John Naughton, the Observer's Networker columnist, looks back on a momentous year for new technology
From These Organizations:
Does Blackberry have a future?
Governments all over the world had to deal with the power of social networking – and their reactions were not exactly an endorsement
The year began with the reverberations from Wikileaks – first the revelations about US military operations in Iraq and Afghanistan and then what American diplomats had been writing home. Western governments that had hitherto viewed modern networked-communications technology as a useful scourge of authoritarian regimes began to have second thoughts.
The U-turn was most painful in the US State Department, where Hillary Clinton had to eat her hat, or at any rate her stirring January 2010 speech about how “information has never been so free” and how “even in authoritarian countries, information networks are helping people discover new facts and making governments more accountable”.
Then came the Arab spring and the agreeable discovery that social networking and mobile phones appeared to have politically useful effects. I had a fascinating conversation with a State Department official who related how his colleagues, frustrated by the absence of al-Jazeera on US cable channels, were reduced to streaming it to their laptops. He also told an instructive story about how a senior colleague was baffled when a demonstrator appeared in Tahrir Square holding up a placard that contained only a Twitter hashtag. “What’s that?” asked the baffled diplomat.
There was delight in the west when the Tunisian regime failed to grasp the significance of Facebook and Twitter, and concern when the Mubarak regime did. There was gleeful exhilaration when some hackers rigged up a “phone to tweet” system that enabled Egyptians to dial an international phone number and record a message that was then broadcast as a tweet. Mubarak shut down Egypt’s internet access for several days, which caused some disquiet. But then the Egyptian generals, who run a lot of businesses, discovered that they were losing millions of dollars in revenue every disconnected day, so the country hastily rejoined the networked world.
This lesson – about the centrality of networked communications to modern industrial life – did not, however, seem to penetrate the corridors of power in Whitehall. When news of Britain’s outbreak of recreational looting eventually reached the more expensive parts of Tuscany and David Cameron returned to take charge of the government’s response, there was a lot of loose talk about the role that Twitter, Facebook and a particularly sinister technology called BlackBerry Messenger was playing in co-ordinating the mayhem. Men in suits speculated openly about whether these satanic channels should be shut down altogether.
Which made one wonder what planet they inhabited. Apart altogether from the irony of seeing a device – the BlackBerry – that had once been the ultimate badge of corporate status now apparently metamorphose into a working tool for the scum of the earth, there was the fact that PIN messaging on BlackBerrys is not only an ancient technology, but was one of the reasons why governments across the world wanted BlackBerrys for their officials.
The truth is that the heady talk attributing these social and political upheavals to social networking and text messaging was mostly eyewash – as, for example, the Guardian and LSE’s “Reading the Riots” study of Twitter’s role in the UK looting suggests.
Political revolutions are made by people putting themselves in harm’s way – on the streets. The fact that they use modern communications tools to co-ordinate their activities or to disseminate news is no more remarkable than that the communards of 1871 used cobblestones to build barricades. People use the tools they have to hand. So the prominence of social networking and SMS in political upheaval is simply a measure of the extent to which these technologies have become mundane.
THE CLOUD’S THE LIMIT
Steve Jobs, its charismatic leader died, yet the iPad maker can do little wrong. How long can it keep it up?
I spent a lot of 2011 writing about Apple for the simple reason that it dominated the news. At one stage it even passed Exxon Mobil to become the world’s most valuable corporation. For a company that in 1995 was only months away from collapse this was the culmination of an astonishing comeback. Everywhere one looked, Apple seemed to have the Midas touch.
In the mobile phone market, for example, Apple pulled in 40% of smartphone revenues and close to 65% of the sector’s profits. It launched an upgraded version of the iPhone – the 4S – that has a voice-control feature that has users behaving strangely: instead of talking on their phones, they now talk to them.
In the PC market, where it was once a niche player, Apple achieved an all-time record this year – a 13% share, up 21.5% on the previous year.
And then there’s the iPad … Apple will have sold nearly 50 million before the year is out (up from 14.6 million in 2010). So a device for which there was no obvious need now has a market share of nearly 75%, and in 2015 is predicted it will have a 50% share of a world market that will apparently be 326 million tablets.
In other parts of the Apple forest, the iTunes store sold its 16 billionth song in October sales of apps for the iPhone and iPad grew even more steeply, the company launched a comprehensive cloud service (called – inevitably – iCloud) and opened more wildly successful bricks’n'mortar stores. And all of this while the life of its charismatic CEO was ebbing away.
This is clearly a company at the top of its game: designing attractive products with high profit margins and bringing them to market with flawless efficiency. Here and there are dark patches that may herald trouble to come: working conditions in the Chinese factories that manufacture the beautiful kit, for example; Apple’s less-than-perfect record at running cloud services; and irritation at the control-freakery that means there’s always a trade-off between users’ freedom and Apple’s relentless upgrade policy. Customers who naively upgraded to the latest version of OS X, for example, discovered that their copies of Microsoft Office no longer worked. Apple’s response? Essentially this: tough. Upgrade to the new version of Office. Or use Pages (the Apple word-processing product).
Technology moves at lightning speed. This came as a surprise in 2011 to some tech companies, such as Nokia and Hewlett-Packard
How long can Apple sustain its current dominance? The problem with the technology business is that somewhere else in the jungle there lurks an outfit whose business plan is to eat you for breakfast. And market dominance is no guarantee of safety.
Just look at Nokia, which for a generation dominated the mobile phone business and whose flight into the arms of Microsoft marked one of the most humiliating climbdowns in corporate history. The problem was not that Nokia wasn’t selling lots of handsets; it continues to be the world’s biggest manufacturer of phones. It’s just that most of them are low-end, whereas most of the growth (and profit) potential lies in smartphones; ie the market for powerful handheld devices that provide high-quality internet access as well as voice and SMS. This is the market that was comprehensively disrupted by Apple when it launched the iPhone.
At the root of Nokia’s decline was the fact that it was, at heart, a hardware company with an engineering culture that didn’t seem to understand software. Smartphones need sophisticated operating systems, and Nokia’s efforts in that direction – Symbian and MeeGo – never really measured up. So, in the end, its only option was to team up with Microsoft last February in an “alliance” that would see Windows software running on Nokia hardware. Sales of the first of these devices, the Lumia 800, have been – surprise, surprise – “disappointing” so far.
But if Nokia was laid low by its “hard” engineering culture, another technology giant, HP, lost its way by abandoning it. For generations, Hewlett-Packard – which was named after the two engineers who founded it – was a byword for wonderfully engineered, highly functional and reliable products, which sold into scientific laboratories, computer centres, offices and retail outlets worldwide. Its LaserJet printers became the de-facto office printer. It was the engineering equivalent of a blue-chip company.
But then it embarked on the path of traditional corporate growth by acquiring companies with different cultures, entering the consumer market and in due course becoming dominated at board level by a marketing rather than engineering culture. Since 2006, that board has been enmeshed in one scandal after another – ranging from allegations of covert surveillance of some board members, cover-ups of technical problems and a legal dispute with Oracle. HP is still a big and important company. But it’s no longer a paragon.
And then there was RIM – the company that makes the BlackBerry smartphone. Once it, too, was a paragon of corporate success as the first company to make a mobile email system that actually worked. As a result it rapidly acquired a stranglehold on corporate and governmental markets. When Apple announced the iPhone it was assumed that, while it might prove disruptive in the consumer market, it would not impact on the BlackBerry franchise in the business world.
How wrong can you be? Late last year RIM’s share of the smartphone market was outstripped by the iPhone and soon afterwards RIM was overtaken by Android phones. Since then it’s been downhill all the way, so a company that was worth $84bn (£53bn) in 2008 is now valued at just under $9bn (£5.7bn). Sic transit gloria and all that.
Mark Zuckerberg’s luck (or skill) continued to hold in 2011. Despite the recession, investors clamoured for a chance to invest their dollars
There are lies, damn lies and pre-IPO (initial public offering) valuations. Facebook started 2011 with 500 million users and ends it with more than 750 million. If this goes on it’ll have more people than India by this time next year. And its putative value – ie what it would be worth if it floated on the stock market – has risen in proportion: from $50bn (£32bn) at the beginning of the year to $100bn (£64bn) now. If anyone doubts that we’re in the middle of a bubble, then this should be a wake-up call.
The feeding frenzy to get a share of the Facebook action is driven by many things, but chief among them is the fact that there are a lot of people out there with oodles of cash and nowhere to invest it that will give a decent return now that the banks are bust and even hedge funds have lost their magic. So think of Facebook as a dam behind which a huge tidal wave of cash is building.
Of course there are also a lot of people who believe the infant Zuckerberg’s assertions that “everything will be social” one day, and that when that day comes he will be the sole proprietor of the world’s “social graph” (a fancy term for network). So here, in the interests of prudence and common sense, are two cautionary thoughts. The first is that if the eurozone implodes and the world economy nosedives then even ownership of the vaunted social graph might look a tad expensive at $100bn. The second is the salutary fact that of all the recent technology IPOs, only one – LinkedIn – is still trading at above its offer price. – is still trading at above its offer price.
Hopes and investment have been pinned on our silicon economy, but the jobs created may go elsewhere
As the UK economy prepared for its next nosedive, the fantasies of coalition ministers about the economic significance of start-ups and “creative industries” became increasingly comical. That’s not to say that start-ups are not wonderful things – they are – nor that industries should become uncreative. It’s just that start-ups, especially in the technology sector, create very few jobs in their home countries. They create jobs for the highly skilled people who found and run them, but these are a small elite. Most of the manufacturing jobs go to China or Taiwan. In that sense, while start-ups may have a beneficial impact on exports and GDP, they won’t solve the really scary problem we face – mass unemployment. Oddly enough, large companies could do something about that. But in order to do so, they’d have to learn to innovate – and that’s something they have hitherto not been good at. Sigh.
A digital version of a classic poem showed the magical potential for ebooks
For me, the most exciting product of 2011 was not a gadget or anything Google or Apple did, but an iPad app – Touch Press’s magical evocation of TS Eliot’s great poem, The Waste Land. By bringing together the text (with scholarly annotations and the marked-up typescript) with a filmed performance by Fiona Shaw, audio recordings of readings by Eliot himself, plus by Alec Guinness, Ted Hughes, Viggo Mortensen and Shaw, and commentaries from Seamus Heaney and others, the app provides an entrancing glimpse of how the book might be reinvented for a digital age. When I reviewed it in June, I observed that another great modernist text cried out for the same treatment: Joyce’s Ulysses, which comes out of copyright in January. And guess what? Touch Press are working on that right now.
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