iPhone game download prices have been steadily decreasing over the last year and since Apple allowed developers to charge for in-game transactions on free to download apps the trend towards free has accelerated.  Free as a business model demands innovation from companies that will keep making money and Ngmoco has come up with a good one in Eliminate Pro it’s new multi-player shooter.

In a hark back to the arcade players can pay to keep playing.  In more detail, the game is free to download, and then during gameplay you use up ‘power cells’.  When these run out you can either wait for a re-charge (whilst your buddies play on) or you can pay to get topped up and playing again immediately.

I haven’t played the game, but on paper this has several elements of a compelling free proposition:

• It is free to get started
• There is a viable option to always play for free
• For a subset of users paying for a better experience will make sense (in this case the impatient and/or cash rich)

There is a direct analogy here with earning gold in World of Warcraft – it can be done for free with time and patience but many choose to cut out the wait and pay (the key difference of course is that in the case of Eliminate Pro payment is within the game whereas in WoW it happens in a black market outside the game).

Inspired by Fred Wilson’s recent post on thematic investing I’ve been thinking a lot about how the world will look in five to ten years with a view to building an investment strategy around that vision.  Hence I was interested to read the following quote from Eric Schmidt this morning (on Niemen Lab):

In five or ten years, what will the primary news reader look like?

Well, that person will be probably on a tablet or a mobile phone, probably the majority of the reading will presumably be online not offline, just because of the scale of it. It’ll be highly personalized, right? So you’ll know who the person is. There’ll be a lot of integration of media — so video, voice, what have you. It’ll be advertising-supported and subscription-supported, so you’ll probably have a mixture. Think of the Kindle as an example. The Kindle is a proto of what this thing could look like. People will carry these things around.

I think this is pretty accurate.  Picking out the bones:

• News is consumed on a device – I would say it could well be the mobile phone
• It will be connected – I would add there may well be caching capabilities for offline consumption, tube, plane, poor network areas etc
• It will be highly personalised and self educating
• Text, audio, video will be combined
• Revenues come from ads and/or subscriptions – I would add subsidised by third party services, e.g. airtime contract (think Nokia Comes with music)

Most of this could be delivered today, meaning the startup opportunity is in application/service provision.

As ever, I post this to crystalise my own thoughts and start a conversation, so please comment away.

I may follow with other 5-10 year view posts.

At the Web2.0 Summit in San Francisco a couple of weeks back Mary Meeker gave a presentation which included the three slides below that show there will be a huge opportunity in mobile over the coming years and attempt to predict where within mobile that opportunity will fall as the mobile wave evolves.

In a nutshell she argues that the mobile is the next big computing wave, that each wave is 10x the size of the previous wave and that the opportunity for startups withiin each wave runs in the same order – infrastructure, software/services, content, commerce.

I went back to this deck two weeks after the event because I have been scratching my head looking for the opportunity in mobile at the moment.  Obviously there is a heck of a lot going on, but most of the activity seems to be in either really big companies (Apple, Google, HTC) or in companies that are hits driven or may not scale to venture size (e.g. iPhone app developers).

My instinct has been to look for consumer oriented apps/services and maybe platforms but I haven’t come across much of interest.  Maybe I should be looking a level or two deeper in the network.

The whole presentation is embedded below.  There is a lot of great data, but in particular I would point to the pace of mobile adoption (slide 33), the prediction of a 2010 inflexion point for 3G (slide 35), the falling importance of carrier decks (slide 46), and the 66x projected growth in mobile IP traffic by 2013 (slide 55).

Data out from Admob’s regular report on mobile web activity derived from data on where their ads are shown shows that 10% of smartphone web requests now come from Android devices (see the chart below).  This is up from nothing a short while ago and comes before much hyped devices like the HTC Hero and Motorola Droid have had a chance to make much of an impact.

The iPhone is still way out in front but it’s USPs are on the wane.  A year ago it was the only touch screen handset in the top ten and now there are five and six have mobile application stores.  Plus it will now have to compete with turn by turn GPS navigation bundled free with Android.

Despite Microsoft’s efforts over the years the mobile market has largely stuck to bundling proprietary software with proprietary hardware.  That might finally be about to change.  If it does we will see a flood of apps and services that will dwarf what we have seen on the iPhone so far.  I think it will also herald the end of the distinction between mobile and web that is prevelant today.

I’m back from holiday today (Majorca, very nice, thank you…) and have been enjoying catching up on reading and looking forward to getting back into the routine of posting every workday.  Perusing my usual sources for inspiration (amongst which Viewsflow is becoming increasingly important) I hit on this wonderful post from Bill Gurley about Google and the ‘Less Than Free’ business model.

Bill’s first point is that this is VERY BAD NEWS for TomTom/Tele Atlas and Nokia/Navteq as Android now includes turn by turn navigation for free based on Google’s data (after they dropped Tele Atlas in October).

His second point, and this is where ‘less than free’ comes in, is that Google will effectively be paying mobile OEMs to use its Android OS by offering them a share of the search ad revenues that come with it.  This presents a tough choice for Apple and RIM who must choose to either not match the competitive offering of free turn by turn navigation or pay royalties to Tele Atlas or Navteq on every device sold, threatening already tight margins.

It is worse news for mobile OS vendors Microsoft and Symbian who will face the same choice but will have few other dimensions on which to compete with Android and lower revenues per handset to soak up the cost of a license to Tele Atlas/Navteq.

Bill’s final point is that Google can make the same ‘less than free’ offer to PC OEMs who might choose to use Chrome instead of Windows or another open source alternative.

All this adds up to a very powerful set of moves from Google and have the potential to significantly increase their stranglehold on the search market – which will be bad news for most of us.  I have been impressed by Microsoft’s latest efforts with Bing, but it is hard to even dream about a search feature set which would compete with the structural competitive advantages that Google is building.

Afterword: naysayers on ‘free’ in general take note.

• Published a new post: Twitter Weekly Updates for 2009-10-25 http://cli.gs/uG1qe #
• The Telegraph 'Twitter costs British economy £1.38bn' http://bit.ly/3yYYJC – this s**t winds me up. Naive and misguided on M levels #
• The Telegraph 'Twitter costs British economy £1.38bn' http://bit.ly/3yYYJC – this s**t winds me up. Naive and misguided on levels #
• The biggest mcommerce number to date? RT @TechCrunch Shoppers To Spend $400 Million On eBay This Year via iPhone App http://bit.ly/HhlUV #

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• Published a new post: Twitter Weekly Updates for 2009-10-18 http://cli.gs/Hn4M7 #
• Published a new post: Beware the halo effect http://cli.gs/PM8jJ #
• McKinsey talks about the changing social contract – social standards are coming to market based relationships – http://bit.ly/uh7pO #
• At web2.0 hearing very positive story on economy and tech from Mary Meeker – still plenty to worry about though #
• The virtual goods blitz continuesRT @TechCrunch Ning Launches Virtual Gifts Allows Network Creators To Design Their Own http://bit.ly/4CvfJO #
• @ev on stage at web2.0 saying 97% of company's effort still focused on building tech and site, ie not on monetisation #
• I'm getting good value out of @azeemazhar viewsflow app – articles I've found there have stimulated two blog posts already this week #
• Published a new post: More evidence of ads not working http://cli.gs/H4bpj #
• US traffic growth on Twitter.com has slowed. Now rumours Bing and Google close to licensing firehose: http://bit.ly/3JV1yU. Coincidence? #
• RT @ajkeen: Ultimately e-readers will have be interoperable across platforms. iTablet will likely change everything #
• @fredwilson writes about the challenges of investing in a product pre-launch http://bit.ly/2ZObVk #
• Published a new post: Bing, competition, and search http://cli.gs/Bd9j0 #
• Screenshot of Google's music service – http://bit.ly/26iT67 – the interest in this space is staggering given the business model challenges #
• @davidjwbailey I agree. My point is that it is difficult for VCs in reply to davidjwbailey #
• Published a new post: Tech companies are cashed for make acquisitions http://cli.gs/5U9um #
• AOL has gone from 500 to 2,000 journalists in the last six months. #w2s #
• AOL has 270m uniques, 100m in the US #
• MSFT posts great results, buoyed by Windows 7 – which beat Harry Potter to become the most pre-ordered item on Amazon http://bit.ly/3kb7uM #
• Good article on the EA-Playfish saga – http://bit.ly/2oGLSM #
• Published a new post: An open, sharing culture is good for the startup ecosystem http://cli.gs/UBDHt #
• @plc thanks Peter. Seems to be ok now? Let me know if not, and of any future probs. in reply to plc #
• @vwadhwa thanks Vivek, and I still don't think that post was a real slamming in reply to vwadhwa #
• #chelsea – conspiracy theory – mgt allow long queues into Matthew Harding coz more people get here earlier increasing matchday bar takings #

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I had an interesting meeting this morning with two-time-entrepreneur turned Berkeley, Duke and Harvard based academic, Vivek Wadhwa who has a keen interest in understanding and promoting entrepreneurialism and startups.  You can find some of his recent posts on Techcrunch here.

We were talking about the history of the US startup scene and he described how in the 1980s Boston and the Valley were more or less on a par, but now, as we know, there is far more activity here in CA (where I have been this week).  He told me about some research into why Boston had failed to keep up which came up with three reasons that explained the difference:

• The Valley’s open, sharing culture works better for startups than the more secretive formality on the East Coast
• Many more immigrants from India, and to a lesser extent China, headed for the Valley
• The Valley has better and stronger networks, the most prominent of which is TIE

Anyone who reads this blog regularly or who has talked with me or heard me speak will know I’m a cheerleader for the London and European startup and venture scene.  There are still far fewer startups in Europe than over here, but the gap is closing and for many companies, particularly the best companies, it isn’t too much of a stretch to say that the same levels of finance and support are now available on both sides of the Atlantic.

I’m very interested in the things that will help close the gap more quickly, particularly now in late 2009 after the recession has knocked everyone’s confidence a little, which is why I picked up on Vivek’s comments above.  The default culture in much of the UK and Europe is more secretive than sharing, I think that is changing, but it could always change more quickly.  I often find myself saying that if you tell ten people about your idea there is a much greater chance of finding someone who will help you than of getting your idea ripped off.  Similarly obscurity is a much greater risk for most startups than having their idea stolen.

Sharing, of course, happens within networks and their events and parties, both formal and informal.  So my final point here is to say kudos to all the folk in the UK and Europe who make this happen.  Singling out a few names Mike Butcher of Techcrunch, Saul Klein with Seedcamp, Andy and Ali of Huddle with DrinkTank, Sam at Chinwag, Simon Grice with Mashup and Mark Littlewood with his BLN dinners and Robert Loch with a variety events over the years have been key to bringing everyone together and putting us on the trajectory we want to be on (please forgive me if your name isn’t on this list, it isn’t supposed to be exhaustive).  We can’t have too much of this.

The last month or so has been a strong one from an M&A perspective, with Cisco making two $3bn acquisitions (Tandberg and Starent Networks), Intuit acquiring Mint for $170m and Adobe acquiring Omniture for $1.8bn – and that is just off the top of my head.

Take this activity and add the rumours circling about tech companies receiving pressure from shareholders to use some of their cash to make acquisitions and one could almost forget that it is only 13 months since Lehman filed for bankruptcy and people were predicting the end of capitalism.

In this context I thought you might be interested in the following list of cash holdings at leading tech companies.

There is a lot of cash there which needs a home people.

We’ve all heard the old adage that the search problem is only 5% solved.  My news today is that I got a much better idea of what the next few percent will look like, largely from a Microsoft sponsored session this morning here at the Web2.0 Summit talking where they are taking Bing.  It was a pretty impressive session and I was left thinking that they had done a good job of thinking where search works at the moment, where it doesn’t, and what the small concrete things they can do about that.

Some examples (and I could have given many more):

• The ‘hover feature’ which allows you to preview more of the content on a page before clicking on the link, so you will have less of the frustrating hitting the back button to return you to the results page when you click on a link that you hoped would give you what you want, but turns out not to
• Including facts in search results – going beyond far beyond weather to include many more facts e.g. traffic and flight status if you type in a flight number
• Bringing the features that you would use from sites direct into the search results – e.g. a search for UPS brings you a UPS track parcel search box right into the results
• Visual search for shopping so you can flick through literally thousands of e.g. HDTV’s, and they have some nice tools to refine the search based on parameters – e.g. 37-42 inch TVs
• Bringing aggregated review results direct into search results, and they have done some nice work helping the user to quickly derive meaning from the reviews

Stepping up a level, these initiatives are changing what search is about, which is a response to changes in consumer intent when they are searching.  When we first started searching we were generally looking for a link to a site that we knew – so the intent was navigational.  That remains the case for a large number of queries, but for an increasing proportion the intent is simply to find information.  For this set of customers the search paradigm changes from being one of ‘get me off the search engine and to where I want to get to as fast as you can’ to ‘get me to the information as fast as you can’.

In other words search engines are becoming destination sites in their own right, in part at least.

Four of the five Bing features I list above can be understood in this light (check out the screenshots below).

Notice I have not said that all of this will be enough for Microsoft to take a chunk out of Google, but I do think it gives them a shot, and at the very least we will get some good parallel innovation from Google.  Taking a more optimistic view you can see a scenario where the search market gets more competitive and margins start to come down which, amongst other things, would reduce the cost of clicks and hence customer acquisition for many startups.  Remember also that we are talking about a paradigm shift in search which is one of the reasons I think MSFT has a chance.

In related news we have just heard that Microsoft and Twitter have done a deal which will see the full firehose turning up in Bing search results.  It is unclear how that will look over time, but realtime is another area where search becomes more destination site than hop off point.

Update: I’m listening to Marissa Meyer announcing that Google is now also receiving the full Twitter firehose and talking about some neat social additions to their search results page