Apple’s sales performance has somewhat relied on the ability to keep information out of the consumer’s hands. A “leak” of this proportion must make for one unhappy Steve. Think about it, with the news that the iPhone Nano (priced at $300) will launch in the fourth quarter of this year (a measely 3-4 months away), what consumer in his or her right mind wouldn’t summon every drop of whatever patience has gotten them this far to hang on until then?

Investors may be disappointed come 3Q earnings season, as consumers back off from papa iPhone in anticipation of the nano version. Further, even though gross margins (reported in excess of 50%) might make for some sparkling earnings figures, with the release of the margin information, one must assume that the market has already built that sparkle into the stock price (hence the 5% jump last week).

That being said, it should be noted that the above usage of the word “bad” must be taken in its relative meaning. Chang is right to suggest that this release will actually drive profits by fiscal year end. If the stock takes a dip at 3Q earnings, it is probably a good time to buy, because when 4Q rolls around, its headed in the only direction it seems to be able to go, up.

Even so, tonight Steve goes to bed tonight with a sad puppy dog face.

-Jake Levine 

For six months Apple sold hype. 2/3 of the U.S. population had heard of the iPhone before its launch last Friday, an astronomical number, and unheard of particularly for a handheld gadget. Apple sold hype, and millions of people bought it.

I reacted to the hype in two ways. The predominant feelings were that of excitement and hope; I have been a big fan of Apple recently (very happy with my MacBook Pro), and I was hoping the magical fruit company would similarly impress me with their latest endeavor. Lurking behind my naivete, however, was my father’s brow-furling skepticism that had time after time kept me out of trouble.

I held the little beauty in my hand for the first time today, and despite every sceptic fiber in my being, I had to admit that it blew me away. Now before you, faithful reader, hit the back button or whatever target key you have assigned for your facebook.com bookmark, let me say that this isn’t an iPhone puff piece. As Steve is my witness, we all know that there are plenty of these circulating the blogosphere at this very moment, and so the marginal utility of just one more wouldn’t really add anything to anyone’s life, particularly that of yours truly.

What I want to talk about is beneath the puff. Any review will tell you that the interface is beautiful, gorgeous, magnificent, stunning, etc. etc., but what does this mean for computing?

Right after I finished playing with the iPhone this afternoon, I received a text message from my girlfriend on my plain old LG VX8600. Now the LG is a nice phone. In fact, I would hazard to say that it is a top tier cell phone; but when I flipped that lid, read the new message on my boring old screen, and began typing a response, it felt like scrawling characters on a stone tablet using only a hammer and giant nail. I was a little boy forced to leave Disney World early because his sister came down with chicken pox. It just didn’t seem fair. Even typing on my MacBook Pro seems second class. Nothing will ever be the same!

Yes, I am overdoing it a bit for dramatic effect, but the feeling cannot be denied. This afternoon I experienced a closeness to computing that I have never felt before. Of course the iPhone isn’t perfect. In fact, there are many things that could be improved. But the graphical and nearly natural smoothness with which the user manipulates information on the iPhone is unparalleled.

After Apple introduced the first Mac 23 years ago, and brought folders, icons, and the mouse into our lives, computing was never the same. Now Steve (not singlehandedly of course; technology is a process) has done it again. Apple has brought a new mode of information interaction to the consumer-at-large.

When Walt Mossberg interviewed Steve Jobs and Bill Gates at the DConference last month, Gates spoke about the evolution of the GUI. He saw ahead of us a time when natural form factors would dominate the technological landscape, merging movement and information manipulation into one fluid system of data exchange. The iPhone is the beginning, the evolution is at our fingertips.

-Jake Levine 

One of the things I really like about his blog (besides the brilliant content and advice) is that he makes longer posts, often in series. He follows an idea through as opposed to just posting a quick blurb. He has tons of experience too, so I’m more apt to trust his advice. I’ve particularly enjoyed his recent posts on startups.

In general the site is well-designed and he gives readers a little preview of upcoming posts, showing that he has really thought this out rather than just posting what comes to mind. Definitely worth the read.

Brick and mortar institutions, just as websites, often build their reputation as trustworthy entities with which to do business. Word of mouth is no doubt the most significant contributor to this, but ratings organizations such as Consumer Reports play their role. The web obviously simplifies this process by making it mass scale and simplifying it, which has it benefits and drawbacks. Social news and ratings sites allow the aggregate “recommendations” of thousands or millions of often like minded individuals. These are only becoming more advanced and automated, as sites like last.fm or iLike improve their services.

A lot has been written about this kind of trust building online; that is, the trust in a large group. Can we trust Wikipedia is a well-examined and interesting question, but I’d rather focus on individual trust on the Internet.

In general, bloggers build trust by writing accurate and interesting posts over a longer period of time. If their predictions come true or their word-view seems “correct” or at least amenable to the reader, a bond of virtual trust is formed even though the medium is decidedly one-to-many.

I’ve been seeing a lot of Disclosure Statements popping up on blogs lately, and I think this is a trend in the right direction. Lessig posted a well thought out one on his blog, and even amended it based on readers’ comments, demonstrating that he trusts his readers to have good insight. He lists non-profit boards he sits on, states that he does not take products for review or accept money to reccomend something, etc. The best part, I think, is his Non-Corruption Principle:

The simple version is just this: I don’t shill for anyone.

The more precise version is this: I never promote as policy a position that I have been paid to advise about, consult upon, or write about. If payment is made to an institution that might reasonably be said to benefit me indirectly, then I will either follow the same rule, or disclose the payment.

More should come out and promise things like this in an age when blogging is becoming more commercial and the line is increasingly blurry between news, opinion, and pure marketing.

Other names of bloggers with solid ethics that spring to mind are Scoble and Arrington, both of whom have posted in the past about from whom they have accepted what and how they decide what to post. Their sites hold tremendous advertising potential for the companies they mention or recommend, so clearly we would not want to find out that they were being paid to post. Arrington’s “Policy on Embargoes and Exclusive Stories” is posted here.

I’m not saying that bloggers should not be able to be businessmen who own stock. We have a lot to learn from these entrepreneurs and insiders. They should just disclose what they do and what they have to gain. And a lot of the time they do. Thomas Hawk precedes every post about Zooomr (of which he is CEO) and Flickr or other photosharing sites (direct competitors) with a disclosure that he is CEO of Zooomr. I can read his posts with this in mind and read between the lines as I like.

The problem comes when people don’t disclose. How do we find out or read between the lines then? The simple answer is we can’t. But I feel like the web is connected enough that these posters will be called out on other blogs or forums. Thus the impersonal aggregate trust building system interacts with the personal end of the spectrum in a system of checks and balances. Individuals can similarly call out Digg’s social rating system if they so choose.

The web is certainly still not a perfectly trustworthy place and fraud is still a problem, but websites like Ebay have shown that ratings systems can alleviate these problems. So too can personal disclosures or policy statements. States exerting real world laws within virtual marketplaces increase trust as well. Building trust is difficult in the real and virtual worlds alike, but those who want to make an impact in the latter would do well to figure out how they can strengthen this variable in such a way as to build loyalty and respect.

Not surprisingly, Google answered today with something it has no doubt been working on for some time: Google Gears.  Simply put, Google Gears offers third-party developers a way to create programs that allow the off-line use of websites.  It accomplishes this using a simple browser plugin (less than a megabyte) that offers developers’ three APIs with which to interact with the web.  It is open source, cross-browser, as well as cross platform.  For more technical details, check out the TechCrunch coverage as well as Scoble, who was at the press event.  See also the Gears website.

An example “Gear” is already up that enables off-line functionality in the beautiful Google Reader, which is many a power feed-follower’s client of choice.  It puts a little arrow in the top-right corner of the page.  When you click the icon, Reader begins to download the 2000 most recent messages for use off-line.  When connect again, everything syncs up–messages that have been marked read, tags, etc.  It works great, especially for such an early release.  Tomorrow, as I begin a road trip to New Orleans, I know that I’ll be happy to burn through the morning’s posts, which I’ll sync before I get in the car.

One can only imagine the possibilities.  The most obvious, following in Jake’s footsteps, is a Gear for Gmail.  This would fix my one remaining problem with the application.  If I could sync Gmail off-line, I would return to it with open arms and a big smile as my email client of choice.  The security this un-connected access would offer is just too big to ignore, especially as some businesses (and certainly business-people) embrace Google Apps as mission-critical software.

There is another environment that addresses this need called Dojo Offline Toolkit.  I would hope that Gears and Dojo would be integrated, as they seem to address the same space and there is no way Dojo can compete with the kind of muscle Google can put behind its offering.  As far as I can tell, Gears will work on any web-app developers to which developers decide to apply it, not just Google’s suite.

This is a big day for the future of a web that should be useful if one is connected to it or not.  Internet access will only spread, but users still have those times they are unable to access its services, most notably on planes.  Those unable to afford EVDO cards can add cars and trains, as well as your average coffee shop, to that list.  There is still something about web apps that I love, and I will be glad to be able to return to their world unfettered by the unease of disconnection that I used to fear. 

-Alex Rosen

$4 BILLION dropped off AAPL‘s market cap immediately as investors hurried to beat the impending sell-off. The stock dipped 2.3% at volumes of over 2 million shares traded in just a few minutes. Just another night on the Street right? Not exactly, you see there is a slight problem with this tiny tumble: the announcement was falsified.

Disgruntled Apple employee? Microsoft saboteur? Jack Bauer? An AAPL investor who sold his shares last summer for $50? Who knows? Someone hacked Apple’s internal memo system and someone else (a “reliable” source, claims Engadget) sent it straight over to Engadget. It was Christmas/Chanukah for some investors who were able to buy into the stock at the discounted price of 103.42 (it closed earlier that day at 107.34). Meanwhile, many others took part in a $4 billion tumble.

Four hundred years ago in England, a substantial canal system helped the country become the world’s earliest industrial economy. Information and therefore capital could travel cross-country faster than in any other place in the world. Today, the speed of information and capital is as fast as the human ability to make and vocalize decisions. This has provided the developed world with a level of productivity that could never have been imagined just one century ago, not to mention four. Along with this improvement in speed has come a vast expansion in the diversity of media, moving from letters sealed with a wax emblem and carried by hand to emails, voicemails, faxes, and blogs with virtual signatures carried over fiber-optic cable that would have proven most useful half a millennium ago tied to a cleat.

The Apple memo was retracted within two hours, but the damage had already been done. The speed with which information travels and large scale capital transactions are made is staggering, but the recent demonstration of the power of the blog is even more so. The reaction shows that Engadget is as much a world-mover as CNN or ABC ever were, and combined with the latest M&A activity in the online ad market giving much the same indication, traditional media giants better watch out. Online news sources have a vast and confident readership that have one characteristic that differentiates them from the TV, Newspaper, and Radio audiences: they are more specialized than ever. It would be a rare thing for a non-tech geek (or what we call in the business: n00bs) to peruse Engadget.com on a daily basis, and sure, their readership might not reach the millions of viewers CNN and ABC receives every night, the Engadget.com nerd community is much more likely to turn that information into some kind of use-value. The entire technology industry eyes Engadget.com closely, and while the information is limited in range, its depth is unparalleled in the traditional media.

What will this mean for the media world in general? An shift of this magnitude in an industry that sinks its tentacles into every aspect of life, business and personal, will have dramatic consequences for the near future. Are websites like Engadget.com the end of this sprint towards media diversification? Or will we see a new revolution join the ranks of bloggers who have marched forward incessantly in the past few years? Who knows, maybe Twitter is the next Vogue. Journalism is changing, and with it, the world.

All that being said, it is Microsoft that first approached the smoothness we seek. The following is from the Windows Live Hotmail press release of May 6:

“• Outlook Connector…will enable people to view and manage their Windows Live Hotmail account from Outlook for free, with full contact, e-mail and e-mail folder synchronization.
• Mobile: Using Windows Live Hotmail for mobile…customers can access their e-mail when they are on the go on a Web-enabled mobile phone or PDA. In the future, Windows Mobile® customers will receive a richer online and offline Windows Live Hotmail experience with Windows Live for Windows Mobile, which will ship with Windows Mobile v6.”

Any Gmail user must admit that if I had just quoted a Google press release, they would be fairly excited. I know that Alex and I would be, at least. Even if this isn’t a threat to the supremacy of Gmail, as the Web Worker Daily article claims (and many other articles like it written in the past few days), mustn’t this necessarily change the way we think about email? Even if Gmail continues to dominate the online mail sector, this kind of change must force a reaction from Google. This, at least, is what one would hope.

Competition breeds innovation, which breeds further competition, which breeds further innovation and so on. Capitalism. The last thing we want is for one email provider to monopolize the field, which would necessarily result in a reduction of the impetus for innovation. But do these principles apply in the world of Web 2.0 and beyond? Rockefeller’s Standard Oil monopolized the oil industry by vertically integrating the modes of production in the oil industry. Viacom, the owner of Comedy Central, MTV, CMT, VH1, and Dreamworks, provides a good example of a horizontally integrated coroporation. But what do you call Google’s recent purchases of YouTube.com and DoubleClick? What is the industry relationship between these two companies other than they are on the internet and add to Google’s massive and amorphous depth. Take a look at the google apps website to get a sense of what I am talking about:

http://www.google.com/intl/en/options/

In the Web x.0 of the future, what is the relationship between competition and innovation? The dynamics of web integration are not straightforward, and it is probable that the legal parameters of this integration are even less so. It will be interesting to see if U.S. antitrust laws have what it takes to go up against a company with an enormous amount of power that doesn’t even require its users to pay. In the meantime, I’ll be rooting for the underdog.

Digg’s decision to keep the numbers up heralds a decisive recognition of user power over what amounts to real force online–patronage. We have been hearing about the power of the group and the wonderful nature of socially generated media for years now, but this look like the first time that it has been put to this kind of test against the power of the government (or is it the company?). (I am probably wrong about this and there are many earlier examples to choose from, but I’m new at this and this particularly case has been getting a lot of media attention.) Digg’s decision (Kevin Rose even posted the numbers himself) has the subtext that a Digg user revolt (as we saw) is a more powerful threat than legal threats.

It will be interesting to see what happens to Digg in the long run on this. The MPAA and AACS realize that there is no way they can prevent the spread of this number. It is everywhere: blog posts, photos on flickr (that evil search engine bots can’t read), and music videos on YouTube (ditto). But Digg was the most high profile offender, and I wouldn’t be surprised if the industry chose them as a their target. It would certainly be high profile, as Digg started the social news revolution, and is populated by a fiercely loyal community (though not one that would sit back and watch as the site did something they didn’t like).

But all in all, the threat from its users was more immediate. Lawsuits take ages to play out and Digg can probably reach some sort of deal, so they will at least be able to stay up while this all plays out. In contrast, if it had done what it had been doing (taking down posts and banning users) they were going to be shut down with days (or hours).

The users have the power in this one, at least for now. But if history is any guide, the industry will retaliate. Everyone is certainly worried about this eventuality, including Wikipedia admins. But if a state can’t protect its citizens’ intellectual property, is it still the same kind of state? Are we moving further into the era of citizen and private corporation mediated laws?

-Alex Rosen

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