With the proliferation of the new iPhone, Mobile Applications as a viable VC investment category is dead.

Companies like Digital Chocolate (founded by software gaming pioneer Trip Hawkins) are now painfully aware of that. Recenty switching gears, it is debatable whether they can compete with the endless supply of a new free-market.

The future of many companies like Aeroprise, still basking in the glory of a proprietary Blackberry environment and tucked away in the enterprise mobile markets, will be severely threatened by standards-based technlogy running on any internet capable device, very soon.

The premium market of mobile applications protected by walled gardens has been changed to a free-market by Apple’s iPhone and the App Store. Macro-economics, discussed in this blog many times before, at work again.

Rather than single minded companies being able to protect their turf with a collection of proprietary applications (usually aimed at businesses), now individuals will start to create applications for other users. By the people, for the people. N/N :the airplane code for Steve Jobs’ Gulfstream. Get it already?

User-generated-content (one of those awkward Silicon Valley attempts of describing content that resides in a free marketplace) has a brand new companion, it is called: applications.

But these applications are no longer mobile applications, they are internet applications - that happen to run on a great mobile internet device. And they will run on many other internet devices, hard-wired or mobile. Think of them as the big brother of widgets, task oriented applications that remove the need to use a browser to benefit from the Internet. They target regular consumers, not internet savvy technologists and they self-configure, based on location and other user preferences.

So the investment model for mobile has changed dramatically and the recently announced $100M iFund (by top investment firm KPCB) and a similar one by BlackBerry - the vehicle of purportedly investing $1M per application vendor - makes no sense at all. Here is why:

1/ User-generated content does not provide a great foundation for large upside - let alone an acquisition or IPO that is priced to produce interesting VC returns.

2/ The value to the VC is in the “winner-takes-all” platform, not the content (albeit that produces great value and choice to the consumer). Apple, with the App Store platform for distributing applications using free-market principles (although still not perfect, check out our marketplace rules) will again walk away with the same benefits it reaped from the iTunes store, direct and halo.

3/ Application development is a very high cost business, especially in a highly competitive marketplace. The gaming industry wrapped in a slower transition from premium to free-market is finding that out too.

4/ Mobile used to be a proprietary, and protectable, path to the internet. No longer. The intelligence of the backend service, accessed through a mobile of hard-wired computing device is where the value is.

So, i suggest to rename the iFund in Software-As- A-Service fund, agnostic to access paradigm.

Nokia and Blackberry (RIM) will have to follow quickly. But they would need to start hiring people that understand macro-economics, not just technologists that create poor copies of Apple’s implementation.

All phones need to have a real operating system inside, and Roger McNamee’s investment in Palm may make sense in that way, but they better step it up quickly. Nokia is off playing with Symbian, Microsoft has its own concotion. All of them pretty much asleep at the macro-economic wheel.

Yet for individuals, on the supply and buy side, all this disruption leads to new opportunities that are derived from a meritocracy. Fantastic applications are being developed and used in massive numbers. The world is indeed flat after all.

Tags: Apple, Nokia, Blackberry, Free-market, Marketplace, Meritocracy, SaaS, Proprietary, Gaming, Funds, Wall-Street, ITunes

I am a sucker for beautifully designed products. So recently, at a neighborhood gathering in Palo Alto, I listened in on a conversation with some of the top industrial designers from HP, Dell, IBM etc. These guys have the great job of making sometimes characterless technology products beautiful. Spirits were up because their jobs had gotten easier. Feeling the heat from Apple's success their own management had found a new appreciation for industrial design. Soon the discussion turned to the importance of innovation in colors, themes, demographics, brand and the challenges of subjective design criteria to weary business unit managers. But the focus on industrial design as the impetus for success went a little too far for me.

Just like so many things in business (and life), no single element defines success. Industrial design without a weighted fit in the rest of the product ecosystem, means absolutely nothing. Take Apple. Without the content of the largest electronic music store, a large hard drive to hold thousands of songs, an easy to use interface, worry-less desktop integration, the great looks of the iPod or iPhone would mean nothing. Conversely, bad industrial design can really turn mass customers adoption off before the product feature set is even explored (Amazon's Kindle, Palm, Blackberry).

Develop an innovative customer experience, not just a technology product. Technology companies should focus on the customer experience from the beginning of the development phase. And don't turn industrial design into the trophy wife, after the product is finished. It will only yield a great party.

Tags: IBM, Palo Alto, Apple, Blackberry, Amazon, Palm, IPhone, Experience, Design, Brand

Did Cingular read my my rant about the ugly designs of Blackberry? The new 7130c from Cingular (not to be mistaken with the still ugly 7130 from other carriers) comes closer to what modern design for a PDA-with-phone should like like.

Having tested a ton of phones, PDA's etc over the years, the 7130c is a very attractive competitor to the bulky Palm Treo 650 and ... certainly more usable. The small dimensions of the 7130c cuts the size of the older Blackberry almost in half, a little thicker than the Motorola RAZR (which I love) and a bit taller, the 7130c still fits in the pocket of my pants easily. I like it so much, that I decided to get rid of my old Blackberry (on eBay) and my RAZR (although I'll keep it around, just in case) and combine two capabilities into one.

The 7130c with EDGE internet connectivity is actually fast enough to make it a delight to browse the internet (and visit the WAP site of CNN) and read e-mail, while waiting for the traffic light to turn green. The industrial design is good enough (not great) and appealing, the screen that is clearly visible in bright sunlight and adjusts automatically to your surroundings. This is absolutely the best screen I've ever seen on a mobile device.

Phone services are integrated into the PDA capabilities, but this part could be more intuitive. The heritage of the scroll menus from the Blackberry PDA platform complicates things beyond what is necessary. More 'special purpose' buttons would solve the problem. For now however, the Blackberry 7130c has become my new one-eyed king in the land of the blind.

Tags: Blackberry, EBay, PDA, Motorola, Cingular, AT&T, CNN, Design

Talking about the brains of the service. From another angle Blackberry is pushing the boundary of what geeks will use in order to get portable functionality. The new BlackBerrys are the most horrid looking devices I have ever seen. No doubt that the increase in functionality on other devices (such as Microsoft based) with not have a hard time competing with BlackBerry on looks. As new features on the BlackBerry have stalled and great looks have diminished, perhaps the only thing for BlackBerry to hold on to now are its patents. Apple, where are you?

Tags: Blackberry, Design, Microsoft, Apple