Sunday, February 27, 2011

Early Indications February 2011: An Earthquake Every Year

It's become a commonplace to state that we live in extraordinary
times. Rather than merely assert this, however, it doesn't take a lot
of digging to find data: in nearly every year for the past 15, a new
industry has been jump-started, an old one crippled, or a new way of
looking at the world propagated. Consider a quick timetable that
_ignores_ such developments as PayPal, Wikipedia, Twitter, Craigslist,
AOL, online mapping, or the iPod, and let me know what you think:

The Netscape browser goes from 0 to 38 million users in 18 months, the
world's fastest technology adoption to date.

Windows 95 sells 1 million copies in its first 4 days on the market,
and later serves as a launch pad to the Net for millions of users via
Internet networking support, CD-ROM, and native modem drivers.

Dell focuses on supply-chain and related innovations as opposed to
lab-based R&D, the norm at IBM or HP. As the world's businesses and
households strive to join the online revolution, the build-to-order
model surges in popularity for desktop configuration. IBM soon exits
the business, while such manufacturers as Digital, Compaq, Gateway,
and others either fade or get absorbed in consolidations. From an
also-ran position in 1996, Dell more than doubled its global market
share in 5 years, becoming the #1 producer.

Linux and Apache explode in market share for server operating systems
and web server software respectively. Linux shipments tripled, not
counting free downloads; Apache powered the majority of websites as
sampled by the Netcraft measurement firm, particularly as compared to
Microsoft's competing Internet Information Server. The fact that
neither product emerged from a traditional development process, from a
corporation, or from a monetary transaction stymied many industry
observers who contended that the open-source model simply could not

DVD player sales quadruple from 1 million to 4 million, an astonishing
rate of adoption for a physical product (as opposed to virtual
Netscape software downloads).

Shortly after its launch in June 1999, Napster redefined the music
landscape. Rather than attempt to use the tool for promotion in the
manner of radio, the music industry wanted to shut down all
peer-to-peer file sharing. Because it employed a centralized
directory structure, Napster was vulnerable to legal action in ways
later distributed models were not; much of the enterprise's brief
history was spent in or around courtrooms. 25 million users, many of
them college students enjoying broadband speeds that few other
populations could access, flocked to the service, which shut down in
2001. In a fascinating secondary outcome to the ascendancy of MP3
music, manufacturers including Bose, Yamaha, and Harman International
witnessed a _93%_ drop in sales of standalone audio components over
the following four years -- an entire industry unrelated to the
much-maligned record companies essentially vaporized overnight.

After indexing a billion Web documents and contracting with Yahoo to
power the latter's search bar in 2000, Google rapidly becomes
essential; the American Dialect Society called the verb its "word of
the year" for 2002 and the term entered both Merriam-Webster and the
Oxford English Dictionary in 2006. Counting partnerships, Google
handled about 85% of all web searches as of early 2004 before Yahoo
pulled out of the agreement and built its own capability. A
staggering succession of acquisitions -- including Pyra (Blogger),
Keyhole (Google Earth), YouTube, DoubleClick, and Hans Rosling's
Gapminder -- followed.

According to Instat, wireless Local Area Network shipments rose 65%
from 2001 to 2002. Business shipments of 11.6 million units led the
way, and with home shipments of 6.8 million units, the total market
revenue of $2.2 billion. Given that the more familiar term for this
technology -- WiFi -- entered the Merriam-Webster dictionary in 2005,
it's no surprise that it became a multi-billion dollar industry only
three years after launch. Even more significantly, wireless
networking entered all those homes and businesses one at a time: there
was no "Sputnik moment," no tax credit, no policy mandate, no Big Blue
or Ma Bell. Instead, particularly on the consumer side, the rapid
adoption represents millions of trips to Best Buy or the equivalent.
Combined with wide deployment of cable modems and DSL connections in
this same period, the U.S. weaned itself off the acoustic modem in a
surprising short period of time, without anyone making much of a fuss.

In yet another quiet transition that was barely remarked upon, cell
phones surpassed landline connections in the U.S., replicating the
norm in essentially every other country in the world. At about the
same moment, digital cameras overtook their analog equivalents (Kodak
stopped making film cameras entirely in 2004); soon the standalone
device would itself be usurped by cellphone cameras. In one brief
transition, two stable, ubiquitous technologies dating to the late
19th century were surpassed by digital counterparts.

No technology can compare to the wireline phone for reach,
particularly in the U.S., where "universal service" is literally the
law of the land. After 100 years, more than 97% of households had
phone service; the average household had 1.3 lines. The 1-2 punch of
Voice over Internet Protocol (the phone service offered by Vonage,
Skype, and by cable operators' triple plays) and mobile changed that
in a hurry: wireline penetration is heading south of 40% less than 15
years after peaking. Equities markets took notice of the VoIP takeoff
and began depressing telecom valuations accordingly, their cellular
growth notwithstanding. Skype, meanwhile, has grown enormous: as of
March 2010, up to 23 million concurrent users are logged in. The
total installed base was roughly the same size as Facebook, with 560
million users at the end of 2009, at which time the service accounted
for 12% of all international calling minutes -- on the entire planet.
From launch through 2009, users had completed 250 billion minutes of

GPS is another technology that seeped into mainstream adoption without
anyone making an editorial point of noticing a breakout year, yet its
ubiquity cannot be ignored. In 2004, GPS on a mobile phone was
successfully proven; it rapidly became a key component of the mobile
platform. The original $12 billion investment by the U.S. Department
of Defense spawned a commercial market worth $13 billion in 2003
alone; recent estimates predict a $70 billion market by 2013, with
location-based services comprising $10 billion by themselves.

Following its launch the previous April, YouTube soared from 50
million page views per day after barely six months live to hit 7
billion on several days in August 2006. At the time of the Google
acquisition, 100 million videos had been uploaded. Every one of them
had the capacity to reach a worldwide audience for zero distribution
cost and minimal, if any, production expense.

While Amazon refuses to release unit sales figures for the e-reader
launched in 2007, one statistic about electronic books merits
mentioning: Kindle book sales in the first quarter of 2010 were 1.8
times those of hardbacks. In other words, a technology dating back
nearly to Gutenberg was eclipsed in market share in about 30 months by
one retailer.

According to Morgan Stanley analyst Mary Meeker's statistics, the
iPhone (counted along with its wi-fi-only iPod Touch sibling) reached
50 million customers faster than any piece of hardware in human
history and jump-started the entire smartphone market.

Facebook claimed an incredible 600 million users in roughly six years
after launch. 2009 was the breakout year as membership surged from
about 150 million to 350 million.


Apple sold three million iPads in less than one calendar quarter.
This matches the sales rate of the DVD after five years in the market.
Even more telling is the calculation by Deutsche Bank analyst Chris
Whitmore that if the iPad counted as a PC, it completely rewrites the
market share scoreboard, putting Apple on top by a comfortable margin.
In an unrelated corner of the industry, meanwhile, the Groupon online
coupon business went from revenues of $33 million to $760 million in
one year, making it most likely the fastest growing business in