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http://www.psynixis.com/blog/

Could be a good deal for both Ebay and Skype. Ebay is currently overvalued (unless you believe its 50% year on year earnings growth is going to continue), so as long as it can use mainly its overvalued paper for the aquisition, paying a multi-billion dollar price for Skype isn't as expensive as it might seem.

In a word? No. Aside from the fact that the phone doesn't even get the hygiene factors right; the whole design isn't even close to compelling.

The phone's strongest point is having an iTunes client built-in. That's a great idea; there are some good things about how this works - in particular the way the client interacts with the iTunes software on a PC. As Steve Jobs said at the launch yesterday, one way to think of the current iTunes mobile client/phone combo is that it gives the phone an iPod Shuffle capability. Of course, with only 100 songs, the need for a great way of navigating the songs on the phone isn't too important.

Bottom line: I don't know if an "iPod Shuffle" phone is going to be a huge success given that the rest of the phone seems so mediocre. I suspect it won't be. Seems like a missed opportunity to me...

... or is it? In its agreement with Motorola, it appears that Apple mandated there be a physical cap on the number of songs that can be stored on the phone - not more than 100 songs. I wonder, therefore, whether this indicates that it's part of Apple's strategy to make make the Motorola device not as great as it could be? After all, Apple is a consumer electronics company - the iPod is one of the most popular consumer electronics devices in the world. Why wouldn't they bring an iPod mobile phone to market themselves and grow their own revenues? Perhaps because they don't know how to design a mobile phone and bring it to market. So, maybe the point of working with Motorola on this first phone was to: a) learn from Motorola about what's involved in bringing a mobile phone to market; and b) start building relationships with wireless operators so that there's a market for an Apple iPod phone.

Microsoft's new, upcoming mobile OS - Windows Mobile 5.0 (aka Magneto) is looking pretty interesting. It's clearly going to be a big improvement over Windows Mobile 2003 Pocket PC. It's really starting to look like Windows-based smart phones might, at last, be ready for prime time, offering compelling values propositions for device makers, wireless network operators, developers and consumers.

Devices are expected to hit the market during the next few weeks...

From Reuters...

Consumers should expect punishment for tinkering with their Blu-ray players, as many have done with current DVD players, for instance to remove regional coding. The new, Internet-connected and secure players will report any “hack” and the device can be disabled remotely.

It seems that more and more companies selling media-related products and services to consumers are losing their focus on providing benefits to their customers. First we had highly-restrictive DRM, then restrictive HDMI. Now, self-destructing Blu-ray players. These organisations seem increasingly intent on treating their customers as if they are criminals.

If this report turns out to be correct, I won't be rushing out to buy a Blu-ray player. Pity. The actually technology is pretty useful. But, who wants a device that the manufacturer can remotely disable on a whim, or through technical incompetence? Not me...

See the complete Reuters article.

There’s a huge amount of innovation going on in mobile phone handsets, with phones taking steps forward in power every few months. The electronics are getting more and more powerful: faster processors; better quality screens with more colours; longer battery life; higher quality, higher resolution cameras; support for more Java APIs.

But many phone manufacturers are missing an understanding of some fundamentals. They’re what I call “hygiene factors” – features that, when you them get right, don’t increase the pleasure of using the phone particularly. But – if you get them wrong, people find it really irritating. Getting the hygiene factors wrong will reduce the market for a phone. Some manufacturers are just not thinking hard enough about user interfaces. That’s both the graphical user interfaces, and the physical interfaces (keypads, joysticks etc.). A couple of the biggest hygiene factors for mobile handsets are getting the design right for allowing people to make phone calls, and for sending SMS texts.

This afternoon, I compared, side by side, the user interfaces for composing SMS text messages on two phones: an old phone, the Nokia 3310; and a new phone, the Sony Ericsson K750i. The K750i is much - years - newer. If innovation was working properly, the newer phone should have beaten the older one hands down. But the truth is – the K750i wasn’t even close to being as good as the 3310 for composing texts.

Of course, those us of who are focussed on building great software, know all about how bad the user interfaces for most pieces of software are. In one sense this good news – it helps us win out over our competition. But in another sense, it’s bad news. As an industry, we need the handsets to be the best they can, given the state of technology at any given time.

What fundamental mistakes did the K750i designers make, when it comes to hygiene factors for composing SMS text messages? Well, a key feature of a design should be to minimise user interface errors. i.e. help people to get the phone to do what they want. The K750i gets this wrong in a couple of important ways: firstly, there is no space between the keys on the keypad, making it all too easy to hit the wrong key (compare the design of the Nokia 310, or more recently a Blackberry keypad); and secondly, the predictive text graphical user interface requires the use of the joystick to pick options in a list – requiring the user to take their fingers of the keypad (increasing the chance of making a mistake).

These hygiene factors are not hard to get right. But by the same token, they’re clearly easy to get wrong. And for the ones I've discussed above, they’re the difference between allowing people to compose texts quickly and enjoyably, or not. To expert “texters” - and that’s what many people in the target demographic for K750i are – I would say this is a major problem. If the mobile phone industry wants to make headway, creating feature-rich, connected devices e.g. displacing the iPod from its music player leadership position, then it’ll have to raise its game when it comes to user interfaces. The technology is there. The thing that’s stopping the phone taking over is user interface design.

DRM is impacting more and more people every day, and there are some interesting discussions emerging regarding DRM in the context of protecting IP. Most people who're involved high-tech businesses understand the value of IP; and understand very well the many and varied motivations of those that seek to protect their IP. My issue with DRM - where the term is used to imply an encoding of a digital asset to restrict its use - is that it doesn't work. It's technically impossible for it to work. Ever. That kind of technology is not going to help people protect their IP. Ever.

So, why all the investment in DRM? It's truly a red herring. The answer is obvious: the current key players (movie companies, music companies) don't really understand how the Internet is changing (and will contrinue to change) their business models. They sorta, kinda understand that it doesn't work, because they're obsessed with trying to plug the analogue hole. But even knowing that, they still ask questions like, "So how many times should people by allowed to play a movie they just bought?" They clearly have some way to go in there thinking.

Now, all this is not to say open DRM security models for user authentication are a bad idea. Given that DRM, in some form, is probably here to stay, I'd say this kind of thing is a sensible way to go. Indeed, if it's done right, there's no reason why DRM can't be a good thing. But what a pity so many people are wasting so much time thinking about how to protect their content in ways that can never work. I call the kind of behaviour we're seeing with DRM "focussing on failure." It's not a good thing - it paralyses people and businesses. Far better to focus on success. In the context of the DRM debate, focussing on success means people spending more time thinking about how to get their createive works out to the largest possible, most profitable markets in the most timely manner. What the media companies need to understand is that the largets, most profitable markets of the future, don't look the same as they do today.

Business 2.0 has gotten together with 11 venture capital groups to ask them what they think would be hot deals right now. It makes interesting reading. Here's what they're interested in:

• Fraudproof credit card authorization via cell phones and PDAs. Woodside Fund thinks the cell phone, packaged with the right software, presents an ideal solution. Imagine getting a text message on your phone from a merchant, prompting you for a password or code to approve the $100 purchase you just made on your home PC or at the mall.
• A startup that converts proprietary software applications from large banks into a co-op IT service for participating members. (Partech International)
• Software that makes better product recommendations to online shoppers. (Redpoint Ventures)
• PCs tailored for senior citizens, who would rent the machines on a monthly basis. (Ignition Partners)
• AN EVEN SMARTER SMARTPHONE - A clever resurrection of the smart-card concept: a software platform for cell phones that allows consumers to make purchases or open doors by waving their phones in front of tiny infrared or RFID readers. (Storm Ventures).
• A startup that can create a suite of open-source applications for maintenance and upkeep of a company's IT backbone. It would give away the programs to corporate clients but charge for service and upkeep at a substantial discount off current rates. (WaldenVC).
• A kind of souped-up Craigslist for every neighborhood, everywhere. Just type in a zip code, and this website will present not just garage sale listings and classified ads, but headlines and photos from dozens of local news sites run by busybodies willing to provide free content and keep it constantly updated. (Norwest Venture Partners)
• VOIP-enabled software that merchants can use to automate and customize phone orders from their customers. (El Dorado Ventures)
• PLUG-AND-PLAY MOBILE SERVICES - What wireless networks have been craving for years: a single software platform from which they can launch new services (Soffinova Ventures)
• A wireless home-monitoring network for recuperating hospital patients. (3i)
• A KILLER APP FOR CONVERGENCE Software that permits any Net-connected gadget in your home to access and display services like VOIP, instant messaging, and streaming television. (Outlook Ventures).

Now, the details of all these ideas aren't universally compelling - but it's striking just how many of these relate to wireless technology, and more specifically to mobile phones. It will be interesting to watch the investments that these companies make going forward.

So, it's clear. Skype is up for sale. Of course, it's a VC-backed business, so it's always been up for sale. But something is clearly afoot. There have been rumours of interest from New Corp, to the tune of $3B. News Corp. was prepared to pay $580M for MySpace - a company that in March of this year had a pre-money valuation of around $6M (post-money $44M). That's a nice return for their investors.

However, I wouldn't have paid $580M for MySpace. I suspect that News Corp has misunderstood the loyalty that users will have for any particular social networking site. Social networking sites are all much of a muchness. There's always talk about people not wanting to throw away their carefully built "friends lists" on these sites. But, that tends to be from people that don't use them. Make no mistake. People can switch away from MySpace in an instant. And they will - as soon as the next cool thing comes along. I don't see much genuine value in MySpace.

And so to Skype. Is it really worth $3B? I think the answer is - it could be worth that much to someone. Their value is that, right now, they have many millions of regular users. There usually seems to be a few million logged on at any one time. Of course, they face the same (lack of) customer loyalty issues that any Internet service offering faces - there are no barriers to prevent users from switching to other providers. But that's OK. The thing you have to do here, is keep innovating with the software. There are some fabulous, valuable (paid) services that can be conceived of, innovating on a VoIP platform. Skype has only just scratched the surface. It's not hard to imagine ways in which Skype's future revenues could support a value well in excess of $3B, if the buyer is smart enough to exploit the opportunity.

I think there are two classes of potential buyer for Skype who would pay billions for the company. The first is a buyer that doesn't understand in a deep way what they're buying, and thinks that billions isn't too much based on some comparator or other e.g. dollar value per customer etc. The second class is buyers that are confident they can build on what Skype has already done - innovate new services, and do what's necessary to keep the call quality up.

All of which which means the list of buyers is potentailly quite long. It could include media companies (like News Corp), other Internet software/service companies (like Google or Yahoo), or telecomms companies (fixed line or mobile). If the investors can't sell the company, I suppose an IPO isn't out of the question. However, whether or not an IPO'ed Skype could sustain a near-term valuation above the low hundreds of millions on the public markets isn't clear.

Funniest new piece on the forthcoming XBox360 I've seen so far is this "intervew" with Microsoft VP, J Allard. It's a must read for anyone following the runup to the launch of the XBox360 in November - I came across it whilst reading Chris Melissimos's blog.