So it’s no surprise that now over 40% of email opens are on mobile devices, and mobile is on track overtake the PC this year.  It’s pretty amazing when you consider the smartphone, as we know it, was launched less than 6 years ago.

Mobile and Web are blurring together, slowly ceasing to be distinct “things” (I’ve written before about a mobile strategy for Web sites).  This trend suggests some best practices for emails:

• Format emails for mobile.  This is basic stuff that a lot of designers seem to mess up.  Make sure emails open and render well on mobile devices.

• Mobile-optimize email click-through landing pages and flows.  If users are reading emails on mobile devices, they’re also clicking through links on mobile devices.  Check your Web usage stats:  you might find that a significant percentage of your site usage by mobile users is coming from email click through paths.  Nothing kills the user experience like a landing page that hasn’t been mobile formatted.

As you might imagine, an exclusive FCC license can have significant commercial value.  Given this, the primary method of making wireless bandwidth available (as directed by Congress) is to auction it off.

On the surface, this seems like a reasonable approach.  Companies shouldn’t get a government “free lunch”, and we can certainly use the cash ($60 billion to date).  Companies can’t mine Federal land without paying, and the patent system shows how exclusivity incents commercial investment.  Also, a market-based system sounds appealing.

But if our goal is driving innovation and meeting growing bandwidth needs, it’s time to consider that the policy (as the primary way to allocate bandwidth) is seriously flawed.

Unlike oil drilling, spectrum is not a commodity:  1GB used today doesn’t mean there’s less tomorrow.  And license exclusivity is not like patents:  the wireless bidders are not providing a documented technological advance.  Spectrum is a public right-of-way:  what if your local government auctioned off public roads to the highest bidder?  (To be clear:  I’m not suggesting government wireless infrastructure.)

The real problem is that we’re stuck in the translation trap that often happens when we attempt to treat intangible licenses as physical property.  The failure is becoming more clear:  much auctioned spectrum remains underused.  Winners generally have little obligation to actually do anything, and technology advances make it notoriously difficult to estimate future value and bid accurately.  Licenses are for very long periods, not matched to the rapid pace of innovation.

As a result, licenses become expensive trading cards for large wireless companies, with lawyers and regulators involved with every exchange.  Witness the arguing and posturing that’s between Sprint, Clearwire, and all the other wireless companies.  (TL;DR:  Clearwire’s WiMAX business hasn’t gone so well, Sprint wants to buy them for the spectrum value).   Spectrum ends up stuck in a slow-moving, heavy-friction “market”, without being efficiently deployed.

We need a policy that removes friction, by making more unlicensed (or lightly licensed) spectrum available.  The unlicensed bands are a source of significant innovation, starting with CB Radio, and continuing with cordless phones, the Family Radio Service, Wifi, and Bluetooth.   Where else can you buy a 150mbit radio for under $3?  We all switch our phones over to Wifi if it’s available (often provided by a $50 access point).

Our current spectrum policy is a vestige of the old “walled garden” mobile market, where the wireless carriers had exclusive control of the mobile device.  We need a policy that’s aligned with the app-store world, with more spectrum available to innovators that don’t have lawyers and billions of dollars.

As friction goes away, things become much more fine-grained.  You don’t need $5m anymore to start a company:  a laptop and a cafe wifi connection will do.  This enables an explosion of new projects, but with smaller teams and narrower ideas.  The industry gorilla platforms fuel a “feature ecosystem”:  are those icons on your phone “apps” or “features”?  Viewed in person terms:  a thousand 100-person software teams might now be 30,000 3-person teams.  Software is no longer a sport of kings.

This effect, in turn, is flattening the industry.  Most projects now start on nearly identical footing, often with many competitors or near-competitors.  It’s like starting a civilization in a desert vs the mountains; there are far fewer strategic passes and valleys to control and extract disproportionate value from surrounding areas.  It’s a maddening conundrum for entrepreneurs and investors:  we’re all toting personal super computers, the world is bathed in wireless access, and there are millions & millions of mobile apps and Web sites.  But why does it feel harder than ever to create a $1b software company?  This is why.

Well, no, there is no OpenGL or any graphics API for that matter, it’s all some stupid low-level hardware API that you have to tickle to get any 3D rendering to work.

and

So let’s say you get over your initial API shock, you have a decent handle on what all the little libraries do, and you wanna buy some development hardware now. Well, uh, okay. That’ll be anywhere from $2,600 (leaked 3DS devkit figures) to $10,000 or more (leaked Xbox 360/PS3 devkit figures).

This reminds me exactly of the pre-iPhone “walled garden” mobile app world, when you needed ~$10,000 for a development license for Qualcomm’s “BREW“.  The original article  ”The Minecraft Test” (e.g. could your platform spawn the next Minecraft?) is a fabulous way to think about platform openness.  (Also see Nate Brown’s post “Stupid, Stupid Xbox!!” for an insider critique).

The console platforms have completely missed the market transition to open, low-friction developer on-ramps, and it’s no surprise the console market is now anemic.  In contrast, the new OUYA console (I have one on pre-order) has a fledgling, but very open SDK and just had a “game jam“.  The OUYA is under-powered relative to current consoles, but I bet the openness will more than make up for that issue.

For example, last month, Liz Gannes wrote about Facebook’s search plans:

…the fact that Facebook has finally made its search intentions known could actually be really good for Google. That’s because regulators — especially those in Europe, who are in the thick of deciding whether to settle with Google over antitrust — now have the prospect of additional search competition to consider.

Also, Google now has Gmail, Maps, and Chrome on the iPhone, where Apple had previously rejected apps that “duplicate the functionality” of built in iOS apps.  But it doesn’t look good (in anti-trust terms) for Apple to reject competitive apps, and Google’s smart to get as many apps as possible to dilute Apple’s platform influence.

I think it’s net-good for consumers, as it increases the chances that more of our devices and systems will interoperate.  But what we really need are some new gorillas.

I think they’ve got a decent shot.  I’ve always felt television, in the limit, will be delivered over IP.  Specialized, proprietary cable TV distribution is gradually giving way to big, fast, cheap IP pipes. Your phone, tablet, and TV screens will be iOS or Android-powered, and will stream video from anyone. Of course, HTML5 & native apps will enable the long-awaited vision of “interactive TV”.

I’ve written about this before (going back years):

• One more step to IP-delivered television (2008)
• Browser Powered Television (2009)
• Hulu Desktop & Boxee:  Temporary Solutions (2009)
• The Mess That is Television (2012)

What’s taking so long?!?

The problem isn’t technology; it’s the business model.  The way our traditional television content is produced, financed, and distributed is balled up in a big legacy with a lot of inertia.  Payments flow in various ways between advertisers, production companies, traditional TV networks, premium networks (e.g. HBO), and cable companies.  This makes it hard for anything to change quickly; if HBO wanted to sell direct Internet subscriptions, they’d be shooting themselves in the foot.

It’s good to see Netflix getting enough critical mass to stir things up.

The reason is “self-publishing” is now a reasonable option.  The app store ecosystem has removed most friction from the system, provided a clean and easy business model (70/30 revenue split), and eliminated almost all barriers to entry.  If you have talent, a laptop, and a coffee shop wifi connection, you have a chance at writing the next great app hit.

As a result, many good developers have (or believe they have) a better chance at doing their own thing vs working for someone else for salary or an hourly rate.

I’m expecting precisely zero effect on anything here, but it captures my analysis of what happened.  Apart from the sadness and tragedy, I think we all need to be very mindful of the growing gaps between technology and our laws.

January 28, 2013

The Honorable Carmen M. Ortiz
United States Attorney for Massachusetts
John Joseph Moakley
United State Federal Courthouse
1 Courthouse Way, Suite 9200
Boston, MA  02210

Dear Mrs. Ortiz:

I’m writing you (and Mr. Heymann), as many have, regarding Aaron Swartz.  I know emotions are high, and I’m sorry the criticism has been so unfair and uninformed.  I’m sharing constructive comments I hope will be helpful as you consider this matter.  I’ve reviewed the public court documents and several relevant legal opinions.  I am a pioneer of the Internet economy, and a technology and business method expert in the subjects of this case.

It is clear Swartz did something wrong and should have been punished.  However, I have come to agree the prosecutorial stance did not match the severity of Swartz’s deeds.

I believe that you and Mr. Heymann were doing “what any good prosecutor would do”, and as you’ve noted, prosecutors don’t make the laws and penalties.  However, the CFAA is unusually broad and ambiguous, by design, to address a major policy issue.  Technology is advancing much faster than our laws, and the Justice Department has argued for legal flexibility with this Act (e.g. Richard Downing’s House Judiciary Subcommittee testimony in Nov, 2011).  That flexibility requires discretion in application, perhaps more than any other statute you prosecute.

This case is a nearly perfect test of that discretion, because it’s missing most of the typical criminal elements.  Swartz was not pursuing financial gain.  He wasn’t trafficking in credit cards, passwords, national secrets, or confidential/proprietary information.  He didn’t destroy data or access personal records.  He didn’t access something he wasn’t supposed to; he accessed more than he should have.

Swartz, like any MIT guest, was allowed to download JSTOR articles.  He enjoyed no greater access than any normal user would, but he violated JSTOR’s Terms of Service (ToS) by automating his download process.  His violation of MIT’s guest ToS is less clear:  MIT is famously and widely known for an open campus and network, and there’s a reasonable argument MIT’s effective ToS is much more permissive.  (Also, MAC address manipulation is not analogous to VIN tampering; if it were, it would criminalize the “Change MAC Address” feature available in nearly every consumer router.)

Regarding damages, JSTOR’s articles are freely available at 7,000 institutions worldwide, and many documents are public domain.   MIT’s $50,000 annual subscription amounts to $136/day, a starting point for calculating damages.  However, subscription fees have limited use in determining damages, because they mix the access costs with document value.  For example, PACER’s public documents “cost” $0.10/page, but their value is zero.  JSTOR’s quick civil settlement, their public stance in this case, and their subsequent public release of millions of articles are all extremely telling.

Swartz did not destroy or damage data or infrastructure.  There’s no (public) evidence his actions caused more than minor service outages and investigation costs at MIT and JSTOR.  Swartz’s actions were “minimally criminal”, and justice should have been sought on those terms.  (In addition, if your case had prevailed on the basis of ToS violations, there’s a solid appeal to void this interpretation for vagueness.  It’s nearly impossible to pass the “average citizen” test for defining criminal behavior with CFAA+ToS.)

At this point, you will likely say Swartz would have had every opportunity to make these arguments.  That’s true of course, but I’d respectfully say it’s disingenuous.  From the moment you indict and issue a press release, you frame the case.  The use of Secret Service resources, the home search warrant, the discovery refusal to provide raw hard drive images, the superseding indictment, and the reported plea negotiations & constraints; these all signal that Swartz’s acts were extremely serious, worthy of government resources.  Furthermore, Mr. Heymann is a seasoned prosecutor and computer crime expert;  the judges, jury, MIT, and JSTOR take cues from his stance.

Again, the unique ambiguity in the CFAA demands a prosecutorial duty of discretion above and beyond normal.  Our goal is to seek justice, and to that end, I share several suggestions.  First, I strongly recommend you proactively and immediately release all non-exempt case documents, and consider selectively waiving FOIA exemptions for other material.  The content may be unflattering, but transparency would be a very powerful leadership act on your part.  The people have a right to know how their attorneys conduct business, and the full record will help us enact the best policies.

Second, I would encourage you to support sensible CFAA revisions.  For critics, this case is a poster example of why the statute needs to be less vague.  Congress looks to Justice for advice, and you now have the best perspective of any prosecutor on finding a balance between (a) a flexible law, (b) a clear definition of criminal behavior, and (c) the prosecutor’s duty of discretion.

Third, I suggest you consider future CFAA cases more carefully, especially cases missing the obvious criminal elements.  The computer fraud case volume is relatively thin, making each case a bounds test almost by definition.

I pray you find these thoughts helpful in this sad and tragic story, and I hope they constructively capture the broader criticism about proportionality.

Finally, if an informal discussion regarding this matter (or fraud policy in general) would ever be useful, I would welcome that opportunity.

My email is <andy [at] payne [D O T] org>.

Sincerely,

Andrew C. Payne

Cc:       Stephen P. Heymann, Assistant U.S. Attorney
Scott L. Garland, Assistant U.S. Attorney

For startups, patents make the most sense in industries with (a) relatively long development times and (b) significant R&D budgets.  The PTO doesn’t move quickly:  for some art units, it can take 2-3 years (or more) to get a patent issued.  That’s fine for a biotech company bringing a new drug to market, but is much too long for a software company launching a product in six months.

Also, patents can be very expensive.  For a $750,000 seed round, it may not make sense to spend ~5% of that (or more) on getting US patents filed.  International?  Budget six figures.

Finally, fundraising entrepreneurs frequently overplay the value of patents, missing the other elements needed to make a successful business and making themselves look naïve.  For example, “provisional patents” don’t exist:  it’s a provisional application that gives an option to file for a utility patent later (and it’s just that, an application).  “Patented” means patent issued and in force, “patent pending” means a patent filed but not issued.

If you don’t have an issued patent, it’s a long and expensive journey:  claims are often rejected entirely or issued very narrowly.  It’s nearly impossible to know what a patent is worth until it issues.

QR codes are so helpful for connecting the physical and digital worlds:  imagine scanning the bottom of a product to see the current owner’s manual, or to get reorder information.  Or scanning codes at a museum or park to get more information about an exhibit.  Or scanning the “missed delivery” door tag that FedEx left, to figure out your delivery options.

It’s not a new idea, but for the first time we’ve all got scanners in our pocket.  However, QR codes are still a little geeky:  you need to know what they are, and install an scanning app.  It’s a chicken-and-egg problem, and including scanning as a built-in phone feature would go a long way to seeding things.

As Web site operators watch mobile usage grow, the next thought is usually:  ”let’s build a mobile app!”  It’s a good instinct, but I think it’s also a great way to waste a lot of time and money.  Leaping in without any insight on mobile usage is a good way to build the wrong app.  Also, it’s easy to end up with something that only partially replicates Web site functionality, frustrating users and creating two different UIs to maintain in parallel.

For a better strategy, Facebook is a good example to study.  They took way too long to focus on mobile, but their sequencing is a good place to start.  (Note:  this advice is really for existing Web sites).

Following their example, here’s a “starter” mobile plan:

Step #1:  Mobile-enable your Web site.  Remember m.facebook.com?  You can get pretty far these days with just HTML5.  Use your mobile usage data to figure out what areas to prioritize (Google Analytics will break out mobile usage).  Consider both tablet and phone cases:  depending on your application, you may want to deal with them separately.

Step #2:  Develop a native app, with generous use of embedded browser widgets.  Consider which app elements must to be native for the best experience, and do the rest using embedded browser widgets (e.g. WebKit).  Most of your app will actually be HTML5 served from your servers, and you can change content on the fly without having to do an approval cycle with Apple (which can take weeks).

You should be able to leverage the HTML5 work you did in step 1.  Use your existing mobile usage data to prioritize Android vs iPhone and phone vs tablet.

Step #3:  Go 100% native.  (If needed)  At this point, you should have a good sense of the most important use cases, platforms, and form factors.

Edit to taste!

 …one of the most conspicuous trends in the last batch was the large number of hardware startups. Out of 84 companies, 7 were making hardware. On the whole they’ve done better than the companies that weren’t.

After doing software for nearly 20 years, I’ve now been spending most of my time on hardware, and especially, hardware projects that have a large software component.  (See my post last year on the Coming Bits and Atoms Disruption.)

As the essay points out:  it’s getting cheaper & easier to design and build hardware projects.  I think we’re going to see a lot of interesting products over the next few years.

However, there’s also a lot of hype surrounding 3D printing:  some imagine a “printer in every home” or replacing traditional manufacturing methods.

I’m skeptical.  3D printing has some very serious limitations: printers are slow, with no economies of scale. One-hundred parts takes almost exactly 100x as long and 100x the cost of one part. Even at low quantities, traditional manufacturing methods (e.g. injection molded plastic) are often more attractive.

Also, printer technologies vary widely, with a range of materials (plastic, metal, ceramic), durability, fidelity and color options. It’s not like paper printing, where anything that puts colored bits on paper gets you in the game – different 3D printing technologies have very different applications.

Hype aside, I think 3D printing will be disruptive in a few application areas:

• 100% custom “quantity one” parts (e.g. anything that touches the human body)

• Low-quantity parts. Examples: the long-tail of repair parts no longer manufactured, or “parametric parts”, where the design is a function of several parameters, and it’s not possible or practical to stock all combinations.

• Parts that can’t be manufactured any other way. What’s most interesting:  3D printers control every bit of the part volume, including the “insides”.  Most “solid” parts aren’t solid at all; they usually have a honeycomb-like interior structure to save material, but that structure could be anything.  Now, you can build parts that have interior structure that you can’t build with traditional methods.

This last category is especially exciting, and I’m hoping to see interesting designs as 3D printers get more widely deployed.

Last week, I got a copy of Steve Krug’s book, Don’t Make Me Think.  It’s a fabulous book on Web UI design, and I’m wondering why I didn’t find it sooner.  It’s short (216 pages, less than 1/2″ thick) and very tightly written.  You can speed read it in one sitting, and you’ll want to buy copies for the rest of your team.

Highly recommended.

As a modestly active angel investor and an LP in several venture funds, I hear many, many startup pitches.  I think I’ve a good sense of pitches that work (and why), and I’m good at giving specific feedback (on both the idea, and the way it’s presented).  AND, I’ll give very direct feedback, even if it’s something the entrepreneur doesn’t want to hear (not assuming I know all the answers, of course).

So, I’m trying a little experiment:   a “pitch practice” session.  If you’re interested, please email an overview of your company by Oct 3.

I’ll do a half-day with four 1hr slots, one per company (privately), each with 30 min for presenting and 30 min for feedback.  I’ll choose four (if anyone’s interested!) and schedule a half-day block for sometime in the next ~2 weeks.

Please note:

• My background is in technology, specifically software and hardware with a significant software component.  I won’t be that helpful for projects outside of those areas.

• In your overview, please include bios for the company principals and specifics on your idea.  ”We’re building a revolutionary new ad network” is not specific enough.

• Please explain what funding stage you’re at (e.g. seed, A, B, etc.)

• I strongly prefer to meet in-person, but will consider Skype/Webex sessions for entrepreneurs outside of New England.

• This is just for pitch and company feedback, and not for:  networking, investment, board seats, advisor relationships, customer leads, partnerships, and/or investor introductions.

Let me know!

I think silicon valley as we know it may be coming to an end. In order to create a successful new company, you have to find an idea that (1) has escaped the attention of the major Internet companies, which are better run than ever before; (2) is capable of being launched and proven out for ~$5M, the typical seed plus series A investment; and (3) is protectable from the onslaught of those big companies once they figure out what you’re onto. How many ideas like that are left?

As you might expect, his note sparked a fierce debate in the comments (and a TechCrunch article).

I think he’s more right than not:  the unbounded “wild west” days of the Internet are winding down.   I’ve written before about the GAAF ecosystem, and how much of the Internet is now controlled by Google, Apple, Amazon and Facebook.  Those gorilla incumbents have taken a lot of friction out of the system, but they also tax, manipulate, control, and limit success at the upper-bound.  You’re not going to build the next Facebook on Facebook.

(The incumbents will get replaced, but it will be a LONG timeframe — they’re too deeply entrenched.)

However, the Facebook discussion suggests a nice framework for evaluating opportunities.  Ideas within the incumbent ecosystem (especially pure Internet software ideas) will be limited.  But stepping outside that ecosystem makes things much, much more interesting.  Uber (mentioned in one comment) is a great example:  they solve a messy, real-world problem — they’re a lot more than just a app.

Markets are smart:  Silicon Valley will figure it out, but it might take a while.

To be clear, I rarely use Siri as the “personal assistant” that Apple highlights in their commercials.  Most of my usage (90%) is straight text input (i.e. the microphone icon on the keyboard) for emails, text messages, Facebook status updates, and Google searches.  For example, I’ll set up a new email through the standard touch UI, then use Siri to dictate the text body.  The speech recognition is quite good, and I’ve learned to speak a little more clearly to make it even better.

For the personal assistant features, Siri is the fastest and easiest way to get meetings into my calendar.  Just say, “Schedule Rob at 9am on Wednesday for an hour” and it’s done.  It’s also great for dialing in the car.

Try it!

How much does a super-strong opening really matter, in the long term?  If their stock had closed at $60 (as I had predicted), that would have meant it was underpriced, leaving money on the table for the underwriters and their clients.

Some argue that a big IPO pop is important to the continued momentum of a company, but I’m not so sure.  Most of my friends don’t know (or care) they went public.  The initial price gyrations aren’t about long-term value;  they’re about underwriters and traders jockeying their positions (e.g. propping up at $38 on Friday, and likely selling today to minimize exposure).  Apart from NASDAQ’s problems handling the trading volume, I bet this IPO will be a distant memory in a few quarters.

I think Facebook actually played it pretty well.  Maybe it was priced slightly high, but most of the proceeds went to the company (and inside sellers), not aftermarket traders, which is how it should be.  The underwriters are certainly earned their fees by providing float for the stock on Friday.

I like owning companies that play it well.

Disclosure:  I’m long FB.

This shows how skewed and concentrated technology returns have gotten.  In the old days, a venture investor might have hoped for one home run in 10 for the investment math to work.  Now, it’s more like 1:100, or even worse.  How many groups went through Y Combinator before Dropbox and Airbnb?

For many Internet software and mobile investments, I think this is a symptom of the “gorilla ecosystem” that I’ve written about.   Many startups end up paying a tax, in some form, to Amazon, Google, Apple, and/or Facebook, causing a significant fraction of startup value creation to flow to the gorillas.

Net, net:  instead of a nice stream of $1b exits for the last 5-10 yrs, we’re going to have one gigantic $100b exit.

One case in point:  stars (flags) for messages.  They’ve been moved to the right side, so they now appear like this:

This is a less important place on the page — we read left to right, scanning the sender and subject first.  The star’s function is to mark the most important messages, so it should be in an important place (on the left).  Even worse, they’re not even aligned anymore because of the “reply” button, creating more visual work to locate the stars.  Why is this an improvement?

Also, the left rail has now been replaced with a person-info icon that you can hover over and click to expand messages, completely redundant with clicking or hovering over the sender’s name.  Why?

Worse, they show the person-info hover dialog for my own emails.  Why?