Monday, June 24, 2013

Will Facebook Reader threaten traditional newspapers?

Written for
According to the Wall Street Journal, Facebook is working on a mobile service that gives users personalized news in a very attractive graphical form. The service is called internally Reader and reminds successful Flipboard service that allows users to browse news of participating media as well as current updates published by our friends.
The original idea of Flipboard came from the brainstorming of its founders, who thought about how would the web look lite if they could design it from the ground up. The result was resembling a color printed magazine, without any windows, but with full page pictures, in which users browse in a very natural way by turning pages just like in a printed magazine.

Facebook COO Sheryl Sandberg recently said that every team within Facebook is now focused on development of mobile applications. The company is increasingly focusing on mobile services as it is the area that urgently needs to increase advertising revenue. In a situation where people are increasingly using smart phones at home and at work Facebook has to call for a fundamental change in its corporate priorities. If Facebook succeeds in mobile services, it can reach out to its users through highly targeted advertising virtually anytime and in any situation. If it however fails here, it will leave this lucrative segment to other players.
At this moment it seems that Facebook mobile strategy works well. Facebook "owns" one of every seven minutes PC users spend on the internet, and one of every fifth minute of users who access the Internet from mobile devices. Mobile use of Facebook clearly grows, but what is even more positive for Facebook is the growing revenue from this area. Facebook now gets 30% of its income from the mobile serment, which compared to zero in the time of Facebook's IPO is a truly excellent result.
Facebook Reader is likely going a similar direction as the recently launched Facebook Home - it is a full-screen skin of Facebook interspersed with interactive advertising. In comparison to Facebook Home, Facebook Reader can be for its users more useful and less obtrusive. And that is exactly what Facebook wants to achieve - to dominate the area of mobile devices, and through this to dominate the time of its mobile users.

Monday, June 10, 2013

Apple iRadio marks the end of music industry in its current form

Written for Start2Cloud.
Today, Apple officially unveiled its new iRadio service - free internet radio broadcasting personalized stream of songs funded by advertising. At first glance, it is not no breakthrough; there are already numerous similar services on the market - let’s name for example Spotify,, Musicovery, Google Play Music All Access, and especially the founder of this segment, the Pandora service. Yet this step is very important, and it is because of the one who makes it.
Apple's new service iRadio
Apple iRadio is a classic proof of the claim that if two people are doing the same thing, it's not the same. The importance of iRadio is not in its innovativeness (by the way, Pandora offers a similar service for 13 years), but in the power of the Apple brand, which can accelerate, and eventually promote this significant change in the mass market. No one else has the power to force changes in the habits of millions of music listeners so dramatically and quickly, just like Apple. Apple is not only the market leader in IT and consumer electronics, but also the number one in online music sale. Its iTunes Store is since April 2008 the largest music retailer in the United States, and since February 2010 the largest music retailer in the world. Apple will compete in the new market not only with other steaming music competitors, but also with itself. It will cannibalize its own sales of online songs - the more audience Apple manages to get to its iRadio, the less songs it will sell.

Apple is however forced to take this step, because it can not ignore the ongoing general music industry transition from sales of albums and tracks to sale of services. Sales of songs has been declining since 1999, and during this period fell from $ 38 billion to 16.5 billion last year. If Apple did not build its position in emerging markets in time, surely someone else would, and Apple would have missed its chance. By the way Apple is not the first company which decided to cannibalize its existing markets. A similar step was made by Internet bookstore, who reacted to the decline in sales of paper books by developing its own e-book Amazon Kindle, effectively accelerating the paper books decline.

Market of the new music industry will combine revenues of two major markets: Market of sales of tracks/albums and radio advertising market. The size of the second market is estimated at $ 14 billion per year (ie, only slightly smaller than the current market of sales of songs), and in addition, this market has not yet been affected at all by the digitization process. We should underline the word yet, because this is what can Apple change quickly, because of its great market power. In fact, it can change the radio advertisement market in a very similar way to how the company has influenced the music industry with its iTunes Store. As a result, Apple may substantially speed up the already long-going process of extinction of the music industry in its current form, based on sales of music tracks, and contribute to its faster transformation into a new form based on the sale of subscription services and services funded by advertising.

Recall on this occasion one more interesting thing: Apple enters a new market for the first time since the death of its co-founder Steve Jobs. As we can see, surprisingly, it is not the smart TV market, or the market of smart watches, which were so widely speculated about. It is very likely that Apple is working as well as products for these markets we mentioned, but apparently it has been unable to progress in these segments fast enough, so the streaming service came out first. In any case, all this development only confirms the closed and secretive nature of Apple’s business.

Crowded but growing market of streaming music
Therefore Apple is now entering a crowded, but growing market of streaming music and will compete with established players such as Pandora, Spotify or Google Play Music All Access, and also in addition with classical music radio stations - and indeed with itself. But regardless of who will ultimately be the winner of this battle, one thing is certain. The year 2013 will be written in history as the year when the music industry actually died in in its current form and was replaced by significant new services based on the new paradigm of personalized services.