Companies avoid competition if they can and as much as they can. Publicly, they might praise the virtues of “the market”, but none of them wants to be in a fiercely competitive market. It makes for a tough life. Markets with few competitors are far easier to navigate and generally more rewarding. And it’s plain sailing, if you’re a monopoly.

Or is it?

The Perils of the Monopoly

The great advantage of the monopoly is also its fundamental weakness: It has no competition to impose discipline upon it or to measure itself against. The monopolist’s business model quickly becomes subverted to the overriding goal of preserving the monopoly. Many of the activities that serve to keep a company healthy are not pursued at all.

Costs and rewards are only marginally controlled by external market forces. The price of the product (or service) is not gauged in any way against perceptions of value. Innovation becomes unimportant. Marketing and sales skills atrophy. Arrogance becomes endemic; the belief is that “because we dominate the market we’re are supremely talented in everything we do.” All the weaknesses are viewed as strengths. And thus a monopoly contains the seed of its own destruction.

Microsoft’s major problems are due to astonishing success. The company did not just overshadow the competition it stomped it into the ground. It forged a huge economic ecosystem which had considerable momentum, but now Microsoft is in difficulties in almost every area of its operation.

Microsoft’s Mobile Muddle

Put yourself in Microsoft’s position in 2000. It is at the pinnacle of its power. George W Bush has just been elected president and one of his first acts as president is to drop any further antitrust action against Microsoft. Netscape has been smashed, PC revenues are flowing, Microsoft is making gains in the server market, etc., etc.

Where are the opportunities for the new millennium. One is surely the mobile market, where mobile phones need to gains functionality, mobile phones and PDA are gradually converging and hundreds of millions of handsets are being sold every year. The mobile market was one of Microsoft’s primary targets.

Microsoft came to market in April 2000 with the Pocket PC 2000 environment, which grew up to become Windows Mobile. It was a stunted version of Windows CE 3.0 for PDAs and high end mobile phones. Microsoft immediately gained traction in the market on the basis of Windows familiarity.

So fast forward to 2009. Windows Mobile (currently in release 6.1) runs on Pocket PCs, smartphones, portable media devices and embedded computers in some cars. Microsoft sold about 18 million licenses in 2008 which looks like a very respectable figure, given that it’s greater than the number of iPhones that Apple sold last year.

That seems impressive until you realize that you are comparing apples with mozzarella cheese. As a smartphone OS, Windows Mobile is in decline. It’s share of the smartphone market (worldwide) is down from 23% in 2004 to 12% last year. Microsoft licenses Windows Mobile to many of the major mobile phone manufacturers, but its mindshare is in decline. It has been jilted recently, with both Samsung and Sony Ericsson dropping Windows Mobile for the Symbian OS in their flagship phones. Consequently, Microsoft’s main licensees are HTC, which makes 80% of Windows Mobile smartphones, and LG. But both of these companies also plan to sell Android phones.

Unfortunately for Microsoft, if it wanted to maintain its Windows monopoly, the mobile market was a “must win.”

Apples are Apples, But Mozzarella Is Only Part of the Pizza

In the PC market it was possible for decades to charge a high price for the OS, irrespective of the fact that maintaining and enhancing the OS was not a high cost activity. It was “money for nothing and the chicks for free.” The mobile phone market is entirely different. The OS is only one component of many and the manufacturers won’t pay an extra cent for any components, unless they have to. You can divide the smartphone OSes into 3 groups:

1. Proprietary OS used only by the owner: the iPhone OS, RIM’s Blackberry OS, Palm WebOS
2. OSes available at no charge to handset vendors: Symbian OS (owned by Nokia but available for free), Linux and Google’s Android.
3. OSes available at a price: Windows Mobile.

What’s wrong with this picture? Nothing at all, unless you happen to be Microsoft. If you convert Microsoft’s market numbers into revenue, it is small beer. Microsoft charges somewhere between $8 to $15 per phone, according to Strategy Analytics, which means that Microsoft is probably earning no more than about $180 million from the mobile market. Compare that with the billions of dollars or revenue that Apple harvests and you have to wonder why Microsoft is even in this business.  As Microsoft’s market share declines the costs of maintaining Windows Mobile may become unsustainable. Microsoft isn’t even in a position to compete with Apple at this point (see How and Why the iPhone Changes The Game.)

The Rearguard Action

Credible rumors have been circulating that Microsoft will introduce a phone-of-its-own this spring. It would surely collapse much of the Windows Mobile market, but there is also upside potential. Microsoft is looking enviously at Apple’s App Store and could build a similar capability to accompany its me-too-phone. Microsoft is unlikely to be successful with this (see The “Bootleg Apple” Strategy and Why It Will Fail) but it has little option but to pursue this course.

Here’s why:

Microsoft would not be fighting to preserve Windows Mobile, it would be fighting to preserve Windows on the PC. Unfortunately, ASUS is expected to introduce a Google Android netbook later this year. Nokia has been threatening to enter the PC market and if it does, most likely it will be a Symbian netbook device. Such devices will most likely run on ARM chips and may lower the netbook price points even further.

You can look at a netbook in two ways; as a shrunken PC or as an expanded smart phone. From where I’m sitting, it looks very much like an expanded smart phone. As soon as all these other OSes (Symbian, Google Android and OS X) join Linux and Windows in the netbook market, the Windows monopoly is broken. Just as Windows migrated onto the server, so will these OSes migrate up the food chain and onto the desktop.

Microsoft is now fighting a rearguard action.

In a final and possibly doomed attempt to save North Pole Special Delivery Services Inc., the company’s CEO, Mr Claus, known to his staff simply as “Santa”, appeared before the US Congress earlier this week in a last-ditch effort to get a $50 billion bailout for the once thriving holiday season delivery service. Before his appearance on Capitol Hill, Mr Claus made a statement to journalists, saying:
“Yo-Ho-Ho!”
“Unless congress agrees to the bailout, the Holiday Season will be over right now! Yo-Ho-Ho!”
“Children will wake on Christmas morning to empty stockings and a yawning space beneath the Christmas tree. Yo-Ho-Ho!”
“T’is the season for bailouts. Yo-Ho-Ho!”

Congress Unimpressed

Unfortunately Mr Claus’ scare tactics didn’t have much impact on Capitol Hill. He faced intense questioning and severe criticism from both sides of the house.

A Democrat from Delaware wanted to know “Why Mr Claus had flown to Washington by private sleigh instead of using a more public form of transport ?” A Republican from South Carolina asked tough questions about North Pole’s excessive pensions and health care costs – the result of deals negotiated with the UEW (Union of Elf Workers). Several congressmen questioned whether America really needed a Holiday Season Delivery business, when clearly, the same service could be provided with much greater efficiency by Japanese delivery operators.

A Pennsylvania Democrat made sarcastic comments about the outsourcing of some of North Pole’s reindeer operations to so-called “efficient” German reindeer (Donner und Blitzen, GmbH.) and another noted that the vast majority of toys delivered by North Pole were, in fact, manufactured in China. Why would American tax-payers want to bail out foreign companies? A Democrat from Maine, quoting a report from the EPA, was critical of the high carbon footprint of the North Pole’s HQ and suggested that the ecological pressure on polar bears might be due almost entirely to Mr Claus’s operation.

Meanwhile, a California Democrat claimed that the company had been irresponsible in locating its operation in such a northerly location (against all sensible ecological advice). He claimed that the company would likely be back again in the future, requesting further funding when its HQ became threatened with inundation. A Republican from Alaska claimed to be able to see North Pole Inc. from her house.

By the end of the day, it was clear that no consensus had emerged that would support a bailout and Mr Claus waved sadly to the press, as he boarded his sleigh and headed back North.

Breaking News!!!

In a surprise announcement from the White House, President Bush, revealed today that he would be making $50 billion available to North Pole Special Delivery Services Inc from what remains of the $700 billion TARP funds. In a parallel move, White House staff released “taking points” to the press that listed the “many achievements of the Bush Presidency.” The talking points consisted of a long list of one:

President George W Bush Rescued Christmas

Actually it’s quite a simple thing, although technically, it’s not so simple to deliver. The truth is that you do two distinct things on a PC (or Mac or mobile device for that matter).

1. You use apps to do work of one kind or another. You make stuff happen. It doesn’t matter much whether the apps are local, client/server or run remotely through a browser because all you see is the interface and not the software that lies beneath.
2. You arrange the environment to make it more productive. And that means that you adjust the interface you use as best you can in order to make it “work for you”. And it doesn’t matter whether you know how to do this effectively, if you’re given any ability to tailor the environment to your liking, you will make use of it.

The second of these activities is “personalization” and the extent of it can vary dramatically depending on circumstance. Everyone and his dog sets the desktop wallpaper and chooses a screen saver (if they’re allowed to).  But very few of us use an application like Photoshop in a professional capacity. If we did we would discover that a wide range of personalization is possible, and most likely we’d take advantage of it.

The reality is that the OS (Windows or OS X) comes with a set of user-selectable options. And every application has at least a few settings that can be varied. And these capabilities are provided, usually, because some user take advantage of them.

If you’ve ever experienced a “PC meltdown” where you lost the whole environment you had evolved over time, (and who hasn’t), then you’ll know what it’s like to have to recreate your personalized environment. It’s time consuming and it’s dispiriting, because you never seem to get it back to the way it once was. You just don’t remember where all the settings are hidden in the apps you use.

OK, let’s cut to the chase. I was briefed by AppSense on it’s virtualization technolog. Here’s a diagram which explains what the company is up to:

The PC market is difficult to understand at the moment. The combination of the holiday season and the advancing recession have collided with other trends; Apple’s growth in market share and the take-off of the netbook (or sub-notebook) market. Here are some market figures:

• Sales of Macs (i.e. desktops) in US stores declined last month (down 1% from a year ago) according to NPD Group
• PC sales rose 2% (NPD Group)

This is a single months figures. In October, Apple shipments grew 28% from a year earlier, while PCs grew at a mere 7%. But the psychology of recession had not taken hold in October, so those figures may be reflecting a whole different era.

Despite the fact that Steve Jobs doesn’t believe in netbooks, (he thinks it’s impossible to build anything but junk at netbook prices), there is clearly a big market for them, that has drawn HP, Dell, Toshiba and just about every PC vendor in. However, netbooks have wafer-thin margins of the kind that Apple could never live with.

Apple hasn’t cut its prices much beyond the special discounts it offered for a day or two just after Thanksgiving, while Dell and HP have been dropping prices by up to 50%. The average Windows PC price is down by about 35%. Thus the price disparity between Apple and everyone else is showing and having some impact. And in line with the tumbling economy, analyst firm IDC has lowered its 2009 PC growth forecast, from an estimated 4.5% growth to a 5.3% decline.

MacWorld Cometh

It is far too late to affect sales in the holiday season, and it’s likely that Apple will perform reasonably well overall, due to strong iPhone and iPod demand, irrespective of how poorly the consumer market behaves. Nevertheless there is speculation that Apple will introduce something into the “netbook space” at MacWorld in January.

To my mind, there are several possibilities

1. The mac mini may be updated, just to remind everyone that it’s possible to buy a low-cost Mac desktop.
2. Apple may produce a gaming device based on the iPhone software, but larger than the iPhone. This would probably also be a video player. Such a device would “qualify as a netbook of a kind” but would redefine the market to being “not exactly a cut down laptop.” It’s the kind of thing Apple does very well.
3. Apple might produce a tablet device, which was not exactly a tablet device.

In the case of either 2. or 3. (above), I’d look to Apple to feed applications to the device from its iPhone download site. It’s really unlikely that Apple will do an OS X netbook because it could canabalize its laptop sales (and its laptop sales have held up very well.)

Rickrolling is a prank that became a craze and has almost become a cliché. In fact it has. The prank is a simple bait and switch: a person provides a Web link they claim is relevant to some topic or other, but the link actually takes the user to the music video for the 1987 Rick Astley song “Never Gonna Give You Up”.  The URL will be masked or obfuscated in some manner so that the user doesn’t suspect that a rick-roll is in progress.

So if you receive an email from a friend entitled “That rumor about Microsoft is True” and it includes a link then it could easily be a Rick-Roll. Even porn spam could be a Rick Roll nowadays. Rick Rolls also lurk on web sites. As a web site developer it is now almost obligatory to inject a Rick Roll somewhere – in the FAQs perhaps.

According to authorities on the matter, it started out as “duckrolling” a feature of the imageboard 4chan, when some links that appeared interesting actually linked to a duck with wheels. Legend has it that some wag eventually substituted Rick Astey for the duck and Rick-Rolling was born.

The Rick-Rolling Explosion

By early this year, Rick-Rolling had become an Internet phenomenon. A poll by SurveyUSA in April estimated that at least 18 million American adults have been Rick-Rolled, but at the time of writing YouTube indicates that the number is more likely to be in the region of 40 million. There are multiple Rick Roll videos on YouTube including a version that runs in reverse that has been viewed by half a million people – presumably if you’re caught by that one you’ve been Llor-Kcired.

The Rick Rolling song “Never Gonna Give You Up” has been used as a theme song by Scientology opponents – although I’m not exactly sure why. (Are Scientologists more irritated by pranks than other people?) The New York Times reported that a women’s basketball game was interrupted by a Rick Roll consisting of a Rick Astley impersonator singing the dreaded song. In April, “Never Gonna Give You Up” won a contest to become a Mets 8th innings baseball song, which means that the Mets became the first baseball team to be Rick Rolled (rumor has it that Rick Rolling fanatics rigged the vote.)

This may have had something to do with the fact that on April 1st, Rick-Rolling took off exponentially, as hundreds of web sites got the idea to insert a Rick Roll where you thought you were going to look at an interesting piece of news or a video of something else.

The first known TV Rick Rolling took place in June on the late night talk show, Last Call with Carson Daly. Carson announced that he was going to show “a video of Paris Hilton” he’d discovered but instead he rick-rolled over a million people in a single hit. Other TV Rick Rollings followed with The Daily Show’s Rick Rolling possibly the biggest TV audience yet carried out by John Oliver who was claiming to be about to reveal somthing to do with the Iranian nuclear threat. Oliver proclaimed; “You just got rickrolled, Jon. All your coworkers will think you’re a big, gay Rick Astley fan.”

Rick Rolling entered the US election with a number of political bloggers posting articles and comments  claiming to link to footage of Michelle Obama going on a rant that include racist references to ‘Whitey’. It was a Rick Roll.

For a brief time there was a Rick Rolling phone service that you could ring and direct to a victim that you wanted to Rick Roll by phone. The service has been taken down.

As regards Rick Astley himself, he must find it extraordinary that a video he made 20 years ago has now been watched by a population greater than that of most countries and may even be the most listened to song of 2008 – and the most inadvertently listened to song ever.