User’s of Google services such as Google Maps, Gmail, G+, and Google Search often consider themselves “Google customers.” In reality, they are the products that Google sells to advertisers. The longer a customer looks at an advertisement, the greater the chance they click through and earn Google money.
Anyone using the new Gmail has spent a lot of time with their eyes wandering around the screen lately. The user interface could be described as the opposite of intuitive.
-Hovering next to “inbox” expands the mailbox list.
-So does hovering over the prominent link to “Buzz.” A supposedly dead service.
-There is a separator line below Buzz that can expand the list permanently, which only appears when hovering below the line.
-Hovering above the separator line briefly shows a grey bar, then expands the list temporarily.
-There Gchat window obscures the mailbox when expanded.
-The compose button is above the mailbox and is shaded bright red, which universally means “clicking this launches a destructive action.”
-There is no bottom page navigation so the whole page must be rescrolled to turn pages.
-There is an advertisement directly between critical navigation buttons which is disguised to appear as an incoming mail item.
And that’s just to name a few problems. We know that software designers use eye tracking to test web pages for problem areas and ensure a smooth user experience. Since it is literally detrimental to Google’s advertising business if users are able to quickly zoom through pages to get their desired content, is it possible the Google deliberately designed the new GMail to be unintuitive, forcing users to search around the page to execute the actions they want? Hey, it’s a stretch, but anythings possible!
An “edge case” in economics often refers to an abnormal consumer scenarios. Take car consumers for example. The average consumer of automobiles drives to work, picks their children up from school, or maybe even drives across the country to go sight seeing. These are all normal activities that manufacturers plan for when designing their automobiles… But what about the consumer who intends to use his car to drive offroad and hunt wild boar? This is an “edge case,” and though there is certainly a need for offroad capable hunting vehicles, most car manufacturers opt not to directly produce such vehicles, and leave it to aftermarket car customizers to add gun-racks, big tires, and offroad shocks.
There are also edge cases in consumer electronics. A classic example is the “Gamer” demographic. The average person uses their computer to watch Netflix, check their email, write papers, and browse the internet a bit. They aren’t particularly concerned with graphics performance or refresh rates. Gamers on the other hand, love having the best graphics money can buy. Accordingly, there is a nich market for “computer gamers” who run neon-lit boxes like the watercooled bad boy pictured below…
But is there a market for mobile gaming? Or, more to the point, is there a market of mobile gamers that justifies the creation of a mobile phone specifically “designed” for gaming? Sony thinks (or thought) so, and introduced the Experia Play. An Android phone with a touch screen and a button interface reminiscent of 16 bit entertainment systems. The “Play” comes with a hefty $300 price tag ($50 on contract). The question is-who’s buying?
As always, exact sales numbers are fuzzy or difficult to come by. Sony is employing the same trick that Motorola did with the Xoom and reporting units “shifted” to retailers, rather than sold.
On it’s face, the idea makes sense. There are relatively successful portable gaming platforms like the PS3 and the Nintendo DS, and people do sometimes enjoy playing games on their phone… However, there seems to be little justification for game specific hardware, especially given that no Android developer is going to design a game with this individual phone in mind. You would end up with a largely useless slideout pad in place of a worthwhile full hardware keyboard.
As I mentioned in earlier posts, cellphone shopping is costly to the consumer not just because of the initial cellphone cost, but especially because of the 2 year contract plan that usually accompanies the purchase. People usually put a bit of thought and research into their phone purchases, and my suspicion is that the average consumer will conclude that such a specialized phone is NOT worth being a daily-use device for two years. The return rates on Android devices are notoriously high, as high as 40 percent at some stores, and though the actual return rates on this specific device will never be revealed, I would guess it tops every single other phone currently on the market in returns.
I spend way to much time talking about Apple VS. other Electronics firms because it provides such great industrial problems.
When making products, Firms make a lot of different strategy choices. One of these choices involves “spatial analysis.” Is the cost of adding a new product worth it to draw in new consumers? Or will the additional product cause confusion, detract from preexisting products, or otherwise cause the firm to be less profitable.
An example where creating many versions of a product is sound strategy is Cereal.
Check out all these varieties of Capn’ Crunch!
There’s something for everybody. This is a profitable strategy for the Capn’ because different consumers have different cereal preferences. There is not a clear “quality teir” in this strategy, just preferences. No one cereal is objectively better than the other. The wide variety of flavors allows Captain Crunch (really Quaker, but for simplicity’s sake…) to draw in consumers who might otherwise go for other brands. For example, someone who likes peanut butter flavors might be drawn away from Reese’s cereal and buy Peanut Butter Crunch instead.
Importantly, There is a fairly negligible cost penalty to adding a new cereal flavor. Bring a different part of the assembly line online and throw some different ingredients in. More importantly, it is not costly for consumers to make a mistake. If they chose a cereal they dislike, they are only out $4.00
Sally, Joe, Henry, Ally, Peter, Jake, Emily and Bob are able to happily chose their cereal of choice.
Contrast this with the iPhones clear product hierarchy.
The new one is the best. And everyone in their right mind is buying the iPhone 4s, Which is all well and good for Apple. It is more cost effective for Apple to produce one high quality phone than several different phones. It is also great for the consumer. Selecting a phone can be very costly, The phones themselves are expensive and worse still you are generally stuck with them for two years. It is relatively easy (uncostly) to ask someone who already has an iPhone what they think of it.
But what about Android?
Look at all these androids! There is not necessarily a clear product hierarchy. We may assume that the Razr is the best because it’s the newest. But hey the Bionic only came out three months ago…and I heard Samsung is supposed to be reliable so why not the Galaxy? Hmm Maybe something with a hardware keyboard?
These phones were all relatively costly to make. It was not just a matter of slight assembly changes and new ingredients. Each phone required ordering, designing, retooling, reoptimizing, and retesting countless versions of hardware and software. The different screen sizes mean that Software either needs to be separately optimized at great cost, or the UI ends up looking terrible. Or both, as seems to be the usual case. Worse still, it is extremely costly for the consumer to get reliable information about which is the best phone. You must either research them on tech blogs or chase down someone with the Galaxy 3g IIs, a relatively difficult task. There is a great risk that you well end up with a phone you hate for two years. And that is one of the reasons iPhone is unstoppable.
“Apple.com broken by entire world typing “where is the iPhone 5 Tim?” in the search box.” —
-Guy on a forum.
It looks like I was wrong about the existence of the 4S. But I was correct in the assessment that two phones would never be released at the same time (a top tier and “mid tier” phone.)
Free Online Database Class Through Stanford
There has been a lot of talk on “the blogs” that Apple will release two phones at their next event. The idea is that they will release a “mid tier” iPhone 4 GS alongside an iPhone 5. This will never happen because Apple is a competent tech company. It is a question of industrial organization.
Apple figured out long ago that diversifying the product lineup to cater to every edge case, every income bracket, and every preference is a waste of productive capacity and confusing to consumers. It complicates up production and fulfillment. Remember, Apple does not employ the fashionable and supposedly advanced policy of “just in time” production. Rather, they plan and allocate resources years in advance, leaving other firms overpaying for touchscreens and other critical components on the spot market.
Most importantly, the iPhone 4 is still bar-none the best phone on the market. Research in Motion is in its death throes, and Microsoft is releasing phones that lack total landscape/portrait orientation in 2011.
Android has a lot of market share, for now, but the fragmented nature of their phone lineup does not bode well. Apple doesn’t NEED a mid tier phone between iPhone 4 and 5.
“There are two types of companies: those that work hard to charge customers more, and those that work hard to charge customers less. Both approaches can work. We are firmly in the second camp.” — Jeff Bezos - introducing the new Kindles today (via bijan)
A Portfolio Game for Recent Grads
Ever since the release of the iPad, analysts have been telling us that the “tablet space” is a field that every tech company must compete in if they want to be taken seriously. However, the non-iPad tablets have not performed well on the market.
The first big failure was of course the Motorola Xoom. A tablet that shipped with many of its reported features absent or broken, at a pricepoint higher than the iPad. , Research in Motion jumped into the fray with the Playbook, whose design and execution was matched only by their terrible marketing campaign and (dual) CEO’s inept PR bumbling. The device actually shipped with no e-mail client, in 2011.
So what reason is there to believe that the Amazon tablet can compete with the iPad? Just one: its pricepoint. It is pretty much objective fact at this point that any attempt to compete with iPad on the features or quality plane is a complete waste of a firm’s time and money. Witness the backlog of Playbook inventory piling up in warehouses and the Xooms sitting on retailer shelves.
Tech analysts like Engadget and C-net contributors are often heavily biased towards Android because they have computer science backgrounds and enjoy customizing their electronics… As such they have always had a problem admitting the fact that Apple is so far ahead of the curve in producing electronics for end users. The fact is, normal consumers do not want to have to wipe their devices and install custom software to have a functional phone. Androids clunky unintuitive UI simply cannot compete with Apple for ease of use.
And so it is refreshing to see that Amazon is competing on price, offering their tablet for a cool $199. This will get customers “on the fence” about tablets to try them out for a more reasonable price. It seems like the non-iPad tablet manufacturers may be coming around to the fact that they should not be charging iPad prices for inferior products.
I am a recent graduate of the University of Vermont. I am primarily interested in the economics of industrial organization. However, this blog will discuss many current events in finance and economics, as well as other areas of interest. Please feel free to comment and discuss!