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There’s been a lot of negative discussion of Netflix recently – and while I think they have made mistakes, I’m bullish for the medium-term future. Essentially, Netflix lost 2% of their subscribers after a 60% price hike. Their overall revenue increased 4% from the second quarter, and 49% YOY. Granted, they expected more, but that big of a plummet?

The main argument I hear is that Amazon is going to compete with them. Amazon has had Instant Video (used to be called Unbox) for awhile, but now they are starting a subscription service, similar to Netflix. The content providers clearly want a second major player that they can play off Netflix from a negotiation stand point. But to assume they can be competitive with Netflix in the next year or two is misguided, in my opinion. Netflix has a huge user base of very loyal customers. More importantly, Netflix has significant distribution through set-top/DVR boxes, TV manufacturers, gaming consoles, Apple/Google TV, iPad, iPhone, Android, etc. Amazon has distribution on almost exclusively TV manufacturers and Google TV. Amazon has had time but is clearly not getting the same distribution – my hypothesis is that it’s because they are competing with some of the other channels with their Kindle Fire. And the assumption is that they’ll eventually get into the mobile phone space as well. So Microsoft, Google, and Apple aren’t going to push Amazon’s streaming service over their own, or Netflix (which has no single horse in the race). And distribution matters – I believe (albeit without proof) that people make buying decisions based on whether a device supports Netflix.

Content is still king, but as long as Netflix can continue to secure more content (which they can, utilizing their distribution/brand advantage), I would buy into their growth.

A huge part of the mobile experience is still extremely subpar. No one has created a seamless handsfree experience. I briefly blogged about this 2.5 years ago, and I still feel like there is tons of room for improvement. I don’t blame the headset companies, as my Plantronics (and for many others Jawbone) headset works great… as a headset for phone calls. But using it is not easy. Voice dialing (calling a contact using voice recognition) is a very basic start. The iPhone has Voice Control, which is little more than voice dialing plus basic iPod controls. Android has the best solution right now, Voice Actions, which seems very promising. Yet it doesn’t work consistently with a bluetooth headset, and the commands themselves are too robotic for most users. There are also some solid apps in the space. Nuance’s Dragon voice to text is great. Siri (which Apple purchased 1.5 years ago) has a good amount of NLP (also uses Nuance) and allows for a variety of different commands. Vlingo, Google, and countless others have apps too. But it isn’t effective unless it’s integrated at the OS level and works with handsfree devices.

The obvious use case (especially in CA and other states where there are specific laws) is controlling the phone while driving. Some cars have tried solving this, but none (that I’ve tried) have done it well. But handsfree use cases can be more common- anywhere from multitasking to video chat would be improved by some sort of integrated headset. Wired headsets are obviously not easy to use (I feel like I’m always untangling mine). And wired headsets only work on a single device- bluetooth would allow for switching between iPhone/iPad/etc. where appropriate. Apple previously tried making a bluetooth headset (see here) but apparently gave up, I’m guessing due to technical limitations and lack of polish. The bluetooth spec has improved significantly, allowing for better quality and lower power consumption. A typical headset now can go days/weeks before a charge with decent use. My ultimate wish is that the headset would be able to charge directly from the phone via a mini charging connection or induction-based charger.

But the software integration is the most important – the headset and phone need to understand a variety of commands and output results using display and more importantly voice. Something like “look up directions to Mitchell’s Ice Cream” should return a map and read out the list of turns.  ”Schedule phone call with Mom for tomorrow at 3 pm” should read back, create a calendar item, and send an invite. The harder but equally important one command is “reserve a table for tomorrow at 7 pm at Aziza for 4 people,” which should use the OpenTable app, and read back available reservation openings and confirm. And the software should somehow know how to differentiate and use the appropriate device, whether an iPhone on the road, or the Apple TV at home.

My prediction (dream?) is this will be solved in the next major iOS (5.x) release, and that Apple will release a headset at the same time.

Google officially announced the Nexus One today, and it seems pretty cool.  I haven’t had a chance to play with one yet, but by most accounts, it’s worth checking out.  I believe it will be a successful device, along with the Motorola Droid and the HTC Droid Eris.  However, there seems to be a lot of sentiment that this is playing out like the PC vs Mac wars a decade or so ago, and that slowly app developers (and in-turn users) will all gravitate towards the more open Android platform.  The argument is that Microsoft excelled because it was hardware agnostic and did not control the ecosystem (thus allowing it to innovate), whereas Macs struggled because they controlled the entire experience (here’s a good take on this).  In the mobile marketplace, the argument continues, Android will eventually win out because it’s completely open.  Never mind the over simplicity (i.e. Jobs left, the hardware started to suck, etc.), there are some good parallels to make the analogy fit.

I, however, completely disagree.  This market is much, much more nuanced.  The reason is that there are two major differences between different phones that affect user behavior – input mechanism and screen size.  For example, here’s a list of the different screen resolutions for Android devices:

800 x 480
600 x 800
320 x 480
240 x 320
854 x 480
240 x 400
1024 x 600

And Android is only now becoming popular.  Some Android devices have keyboards, some are touch only, some have pointers, some have extra buttons, and some have sensors others don’t.  With the computer, everyone had a similar keyboard and mouse.  Users had different size monitors, but the big difference was that you could get away with cropping and not using the entire monitor for computer apps.  On a phone, where the screen is already so small, not using the entire space is much more significant.

This is the same issue that plagues Blackberry right now (well, that and terrible API implementation/documentation).  Whether it’s the Curve, Bold, Pearl, and so on, every device has a different resolution, and so apps need to be tailored appropriately.  I’m not the first to realize this is an issue (official Android documentation and another post).  The iPhone, on the other hand, has one screen resolution 320 x 480, and one input mechanism, touchscreen.

That all said, I believe that Android will thrive, but it won’t be the same way as Mac vs PC.  Bill Gurley’s piece (a must-read, in my opinion) begins to get at the nuanced differences, but Android is still a smartphone platform, which puts it head-to-head with the iPhone.   It is very lucrative for manufacturers and carriers to use Android instead of paying a licensing fee (they actually receive ad revenue share for using Android).  But for consumers and users of apps on both devices?  I still think the iPhone will be a better experience.

Two additional interesting factors to consider – if feature phones (i.e. non-smartphones) begin to adopt Android in full-scale, and the continued success of the iPod Touch and iTunes store (remember, you can’t use your iTunes music on a non-Apple device).

Google is a remarkable company.  They’ve flipped the business model in numerous ways, because they can.  But what’s happening in the mobile space is becoming a both exciting and troubling.  I love how they give away navigation data, or that they pay manufacturers to use their phone.  Soon they will subsidize your laptop, and maybe even your TV.  It’s giving folks who don’t normally have access to some of this technology a way to buy it.  And in the mobile space, with their new “phone”, they are trying to break the carrier-driven model (which I argue would come anyways once LTE rolls around, as most carriers will then be on the same technical platform).  To Google, it’s all about getting the accessing the world’s information and letting you search it quickly (and of course selling ads).

But soon, a single company could provide your software for your email, browser, OS, TV, and mobile phone.  That’s every single way I consume information, purchase products, and communicate with my friends and family.  A single advertising company.

Right now, they are a fairly friendly privacy company.  But what happens if growth slows, or there’s a change in leadership, and the company is pressured to seek alternate revenue streams.  I’m not sure I’m ready for a single company to own/control access to all this data.  I like convergence but not this much.  The question as a consumer is where do we draw the line?  Google has not made many major missteps with privacy (though last week’s comments were awfully close).  But what if that changes?

The thing is this – there should be a large competitor that’s challenging Google and trying to perform the same convergence, and there isn’t a clear one yet.  Yahoo tried with Connect TV/Digital Home, but they have been struggling.  Microsoft has been trying to push Media Center for awhile, and their mobile platform is confusing at best.

Apple seems the best poised.  Although no one has said it, the new Google device is their answer to the iPod Touch, a tremendous device that can be used for a variety of things, including as a phone (and I’m guessing an HD camera soon).  But Apple tends to attack verticals.  Regardless, I will continue to use my Apple phone, my Windows laptop, and my garbage software on my TV.

I hope some startups and incumbents come up with ways to challenge Google on all fronts.

FYI – I’m long Apple.

Last night, I was driving home from my sister’s place in the east bay, and after checking Google Maps and seeing all green roads (i.e. no traffic), I decided to take 880/Bay Bridge to get back to SF.  Little did I know it was green because there was no traffic on the bridge (due to the closure).  Had I known beforehand, I would have saved a full hour.  In a moment of tragic comedy (okay, it was not that bad, but good thing I had company), Caltrans decided to alert me after I passed the traffic-filled toll plaza on the San Mateo Bridge that the “Bay Bridge is closed, seek alt route.”  Thanks.

I’m not alone when I say I’m often running late to lunches and social gatherings.  Or oftentimes I get delayed when I need to travel out of the office for a meeting.  The one thing that’s constant in all these situations – my phone.  My mobile device always knows where I am.  My calendar always knows where I should be.  Why can’t these two merge?

Now, I know this is difficult on the iPhone since there are no background apps, making it difficult to keep updating location (though some folks have found workarounds) .  But on Android, this should be relatively easy.  With the proliferation of LBS, my phone knows where I am at all times.  It could tell, for example, that if it’s 8:45 AM and I am more than 15 miles away (or there’s traffic) from my 9 AM calendar appointment location, that I will be late.  It could then send a text/email to the other attendees (or at least the organizer).  Little late to dinner?  Perhaps an integration to OpenTable.  Flight late, meaning I can work later?  An integration to TripIt would be help.  Yes, many folks have admins to help with this, but it really should be automated.  Last night, my phone clearly could have known I was heading home to SF via the Bay Bridge, and alerted me of the closure (the news was all over Twitter, which I unfortunately did not check before leaving).

None of this is ground-breaking, or extremely tough to do.  Google is probably best positioned to do this, but perhaps there’s a startup already hard at work (I hope so).  I’m looking forward to the day when all these services are combined and I can comfortably know I’m being alerted.  In the meantime, good luck to Caltrans on the repairs, and all commuters who usually take the Bay Bridge daily.

Apple announced today that over 2 billion apps had been downloaded – quite an amazing feat in little over one year.  Since I started using an iPhone, I realize that my favorite part is the App Store.  The touch screen and slim profile are nice, but it’s really the store that makes me love the device.  Perhaps I’m unique.  As a kid, I used to love getting the Sunday newspaper, especially on a snowy day, when the newspaper was cold and crisp.  After perusing the sports section and the comics, I loved leafing through the CompUSA and Circuit City flyers, especially the clearance and sales sections.  I could never buy enough cheap peripherals or hard drives.

The app store has taken over my previous excitement that I felt about the flyers.  Now I download Waze or buy Snapture rather than a trackball mouse or screen cleanser.  Instead of waiting for Sunday, I can just load up the store on a whim and see if there are any cool apps.  I wish there was more turnover in top apps, but the fact is that it’s far and away better than Blackberry’s App World (and I hear also Android’s and Palm’s, though I have limited first-hand experience).  It has the instant gratification element.  I wish that the iPhone allowed developers more flexibility, but as long as people keep releasing great apps, I will be interested.  And that’s the key – the moment another platform’s app store gets more traction, and their apps become more innovative than the iPhone’s apps in terms of quality and quantity, I will most likely switch over.

UPDATE: As I was loading up my blog to post this, I saw a very relevant argument that Blackberry needs to step up their efforts in the app store.  Worth a read…

In the spirit of the playoff stretch, I thought I would briefly mention how awesome the MLB app on the iPhone is.  The MLB Advanced Media (MLBAM) group has done a great job over the past several years.  Since I’ve moved to the Bay area in 2005, I have been able to watch or listen to nearly any Red Sox game through my computer with MLB.tv (though I barely take advantage).   The limitation is you can’t watch in-market games (so if you are in the Bay area you can’t watch the Giants/Athletics) or nationally televised games.  But the quality is superb.  MLB was clearly ahead of the pack, but now Hulu has made the internet TV watching experience more mainstream.  This year, the service cost $79.95 for the season (you can sign up now for the remainder for $14.95).

What is extremely interesting is their iPhone app.  The app costs $9.99 (slightly steep, but worth it if you are a baseball fan), and has game tracking, video highlights, live audio, etc.  But if you are an MLB.tv subscriber, it lets you watch games live, on your phone.  And it works on the 3G network (which is huge), without much choppiness.  In fact, here’s an image of a Sox game via 3G:

Anyways, I thought I would mention it on my blog because I love showing it off.  It looks like they are running a promotion, so if you download the app, you can buy individual games for $.99 (without being an MLB.tv subscriber).  It’s definitely my favorite app on the iPhone, just wish I had time to use it more!

There’s been a large movement online towards consolidating identity.  Single sign-on (SSO) online has been a goal for a long time, starting with Microsoft’s Passport and then the OpenID and Open Stack movement.  Facebook Connect, in its short life, has probably done a lot more to enhance the progress.  It’s not yet ubiquitous, but many sites support Facebook Connect to not only provide identity and authentication, but to let users interact with their friends through the site.  Google has a product as well, Friend Connect, which is a more open version (supports OpenID) though less popular flavor of the same thing.

What’s fascinating is how this movement is happening with the telephone as well, in a seemingly parallel track.  Convergence will happen sooner than we think.  I’m terrible at remembering numbers – but pretty soon we won’t need to.  That’s what makes Google owning GrandCentral (now Google Voice) fascinating – at some point, the phone number (at least the way we think of it today) will be superfluous.  The Palm Pre already connects to Facebook, Android phones to Google.  The phone number will essentially become the device ID.

This why owning the digital identity of the individual is so important to Facebook and Google.  At some point, reaching individuals via phone will be based entirely on a digital identifier, i.e. SSO will apply to phones, and our digital identity will be the conduit for communication.  It may be our email address (like it is with online payment), or our Facebook identity.  There are pros and cons of both, and clearly both companies want to be in the middle.  By being the broker of communication, they will become the telecom companies of the next generation.  A lot of this is obvious, but my hope is that it’s done in an open fashion.   I’m just looking forward to the day where all I will need is an online ID and that’s it.

When Amazon announced its acquisition of Zappos yesterday, I was pretty excited.  Here were two of my favorite companies joining forces. I have become a huge advocate of Amazon (especially their Prime service) over the past couple years, as they continue to show innovation and reduce the pain of shopping (this doesn’t account for the Kindle and AWS, which I discuss here).  I’d say 90% of my online shopping goes through Amazon due to price/ease.

Zappos, on the other hand, is a more recent fad of mine.  I heard Tony Hsieh speak at TiEcon earlier this year, and it was the best keynote I can remember, especially given that I was able to stay awake (without coffee) on a Saturday morning with very little sleep.  And he was quite inspirational, though he didn’t talk just about Zappos or his background.  I actually bought a book on his recommendation – Happiness Hypothesis (which I will blog about sometime in the future), ironically on Amazon.

Their value prop is awesome (free unlimited shipping and returns) and their service is impeccable.  While they focused on shoes (competing with Amazon’s Endless.com), they had already expanded into apparel, and it was only a matter of time before they moved to other types of goods that Amazon offered.  I loved where the direction they were pushing the market in, and was hoping that I’d eventually be able to choose between Zappos and Amazon for that next gadget or toy.

The question I wonder is whether, as a consumer, is it good that these companies are now one and no longer competing.  As Hsieh colloquially put it in his letter (btw I like his sense of humor), this was less an “acquisition” and more like “Amazon and Zappos sitting in a tree…”  In my opinion, Zappos’ customer service cred kept Amazon honest, but now that they are “sitting in a tree” together, who is challenging them, and pushing even their vaunted reputation higher?  I’m sure there are smaller companies out there that are evolving, but to reach their scale it requires significant capital.  Perhaps Ebay can challenge them but given their CEO’s recent statement, it looks like they’re going to push their Paypal offering (which has a terrible customer service reputation, fair or not), which to me means they may be deshifting their focus against Amazon.

Anyways, I will leave you with the presentation Hsieh gave to TiEcon – it gets really interesting around slide 36 (though even the beginning is great):

I am probably not the typical phone user.  I rely on my device for a ton of things throughout the day and night, anywhere from email, maps, news, shopping, entertainment, and, of course calling people.  My Blackberry 8800 and then Bold served me well in all these functions – I used their integrated email, Google Maps, Viigo, Amazon App, the camera, UberTwitter, Facebook, and more, all at least once a day.  When the iPhone initially came out, I thought it was a cool toy, but nothing that could replace my daily needs.  Once the SDK was released, I started to grow a bit envious.  Cool apps were developed left and right.  I needed to buy an iPod Touch to help satisfy my gadget needs.

A couple things kept me excited about Blackberry – their App Store and OS5.  I thought here was a chance for Blackberry to demonstrate their full potential.  The Bold was a fairly powerful device when utilized to it’s max (see Google Maps, Vlingo, Amazon, Shazam apps), so it seemed like it could be somewhat competitive.  The problem is that Blackberry was originally built as a messaging device, targeted at enterprises, with lots of security built-in.  They did a good job of building a platform around it, but it wasn’t scalable.

Then the App Store came around – which tried to imitate Apple’s.  Soon after, OS5 pictures leaked out.  Here was a chance to even the playing field – and they didn’t come close.  The app store made installing apps easier (though you needed to know how to download the App Store app ironically), but OS5 looked just like 4.6, 4.2, etc, with some additional features.  They’ve tried to woo developers (see Blackberry Fund), but it hasn’t really worked.  The reason is not lack of devices- there are many more Blackberries in the market than iPhones.  It’s that from everything I hear and see, it’s not easy to develop on Blackberry.  From the poorly documented API, large number of models, different versions of OS’s, etc, it’s just tough to manage.  And it doesn’t seem to be getting better (BGR wrote a great piece on this).

The one advantage I always thought I’d have over the iPhone was phone service quality.  But once calls started dropping (quite an understatement), I decided to give the Palm Pre on Sprint a try.  Knowing I could return the device within 30 days, I went out and bought a Pre.  My quick review-  it’s great product but needs to mature (and it will, in time).  webOS was awesome – they did a great job with the “cards” and multi-tasking.  I really liked how the mail and notifications popped on the bottom.  I liked how most things worked, although at times it felt a bit too cute.  Problem came down to the keyboard.  I did not like the keys – felt way to plasticky.  And I especially did not like how it slid out.  Everytime I needed to do something I had to flip out the keyboard – I felt like I was going to drop it and it just slowed things down.  It actually made me crave a virtual keyboard.  That’s when I decided to get the iPhone 3GS.

I’ve had it a couple days now, and I can’t imagine going back.  It’s weird, because I was once a hard core Blackberry user (convinced friends and family to get one).  But now – I’m going the other way.  If you can get over the lack of a physical keyboard (which isn’t terrible unless you write a ton of emails) and the non-removable battery (which wasn’t much worse than my Bold, though I carried a backup), there’s no comparison.  And while I still have nostalgia for my Bold keyboard and its build quality (mine survived a beating), if you crave features and functionality, the iPhone is the way to go.  Sorry, Blackberry.

FYI – I am long Apple, and have been for almost 2 years.