Posts Tagged‘growth’

The Windows 8 Hate Is Starting To Get Old, Guys.

I’ve been using Windows 8 for a good 6 months now and as someone who’s use all previous Windows versions going back to 3.1 it’s easy for me to say that it’s the best of the lot so far. Sure I don’t use the Metro interface a lot but that’s mostly because it’s not designed for the current platform I’m using it on (a PC that doesn’t have a touch interface). Still it seems I can’t go a day where someone, usually an executive from a large OEM, is bashing Windows 8 in one way or another. Considering that nearly everyone I talk to, including people who aren’t that technically inclined, seems to say the direct opposite of what they say I figured it was something worth looking into.

Windows 8 Shadows

A lot of the criticisms seem to stem from the awkward launch that Windows 8 had. Now I’m not going to try and be an apologist for this as it’s well known that even Microsoft was disappointed with the initial release. For those of us who endured the Vista launch however it’s pretty obvious why this occurred as whenever a new Windows release deviates heavily from the previous one (whether in terms of interface or underlying architecture) the sales are always lackluster as their biggest customers, the enterprise buyers, don’t want to take the risk until all the teething issues have been sorted out. More crucially though is that whilst the launch might have been an all round disappointment it didn’t take long for Windows 8 to gain some significant steam, getting on par with Windows 7 after 90 days.

Several other high profile people have gone on record saying that the Surface is also seeing lackluster sales. This coming not long after many people have called the ultrabook market a failure (which is not unjustified) makes it look like Windows 8 ‘s introduction can’t have any impact on what looks like a declining PC market. Now I’m not going to argue against those numbers however if you look at past Windows releases, take 7 for instance which was released in Q4 of 2009, you’ll see that whilst there was a small boost (which wasn’t out of line with current trend growths) the previous quarter it was back to where it was before. What this means is that while you’d expect people to be buying a new computer in order to get the latest version of Windows many in fact don’t. This doesn’t come as much of a surprise as the system requirements between Vista, Windows 7 and Windows 8 aren’t that great and indeed any PC bought during the time that these operating systems has been available would be more than capable of running them. Indeed many computers have reached the level of good enough half a decade ago for the vast majority of the population so the lackluster growth isn’t surprising, nor is it anything to worry about in my point of view.

I think the reason for the backlash is due to two reasons, both of which the blame does actually lie with Microsoft. The first is a bit of speculation on my part as I think Microsoft promised a boost in PC sales to the various OEMs in order to get them on board early with Windows 8. This is pretty much par for course when you’re working with OEMs on a new and risky product as otherwise they’ll be waiting until the product catches on before they throw their hat in the ring. Now whilst Microsoft could probably handle Windows 8 not getting a lot of OEM support for a while it would have been likely that Windows 8 wouldn’t have caught up to 7’s sales in the first 90 day period, severely stunting its future growth. Whilst they wouldn’t have a Vista level disaster on their hands it would’ve been much worse than what they’re dealing with now.

Secondly I get the feeling that many of the OEMs aren’t too enthused about the Surface and I don’t blame them. I said a while back that Microsoft needed to keep their product in the premium range in order to not piss off their partners and they’ve done that to some extent however with the exorbitant license cost for OEMs it’s incredibly hard for them to make a comparable tablet for the same cost as the low end Surface RT. This has no doubt generated a bit of animosity towards Microsoft with many OEM executives bashing Surface at every chance they get despite it selling out almost immediately upon release. Whether Microsoft can repair this relationship remains to be seen however as the platform’s long term survivability will be made or broken by their OEMs, just like it has been in the past.

Microsoft took a risk with Windows 8 and by most accounts it appears to be paying off for them, unlike their previous experience with Vista. It might not be the saving grace of the PC industry nor might it be a runaway success in the tablet market however Microsoft is not a company that plays the short term game. Windows 8 is the beginning of a new direction for them and by all accounts it’s creating a solid foundation with which Microsoft can further build on. Future Microsoft releases will then be able to deliver even more capabilities on more platforms than any other ecosystem. This isn’t the first time they’ve been on the back foot and then managed to managed to dominate a market long after it has established itself (Xbox anyone?) and I’d be really surprised if they failed this time around.

 

The Last Thing BitCoin Needs: Rising Exchange Rates.

In regular financial markets the value of a country’s currency is a great marker for how well it’s doing in economic terms. The surge in value of the Australian currency over the past 2 years demonstrates how strong our economy was in comparison to the rest of the world, mostly thanks to our strong capitalization of our banks couple with some pocket change from the mining and resources boom. However there’s one particular exchange rate where the value of the currency is actually irrelevant to the strength of the underlying economy and a high trading price actually signals that there’s something going horribly wrong. The economy I’m referring to is the one of the online cryptocurrency BitCoin.

Long time readers will know that I was very skeptical about the idea at first as it harked back to the days of other online currencies that were ripe for exploitation and all of which inevitably fell down, sometimes with catastrophic consequences. My concerns were mainly centred around the immense amount of wealth that that was concentrated in the hands of the early adopters but over time it shifted to the crazy exchange rates that BitCoins were attracting which inevitably lead to the price crash that happened in the middle of last year. Since then I’ve been more bullish on the idea of BitCoins because the price has remained steady whilst transaction volumes have started to rise, showing that BitCoins can actually function as a proper currency and not a speculative investment vehicle.

However over the last month or so BitCoin’s exchange rate has been creeping up steadily and the last week alone has seen massive gains in the current trading price:

As you can see for the past 6 months or so the price of BitCoins has been relatively steady, trading at around $5 for a good length of time. However just over a month ago the value started to slowly tick upwards and the last two weeks have seen that value explode in some rapid gains, culminating in a massive jump of almost 20% in under a week. Whilst it’s nothing like the speculative bubble of last year it does raise concerns that the stability of the BitCoin currency was short lived and the speculators have come back to the market looking to derive some more short term gains from the market they successfully pillaged last year.

Increases like this remind us of the unfortunate fact that at its current size the BitCoin market is still volatile as there are strong correlations between large transaction volumes and huge swings in the exchange rate. This is not a desirable attribute for a currency and is much more amenable to speculative trading, something which has burned BitCoin users in the past. Indeed a rising BitCoin value should cause a rational actor to hold off using is as a currency as they would instead want to hold onto them for as long as possible in order to extract the maximum amount of gain out of them. Such thinking is what lead to the BitCoin price to reach such dizzying heights last year and this last bump in the price has the potential to do it all over again.

For BitCoin’s sake I hope this isn’t the case as there are many innovative companies betting their core business on the BitCoin idea and a volatile market could easily spell the end for them. It’s quite possible that these latest bumps are just blips on the radar but the steady rise over the last month or so really has me worried about a repeat of the speculative bubble that happened last year. Can the BitCoin market correct for this kind of behaviour? Will passionate BitCoiners get roped back into the idea that their BitCoins are investment and not a wealth transfer vehicle? I don’t have straight answers to these questions but the next couple months will show if the BitCoin market can learn from the mistakes of its past and hopefully overcome them to become the real virtual currency it has always strived to be.

Why I Want to Read About Failure More Than Success.

With my daily helping of all things TechCrunch, GigaOM, VentureBeat and what have you I pretty much can’t go a day without hearing about yet another up and coming start-up that’s poised to take the world by storm. Whilst I was developing Lobaco these kinds of stories were the inspiration fuel that kept me going as it seemed like even the most wacky ideas were securing funding and it was my fervent belief that should I follow in their footsteps that I’d then also reach some level of success. Of course 1 year and 1 failed Y-Combinator application later taught me that the road to success isn’t always paved in the same way for you as it is for others.

Indeed I vented my frustrations with all these positive stories, likening it to inspiration fatigue.

After coming to that realization I started trying to seek out the stories of failure, stories of people who were in situations like mine and what caused their idea to fail. Such stories would provide me with a framework of what to avoid and what I should be doing that I’m not doing now giving me a much better shot at achieving success. Trying to find such information amongst my feed reader proved to be quite fruitless except for the tales of large companies that were in the long downward spiral of decline. This is to be expected however as a failing start-up that’s only received seed or series A level funding doesn’t seem like much of a story since 90% of them fail anyway.

The Startup Genome project then was exactly what I was looking for as when I first read about them they were looking to gather information from both sides of the table. I’ll be honest though I was sceptical that they’d ever come up with anything, figuring they were just another think tank that would use metrics that no one could be reasonably expected to apply to the real world. That all changed when I read their first report, especially their insights on premature scaling:

Since February we’ve amassed a dataset of over 3200 high growth technology startups. Our latest research found that the primary cause of failure is premature scaling, an affliction that 70% of startups in our dataset possess.
The difference in performance between startups that scale prematurely and startups that  scale properly is pretty striking. We found that:
 – No startup that scaled prematurely passed the 100,000 user mark.
 – 93% of startups that scale prematurely never break the $100k revenue per month threshold.
 – Startups that scale properly grow about 20 times faster than startups that scale prematurely.
To me that paragraph is worth more than 1000 success stories as it outlines pretty clearly where the real problem is for a high technology start up. What really did it for me though was this infographic from visually that made the report’s information very clear on what constitutes premature scaling and how to identify it within your startup. The real value though was in the breakdown of the stages of a start up and what a consistent start up should be expecting to be doing at each stage in their life cycle. I found that far more inspiring than reading about yet another start up passing the 1 million user mark in some crazy record time.
Reading the Startup Genome report was enough to convince me that I’m on the right track now with my latest idea, even if it feels like I’ve been making progress at a rate much slower than other people seem to be capable of. I’m still very much in the discovery stage at the moment but my small bit of validation that I’ve done with people in my target market suggests that this idea could be worth something to them. Whether that will be enough for the service to gain enough attention from users remains to be seen, but I wouldn’t continue working on it if I didn’t believe in the idea.

iPad Cannibalising Netbook Sales? Please Put Down the Kool-Aid.

If you didn’t spend 5 minutes talking to me about Apple you’d probably assume I was one of their fan boys. Whilst I don’t have many of their products I can count quite a few of them littering my house with a shiny MacBook Pro scheduled to be delivered sometime soon. Long time readers of the blog will know that I’ve launched my share of both vitriol and praise in their general direction over the past couple years with most of it tending towards the former, almost wholly due to them rubbing the caged libertarian in my head the wrong way. I’d say that the other part is from the more fanatical parts of their fan base who seem to do more work than Apple’s own PR department.

Today’s rant comes to you courtesy of the latter who have recently taken to stating that the iPad, in all its wondrous “magical” glory, has begun chomping away at netbook sales as demonstrated by some recent sales figures:

Look at the figures, things seemed to be on the rise over the previous eight months with only two monthly declines that are explained by the drop off after holiday sales (Dec to Jan decline) and the drop off after back-to-school sales (Sep to Oct decline). The moment consumers were able to put down the money for an iPad, the number of notebook sales started to fall.

Best Buy CEO Brian Dunn also backed up this data telling the Wall Street Journal that Best Buy is seeing iPad sales taking as much as 50% away from notebook computer sales!

Indeed the way the data is presented it would make you think that even the mere mention of a computing product from Apple would be enough to scare people into not buying a netbook. However this is one of those times when you need to understand that correlation does not mean causation, I.E. whilst there’s data that shows these two variables interacting this does not imply that one has affected the other. In fact I’d argue that to say so ignores a wealth of data that was pointing to netbook sales stagnating a long time ago with a plunge to follow soon after.

2007 was the first year we saw a significant amount of traction with the netbook market with around 400,000 units being sold. The year that followed saw a stratospheric rise in sales, to the tune of almost 30000% with 11.4 million units sold. Whilst I can’t find a hard figure on sales for 2009 most articles around the time pegged an increase of around 100% or 22.8 million units moved. That kind of growth as any economist will tell you is completely and utterly unsustainable and it was inevitable that the netbooks would finally reach a point where their sales growth would hit a ceiling. It appears that the time is now which just so happens to coincide with a release from Apple. Whilst I’ll admit that there may be some influence from people not refreshing their netbook in lieu of an iPad I’d hazard a guess that that number is vanishingly small.

The trouble with using such figures as a tell for the iPad’s influence is that these are comparative figures (growth is compared to the year previous). If you take a look at that graph above you’ll see that the previous year’s growth was quite massive, hovering around the 30% region for all of the months that are showing decline. I wouldn’t be surprised if next year when we’re able to do the same comparison that we see a much more sustainable growth rate in the single figures. Growing at double digit rates for extended periods of time just isn’t doable, especially in an industry where hardware is usually expected to have a useful life of 3 years or more. The drop in sales is likely a combination of the market reaching saturation, netbooks falling out of favour (to be replaced with games consoles, new cameras and 3D TVs apparently) and an overall reduction in discretionary spending thanks to a bleak economic outlook in the USA. Somewhere in the midst of all those factors are those few people who were looking to buy a netbook but decided to go for an iPad instead, but those few do not swing as much power as the other factors that have had a downward pressure on netbook sales this past year.

Look I get it, Apple made a product that a lot of people think is pretty darn spiffy and anything that could be classed as a competitor obviously will be decimated by it. We’ve still yet to see the media revolution that it was meant to spawn (amongst other things) it seems rather premature that a device that hasn’t achieved its other goals is already decimating a market that it’s only casually related to. The stories then come from those who are towing the Jobs’ party line that netbooks are nothing more than cheap laptops, with little regard for the actual facts. Luckily it appears that not all of them are getting sucked into the easy pageviews and hopefully the fud will eventually be drowned out, leaving only the deluded fan boys holding onto dubious claims and long debunked statements.