Carpadium Consulting

There have been rumours for a while now that @jack from Twitter was working on a new payments venture. Well, it seems that those rumours are true with today’s announcement of SquareUp.

The home page has some information about what they are doing, but the service is in soft-launch / invite-only mode at the moment so full details are not yet available.

Straight away, SquareUp looks cool, and from what limited information is available on the site, it looks like it has the potential to shake-up the way small businesses work with credit cards to accept payments.

Two things stand out. Firstly, it looks like it is designed only for card-present transactions (as far as I can tell), and secondly, it uses a magnetic stripe reader to acquire the card details. The first point means that its not likely SquareUp can be used for online payments, and the second point will probably mean that it does not handle chip cards.

However, this does not mean the system is without a security overlay. One neat feature is that it supports a form of photo id check. When a merchant accepts a payment, the iPhone application shows them a photo of the cardholder, which they can use to verify against the payee. I have to assume that this only works for cardholders that have pre-registered a photo with SquareUp.

To some extent (but certainly not all), this gets around the need to use a chip card, although I wonder what the card schemes will have to say about this as they roll out chip cards and readers everywhere.

One final note about SquareUp that is specifically relevant to the Australian market (although I have no information about plans to roll-out the service here) is what it might look like against the proposed MAMBO payments service.

Is this another payments innovation that the big banks should take notice of, or something with a limited niche for use by small businesses currently lacking in ability to work with credit card payments?

My first impression is that it will certainly be successful in that niche, however you have to wonder what they might have up there sleeve. If we have learnt only one thing from the history of Twitter its that they understand how to build a platform.

M@

Update 1: Here’s some words from the Man himself. Pretty much confirms my initial thoughts. Still no CNP option, as far as I can tell.

There is a crazy amount of speculation at the moment that Apple will release a new kind of device sometime this year, or at least announce one, possibly at WWDC in June.

If you believe the official line from Apple, this thing won’t be a Mac and it won’t be netbook – at least as they are currently defined – because Apple believes that it cannot make a decent quality product at that US$300 or so price point.

So let’s have a think about what is compelling about the current crop of netbooks. Obviously form factor is a hit with people who want to be ultra mobile. But from my experience with the animal in the wild (which is little more than having a heft of one in a PC store) the extremely small form factor is as much a curse as it is a blessing. They are obviously great for doing really simple stuff like reading your daily blogroll, posting a few tweets, or checking e-mail, but I’m pretty sure that the next Great Novel will not be tapped out on a netbook.

Price is also a huge factor. The pricepoints of netbooks (even here in Australia, where we tend to pay a premium for most hardware) are pretty good. For example, you can get one of these for about A$600 or A$700 or so. There are better deals, that was just the first one that came up in a Google search. That is quite a bit less than what you would pay for a full featured laptop, and rightly so, because netbooks are relatively underpowered compared to something like this.

So, what if rather than trying to scale down a Mac into a netbook, Apple scaled up an iPhone into the category?

I would like to propose a name for this new type of device: The Phonebook.

That’s phonebook, as in:

Netbook + iPhone = Phonebook

What would set the phonebook apart from a normal netbook? The first thing is that the phonebook has a slot for you to plug in a SIM card. Apple obviously has all of the hardware and sofware IP required to make a phone, so it would seem pretty straightforward for them to pull this together.

This has two benefits. Firstly, it gives the device an edge against the current crop of netbooks that need a WiFi access point, or some kind of external 3G hardware. But perhaps more importantly, it gives them a way to manage the pricepoint. Sold with an appropraite 3G broadband contract, these devices could be given away for free, just like most iPhones are sold now. This makes the entry price very competitive when compared to other netbooks.

There is also a further opportunity to solve one of the problems of the current generation of netbooks: the keyboard.

If you recall, Apple’s solution to the problem of fiddly keyboards on mobile phones was to throw it away alltogether.The same approach is possible with the phonebook: get rid of the keyboard and just go with the same kind of touchscreen technology that exists in the iPhone.

This would be obvious, but Apple rarely just does the obvious when it comes to innovation. So I was thinking about the possible size of such a phonebook, and it struck me that you might want to hold it with two hands, kind of like a book held sideways.

Compare this to the way that I (and many people) hold an iPhone, which tends to be in the right hand, with the right thumb doing most of the work, and the left hand coming to the rescue on occasion (or vice-versa for the sinister among us).

And with this tablet-like-a-book image in my head, I was reminded of a previous Apple patent application that described a mechanism that used the back of the device, rather than the front, for input.

The patent suggested that in touch-controlled devices of a certain size, the user’s hand and arm tended to get in the way of the user interface as it was being used. The solution was to make the back of the device touch sensitive (I am not sure how this would work), so that whilst one hand held the device, the other hand could control it by touch from underneath. Here’s a link to an article discussing the patent.

So, on reflection, what I think we’ll see is a device that is far more iPhone than it is Mac, but it will be something arund the size of the Kindle. For example, I think this is probably as good a guess at what it will look like as you will find.

In addition to that design, I think it will have phone capabilities, and I would really like to see it make use of the back-of-the-device touch patent. Here’s an idea: perhaps the device could have a cover, the inside of which was touch sensitive. When the cover folds around to the back of the device, it works as touch panel. That could work.

M@

Update 1: Looks like some of this might be on the cards. Here’s a little bit of extra rumory goodness (via 9to5mac) that suggests the next MacBook hardware rev might contain builtin 3G wireless.

Over the last couple of weeks, there’s been several articles suggesting that most iPhone applications are downloaded, used a couple of times, and then never used again. While it’s hard to disagree with the raw numbers, I have some difficulty with the interpretation concluding that iPhone application development is just a novelty.

I have an iPhone, and I’ve downloaded a number of applications (46 at last count). I’m quite sure that I’m not the largest iPhone AppStore user, but 46 is more apps than my Mum has downloaded onto her device. Whatever that might mean. 

Of that 46, I make regular use of about 10 or 12. Roughly 25%. Almost exclusively, the ones I use are the ones that I paid for. The ones that I don’t use, or use rarely, are the free ones (mostly games), and the ones that I have used once and never gone back to are almost exclusively ad-ware. This is not including the built-in apps (particularly Mail and Calendar) which I use almost every time I pick up the phone.

My personal view is that ad-supported applications are problematic on the iPhone. Screen real estate is limited, and filling it up with ads is just about the most annoying thing I can think of. Perhaps the Pinch Media data indicates that I am not alone in this view.

At the moment, it would seem that the ratio of good apps to bad ones (or at least, simple ones) falls rather heavily on the side of the simple. There’s a few reasons for this, not the least of which is the fact that its relatively easy to build a really simple application with the iPhone SDK. However, just like desktop software, it’s really hard to build a good application. Unless you spend a lot of time understanding the user, and a lot of time on interaction design, the app will most likely suck. You don’t have to go to the iPhone App Store to see this play out. Many desktop applications are just as ill conceived as some of the dumbest iPhone apps.

This leads me to question the simplistic interpretation of the data. Basically, the apps that I don’t use are the crappy ones, and my broader hypothesis is that the apps on the iPhone that are gathering dust are the apps that people think are crap, and at the moment, there’s a boatload of crappy apps. So while I accept that the data probably says “most apps are gathering dust”, I really think it should be saying that “most crappy apps are gathering dust”. This is not surprising, and almost certainly true of desktop applications as well, particularly in the freeware domain. Just consider some of the rubbish that comes for free in your typical Linux distro. Sure, there’s loads of great stuff as well, but most of it never gets run more than once, if at all.

Ultimately, I don’t think there’s any real difference between the elements of design that make good software on the iPhone, and the elements of design that make good software on the desktop.

Then and Now: iPhone and Newton

I found my old Newton MessagePad 2000 when I was cleaning up my desk late last year. I still love the noise this thing makes when you turn it on. Unforuntately, it doesn’t quite have the same feel in your hand as the iPhone.

Perhaps it will be a collectors item one day. In the meantime, it’s a book-end.

M@

I had a few comments to the effect that it wasn’t Apple that was calling this a subscription. That’s entirely correct, and kind of my point. There has been ongoing talk (eg Rob Enderlie) about why Apple should release a subscription music service, but yet Apple stubbornly refuses to oblige. I suspect the reason Apple has not gone down this subscription path – at least in the form suggested by the likes of Enderlie – is because it’s a really dumb idea. We will see.

If the comments on the MacRumors and 9to5mac forums are anything to go by, a subscription along the lines of Ruckus or Napster or MP3.com is not the kind of thing that people want. It seems that the average punter [1] wants to buy music to own, and they want to be able to use it whenever and wherever they are.

The risks of the music disappearing when the subscription runs out or worse, when the service goes dark, are a little too much to stomach.

M@

[1] As an aside, some people in those threads read the headline and thought that Apple was going to charge people $20 for the iTunes client software, so perhaps they are not the best examples of what the iTunes / iPod community is thinking …

Apparently, this is the name of a new product from Microsoft that will be making its way into Windows 7:

• Windows Live ID Sign-in Assistant 6.5 (Beta)

Is that some kind of joke? Can you imagine sitting around the table in the meeting where that name was unveiled? I’m lost for words.

M@

As a follow-up to this post, Bob Cringley gives a prescription for Microsoft today, which you can read here.

Bob thinks that Windows Mobile and XBox are too valuable to walk away from, and he thinks that they should hang onto the Zune and merge it with Windows Mobile in order to force Apple towards a subscription model for music.

Leaving aside the technical feasibility of such a merger for a moment, I just don’t buy this subscription argument (no matter how many times I hear it).  Just look at the recent death of Ruckus if you need any more evidence.

However, if there’s one really good thing about Cringley’s commentary, its how he goes back and checks out how his predictions turn out. There are some very specific predictions in this post, so it will be very interesting to see how the turn out over the next 12 months or so.

M@

Update 2: Oh dear. I guess my comments about Windows Mobile 6.5 not coming out until the end of the year were a little premature. Nice one, Sol.

Update 1: The guys over at Engadget reviewed Windows Mobile 6.5, and they haven’t got much good to say about it. In fact, they came up with 10 reasons why it misses the mark. This is the kind of thing that worries me about where Microsoft is going with Windows Mobile 6.5. Not only is it not due until the end of the year, early reports lead you to conclude that it is already way behind the state of the art. I think SkyMarket is going to have to be really, really good to save it.

In an earlier post, I was pondering where Microsoft was going with the Windows Mobile platform. As I mentioned in that article, it appears that they are now, at best, 3rd in the smartphone market which is somewhere they are not used to playing.

I find this fascinating, because it highlights a really interesting schism in Microsoft. On the one hand, you have the outrageously successful Windows and Office franchises, not to mention their development and tools platforms, where Microsoft’s ability to generate cash is well documented. Then on the other hand, you have the XBox, Zune and Windows Mobile.

You have to ask: what is the difference between Windows / Office / Tools, and these other products?

The answer is lock-in.

Regardless of the mechanism by which it was established, Windows has a huge lock-in factor with the vast number of hardware OEMs that build Windows compatible PCs and peripherals, and an equally huge (if not bigger) lock-in factor with all of the ISVs writing applications, using Microsoft’s portfolio of developer tools.

Office has lock-in too, but of a slightly different form. With Office, lock-in comes from the vast array of documents, spreadsheets and presentations that exist in businesses who use Word, Excel and PowerPoint for everyday business productivity. Even if someone could build a better word processor, spreadsheet or presentation application, users are still faced with the daunting task of porting existing documents to the new applications.

By way of example, I worked at a bank a couple of years ago that was contemplating an upgrade from  Office 97 to Office 2000. The total real cost for this project included an amount for document conversion that dwarfed the software licensing and upgrade costs by a factor of 5. That’s a big hurdle for any business, and this just was an upgrade to a new version. The costs for changing to a new application would almost certainly have been prohibitive.

Don’t get me wrong – I am not suggesting that lock-in is a bad thing. If a business manages to build a product platform that can generate even a modest degree of lock-in, then they are on the way making a successful product. Look at the iTunes Music store and the iPhone AppStore if you need any clearer example of a great piece of lock-in!

The point here is that Microsoft is not successful competing when it is not dominating. In fact, the evidence of the Zune and the XBox suggests that when they try it, they end up loosing a whole lot of coin. Arguably so much coin that you would need to be extracting supernormal profits from something else to afford to sustain them. But that’s a whole other story …

Apple is a little different. Although they are certainly dominant with music players, Mac market share only pushes around 10% for desktop PCs, and although they do very well in laptop sales, they are not dominant to the same extent that Microsoft is with desktop operating systems.

The only time I have ever seen Microsoft succeed is when they only have daylight behind them. But I’ve seen Apple (and others: Porsche?) do very well when they are far from the front, at least on the measure of marketshare.

Which leads me to wonder about the future of these products, so I’ll go ahead and make some predictions:

1. I think the Zune will be the first to go because it really hasn’t worked at all. I wouldn’t be surprised to see that happen in the first half of this year.

2. The XBox is a little trickier. I don’t think anyone would have predicted the success of the Nintendo Wii, which turned what looked like a 2-horse race between Sony and Microsoft into something altogether different. I would expect Microsoft to keep hard at the games market, even if it is losing a lot of money doing so. A wildcard alternative scenario here is for Microsoft to divest from the XBox altogether. I don’t know who would buy it (Sony?), but I could see it doing better out on its own.

3. Unless something remarkable happens with Windows Mobile, I think it will continue to languish. However, I don’t see Microsoft giving up this franchise lightly because thre is just too much at stake in the mobile platform market. The only outcome I see for Windows Mobile is that it is forced into price competion against Linux. Good luck competing with $0.

Microsoft has entered these other markets largely, I believe, because of its subconscious desire to dominate. It’s in the DNA of the organisation and it seems like they don’t know how to operate any other way.

It’s possible that the current economic climate could bring about a change at the top. Things haven’t exactly gone swimmingly well for Balmer recently. I’m sure that a different CEO would see things differently, particularly if they came from outside the organisation, and these divisions would end up being not long for this world.

M@

PS: A confession: the reference above to iWork is a little cheeky on my part, because I still use Word, Excel and Powerpoint for pretty much everything I do. I am a proud owner of iWork, and I have even recently upgraded to iWork’09. However, I am an example of precisely the lock-in that I’m talking about. I have so many documents and templates, that it would take me a couple of weeks to port everything over from Office to iWork. Even though iWork opens and reads Office format documents, it doesn’t get them quite right, and when it comes down to it, I’m a bit of a pedant with document presentation, so I’d be forced to rebuild my templates in an iWork-like fashion before I really made the switch. And who has time to do that? Now, if the file formats were open and public, then the balance would be entirely different …

I recently pondered the demise of both Windows Mobile and PalmOS. To be fair, the real theme of both those posts was how crowded it is getting in the mobile device operating system ecosystem. The mobile landscape exists in stark contrast to desktop operating systems where Microsoft dominates, Apple innovates and Linux continues to build momentum.

The SMH has an article today about a deal between Microsoft and LG for the later to use the former’s mobile operating system in its smartphones. Now whilst the deal itself is interesting (for example, I would really like to know the per-handset licensing terms on which I would wager that there has been some serious downwards pressure) what I found most intriguing was the last paragraph (my emphasis):

Microsoft, whose Windows mobile operating system used to be the second-most popular for smartphones after Nokia’s Symbian, has been overtaken by Apple and BlackBerry maker Research in Motion.

This data has been public for some time now, but what it means is that Microsoft is now playing #3 in a market. If they were taking Jack Welch‘s advice to be “#1 or #2 or get out“, they would need to have a serious look at Windows Mobile and ask themselves why they were bothering.

By the way: there’s something a little deeper at work here, and it has to do with lock-in and Microsoft’s ability to compete in markets where they are not the dominant player, but more on that later.

But of course we all know why they continue: mobile devices represent pretty much all of the future growth potential for teh technology business. Sure, the desktop PC market will continue to grow, but it’s at such a scale these days that its growth approaches that of the market as a whole. To a business that has seduced everyone into thinking that 15% or 20% annual growth is the norm, running at little more than the growth of the economy seems decidedly second rate. Or even third rate.

If Microsoft walks away from mobile platforms, then they might just be walking away from the entire hegemony.

M@

In a post the other day, I asked the question “Is Windows Mobile Dead?”, to which I received a couple of comments, some good and some bad. In that post, I also wondered what Palm was going to do with its PalmOS. Well, today, I read this headline, which seems to answer that question pretty resoundingly: it’s all over for PalmOS.

So this narrows the mobile operating system field down to webOS, Windows Mobile, Symbian, Android, OS X for the iPhone, plus a a variety of Linux distros.

Is there really room for 6+ mobile operating systems in the market? I wonder which one will be the next go?

M@