Can Apple crack the code in tablet computing?

Not the real Apple tabletThe plot thickens: Even renowned publications like the Financial Times are now saying that Apple will soon launch a tablet computing device, sort of a large-scale iPod Touch.

If true, that would be a pretty bold move. The history of tablet computing — flat devices that use a touch screen or pen for interaction — is a long sequence of failures and disappointments. Microsoft had at least three shots at this market, starting in 1993. Windows XP Tablet PC edition in 2002 was a flop, and the entertainment-focused Ultra-mobile PC, released in 2006, didn’t fare much better. Now tablet-oriented features can be found in every copy of Windows Vista, but very few PC models use them. Many other vendors tried their luck with tablet form factors, but the only moderate success were probably the PDA devices of the late 90s.

So what does Apple need to do differently in order to be successful in this market?

I’m actually a fan of the tablet form factor. I experimented with the first “Windows for Pen Computing PCs” back in 1993 (which were really, really bad) and still own four different Tablet-PC and UMPC devices plus various PDAs and smartphones. From my experience, Apple needs to avoid the usual pitfalls and do the following:

1. Make sure it’s really mobile.
Tablet devices are supposed to be extremely mobile. But that’s pretty pointless if their battery life makes you carry around a power brick and various accessories anyway. My worst device in that respect was a UMPC built by the now defunct OQO. Its battery lasted less than two hours, and the power brick was bigger than the computer itself. So Apple needs to make sure that battery life is adequate and that the product doesn’t need any accessories (such as easily lost digital pens or external keyboards) to work — as in: Really work for the things people want to do with it, not just for a quick demo.

2. Do one or a few things really well.
The most successful tablet device in history, the Palm PDA, had a very clear focus: It was a digital replacement for your appointment book, not more and not less. Microsoft’s tablet PC on the other hand suffered from ambition overload. It tried to be a full-blown PC, but also a digital notepad, a highly portable information capture device for professionals, and oh yeah, also a great entertainment gadget. Unfortunately, it did none of these things particularly well. So Apple needs to decide what its tablet device should be for and provide a great user experience for that purpose. It looks like it will have a clear entertainment focus, which is probably a good idea.

3. Have a truly simple UI, don’t try to solve the hard problems.
Most tablet devices contained some kind of handwriting recognition. This seems to make sense for a tablet form form factor, but the sad truth is that computers are still pretty bad at reading handwritten text. A success rate of 95% (which is what most vendors claim) sounds good, but is almost unusable in practice. Most tablet devices have relatively slow CPUs and are therefore not able to get much better results. That’s why Apple should concentrate on an extremely simple touch UI without fancy input methods. But judging from the iPhone, Apple already knows that.

4. Make really, really good hardware.
Tablets need to be light, and that’s why many vendors compromise on hardware stability. Most of my tablet devices have one or several mechanical defects, since highly mobile use tends to be strenuous for hardware and the flimsy build quality of many of these devices is simply not good enough. An Apple tablet device at the rumored price of around $800 needs to be much more robust than the iPhone. People will expect these things to last for several years, not just until the next model comes out.

Apple already has the other necessary ingredients for a success: It knows how to generate that “wow” factor that is necessary to make people consider a new product category. It has retail shops that will provide a hands-on experience for consumers — something that the Windows-based Tablet PC market always lacked. And it has the developer ecosystem and licensing agreements to provide interesting content for the new device.

Now the only question is if and when Apple will come out with such a new device. If somebody can crack the code in tablet computing, it’s clearly Apple.

Facebook’s and Twitter’s business model problem: The very long tail of user activity levels

Facebook and Twitter seem to be the big winners of the current social media wave. Both services are growing like crazy, adding hundreds of thousands per users per week. But both companies are still struggling to find a profitable business model, currently prioritizing growth over revenue. Once you dominate the world you can always figure out how to make money from it, right?

Maybe. But the seemingly huge user numbers of these services could turn out to be far less impressive (and commercially relevant) in practice. Sure, both platforms have tons of registered users, but are these users really active? That’s probably something advertisers would like to know before they spend money on these channels.

Several new reports (e.g. here and here) indicate that Twitter’s user activity patterns follow a typical “long tail” distribution.

Longtail

There are a few heavy users that are extremely active, tweet a lot, have thousands of followers etc. But beyond this small group, usage drops rapidly. 50% of Twitter’s registered users are basically inactive. Since Facebook is far less transparent than Twitter, there are no similarly precise studies about usage of the leading social network. But a quick survey of the activity level of my 358 Facebook friends showed similar patterns. Only 71 (=19.8%) of my friends showed any activity in the past 72 hours, with only a handful clearly dominating. Admittedly, that’s anecdotal, but I’ve not seen any studies that show a different pattern.

Now, it’s not surprising that this kind of service has a long tail usage pattern. You can find very similar patterns in other types of communication networks like the phone system, e-mail, instant messaging, etc. The problem lies in how to best monetize these services. Both Facebook and Twitter don’t charge users. They want to monetize their services indirectly. Facebook mainly sells ads and virtual goods, Twitter still has not come up with a business model, but probably will go a similar route.

The problem is: these monetization approaches depend heavily on actual usage. Nobody pays much for ads that not many people see or click on. Virtual goods are profitable, but you can only reach a decent revenue size if many people buy them. So if it’s true that only 20% of users on both Facebook and Twitter are really active, that’s a big problem for both services, since their opportunity to sell ads and premium services is much smaller than their raw user numbers suggest. Granted, both platforms are very big even then, but maybe it’s not quite enough for total world domination…

So what would be a better way? Think about it: How does your phone company charge you? Your cable company? They charge flat fees because they want to extract a lot of money from low-volume users. Sure, they have different price levels for different user types, and they offer premium services, but the lowest levels are not cheap at all.

For instance, I’m a very low volume user of phone services. AT&T charges me for a 550 minutes per month package for my iPhone plan, of which I typically use 100 minutes or less. There’s no smaller package — tough luck for me. Do you want high-speed Internet at home, but use it only a couple of hours per week? You’ll still pay the full price. You need Microsoft Office for your business (because people send you fancy PPTX and DOCX files), but only use it every couple of weeks? That’ll be $399 for the “Standard Edition”…

These flat-price plans are simply a very profitable way to make money from services that have strong network effects plus a long-tail usage pattern. Charging based on usage (and online advertising is economically speaking an indirect way to do that) is fine as long as you sell to a heavy user, early adopter customer base, but as soon as you reach the mainstream, flat-fee models are way more profitable.

So the problem for Facebook (and, supposedly, Twitter at some point) is that the current business model will not really scale well with further growth in the mainstream, low-usage market. Online ads are measurable, and advertisers will only pay for audiences that are really active, i.e. generate page views or click on ads. I think Facebook and Twitter can only scale financially if they find a way to charge people even if they don’t use the service frequently.

By the way: Google recently killed strongly de-emphasized the free version of their “Google Apps” suite of messaging and productivity apps. Their model until recently was that small companies with less than 50 users could get the product for free, financed through advertising. Looks like that didn’t work out so well. The costs for accommodating a lot of mainstream users probably grew more quickly than the revenue from heavy users and ads.

And I’m convinced that Facebook and Twitter will face similar challenges in the near future.

The End of Substance, or: Is Blogging Dead?

A worrying trend is becoming increasingly obvious: Many of the very best and most interesting bloggers are writing less and less.

Some examples: Nick Carr is down to maybe a couple of posts per month, and there’s a similar pattern on the blogs of Dharmesh Shah and the always controversial Andrew Keen. Jason Calacanis recently decided to send out his more substantial pieces through his e-mail list only, and his former blog is now just a photo stream. Marc Andreessen and John Hagel seem to have disappeared entirely. And online PR guru Steve Rubel just officially gave up blogging and instead wants us to read his “lifestream” on Posterous — which is nice, but hardly a replacement for his deeper analytical posts.

It’s a striking pattern that particularly well-known tech bloggers (i.e. real thought leaders) who specialize in longer analytical pieces (i.e. real substance) are pulling back. It feels like well thought-out content is increasingly replaced by noisy, relatively random short bursts of information on Twitter, FriendFeed, Tumblr and similar platforms.

What’s going on here? Based on my own experience as a much less important blogger, I think there are three main reasons for this trend:

1. Blogging is hard work. Twittering is not.
Let’s be honest: I can easily reach about three times as many people on Twitter (and, through a feed, on Facebook) as with this blog post. And the ratio is probably even more dramatic for A list bloggers. Writing a smart Tweet that will grab people’s attention takes seconds, writing a good blog post takes hours. And the difference in the level of attention and positive feedback you’re getting might not be large. Twittering and lifestreaming are simply a more efficient way to get attention. And yes, people do blog to get attention.

2. The quality of feedback on blogs decreases with audience size.
One of the most motivating things about blogging are the comments and resulting discussions with the really smart people who read your blog. When you have a couple of hundred readers, the quality of this interaction tends to be very high. Unfortunately, it always seems to decrease as you get more readers. Suddenly “trolls” show up, you get more and more spam, and in many cases people simply seem to comment because they want to get some attention for their own blog, not because they have something to contribute. This kills one of the most important reasons for blogging.

3. You don’t necessarily get rewarded for quality.
I still remember what a thrill it was to get my first blog comments or get linked on other blogs. On Rivva.de, the German equivalent to Techmeme, I was for a while in the Top 15 most influential blogs and news sources, with a higher ranking than some well-known mainstream news outlets. How cool is that? Blogging can be very rewarding. I guess most people feel the same, even if they’re well-known authors. Traditional media doesn’t offer the same kind of instant gratification feedback loop that blogging provides.

But, you know, it gets old. And what’s even worse, the positive feedback doesn’t necessarily increase with the quality of your output. Commercial blog publishers (one of which I’m a co-founder of) know that the pure posting frequency is often more important for success than the quality of your posts. And most bloggers probably have experienced that a really strong post that they put a lot of work in hardly got any feedback, while sometimes the more fluffy pieces get picked up like crazy.

So it’s not surprising that quality-oriented bloggers in particular are looking for the next mountain to climb, the next reward curve, the next shiny new toy. And that’s not necessarily just in social media. Several popular bloggers have published books recently, are working on their speaking careers or are focusing on their startup projects.

For a while, blogs were probably the best source for breakthrough thinking about technology and entrepreneurship issues. I think this short era is coming to an end, at least for some time.

Social media, and maybe online media in general, is currently in the cambrian explosion phase. We see new concepts and channels almost every day, and the market is changing very rapidly. It probably will need a few years to settle down, for the winners to emerge, for more constant structures to evolve.

People who contribute substantial content to any medium don’t just do that because it’s fun, but because they can expect certain rewards, either in money or status. The reward equation in social media is currently changing too rapidly. That’s fine for some experimentation, but in order to create long-term incentives for deep thinkers, the ecosystem has to cool down quite a bit. In the meantime, read a good book.