Nate Winter Marketing Analysis

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Sunday, January 14, 2007

Ford+Microsoft: Will the Sync Swim?-- by Nate Winter

Ford and Microsoft have just released details of their joint venture developing a vehicle communications system that will allow passengers to use cell phones, MP3 players and other devices through the on-board, voice-activated system known as Sync. Starting with the 2008 Ford Focus due out later this year, Sync will become a standard feature across all Ford models.

In my post from January 11, 2007 entitled, “Whooooaaaaaa, iPhone,” I looked at how the iPhone stacks up against the track record of other products based on technology convergence. From Al and Laura Ries’ The Origin of Brands, convergence is the idea of combining multiple technologies into one device, vehicle, machine, etc. The Rieses argue, with much historical evidence, that convergence products are almost universally guaranteed to fail unless they offer an unusual convenience factor.

At first glance Sync seems to be the latest in a long line of convergence products like the iPhone, combining the capabilities of multiple devices into a single device. However, I contend that Sync is not, in fact, a product based on technology convergence—not completely, anyway. While Sync does seek to provide a single interface for using multiple technologies in the car, the key differentiating factor is that Sync does not attempt to replace any of the owner’s existing gadgets.

The iPhone, for example, attempts to become a user’s default cell phone, MP3 player, mobile web browser, and personal organizer replacing any competing products the user might already have. Sync, on the other hand, is a unified interface for existing products and not a replacement at all. In fact, individual tech components like the cell phone, PDA, and MP3 player are integral to the Sync system. Based on information released thus far, Sync is completely useless without these items.

Sync is an accessory like many others for cell phones, MP3 players, and PDAs. Sync just happens to be a single accessory intended to work for all three. iPhone is a swiss army knife; Sync is a tool box.

The fact that Sync is a new technology based on the use of existing components is a true strength, one that avoids the curse of convergence. The challenge Sync faces is in the user interface. This is where Sync will succeed or fail.

Sync relies heavily on voice activation and text-to-speech technology, the former allowing users to give commands to the system while the latter allows Sync to read aloud text messages, song titles, and address book items to the user. Cell phones have maintained these capabilities for a few years, but the accuracy of voice activation and recognition has been cumbersome. While this technology is continually improving, the fastest and most reliable way to do anything with a cell phone is still to push the buttons and use the graphic user interface. Reliable hands-free and eyes-free use of any technology remains elusive. In order for this feature to live up to the hype, it will need usability that is beyond anything consumer electronics has seen to date.

Curious Partnership
Ford’s partnership with Microsoft is an interesting choice. While Ford undoubtedly likes the idea of a Microsoft partnership to lend credibility to the Sync technology, ironically, Windows isn’t exactly known for its ability to interface easily with peripheral devices. That’s a Mac quality. In fact, none of the products that Sync was created to integrate (cell phone, PDA, MP3 player) speaks to Microsoft’s core competencies of desktop operating systems and office productivity software. The Windows Mobile OS is fairly well known, but by no means the industry standard for PDAs and smart phones. And Microsoft’s Zune portable media player is not exactly a break away success either. Nonetheless, the collaboration of Ford and Microsoft is sure to gather continued media attention and become a factor in the buyer decision process.

In addition, the partnership has the potential for serious benefits to the long term agendas of both companies. Microsoft is constantly looking to expand its reach in consumer electronics for the reasons I outlined in my December 26, 2006 post, “Zune vs. iPod: The Battle for Home Domination.” While that post dealt with standards and systems inside the home, the same rules apply to the car as the expectation of perpetual access to music, video, and other media increases. Microsoft will continue to develop technology for networking and media in the automobile and attempt to make its applications and proprietary file types the standard.

Sync satisfies Ford’s need to compete with GM’s OnStar, a thorn in its side since the late ‘90s. Although to make up ground, Ford needs a quick home run with Sync, as the auto maker’s exclusive deal on the technology expires after 2008.

OnStar’s Shadow
AdAge.com’s article on the Sync announcement cites one source who suggests that “Sync could signal the beginning of the end for GM's OnStar communications system.” I’m not convinced.

Sync seems to match up with OnStar only in terms of OnStar’s hands-free calling feature, which Sync appears to have bested. But when it comes to matching OnStar’s emergency contact service, 24-hour live operators, satellite GPS, and vehicle diagnostics, Sync’s parities are absent. A notable advantage for Sync is that its system is not subscription-based, a key benefit for those wary of monthly fees. However, when it comes to peace of mind and the ability to have a live operator save the baby you locked in your car, a monthly subscription is not prohibitive. For right now, the technologies are not similar enough to truly compete. Until OnStar steps up its peripheral device integration or Sync expands into remote vehicle concierge, it's pretty much apples and oranges. And in 2009, Sync (or something better) will undoubtedly be offered by all the major auto makers and the choice won’t be mutually exclusive anyway.

Until then, I expect the two technologies to stratify the market with young professionals and more tech-minded people opting for Sync with Ford's Fusion and smaller cars, while families and those looking for white glove service will stick with OnStar in GM's Cadillacs and larger SUVs.

--Nate Winter

Thursday, January 11, 2007

Whooooaaaaaa, iPhone.-- by Nate Winter


Big announcement. Lots of hype. Typical Steve Jobs style. Apple’s stock rose 8.3% the day after the announcement of a product that’s not available for 6 months. Will iPhone live up to the hype?

Influencing my view on iPhone is my recent reading of Al and Laura Ries’ The Origin of Brands, a book whose thesis is that convergence products like the iPhone are not financially successful. The Rieses argue, with much historical evidence, that convergence products, those which seek to combine multiple technologies into one device, vehicle, machine, etc. , are almost universally guaranteed to fail unless they offer an unusual convenience factor. It’s not that they are bad products, but they are not universally adopted by consumers because their value isn't perceived.

Look at examples like the flying car, the car-boat, web-TV, Apple's Newton PDA, the "home of the future" with one system controlling every appliance, utility, and entertainment feature. We have the technology for these things, but they haven’t happened and probably won't.

Swiss army knives are relatively useful if you need a knife, a screw driver, a bottle opener, and a file to all fit in your pocket, but few people would choose swiss army knife tools over a separate screw driver, or a separate bottle opener, or a separate metal file. "Jack of all trades, master of none" the saying goes. Do people want a 'Jack of all Trades' for their portable device or a set of specialized master devices? More importantly, which will they buy?

Examples like the camera phone and the pencil with attached eraser have been successful because there is a significant convenience factor involved. In these cases the conveniences are sending photos from the device that captures them and the eraser is 5 inches away (or less) at all times, respectively.

The question for an unabashed convergence product like iPhone is, “Is it convenient enough to defy the convergence curse and survive?”

As of June 2007, popular culture is already a bit uneasy about everything the iPhone claims it will do. Watch this clip from the Conan O'Brien show on the many unusual uses for the iPhone.

Reasons for iPhone’s success:

iPod: the 800 pound gorilla. Between the iPod and iTunes (and not to mention all the collateral Mac sales), Apple hardware and software are no longer strangers to the general populace. People love iPod. My suspicion is that the iPhone began as an iPod that allowed users to download music wirelessly, independent of their desktop iTunes applications (a feature I referred to in my December 26, 2006 post, “Zune vs. iPod: Much Ado About Nothing?”). A portable music player that can add new music from anywhere, any time wirelessly is a phenomenal idea. However, engineers realized that in order to make the device wi-fi-enabled to download music, it would need a cellular signal. So then, the logic became, “Why not make it a phone, too?”

Flashy technology. The thing has no damn buttons. No buttons! It’s all a digital touch display—an amazing innovation and a turning point in the user interface of consumer technology. In addition, it seems like the first product truly intended for mobile internet use. If anything can make mobile email and internet use a must-have and then a universal expectation it’s iPhone.

The Apple effect. Not that Apple hasn’t had its flops (ahem, the Newton), but don’t count it out. Never say never… It may take time for iPhone to build up a full head of steam. iPod’s sales were meager for the first couple years, but look at it now.

Predicted problems with iPhone:

Apple is not a phone manufacturer, and not known for telecommunications hardware or software. People will be skeptical of an Apple phone technologically. Furthermore, most people who would be targets for an iPhone already have both an iPod/MP3 player and a cell phone. The percentage of people who would disregard both their working cell phones and MP3 players to get an iPhone are small. And what are the odds of needing a new MP3 player and a new cell phone at the same time? There are always the “early adopters” who indiscriminately buy the latest tech gadgets to show them off. But these people represent a very small portion of the overall market, a portion far too small to play any significant role in the success of new technology.

Exclusivity with Cingular. I’m confident that this decision had more to do with Apple preventing hardware and compatibility issues among multiple carriers than it did with truly intending an exclusive deal with Cingular. Although, there’s little doubt that Cingular paid handsomely for the exclusivity rights anyway. While Cingular is the largest cellular service provider in North America, its market share is less than 50%. By partnering only with Cingular, Apple alienates half the cell phone market. Unless, of course, Cingular and Apple consider the iPhone to be a “switch worthy” device. That is, a device with so much appeal that it causes existing cellular customers currently contracted with other service providers to switch to Cingular. There probably will be some switchers (the “early adopters”), but Apple and Cingular are delusional if they believe any significant number of consumers will break existing contracts with other providers for the privilege of spending $500 on an iPhone.

At least Apple had the foresight to partner with an existing service provider and didn’t try to start it’s own cellular network. You may be thinking, “An Apple cell phone service?!” I know it sounds ridiculous, but these things happen. Microsoft’s failed attempts with WebTV (another convergence dead end) resulted in millions of dollars squandered trying to develop its own satellite television and broadband internet service.

As discussed above, the iPhone probably started out as an iPod. But the problem is that now the product is no longer an iPod, where the name communicates a media playing capability, it’s an iPhone, where the name connotes only that it’s a cell phone and Apple assures us there’s an iPod in there somewhere too.

Price. It’s $500. Let me say that again, IT’S 500 DOLLARS! And that’s if you want the smaller, 4 GB version. The 8 GB version costs $600. That’s a hefty sum, a sum that doesn’t even include monthly service costs. In order to obtain service for making phone calls, sending and receiving text messages, sending and receiving emails, and navigating the internet wirelessly draws a hefty cost under Cingular’s current price model-- well over $100 per month. Plus, if a user breaks his/her existing contract with another service provider to switch to Cingular for the iPhone, that’s another $150 or so.

Flashy technology. It looks cool, but will it work? People will wait to see. Will people treat their iPhone the same way they treat an iPod? Will they jog with it? What if it gets dropped? Is it durable? First generation iPod nanos suffered from durability issues with their soft plastic cases and easily-scratched screens. Having all your eggs in one basket is certainly convenient, but is it worth the loss if disaster strikes? If loss or malfunction befalls an iPhone, are consumers prepared to lose their cell phone, iPod, mobile internet access, personal organizer and the $500 or $600 it cost them?

When people spend this kind of money, they want to know that they are getting the best. But a major concern is that when you combine different technologies like this, people refuse to believe (usually correctly) that all the technologies involved are top of the line. Arguably, Apple already makes the best portable music player, or at least the most popular. However, it's hard to believe that Apple would also make the best cell phone (especially given Apple’s complete lack of experience in telecommunications), the best portable internet device, and the best personal organizer separately, let alone all in one package. And when competitor's inevitably respond with better cell phones, better MP3 players, better mobile internet devices, and better personal organizers, the consumer is left with outdated technology.

--Nate Winter

Sunday, January 07, 2007

SubservientChicken.com vs. AllIWantForXmasIsAPSP.com -- by Nate Winter

SubservientChicken.com vs. AllIWantForXmasIsAPSP.com -- by Nate Winter

In November Sony posted a fake blog promoting its PlayStation Portable (commonly known as the "PSP") on a site called AllIWantForXmasIsAPSP.com and recently got busted by consumers. The drama that ensued was written up in Advertising Age in an article entitled, “What We Should Learn From Sony's Fake Blog Fiasco.” Like many AdAge.com articles, this one prompted reader comments.

While there were several comments posted in response to the article, here is one of interest:

COMMENT POST
What I don't understand is, when CPB [ad agency Crispin Porter Bogusky] execute logoless campaigns like subservient chicken and the mini cooper robots campaigns, which run logoless until revealed to be advertising, its hailed as 'cool'. When sony gets discovered its 'deception'. Is the line between the two merely how well its executed? –Nick Senior, Baltimore, MD

The difference between Sony’s AllIWantForXmasIsAPSP.com and Subservient Chicken are many.

First off, it’s not the execution, it’s the idea. The idea of typing in commands to a chicken on-screen is interesting, whether related to marketing or not. It makes you want to test the boundaries and see what happens. The idea of reading a blog about asking for PlayStation Portable for Christmas is mildly interesting (at best) if it’s honest and not marketing-related. (Only a handful of blogs are truly tolerable, everything else in the blogosphere is drivel.) If it’s a fake blog, not only is the content not interesting, you end up pissing off a lot of people.

If the idea is strong enough consumers won’t care if it is corporate-backed or not. When Subservient Chicken was revealed to be associated with Burger King, people were surprised, but only because it was among BK’s first ventures with ad agency Crispin Porter Bogusky that took the brand in a new direction. I believe people liked the site and idea even better once they saw how Subservient Chicken fit in with Burger King’s “Chicken Your Way” campaign.

The second difference is honesty. SubservientChicken could have had something on the site to the effect of, “We’re just two guys with an idea about making chicken do what you want it to.” But it didn’t, because the idea was good enough that it didn’t have to have specific authors associated with it. Subservient Chicken’s origins were mysterious, but not deceitful. PSP was a flat out lie. There were no two guys, just a team of hired writers. While both sites were marketing-related, the difference between not revealing a corporate relationship and lying about it is night and day in the eyes of a consumer.

Related to the honesty of a campaign like this is the circumstances surrounding the revelation of the idea’s origin and its corporate relationship. In Subservient Chicken’s case, it was Burger King who revealed its association with site as part of “Chicken Your Way.” It was proud to have created buzz around an interesting idea, and took credit for it.

Sony, on the other hand, was “found out” to be involved with the site by consumers who looked up the site’s domain registration information. Only then did Sony take action (which consisted of simply taking down the site). This revelation was highly distasteful to the general public, who suspect Sony would have never admitted that it was behind the site had it not been "outed."

The type of content involved with an unidentified marketing tool is important too. While blog readers understand that anything is possible, blog content is generally expected to be self-produced by real, little people and the content is generally expected to be unaffiliated with major corporate interests. An interactive video site like SubservientChicken.com could be self-produced by some real, little people, but it's less likely because of the content production and site development that go into creating something like Subservient Chicken.

That’s not to say that the presumptions surrounding these content types are hard and fast and that a highly successful, anonymous campaign can’t be carried out on a blog. On the contrary, it’s very possible. But in order to maintain integrity to the consumer, it must be carried out in such a way as to not purport independence at first if it is corporately affiliated. Otherwise the backlash will be severe.

--Nate Winter