Mobile Computing Is Just Getting Started

Smartphones, tablets, and wireless data plans are already a trillion-dollar business. It’s just the beginning.

Mobile computers are spreading faster than any other consumer technology in history. In the United States, smartphones have even begun reaching the group of relative technophobes that consumer researchers call the “late majority.” About half of mobile-phone users now have one.

The big question facing technology companies, and the subject of the upcoming stories in this month’sMIT Technology Review Business Report, is how to make money from this rapidly expanding technology.

Wireless carriers make money at the greatest scale. Globally, 900 of them take in $1.3 trillion in revenue each year, about four times the combined revenue of Google, Apple, Microsoft, and Intel. Yet individual device makers, notably Apple, capture more profit. That company’s markets aren’t restricted to one network. Its products, by bringing personal computing to phones, have sharply increased their capabilities and value.

In 2007, the average wholesale price of a mobile phone was $120 and falling; analysts talked of market saturation because nearly everyone who could afford one had one. But since then, prices have leapt by 50 percent, and the revenue from all mobile handset sales has doubled.

Apps and services still account for the least amount of money in mobile computing. Mobile advertising brings in only $9 billion as yet. But here is where the most opportunities lie. Facebook has a monthly audience as large as any ever reached. And in January, it said for the first time that more of that audience was coming from mobile devices than from PCs.

The swings in the company’s value—it was worth $104 billion at its IPO, then $42 billion, and now more than $60 billion—are a measure of its No. 1 ranking among apps (23 percent of the time that Americans spend on mobile apps is devoted to Facebook) and the uncertainty about whether it can profit from ads on the small screen. But the rise in its stock price reflects the fact that it has started to.


That was fast. Now, watching the fever lines on tech analysts’ charts cross and collide has become a kind of spectator sport. Smartphones outsell PCs. Touchscreens outnumber keyboards. In India, mobile Internet traffic exceeds desktop traffic. Even ordinary search—Google’s great cash cow—is declining in the United States as people use their phones to search for restaurants, bus times, and weather reports.

Large companies are responding with bold moves. Google is developing Google Glass—a computer in a pair of glasses. The components are cheap, off-the-shelf. It’s not hard to make. Google hopes this new way to use a computer tilts mobile revenue in its direction. Whether anyone will want Glass isn’t clear, but it’s worth trying. That’s because we’re still early in the mobile switchover.

How early? Mary Meeker, the venture capitalist and Internet prognosticator, leads her annual set of predictions with observations on the underlying trends. By her tally, 1.14 billion people own mobile computers, but another 5.8 billion don’t. Of those, 4.5 billion aren’t users of the Internet at all.

In one of this month’s upcoming stories, you’ll meet an entrepreneur with a feel for the opportunities that lie in those figures. His name is Suneet Singh Tuli, and his company, DataWind, is trying to sell dirt-cheap tablets in India. They come with free wireless access, supported by ads. Just as customers in the developing world skipped landlines for cell phones, Tuli thinks, they’ll skip PCs for wireless tablets and smartphones. It makes sense: in India only 11 percent of people are on the Internet, but just about everyone already has a mobile phone. “We’re talking about what will be their first computer,” he says.

That’s a reminder of what the real stakes are: the killer app isn’t Angry Birds, but access to computing itself. Wireless smartphones and tablets allow the Internet and its digital affordances to flow into every hand, everywhere, in every circumstance. We’re not in the “late majority” yet, either. We’ve got nearly six billion people to go.

IBM, Lenovo server deal in limbo over security worries: WSJ

International Business Machines Corp’s proposed $2.3 billion sale of its low-end server business to China’s Lenovo Group is in limbo as the U.S. government investigates national security issues, The Wall Street Journal reported, citing people familiar with the matter.

U.S. security officials and members of the Committee on Foreign Investment in the United States (CFIUS) are worried that IBM’s x86 servers used in communications networks and in data centers supporting the Pentagon’s networks could be accessed remotely by Chinese spies or compromised, the newspaper reported. (

The long-expected acquisition in January came nearly a decade after Lenovo bought IBM’s money-losing ThinkPad business for $1.75 billion, which had also faced scrutiny.

Government officials are also uneasy about the potential sale of servers that may be clustered together to perform like a powerful computer, the report said.

IBM and Lenovo are trying to address CFIUS concerns about server maintenance and have said that IBM will provide maintenance on Lenovo’s behalf “for an extended period” after the sale, the sources told The Wall Street Journal.

IBM and Lenovo have refiled their application for approval of the deal to buy more time, Bloomberg reported earlier this month. (

Chinese companies faced the most scrutiny over their U.S. acquisitions in 2012, according to a CFIUS report issued in December.

Chipmaker Audience buys startup to boost smartphone sensor technology

Chipmaker Audience Inc (ADNC.O) is acquiring a Silicon Valley startup in hopes of helping build smartphones that can figure out what you need at any time of the day, or even how you’re sleeping at night.

Audience announced late on Tuesday it is paying $41 million for Sensor Platforms, which creates algorithms that help analyze data from sensors on smartphones and other mobile devices.

Mixing Sensor Platforms’ technology with its own audio processing expertise could give Audience a leg up in improving how smartphones and other gadgets interpret what activities their owners are doing and how to help them.

Samsung and other manufacturers are packing gyroscopes, cameras, microphones, barometers and other sensors into smartphones. But those sensors drain battery power, and app developers are trying to find more ways to use them.

Audience wants to design low-power chips that build on its audio expertise by analyzing data from several sensors at once. Chief Executive Peter Santos used sleep analysis as an example.

Sleep analysis apps on smartphones or smart wrist bands currently rely mostly on motion sensors to detect tossing and turning at night. But they could be much improved using a processor designed to combine and analyze data about movement, the sound of breathing and background noise like a blaring television or noisy neighbors.

“The presence or lack of snoring, the pace and evenness of breathing. There’s a lot more information that’s available acoustically,” Santos told Reuters on Wednesday. “Having the intelligence and being able to make sense of the sound information is something we excel at.”

The Mountain View, California company lost Apple (AAPL.O) as its largest customer in 2012, and it now depends on smartphone leader Samsung Electronics (005930.KS) for most of its business. Its revenue last year was $161 million, making it a relatively small player in the global smartphone supply chain. Like other chipmakers, it is increasingly focusing on emerging wearable computing devices.

Audience’s interest in context-aware computing is not limited to the bedroom. Santos says smartphones and a growing crop of smart watches and other intelligent clothing should do a better job of combining audio with other sensors to interpret and react to a range of situations and activities, like riding a bike or traveling on a train.

“We’re seeing more and more companies looking at the sensory area,” said Chardan CapitalMarkets analyst Jay Srivatsa. “The good part for Audience is that the sensory business is much like voice processing in that there are no standards. It all comes from algorithms you develop internally.”

Google Announces Sub- $100 Smartphone

A low-cost smartphone designed by Google will go on sale in India this fall before debuting in other emerging economies, the company announced today.

The phones will be branded “Android One,” after the company’s mobile operating system Android, and will cost less than $100. They are part of a new effort by Google to get devices based on its software into the hands of people who currently lack access to the Internet.

Already, one billion people use phones running Google’s Android software, said Sundar Pichai, leader of Google’s Android division, at the company’s I/O conference in San Francisco today. “Our goal is to reach the next five billion people in the world,” he said. “In India and other countries like that, it’s disappointing that less than 10 percent of the population have access to smartphones.”


Google has also developed a series of smartphone “reference designs” that it is making available to manufacturers. On stage, Pichai introduced a device based on one of those designs, made by the Indian manufacturer MicroMax.

That device will go on sale in India this fall for less than $100. Its features include a 4.5-inch screen, dual SIM card slots, an SD memory card slot, and an FM radio.

Similar devices from two other Indian manufacturers, Carbon and Spice, will also go on sale this fall, and Android One devices are expected to appear in other countries soon, said Pichai. In contrast to the arrangement with many Android devices, Google, not manufacturers or wireless carriers, will be responsible for updating the software on Android One devices. The company is working with wireless carriers to make low-cost data plans available, he said.

Like other initiatives by Google and its competitors to spread access to computing and the Internet in poor countries, Android One could help bring a lucrative new customer base online (see “Facebook’s Two Faces”).

Indeed, low-cost Android phones are already  common in many emerging economies (see “Android Marches on East Africa”). But many of those devices use versions of the open-source software that don’t include services such as search, maps, and e-mail or access to Google’s app store. Android One devices will have those capabilities by default.

Venture fund 500 Startups uses Jobs Act to raise $100 million from public

(Reuters) – 500 Startups, the $100 million Silicon Valley venture fund perhaps best known for its incubator program for young companies, said on Thursday it would tap a new source of cash for its latest fund: the public.

Such a move would have been illegal until late last year, when a new law kicked in that allows private companies and funds to use advertising to find investors. Its adoption by 500 Startups, founded by respected entrepreneur and investor Dave McClure, signals growing acceptance of public fundraising in Silicon Valley.

“Imagine trying to sell a product, especially if you’re a public figure, without being able to talk about it,” said McClure, adding the firm wanted to take advantage of its relatively high profile, including its almost 200,000 Twitter followers.

Still, McClure expects most investors in the fund to come from traditional sources, rather than via Tweets and notices on his website. And all investors will still have to be accredited, meaning they have net worth of at least $1 million and can prove it through documents such as tax returns.

While many start-up companies have taken advantage of the change in rules, few venture firms have. One exception: New York-based ff Venture Capital, which raised a $52 million fund late last year in part through mentions on Twitter and its website.

The old rules, mandated by the 1933 Securities Act, changed last year thanks to a provision of the 2012 Jumpstart Our Businesses Act, better known as the Jobs Act.

The ban on advertising was originally to prevent opportunists from targeting the gullible and has long been considered a bedrock protection against scams. Congress decided to lift it, with some protections, to help startups and thus boost the overall economy.

Many lawyers warn that lifting the ban could lead to abuse.

McClure’s fund, which will target investors who can commit $1 million to $5 million each, is 500 Startups’ third fund. It raised a $29 million fund in 2010 and a $44 million fund in 2012.

Action camera-maker GoPro makes picture-perfect debut

Shares of GoPro Inc, a maker of cameras used by surfers, skydivers and other action junkies to record and post their exploits online, rose as much as 38 percent in their market debut.

The company’s shares rose to a high of $33 in early Nasdaqtrading on Thursday, valuing the company that popularized action cameras for consumers at about $4 billion.

GoPro is the first U.S. consumer-electronics company to go public since headphones maker Skullcandy Inc in 2011.

Videos taken using the company’s wearable cameras have made a big splash on the Internet. The company says its videos attracted more than 1 billion views in the first quarter on YouTube, where its channel has 2 million subscribers.

GoPro was founded in 2004 by Nick Woodman, who hit upon the idea while on a surfing trip to Australia. He raised his first funds to develop the camera by selling seashell necklaces along the California coast.

“There probably hasn’t been a consumer electronics brand as dominant as GoPro has been in its category since the early days of the iPod or the iPad,” Dougherty & Co analyst Charlie Anderson wrote in a note to clients.

Anderson estimates that GoPro has captured more than 90 percent of the action camera market.

Felix Baumgartner’s record-setting 24-mile (39-km) jump from a stratospheric balloon was captured using a GoPro camera. That video has attracted nearly 16 million views on YouTube.

Olympic gold medal winning snow boarder Shaun White and 11-time world champion surfer Kelly Slater are among well-known athletes who have endorsed the cameras.

GoPro cameras have also become popular among bands such as The Rolling Stones and Foo Fighters. The company received an Emmy award in 2013 for its contribution to the television industry.

GoPro sold 8.9 million shares, while the rest were offered by selling stockholders, including Woodman and investors Riverwood Capital LP, Taiwanese electronics contract manufacturer Hon Hai Precision Industry Co Ltd and Sageview Capital Master LP.

Woodman, the company’s chief executive and its largest shareholder with a 48 percent stake, sold about 3.6 million shares.

Private equity firm Riverwood owns 16 percent of the company while Hon Hai owns 10 percent through its indirect wholly owned subsidiary Foxteq Holdings Inc. Sageview owns 6 percent.


The popularity of its Wi-Fi equipped cameras drove San Mateo, California-based GoPro’s revenue to nearly $1 billion in 2013, an 88 percent increase from the year earlier. Its net profit doubled to about $61 million.

“GoPro is a brand that defines a category, like Band-Aid or Uber, and is growing very fast. It helps that they are profitable,” said Rett Wallace, chief executive of Triton Research, which analyzes startups.

Woodman’s first version of the camera was a 35-mm film camera that was strapped to the wrist and retailed for $30 at surf shops and other niche stores.

The company took off in 2009 when it launched its first digital camera that shot HD video.

Sales have grown rapidly outside the United States, with international revenue now more than half of the company’s total in the first quarter of 2014, up from 35 percent in 2011.

GoPro this month hired as president Tony Bates, a former Microsoft Corp executive who was reported to have been a CEO candidate before Satya Nadella’s appointment.

The IPO raised $427.2 million, after its offering of 17.8 million class A shares was priced at $24, the high end of the expected price range.

JP Morgan, Citigroup and Barclays were lead underwriters.

l Yahoo looking to buy YouTube content provider for $250 million: Sky News

Internet giant Yahoo has put in a bid of around $250 million to buy Fullscreen, a company which creates content for YouTube channels, Britain’s Sky News reported on Thursday.

Yahoo is looking to expand its reach to young consumers through the acquisition of the company, which generates more than 3 billion monthly views on Google Inc’s YouTube.

Yahoo faces competition from private investment firm Chernin for control of the California-based company, Sky quoted insiders as saying.

Chernin is already a shareholder in Fullscreen, having bought a stake in June last year along with the world’s largest advertising group, WPP and Comcast Ventures.

Chernin, owned by former News Corp executive Peter Chernin, is understood to have the right to buy Fullscreen at a previously-agreed price if other bidders do not offer at least $300 million, Sky reported.

Fullscreen was founded in 2011 by George Strompolos, a former Google executive.

A Start-Up With a Way to Filter Botnet Traffic Gets Funding

Botnets, networks of infected zombie computers that operate at the whim of their controller, are arguably one of the nastiest scourges of the Internet.

But security researchers believe they’ve found a way to filter bot traffic from the real thing for good.

Last October, the well-known security researcher Dan Kaminsky, Michael J. J. Tiffany, Ash Kalb and Tamer Hassan took their small security start-up, White Ops, out of stealth, publicly claiming they had developed technology that could differentiate between so-called “bots” and real people.

Eight months later, they’ve secured the confidence of new investors at Paladin Capital Group and Grotech Ventures, who together invested $7 million in their antifraud start-up.

If all goes according to plan, White Ops has a huge market opportunity.

While hard losses are difficult to track down, as much as 29 percent of display advertising traffic worldwide is driven by zombie computers, according to an estimate from Solve Media, a security firm that estimates that botnets cost advertisers $10 billion last year.

In some cases, operators set up websites, pay botnets to flood them with traffic, then trumpet their viewership to legitimate advertisers like Target, or Amazon, and begin collecting checks as zombies flood the ads with fraudulent clicks. In other cases, legitimate websites find they can significantly boost their advertising revenue by paying bots to help them boost their click quotas.

“We’ve seen entire ad campaigns that have been completely and utterly overrun by bots,” Mr. Kaminksy said. “You see a site, at the end of the month, that is 500,000 clicks short, and then 500,000 clicks magically appear.”

White Ops’ technology differentiates between a person using a web browser on their own computer, and a bot controller directing the web browser on a malware-infested computer from 3,000 miles away using Javascript and Flash, two tools that allow for the development and control of computer interfaces.

“Our discovery is that both Javascript and Flash will also tell you if there’s a real user behind that inferface,” Mr. Kaminsky said.

White Ops sells customers one line of code that allows them to differentiate between bot traffic and the real thing. They compare it to Google’s analytics service, and White Ops tells website operators how much of their traffic is coming from humans and how much of it is coming from bots. The start-up bases its charges on website volume: a site that typically generates one billion clicks a month will pay more than a site that generates 1,000 clicks.

“In the beginning, advertisers were saying, ‘We’re afraid to do something,’ because fraud was generating so much revenue for the display ad industry,” Mr. Kaminsky said. “Now the fraud is large enough that they’re saying, ‘We’re afraid not to do something.’ ”

On Tuesday, White Ops will also begin selling its expertise to businesses beyond advertisers, who have fallen victim to bots in ways other than ad fraud. Businesses, WhiteOps said, increasingly suffer from similar fraud, such as automated attacks on their websites, or criminals who use bots to charge purchases from stolen credit cards across thousands of sites.


Manufacturing in the Balance: Inexpensive labor has defined the last decade in manufacturing. The future may belong to technology.

When General Electric expanded manufacturing of home heaters and refrigerators at its facility in Kentucky last year, the reasons included big wage concessions the company had won from local workers and the advantages of being closer to its U.S. customers. But writing in the Harvard Business Review last March, CEO Jeffrey Immelt explained that one of the biggest factors in GE’s decision to bring back manufacturing from China and South Korea was the desire to keep appliance designers near its manufacturing and engineers.

“At a time when speed to market is everything, separating design and development from manufacturing didn’t make sense,” Immelt wrote. Now, someone who has an idea for a dishwasher that has fewer parts and weighs less can actually try to build it. These designs won’t be so quick to end up in knockoff products built by GE’s suppliers, either. “Outsourcing based only on labor costs is yesterday’s model,” Immelt said.


The strategy adopted by many multinational conglomerates, whether based in the U.S. or in Europe, was simple: substitute inexpensive labor for capital. Why invest in a machine to assemble iPhones when Chinese companies could throw half a million workers at the problem? The Internet, telephones, and affordable air travel and sea shipping made it easier than ever to coördinate labor from far away.

Partly as a result, the U.S. lost about six million manufacturing jobs—33 percent of the total—between 2000 and 2010, and China has overtaken the U.S. as the world’s largest producer of manufactured goods. But the impact extends beyond macroeconomic statistics.

In Producing Prosperity, a book published this year, Harvard Business School professors Gary Pisano and Willy Shih call offshoring of manufacturing a “grand experiment in de-industrialization.” They and others now believe that the consequences have been unfortunate because innovation is hard to separate from manufacturing in technologically advanced areas. Without understanding the details of production, you can’t really design the most competitive products. Eventually, what Immelt calls “core competencies”—such as product design and understanding of materials—are put at risk.

Lately, however, economic trends have been turning. Wages in China’s southern cities have been rising fast and may soon reach $6 an hour, about what they are in Mexico. Boston Consulting Group—the same consulting firm that told clients to run, not walk, overseas—now says it’s time to “reassess” China and estimates that for some products, that country’s overall cost advantage could disappear by 2015.

The vanishing comparative advantage of Asian cheap labor isn’t the only reason for companies to question offshore manufacturing. Natural catastrophes can occur anywhere, but the risks of long supply lines became apparent in 2011, when the Japanese earthquake and tsunami interrupted shipments of computer chips and floods in Thailand left disk-drive factories under 10 feet of water. Meanwhile, higher oil prices have quietly raised the cost of shipping goods. And a bonanza of cheap natural gas has made the U.S. a relatively cheap place to manufacture many basic chemicals and is providing industries with an inexpensive source of power.

The kind of manufacturing in which labor costs are most important isn’t ever coming back from low-wage countries (assembling five million iPhones for a product launch can still only be done in China), but the recent economic shifts are giving companies a chance to adjust course. One major line of thinking, the one most vocally endorsed by the White House, is that the U.S. should focus its efforts on advances in the technology of manufacturing itself—the set of new ideas, factory innovations, and processes that are also the focus of this month’sMIT Technology Review business report.

The U.S. holds advantages in many advanced technologies, such as simulation and digital design, the use of “big data,” and nanotechnology. All of these can play a valuable role in creating innovative new manufacturing processes (and not just products). Andrew McAfee, a researcher at MIT’s Sloan School of Business, says it’s also hard to ignore coming changes like robots in warehouses, trucks that drive themselves, and additive manufacturing technologies that can create a complex airplane part for the price of a simple one. The greater the capital investment in automation, the less labor costs may matter.

Because manufacturing is so heterogeneous, no single technology can define its future direction. But for advanced economies like the U.S., the questions don’t change. Says McAfee: “If labor is not the differentiating factor, you need to ask, ‘What can be?’”

The Robot Revolution Is Here, and Growing

Robots already surround us, and they’re about to do much more than work on assembly lines and pick up dust bunnies.

If you have been following technology news, you might be wondering if robots are about to take over our lives. Google in particular has made a slew of robotics acquisitions: the company bought eight robotics companies in the second half of last year, including Boston Dynamics, a maker of legged robots that can balance well enough to climb over obstacles and run, and it recently agreed to buy drone maker Titan Aerospace, whose robotic aircraft could help bring the Internet to remote parts of the world.

What does it all mean? At the least, companies like Google are anticipating business trends. These companies know that robotics is important, maybe even revolutionary. But if a revolution is coming to the consumer market, what will it look like? And why would it happen now?

If you’re waiting for an invasion of walking, talking, anthropomorphic robots, the coming changes will surprise you. In fact, many have already occurred. Robots are already an essential part of modern civilization, but they have mainly performed static, repetitive tasks (dispensing cash as ATMs, for example). Now, thanks to trends including the plunging prices of certain technology components, robots will soon be able to tackle an array of more complex, varied tasks with greater degrees of autonomy and intelligence.

The true barrier in this market has been the cost of buying and prototyping the key hardware components—components that allow machines to gather data and interact with the world around them. And now, for the first time, these components can be tested and produced at a price consumers can afford. We might see a robot that feeds your pet when you’re away from home, or a robot consisting of a punching bag with hands that helps you train at boxing.

But let’s return to the ATM. Imagine that it could learn to walk around a festival or event and focus on people who looked as though they were interested in making a purchase. Technological advances of the last few years have made it economically feasible to explore ideas like this. Because of the boom in smartphone production, a small camera can cost as little as $20, making it easier and cheaper for machines to read visual data from the world around them. Other components—such as processors and sensors—have also become exponentially cheaper in the last few years (again, largely thanks to smartphone production). There are still large and exciting challenges to overcome (such as creating the software to run such a “smart” ATM), but the technology and the business models already exist.

The Roomba is one of the few success stories in the market for home robotics, and it’s a good example of how a task can be automated with the right combination of technology and cheaper components (such as motors and sensors). And the market for vacuums alone is huge: Transparency Market Research estimated it at $11 billion in 2012 and projected an increase to $14.6 billion by 2018, with robotic vacuum sales rising faster than others.

There’s plenty of room for improvement in this niche market as well. Robotic vacuums like the Roomba must learn to navigate obstacles more skillfully, clean vertical surfaces, reach high places, and receive feedback and instructions by phone. Even more advances may soon be possible; perhaps in the future, the robot will be able to split apart into smaller robots in order to clean cracks and hard-to-reach places.

The smartphone and PC revolutions have given us valuable precedents for studying this market. Once we can make useful devices affordable enough, an entire industry of thinkers, engineers, and inventors will spring up to address the rising demand. In fact, we’ll probably see an app store for robot hardware as well.

Indeed, trying to predict where the robotics industry is headed feels like holding your first iPhone in 2007 and imagining how it would become part of our lives—it’s exciting to ponder what the future holds, but impossible to know. When it introduced the first iPhone, Apple had created an extraordinary piece of technology. But more important, it had produced an affordable product. We can now do the same with robots, and the possible applications are endless.