, remove the original and copy it back. The Aperture import process fragments the library dramatically; I ended up with a Library of over 6,000 file fragments, absolutely killing performance.

Tags: Blackberry, Design, Microsoft, Apple

By Georges van Hoegaerden

Last week I bought a Motorola Razr to replace my Treo650. It is beautiful, highly functional and tiny, and folds open to something substantial in my hand. The Razr synchronizes all business data from my Apple Powerbook wirelessly over Bluetooth, including most contacts and calendar appointments. At a quarter of the size, and a third of the price of a Treo it keeps me just as informed. No wonder Motorola sold 6 Million of them. Lucky Ed Zander, Motorola's CEO who rolled into Motorola (from Sun) after the Razr had already been conceived.

Apart from previous comments in this blog about the Treo with regards to UI, target market etc., the Treo's bulky form-factor (which still reminds me of the old Ericsson, pre-Sony phones) with its pointy antenna, really started to bother me. I felt like a cop patrolling the neigbourhood with a gun in its holster.

But the real reason for my change is a strategic one. I lost confidence in the Palm (Source) platform and so apparently has Palm's CEO. The announcement of the Treo700 based on Windows Mobile has reduced Palm to a commodity hardware player with not much to be proud of. Owning and refining the Palm OS and segmenting it to identifiable target markets would have been the winning business strategy.

Amazing is the power and persistence of Microsoft who now delivers the Windows Mobile version on PDA phones from Motorola, Sharp, Samsung, HP and other brands, steadily repeating its Windows PC software success downstream. I am eagerly awaiting Apple's foray in the phone OS business.

Tags: Palm, Treo, Motorola, HP, Apple, Windows, Razr, Mobile

By Georges van Hoegaerden

"Apple is going in a different direction than we want to go." That is the statement from a long term Apple customer (10+ years) we recently talked to. The Apple Store in Palo Alto has recently been revamped to where the iPod and its accessories seem to make up the majority of the new store layout. Media software has been tucked into a little corner in the back. Enterprise software for Small and Medium Enterprises (SME), like FileMaker Pro Server is virtually non-existent, "you can get that online" was the response from an Apple representative.

Did you know Apple is actually making more strides than ever in the enterprise business? Oracle, MySQL and a lot of other mission critical software now runs on OS X. Apple risks loosing SME foothold if it does not carefully balance advertising the iPod trojan horse with the reasons why it created the iPod, selling higher margin products. Enterprise software may not be bought in a retail store, but providing exposure and demo stations with enterprise and SME solutions are critical to changing a destructive perception. Or does Apple plan to open new Business Stores soon?

Tags: Apple, IPod, MySQL, Oracle, Small Business, OS X, Software, Retail

By Georges van Hoegaerden

While attending Tony Perkins' Media 100 beer-and-burger bash at the Alpine Inn, I was confronted by another opinionist that questioned Oracle's foray in the Enterprise Collaboration business. Indeed, it has been a long road; Oracle*Mail, Oracle Office, Oracle Library, Oracle Documents, Oracle Workflow, Oracle InterOffice Suite, Oracle InterOffice, Oracle Collaboration Suite is the reincarnation Oracle's installed base has been hit up with since 1990. As the lead salesman (or should I say Director of Worldwide Marketing), more than 7 years ago for Oracle Office and InterOffice I learned a few important lessons that stuck with me forever.

For one, technology does not sell. Oracle's collaboration tools were then, and are now some of the best in the business.

Two, deliver a proposition to sales people that matches the vendor's existing business model. Incompatibility of business models is why 800-pound Gorillas can't buy themselves into new categories.

Three, commission sales people competitively to other proven product offerings. Don't let your weakest sales people hide behind selling the "impossible". Again, Oracle's technology is not the problem, incompatible business models is the real issue. I see a bright future for Oracle's Collaboration Suite as the software-as-a-service solution for customers who have bought into Salesforce.com's business model.

Now, Digital Asset Management, often erroneously merged into the Collaboration substrate, is a market category that Oracle needs to own and quickly. "Unstructured" data and corporate media management markets are currently growing at a clip of 45% a year, faster than RDBMS or ERP growth. If Oracle wants to be the database for all corporate data, digital asset management is the real opportunity, not only because it works best with Oracle's organic business model. I've got suggestions for Chuck (Rozwat and Phillips) of who to buy to get in quick.

Tags: Oracle, Media, Collaboration, Digital Asset Management, Business Model

By Georges van Hoegaerden

With homeland security as a hot topic these days, LaserCard in Mountain View (NASDAQ: LCRD, formerly known as Drexler Technologies) quietly continues to ship millions of unique memory cards as the foundation for "Green" cards and National ID cards to US, Italian, and Canadian governments and others. In addition to its incredible resistance against wear and tear (we punched holes in it and it still read successfully) and unique security features, the LaserCard stores an impressive 2.8M of personal and biometric data. Fingerprints, retina scans, voice encoding or whatever becomes the prevalent set of biometric verifiers, can be combined with visual authentication to ensure the holder of the card is indeed the one presenting himself. All these attributes can be stored on the card and read offline without the need for centralized databases. So why is homeland security not using this card to it's fullest potential? Why does it waste time on privacy debates with regards to centralized storage? Why, four years after 911 are we still not able to verify a persons real identity?

Tags: LaserCard, Security, Homeland Security, Biometrics, IDentity

By Georges van Hoegaerden

Getty Images, the self proclaimed market leader in the $7B stock photography market, recently posted an impressive $622M in 2004 revenues. Our in-depth analysis of the market actually shows a 2004 decline in Royalty Free and Rights Managed images sold compared to 2003 and Getty making it up by increasing ASPs significantly and a small increase in editorial sales. Royalty free images were sold at an ASP of $210 compared to $150, Rights Managed images moved up to $585 from $560 in 2003. While the company boasts an impressive 70M images on file, our analysis shows Getty Images sold no more than 1.5M images in 2003, a 3.5% market share of 43M images sold each year in the stock imagery market. Hardly a gorilla, want to know what are they are really selling?
Our opinion: Agency & distribution model are in conflict, restricting organic growth.

Tags: Getty-Images, Photography, Stock, Revenues, Images, Distribution, Markets