Mobile gaming in Japan: A different world

From time to time I like to drop in on What Japan Thinks, a website that translates into English an enormous number of market research studies conducted in Japan. That's where I recently came across an astonishing survey conducted earlier this year on mobile game use in Japan.

In the US, game-playing on mobile phones is seen as a fairly popular activity, and I think the view in Europe is similar. But neither place holds a candle to Japan, if you can believe the survey. Here are some highlights:

More than 90% of the people surveyed play video games. That seems like an incredibly high figure, but the survey was conducted by InfoPlant, a reputable Japanese market research firm. The survey base was supposedly users of DoCoMo mobile phones, which sounds a little unconventional but is a fairly representative sample of the overall Japanese population. It's better than surveying PC useres, which is what's typically done in the US. PC usage rates are a lot lower in Japan than in the US, so surveying via mobile phone actually reaches a greater share of the population.

It's surprisingly hard to find directly comparable game-playing statistics for other countries, but the reports I could find implied lower levels of activity:

--A report from the Entertainment Software Association , a trade group, claims that 69% of US "heads of households" play video games.

--Back when I was at Palm, we had access to Forrester Research's excellent consumer tracking surveys. At that time (a couple of years ago), they said 32% of US households had videogame consoles, and 24% had handheld game systems.

--At Palm we also did our own surveys of consumer interest in mobile gaming. We found that about 13% of the population in the US and Europe were mobile entertainment enthusiasts -- people who were willing to pay extra to have an entertainment device with them when they were on the go. We never ran the survey in Japan, and now I wish we had.

The InfoPlant survey figure appears to indicate that there's a much higher percentage of gaming enthusiasts in Japan than we have in the US and Europe. That fits the stereotype of gaming in Japan, but I always question stereotypes like that unless they've been tested objectively.

At least three-quarters of the people surveyed play games on mobile devices.
Mobile phones are the devices most often used for game-playing, but about half of the respondents said they also own a dedicated mobile gaming device like a Gameboy (about double the ownership rate Forrester found in the US). Half of those users, a quarter of the Japanese population, said they use their game devices frequently.

Here's the breakdown of gaming device usage by sex (numbers total to more than 100 because many people play games on more than one type of device). Game usage on mobile phones and portables was a little more popular among women, while console gaming was more popular among men.

On what kind of machine do you usually play games?

Women prefer Nintendo.
There are some interesting differences between men and women in what brand of mobile gaming device they use. The women were a bit more likely to use Nintendo products, while the men were more likley to have Sony PSPs.

Select all the portable game machines you own.

In case you're wondering what a Wonder Swan is, it's a mobile game system sold by Bandai in Japan.

Most people use mobile game devices at home, not in transit.
This is a great example of why I distrust stereotypes. The stereotype of Japanese mobile gaming is that most people would do it on trains, while they slog through their commutes on those endless subways beneath Tokyo.

The survey confirmed that some people genuinely do use mobile games in transit, but the most common usage of a mobile game platform is at home. I guess the pattern would be to come home, stretch out on the futon, and play a little Pokemon:

Where do you usually play on your mobile device?

I wish we knew more about why people would use a mobile game system so heavily at home. Is the TV being used for other purposes? Or in a relatively small Japanese home, does the portable game system just fit in better?

Old folks dig the DS. The greatest surprise to me was a finding that Nintendo DS ownership is vastly higher among older people than young people. The chart below shows the percent of people in each age group who own Nintendo DS systems:

Percent of respondents in each age group who own a DS:

What Japan Thinks attributes this to Brain Age and other "brain training" games for the DS that are supposed to protect against mental decline as you age. Apparently this is driving vast usage of the DS by older Japanese people.

It's a fascinating difference from the US, where the DS is generally seen as a kids device, at least for now.

What it all means

As I noted earlier, without knowing more about the study's methodology, it's hard to say how much we should trust it. But even if some of the numbers are off by a bit, I think they teach a couple of good lessons:

Convergence doesn't necessarily destroy specialized products. Mobile gaming is heavily deployed on Japanese mobile phones, and yet standalone mobile game devices continue to sell well. Why? I think it's because the mobile consoles do things that the game-equipped phones can't. Convergence kills markets only when the converged product is a complete and affordable replacement for the dedicated one. That's very important to keep in mind when you read the forecasts saying things like, "cameraphones will destroy sales of digital cameras." That will happen only to the extent that cameraphones have all the same features as standalone digital cameras. If the camera vendors keep innovating, I think they can survive indefinitely.

Don't assume a market's boundaries are fixed. The standard assumption in the industry has been that mobile gaming is primarily a kids and young adults thing, with GameBoy + Pokemon being the prototypical example. Even the PSP, which shoots for a more mature audience than GameBoy, is still aimed at hardcore gamers. But Nintendo has been very up-front about aiming both the DS and the new Wii console at mainstream adults. That strategy has apparently been very successful for the DS in Japan, and you can read an update on Nintendo's Wii marketing plan, targeting soccer moms, here.

(I first started believing that Nintendo's Wii strategy might work when my wife abruptly told me she wanted one for this Christmas. She said it's a great way to get exercise if you don't want to go through the hassle of traveling to a tennis court. About half of her friends agree and also want Wiis. This from women who have never shown serious interest in a game console before, and who barely even know what an Xbox is. Remarkable.)

It's very common for tech companies to assume that the people who make up a market today will always be the core of the market in the future. But that's like driving a car by staring at the rear-view mirror; you can only see where you've been.

Looking ahead and growing a market is a lot harder to do, but it's one of the most effective ways to fight a larger competitor who's invading your turf. If the other guy has a volume or resource advantage, the worst thing you can do is stand still and let them spend you into the ground. Change the rules of the competition by innovating in unpredictable ways, or by growing the market in a new direction. That turns the biggest advantage of a large corporation, its scale, into a disadvantage. The larger a company is, the slower it reacts, and the more its internal politics will interfere. If you change the rules frequently enough, the big guys will never be able to get their cannons fully aimed at you.

That's what Nintendo is doing in its fight with Microsoft and Sony. There's no guarantee it'll work, but I admire Nintendo's vision and courage.

Hollywood's view of the Web: Through a glass, strangely

The LA Times is a wonderful place to watch the entertainment industry try to figure out the Internet. Some issues that aren't a big deal in Silicon Valley fascinate them endlessly, while other things that Silicon Valley thinks are important are completely ignored.

A great example of this process is the newspaper's recap of 2006 on the Web, "Ten moments the web shook the world."

"This was the year wishful thinking -- that this Internet phenomenon might just go away -- evaporated, and those media companies still standing began to seek anything that might see them through the deluge."

So what made up the deluge, according to the Times? Some highlights:

Snakes on a Plane is described as the first time that the Web took control of the production of a movie. Most folks in the blogosphere viewed Snakes as a cool example of participatory marketing, but if you view it through the eyes of a Hollywood producer, it's a threat to power.

LonelyGirl15. This mysterious personality on MySpace was the subject of endless coverage and speculation in the Times throughout the summer. They analyzed it with the same intensity that many websites reserved for Britney Spears' underwear. I think the idea of someone using the Web to launch an acting career blew their minds.

The rise of celebrity websites. The Times viewed this as the year in which celebrity-focused websites first started to drive (read: debase) the standards of what constitutes a celebrity. People like Paris Hilton (and our gal Britney) proved to be willing to do just about anything to get a little online attention.

The common theme in all of these cases is the loss of power by parts of the traditional entertainment industry: producers, agents, and journalists. For years the Web has been eating away at power structures in lots of industries, but this was apparently the year in which Hollywood first really felt the impact.

The Times asks: "As traditional media interact with new media and vice versa, whose values will infect whom? Will old media arrive like the cavalry on the scene, Good Book in hand, to lift up the Web rabble with the promise of Bedrock Standards and High Production Values? Or when the drawbridge is lowered just a little bit, will the masses simply storm the castle and repaint it electric blue and pink?"

That's easy to answer. I heard the same questions almost 20 years ago when desktop publishing started to challenge the printing industry. The answer is that you'll get both -- the high-standard material will coexist side by side with amateur hour. People will prove to be very accepting of poor production values if the material is compelling in some other way (YouTube already demonstrates this, where we cheerfully watch video of such poor quality that you'd call the cable company and complain if it came over your TV).

There will always be a market for the best productions, but in the future I think it'll be much harder to get away with charging high-quality production prices for shows or movies that aren't truly entertaining, because people will have a cheap alternative. The threat isn't to HBO, it's to the CW.

Understanding Palm: What Ed Colligan really said

I sympathize with reporters sometimes. If you attend an event, you're expected to write about it -- even if there isn't any news. That's what I think happened a few weeks ago when Palm CEO Ed Colligan did a breakfast Q&A for the Churchill Club, a local discussion forum here in Silicon Valley.

About 50 people attended, and while Colligan said some interesting things, an informal breakfast talk is not the sort of place where you deliver major news. But two reporters from the San Jose Mercury News were there, and they had to write about something. So they picked on Colligan's answer to a question about competition from Apple and others entering the mobile phone market. He pointed out that it's hard to make a successful phone product.

Unfortunately, there's no effective way to answer one of those theoretical competitive question when reporters are in the room. If you say, "we're very worried about the new competitors," the headlines will scream, "Palm CEO says company is doomed." If you say you're not concerned, the story will be, "Palm CEO overconfident." I've been there. You can't win.

Sure enough, the Mercury-News headline read, "An Apple phone? Palm CEO says, 'What, me worry?'"

Then, of course, the culture of Internet outrage ran with the story. The high-visibility Mac weblog Daring Fireball (#345 on Technorati's worldwide list) headlined its commentary, "Palm CEO Ed Colligan’s Head Seems to be Stuck Somewhere." No need to read the article; you can tell what it's going to say just from the headline.

There were three ironic things about all of this:

1. The question didn't actually focus on Apple. Colligan was asked about all of the new competitors who might be entering the market: Apple, Google talking about free phones and hiring Andy Rubin of Danger, and so on. "The phone market could look intensely crowded."

Colligan's response: "It's also intensely big, we just have to get our fair share." "Let me tell you this, it's not as easy as it looks." He cited the Motorola Q as an example -- it was supposed to take over the world but didn't. "I just would caution people that think they're going to walk in here and do these.... I don't think it'll be so easy as everybody thinks. It's a tough space...I'm not trying to be cocky about it. It is a tough business. We've really struggled through that." "We struggled for years figuring out how to make a decent phone."

He said making world-class radios that work consistently on world networks with all the right applications is very hard.

I thought that was a pretty nuanced, honest answer to the question. He didn't sound dismissive to me; he was just pointing out that it's hard to make a phone. He's right that until you've lived through the process of producing a phone, you have no idea how many little decisions have to be made, how many things can go wrong, and how many tweaky little features the operators will make you add. Although you might think phone features are standardized, in reality they often require all sorts of small customizations for every operator. That's incredibly expensive to do, the process is hard to learn, and if you fail on even a couple of small things the operator may refuse to sell your phone. It's several times more complex than creating a PC, and I believe no company can easily ace all of that stuff on the first try.

2. Even if that had been the question, it was the wrong question. The Treo is an e-mail phone for people who want business productivity. If Apple's making an iPhone, it'll be a music phone for people who want entertainment. Those are completely different markets. If you think there's a huge competitive overlap between them then you've got your head stuck someplace. (Colligan didn't say that, but I wish he had.)

3. The competitive comment was not the most interesting part of the talk. Not even close, in my opinion.

If you want to hear the whole speech, you can listen to it here. Or if you want to save an hour of MP3 time, below is my summary of what I heard, with some color on what I think it means. (Most of what follows is paraphrased. The text in quotes is pretty close to what he said, but I probably missed a few words here and there. My comments are in italics.)

My nomination for Colligan's most important quote. "We're not in the handset business, we're in the mobile computing business....Voice is a killer app of the future of mobile computing. That's how we look at the world."

Think about that for a while. It's not as newsy as an imaginary cheap shot at Apple, but that quote says everything you really need to know about Palm: Mobile computing first, voice telephony second, and if you don't want that you should buy something else. I can tell you from personal experience that's how most of the folks at Palm really think.

Technologies and trends

Eric Schmidt of Google says that in the future cell phones will be free and ad-supported. Do you believe it? "Everything in the world looks like an ad" to Eric because he's in the business of selling ads. Google sees a phone as a great way to target ads, but the phone is one of the few private spaces left. People may resist intrusions there. The ads will have to be incredibly creative in order to be accepted.

Colligan then branched to a discussion of Google Maps on the Treo, which he says is a great application. He wants to use it to look up nearby pizza restaurants and then phone an order to one of them automatically. He was very enthusiastic about this sort of functionality.

On voice over IP. People don't want to give up the ability to use the phone anywhere. He's skeptical that there will be enough coverage to make WiFi phones a replacement for cellular anytime soon. "Maybe on college campuses." Mesh networks will take a long time to deploy.

What's the market for video on mobiles? Short clips, a la carte selection. I agree. I can picture people watching short YouTube-style content on a mobile a lot more readily than a half-hour TV show. It's bon-bons, not a full meal. Mobile games are the same way -- quick reward, nothing too involved. That's why Bejeweled has been so successful.

On 3G. He loves EVDO. It's very fast. Less enthusiastic about UMTS – it's more of an incremental bump in performance, but there are latency problems. You need HSDPA to get reasonable performance.

About the iPhone. The rumor mill says that Apple will produce an unlocked GSM/GPRS phone sold at retail, so users can buy phone service separately and slip their SIM card into the phone. Colligan said he thought that would be very difficult to sell, that the only approach in the US if you don't want to sell through the operators is to focus on WiFi only. Did he have some inside information on what Apple's doing? Was he trying to seed some skepticism about Apple's product? Was he talking about what a non-operator Palm product would be like? Or was he just trying to answer honestly? I don't know.

On the Motorola Q. (The general tone of rumors around the mobile industry is that the Q is a failure, with low sell-through and lots of returns. Colligan did nothing to contradict those rumors.) Integrating a whole mobile computer and OS is difficult. Also, it's nice to make a thin product, but not if you make the battery so small that the device can't get through a day's use. It's hard to balance all the features and user experience and get them all right. "I think they got some of those things wrong."

Are we in another tech bubble? Things are exuberant, but not irrationally so. There's not too much excess yet. But there is too much money chasing too few ideas. "I look at the traffic patterns" on Bay Area freeways, and traffic has been getting worse. That means the economy is heating up.

About the operators

On mobile phone subsidies paid by the operators. He wishes subsidies would go away. He would prefer to sell through retail rather than through operators. "I love retail. We have a huge retail presence. We'd love to have the retailers have more power." He wants to compete head to head with other device companies without the operators saying what features to put on the device.

But on the other hand, he said, the operators spend a lot of money advertising your products, which is a good thing.

European vs. US operators. Coverage is better in Europe. "In Europe, nobody says, 'how many bars do you have?'" In Europe there's one mobile technology, and more operators. The US is split between two phone technologies, and has fewer operators.

Will the operators lose control over the market? "The sentry breaks down over time." I thought that was a nice zen-like way of saying "yes." He avoided a Mercury-News headline screaming "Palm says carriers are doomed," which would not have helped him sell Treos.

He went on to contrast the PC model (open gardens) vs. the videogame platform model (apps controlled by the vendor). Who's to say which one will do better in phones long term, he asked.

Working with Microsoft

About Microsoft. Windows Mobile is "becoming a bigger and bigger part of our business." They are very good launch partners. "They are great the day you come out...beyond my wildest dreams." (He implied that Microsoft is a lot less helpful after you've launched.) The relationship has been difficult to develop because Palm actually partners with Microsoft at an engineering level, which most Microsoft customers don't do.

Do you worry about Microsoft being a monopolist in phones? "No. Not in this space. There are so many countervailing forces that they'll never get to that position."

Is Palm OS easier to use than Windows Mobile? "I think David Pogue is right" that Palm OS is easier. But it's a matter of customer choice; some people like the Start button. He wants to create a situation where a Windows user chooses the OS platform he wants, looks for the best device on that platform, and finds that "Palm makes the best Windows product."

On Palm and its future

Future Treo products. Palm is working on products that will combine WiFi and cellular. "Stay tuned." I took that to mean a Treo with WiFi built in. I hope the operators will be willing to sell it.

Beyond smartphones. "Are there are other segments of the market that we could go after with new designs and new form factors and are we going to do that? Sure. Absolutely."

"We're a mobile computing you can expect us to do more products...that leverage the fact that every one of you is going to have a broadband modem in your pocket which is instantly accessible to the Internet and the outside world. We think that's a pretty cool thing and we're working on products that take advantage of that."

"They (users) have a high-speed their pocket...Boy, is there things we can deliver to them, and is there compelling experiences that we can deliver to them, that are going to help us differentiate our products? I think there are, and we're working on things like that."

Same vague hints that Palm has been giving for a year: Broadband modem, lots of local storage, think what we could do for that. What I think I'm hearing is: A mobile product with WiFi, which Palm pairs with Web services that deliver content and do other things for the user. I wish I knew what those things are -- that'll be the interesting part.

Do Palm PDAs (no phone built in) have a future? It's been shrinking, because we've been cannibalizing it with the Treo. But it's still a $300 million business. My translation: We'll keep offering them as long as people buy. But we're not putting a lot of energy into them.

On the LifeDrive: "Too big, too late to the game" compared to iPod. Wow, if they expected that thing to compete with the iPod, they were even more naive than I thought. They didn't have the iTunes-like service, and they tried to be all things to all people. I hoped they learned the right lessons for their next generation products.

Is Linux in Palm's future? We look at Linux as being an interesting community to leverage. (He then branched to a discussion of Palm OS.) There are a lot of users who have loyalty to Palm OS and love it. "We want to take the Palm OS forward." That little quote makes a lot more sense now that we know he was in the process of buying rights to Palm OS Garnet. But what does he mean by leveraging the Linux community?

Is Palm for sale? Companies don't get sold, they get bought. We're trying to execute against a brand, to build a great brand. I think the implication was: 'we're not trying actively to sell ourselves, but we're publicly traded and would have to listen if somebody offered a bunch of money over the market price.' I have heard companies be a lot more vehement about "we're not for sale." So I'd call this a non-denial denial. Or maybe he was just trying to be polite.

Required reading for Palm executives. Colligan is having the Palm executive team read the book "From Good to Great" because it focuses on execution and is very practical. "What we need to do better is disciplined execution." (Shortly after his talk, Palm announced that it would have an earnings shortfall because a product was coming to market late. So you can understand why he's focused on execution.)

That's it. Nothing revolutionary, but I think it does help you understand the company. Like it or hate it, they really don't see themselves as a mobile phone company. They are a mobile computing company, and telephony is just a part of mobile computing. A lot of my phone-centric friends in Europe are going to throw up all over that idea, but I kind of respect it. I think Palm is not big enough to win as a mobile phone company, but as a mobile computing company it's a world leader.

The question is whether they can develop mobile computing into something distinct enough to stand as its own category. The jury's still out on that. I think a lot will depend on what they release in 2007. If they can establish a new product line beyond phones, they'll have a much better chance. If they can't...well, we'll find out how patient their investors are.

Will flat-rate pricing make mobile data take off?

No. It's a nice start, but the operators need to take several other steps as well.

Recently flat-rate pricing for wireless data service has become a big issue in Europe and some other parts of the world. Data service to mobile phones there has often been metered, with users paying by the megabyte. This led to some frightening stories on the Internet of people accidentally ending up with 800-Euro monthly phone bills for browsing too much. Needless to say, this has made many people very cautious about using mobile data.

Recently T-Mobile in Europe offered a flat-rate data service, in which the user pays a single fixed monthly fee for virtually all the data access they want (the limit is about a gigabyte a month, which is a lot for a mobile phone). Then on November 16, Hutchison Whampoa, the owner of the "Three" wireless network in Europe and Asia, announced its own flat-rate plan (more details below).

The Mobile One network in Singapore just cut its unlimited 3G data price by about 2/3, to around $13 a month, in order to compete with fixed broadband services. And on December 1, the CEO of Vodafone went even further, predicting that within a few years we'll have flat-rate billing for all mobile services, including both voice and data.

All of this sudden price activity, especially the announcement by Hutchison, has created a big stir among mobile-focused commentators in Europe. For example, here's a sampling from a mobile discussion board run by Oxford University:

"I'm astonished, frankly.... this is clearly the mobile internet 'done right.'"

"It seems like a seminal event!...Now we have the makings of a new day in our industry.... Has mobile operator 3...discovered the holy grail of the mobile phone industry?"

"When all mobile operators realise they have no choice but to give in too, a torrent of innovation will rush forth I'm sure."

"I strongly applaud this development, and am looking forward to the next stage of competition in 3G/mobile with open gardens and flat data rate packages."

Are they right? Has Hutchison revolutionized the mobile Internet?

I don't think so. Unfortunately, just offering flat-rate pricing is not enough to make mobile data take off. This is one area in which the US mobile phone market has been a leader, believe it or not. The top four mobile operators in the US have offered flat-rate data for years, ranging in price from $15 to $40 a month. Some of them even let you use your mobile phone as a modem, something that Hutchison bans.

The result? Some happy Blackberry and Treo users, but nothing like a mass migration toward mobile data. In fact, the most aggressively priced data service, Sprint's seductively fast 3G network, is rumored to be producing some of the most disappointing subscriber growth.

Flat-rate pricing is a necessary condition for the success of mobile data, but it's not enough. In order for it to take off, the operators have to do some other things as well. I'll discuss those below, but first for context I need to give you an overview of Hutchison's new offer...

Hutchison's X-Series: Open network, all you can eat data

Hutchison Whampoa announced that Three is moving to flat-rate, all you can eat data with a very open business model. The most eye-popping things they promised were unlimited Skype calling over IP, and unlimited instant messaging. Those are both heresies to the operator world. Hutchison's rhetoric was also heretical:

"This charging structure overturns the traditional telephony model of charging per minute, per message, per click, per event and per megabyte."

"What is free to use on the net ought in principle to be free when you use it on the mobile net."

Hutchison made its announcement accompanied by a laundry list of prominent Web brands, including Google, eBay, Yahoo, and MSN, plus the prominent startups Sling Media and Orb. Some of them will be offering specially-configured services bundled with the phones. The first phones offered with Three's new "X-Series" service will be the N73 from Nokia and the w950i from SonyEricsson.

The price of the service is pretty nice. For five pounds a month (about $10), you get 83 hours of Skype a month, 10,000 MSN Messenger messages, and a gigabyte of browsing and e-mail downloads. That's equivalent to unlimited use for most people, unless you're downloading YouTube videos all day.

The Skype and MSN components are potentially frightening to operators, because they compete directly with the voice and SMS services that provide most operator revenue. The overt embrace of those services is, I think, the most radical of Three's changes.

For ten pounds a month ($20), you get everything above plus 80 hours of SlingBox and Orb service, allowing you to use your mobile to play TV shows, MP3s, and other files stored at home.

Although browsing is unlimited, Three notes that not all websites work well on mobile browsers (a polite understatement), and says it blocks access to adult websites. Also, you're not allowed to use your phone as a modem for your laptop computer.

What it means

A change in attitude. I think the most important impact of Hutchison's announcement is not the service itself, but the new agenda it sets for mobile operators. Hutchison was one of the first operators to deploy 3G, and had been an outspoken critic of open Internet access on mobile devices. In 2004, Three COO Gareth Jones said, "People don't want open access, that's not what our customers tell us they want. Anyone in their right mind who tries to do anything on the Internet with a screen that size has to be nuts."

Given that background, the vehemence of Hutchison's new commitment to openness amounts to a declaration of surrender. I think that changes the competitive situation for mobile operators in Europe and Asia. Hutchison is now competing in terms of who can be the most open, rather than who can come up with the most clever bundle of closed services. Assuming that Three doesn't explode or go bankrupt in the next six months, it is putting enormous pressure on the other operators to match or exceed its openness. That change in dynamic makes it much more likely that the mobile Internet will be freed to evolve as quickly as the wired Internet has.

Flat rate is not enough. But just charging a flat rate isn't enough to make mobile data take off. If it were, mobile data would be taking the US by storm.

I think the most important fact about mobile data right now is that we don't know what users will do with it. Hutchison was right several years ago that just blindly transferring the Web to a phone won't please a lot of people. Screen size and the lack of a keyboard and mouse make the mobile browsing experience very different from browsing on a PC. Limitations in coverage, especially for 3G, make the thin apps development model used by web applications much less attractive on a mobile than it is on a constantly-connected PC.

Historically, the software leaders in one computing platform are almost never successful in a new one. When PCs switched from the command-line interface to graphical interfaces, the established software leaders -- Lotus, WordPerfect, Ashton-Tate, and so on -- were almost all swept aside. When the Internet arose, virtually none of the graphical applications leaders were able to make themselves leaders in Web apps. Now that the mobile Web is appearing, it is naive and foolish to think that the desktop Internet leaders will automatically be the leaders in this new space. They don't understand it, and their existing desktop-based businesses are a hindrance to learning.

What needs to be moved to mobile networks isn't just the Web's applications or price structure, it's the Web's open business model. We need to run a huge number of experiments in order to figure out what applications users will want in mobile data. No single company is capable of doing all that work on its own. The only way to make the experiments happen is to set up a vibrant, chaotic ecosystem in which thousands of developers will be free to rapidly try and fail at a huge number of things. It was that sort of random experimentation that permitted leaders like eBay, Amazon, and Google to emerge on the wired Internet while companies like RealNames, AltaVista, and Chemdex were left behind.

Five steps to make mobile data a success

In addition to offering flat-rate data, here are the other steps a mobile operator must take in order to make that mobile data ecosystem work:

1. Provide a consistent architecture that works offline. This is probably the most critical need. Web applications depend on having a constant connection between the user's computer and the Internet. That's not practical for the mobile Web. Even in countries with heavy 2G coverage, there are lots of gaps in the 3G network, and will be for many years. Mobile Web apps need to work like RIM's e-mail client, which stores both the program itself and the user's data locally and then sends the data to the network when a connection is available.

That means just bundling a browser is not enough. The phones will also need software installed on-device that can manage applications and data when the user is offline. That could be an operating system like Windows Mobile or Palm or Symbian, it could be an applications layer like Adobe Apollo or Java, or it could be other software that the web community will create if given the chance. This software layer will need to be consistent across phones, just as HTML is consistent across all browsers.

Three has already failed this test in the first two phones it picked for X-Series. The Nokia N73 runs Symbian OS with Nokis'a S60 software on top of it. The SonyEricsson w950i runs Symbian OS with its UIQ software on top, which is not compatible with S60 software. Guess what – Three just announced that the N73 is available now, but that the w950i is indefinitely delayed. Three didn't give the reason, but I'm not surprised, since all of the client software has to be rewritten to run on the SonyEricsson handset.

I don't think any operator is capable of setting a platform standard on its own, but they should be encouraging the rapid evolution of a standard, by making their phones open to new software (just as open as the PC is), by offering to help deploy new tools, and by providing free testing to make sure they work on the wireless network.

2. Kill security certificates. The line between websites and applications is blurring, as Web 2.0 architectures allow much more processing to be done on the client device rather than a server someplace in Idaho. Google is pretty much a traditional website, but Google Maps is a hybrid, and Skype is a full PC application that talks to the Web. In the future it will be impossible for a user to tell exactly where an application ends and the Internet begins.

But today the operators treat websites and applications completely differently. The new flat-rate data plans let you browse just about any website you want. But operators are starting to insist that applications obtain a security certificate before they can be installed. The certification process is slow, inconvenient, and unreasonably expensive for small software companies and those that create a lot of applications. Since small software companies are the most innovative, this has an enormous chilling effect on mobile innovation.

This approach is also completely inconsistent with the way the Web works. Can you picture a website paying for certification before it can run on your browser? How many sites would bother? If the operators insist on certificates, they will make the mobile Web a small and uninteresting subset of the real Web, permanently. Certificates have to go.

3. Unlock the user's data. This is the other security-related problem area. Many operators make it very difficult for an application to access the user's data stored on the device, such as the address book, the dialer, and the user's current location. But many of the most interesting new mobile applications need to be able to work with this information. Users should be informed when they give an application access to this information, but it should be very easy for them to say yes.

Like the previous point, this one is scary to the operators, because they worry that a rogue application could make thousands of phone calls or send huge numbers of premium messages, building up a huge bill.

Although that's a legitimate fear, strangling mobile data is a self-defeating solution. The operators will need to adopt the same security model used on the Web -- let the user do what they want, and defend the device via security software.

This isn't as dangerous as the operators fear it will be. We've used the same model for more than a decade on the fixed line phone and data networks, and millions of fully open Palm OS, Symbian, and Windows Mobile devices are on wireless networks today. Despite this, no one has taken down either the wired or wireless networks.

4. Make it easy to discover new content and services. The mobile data ecosystem will evolve faster if it's easy for users to find new services and applications. Today the content discovery tools and software stores on mobile devices, if they are installed at all, are often buried under several layers of icons, or are very hard to use. We need the mobile equivalent of an -- an online content store that's easy to find, browse and search, and that makes suggestions to you based on what you've used in the past.

5. Get ready to go to a flat rate for everything. Vodafone's comment shows that they understand this: the logical outcome of putting the open web on a mobile device is that voice and data merge under a single flat fee. If a Skype call is free, then eventually all calls need to be free, or the users will just switch everything to Skype. Same thing for SMS messages once they're directly in conflict with instant messaging. The operators' old financial model won't evaporate overnight, but it's now officially dying. And it's in Three's interest to move to the new model as quickly as possible -- the sooner it adopts the new model, the sooner it can cannibalize the customers of other operators. I think the race is now on for full flat-rate mobile pricing in Europe. Because the operators there are more competitive than the ones in the US, I think it's very possible that Europe's pricing evolution will move faster than in the US. But the same principle applies everywhere in the world: the operator that moves to the new model fastest stands to gain the most customers.

Let's hear it for desperate operators

Some people have been asking why Three chose to make such a radical change. It may be genuine vision, or it may just be desperation. Press reports say that Hutchison had been hoping to spin out the Three networks, but had to cancel the plans because Three is not making money. If that's the case, Hutchison may have decided that it might as well take a chance on aggressive new pricing.

Unfortunately, if Three is counting on the new pricing alone to bail it out, then I think it'll be disappointed. It needs to take all the steps I've outlined above. But I like the idea of desperate operators being willing to experiment. If we get enough of them desperate, someone will probably eventually make all the right changes. I like to believe it's just a matter of time.

Testing a new template

I'm testing a new template for Mobile Opportunity. If you'd like to check it out, you can see a prototype version with some dummy content here. You can post feedback as a comment to this message, or post a comment on the prototype blog. Thanks.

If everything works, I'll move to the new format in about a week.

Phones = cars

"Phones are the new cars. The car's history suggests that the phone's future is about divergence, not convergence." -- The Economist, December 2, 2006

It looks like the world is finally starting to understand that the future of mobile data is about segmentation rather than finding a single killer app. Because different people want to do different things, it's impossible to make a single mobile device that pleases everyone -- just as you can't make a single automobile that's simultaneously ideal for sports car fans, SUV drivers, and delivery vans.

This is the norm for most product categories. As a new market matures, it divides into segments. I'm not sure why so many people expected the mobile market to converge into a single design. Maybe we were all expecting mobiles to develop the way PCs did. But PCs are starting to look more and more like the exception rather than the rule. For most products, divergence rather than convergence is the dominant reality.

Getting this message across to the mainstream press has taken more than four years. I first started talking about the car market as an analogy for mobile data in mid-2002. For the record, here's a slide I created for PalmSource's main strategy presentation that year:

I'd like to believe that the Economist picked up the idea from me, but it's far more likely that they cooked it up on their own, since it's pretty obvious once you've talked to enough mobile data users.

Once you start thinking about segments in the mobile device market, the next critical question is what the main segments are. The Economist didn't have much insight here. Instead, their article was a very competent overview of all the traditional possibilities -- the "remote control for your life," the "life recorder" (personal video archive), e-wallet, and so on.

The idea they covered that I'm most skeptical about is that in the future we'll all wear glasses on which information about the things we look at will be projected. Living in a nation where more than million people a year pay to have their eyes cut open with a knife and blasted with a laser, all so they won't have to wear glasses, I really doubt that we're all going to start to wear glasses just so we can see hypertext links projected against the walls of restaurants.

To cull the huge list of products that could happen down to a list of things that are more likely to happen, you need to look at users' psychology and what problems they are trying to solve in their lives. I've taken a shot at doing that sort of segmentation in previous posts, and I think they three main segments are mobile entertainment, mobile communication, and mobile information management. You can read the details here.

Who knows, maybe that's what the Economist will be writing about in four more years. ;-)

Palm gets its OS back

"Palm Signs Perpetual License for Palm OS Garnet Source Code" -- Palm press release

Now the circle is complete.

Way back in the days before the Internet bubble, Palm was a single integrated company run by its founders, making its own hardware and OS.

Today, Palm is once again a single company, run by its founders, with its own hardware and OS.

If it weren't for Eric Benhamou being on Palm's Board of Directors, you could almost pretend the last eight years didn't happen.

The details of the license agreement, explained in an admirably detailed Q&A posted by Access, raise some interesting possibilities. Here's what I read into them (and this is just my speculation; I don't have any inside information):

--Palm OS on Windows? Most important, Palm has the right to put Palm OS Garnet on any other operating system. As others have pointed out, that means they could create a new Linux-based device and run the Palm OS applications base on it. I believe they can also put Palm OS Garnet on Windows Mobile, which is going to turn the stomachs of many Palm OS enthusiasts but is extremely interesting to me.

Palm doesn't have a Palm OS-compatible 3G phone today for the GSM countries. In those countries, it can offer only Windows Mobile. But Palm can now theoretically offer Palm OS on top of its Windows devices. There are drawbacks -- the most prominent being that Palm uses 240x240 screens on its Windows Mobile devices. So we'd need new hardware, or some sort of awkward resolution hack. But I'll bet that Palm can still do that faster than it can rewrite Palm OS itself to run on 3G GSM.

I don't know what Microsoft would say about that. Probably something unhappy; they wouldn't like being treated as plumbing for someone else's OS.

Palm could also do Palm OS on Symbian, which might be less unappetizing than you'd expect. I think you'd completely hide the underlying Symbian OS, using it just as plumbing and phone management while you let Palm OS handle the UI and applications layer.

The key task for Palm will be finding a way to get all the basic phone software support for as little cost as possible, so they can concentrate on the value-added user functionality.
Palm can now play the field and choose whichever plumbing it likes best. It's a pretty liberating thought to me, and I bet it feels that way to Palm as well.

--Is it a full divorce? Palm and Access pointedly didn't say if Palm will use the new Access Linux Platform. It's still possible they might do it, but it's also possible that this agreement is the final divorce settlement between the two companies.

--Garnet has legs. I have a deep sentimental attachment to the Palm OS Garnet code base. The OS has its limitations, but for basic applications you can get a lot done with very little programming effort, especially compared to a nightmare case like writing native Symbian apps. Palm will apparently now start adding new features to Garnet, which is great (although it does create the risk of fragmenting the code base).

We now have three companies putting various levels of investment into Palm OS Garnet: Palm itself, Access, and StyleTap. An interesting situation for a dead, obsolete OS.

--Will Access make Palm OS Garnet into a layer? Now that Palm's using Palm OS Garnet as a software layer in top of other things, will Access license other companies to do the same? I have seen no signs that they will, but I think a Palm apps layer could be a lot more useful on mobile devices than Java has been. I argued for this for years within PalmSource, and I still think it's a good idea.

Anyway, I'm sure the old-time Palm engineers are glad to have their code base back, and I'll be very interested to see what they do with it.

Jeff Hawkins' "secret" project is coming next year

Ed Colligan, CEO of Palm, gave a talk this morning. Afterward I asked him if we'll see next year the secret project that Jeff Hawkins has been working on. "Yes," he said, and moved immediately to another question.

Very little information has been released publicly about the Hawkins project. I know a number of very bright people at Palm moved to work on it, more than a year ago. Hawkins himself has dropped cryptic hints about something that would start a new category of devices, alongside handhelds and smartphones. I know some developers have been shown pre-release versions of the product, and the reactions were mixed. But nobody's discussing what the device actually is.

Apparently we'll find out next year.

I'll be interested to see it because I believe there's still a huge opportunity for new sorts of mobile devices. The mobile market is heavily segmented, so much so that mobile phones can't and won't eat everything. Other than Palm and Apple, though, there aren't a lot of companies that are both willing to experiment in new categories of mobile hardware and capable of creating full hardware-software solutions, as opposed to just tossing a hunk of hardware out there.

I'll post more about Colligan's talk later.

The Cluetrain Manifesto revisited

In April of 1999, Rick Levine, Christopher Locke, Doc Searls, and David Weinberger posted to the Web one of the most iconic artifacts of the Internet Bubble. It's called the Cluetrain Manifesto, and parts of it are so pompous that they read like a cross between the socialist Internationale and an L. Ron Hubbard novel. Here's the document's preamble:

"The sky is open to the stars. Clouds roll over us night and day. Oceans rise and fall. Whatever you may have heard, this is our world, our place to be. Whatever you've been told, our flags fly free. Our heart goes on forever. People of Earth, remember."*

No kidding, it really says that.

The body of the Manifesto is 95 truisms about marketing in the Internet era, modestly patterned after Martin Luther's 95 Theses that sparked the Protestant Reformation. This implied equivalence between web browsing and one of the founding documents of western civilization is a priceless example of the attitudes that prevailed in the Bubble era.

At the time of its creation, the Cluetrain Manifesto created quite a stir in the online community. Many prominent tech managers signed it, and it was turned into a book.

Seven years later, you don't hear much about the Cluetrain Manifesto. And yet, it's still a very useful document.

Parts of it are silly, and parts of it are just plain wrong. But a lot of it is brilliant. Once you pare away the BS and the posturing, it's a great document on the new world of Internet communication, and much of its advice is just as relevant and insightful today as it was in 1999. Maybe more so, because the technologies involved have matured.

Most companies marketing online still ignore the Cluetrain's advice, to their detriment. Over at Rubicon Consulting, we've been trying to combine the best ideas of the manifesto with our own thinking, to create a short document that companies could use to guide their online communication. You're welcome to check out what we've written; we'd appreciate your comments and suggestions.

I know it's presumptuous to mess around with an Internet icon like the Manifesto, but the original is too flawed and too weird to be taken seriously by most companies.

What I want to do here is take a leisurely walk through the 95 points of the original Cluetrain, pointing out the parts that work and those that don't. Fair warning, this is a very long post. But I hope you'll enjoy the hike...

1. Markets are conversations.

An outstanding observation, but it needs an amendment: Online markets can be conversations. Most companies still market in the traditional way, using traditional marketing tools. They get into trouble when they take their traditional marketing reflexes into the online world. Because online media can be two-way, it's very insulting to use it in a one-way manner (for example, e-mail messages that don't allow answers, or weblogs that don't allow comments). That's as rude as refusing to respond to questions at a cocktail party. And people online often take the insult personally.

2. Markets consist of human beings, not demographic sectors.

True. And a corollary is that because every human being is an individual, no one belongs to a single market. We're each members of a unique rainbow of different markets. Maybe you're a Volvo owner and also a fisherman. The web lets you play both roles, and lets Volvo and a fly fishing outfitter speak to you directly in each role.

In the old marketing world, we had to market to big segments like "males 18-25 years old" because mass media couldn't slice people any finer than that. When you're marketing online, mass market segments are irrelevant and inefficient because you can target much more finely.

Forget about the Long Tail – the online world is all tail.

3. Conversations among human beings sound human. They are conducted in a human voice.

This needs some translation. The web lets you have conversations with your customers. You shouldn't put those conversations in the tone of a press release. Therefore, don't let your lawyers and PR agency write your online messages. Corporate-speak stands out online like a dead fish, and can be detected at the same distance.

4. Whether delivering information, opinions, perspectives, dissenting arguments or humorous asides, the human voice is typically open, natural, uncontrived.
5. People recognize each other as such from the sound of this voice.
6. The Internet is enabling conversations among human beings that were simply not possible in the era of mass media.

See point 3. In places the Cluetrain gets kind of repetitive. You get the feeling they were stretching it to get up to 95 items.

7. Hyperlinks subvert hierarchy.

Um, okay, I guess. Maybe this sounded revolutionary in 1999; now it's kind of quaint. Like listening to speeches by the hippies in People's Park in Berkeley.

8. In both internetworked markets and among intranetworked employees, people are speaking to each other in a powerful new way.
9. These networked conversations are enabling powerful new forms of social organization and knowledge exchange to emerge.

Okay. That's a little bit pompous, but there's truth in it.

10. As a result, markets are getting smarter, more informed, more organized. Participation in a networked market changes people fundamentally.

The real changes are just starting. Most people are not deeply engaged with online conversations, so the online impact on market behavior is spotty. If you're not careful, your online conversations can be diverted by enthusiasts who aren't a good proxy for the rest of the world. Remember Snakes on a Plane.

11. People in networked markets have figured out that they get far better information and support from one another than from vendors. So much for corporate rhetoric about adding value to commoditized products.

This is just starting, and it's not always true. But there are cases in which the user community does indeed deliver better support than companies. I think the WordPress blogging tool is a good example.

12. There are no secrets. The networked market knows more than companies do about their own products. And whether the news is good or bad, they tell everyone.

Yes and no. Definitely the Web gives a much louder voice to product enthusiasts outside of companies, so word about product flaws circulates faster than it did pre-Internet. But it's just a change in speed. Back before the Internet, there were these things called newspapers and magazines that were pretty good at spreading product information quickly.

And with the application of enough money and effort, it's still possible to keep secrets. Look at Apple.

13. What's happening to markets is also happening among employees. A metaphysical construct called "The Company" is the only thing standing between the two.

Companies aren't just metaphysical constructs. They are organizations that pay employees money, and so they have a certain coercive power that markets can't match. I think there's a strain of wishful thinking in the Manifesto – because a lot of online people don't like traditional corporations, they're inclined to believe scenarios in which the corporation withers away. But I personally need to see the evidence to back up that belief, and it's lacking.

14. Corporations do not speak in the same voice as these new networked conversations. To their intended online audiences, companies sound hollow, flat, literally inhuman.

Another repeat of point #3.

15. In just a few more years, the current homogenized "voice" of business—the sound of mission statements and brochures—will seem as contrived and artificial as the language of the 18th century French court.

Well, it has been more than a few years since the Manifesto came out. Most corporations still speak in he same language, and they don't sound any weirder than they did in 1999.

Online, corporate-speak does sound weird. But in traditional media it sounds normal. The authors were making the mistake of thinking that the Internet was the future of all media. It's not – it's a series of new media that will live alongside the old ones for a long time.

16. Already, companies that speak in the language of the pitch, the dog-and-pony show, are no longer speaking to anyone.


17. Companies that assume online markets are the same markets that used to watch their ads on television are kidding themselves.

Wow, we go straight from a statement that was stupid to one that's very insightful. Because of its potential for personalization and direct communication, the web destroys traditional market segmentation. It creates (or maybe more accurately, it brings to light) a lot of small vertical markets in place of a few big mass markets.

18. Companies that don't realize their markets are now networked person-to-person, getting smarter as a result and deeply joined in conversation are missing their best opportunity.

That only applies to the customers who are deeply networked online – a small segment of the population at present. Come back in a generation and this statement will be much more true. For now we're in a transition.

But it sure is an opportunity.

19. Companies can now communicate with their markets directly. If they blow it, it could be their last chance.

Um, no. A company gets an infinite number of last chances until some competitor wipes it out. Unfortunately, it's very hard to predict when that will happen, so companies that misuse online marketing are playing Russian roulette.

20. Companies need to realize their markets are often laughing. At them.

Translation: Companies need to realize that a relatively small number of people online are laughing at them. But those people sometimes create YouTube videos that get forwarded all over the place, so you gotta watch out anyway.

21. Companies need to lighten up and take themselves less seriously. They need to get a sense of humor.

Unfortunately, most people aren't great at creating jokes. If they were, Robin Williams would be unemployed. I think what companies need to do is relax and act like themselves. If their reality is that they're a bit stern and somber, that's OK – as long as it's genuine.

Nothing is more pathetic than a CEO trying to pretend that he or she is hip. This is why you don't ever see Bill Gates break-dancing.

22. Getting a sense of humor does not mean putting some jokes on the corporate web site. Rather, it requires big values, a little humility, straight talk, and a genuine point of view.

OK, you're not really talking about humor at all. So why did you say to get a sense of humor?

23. Companies attempting to "position" themselves need to take a position. Optimally, it should relate to something their market actually cares about.
24. Bombastic boasts—"We are positioned to become the preeminent provider of XYZ"—do not constitute a position.
25. Companies need to come down from their Ivory Towers and talk to the people with whom they hope to create relationships.
26. Public Relations does not relate to the public. Companies are deeply afraid of their markets.

There's a nugget of absolute truth in that last point. Many companies are deathly afraid of having an uncontrolled conversation with their customers, mostly because they expect to be overwhelmed by complaints. Ironically, the best way to reduce complaints is to listen to them and respond. You can turn most complainants into fans pretty easily, if you're just polite and respectful to them. Try apologizing when you've made a mistake – it does wonders for a marriage, and it can help a customer relationship as well.

The Internet is a great tool for having this sort of conversation.

27. By speaking in language that is distant, uninviting, arrogant, they build walls to keep markets at bay.

This isn't even a full sentence, and it just repeats the previous points.

28. Most marketing programs are based on the fear that the market might see what's really going on inside the company.

That's occasionally true, but the word "most" is a gross exaggeration and hurts the credibility of the manifesto. Most marketing programs are like someone going on a first date – you try to make yourself look good, and accentuate your best qualities. Most people (and most companies) won't outright lie, and fear is not companies' greatest motivation.

Greed is.

29. Elvis said it best: "We can't go on together with suspicious minds."

Cute. Meaningless, but cute.

30. Brand loyalty is the corporate version of going steady, but the breakup is inevitable—and coming fast. Because they are networked, smart markets are able to renegotiate relationships with blinding speed.

No, no, no, no. This point implies that brand marketing is coming to an end. Brand marketing will evolve because of the Web, but well-run brands can and will develop deeper and more meaningful relationships with their customers. At the risk of over-stressing the metaphor, they can go from going steady to getting married.

I think that the manifesto went wrong on this one because a lot of the online crowd views branding as a form of pure evil; they think it clouds consumers' minds to the reality of product features. But most human beings aren't wired that way. They like being associated with a brand that shares their values, because it says something about them. The Web makes it possible to communicate values more thoroughly, so the bonds to a brand can be deeper.

31. Networked markets can change suppliers overnight. Networked knowledge workers can change employers over lunch. Your own "downsizing initiatives" taught us to ask the question: "Loyalty? What's that?"

The first two sentences are exaggerations. In particular, unless a company is selling only on price, the Internet doesn't make customers any more mobile than they were in the past. But if you are selling just on price, watch out. All the more reason to use the Internet to form deeper ties with your customers.

The third sentence is true, by the way. The way I'd put it: "Never love a company -- it can't love you back."

32. Smart markets will find suppliers who speak their own language.

I don't know what a smart market is. Markets can't be smart, people can be smart. People will indeed gravitate to suppliers who speak their language. But the outcome of this is going to be different than the online crowd expects – a lot more people speak the language of Wal-Mart than speak the language of Fry's.

33. Learning to speak with a human voice is not a parlor trick. It can't be "picked up" at some tony conference.

Yeah, okay.

34. To speak with a human voice, companies must share the concerns of their communities.
35. But first, they must belong to a community.

Yes!! Those are two of the best points in the whole manifesto.

36. Companies must ask themselves where their corporate cultures end.
37. If their cultures end before the community begins, they will have no market.
38. Human communities are based on discourse—on human speech about human concerns.
39. The community of discourse is the market.

This is all pretty good. Item 37 is overblown, and I'm not sure what 39 means, but the ideas here are powerful.

40. Companies that do not belong to a community of discourse will die.

Dang, back to the overstatement. Companies can survive without belonging to a community of discourse. For example, if they're the cheapest supplier people will buy from them even if they are rude to their customers (if there's a Fry's in your town, go there on a Friday night and try to get customer service).

But companies will get higher margins, make better decisions, and have more loyal customers if they participate in communities with them.

41. Companies make a religion of security, but this is largely a red herring. Most are protecting less against competitors than against their own market and workforce.

No. That's another gross exaggeration that hurts the credibility of the whole document.

First, not all companies make a religion of security. Second, companies want security for a lot of reasons. Competitive concerns have a lot to do with it, but so do financial regulations on stockholder lawsuits. And yes, there is some paranoia involved too.

The important point – the one the Manifesto fails to make – is that the benefits of heavy information security are outweighed by the advantages of open discourse with customers. When you're online, it's more efficient to be open.

42. As with networked markets, people are also talking to each other directly inside the company—and not just about rules and regulations, boardroom directives, bottom lines.

Uh, yeah. But that's been true since the first corporation was formed.

43. Such conversations are taking place today on corporate intranets. But only when the conditions are right.

The conversations also happen in lunchrooms, hallways, and next to water coolers. They move a little faster on intranets, but the difference is not enormous.

The benefits of intranets for driving internal conversations in corporations are substantial, but are not as great as they are for driving conversations with and among customers. Before the Internet, company employees still had lots of ways to communicate. There were even jokes about corporate gossip being the only thing that travels faster than light.

44. Companies typically install intranets top-down to distribute HR policies and other corporate information that workers are doing their best to ignore.

That's so stupid. Companies generally installed intranets to exchange e-mail. File servers and web access came later. HR policies were the almost last thing to go electronic, because HR teams are usually not very technical. Even today, in many companies you're more likely to get paper memos from HR than from just about any other company department. Paper feels more official to them.

Sometimes it seems like the Manifesto authors' main experience of corporate life was reading Dilbert.

45. Intranets naturally tend to route around boredom. The best are built bottom-up by engaged individuals cooperating to construct something far more valuable: an intranetworked corporate conversation.

A typical engineer's point of view, since they're the only ones in the corporation capable of building their own intranets.

46. A healthy intranet organizes workers in many meanings of the word. Its effect is more radical than the agenda of any union.

First sentence is good, second sentence is dumb. A union is very different from an intranet, and has very different effects. One's not more radical than the other. That's like saying a dog is more radical than a cat.

47. While this scares companies witless, they also depend heavily on open intranets to generate and share critical knowledge. They need to resist the urge to "improve" or control these networked conversations.

Oh, please. Intranets don't scare most companies witless.

48. When corporate intranets are not constrained by fear and legalistic rules, the type of conversation they encourage sounds remarkably like the conversation of the networked marketplace.

Yes, but that's because engineers and technophiles tend to dominate the online conversation both outside and inside corporations.

49. Org charts worked in an older economy where plans could be fully understood from atop steep management pyramids and detailed work orders could be handed down from on high.

Org charts are still mandatory in any corporation, because they designate who controls the salaries of whom.

There's a nugget of wisdom here, though. The Internet makes it possible for information to move more quickly, and for groups of smart people to coordinate their work directly. A properly designed company, taking advantage of electronic communication, requires much less detailed hierarchical control.

But somebody still has to write the performance reviews.

50. Today, the org chart is hyperlinked, not hierarchical. Respect for hands-on knowledge wins over respect for abstract authority.

It isn't either-or. There's still an org chart, but there's also an informal network of people who share information and sometimes agendas. But that has always been true of corporations, an intranet just makes it more visible.

Every generation thinks its parents were stupid, and in the second sentence you hear some baby boomers saying their parents had too much respect for abstract authority. Go read some books, guys. See how soldiers in World War II felt about abstract authority in the military, or how workers in 1910 felt about their bosses. Better yet, read the US Declaration of Independence and pay attention to the part where they talk about the king.

51. Command-and-control management styles both derive from and reinforce bureaucracy, power tripping and an overall culture of paranoia.
52. Paranoia kills conversation. That's its point. But lack of open conversation kills companies.

This is just posturing.

53. There are two conversations going on. One inside the company. One with the market.

There are an almost infinite number of conversations going on. The Internet can actually reduce the number of conversations, because it consolidates them.

54. In most cases, neither conversation is going very well. Almost invariably, the cause of failure can be traced to obsolete notions of command and control.
55. As policy, these notions are poisonous. As tools, they are broken. Command and control are met with hostility by intranetworked knowledge workers and generate distrust in internetworked markets.
56. These two conversations want to talk to each other. They are speaking the same language. They recognize each other's voices.
57. Smart companies will get out of the way and help the inevitable to happen sooner.

This thinking is dangerous, and not in a good sense. There's an idealized agenda in operation here, an assumption that bosses are stupid and that companies will make better decisions if the average employee talks directly to the average customer, and they then make a collective decision on what the company should do.

The reality is that bosses are sometimes stupid, and in those cases the company will indeed do better work if the bosses are bypassed. But those companies generally go broke eventually anyway.

In a well-managed company, it's important to draw a line between listening to input and making decisions collectively. Listening to input is almost always good. The internet can make for better input, meaning better decisions. That's fantastic. But making the actual decisions collectively is usually bad, because collective decisions reflect a compromised consensus. Products designed according to that process are often over-featured because they try to please everyone. An example: the Sony Clie handheld was beloved by online users but failed in the marketplace. Why? Too many features, too hard to use.

Companies are most effective when they have smart management, and that management has the authority to make clear decisions and have them carried out by the staff. If the Internet undercuts that, it's not helping the company or the customers.

58. If willingness to get out of the way is taken as a measure of IQ, then very few companies have yet wised up.

Companies don't have IQs. Their managers do. And a company manager who passively "gets out of the way" and lets the market drive his or her decisions is not doing a good job.

59. However subliminally at the moment, millions of people now online perceive companies as little more than quaint legal fictions that are actively preventing these conversations from intersecting.
60. This is suicidal. Markets want to talk to companies.

No, people want to talk to people. And it's good to enable that. But the company still has a role to play, and it needs its own decision-making.

61. Sadly, the part of the company a networked market wants to talk to is usually hidden behind a smokescreen of hucksterism, of language that rings false—and often is.

Translation: Come the revolution, the first thing we'll do is shoot all the marketing and PR employees. Spoken like a true engineer.

62. Markets do not want to talk to flacks and hucksters. They want to participate in the conversations going on behind the corporate firewall.

If you substitute "customers" for "markets," this one is true.

63. De-cloaking, getting personal: We are those markets. We want to talk to you.
64. We want access to your corporate information, to your plans and strategies, your best thinking, your genuine knowledge. We will not settle for the 4-color brochure, for web sites chock-a-block with eye candy but lacking any substance.
65. We're also the workers who make your companies go. We want to talk to customers directly in our own voices, not in platitudes written into a script.
66. As markets, as workers, both of us are sick to death of getting our information by remote control. Why do we need faceless annual reports and third-hand market research studies to introduce us to each other?
67. As markets, as workers, we wonder why you're not listening. You seem to be speaking a different language.
68. The inflated self-important jargon you sling around—in the press, at your conferences—what's that got to do with us?
69. Maybe you're impressing your investors. Maybe you're impressing Wall Street. You're not impressing us.
70. If you don't impress us, your investors are going to take a bath. Don't they understand this? If they did, they wouldn't let you talk that way.
71. Your tired notions of "the market" make our eyes glaze over. We don't recognize ourselves in your projections—perhaps because we know we're already elsewhere.
72. We like this new marketplace much better. In fact, we are creating it.
73. You're invited, but it's our world. Take your shoes off at the door. If you want to barter with us, get down off that camel!

This is the weakest part of the Manifesto, in my opinion. The authors complain about flack, posturing, and exaggeration, and then go on an exaggerated rant full of posturing. Nothing to see here, let's move along...

74. We are immune to advertising. Just forget it.

Yeah, sure. Tell it to Google.

Reality: Most people don't like advertising. That's not the same thing as being immune to it. If people really were immune to advertising, companies wouldn't do it.

75. If you want us to talk to you, tell us something. Make it something interesting for a change.
76. We've got some ideas for you too: some new tools we need, some better service. Stuff we'd be willing to pay for. Got a minute?

Good! But keep in mind that the people you can reach online are not normal customers. They'll have lots of ideas, but unfortunately they can't speak for your typical users.

77. You're too busy "doing business" to answer our email? Oh gosh, sorry, gee, we'll come back later. Maybe.

Yes. Very well said.

78. You want us to pay? We want you to pay attention.
79. We want you to drop your trip, come out of your neurotic self-involvement, join the party.
80. Don't worry, you can still make money. That is, as long as it's not the only thing on your mind.
81. Have you noticed that, in itself, money is kind of one-dimensional and boring? What else can we talk about?

Groovy, baby. Join the love-in. This is starting to feel like that old episode of Star Trek, where Spock meets the space hippies.

82. Your product broke. Why? We'd like to ask the guy who made it. Your corporate strategy makes no sense. We'd like to have a chat with your CEO. What do you mean she's not in?

Fair enough. Now that it's possible to have candid conversations online, it'll be perceived as rude not to have them. Most companies haven't realized that yet.

83. We want you to take 50 million of us as seriously as you take one reporter from The Wall Street Journal.

Believe me, every company takes 50 million customers more seriously than one Wall Street Journal reporter. But most of them haven't yet figured out how to talk to 50 million people online.

84. We know some people from your company. They're pretty cool online. Do you have any more like that you're hiding? Can they come out and play?
85. When we have questions we turn to each other for answers. If you didn't have such a tight rein on "your people" maybe they'd be among the people we'd turn to.

I agree with these. Most companies would come across better online if they allowed employees to communicate freely on the web. You can create some sensible guidelines (don't pre-announce products, label opinions as your own), and trust that most people will follow them. And if they don't, fire them.

Being open personalizes your company, helps people feel good about it, and helps you make better decisions. The benefits of this outweigh the risks.

86. When we're not busy being your "target market," many of us are your people. We'd rather be talking to friends online than watching the clock. That would get your name around better than your entire million dollar web site. But you tell us speaking to the market is Marketing's job.

The answer here is not to get rid of marketing, it's to teach marketing how to operate in this new world. Because, in reality, the engineers do have some other tasks they need to focus on.

87. We'd like it if you got what's going on here. That'd be real nice. But it would be a big mistake to think we're holding our breath.
88. We have better things to do than worry about whether you'll change in time to get our business. Business is only a part of our lives. It seems to be all of yours. Think about it: who needs whom?

Again with the posturing.

89. We have real power and we know it. If you don't quite see the light, some other outfit will come along that's more attentive, more interesting, more fun to play with.

Translation: "We are arrogant and we don't know it. We think we represent all customers when in fact we represent a slice of them. Companies would be stupid to take all our rhetoric at face value. But our influence is growing, it would also be stupid to ignore the potential we represent. We are noisy, we influence a lot of purchases, and we're increasing in number."

90. Even at its worst, our newfound conversation is more interesting than most trade shows, more entertaining than any TV sitcom, and certainly more true-to-life than the corporate web sites we've been seeing.

Well, it is to those of us who like to read and write blogs. But a lot more people watch TV. So in the real world companies will have to deal with both.

91. Our allegiance is to ourselves—our friends, our new allies and acquaintances, even our sparring partners. Companies that have no part in this world, also have no future.
92. Companies are spending billions of dollars on Y2K. Why can't they hear this market timebomb ticking? The stakes are even higher.

Well, that one's a tad dated now.

93. We're both inside companies and outside them. The boundaries that separate our conversations look like the Berlin Wall today, but they're really just an annoyance. We know they're coming down. We're going to work from both sides to take them down.
94. To traditional corporations, networked conversations may appear confused, may sound confusing. But we are organizing faster than they are. We have better tools, more new ideas, no rules to slow us down.
95. We are waking up and linking to each other. We are watching. But we are not waiting.

At this point you really expect John Lennon to stroll in with a guitar, singing Imagine...

Lessons from the Cluetrain

Don't be pretentious. Unless you're writing the Declaration of Independence for a new republic, you should leave out the cosmic rhetoric. It's ironic that a document telling people to speak like humans contains so much trippy rhetoric. (Or maybe that's how the Manifesto's authors really talk.)

Be careful with timelines. Like almost all tech commentary written in the bubble period, the Manifesto assumes that the Internet is about to take over all communication and be used by all human beings. In the real world it's growing, but other media will continue to exist alongside it for a very long time.

The Web is an accelerator more than a revolutionary. The Web speeds up conversations, and broadens their audiences. That's very important, and sometimes the increase in speed produces a qualitative difference. But our parents and grandparents were pretty clever, and most of the human principles we think we're pioneering online have actually been around for generations.

Keep it short. Ten commandments are a lot more memorable than 95 manifestos.

In that spirit, at Rubicon we've been working on a set of principles for communicating with people online, combining our thinking and what we think are the best ideas in the Manifesto. Here's our list:

1. Engage, don't sell.
2. Speak as individuals.
3. Be yourself.
4. Never lie.
5. Don't be afraid of passion.
6. Set your employees free.
7. The Internet strengthens great brands – and destroys false ones.
8. Forget about mass markets.
9. Remember that the Internet is still evolving.
10. Don't mistake the Web for the real world.

They're not nearly as colorful as the Manifesto, but I hope they'll be more actionable. You can read the details here.


*As pointed out by the authors of the Gluetrain Manifesto (a satire of the Cluetrain), it's hard to have the sky open to the stars when clouds are rolling over you all the time. But let's not quibble. The Gluetrain is no longer available online, but a copy was printed at the end of a Cap Gemini / Ernst & Young document here. If you want to understand what the Cluetrain authors meant by that "clouds and skies" imagery, there's an essay here that sort of explains.