Back in May, we had discussed the launch of Pivotal, the EMC family’s take on PaaS. Well, Pivotal last week made a small but interesting acquisition of Toronto-based mobile development and strategy shop Extreme Labs for $65 million in cash. Extreme Labs has approximately 300 employees, and has built mobile apps for companies such as Groupon and Microsoft among others. In early 2012, EMC had acquired San Francisco based agile software development shop Pivotal Labs, which is also where the Pivotal name came from. Pivotal Labs’ strong developer teams had for over 20 years collaborated with client personnel to develop custom, scalable software solutions for clients willing to pay top dollar. Extreme Labs has a similar modus operandi in the mobile app development arena. Thus, Extreme Labs helps Pivotal fill out the mobile services piece of its ‘choice’ oriented approach towards helping customers build the right PaaS for their needs.

Big data broadly speaking is about three dimensions – volume, velocity and variety. The more visible PaaS offerings, such as AWS, Azure and OpenStack-based implementations, provide abstraction across all three of these dimensions. However, the focus for Pivotal seems to be large, traditional enterprises (such as GE, which invested $105 million), where the near term focus might be more on volume and velocity than on variety. Hence the Greenplum-based data engine, the focus on the industrial internet etc. These also are the kind of customers with whom the EMC sales engine could help close deals effectively. This means serious competition for the likes of IBM, Dell, Deloitte and Accenture, and that too driven by folks out of VMware, Pivotal Labs, Extreme Labs etc., who know what it takes to develop consumer-grade mobile and internet architectures. For PaaS or cloud middleware entrepreneurs on the other hand, the takeaway may be different – the opportunity to start with SMBs and to eventually move up to large PaaS deals might be going away soon, if not already. The opportunity instead might be in developing PaaS offerings optimized around usability, domain-specificity, configurability and cost for resource-constrained SMBs, and in scaling through increased breadth of offerings over time. This isn’t necessarily easy – PaaS was never really a friendly arena for entrepreneurs when compared to SaaS. So for entrepreneurs offering middleware/PaaS but not yet taking this approach, maybe it is time for a pivot?

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Back in May’13, Adobe, one of the few remaining bastions for packaged enterprise software, had announced that it would stop offering its Creative Suite (which includes products such as Photoshop, Illustrator and Acrobat amongst others) by the end of this year. The company announced at the time that it was doubling down on Creative Cloud, a service that offered users the same products via a monthly subscription. Well, last week, Adobe announced the results for its latest quarter, which showed that Creative Cloud had more than 1 million subscribers and annual recurring revenues of $546 million, representing an approx. 50% quarter-over-quarter increase in its cloud user base. The packaged software Creative Suite has in the past represented approximately half of Adobe’s $4 billion annual revenues, or $2 billion. Thus Creative Cloud is still only a quarter of its packaged software predecessor, but with a strong growth rate.

Adobe’s decision to rapidly move away from packaged software and into the cloud was quite a gutsy one, since it was undertaking this transition for nothing less than its flagship product. Aside from Microsoft, Adobe had been the flag-bearer for packaged software sales, but to the company’s credit, its understanding of its user-base’s pulse was correct, and adoption of Creative Cloud has been rapid. Furthermore, the move to the cloud is enabling Adobe to understand its user-base in ways it couldn’t before. The company can now fine-tune pricing tiers and application bundles to optimize its revenues around consumer willingness to pay. Also, by including 20 GB of storage with the SaaS offering, Adobe now gets to segment its subscribers around usage levels and use-cases, gaining insights that it never may have had before. All this paves the way for Adobe to truly own the large designer community that it is the lifeblood for, and all while simplifying feature-control and customer-support operations for the company.

During a week when another ex-behemoth Blackberry was in the news for the wrong reasons, it was refreshing to see Adobe achieve partial success as it embraces the cloud business model for its flagship product. Looking forward to a world where Photoshop for the masses becomes a reality, if only for the reason that there is a creative person within every one of us!

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Last week, the NoSQL database space saw a couple of interesting new announcements: First, Couchbase announced a new, mobile-focused database called Couchbase Lite. With Couchbase Lite, app developers can natively use the database on the mobile device to enhance user experience as well as to enable more comprehensive syncing of app-states across mobile devices (a la Dropstore API). Second, Amazon announced a local version of its own DynamoDB database, which can be used for offline development of applications before the developer goes live on AWS. Couchbase and DynamoDB are both key-value store databases that offer low latency/high throughput, but with limited feature-sets around understanding the underlying data itself (Couchbase 2.0 does get closer to being a document store).

As compute power in mobile devices continues to grow, it makes sense to have more and more data around the app reside on the mobile device. In that context, a key-value store such as Couchbase Lite might have the best shot of all the NoSQL flavors to find immediate use cases in mobile – other flavors such as column stores and document stores, being more feature rich and with higher latency, may find it harder to make headway in the near term. Couchbase Lite should thus help the company improve its competitive position in the NoSQL market that currently sees MongoDB as the leader.

As for DynamoDB’s local version, while the stated objective is to simplify app development and deployment, the bigger goal is probably for Amazon to use DynamoDB to get a foothold in the private or hybrid cloud and/or to move beyond IaaS and into PaaS. Either ways, this should help DynamoDB get increased adoption within the developer community and further muddy the NoSQL landscape

Last week’s announcements suggest that whether it’s content consumption or app development, compute might be moving back just a little bit from the cloud to the edge device. This means that NoSQL vendors might need to deal with increased diversification in end-points and environments going forward, all while the vendors continue to jostle for market share. Maybe this diversification will be the impetus for consolidation or shake-out in this fragmented space.

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Last week was a busy week for the smartwatch segment. No less than three large corporate entities announced the launch of their individual smartwatches: Samsung (Galaxy Gear), Qualcomm (Toq) and Sony (Smartwatch 2, a sequel to their first version that was launched last year). The Galaxy Gear and the Toq are both priced at $300, whereas the Smartwatch 2 at $200 is closer to the prices of existing smartwatches such as Pebble and Basis ($150 each). Quick feature review: the Samsung Galaxy Gear has a 1.9 MP camera, a speaker/mic, has a 24 hour battery life, and can connect with other Galaxy devices. Neither the Qualcomm Toq and the Sony Smartwatch 2 have a camera or a speaker or a mic, but both have more than 3 days of battery life, and both can connect with Android devices with recent firmware versions. Qualcomm Toq uses its own Mirasol Display.

Smartwatches have in recent times been a polarizing topic for the tech world. We are still in the early adoption phase – while almost 300,000 Pebble watches have been sold so far, the first units were shipped just a few months ago. At the mass-scale, success of the smartwatch would depend on whether it can become its own consumer electronics category, and at a price of $300, that seems unlikely. Beyond being a wrist-watch replacement, the smartwatch is still just an advanced wellness device; features like mics and speakers might be useful but are not sufficient to preclude the need for a smartphone. The high price point will thus make it difficult for a user to justify the purchase of one more mobile gadget, especially given the expectation of rapid evolution in feature-sets and form-factors. Now, if this device were priced in the $100-150 range, the story could be different…

Last week’s news indicate just how low the barrier to entry in the connected device arena is, the upshot being rapid fragmentation in the market. Given this, the best chance at building a successful business in this space might go to the arms dealers – chipset players such as Qualcomm, ARM as well as Opus portfolio company GainSpan, operating systems such as Android, and the contract manufacturers for the devices. For everyone else, it’s a free for all, all while the market decides for itself!

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Shopify, one of the leading providers of online storefronts and payment processing solutions for retailers, last week introduced its own iPad-based  point-of-sale (POS) system for merchants. The company views this new POS system, complete with a card-reader, a receipt printer and a cash register, as something that will enable merchants to manage their online and offline storefronts using a single software platform. Shopify currently has 65,000+ online storefront customers, and its key competitors include Magento (acquired by eBay) and BigCommerce.

A number of Shopify’s customers probably also have a physical presence, so it seems like a natural extension for Shopify to offer a POS with integrated inventory management and transaction processing to its customers. However, the story might not be that simple. Shopify’s selling proposition to customers so far has been its ease of deployment and lower price points compared to competitors – suggesting that its clientele might comprise mostly of small businesses (as opposed to medium or large). One could argue that the greatest need in this segment is the kind of easy-to-use, mobile-friendly card reader pioneered by Square; a bundled POS system (see image) with integrated inventory management, cash registers, receipt printers etc. could be useful, but will probably push Shopify to sell into more the medium/large business segment. In that segment, it might end up in a whole new ballgame, competing with established players like Verifone and NCR. At the same time, Shopify now will need to worry about hardware supply chains, increased customer support needs, and lower margins. Too many dimensions of unfamiliarity for a startup to deal with…

A simpler approach for Shopify might have been to add just the card reader to its product suite, and that too only to defend its turf around payments and storefronts. With the likes of Square, Intuit, Paypal, Groupon and others in the transaction ecosystem, Shopify already has its hands full with tough competitors, and it really did not need to add POS terminals like NCR and Verifone to that list. So, we will see – let’s hope now that fortune favors this brave start-up!

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Uber, a three year old start-up that has created a marketplace for car-service booking, last week announced a mammoth fundraising round of $361 million, at a valuation of approx. $3.5 billion. Leading the round was Google Ventures with $258 million, the other notable new investor being TPG with $88 million.  Uber is expected to bring in around $125 million in revenue this year, so the latest round represents a ~30x revenue multiple. In addition to enabling consumers to obtain quick access to taxi-cabs and luxury cars, Uber’s app currently enables seamless payments (using its dynamic pricing setup) and driver and commuter ratings.

With the advent of mobile and distributed work-forces, the car is becoming an important environment to track user behavior around, so having the backing of Google with its driverless cars and its Waze know-how suggests Uber could well become the first player to crack the public transit and commute optimization problem. But beyond that, Uber represents an example of the emerging, data-driven ‘sharing’ economy.  Today, there exist sharing and rental marketplaces around homes (AirBnB), planes (Blackjet), cars (of course), fashion (Rent the Runway), and so on. Each of them relies on data to disrupt the existing paradigm around pricing and logistics. Some, like Uber, have proven that there is a real business here, yet the broader question is whether this is a real, sustainable trend or whether this trend might be limited to a specific urban demographic for the near term.

So what could Uber do with the money it has just raised? Buy its own fleet of vehicles (driverless or otherwise)? Expand into other transit systems such as buses? Integrate into the vehicle POS system and become an ad network? Become a key player in location-based services? Quite a large number of possibilities – some are far-fetched, some not so much. Irrespective, one thing is clear, which is that with this latest raise, Uber has made it astronomically more difficult for its closest competitors to keep up.

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Another mobile advertising acquisition is in the books – last week, mobile display ad network Millennial Media acquired competitor Jumptap for approx. $225 million in an all-stock transaction. The combination of Millennial and Jumptap owned approximately 28.7% of the United States third-party mobile display advertising market and had approximately $240 million in total revenues during 2012. The combined entity would become a market leader in this segment, at par with Google (29.0% share) and larger than Apple iAD (14.8%), in third party mobile display advertising.

Mobility is a fast-growing trend, and so are projections for mobile advertising dollars. Yet, the mobile advertising landscape has been quite curious from an IPO/M&A standpoint. Aside from AdMob’s $750 million acquisition by Google, there seems to be a soft ceiling of ~$300 million for acquisitions in this space. On the public equity side, recent IPO and public company valuations seem to all be at $600 million range or lower. Isn’t it interesting that there isn’t currently a stand-alone billion dollar company in this high-growth space?

Let’s start with the numbers here. Global mobile advertising (including search, display and messaging-based advertising segments) revenues were $8.9 billion in 2012.  Of this, mobile search advertising accounted for ~53% (with Google being the dominant player) and mobile display advertising was at 38.7% (~$3.4 billion). Further, the mobile display advertising market can be divided into two categories – first-party (e.g Facebook, Google, Pandora, Twitter etc. managing display ads on their own mobile sites), and third-party (e.g Millennial displaying ads on third party owned content sites). This third-party mobile advertising segment is currently approx. $850 million in size as back-calculated from Millennial’s announcement, meaning first-party mobile ads accounted for more than two-thirds of display ad revenues last year.

So, a company like Millennial Media needs to compete not only against other pure-play third-party ad networks, but it also has potentially limited access to the largest content sites owned by Facebook, Google, Pandora and other big players. Further, as content sites get scale in mobile, they will want to become their own first-party display ad networks to ‘cut out the middleman’ – meaning a pure-play provider like Millennial will always run the risk of key customers walking away from them. Not good for any business, even in a hyper growth market.

Acquiring Jumptap gives Millennial a bit more scale for today, but the bigger question is whether the likes of Millennial can remain viable and thrive over the long run. As of now, neither the stock market (in the case of Millennial), nor venture investors (who put in $122 million into Jumptap for less than a 2x return) seems to think so…

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Last week, Los Angeles based startup FreedomPop announced that it now has more than 100,000 users, and that it will now be using Sprint’s LTE network as its infrastructure backbone (in addition to its ongoing use of Clearwire’s WiMax infrastructure). The two-year old startup is a wireless internet provider delivering free 4G mobile broadband internet access using a freemium business model. Users get 500MB of free monthly data usage (using a FreedomPop provided LTE hotspot) and pay for data overages at ~$10 per GB. Users can gain additional free data capacity by recruiting others to sign up or by responding to surveys / sharing information with advertisers.

In today’s subscription plan based world of mobile services, FreedomPop is trying to bring a viral, disruptive business model. The company has so far raised approx. $16 million, and with the Sprint partnership and the initial subscriber traction, looks promising so far. But going forward, for the company to scale sustainably, a number of pieces need to fall into place on three fronts. On the infrastructure front, FreedomPop will need to get long-term price and usage guarantees from Sprint (or another major carrier) around its wireless spectrum usage. On the consumer front, FreedomPop will need to show consistent free-to-paid conversion rates and prove to the underlying carrier that a FreedomPop user is on average more valuable than a standard status-quo subscriber. Additionally, it will need to educate and convince users to unbundle their wireless data plans from their cellular contracts, and, if further possible, to convince them to adopt VoIP. On the advertising front, the company will need to prove out ROI to marketers and brands. Each of these fronts is a challenge in itself. Sprint’s LTE network currently lags other major carriers and so may not be attractive for consumers. For consumers, hotspot and VoIP adoption poses its own risk due to perceptions around portability and performance. And advertising ROI in today’s world of social networks and mobile apps may be extremely difficult to estimate. Complicating matters further for FreedomPop are alternative approaches such as residential small-cells.

FreedomPop might be an example of a startup that’s fighting too many battles all at the same time. Yet, the reality also is with FreedomPop, a freemium model at scale might enable much better optimization around willingness to pay, and might more easily be able to track Sprint’s spectrum capacity constraints and infrastructure buildouts. ‘The internet is a right, not a privilege’ – so goes FreedomPop’s tagline on its webpage. Let’s hope FreedomPop can establish itself as an ally for the mobile consumer; a hundred thousand users is a great start in that pursuit!

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Last week, Google announced its latest smartphone, the MotoX. The device, which was developed by the Google’s Motorola Mobility unit over the past year, offers a number of enhanced features, yet has generally been reviewed as more of an incremental step up than as a revolutionary new smartphone. Two key new features for the MotoX include the ability to customize its look-and-feel (available for the near term only to AT&T subscribers), and the tight integration of the device with Google Now.

For Google, as the central node in the Android ecosystem, any in-house smartphone development presents the risk of ruining the company’s relationships with a number of key device manufacturers like Samsung, LG and HTC. At the same time, it is becoming clearer that the next frontier in mobile technology is around contextually intelligent apps (the likes of Siri and Google Now). Given these, the MotoX in its design phase would have had two alternative paths – the first being to become the sleekest, most powerful, cutting-edge device possible, and the second being an example of the kind of user experience that Google Now and other Google services could represent. Google has chosen this latter, Apple-esque path both in word and in deed, while other Android devices continue to push the limits of performance. Given this chosen path, the MotoX now goes into the marketplace with its Motorola brand (which might be weak on the high-end but stronger in the low-end segment), its customizability (an unknown feature), its ‘Made in the USA’ sticker, and its incrementally better features. Not helping at all in this journey is the $199 price tag which pits it against dominant models like the iPhone and the Galaxy.

All in all, it is quite likely that the MotoX won’t make much of a dent in the market in the near term. But like numerous other Google products that seemed intriguing but not clear winners when launched (Chrome, Google Docs, Google+ and so on), the success of MotoX might still just be a matter of time, even if that takes a year (or a few) and a generation of devices (or a few)…

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So the $35 Chromecast is in the market now, having been released last week. Chromecast is a small form-factor dongle that can be directly connected to the HDMI port on a TV and which can stream content over Wi-Fi from any of our mobile devices as well as from Google Chrome browsers on PCs. Functionally similar in many respects to the Apple TV, Chromecast takes streaming-to-television to the next level, being platform and OS agnostic, easier to install, and significantly cheaper.

Currently, approx. 14% of broadband-enabled households in the United States own a dedicated streaming device (Apple TV, Roku or other), whereas 25% own a Smart TV (which come with streaming capabilities embedded). Smart TV adoption has doubled whereas streaming devices have only seen a small uptick in penetration over the past two years. Thus, the Chromecast (or any streaming device for that matter) might only be a medium term solution until smart TVs become the default in households. The long-term objective for Google would then be to own the streaming software / firmware layer inside smart TVs, and, consistent with Google’s approach for all its new offerings, Chromecast will serve as a great testing-ground for Google in this pursuit.

From a TV broadcasting perspective, is Chromecast yet another (and maybe the strongest yet) candidate for disrupting revenues for the cable networks and content studios? Can the TV screen be disrupted to become just another screen for online content to be consumed and interacted with? A certain amount of upheaval is bound to happen, for example around access to on-demand content and ability to rate such content. But beyond that, the psychological aspects of TV viewing such as the relatively passive, lean-back experience and the content discovery aspect will still need to be fulfilled. Given these needs, can smart content from YouTube upend traditional broadcasting media? Probably a bit, like Pandora is doing to radio, but beyond that, things should still remain broadly the same for broadcasting.

And thus continues the trend towards multi-screen convergence. Here’s hoping that despite the evolution of technology, there will still continue to be a single-button-push, stupid-smart, lean-back-and-relax, right brain experience like TV is today (and hopefully for cheaper monthly rates!).

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