Just as Silicon Valley was starting to come to terms with the sudden departure of Apple founder and CEO Steve Jobs, another technology giant dropped a bombshell: Google CEO Eric Schmidt said he is stepping down to become executive chairman of the company. Schmidt says he will focus primarily on government relations, while Larry Page is going to take back the CEO role he held until Schmidt arrived to take the job in 2001. Although Schmidt will still be around to advise on various matters, the executive shuffle makes it clear that Larry Page is now in sole control of the web giant. But does he have what Google needs? That’s not obvious.

After the news broke Thursday afternoon, Schmidt posted a message on Twitter that linked to his blog post about the changes, also writing “day-to-day adult supervision no longer needed!” That comment was a reference to the fact that Schmidt — a former senior executive with Sun Microsystems — was seen by many as the “adult supervision” the two young billionaires needed in 2001, when they were planning the stock offering that eventually came in 2004. The memories of the tech implosion of the late 1990s were so fresh still that many clearly felt Page and Brin needed to be stopped before they blew all Google’s money, and since Schmidt looked the part of a senior executive, the company’s backers felt he would go over better with investors.

Over the past 10 years, Schmidt has repeatedly stressed — as he did in his announcement and on the earnings call — that although he was the chief executive, he and the two founders have functioned more or less as a triumvirate, advising each other and debating various courses of action. Schmidt has suggested this is because of the mutual respect each had for the other, but his role was undoubtedly also influenced by the fact that Page and Brin share ultimate voting control of the company, thanks to their majority ownership of Google’s multiple-voting shares.

Now, Page has taken the reins as CEO, and Schmidt made it clear in his blog post about the news that this was done “to simplify our management structure and speed up decision making.” After the split, each member of the triumvirate seems to be taking on the role for which he is arguably the best qualified: Schmidt, who is the most senior (and tends to wear a suit), becomes the public face of the company when it comes to government: meeting with senators who are investigating the company’s privacy infractions, for example, or appearing before congressional committees, the FTC, and so on. Page becomes the day-to-day leader, and Brin gets to spend time on the projects he enjoys (which may or may not include self-driving cars).

How Schmidt performs in the governmental role remains to be seen. He might have to tone down his penchant for inappropriate jokes about how people “can just move” if they don’t want their houses to be photographed by the Google StreetView car, or his comments about how “If you have something that you don’t want anyone to know, maybe you shouldn’t be doing it in the first place.” That’s probably not going to go over well in Washington.

The reality is, Google is facing challenges on a number of fronts. Yes, it turned in another stellar performance in the most recent quarter, with revenues climbing by 26 percent to $8.4 billion. The search-related advertising business is still doing extremely well, and that cash cow has allowed the company to do many other things, including promoting the Android operating system and running a number of popular (but money-losing) services such as Gmail and YouTube. But the tech giant has been unable to get much traction on the social-web front, and that has led to criticism that it’s losing the battle — or is at least in danger of losing the battle — for both users and advertisers to Facebook, whose share of the online-ad pie is growing at a phenomenal rate.

Critics are also getting more vocal about the rapid deterioration of Google’s search results, its core business, thanks in part to the contributions of “content farms” such as Demand Media, with many saying Google hasn’t done enough about the problem because it gains ad revenue from those publishers. Then there are the governmental hurdles Schmidt is expected to help the company leap: a potential antitrust investigation by the Department of Justice into Google’s proposed acquisition of travel-information provider ITA, along with pressure from Congress on the company’s approach to privacy, and continued difficulties with foreign governments like Italy and China.

Larry Page is taking the helm at what could be a turning point for Google. Its core business is under fire; it’s losing ground to Facebook in an important new market; and it’s still relying on search-related ads — a market getting long in the tooth — for 90 percent of its income. It has been unable to build any substantial new businesses, despite a number of attempts, including its recently rebuffed $6-billion acquisition offer for Groupon. As angel investor Chris Dixon put it, some Google watchers are probably asking: Is Page’s return like Steve Jobs coming back to Apple in 1997, or is it more like Jerry Yang’s return to Yahoo in 2007?

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Techmeme, the technology-news aggregator that is like CNN for many geeks and tech fans, has given its seal of approval to the idea that Twitter is a real-time news network — founder Gabe Rivera announced today that tweets will now be highlighted as headlines on the site, if they meet his newsworthiness criteria, and even Twitter messages that refer to a breaking news story can make it onto Techmeme if they are noteworthy in some way, or posted by influential users. But will this new feature provide the site with more news to choose from sooner, or will it overwhelm the service with noise?

I admit that my first response to the news (which I saw on Twitter, naturally) was that it didn’t really seem to make a lot of sense. It seemed a little like printing text messages on the front page of the newspaper, in some ways. Much like Twitter, text messages are for chatting and banter, while the front page of a paper is where the important headlines and story excerpts are supposed to go. And Techmeme is very much like the front page of a newspaper, except it’s a newspaper that is devoted solely to technology, and it is updated minute by minute, and sometimes even second by second. Wouldn’t mixing an informal chat-oriented medium like Twitter mess up the headline aspect of the site?

In looking at the current example of the feature, which is Rivera’s own tweet followed by a lot of @ replies, it does seem quite noisy. There are dozens and dozens of comments of 140-character or less attached to the original, and none of them really add a lot to the conversation (including mine, I confess). Or rather, some of them might add something, but it’s really hard to tell which ones, or to sort through them all looking for meaning. On Techmeme’s sister site Mediagazer, where tweets are mixed in with blog headlines, it’s hard to tell what is a tweet and what is a link to a blog post, which presumably would have more to add than just a single offhand comment.

That said, however, Rivera makes a good case in his blog post that tweets can in many cases be news, or make news — such as an announcement from a company that is launching something, or a rumor posted by a celebrity. Another example the Techmeme founder uses is the tweet from former Twitter engineer Alex Payne that seemed to signal unpleasant changes coming for third-party Twitter developers, and was eventually followed by exactly that. In that case, however, it’s arguable that the tweet only became news because TechCrunch wrote about it and put it in context. Would the tweet itself have made Techmeme without the context that blog post provided? I don’t think so.

In any case, it’s interesting that Rivera sees tweets as potentially newsworthy enough to make it part of his news-filtering service — something venture capitalist and blogger (and Twitter investor) Fred Wilson was suggesting might happen as far back as 2008, before many people had even recognized that Twitter was a worthwhile service, let alone a real-time information network. And presumably, the Techmeme founder will apply the same combination of algorithm-driven selection and human filtering that he has to the headlines to keep tweets from overwhelming the site. And Twitter now has another thing to point to that confirms it is a real news network.

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This data on mobile browsing in Africa comes by way of Opera’s monthly State of the Mobile Web report, the most recent version released just this morning. Most of the report focuses on the standard bits: information showing the amount of data that Opera web users consumed, how much bandwidth is saved by Opera’s money-saving compression technology and so on. But more interesting to me is the last section, which is completely devoted to mobile browsing in Africa. Some additional highlights:

• Mobile web data transferred in the ten African countries with the most page views is up 331 percent.
• Those top ten nations using Opera Mini include: South Africa, Nigeria, Egypt, Kenya, Ghana, Sudan, Libya, Tanzania, Zimbabwe and Namibia.
• Sudan, at 4908.2 percent, and Zimbabwe, with 2321.6 percent, lead the region in terms of annual page-view growth.
• These same two countries show the most annual growth in unique users: Zimbabwe’s user growth has increased 1719.3 percent, while Sudan’s is up 1219.4 percent.
• While Nokia may have struck out again in the U.S. recently, it continues to do well in Africa’s low- to mid-tier handset market: In 6 of the top 10 countries, the top 10 handset lists were comprised solely of Nokia handsets, with the Nokia 5130 XpressMusic routinely being the most popular device.

So what’s causing such explosive mobile web growth across the African continent? That’s difficult to say, although in areas with limited or slow wireless networks, Opera’s mobile browsers can speed up surfing while using less bandwidth. Opera’s report gives a glimpse of another reason: the growing popularity of top-tiered, global web destinations. According to Opera’s data, Facebook, Google and YouTube are all routinely among the top four websites being hit up by handsets in African countries.

That doesn’t mean there isn’t room in Africa for other popular web sites on mobiles though, so if I were a mobile cloud provider or webmaster for some other mobile service, I’d consider packing my bags for a little safari right about now. And on that trip, I’d also be looking to see if any low-priced Google Android handsets could be hunted and bagged or if Nokia will continue to be king of the African jungle.

Image credit: Flickr user Michael Gwyther-Jones.

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Facebook’s new offering for feature phones is an easy example of the reason carriers love apps, and even need them. The GSM Association’s Mobile App Briefing site said Thursday that Dialog in Sri Lanka, Life in the Ukraine, Play in Poland, StarHub in Singapore, STC in Saudi Arabia, Three in Hong Kong, Tunisiana in Tunisia, Viva in the Dominican Republic, and Vodafone in Romania will all offer free data access for the Facebook app for the first 90 days.

For Facebook, this is a plus, as it gets its app freely available and usable on handsets other than smartphones. For the operators, Facebook is one of those killer apps that get people to sign up for data plans. It’s like giving cigarettes to soldiers in their rations — once you have Facebook on your phone, you won’t want to give it up, even if it’s an expensive habit. Now operators can convince more people to sign up for data plans on lower-end phones, expanding the lucrative plans across more of their subscriber base.

The Microsoft example is a bit more complicated for data-loving carriers. Reports had surfaced that Windows Phone 7 handsets were downloading more data than they should, even when the handsets weren’t actively in use. On a PC this isn’t a problem, as most people don’t pay for their broadband by the byte, but on phones, that’s close to what people do when they purchase a set bucket of bytes. For people on the 200 MB AT&T plan for example, every byte counts — much less the 50 GBs one subscriber allegedly saw. Even on a high-end plan, that’s a $15,005 data bill.

From a carrier perspective, issues like this are a pain. Because the operators have little control over which apps that people can download, when pissed off customers complain about unexpected data use, a carrier can either waive the bill, never knowing what the original problem was (or if it will repeat itself) or risk upsetting its customer. This is where apps and the app stores can wreak havoc on mobile operators. One can argue that the restrictive pricing plans play a huge role in this, but that’s a separate story and issue.

Operators need app stores to get people to sign up for lucrative data plans and boost the average revenue per user, especially as the value of voice declines, and many markets approach saturation for basic cell phone service. But the success of apps comes in part because there are so many options out there for consumers, and people can find whatever they want beyond the carrier-walled gardens. This opens the consumer to higher data usage as well as potential risks that ultimately they will call their carrier about, because the carrier is their point of entry into the whole system and owns the customer relationship.

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Part of the update will also include access to Vudu’s 3D library. Vudu announced streaming of 3D movies at CES, and Boxee’s Andrew Kippen was quick to point out that the Boxee Box currently is the only Internet set-top box that allows the rental of 3D movies. To be fair, Vudu also streams 3D movies to Sony’s PS3 as well as a bunch of Blu-ray players, and we’ve been generally skeptical about the future of 3D in the home, but the feature may give Boxee a slight advantage over Roku and the Apple TV with some users.

Update: Boxee just got in touch with us to correct themselves, saying that 3D isn’t actually part of this roll-out. The company says it hopes to have access to 3D movies through Vudu “in the next few weeks.”

Owners of the Boxee Box have been quite vocal about the fact that the device didn’t ship with access to Vudu and Netflix. Today’s launch of the Vudu app could help to pacify some of these users, but the big elephant in the room seems to be the Netflix app, which is still missing. The startup had originally said Netflix would be available by the end of 2010, but more recently said it hopes to deliver the app by the end of January.

Boxee recently teamed up with Iomega and Viewsonic to produce a network attached storage drive as well as a TV set with its media center software included. Still, the long delay of the Vudu and Netflix apps seems to prove that in the age of connected devices, making CE products isn’t just about hardware alliances anymore.

Want to know how to optimize your Boxee Box experience? Then watch the newest episode of Cord Cutters below, or check out our list of 10 Tips for Getting the Most Out of Your Boxee Box.

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The number of people who watch online video on their TV is three times as high as it was just a year ago, according to Sidereel. However, don’t expect to find an Apple TV or a Roku box in every household included in the survey; 60 percent of respondents have simply connected their computers to the TV screen. They’re using this type of setup to watch a whole lot of online video: 54 percent of users watch five to 20 hours of online video per week.

Granted, surveying users of a site dedicated to online video viewing is more than a little self-selective, but Sidereel CEO Roman Arzhintar told me via phone that the average age of his site’s users actually went up from 26 to 29 when compared to December 2009. This could be an indicator that online video viewing is becoming more mainstream, and Netflix clearly plays a role in this as well, as 24 percent of Sidereel’s users are also Netflix subscribers.

However, not all is lost for Hulu, which is trying to compete with Netflix by offering its own Hulu Plus subscription service. Four percent of Sidereel’s users are also Hulu Plus subscribers. That is actually quite impressive, given the fact that Hulu Plus only officially launched in mid-November.

The single biggest loser of this growing trend toward watching online video subscription services on the TV screen could be your plain old pay TV provider; 25 percent of Sidereel’s users don’t have any pay TV at all, and many others could cut the cord soon. The survey showed that people who watch more than 10 hours of online video per week are more likely to also go ahead and ditch or significantly scale back their pay TV subscriptions. “These are people who are not cord cutters today because they still have cable,” Arzhintar told me, adding: “But they don’t watch a lot of it, and it’s expensive.”

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Boxee May Go to Subsidized Deals to Compete With Apple TV. Founder Avner Ronen also says that the $200 Boxee Box was “way too expensive.” (Electronista)

RealPlayer for Android Upgrade Now Available. The new version, available for free, is based entirely on over a thousand pieces of user feedback. (RealNetworks)

iPad: Just Another ‘Free Internet Appliance’? Research shows that iPad users are choosing ad-supported content over pay content. (Paid Content)

Netflix Spends 20 Times More on Postage Than Bandwidth. Netflix COO Ted Sarandos told the Hollywood Reporter that it currently costs Netflix up to $1 per DVD mailed roundtrip. (Digital Society)

For Hollywood, It Was a Tough 2010. Media sales and theater tickets all declined last year. (LA Times)

1. The Steve Work Ethic

Considering the turbulence Apple faced Monday and Tuesday, it’s difficult to imagine that every analyst would choose to not ask questions about the impact Jobs’ medical leave of absence would have on the company, yet none did, at least not directly. However, one question was posed about “long-term planning” about products.

“In my view, Apple’s doing the best work ever,” said COO Tim Cook, adding that the company was “very happy” with the product pipeline, and then he said this:

“The team has an unparalleled breadth and depth of talent and innovation that Steve has driven in the company, and excellence has become a habit, and so we feel very confident about the future of the company.”

Present or not, the influence of Steve Jobs still guides Apple.

2. Apple and the Dragon

When queried about how Apple can manage to sustain the insane growth of the present and the past, the answer that came up repeatedly was Asia, specifically China. The company stated that years ago Apple identified China among emerging as its “top priority” and the results are “absolutely staggering.” China, Hong Kong, and Taiwan generated some $2.6 billion in revenue for the quarter, quadrupling performance over last year. The number of visitors and sales at Chinese Apple Stores exceeded those of every other store, including flagship stores in the U.S. and Europe.

Besides China, sales in Japan were up 83 percent year over year, with strong growth for the Mac: up 56 percent. Korea was also singled out as being very receptive to the iPhone, and Japan was mentioned as well, but clearly, China is the focus of new markets for Apple going forward.

3. The Mac Is Back

Actually, it never left. For a jaw-dropping 19 consecutive quarters, the Mac has grown faster than rest of the PC market. For the most recent quarter, the Mac achieved 23 percent growth, compared to a meager three percent for the rest of the industry. Apple sold more than 850,000 Macs in retail Apple Stores, and once again, for nearly 10 years, “about half” of those purchasing Macs were doing so for the first time.

As to what people were buying, the biggest sellers were the MacBook Pro and the new MacBook Air. Apple executives described the Mac as a “phenomenal” part of their growth. That growth included 2.9 million laptops sold, representing 70 percent of Macs sold during the quarter. Consumers loved new features like “instant on” and the speed of solid-state drives according to Apple. Look for SSDs to migrate to other Mac portables soon, most likely with faster CPUs from Intel.

4. The Unstoppable iPhone

After selling more than 14 million iPhones from July through September, Apple topped that by selling more than 16 million iPhones during the holiday quarter, and they could have sold more. More than six months after launch, the iPhone 4 is still supply-constrained, and Apple executives have no idea when supply and demand equilibrium will be reached.

It almost certainly won’t be this quarter, with the launch of the Verizon iPhone. In fact, a question regarding expanding sales of CDMA iPhones to countries like China was only partially deflected. While Apple is “always looking for opportunities,” it was implied that current iPhone supplies preclude any major expansion in the short term. For the first time, Apple may be looking at an iPhone that sells out across the model year.

5. Other Tablets Still Suck

Trash-talkin’ Steve Jobs may not have been there to put the smackdown on competing tablets, but Tim Cook filled those shoes admirably. According to Cook, competing tablets currently fall into one of three categories:

1. Window tablets that are “big, heavy, expensive, and have poor battery life,”and that require input devices like a stylus. Consumers are simply “not interested.”
2. Android tablets that, by Google’s own admission, run an OS not designed for tablets in sizes that are “less than reasonable,” failing to provide a “real tablet experience.” They are “scaled-up smartphones” and Apple is ”not concerned” about  them. I wouldn’t expect a 7-inch iPad this year.
3. Vapor. That would be tablets previewed at CES or earlier, and possibly the BlackBerry PlayBook, though RIM was never mentioned.

6. 160 Million iOS Devices Sold

To put that number in perspective, the number of iOS devices passed 100 million last June. In September, that number was 120 million, and now it’s 160 million. By the time the next iPhone launches in June or July, it will be at least 200 million, perhaps as many as 250,000 million.

That’s the takeaway from this quarter’s conference call: six facts worth remembering.

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What’s not as easy to forget is that we’re now collectively getting used to interacting with computers via means and interfaces that have moved way beyond the keyboard and the mouse — the Kinect being the latest example.

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That the question is even asked at all is a testament to Jobs. Since his return to Apple in 1996, the 55-year old co-founder of the company has led it with a sense of purpose and focus of direction rarely seen among multi-billion dollar, publicly held corporations. Under Jobs, the iPod became for MP3 players what Kleenex is for facial tissue; the iPhone started a consumer rush on what was once a market relegated mostly to business users; and the iPad beat all expectations and single-handedly brought tablet computing mainstream. It’s Jobs’ extreme degree of control that accounts for much of Apple’s success, but might it not also lead, ultimately, to failure?

The problem with extreme authority is that once it’s removed, chaos often ensues. Even if someone else steps up to fill the power vacuum, that person won’t be Steve Jobs, no matter what other qualifications he or she brings to the table. And without Steve Jobs, in the minds of loyal followers, the general public, stockholders, and maybe even Apple employees, Apple just isn’t Apple.

At least, it isn’t the Apple we now know. But does it necessarily follow that an Apple without Jobs will be a failure? That’s a much more extreme claim, and one that ignores a number of very important factors. The first is history. Remember that we’ve been here before; from January to June of 2009, Jobs took his first medical leave, which turned out to be for a liver transplant. During that time, Apple COO Tim Cook stepped in as interim CEO. After an initial dip following the announcement of Jobs’ leave (like the one we’re seeing today, as Mathew reports), Apple stock prices rose steadily during that time, peaking at around $145 at end of Cook’s tenure, even amid rampant speculation that Jobs’ absence may become permanent. Apple was so impressed with Cook’s performance that the company gave him a $22 million bonus.

Cook isn’t exactly the only luminary in Apple’s talent pool, either. There’s top product designer Jonathan Ive, whose signature look has made Apple products the go-to gadgets for the fashion conscious and image-obsessed. And there’s Senior VP of Worldwide Product Marketing Phil Schiller, who came to Apple with Steve upon his return, and who has played a significant role in past company presentations. Schiller is now also arguably Apple’s most prominent social media presence through his Twitter account.

None of these potential successors have the celebrity status that Steve Jobs enjoys, but there’s no reason they should as of yet, since that role’s been more than adequately filled by Jobs himself until now. And while a celebrity CEO has been a major boon for Apple in the past, it doesn’t necessarily follow that the company will flounder without one. To suggest so is to ignore the hard work and resourcefulness of the Apple employees that turn Jobs’ vision into a reality. In fact, according to some Apple employees who spoke to us, you often have to work around Jobs subtly on issues where he’s very clearly in the wrong. Having a more reticent corporate leadership could allow dissenting opinions to surface, leading to products that would otherwise come to market late or not at all (a 7-inch iPad, for instance).

While Jobs’ current leave comes as a surprise to us in the media, there’s little chance it was something Apple isn’t prepared for as a company. Steve Jobs may be largely responsible for Apple’s success, but he won’t also be responsible for its failure. That has, and always will be dependent on the quality of the products it creates, and on the resourcefulness and ingenuity of the thousands of employees that work every day to make those products a reality.

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We spoke with Miller via IM about his departure from NNN, his efforts to break into Hollywood and what he loves about creating weekly web content. An edited transcript follows:

NewTeeVee: So, first off — how are you doing?

Bobby Miller: I am doing good. How are you doing?

NewTeeVee: Very well!

Miller: And END interview. That was great!

NewTeeVee: So first things first: What caused you to leave Next New Networks last spring?

Miller: I had planned on moving to Los Angeles, because I had some success with my short film TUB and was able to get some representation, etc. off it. And during that time, NNN were sort of shifting their business model to less in-house type stuff, i.e. the Creators program. And so it just kinda made sense to part ways.

NewTeeVee: In terms of past projects, what has gotten you more work/attention: TUB or your NNN work?

Miller: Hmm, that’s hard to quantify. The NNN shows got me my current gig with NextMovie.com. So, there’s an easy correlation there. But TUB opened a lot of doors in the film community, which is why I moved. It’s a lot harder to get a feature film off the ground than it is a web series.

NewTeeVee: So what opportunities are in L.A. that you felt weren’t possible in N.Y.?

Miller: I mean, for better or for worse, the film industry is out here. I wrote a feature film that sorta relates to TUB and have been able to take meetings out here with studios about it. But, oddly enough, the MTV web series I’m doing is an L.A. production, but it’s done for MTV Digital, which is based in NYC!

I mean, I sorta think of it as this: The web stuff I do gets me web work and TUB will (hopefully) lead me to feature film or TV work. I think they do weave together at points.

NewTeeVee: How is stuff going on the feature/TV front?

Miller: It seems people really dig the script, but it’s pretty odd. So we’ll see. One of the studios gave me a stack of comic books to see if there’s something I could adapt. And I’m working on a cartoon show pitch with one of my pals. I’m finding you have to have a lot of pots marinating on the stove in this line of work. You can’t just think that one project is going to break through. And everything happens s-l-o-w-l-y. Which is why I’m thankful I have an outlet on the web.

NewTeeVee: What kind of guidelines did MTV give you for That Movie Show?

Miller: They were pretty hands off, in the same way NNN was. I think essentially we just have to talk about movies and try to do that in an entertaining way. They could have balked at the idea of doing this sorta show within a show, more narrative thing, but they were game.

NewTeeVee: What do you mean by “show within a show?”

Miller: The idea that it’s also about me trying to make a show. Kinda like how The Muppet Show has sketches, but also sort of behind the scene moments.

NewTeeVee: Muppets! Always a great comparison.

Miller: I should have referenced The Larry Sanders Show instead of the Muppets. That would have made me seem smarter maybe.

NewTeeVee: Nah, Muppets are classy.

Miller: There are puppets all over this show, actually. When in doubt, just put in a puppet.

NewTeeVee: What kind of audience feedback have you gotten so far?

Miller: Oh, they hate it. They absolutely hate it. Actually, I have no idea. The comments seem good. So, I guess the feedback’s been good?

NewTeeVee: Do you have certain audience metrics to hit?

Miller: That hasn’t even entered the conversation really. Which is a relief in a way, because that’s nerve-wracking.

NewTeeVee: Definitely. Have you brought over much of your audience from Next New Networks? If there’s any way to measure that, that is.

Miller: I’ve tried my best to. I think the majority of the audience is people who liked my NNN shows for sure, and hopefully we can build upon that. The first episode really was made for them though, as a sort of link to the NNN shows and this new one.

NewTeeVee: It’s cool that MTV’s given you free rein. Is there anything they’ve said no to?

Miller: Not really, it’s mostly just cursing. I tried really hard to not have to bleep out a–hole in last week’s song!

NewTeeVee: How many episodes lie ahead?

Miller: It’s for 10 episodes total, and we’ll see from there.

NewTeeVee: What direction do you plan to take it?

Miller: Right off a cliff. I have no idea, really. That’s a terrible answer, isn’t it?

NewTeeVee: I wasn’t gonna say anything, but…

Miller: In general, the first few episodes have set up the characters and the world of the show, and I look forward to expanding them in the next couple episodes. Flesh them out a little bit more, or show other sides to them. There might be more singing too.

I think the main thing is to just keep it interesting and varied. I don’t want people to know what to expect from it. What I love about the web and doing a weekly show is you have no time to second guess yourself and it’s open to experimentation. For better or for worse.

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The History

After hitting it big in the corporate networking world, the five founders of Software.com left the successor to their company in 2001 and decided to take their earnings and start a networking business all over again — this time in the home. With the sense that networking would continue to spread, the founders of what would eventually become Sonos first decided to build networking gear that would connect the instrumentation of an airplane. But Tom Cullen, VP of sales and marketing and a co-founder of Sonos, said that when he looked at that idea, he didn’t want to have the Federal Aviation Administration standing between him and his customer, which freed the founders up to create a networked, home-music system.

Using their own money and an undisclosed amount raised from angels, Cullen, Sonos CEO John McFarlane, and three others created Sonos in 2003, believing the phenomenon of IP communications in the workplace would soon invade the home. Building a system that made moving music digitally across a home network in a simple and easy-to-use way became the goal. “We wanted it to be like grabbing a CD off of a shelf and popping it into a player. It had to be that easy,” Cullen said. Fast-forward to today, and the company, which doesn’t report sales, has sold millions of its products and has seen sales grow by more than 105 percent in 2010 from the previous year, thanks in part to the release of its S5 product. The S5 resembles a boombox, connects to your wireless network and delivers whatever songs are stored on your iTunes or a home media server.

The Sonos S5 is making Sonos a household name.

For those who have a Sonos (I do), the experience is unbelievably simple (albeit expensive). You plug in the product; it gets online; and two minutes later, you can listen to music stored on your media server or from an online music service such as Pandora or Spotify. The new-found success has brought in $25 million in new funding from Index Ventures.

This rise to the top hasn’t been a straight line. There are more twists and turns in their story that there are on the Blue Ridge Mountain Parkway.  Along the way, the Sonos crew has learned some valuable lessons that any consumer-focused startup should consider in order to create a good user experience and profits. And for those wondering, Cullen wouldn’t give a time frame for the release of an Android controller, only saying, “We can see a handful of other potential platforms, and we want to see which one has the biggest concentration of music lovers.”

Lesson#1: Focus and Refine

Tom Cullen of Sonos

“We wanted to be the Bose of the digital world,” Cullen said. But in order to do that, the Sonos crew had to figure out how to make a product that was easy to use and could deliver a sound quality that audiophiles and those listening to MP3s would appreciate (as an aside for digital music junkies, Cullen says he stores his audio files as 320 kbps MP3 files). Improvement is ongoing, with the latest advancements being the way it built its S5 boombox-style device. Sonos, not longer content to shuttle bits around the home network through a proprietary wireless system, designed a new speaker for the S5 that digitally controls the output from the different parts of the speaker.

An advantage of this is that the S5 sounds the way most consumers prefer their speakers to sound (at least according to the gurus at Lucas Arts who vetted the sound quality for Sonos) and that the speaker profile can be changed via a DSP programmer tweaking the settings. Expect those advances to be seen in future Sonos products. Cullen also notes that the home audio market is the focus today, but people listen to music in other places, such as in their cars or via headphones — an area Sonos will one day explore. As it does, it’s staying focused on providing the best sound for digital music and continuing to refine the way it builds its products in the service of that goal.

Lesson#2: Consider Usability Before You Build

It took the guys at Sonos a few months to build their first prototype, and at the end, they were left with a product only a geek could love. Realizing this, they sought help from a usability expert, who told them they didn’t need a usability expert until much later in their process. What they needed was an industrial designer who could get in early and help them build the hardware and software with an eye toward the consumer. The team eventually hired Meiko Mieko Kusano, a designer for Phillips, who told them, “Usability is in the bones of the product, not the skin.” Cullen still credits that mentality with Sonos’ success.

“Most consumer electronics companies build out hardware and then add software to update it and change their designs every 18 months. We turned that on its head, building hardware that will last and software that we can update whenever we need to in order to improve the experience.” Cullen credits that shift to Kusano, and offers up Sonos’ Zone Player products as an example. “You should be able to stream music over that for the next 15 years.”

Lesson#3: Don’t Be Afraid to Cannibalize Yourself

That long-term vision for the hardware is part of the success of the Sonos platform, but the other is the philosophy the company has about working with partners and even introducing new products to expand its base. When it launched, a Sonos system could run a user about $99 for a wireless router, another $350 to $500 or so for something that picks up that signal and connects to speakers in one room (each room would need another of these), and a special controller for about $350 to drive the system. But in 2008, Sonos released a free app for the iPod that mimicked the functionality of the controller and thus brought down the cost of the system. Sales surged. The loss in controller revenue was more than offset by sales of the new system, Cullen said.

It now has a free app for the iPad, and as mentioned earlier, Cullen says support for other platforms will come. But last year, Sonos introduced a much more disruptive product: its S5 boombox. For $400, the S5 has speakers and allows someone to create a Sonos network with the addition of a Zone Bridge for $99. The launch of that product has changed the profile for Sonos, moving it out of the specialty market and into the mainstream. At the time of this writing, items No. 3 and No. 6 on Best Buy’s Top 10 bestselling wireless and streaming audio products were S5s. However, Sonos’ S5 cracked the top 100 of Amazon’s Bestsellers in Home Audio & Theater Products list at No. 73, behind rivals Logitech and Bose. But Cullen says the fear of cannibalizing sales of its more expensive gear hasn’t been realized; instead people buy an S5, then tend to add more onto their networks.

Lesson #4: A True Platform Doesn’t Pick Winners
As a platform, Sonos plans to release a breadth of hardware and software to ensure a better digital music experience, but it also extends that to partnerships it signs with music providers. Sonos currently supports Spotify in the U.K. and Scandinavia, and that partnership alone has enabled it to boost sales of its system in those countries by a non trivial amount. In the U.S., a partnership with Pandora has had a smaller but still noticeable affect on sales as well. Cullen said Spotify and other some partners have offered to pay Sonos for providing access to their content to Sonos users, but Sonos doesn’t play that game. “We don’t take revenue from people,” Cullen said. “We don’t want any incentives to guide our behavior rather than the user choosing what they want to listen to. We don’t want to be picking winners and losers.”

So far, Sonos’ strategy is working. The company has now raised $65 million,and while Cullen wouldn’t discuss IPO plans, he says the company has been approached by buyers. However, the $15 billion home audio market beckons, and Sonos believes it has learned how to play the game well and can take the disruption provided by digital music and home networks to give the industry giants a run for their money.

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For example? Your medicine cabinet. AT&T said last week it would provide the service behind an innovative pill cap that will connect to its network and text users when it’s time to take their medicine, or it could text a caregiver.

The nifty little pill bottle top costs $10 per cap and requires a $15 per month service plan. That’s likely worth it for people who need reminders about the drugs they or a loved one are taking, but on a per-megabyte basis that $15 per month nets out to about $25 per MB, although it’s not clear if AT&T gets the full $15. The folks at Vitality, the maker of the cap, said the connected cap transmits less than 20 kilobytes of data per day over the network — a mere crumb when compared to bandwidth hogs watching streaming video on their iPhones.

Compare that to the price of 8 cents per megabyte under AT&T’s 200 MB per month plan for iPhone users or 1 cent per MB for those on the 2 GB for $25 per month plan, and suddenly the focus on falling Average Revenue Per User doesn’t seem as scary for operators who will have an entirely new class of subscribers to go after. There’s a very real possibility that consumers will draw the line at paying $15 per month for their fridge to tell them when to change the water filter, but for the right use case, operators might be able to share in texting-type margins to boost their profits.

Both AT&T and Verizon are looking for extra revenue and low-bandwidth needs from utilities, too, offering their networks to connect smart meters and smart grids. About a year ago, carriers dropped their prices dramatically for utility smart grid projects, evidently finally realizing the low maintenance, steady revenue stream that smart grids can deliver was worth smaller network rental fees.

Machine-to-machine connectivity is also a needed area of expansion in a saturated wireless market like the U.S. As I wrote a few months ago:

The nation’s two largest carriers added more connected devices [in the second] quarter than postpaid subscriptions, according to data released this morning by Chetan Sharma, a wireless analyst. Carriers added 2.6 million connected devices and 1.2 million contract customers. In his quarterly update, Sharma noted that wireless penetration in the U.S. reached 95 percent and surpassed 100 percent if one takes out children younger than five. While there are only 20 million connected devices out of 311.3 million subscriptions, the devices are where the growth is.

Fantastic profits and a chance to keep growing subscriptions? No wonder AT&T and other operators are betting on the Internet of Things.

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The Sundance Film Festival is a showcase that draws about 50,000 people to Park City, Utah — all toting cell phones, tablets and computers, and all expecting to use them without any trouble. The sense of tech entitlement (remember the outrage at AT&T after South by Southwest in 2009 when folks couldn’t use their iPhones?) is only getting worse. For example, it’s becoming more common at large conferences and product launches for presenters to ask reporters or folks in the audience to turn off their personal hotspots or pause their video streaming in order to cut down on glitchy demonstrations or so people can share the connections responsibly.

A recent study by Root Wireless showed that at this year’s Consumer Electronics Show (CES), the influx of people created huge congestion problems that resulted in less reliability and slower speeds, especially during afternoon hours when everyone was likely to be online (see chart, showing performance).

The problem is simple: Wireless — whether cellular or Wi-Fi — uses the airwaves, and one can only cram so many bits into a single megahertz of bandwidth. So if you have enough people in a small space trying to get their bits through, their connection slows or stops. New technologies are always trying to boost the amount of data a given chunk of spectrum can hold, but to think that you can cram a few thousand people into a small area and serve them all perfect 10 Mbps or even 1 Mbps connections is like expecting gravity to suddenly stop working so we can all fly.

The IT folks at Sundance know this, so they did three things to boost connectivity for the attendees at the film festival. First, they brought in about a dozen Comcast business lines, ranging from 100 Mbps to 22 Mbps, to provide about 300 Mbps of total backhaul capacity. They also bullied AT&T into trucking in extra cellular capacity in the form of COWs (Cellular on Wheels) or COLTs (Cellular on Light Trucks), and they got 45 Wi-Fi access points from Ruckus Wireless to create a monster hot-spot.

The end result is that the excess cellular equipment provides more spectrum for those who want to make phone calls and send texts, while the Ruckus access points handle interference and sharing the airwaves for the myriads hopping on Wi-Fi. Justin Simmons, associate director of IT at Sundance Institute, said he’s already seeing 40 gigabytes sent in a 24-hour period over the network, and the festival hasn’t even started yet. He’s convinced that people will still tap out the network as the demand for connectivity is pretty much infinite, but at least this year, people will be able to use the Sundance apps created for iPhone and Android devices.

“The last couple of years, cell service got worse and worse, and last year was even more so,” said Simmons. “We had an iPhone app, and it didn’t work because the 3G network didn’t work, and we didn’t have public Wi-Fi.” In a wrap up meeting to discuss the festival, the lack of connectivity was a huge problem. “People expect connectivity, and when they come to the festival, they need to have it here and it affects their customer experience,” said Simmons. “Plus when we push an iPhone app playing video that doesn’t work, it makes us look pretty bad.”

Unfortunately, it’s likely that even with the efforts taken to improve the situation, there will still be complaints over speeds that IT can’t solve today. It’s just a sobering reality about wireless broadband and crowds. Convenience comes at a price, and generally, the price is slower speeds and more uncertain connections.

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