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The Softer Side of Apple

The Softer Side of Apple

Software took center stage at Apple's WWDC keynote recently as CEO Steve Jobs and a host of other execs outlined the future of iOS, OS X and iCloud, an upcoming service for syncing a wide variety of data across devices. Meanwhile, Apple also softened its stance on iOS subscriptions, Nintendo revealed an early version of its next Wii machine, and Groupon geared up for a big Wall Street debut.

By Paul Hartsock
06/11/11 5:00 AM PT

The WWDC keynote has come and gone, but strangely enough, Apple gave us no new toys to go out and buy. There were no new iObjects gracing the stage this time around at the opening of its developer conference -- guess iPhone 5 will just have to wait until fall. But WWDC is technically a software conference, and there was a lot Apple wanted to talk about in that category.

First was OS X Lion, which is coming next month. This new Mac operating system looks like it has just a few drops of iOS DNA in it, but don't think all you're going to see is row after row of chicklet icons -- though you can see something like that in a new feature called "Launchpad." Also, this new Resume function will start an application at the exact point at which you last closed it, sort of like certain apps in iOS. And Lion will have something called "Mission Control," which gives you a top-down view of every single thing your computer's doing right now. Soul food for the micromanager within.

Next on the menu was iOS 5. That's coming along this fall, which sort of hints that iPhone 5 will come along with it, though that's not a guarantee. Anyway, Apple claims iOS 5 will carry over 200 new features, and one of those will finally eliminate the operating system's worst and most longstanding failure, the darkest shame of iOS: its obnoxious, irritating and above all rude notification system. Currently iPhone notification pop-ups will interrupt whatever it is you're trying to do, regardless of circumstances.

"Attention! The game just finished! Don't you want to know the score?"

"Well, most of the time I would, but right now I'm driving so I've got the nav app running and --"

"They lost, 8-5! Would you like to go to the Sportacular app, or cancel? I'll just wait here on your screen while you make a decision. Try not to miss your turn or get into a wreck as you jab at that little tiny button while driving!"

See? Obnoxious. No more of that -- notifications will be collected in a notifications center to be dealt with properly. All you'll get is a little news ticker, something certain other mobile OSes already give you.

Also, iOS 5 will cut the wires. You won't need to hook up to a computer for anything. Everything from activation to syncing will be wireless.

Perhaps the biggest thing about iOS 5 isn't really a feature, it's actually a completely new service Apple will be offering at the same time iOS 5 launches. It's called iCloud, and it'll rise from the ashes of Apple's ailing MobileMe service. At its most basic levels, iCloud does stuff you can already do with services like Google Sync: contacts, mail and calendar syncing. But it can sync much more than that. It can sync your apps across devices, your documents, music, photos, videos, e-books, etc. And since Apple's providing third-party APIs, it's likely that lots of apps will be able to use iCloud as their way of backing up and syncing data also. It offers a 5 GB online storage locker for free.

iTunes is a big part of the mix here. Anything you've bought on iTunes can be synced to up to 10 different devices. Uploading those songs from your own personal library isn't necessary; iTunes already knows what you've bought. If you want access to stuff you didn't buy from iTunes, you're going to have to pay US$25 per year and let Apple scan your entire music collection. It'll give you access to everything it can identify that exists in its library.

So, a little unusual for an Apple event. The only "buy this ASAP" orders it gave were for a $30 OS X upgrade, and you can't even stand in line for two days to get it -- it's a download on the Mac App Store. Other than that, it was a mobile OS boost and a mostly free cloud service. Everything seemed to be a pleaser -- as long as you don't mind a whole helluva lot of your personal data residing on Apple's servers.


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The Games Continue

While Apple was doing its schtick in San Francisco, Microsoft, Sony and Nintendo were holding back-to-back press conferences at the E3 video game expo. The presentations underscored the main concepts the companies are relying on to keep squeezing money out of their main gaming platforms, which at this point are all well into middle-age and have already saturated the hardware market.

For Microsoft, of course, it's all about Kinect, the hands-free motion detection technology that's been an incredibly hot seller since it was launched late last year. Its new Kinect Fun Labs will focus on emerging Kinect innovations. One new talent Kinect will learn is object scanning -- let Kinect take a bunch of images of an object, and there you go, now that object has been brought to virtual life within the game. Many games were also previewed, including "Halo 4."

Sony's focus is on 3D technology. Lots of its upcoming games will be 3D-compatible, and the company's even making a PlayStation-branded 3D TV set. It'll function as a normal 3D TV, or it can be used to show two users two full-screen yet totally different images simultaneously. All the better to play two-player games without having to deal with a splitscreen. Each user will have to wear glasses, and the images they see in two-player mode will be 2D, but it's still kinda neat.

Sony also showed off its upcoming high-caliber handheld video game system, the Vita. This is the descendant of the PlayStation Portable, and it seems to have plenty of power where it counts, but the success of gaming on mobile platforms like Android and iPhone has called into question whether dedicated portable gaming machines are still viable.

The company also more or less had to acknowledge its little problem with hackers, but the less said about that the better.

Of the big three, though, Nintendo was the only one to show a full-on preview of its next-generation home system. It's called "Wii U," and when it's finished it'll have graphics power that's on par with the Xbox 360 and PS3, which are currently way more powerful than the plain old Wii.

But he oddest thing about Wii U is its controller -- it looks like an iPad mated with a Wiimote and grew some thumb sticks. The main controller has a built-in screen that can be used to provide supplemental graphics to the main game going on on the TV screen. Meanwhile, other players control their part of the action with the usual Wii motion controllers. The whole setup looks like it could be made to serve a lot of different concepts once game developers really dig into the possibilities.

But not all observers were enamored with Nintendo's creation. The company's stock took a nosedive the day after the event, and while it's not always possible to hang a fall like that on one single thing like an unimpressive product preview, it was probably a factor.

The original Wii had the motion-control game all to itself when it arrived. Now Xbox has Kinect, and PlayStation has Move, so it looks like this second-screen tablet controller is going to be the real differentiating factor. Perhaps the worry is that the whole setup will just be too complicated.

The original Wii was an incredible success in part because you could just pick up this wand, wave it around, and suddenly you're bowling or playing tennis or swordfighting or whatever. Here you have two monitors, two different types of controllers, five-player arrangements where only one gets to see the little screen -- it all might be a lot to take in the first time around, especially for some of the more casual gamers that Nintendo's won to its side over the last few years.

Or maybe the concern is more about price. When the Wii debuted, the other two big consoles on the market cost at least twice as much, and it's unlikely the bigger, better Wii will be able to undercut its competition so heavily this time around.

Compromised Position

As it was putting the finishing touches on iCloud, perhaps Apple came to the conclusion that the best way to work with its app maker partners might not be to put their heads in vices and squeeze out 30 percent of whatever's inside.

A few months ago, Apple set some new ground rules for any apps that deliver subscription content to users. First thing that comes to mind with that might be magazines and newspapers, but it could just as easily mean music, e-books and video as well. Specifically, Apple mandated that all apps of that nature offer the user an in-app subscription.

Sounds convenient -- a new user can download an app, hit a button, and immediately start receiving regular updates to whatever media we're talking about -- magazines, videos, anything. The problem for app makers is that Apple gets a 30 percent cut of the revenue off subscriptions that start as in-app subscriptions, and that's not a comfortable rate for publishers.

There was really no getting around it -- Apple also forbade apps to skirt the system by kicking users over to the browser to buy their subscriptions, and it required the in-app subscription price to be the same or lower than the out-of-app price.

All in all, publishers who played by these rules could probably expect 99 percent of all new customers who come their way via an iOS app to be funneled through Apple's system, cutting the publisher's revenue and giving it less-than-perfect access to the user data. Apple said its cut basically amounted to a finder's fee and service charge, that putting an app in the App Store exposes a service to new customers, and buying through Apple is way more convenient that futzing with a Web page.

Some publishers played ball, others refused. The Financial Times abandoned the idea of an iOS app and decided to just stick with its website. Even big publishers like Conde Nast, which did put a few top-shelf mags in the App Store, collaborated to try and come up with an alternative way of doing things on Android that wasn't so costly. Enough ruckus was raised to even get the attention of government regulators in the U.S. and abroad.

Meanwhile, June 30 drew nearer, and that was the date Apple set for app makers to either fall in line or quit the App Store. But it seems that now the rules have changed.

Cupertino has reportedly budged. Price requirements are gone, and a publisher no longer has to offer an in-app subscription through Apple.

There's a bit of a catch, though: App makers still can't include a buy button that kicks the user over to Safari for the purpose of buying a subscription. Presumably they can still describe how to get a subscription by showing you a URL; they just can't automate the process of you getting there. So we'll get the chance to see what matters more to publishers: Giving users a slick way to start reading, or keeping that 30 percent of revenues that Apple would have skimmed.

It's unclear exactly what led Apple to reverse itself this soon before its deadline. It probably came to loggerheads with some key publishers and app makers that put their feet down, and it didn't want to risk losing a bunch of A-list software. Maybe it was Amazon and Kindle, maybe it was Netflix.

Or maybe this was Apple's evil plan all along: First, over-reach with a set of rules that are really harsh but not quite ridiculous. Then set a deadline, wait it out until everyone believes you're serious, then back off a little and come out looking like Mr. Reasonable, even though the new rules, which you were so gracious to compromise on, still give you the power position.

Or maybe I'm just making this sound complicated.

Facebook in Your Face

People who are real sticklers for online privacy have probably already made up their minds about Facebook. The company's reputation in regard to online privacy has been well-known for years, so those who care that much about online identity have probably either mastered the site's privacy controls or decided they just don't want anything to do with it.

But every once in a while Facebook will do something that worries even some of those people who feel they have a really good handle on their privacy settings. The words "Facebook facial recognition" appeared in headlines this week, sparking concerns that the social network is growing into an all-seeing, all-knowing monster capable of stripping your online persona nude.

The reality isn't quite that scary, but there are some potential problems. The feature's called "Suggested Tags," and that's exactly what it does. When a user uploads a photo to Facebook, Suggested Tags will use facial recognition technology to automatically guess the identities of each person in the shot. If the uploader agrees that's correct, the tags are assigned with a single click. Facebook says it built this in response to the fact that people upload an ungodly number of photos to it every day, and it's a bother to hang a name on each and every face if you do it manually.

The feature is opt-out, so if you don't want your name coming up in anyone's Suggested Tags, you can make it so in your privacy settings. But "opt-out" is a dirty word among privacy advocates. Not everyone pays attention to Facebook's every tic, and a person who doesn't know a feature exists can't opt out.

Another problem is false identification. Facial recognition tech isn't always accurate, and if the point of this feature is to let people tag photos even faster, it stands to reason that some users are going to use it to whip through the tagging process without much care as to whether every single tag is correct. Might not be a big deal if you get mis-tagged in a photo of someone hanging out with a good friend of yours, or even total stranger. But what if you're falsely tagged as hanging out with someone or at some place you really don't want to be associated with? Many bad scenarios come to mind.

Finally, the way in which the news about this came up was a little odd. The idea of automatic tag suggestions originally came up all the way back in December, and at that time Facebook said in a company blog post that it would begin the rollout that month. Then in a post that appeared to be dated this week, that same language was used -- it's rolling out the feature in the U.S. over the next few weeks.

So when did it really start?

Well, it looks like that recent post was actually a hastily updated version of the December post. An updated paragraph was placed at the top and the date was revised to June 7, but the tense in the language remained, and the only indication that the bulk of the message was written in December is the fact that some of the comments users made in response to the announcement date back to last year.

So it looks like Suggested Tags may actually have been active on a test basis for some time now. Facebook rep Victoria Cassady told us, "We should have been more clear with people during the rollout process when this became available to them."

Groupon's Grab

Is it fair to call Groupon part of the social in-crowd? Well, it's a website, so it's got that going for it, I guess. And it's seen the kind of growth you usually only get with top social networks lately. Groupon doesn't exactly call itself a social site, but a lot of its direct rivals seem to want to glom onto the social bandwagon through name association: LivingSocial, Social Buy, so on. And when it explains itself to new customers, Groupon is all about encouraging them to learn and share news about its daily deals via real social networks like Facebook and Twitter.

At its heart, though, Groupon does coupons, and there's nothing inherently social about that. You can be a festering pit of misanthropy who's never actually smiled at another human since birth but still get plenty out of Groupon, so long as you're into whatever deal it's giving out in your town today.

But that hasn't stopped people from mentioning Groupon's upcoming IPO in the same breath as LinkedIn, a social network that went public a few weeks ago, scored big on its opening day, and immediately had watchers fretting about a social bubble. Groupon will soon take on Wall Street too, according to papers it filed with the SEC. This is only a few months after Groupon turned down a $6 billion buyout offer from Google, and a few days after Google officially kicked off its own competing coupon system, Google Offers.

So what can Groupon bring to the table revenue-wise? Well, its way of raking it in is already pretty clearly defined: Local business offers a huge discount through Groupon, Groupon gets its cut of the action, and business bleeds profits as customers cash in on the offer. The alleged upshot for the local business is that it gets a great deal of exposure, gets a chance to swing in with an upsell, maybe gains some repeat business, and keeps the proceeds from all those users who bought the Groupon but never used it.

That actually hasn't proven to be a profitable model over the last couple of years. What's really incredible about Groupon has been its rate of growth, and maybe that's what makes it think it'll draw investors to the table. But there's doubt about how long that growth can be sustained, and whether it can make the transition to profitability when growth plateaus.

Groupon is far from universally loved among the kinds of businesses that often offer deals through the site. Groupon insists on offering very generous discounts, so a small business has to be very careful about not making an offer that's going to put it deep into the red, if not belly-up. And that part about gaining new customers and making an upsell -- it doesn't always pan out. When you put something on Groupon, a lot of your new customers are only dropping in for the deal. Then they drop out and you never see them again.

That lack of loyalty could be a problem not only for the businesses that do deals through Groupon, but for Groupon itself. Brand loyalty isn't a virtue often found in diehard bargain hunters, and Groupon is just one of many deal-a-day websites vying for the attention of thrift maniacs.


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