Most startups unrealistically hope to hire idealized coding or UI "ninjas" that they think will make their wildest dreams come true.

Look at the “Jobs” page of any startup and you’ll see a bunch of postings for “Ruby Ninja,” “AJAX Samurai” and “UI Wizard, Level 43.” Of course–I jest–but only a little. These names are more than just funny epithets. These aspirational descriptions of powers we normally only assign to superheroes express the misguided hopes that one or two engineers/artists exist somewhere in the world that will magically turn a given startup into the next Facebook. Unfortunately, the last thing most startups need is another engineer. What they really need is a marketer.

But aren’t marketers only good once you’ve completed building your product and then need to sell, monetize or otherwise hock it to unsuspecting suckers? Aren’t marketing people expensive luxuries only good for creating Super Bowl ads?

No! That’s where many founders and engineers have it bass-ackwards. When your startup is two guys and a dog, yes, your first few hires will likely be engineers who can create a convincing proof of concept (alpha, beta, charlie, tango, whatever) to get you to the next milestone. However, after that most startups just continue to pile on engineers to build more and features (and the frontend and backend to support them). But that’s when you need to hire marketing (especially when the founder(s) don’t have a formal marketing background).

If you don’t have a crystal clear idea of who your customers are and what benefits of your product they’ll most value, you are 99.999% sure wasting your engineering resources on the wrong problems. And this is not simple stuff–but most founders I speak with say something like, “Yeah, I know perfectly well who our target customer is and what their needs are.” Big mistake. In general, before you say another word, I know you’re wrong. Say that to me and you’d better be prepared to fight (like a ninja) because I’ll slice you and dice you until you cry, make you take your statement back and admit you were the second gunman on the grassy knoll.

While some founders are insanely perceptive marketers who need no additional help, unless your name is Steve Jobs you are probably prone to overestimate yourself in this department much more relative to, say, engineering. Why? Because marketing is often thought of as less of a hard skill than say Python or PHP coding, many engineering-types assume it is 100% intuitive, fluffy (nonsense?) and can’t be thaaaat hard. However, if we analyze why most startups fail, rarely do we say “They didn’t have enough engineering.” (Think Veoh.) In my humble opinion, the single greatest cause of startup failure is not understanding the customer’s needs, EVEN THOUGH THE FOUNDERS THINK THEY DO. There, I said it.

Here are a few key lessons:

1. Marketing is not easy
2. Marketing is not about “selling”
3. Marketing does NOT begin when it comes time to sell. Real marketing begins in understanding who the customers are, the needs of those customers, how any given solution will benefit those customers and how to best communicate to those customers. Good marketers are part and parcel of the product creation cycle from as early as possible.

Capiche? So the next time you’re thinking of hiring your next “AJAX, PERL, Ruby Nun-Chucking, Kung-Fu Master Shaolin Guru Attack Wizard”, stop and ask yourself “Would I be better off hiring a marketer who can help me understand whether I am building the right features?” If you feel like you need to hire a superhero for an engineer, maybe its because you’re too dependent on “features” as opposed to customer benefits. Remember, the best engineered products don’t win; the best customer experience/value does.

Today is an historic day in Redmond: the day Microsoft can finally claim I wrote something positive about their mobile OS. Windows Phone 7 Series is a bold re-imagining of Windows Mobile which I have previously described as nothing less than a “car wreck hitting a train wreck getting hit by jumbo jet.” However, in analyzing Microsoft’s new strategy we see they have implicitly ceded defeat on the original Windows Mobile strategy. This has some very interesting ramifications I have not read about anywhere else, so I thought I would point them out.

If you want a good write up concerning the advancements in WP7S, Ars Technica has a great summary here. But, what interests me most about WP7S was never announced and probably never will be.

Windows Mobile = Windows…but Mobile
So the story goes that Microsoft defeated Apple in the desktop OS market because Apple stuck too rigidly to a command & control system of defining all hardware and software. Bill Gates came in and democratized everything allowing anything to work with anything. (Freedom rules! O’Doyle Rules!) The evil, all black wearing, communist Steve Jobs was handily defeated in the Great Operating System War (aka The First World Operating System War).

As the world evolved and mobile devices came to market, Microsoft pushed on with its democratic, diverse hardware platform strategy and ported it directly to these new waves of mobile devices. This is evident from the various names of these mobile operating system incarnations: Windows CE, Windows PocketPC (Windows…in your pocket!!!) and of course Windows Mobile. These attempts were all aimed at putting Windows on a mobile phone–Start button, task manager, windows file explorer and all–the whole shebang.

Why would mobile phones be any different than computers? Until today, Microsoft publicly believed that this is how the world should work: Microsoft makes the operating system and myriad device manufacturers compete from Texas to Taiwan to make dazzling devices with the most differentiation sporting the most megahertz and most whizbang features to lure consumers. (And we see this in how WinMo devices are marketed: They are marketed like computers: “You should buy this WinMo phone because it has a XXXMHz Snapdragon processor and XXXMB of memory!” Oooo! Ahhhh!)

Only problem? As it turns out, Windows in your pocket is a terrible idea. Why? I realize this may be hard to grasp–it’s exceedingly subtle (at least it was in Redmond for a decade): mobile phones are not desktops nor even laptops; they are mobile phones.

iPhoneOS ≠ OS X Mobile

Attack!!!

Until the iPhone was released, the mobile software world was a horrid shantytown of squalor, JAMDAT and diarrhea. No single mobile OS had a rich enough user experience or had enough market share for development to be worthwhile and hardware differed so much from phone to phone that entire businesses were made out of customizing mobile games into tens of thousands of individual SKUs (I should know; I looked at investing in a few such businesses).

A Turning Point
But now we are coming to the turning point in the war. We are 25 years after the first graphical version of Windows on the desktop.  It is becoming apparent even to Billy G. and Stevey B. that quality assurance with an unlimited number of hardware devices and an unlimited number of peripherals, all requiring unlimited numbers of software drivers means, well…infinity plus one combinations of possible devices for Windows to reside on…and that makes producing really tight software quite hard. Windows grew ever larger just to meet the minimum requirements of supporting this infinite universe of hardware and software and soon began to sag and eventually crash under its own weight faster than the Warsaw Radio Mast. We have a name for this tragedy: Windows Vista.

WP7S ≠ Windows 7 Mobile
Today Microsoft announced Windows Phone 7 Series and simultaneously 1) gave itself a decent shot at reclaiming major market share in the mobile OS and 2) conceded defeat of its core strategy by implicitly admitting that the “Freedom Rules!” lessons of the desktop do not apply to the mobile phone. As Ars Technica states:

“[WP7S relative to WinMo], however, is considerably less customizable, and the hardware requirements are much, much tighter…In fact, pretty much the only optional feature is whether to have a hardware keyboard or not…Software-wise, there will only be one version, with none of the variants that its predecessor had.”

Thus, Microsoft was able to save its mobile OS, but only by adopting tactics from the enemy. While this may have been “OK” to do for the limited world of the Xbox, this is quite a big deal for the mobile OS, which easily represents half or more of the future OS opportunity. Microsoft has ditched the large, open, hairy, wooly, unfettered, laissez-faire capitalism of both Windows and Windows Mobile for the carefully regulated, post-modern compromise that is WP7S.

And I toast Microsoft for it! That’s why WP7S works. That’s why it’s promising! And what next? If Microsoft is able to stick to this strategy, we may see a D-Day face off between Microsoft and Apple.

But will Microsoft ever adopt such a rational and post-modern view of Windows on the desktop, combining both a tightly regulated vision with some room for outside vendors? I certainly hope so.

Addendum on Product Naming
Windows Phone 7 Series…or was that Windows 7: Phone Series? Or Windows Phone Series 7? Really? I mean, really ? That was the best name you could come up with? The whole point of this new OS is that it is NOT “Windows 7 in your pocket.” I understand you want to benefit from the wave of positive press and enthusiasm Windows 7 is receiving, but this is short-sighted. It’s a mouthful and the order of the words is confusing. I am not saying I immediately have a better alternative, but then again I haven’t spent any time thinking about. If I happen to find a seven figure check in the mail from Redmond, I’ll start working on it. My guess is they come up with a better name or at least a more consumer friendly moniker before official launch.

[Ed: Of course, as my friend Lucas points out this is all in principle at least. WP7S is supposed to arrive by "holiday season 2010" which puts it just this side of what many would call vaporware. iPhone 4.0 will likely be 33-50% dead already and iPhone 5.0 will be 50% alive by the time consumers get their first taste of WP7S-an eternity in mobile OS time.]

For those of you who know me well, you know I once considered developing a product very similar to Withings–the wi-fi connected body weight and body mass scale. My idea was identical in the basic concepts of a consumer friendly wi-fi scale with an associated web and mobile tracking component. But I’ll get into the similarities and dissimilarities more in a separate, second post. First though I want to identify why I think this product could be representative of a larger trend that I very much believe in.

A lot of exciting things have happened on the web and with technology over the past 20 years. Yet, there have been precious few advancements from either the web or gadgets (or their intersection) which are health related that I regularly use. Consumer health on the web began and ended with WebMD and its clones. That is until Nike Plus. Nike Plus represented a new way to interact with health data combining the physical with the virtual. And Nike Plus is damned good (Need proof? It sold 1mm units in the first 4 months). It demonstrates how you can take something patently boring and horrible like a pedometer and turn it into a mass market hit that is genuinely useful for millions of people by informing and motivating their training and health. But why stop there?

And I am not talking about your $400 Garmin GPS watches for triathletes. Yawwwn. I am talking about a much more interesting and much larger market: preventive consumer healthcare in the home. Reset your expectations to the tens of billions of dollars. That’s where this market could and should go in the next decade.

What am I talking about? I want internet connected scales, blood pressure monitors, sleep monitors, glucose monitors and more–aimed at everywhere from the mass market to granular niches. Some people will read this list and get it instantly. Some will think WTF? But remind yourself it’s all about the execution: think pedometer vs. Nike Plus. The distinction is subtle but critical. The products need to be 1) simple to use and 2) the results need to be made meaningful to your target customer–and it can’t just be a bunch of data puked into Excel or a web page (which is how it’s currently done on today’s most advanced USB/Bluetooth products.) These need to be consumer devices at the end of the day even if the data is synced to a healthcare provider at some point.

If you design and market these devices the “healthcare way”, this whole idea is destination Titanic from the get-go. The vision might be obvious enough as evidenced by the Continua Health Alliance, but good execution will be very, very hard to find. (Most Continua members demonstrate the precise opposite.) I think Withings represents the cutting edge of this non-fitness, consumer -healthcare market that combines the web and smart devices. And when I bring up Nike Plus as the role model, I don’t mean it should be done with the Nike Plus target market or marketing in mind–this is not about getting in shape and is not targeted for fitness freaks. These devices are for a decidedly different target and would require decidedly different marketing and branding, but that doesn’t equal marketing it like you would a goddam enema.

Is it even possible to make some of these products sexy? Wrong question.

You don’t need to make them sexy. To reiterate, you just need to make them 1) user friendly enough that the target audience will be able to frequently use them and 2) have results that are easily understood. Here’s a slide on brand positioning from the original business plan I put together in late 2006 / early 2007. The blue arrows indicates where I think these sorts of devices could be placed on a spectrum from “Full Metal Jacket” to “Mister Rogers.”

So who would these devices be for? Oh, any one of the tens of millions of Americans who deals with obesity, hypertension, diabetes, heart attack, stroke, insomnia, etc. Is it a big market? You betcha. Is this the beginning of all this? I hope so. I hope we start seeing more and more entrepreneurs in this space because the big healthcare players get the concepts of “user-friendly” “marketing” and “web” about as well as Attila the Hun understood the concept of diplomacy.

The upcoming Withings: Part II will include a review of the Withings scale and a comparison to my original business plan. Stay tuned.

I am going to respectfully disagree with Kellogg Professor Mohan Sawhney who recently wrote “I think the iPad is aimed squarely at the center – of nowhere.” My argument boils down to three primary points:
1. Neither early laptops nor iPods were truly mass consumer devices. Their progeny were, but those first incarnations were not.
2. If you try to think of the iPad as a “complete substitute for either a laptop or a netbook or a smartphone” as he argues, you have already erred. It is not.
3. You and I are not typical consumers.

Here we go:

1. The Allegory of the Laptop. I bought my first laptop in 2001. I thought of it as a “great addition to my desktop.” But hardly a great investment from a TCO perspective. I presupposed I would use it whenever I went to the Stanford Library to study, when I was traveling, or perhaps sitting outside in the Oval on one of those famously sunny Palo Alto afternoons. Never, however, did I imagine it replacing my desktop. Why? It couldn’t. The technology wasn’t quite there yet. Battery life was abysmal, the processor was more anemic than the venerable Irom Sharmilla on her 10-year hunger strike and Wi-Fi was still crying from its crib in infancy and not present on my laptop. Oh yeah, and I couldn’t see the screen outside–so much for working outside in the Oval. BTW, have you ever tried using a computer recently that wasn’t connected to the internet? WHAT THE HELL IS IT GOOD FOR?!

But then something changed. In about 2005 or 2006, I noticed some dust on my desktop both literally and figuratively. (Seriously, my room was a mess, the thing was filthy.) I didn’t need my desktop anymore. The equation had changed. I could now do 95% of everything I needed to on my laptop. I thought of my big, custom-built desktop as really only useful for large Excel documents, video games and as a big hard drive for my MP3/AAC collection.

The same is true for iPods. I bought an original iPod way back when. I still have it. It’s black and white, has a FW400 port, is thick as brick, practically needs its own wheelie suitcase to transport and cost $600. I remember my friend Kali asking/reprimanding me at the time, “What the hell is that? You spent $600 on an MP3 player!!!” [Ed: Actually, Kali this MP3 player will shake the very foundations of the computing industry.] That original iPod was not ready for mass market. It was a niche product for alpha geeks like me. But you know what? It wasn’t a mistake. The technology evolved, Apple executed and it turned out that everyone wanted thousands of songs in their pocket (i.e. once the iPod could fit in a regular size pocket). PS-I apologize for the misleading title of this section. That was in no way an allegory.

2. The  iPad is a new device, don’t pigeonhole it bro. I readily admit the iPad is neither a laptop, netbook or mobile phone. It is not supposed to be. Good product design requires as much sacrifice as it does integration. To understand this, you need to think different for a second. To lose the inhibition, follow your intuition. Free your inner soul and break away from tradition. You categorically CANNOT look at the iPad and determine its utility by comparing it to other products. YOU MUST COMPARE IT TO CUSTOMERS NEEDS. Does it have 10x USB and 4x FireWire 800 ports? No. Does it have a 15x dual-layer burnable Dual-Scribe DVD Writer? No. I agree–from that perpsective it sucks. But so do feature lists. Do most people need those things? No! You need to start by asking what people use these devices/tools for.

3. My girlfriend does not have a computer at home. Right now, your mind just exploded and it’s just a red, gooey mess. But, Marketing 101, baby–you and I are not the typical consumer. Most people don’t go home and run conjoint analyses in Excel on weekends. But my girlfriend is closer to the typical consumer. What does she need? First, she has a computer at work. She uses that for most computationally and input mechanism intense tasks that she does–like large spreadsheets and long emails. She also surfs the web on it and takes care of most of personal internet needs through it. Second, at home and on her person, all she’s got is her Blackberry Pearl. Why? Because when she gets home she mostly emails, surfs a web page or two and makes a few phone calls. My girlfriend is the perfect example of a potential future iPad customer. Not today’s iPad mind you–too geeky for her. But perhaps iPad version 3. One day, Gilt or Groupon will come up with a social shopping app that she’ll need to have and the iPad v3 will arrive via FedEx the next day in a white box. Just like it was with the iPod…

Conclusion
Most people do “intense” computer work in the office on their office supplied machines. When they get home, they use the web for leisure, socializing and communication–exclusively. And for those of us who spend 5-10% of our time at home working, we can probably afford both an iPad and a laptop. Although as the iPad improves and you and I catch up to the new reality, we’ll begin to realize we think of our laptops like we think of desktops today–ornery beasts used for work. We’ll spend the majority of our time at home on the iPad, not our laptops. Desktops and laptops were expected to be used for both leisure and work. The iPad has for the first time truly separated “leisure” from “business” computing in terms of devices. From now on, the iPad/tablet is a “leisure” computing & web device, while laptops are “business” devices. This was brilliant customer and product segmenting, targeting and positioning by Apple. Is this all a sure bet? Hell no. There are risks up the wazoo in everything and anything I said coming to fruition–as was the case with the original iPod. But is it a bet I’d take if I were SJ? Hell yeah, I would.

So Chicago might not be taking my advice and trying to transform itself into a hub of mobile application development, but New York certainly is (though I cannot take any credit for it). The NYC BigApps competition is exactly the sort of government prodding that I think can be helpful in stimulating further entrepreneurialism and innovation. Let me be clear when I say that government action is not a necessary condition for any city’s startup culture in the US, but I do think it’s a positive NPV way for a city or state government to use its funds. I can guarantee NYC will get back more than the $20,000 in cash distributed at BigApps plus whatever G&A expenses incurred in the form of taxes and other revenues.

In the long run, this is a good bet for NYC. Mobile apps make a lot of sense for dense urban environments. Urban dwellers are more likely to derive a lot of utility from mobile apps (think about how much more helpful Yelp is in NY than a farm town) and mobile development teams are particularly well-suited for a metropolis since they works in small teams often of a dozen or less as opposed to packing 1,000s of folks into vast, suburban campus sprawls (Yes, I am thinking of you Adobe, Sun, Microsoft, Apple etc.)

Bravo to New Yorkers Mayor Bloomberg, Fred Wilson, John Borthwick, Kevin Ryan and Danny Shultz among others for getting involved and lending their names and credibility to the event. At the end of the day, any such initiative is only as good as the people putting it together and those competing.

(Also, in another bit of great news for NYC mobile app development, CNET co-founder Kevin Wendle and MusicNation co-founder Daniel Klaus recently announced the AppFund which will be based in NYC. Things are really coalescing for a new era in New York-based entrepreneurialism. Great news for us native New Yorkers with a deep tech passion.)

What I dislike about most tech prognosticators is that they make huge general predictions and fail to back them up with any specific reasoning or evidence. Well, here’s my take on Apple’s Lala acquisition complete with sound argumentation.

Lala + HE-AACv2 = the ability to listen to your iTunes purchases anywhere.

How did I come to this conclusion? Well back in the Fall of 2009 with iPhone 3.1 Apple added support in iTunes and iPhone OS for HE-AACv2 which is a better version of the current AAC–AND–is smart and efficient enough to allow streaming (quoth Wikipedia “It is an extension of Low Complexity AAC (AAC LC) optimized for low-bitrate applications such as streaming audio“)

Badda bing. Sometimes it’s good to write predictions down.

Dear Politicians, Entrepreneurs and Financiers of Chicago,
Now is the time for Chicago to make a bold move to develop a technology and innovation-based economy. The proposal is straightforward: offer a basket of tax incentives, political support, direct subsidy, and venture capital to establish a “Mobile App Development Economic Zone” in downtown Chicago. The initiative should be aimed at both incentivizing existing mobile app developers and publishers to relocate to Chicago and for new entrepreneurs to choose Chicago as their metropolis of choice.

Chicago & IT: Now or Never?
Why do this? Let’s be honest. Chicago almost entirely missed the boat in the past 20 years on that whole “personal computer” and “internet” revolution that has energized state and local economies in just about every other major metropolitan center in the  US. Mobile app development is one of the great frontiers of technology today with the potential to create jobs and wealth for Chicago and Illinois, while further diversifying the portfolio/mix of industries. Looking forward to the century ahead, it should be obvious to all residents that technology and specifically mobile technology will become increasingly important to our society and economy. If now is not the right time for Chicago to get involved, when is?

Why Mobile App Development?
Compared to other technology frontiers, mobile app development is particularly lightweight and democratic. For instance, it would be difficult to start a new semiconductor-based economy in Chicago now because of 1) extensive relocation costs for any preexisting company to make the leap since semiconductors are a capital (physical and human) intensive business 2) Chicago lacks the throngs of specialized hardware, firmware, tools, test and services engineers that are part and parcel of semiconductor engineering. You can’t just start a semiconductor business by yourself. You need at least 10-40 employees, which implies a much larger pool of potential employees with such backgrounds. 3) You can’t just start a semiconductor business with an idea that came to you in the shower. Semis are built on specialized knowledge generally hatched out of larger semis firms (see Intel). Chicago lacks all of the above. And this isn’t specific to semiconductors–these points apply as much to semiconductors as they do to enterprise software, consumer hardware or any number of the bedrock segments of an IT-based economy.

On the other hand, today any given mobile app development startup requires a couple of generalist software engineers and a graphics wizard/human interface designer. The idea behind the next great iPhone or Android app will not be found in some corporate headquarters in Santa Clara, CA or Waltham, MA, it could come to a Chicago CTA rider or a local university student. In fact, this has already happened with a notable startup named Bump Technologies, which was founded by a couple of Chicago Booth full-time MBAs. Unfortunately, without any incentives to stay, that company has since relocated to Mountain View, CA. Chicago had the idea and gave it up.

A Proposed Solution

1. Establish Chicago as a MADE Zone, “Mobile App Development Economic Zone”
   • Appoint leading business executives, venture capitalists, entrepreneurs, professors, investment bankers, consultants, and politicians to the Council. I’d like to see Mayor Daley, a Motorola executive, J.B. Pritzker, Kellogg/Booth professor(s), an IDEO consultant from their Chicago office, a Deloitte big wig, and a young entrepreneur such as one of the Threadless founders on the Council
   • Powers and characteristics of the MADE Zone are established below
2. Offer a 5-year state and city tax holiday to mobile app developers & publishers in Cook County (ie Chicago)
   • Specify the qualifying platforms: iPhone, Android, Blackberry, Palm, Windows, and Symbian and other requirements
   • Require all participants to submit formal applications to qualify. Companies must meet various requirements, be under a certain size, etc.
3. Offer direct subsidies for relocating companies
   • Establish a $XX million fund to promote and assist in the relocation of existing startups to help seed the project
   • Market to and work with some leading, notable and young mobile app startups to bring them to Chicagoland
   • Let’s get some really big names ones to make a splash
4. Raise $X million to lease/purchase and rehabilitate a specific industrial building to turn into a MADE Zone incubator  office building for X years–proximity of entrepreneurs drives innovation
   • Offer subsidized rent to occupants
5. Establish a venture capital initiative with Chicago & Illinois as GP or LP to fund mobile app development
   • This could be in the form of a single fund run by the city/state as the GP (somewhat akin to the New York City Investment Fund) or as an LP to third party funds
6. Offer additional tax and other incentives to qualifying new entrepreneurs and startups
   • Have you ever worked in an early stage startup? Life isn’t easy. Payroll tax breaks and other such incentives could help on the cost side, preventing the death from a thousand cuts that kills innovation. How about some pro bono basic legal and tax consulting from MADE Zone Council Members such as Deloitte?
7. Involve the Universities
   • Get the University of Illinois, Northwestern, University of Chicago, DePaul, IIT, Loyola and the other Chicagoland and Illinois (hell, all of the Big 10 and Midwest) schools onboard with mobile app development  courses (see Stanford’s CS193P taught by my good buddies), lectures, student club involvement etc. Give professors advisory positions and align incentives
8. Involve local businesses
   • Local businesses (big and small) should have every reason to support this. Think about it. Motorola: Absolutely! NAVTEQ: Yes! The sandwich shop across from where the incubator building is located: of course!
9. Get the word out
   • This is perhaps the most important initiative of them all and its the one upon which all depend
   • Take out ads, get on Twitter, scream at Michael Arrington until he writes an article and setup press conferences until the whole world knows

Now is the time to act Chicago. Become a leader and innovator.

Sincerely,

Tom Loverro

School life at Kellogg has kept me away from my blog the past few weeks. However, I’ve got a large backlog of ideas I’d like to write about.

Some of the topics that have been occupying my mind include:

• The importance of explicitly defining what you’re not going to do / customers you are not attempting to reach in business strategy. This is partly inspired by a conversation with my buddy Evan Doll, the former Apple iPhone programmer who is now co-founding a startup. It’s also inspired by a brilliant article by Michael Porter titled “What is Strategy?”
• The divide (at least in the media) between entrepreneurs and venture capitalists. Does this divide exist? Or is it the press looking for a story? If it does exist, why does it exist? What does it mean for the industry?
• Why I really like “medium-sized” business plans–these are business plans that don’t say “We are going to dominate the world’s operating system world” but likewise don’t say “We are going to be a tool for an existing service.”

Finally, on a personal note…everything here at Kellogg is going well. I am looking to join the Private Equity Venture Capital (PEVC) Club and make any contributions I can. I am also getting active with both the High-Tech Club and Investment Management Club.

In the next couple of months I will be considering my options for summer internships.

Dissenting opinion. There’s been a lot of garbage and hogwash written about why Google Voice was taken down and barred from the iTunes App Store for the iPhone. There’s also been debate as to whether it was Apple or AT&T who demanded the take down. The one thing everyone seems to agree on is that this was an evil and wrong-headed move by Apple and AT&T.

First off, it really shouldn’t be hard to figure out who ordered the take down. If Google Voice (and other IP-based phone apps like Skype) are allowed to operate over cellular/3G this represents a major business challenge to AT&T. Forget about “right” and “wrong” and your hippy ideals of “open” this and “free love” that for a minute. Do the goddamn math.I pay $122.04 per month with taxes to AT&T to operate my iPhone every month. I don’t even have that fancy of a plan. It’s upper-middle class. I have 900 anytime minutes, the iPhone data plan, and 1500 SMS per month–that’s it. AT&T gets about $100 of that per month after taxes. Now if Google Voice were available, I would instantaneously drop my voice plan from my $60 for a 900 minute plan to the barebones $40 450 minute plan. I would go from the $15 1500 SMS to the $5 200 SMS plan. Net net I would be paying AT&T $35 per month or $420 per year less to the Big Blue Death Star. Oh yeah, and that $420 has near zero marginal cost. It’s the sweet, sweet gravy on AT&T’s poutine. Consider hundreds of dollars of lost revenue per customer for all 78 million American 3G subs that AT&T has and all of a sudden this little Google Voice app approval thing looks like potentially billions of dollars of lost gross margin for AT&T every year. Ouch.

So should we get all up in arms and boycott the iPhone over this apparent customer-screwing move like a bunch of irate schoolchildren who just threatened to stop playing kickball until the rules are to our liking? Hell no. AT&T is a business you communist fool. They ain’t no charity. Randall Stephenson isn’t the CEO for his health. They have executives and a Board of Directors responsible to their shareholders in both the short and long-term. They are not about to voluntarily give up billions of dollars of margin and screw their shareholders over just because you think Apple and AT&T are capricious in their App Store approval process. News flash: It’s their multi-billion dollar 3G network, so we’re playing by their rules. It’s their kickball and their field.

Can AT&T hold out on Google Voice forever? No. They can’t ostrich this one for too long or the FCC or some 18 year old’s technology will find a way around whatever barriers are erected. (Life always finds a way. Doesn’t it Mr. Goldblum?) AT&T needs to come up with a solution. Very short-term they need to deny Google Voice exists except perhaps over Wi-Fi, but after that they need a plan. That’s the responsible thing to do for their company and shareholders.

For instance, AT&T could allow Google Voice but change their rate plans to go one of two ways: 1) the simple way…create a single totally unlimited iPhone plan that costs $89 pre-tax for everyone (i.e. a price point that’s higher than the current median iPhone plan price point but not too high) that doesn’t make silly breakouts for voice, data and SMS. They could call it The “Its All Frickin’ Packets Anyhow Plan.” Alternatively, AT&T could bundle voice, data and SMS together and base their plans on either access speed or MBs per month (or something else?). This would be similar to home internet access through AT&T U-Verse and others. (i.e. In the ISP world this is “Do you want access rates of 3mbps, 6mbps 12mbps or 18mbps?”) I don’t know if cell towers currently have the technological capability to throttle 3G service rates by individual handset (guessing not yet) but this is probably something they should start working on pronto if they haven’t already. Personally I think MBs per month would be a terrible idea that only complete nitwits would go with and would stifle all innovation. I also think Apple would quit AT&T the minute they did that. I am sure there are other sound ways too of AT&T making up for much (but probably not all) of the lost revenue that Google Voice and its kind represent, but the key thing is moving away from “minutes, SMS, MBs” to a less artificial approach that recognizes its all packets anyhow and AT&T should get paid for packets not minutes. (For instance, if at the end of the day under the new billing scheme my bill only goes down by $15 per month–the amount I pay for SMS, I would not be upset. Current SMS fees should be felony offenses in all 50 states.) The real problem is that AT&T still thinks of itself as a phone company.

So who rejected Google Voice? Yeah, I am going to have to go ahead and go with “AT&T” here as my final answer. And why? Because smart companies don’t voluntarily shoot themselves in the foot. Once you accept the fact that even though technology will continue to innovate, AT&T will continue to find clever ways to charge you an inflation-adjusted $80-$100/month you’ll be a happier person for it. So, Messrs. Arrington and Calacanis please give it a rest and realize that AT&T is a business and not a not-for-profit. Use some common sense. AT&T did what anyone should expect of them: they did not commit Seppuku.

Microsoft just announced the pricing scheme for upgrading from various flavors of Windows 7 to other flavors of Windows 7 through the “Windows Anytime Upgrade (WAU)” program. For Microsoft customers, this comes as a relief as it should make life much easier in scenarios such as the following:

One day you decide to purchase a new, sweet looking Dell Mini 10 netbook with Windows 7 Starter. A few weeks later you are reading personal email via Gmail (Internet Explorer), on Twitter (TweetDeck) and listening to music (iTunes), when all of a sudden you realize you missed an important business meeting with Katy Perry and Tay Zonday on the topic of how to solve world hunger because Outlook never served you with a “Meeting Reminder” because you already had three applications open. This would obviously force you to smash your teeth in requiring a long hospital stay and painful oral surgery. Following your release from the hospital you may say to yourself “Hey, self. It might be nice to upgrade that piece of crap Windows 7 Starter edition to something that’s actually functional. Why the hell didn’t Dell warn me about this in the first place? I might still have some of my natural teeth if they had done that.” After an hour on hold with Dell, a Dell sales representive finally picks up and tells you to hang up and call Microsoft and inquire about the “Windows Anytime Upgrade (WAU)” program.

NOW, aren’t you glad Microsoft established this program? Isn’t it fucking convenient? You’re damned right it’s convenient. You can upgrade ANYTIME. Not just on Tuesdays or alternating Saturdays like with all those other operating system manufacturers. Is Caldera or Tandy forcing you to upgrade your OS on weekdays from 9am-5pm? With Microsoft you can upgrade from Windows 7 Home Basic Starter Premium Small Business (Northeastern US) 2009 Edition to Windows 7 Prosumer Advanced Home Theater CE Touch Tablet at 4:30am on a SUNDAY! Yes, you read that right. On a SUNDAY! Anytime. Daylight savings time, Christmas Eve, Boxing Day, while you’re in the shower–wait, actually–anytime, except anytime you want to upgrade from say Window 7 Starter directly to Windows 7 Professional or Ultimate. That’s just unreasonable and impossible. You’re an asshole. That’s what you are.

It seems extremely straightforward, but just in case you’ve missed anything or are more visually inclined, I’ve gone ahead and provided a chart for my readers.

And please remember that there’s no official way as of yet to go from Windows 7 Starter to Windows 7 Ultimate or from Windows 7 Starter to Windows 7 Professional outside of buying two upgrade packages. Also unknown is how one might move from Windows 7 Professional to Windows 7 Ultimate.

Let’s look at the pricing plan for OS X upgrades now: $29.

Sometimes I wonder if the Product Marketing and Management folks at Microsoft have any say at all in the things they make. (Is that statement too Marxian for you? Scary, eh?) Perhaps there are just so many people and layers of management that even when they know something such as their pricing is an impending train wreck more than six months from launch, they can’t do anything to correct course. So who does makes deicisions like this inane pricing scheme? Most folks would say “Clearly, a committee.” But I know the real answer. There’s actually one man at Microsoft who made the decision. I hear he calls all the shots in Redmond these days. His name is Clippy.

Parting thought–what about the pricing of this upgrade path?

If I post this graphic on that official Windows 7 Blog, do you think they’ll respond?