Friday, June 10, 2011

Pandora -- $1.9 Billion Valuation, Really? Smells Like 2000 ...

Pandora just upped the price of its IPO -- which now values the company at about $1.9 billion. And, this from a company with profitability still nowhere in sight. Yes, massive user base, but no proven business model. I recently blogged about this -- click here.

Of course, this never stopped YouTube, Twitter, Skype, or Groupon (which itself is in the midst of IPO mania right now). The difference is that YouTube, Twitter and Skype never went public -- and 2 of the 3 were gobbled up by two of the few handful of companies that could afford to lose big initially on the service itself for the sake of long-term strategic benefits that are not necessarily tied only to that service. Once Pandora goes public, that kind of "big fish" result is not in the cards (or, at a minimum, extremely difficult).

I love the service. But, not so much to invest in it. I am clicking Pandora's "thumbs down" on this one.

iCloud - Apple's Hotel California (or Roach Motel) -- You Pick the Analogy)

Apple's iCloud -- much has been written about it already even before Jobs' official announcement earlier this week. I will assume each of you knows what it is -- i.e., Apple's upcoming Cloud service.

So, what's the big deal? Other behemoths such as Google and Amazon already offer their own Cloud infrastructures and services. In fact, both of those beat Apple to the Cloud-based music scene.

But, here's the fundamental difference -- Apple uniquely is a content company (iTunes, iPhoto, etc.) that owns its own closed hardware/software eco-system. Amazon and Google can't say that. And, Apple absolutely wants its closed world to stay that world -- and that means its approach to the Cloud is fundamentally different.

Why is that critical? Because Apple uses software and services to sell more hardware -- THAT is its monetization play (always has been). Apple makes little margin on services such as iTunes. So, iCloud is a means to an end -- and the ultimate end is complete life-long "lock in" of its customers to their eco-system so that they will always buy only Apple products. That's why Apple's iCloud -- unlike "real" Cloud services from Amazon and Google -- essentially is only about Cloud-based storage. There ain't no streaming here -- everything stored in the Cloud must be downloaded to each individual Apple device. That's right, only to Apple devices. Get it? Check out Apple's own description of how its iCloud will do what it does when it launches -- click here. Industry pundit Dan Rayburn notes it here.

And think about it. Once Apple customers begin "investing" in iCloud by sending all of their own content for storage in the Cloud -- that includes both (1) premium professionally produced content like music, motion pictures and television (trust me, video streaming will come soon to iCloud), and (2) personal content (consumer's own photos and videos) -- those consumers will find it very difficult to leave (in fact, practically impossible for most consumers). Apple customers essentially become locked into a never-ending Apple-ian world via a roach motel strategy where consumers check in, but never check out. In the immortal words of The Eagles' classic song "Hotel California," they may try to check out, but they never leave. They will continue to buy Apple's pretty iOS devices because they essentially "have to."

This ain't Google's or Amazon's view of what the Cloud should enable. In fact, it is the precise opposite of what the Cloud's essential promise -- i.e., a fully open world where you can access your content anywhere YOU want -- not only where Apple wants you to. After all, it is YOUR life.

iCloud -- Apple's new lock and key.

Brilliant ... but a bit disturbing ...