Van Baker

A member of the Gartner Blog Network

Van L. Baker
Research VP
20 years at Gartner
29 years IT industry

Van Baker is a vice president and research director for Gartner's Retail and Manufacturing Industry Advisory Services. He covers consumer behavior as it relates to electronic commerce and emerging Web 2.0 technologies in the retail industry. Read Full Bio

Groupon – I Just Don’t Get It

by Van Baker  |  March 24, 2011  |  3 Comments

There has been a lot of speculation about the valuation of Groupon assuming an upcoming IPO. The numbers that have been circulating have ranged from 15 billion to 25 billion dollars. This is after Groupon turning down a rumored 6 billion dollar offer from Google late last year. Well I for one don’t get it.
What is Groupon anyway. It is in essence a digital coupon service. Groupon offers members large discounts for services and merchandise from merchants that are local to the service subscribers. The subscriber typically sees a 50% discount for some product or service. They pay Groupon for the “coupon” that gives them the service and Groupon splits the revenue with the business.
Reviews from businesses that have used the Groupon service are mixed with some businesses underestimating the number of coupons that would be redeemed and ending up losing money. In Groupon’s defense the merchants can limit the number of coupons redeemed. Other businesses state that they get people coming in that are new to the business but they see almost no return business. This is not surprising as the people that buy the Groupon coupons are frequently just looking for a really good deal and move from one deal to the next with no intention of finding a new merchant to frequent regularly.
The real problem that I have with Groupon is that there is no differentiator for their service. There are few if any barriers to entry and there seems to be a new Groupon clone emerging every couple of weeks. Just to name a few there are: LivingSocial, 1SaleADay, BuyWithMe, CrowdSavings, Weforia, Coupme, Groop Swoop, Groupalia, TownHog, TeamGrab, Agenzy, DailyQ, Tippr, Woot, Ideeli eWinWin and many more. Given the rapid duplication of the functionality of Groupon what is likely to happen? The answer is competition. The revenue split that is offered to the merchants will improve in favor of the merchant as one coupon service competes with the other. The size of the discount in the offer will likely diminish as merchants realize they don’t need to give 50% off to attract bargain hunters. The net result will likely end up being what we see in paper coupons today. The customers will get an offer of 5 to 10% off and the merchants will get 90% of the revenue that the coupon sites collect. These numbers are of course just best guesses and the actual percentages may vary but not by that much. In short the Groupon model will migrate to the paper based coupon model and the appeal for both merchants and consumers is likely to diminish.
If you assume this is the path that these sites will take the real question is why would Groupon be worth 15 to 25 billion? First mover in a market with few barriers to entry doesn’t buy you that much.


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HP’s TouchPad – Will It Succeed?

by Van Baker  |  March 21, 2011  |  2 Comments

Hewlett-Packard is planning to launch it’s TouchPad tablet this summer. The tablet is based on the WebOS operating system just as the smartphones sold by HP’s Palm business unit. Given the success of the iPad many have speculated that there is no room for another tablet competitor beyond Apple and the Android tablets. Despite Apple’s success both HP and Research In Motion have announced tablets to enter the market later this year. This post will consider the advantages and disadvantages that HP faces as it launches the TouchPad tablet.
Potential Advantages
HP does have a number of advantages in the tablet market. First they have control of both the hardware and the software just as Apple does. This may not seem like that much of an advantage but it truly is. When a manufacturer is attempting to get the utmost in performance out of a platform the ability to tune the device from both a hardware and software perspective can be a real benefit. I believe that the only reason Apple is able to get such good performance and battery life out of the iPad 2 is because they control both aspects of the product.
WebOS is one of the best operating systems in the market. The operating system is multitasking, graphically attractive and well suited to multitouch controls. It is relatively intuitive to learn and is a very appealing solution on the TouchPad tablet. It also features Synergy which allows users to synchronize across multiple devices via the cloud. This facilitates entry of data such as an address on one device knowing that it will be synchronized and available on all the devices that support WebOS automatically. Lastly and perhaps most importantly HP has announced that WebOS is coming to Windows PCs. While short on specifics the company has made it known that most applications that run on the Pre smartphones and the HP TouchPad will also run on the PC in this WebOS environment. The company has made it clear that it is not an alternative to WIndows but will be a supplement to Windows on their PCs when it arrives. This alone will dramatically boost the appeal of WebOS to developers because it will dramatically increase the number of “sockets” that developers can sell their applications into. WebOS on the PC should increase the number of applications available for the platform once it arrives.
HP has a distribution channel that is second to none around the world and this is a clear advantage for HP in the tablet market assuming they can equip their reseller partners and their direct salesforce with the tools necessary to effectively sell the TouchPad.
HP is very strong in the enterprise and has been shown the enterprise is interested in tablets. This alone bodes well for HP as they are a trusted partner for many large enterprises.
Potential Disadvantages
In a nutshell, the iPad 2. The second generation iPad is a very strong product in the market. It is a compelling platform in a beautifully designed package. The product has a very strong application store with a very large and growing number of applications that are tailored to the iPad. The product has sold extremely well and it’s success is on top of the already very successful iPad. In short Apple’s position will be hard to assail in the market. HP may find that the competitor they are up against in the tablet market is actually RIM more than Apple if they target the enterprise with the TouchPad.
Android based tablets have emerged as the perceived alternative to Apple in the tablet space. Similar to the situation that exists in the smartphone market the trade press seems to want to make the tablet market a battle between Apple and Google and conveniently avoid the fact that other platforms exist as viable alternatives. This does make it harder for HP to convince the world that there is room for another operating system in the tablet market.
HP is behind in the application portfolio for the device. They have roughly 7,000 applications available for WebOS currently so they do not look good in comparison to either Apple or Android. While the application portfolio currently has many of the most popular applications the company will clearly need to narrow the perceived gap in order to make consumer comfortable.
There are clearly many additional factors that will influence this market and I have just tried to point out a few considerations. This summer the challenge begins for HP in the tablet space as they bring the TouchPad to the market. So will HP’s TouchPad emerge as a success in the exploding tablet market? You tell me.


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The Trouble with Technologists

by Van Baker  |  March 15, 2011  |  6 Comments

It is widely rumored that Apple sold somewhere between 500,000 and 1,000,000 iPad 2 tablets over their first weekend of sales in the United States. International launches are still to come and there is no reason to expect any less success in these markets. This is despite the fact that the technologists have proclaimed it as “evolutionary not revolutionary” and proclaimed the “ten things missing from the iPad 2″ in their columns about the product. They want things such as USB connectors, SD card readers, HDMI out ports, etc etc. The things these technologists invariably point to hardware features that they are certain the product needs to have. This perspective comes from the history of the industry where you needed to be technically savvy just to use a product. The people that could use technology saw technology as inherently cool. The more features that you could pack into a device could only make it better. Well to these technologists I am afraid I have to say, “Guess what the world has changed and you are not the market anymore.” Today the market is made up of ordinary people and they have a very different perspective on technology. For may of them technology has a checkered past and they can all tell you stories of how frustrated they have been when they were just trying to make their PCs do what they wanted them to do. They have experienced buggy software, incompatible driver software, malware and viruses not to mention corrupted registries. All of these issues caused their technology to slow down initially and for many ultimately quit working altogether.

Enter the tablet. Here was a device that was simple to use with a manageable number of tasks that it did very well all packaged in an elegantly designed package. It had no expandability in the device and only one slot for connecting it to a computer primarily to be recharged or backed up. Technologists reacted by declaring the iPad was “just a big iPod touch” and predicted it would fail quickly. Instead Apple sold roughly 15 million units in 9 months. It seems that the technologists were not aligned with the market anymore. It seemed that average consumers actually liked technology that was simple to use and relatively stable. The technologists were not needed to explain how to use the technology anymore because an average person could actually figure it out on their own.

The iPad 2 arrived recently and the company sold even more tablets in the first weekend than they did with the initial iPad. What did they add to the device in term of features? They added front and rear facing cameras, a dual core processor, a gyroscope. There is nothing earth shattering about the new hardware features that Apple added to the iPad 2 but there is a big difference between what they announced and what most of the competitors are announcing in the tablet market. While others tout the hardware features and leave it at that Apple announced new compelling applications that make the hardware benefits real for consumers. A rear facing camera is mildly interesting but when you add a version of iMovie for the iPad and price it at $4.99 you make the hardware feature fun and immediately understandable by consumers. A front facing camera is again interesting but the addition of FaceTime makes the hardware change appealing to iPhone and Mac users that are already familiar with the video calling application. In short new hardware features are not very compelling without the applications to make them appealing to consumers. Kudos to Apple for understanding that it is about the experience for the average consumer and leaving unneeded hardware and costs out of the device.

To the technologists I say, “Get over it. You are not the market anymore and consumers are happy with their iPad 2s. Maybe you should consider listening to the real consumers in the market for a change.”


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nVidia Comes Clean on Ion

by Van Baker  |  June 10, 2010  |  Comments Off

A while back I criticized nVidia for touting a 10 hour netbook battery life for Ion equipped netbooks. The reason that I criticized them was that the 10 hour claim was with the Ion processor turned off with only the CPU enabled. Well they have now updated their information and it appears that the battery life with the Ion enabled is roughly 7.5 hours based on benchmark tests. This is respectable and very usable for most netbook owners. The reason that I bring this up again is that netbooks are now competing with media tablets and the advantage that media tablets have is video – both streaming and downloaded. Media tablets can play video and netbooks can’t, unless they have the Ion processor or an equivalent. If netbooks are going to remain competitive with media tablets they need to get better at video playback and a GPU is one way to accomplish this. Although I still believe that nVidia should not have touted battery life without benchmark data I do believe that they deliver a much needed boost to netbooks that are trying to compete with media tablets for consumer dollars.

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Kin Microsoft Win Over Digital Natives with the Kin?

by Van Baker  |  April 13, 2010  |  1 Comment

Sorry for the pun but I couldn’t resist. Microsoft announced a new phone platform that targets the highly social digital native set. The Kin is the product of a joint venture between Microsoft, Verizon and Sharp and focuses on connectivity with the users networks of friends, friends and friends. In short Microsoft justifiably believe that digital natives or the youth market has multiple sets of friends. There are your friends that you are close to and see regularly in person. There are your friends on your social networks that you may see occasionally but still like to stay in touch with. And there are your friends that you don’t really know such as people that you follow on TwItter. This phone is designed to let you keep track of and share things with your friends in a very manageable fashion.
The home screen on the phone when it is launched is called the Loop. It fees you all the recent Facebook, MySpace, Twitter and other social network feeds that your selected circle of friends have posted recently. It also captures SMS messages and emails that they may have sent you recently. Each contact card for your circle of friends has all their social network feeds associated with them so that you can easily move from Facebook posts to MySpace posts to tweets for that person. A swipe to the left from the home screen and you have the menu for the phones functions such as making a call or sending a text message. At the bottom of every screen is s Kin dot which is the sharing tool for the phone. you can highlight a web address, pictures, videos or messages and drag them to the Kin dot to share them. Next drag the friends contact cards that you want to share this content with to the dot and you are prompted as to whether you want to send an email or post the content to your social network.
The best feature of kin is Kin Studio. Any content captured on the phone is automatically uploaded to a password protected website that belongs to the user of the phone. All the pictures they take, all the videos they take (excluding high definition), the posts they make, the messages they receive, everything is geo tagged and time stamped and placed on a timeline on the site. It is in essence a digital diary the represents the content that they created or captured with the phone. No syncing is required as it is all done via the wireless network automatically. The site can be shared with friends or just kept private.
So will this work for Microsoft. The answer is probably not in Microsoft’s control as much will depend on the price of the phones and the price of the data service from Verizon. If the phones are priced at $199 or $299 and if the data plan is $30 per month then they will probably not sell many of these phones. If on the other hand the price is $99 or $149 and if the data plan is $20 per month unlimited or if they have a data equivalent of a family plan these phones could do really well.
The temptation to compare this to the iPhone will be there but the Kin phones are really very different from the iPhone. They are very narrow in focus. They are targeting the digital native or youth market and they are completely focused on social activities. The iPhone is a much more general purpose device that targets all segments. As such it’s function as a social platform falls short of the Kin bur excels in other areas such as gaming where the Kin does not deliver.
In the end one has to give credit to Microsoft for nailing the behavior patterns of the social digital natives and delivering a device that fits needs very well. Success may be out of Microsoft’s hands but they deserve kudos for a job well done on the phone’s software and the Kin Studio website.

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Rumored GoogleTV Partnership – Déjà vu All Over Again

by Van Baker  |  March 18, 2010  |  1 Comment

The New York Times reports that Google is working on something that is called GoogleTV which might see Android on the television running on Intel silicon and using a Logitech keyboard to control the whole thing. The project is rumored to focus on delivering Internet search to the television making content easier to find and display on the television.  Sony is reported to be the first adopter of the new platform.

Haven’t we been here before? There have been countless products and services which are designed to bring web connectivity to the television starting with WebTV Networks in the early 1990’s. There is only one problem with this vision. Consumers have repeatedly rejected these solutions. Consumers have a perfectly good platform for accessing the Internet and that is the personal computer. Bringing PC style access to the television is just not appealing to consumers.

This is not to say that consumers do not want Internet connected televisions as they clearly do with Internet enabled televisions selling well in the market today. The services that are appealing to consumers on their Internet enabled televisions are services like Netflix and YouTube where they can find video content that they are interested in and display it on a large screen television instead of the small screen of the personal computer.  The combination of video content and quick hit content like news headline and weather that can be accessed via a traditional remote are valued by consumers assuming the performance is adequate and the services are responsive. Bringing a keyboard into the equation takes us back to the PC model of Internet access and consumers have rejected that repeatedly through multiple iterations.

I am speculating here but if these partners are looking to bring PC style Internet access to the television then I would tell them, “Been there done that, didn’t like it.”

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nVidia’s Disingenuous Positioning for Next Generation Ion

by Van Baker  |  March 2, 2010  |  Comments Off

nVidia announced the next generation Ion graphics processing unit (GPU) which offers 1080p HD decode, Adobe Flash support  and 3-D gaming for netbook products.  The addition of this GPU to a netbook  gives consumers an excellent video playback capability on netbooks that would be unable to playback HD video without the addition of Ion. The GPU is affordable and adds roughly $50 to the street price of a netbook. If a consumer is interested in being able to stream HD video on their netbook then this is money well spent in most cases. So far so good.

The problem with the nVidia positioning comes when they position the battery performance of the new Ion GPU. nVidia has a technology which they refer to as Optimus which automatically powers down the GPU when it is not needed and lets the embedded graphics handle the basic graphics tasks. The problem comes when they describe the Ion as offering up to 10 hours of battery life. The 10 hours is only achieved if the Ion is never powered up. nVidia never discusses the “typical” or “average” battery life when the consumer is utilizing the Ion GPU. As such the consumer is left to guess whether the use of the Ion GPU will cut battery life by 20% or 50% when the netbook is being used for a combination of activities. Admittedly they should not assume that the consumer will watch video 100% of the time with their netbook but to tout battery life figures that assume the consumer will never watch video when that is the benefit of the Ion GPU is disingenuous and potentially misleading.

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Palm’s Woes Point to the Need for the Total Package

by Van Baker  |  February 25, 2010  |  Comments Off

Palm revealed that its Pre and Pixi models are not selling as well as they had hoped and that revenue will fall well below expectations. So what is wrong with Palm? It has a very good user interface that is similar to Android which is selling well. They have the advantage that Apple has of controlling the entire hardware and software platform.  This should add up to success but clearly it hasn’t. The lack of the Pre’s success points to some critical mistakes that Palm made. First they announced so far in advance of actually shipping the product that they diluted the positive buss that they created at the Consumer Electronics Show in January of 2009. But the company should have been able to recover from this. Second, they launched with Sprint which is a declining network that is losing rather than gaining customers and suffers from being perceived as a small carrier in the US market. Palm has tried to address this with the Verizon launch but Palm may have waited too long to do this. Third, the hardware is just too cumbersome to use. For most men the keyboard is just too small to use. This is certainly true if you have large hands. Palm is not unique here as other manufacturers are guilty of this in selected smartphones as well. Additionally the need to go back and forth between the touchscreen and the keyboard mandates two handed usage at time and that is not the most consumer friendly approach. The feature that was supposed to differentiate the Pre from the iPhone may actually be a detractor due to this issue. Lastly, Palm just did not have the financial resources available to promote the Pre effectively. Most if not all of these shortcomings could have been offset by an aggressive marketing campaign but Palm lacked the resources to implement this. The struggles of the Pre point to the need for manufacturers to bring the total package in today’s competitive smartphone market.

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Apple’s iPad Delivers on the Hype

by Van Baker  |  January 27, 2010  |  6 Comments

There has been much speculation on what an Apple tablet would offer, and the company did not disappoint with today’s announcement. Apple introduced the iPad with the core productivity apps an e-reader with and e-book store and 140,000 apps from the Appstore, all at a very aggressive $499 price point. This product will define the tablet form factor for the market, and it sets a high bar for other manufacturers.

Apple is offering a product that is very competitive with a netbook and offers a clear value advantage over the Kindle assuming Apple is able to line up the publishers for its e-book store. At first glance, the iPad offers little incremental value as an e-reader other than being color which has some value. However when comparing a $249 Kindle with this device the additional value is immediately apparent. For $250 more a consumer gets a device that offers productivity software, a media player for HD media, a music player and access to 140,000 cheap applications in the App Store. Seems like a pretty easy decision to me. This product will be very strong at $499.

Additionally the company is offering data plans for 3G connectivity that do not require a contract which are aggressively priced and could attract additional data plan users to AT&T. That said the majority of users will find Wi-Fi adequate for their needs as the product is most likely to be used in the living room, the classroom or the local coffee shop, and Wi-Fi is likely to be available in all these venues.

Aesthetically the iPad is a beautiful product that is a half inch thick with a beautiful display and very intelligent multi-touch controls. This new product is positioned on par with netbooks in price but well below most notebooks in both functionality and capability, so the consumer should find it easy to make their decision between the two It is not hard to imagine a use model where a consumer carries a smartphone and an iPad and leaves the netbook at home.

This is not to say that there are no challenges for Apple in this market. Communicating the value proposition for this new category of device is complex by Apple standards, and it will take a little time for consumers to digest exactly what the iPad offers, but the Apple Stores present a great venue for Apple to do exactly this. Additionally Apple has the challenge of lining up the same variety of content in its iBook Store that Amazon offers for Kindle, and they are not there yet.  Additionally, for those customers that have been unhappy with AT&T those challenges still exist with the iPad. In short it is not a slam dunk for Apple but the prospects look good.


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Apple Makes a Safe but Profitable Choice with New iPods

by Van Baker  |  September 9, 2009  |  Comments Off

The new Nano will sell for the same price as the current model at $149 for the 8 GB model and $179 for the 16 GB model. The company also announced three models of the iPod touch with the 8 GB model starting at $199 and two additional models at $299 and $399 with 32 GB and 64 GB respectively. The feature set remains the same for the iPod touch despite rampant speculation by the trade press that the product line would be enhanced with the addition of a still and video camera similar to the iPhone. The decision by Apple to keep the feature set of the iPod touch the same is the safe element of the Apple announcement.
If Apple had added a microphone and camera to the iPod touch the company would have introduced a VOIP equivalent of the iPhone without any service revenue to go with it. This would have been an aggressive but risky choice for Apple. In the end it was one that the company chose not to make.
The Nano has been the best selling iPod ever with over 100 million sold. The focus on the Nano will resonate with consumers that are likely to be watching their wallets this coming holiday season. It is expected that the company will generate very strong revenues with the new iPod Nano in the upcoming holiday season as video continually gets bigger with 1 billion videos being uploaded to YouTube every day. However, the less than aggressive behavior from Apple gives us pause as the company has historically been very aggressive in cannibalizing its own products in order to stay ahead of the competition. This new safe behavior may come back to haunt Apple in the long run.

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