Stratechery Daily Update 2014-02-05

Good morning,

One company I haven't written about in a while is Twitter. This despite a torrent of news stories and new releases over the past week especially. On one hand, all of the news, particularly around new products, is good to see. On the other hand, it all feels a bit…staged. Consider this Steven Levy piece - How Twitter Found its Money Mojo. It's a fine story, although Levy's framing - that no one thought Twitter could make money - is obviously ridiculous to anyone paying attention (I myself wrote that Twitter would easily monetize but struggle to grow back when they announced their IPO, and held that opinion for a long time before that; I wasn't alone). Anyhow, the content of the story isn't the point; rather, you usually do the big Levy feature around a big announcement or new product. But the only truly big news around Twitter this week is it's earnings, set to be announced later today. And it's really hard to take this PR blitz as anything other than an indication that they won't be good.

Anyhow, I might be wrong; if they're great, perhaps the PR blitz was designed to get a lot of momentum, but regardless, look for more on the company tomorrow after the call. I plan to cover both the earnings and all of the product announcements over the last two weeks.

On to the update:

In a stunning move, Tom Wheeler took to Wired to announce his proposal for far stronger net neutrality rules than anyone expected:

It's that last point that is the biggest surprise: the Open Internet Order that the FCC adopted in 2010 only applied to wired broadband. You'll recall that the Open Internet Order was struck down in a Verizon lawsuit because it was enacted under the FCC's Title I authority; the fact Wheeler's proposal - based on Title II, as recommended in the Court order adjudicating that lawsuit - will also apply to wireless shows what a terrible strategic decision Verizon made in challenging the previous order.

Moreover, as this excellent explainer from Giga
Om notes, Wheeler's proposal also addresses peering:

This bit about peering is particularly interesting; in Netflix and Net Neutrality I was skeptical of Netflix's position, as it seems like they are asking non-Netflix users to subsidize Netflix users, and I still think that's the case. Moreover, as I argued in that piece, net neutrality is, quite literally, not free: the price is either less investment or (more likely) metered usage.

As this must-read writeup in the Wall Street Journal of how Wheeler's proposal came to be notes, Wheeler's primary concern was continued investment:

In his Wired piece, Wheeler says he is confident because of the example set by mobile (voice) networks:

Last-mile unbundling (allowing multiple ISPs on the same network) is my preferred method of guaranteeing net neutrality, but as I wrote last fall, it's not politically possible in the United States. Ultimately, Wheeler has chosen the exact same compromise I did in my piece last year:

Remember, the U.S. mobile industry Wheeler is modeling his approach from has some of the most expensive mobile data plans in the world, and there is every reason to expect those high prices to continue with these new rules. It's a high price to pay in every sense of the word, but ultimately, one I believe is worth it. This is good news.

Yesterday was Satya Nadella's one-year anniversary as the CEO of Microsoft; I didn't write anything because I already said my piece in my Christmas Gifts for Microsoft Daily Update:

You can read the original if you want to see why I was so pleased, but my "gift" for Microsoft in 2015 was a buildout of products and services that sat on top of iOS and Android, particularly the development stack. And while there hasn't been too much news there - yet - Microsoft continues to move quickly on the application side.

First up was last week's launch of Outlook, and I'm linking to The Verge simply because of the headline: The Best Gmail App for the i
Phone is now Made by Microsoft:

Indeed, I was stunned at the speed of this release, but then again, that's exactly why Microsoft bought Accompli in the first place. I wrote at the time:

Reportedly, one of those acquisitions arrived today. From Bloomberg:

Humorously, this was the first comment in the aforelinked The Verge article:





In case you can't see it, Vlad Savov, the author is endorsing Sunrise as the best calendar app; I guess now he can write a sequel! And, actually, that's kind of a big deal: at least according to Savov Microsoft makes the best email and calendar apps on the i
Phone. That is excellent news for a company seeking to be a mobile-first cloud-first productivity company, and I don't mind one bit that Microsoft bought their way in.

In fact, I thought this bit of criticism from Om Malik was not just unfair, but downright wrong:

Actually to insist on building it themselves would have been characteristic of the old Microsoft; stuff like "Windows First" is simply the symptom of a more fundamental problem that infects far too many organizations: "Not Invented Here" syndrome. Sure, Microsoft should have built the best Exchange apps back in 2008, but they didn't, and now their delay is a sunk cost to the tune of $300 million. Kudos to Nadella for paying it without blinking.

Moreover, this gets to what irks me about Ballmer apologia like this bit in Mary Jo Foley's Nadella one-year commemoration:

I'm sorry, but putting Office on the i
Pad was the bare minimum for what Microsoft needs to do on mobile, and Ballmer couldn't manage that for over six years! Why oh why do people want to give him credit? Not only should Office have been on i
Pad years ago, but so should a whole host of new applications that reinvent productivity for the Mobile First era. It's great that Nadella is finally beginning to make that happen, and moreover, making it happen with Microsoft's most abundant resource: money.

What is fascinating to consider is that the greatest beneficiary of Apple's unsustainable App Store policies - which hurt productivity applications the most - may be Microsoft. Their business model depends on monetizing through the cloud, not the App Store, which means they are the best placed of any company to make money building productivity applications for the App Store. It's especially ironic if you believe that Apple neutered the App Store to prevent another Microsoft; by doing so, Microsoft may in the long run have the space all to itself.

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Have a great day!