Yesterday was my last day at AOL. Today I’m joining betaworks as an entrepreneur-in-residence, focusing on seed stage investing, as well as working with portfolio companies here in SF and just generally serving as their ambassador to the West Coast. It’s a big change for me and I’ll write more about it in a later post.

The last time I left AOL I never made an announcement or posted anything to my blog. I’ve always felt uncomfortable saying goodbye — I have a bad habit of trying to sneak out of parties — but looking back I really regret disappearing like I did. I was already working on a couple of new projects (RCRD LBL which went nowhere, and gdgt, which brought me back to AOL in 2013) and at the time I only wanted to focus on what was ahead of me, not behind me. Of course, I realize now that I left without thanking a lot of people at AOL or acknowledging the hard work of the team that I was leaving and I won’t make that mistake this time.

First, I have to say thank you to my team at AOL Alpha, who are without a doubt the most talented and capable people at the entire company and who I’ve been very lucky to have had the opportunity to work with. They’ve all done amazing work and I look forward to seeing what comes next out of Alpha. I especially want to thank Evan Fribourg, Michael Cosentino, and Drew Lesicko, who ran Alpha alongside Ryan and me. Their dedication to Alpha has been inspiring and I am going to miss working closely with each of them.

I owe a debt of gratitude Jay Kirsch, who helped spearhead gdgt’s acquisition by AOL. Anyone who has ever sold their startup knows that you need someone who believes in you championing your deal internally if you’re ever going to get something done and we were lucky to have Jay be that person for us (plus he was awesome to work for after the deal closed).

I also want to thank Susan Lyne, who made me her VP of Strategy after she took over the Brand Group a couple of years ago. I learned a tremendous amount from her, and I suspect that everyone who has ever had the chance to work for Susan feels as I fortunate as I do to have had someone as thoughtful and considerate as their boss.

During my first few months back at AOL I pestered Susan (and anyone else who’d listen to me) about the need to shake up the way the company did product development. It was Luke Beatty who actually stuck his neck out to make this happen. He worked to bring Alpha, our experimental product group, to life, and then gave us the organizational cover to do our thing with a minimal amount of corporate interference. Luke is the real deal and I appreciate everything he’s done both me for me and for Alpha. 

Leaving AOL also means that for the first time in many years I won’t be working alongside Ryan Block, my long-time collaborator, gdgt co-founder, and Alpha co-director. Ryan was instrumental in Engadget’s success, and helping to build first that site, and then later gdgt, was a real privilege. I’m honored to call him my best friend and I’m going to miss building new things with him. The good news is that we are going to continue doing MVP, our podcast, so we will be able to continue our collaboration in one small way. And now that I’m in San Francisco we’ll be able to record that in person. 

AOL has been good to me. There were a lot of insanely frustrating moments, I’m not going to lie, but it says a lot that they actually gave Ryan and me the resources to go build stuff and then pretty much left us alone. I met a ton of great people over these past few years and I’ll say that the AOL I rejoined in 2013 felt like a completely different — and better — place than the AOL I left in 2008. Altogether I’ve spent a good chunk of my career here and it’s hard to be anything but grateful.

I was chatting with Josh Guttman from SoftBank Capital the other day about crowdfunded hardware projects and whether or not a successful campaign made him more likely to invest in a company, as it would presumably provide early validation for product/market fit. His opinion was that there’s minimal correlation between running a successful crowdfunding campaign and building a successful business. This may surprise some people since lately investors have been pouring money into companies which have used Kickstarter or Indiegogo to launch new products.

This view certainly resonates with my own negative experiences backing various hardware projects. After a half-dozen projects that I’ve supported overpromised and underdelivered, I’ve given up on backing any kind of gadget on Kickstarter or Indiegogo. None have shipped on time, and without exception, the products I eventually received have all been disappointments.

It’s so common for crowdfunded hardware products to fail to deliver on time — or to fail to deliver at all — that it’s become something of a cliche. I thought perhaps I was just picking the wrong projects, but according to data collected by Matt Witheiler of Flybridge Venture Capital, by the end of 2014, even venture-backed products shipped on time only 1-in-5 cases — and it’s not hard to imagine those numbers are even worse for companies or individuals which haven’t raised venture capital.

I don’t want to leave anyone with the impression that I am anti-crowdfunding. I think it’s an amazing tool for helping products see the light of the day that might otherwise not get created. And it gives those who most want to see a new product become a reality a way to directly participate in its creation, something that wasn’t especially easy before. But using crowdfunding to muster the resources to finance a product can have the unintended consequence of shielding a startup from the market forces that would otherwise force them out of business.*

It’s counterintuitive, because you’d think having fewer challenges when you’re starting out would always be a good thing, but figuring out how to deal with the constraints inherent in starting a new business (whether it’s limited access to capital, difficulty in finding the right people to hire, scarcity of time, etc.) is key to building the foundation necessary for long-term success. Constraints force founders to either focus their priorities on what’s truly important or to go out of business. Finding creative ways to elide those constraints in the short-term may just be postponing the inevitable — and in the case of a crowdfunding campaign, in ways that can come back to haunt you.

Despite steps that Kickstarter and Indiegogo have taken, it’s still too easy for both creators and backers to get enamored by a vision and lose sight of a project’s feasibility. Relatively few controls are in place to protect would-be backers from projects without the know-how to execute. It’s hard for those without much experience developing and manufacturing hardware to understand the full scope of what’s needed in terms of time, expertise, and money to build what they’ve envisioned.

Obviously backers should exercise a heavy dose of skepticism before committing money to any project, but creators would benefit from that skepticism as well. A crowdfunding campaign might validate that there is a market for the product, but it doesn’t prove that the product can actually be produced and delivered at the price point offered or at the quality or speed promised. Being able to gauge demand and pre-fund production certainly de-risks a project for a creator, but it also often commits them to delivering something before they know how long it’s going to take, how much it’s going to cost, or whether they are capable of doing it. This inversion of the logical order in which products are typically manufactured and sold has its advantages, but it has also led a lot of well-intentioned creators into predicaments where they’ve taken customers’ money, only to find themselves unable to meet expectations.

In many cases creators would have been better off assuming more of the risk themselves rather than going the crowdfunding route, since it would have given them a strong incentive to make sure they could deliver on their promises before offering a product to the public. This is especially important because while using crowdfunding to shift risk from one part of the stack to another can certainly pay off, when it doesn’t you haven’t simply lost your own money, or that of professional investors who made a calculated bet, you’ve taken it from a bunch of regular people who put their trust in you. A crowdfunding campaign can help you figure out pretty quickly whether or not there are people who will pay money for your product, but as important as that is, it’s not the only thing a startup needs if it wants to be successful. You also need to make sure you have the right talent, expertise, and resources to actually accomplish your goals and build a sustainable business.

________________________

* Of course, startups which raise too much money can face a version of this, they’ll often end up losing focus and failing because they no longer feel as much pressure to get to profitability. It’s hard to underestimate the importance of being forced to make tough decisions about how to allocate scarce resources.

 

 

 

After fourteen years in New York, I’m moving back to San Francisco. There was a point not too long ago when I expected I’d live in New York for more or less the rest of my life. I’ve loved living here and I’m not leaving because I’m tired of the city or feel like it’s changed for the worse over the time I’ve been here. 

What has changed is that Jill and I want our children to be closer to their grandparents. Her parents live in Marin and my mom is in Merced (where I grew up), and while Skype calls and the occasional visit are great, they’re not a substitute for being able to spend time together regularly (or to for us to just get the occasional weekend off, either). If our parents lived in New Jersey or Long Island we’d probably stay in New York forever. It’s easy when you’re young and in your twenties to underestimate the value of being close to your family, but as I get older — and more importantly, as my children get older — you realize how important that proximity really is. Plus I couldn’t argue that I can’t do my job in San Francisco. 

We’re due to move in early July, just in time to miss most of the humid NYC summer (I actually like the winters here, but have never been able to get used to how gross and sticky it gets in July and August). We’ve already started packing up boxes and figuring out what we want to move to California and what we need to get rid of, and actually the process of reducing the number of things I own has been the one part of this process I’ve enjoyed. 

While there’s plenty to do both before and after our move, I am excited about spending more time with old friends and reconnecting with those I’ve lost touched with over the years. I’m also looking forward to meeting new people, so if you’re working on something interesting in the Bay Area and think we should chat, drop me a line. 

It’s been a few months since my last update on Alpha and it seemed like a good time to share an update on where we’re at and what we’ve been up to. As you might recall, Alpha is the experimental product group that Ryan Block and I help run at AOL that’s charged with coming up with ideas for new apps and then going out and designing and building them. 

Back in January we had just launched Starlike, our second app, and it had been about six weeks since the launch of Pip, our first app. So where are we now? Both apps had great launches, but so far neither could be described as a breakout success.

While obviously we’d prefer this to be otherwise — who doesn’t want a hit, right? — we also knew going into all this that we couldn’t have any illusions about how difficult it can be for new products to find audiences, and that since it’s unlikely we’d hit a home run on our first or second at bat we should expect a lot of trial and error. It’s similar to what Kevin Rose’s North Technologies is doing, spending a few months at a time on experiments in the hopes that one of them catches on. (They’ve already launched a couple so far, with one, Watchville, that seems to have found its audience.) Like them, we’re putting stuff out there, seeing if it gets any traction, and if not, figuring out if there’s anything we can do differently to give the app a shot at catching on before deciding whether to sunset it or not.

Pip, our quick messaging and notifications app, was our first experiment using this process, and in the weeks after launch we knew we had to pay very closely attention to how people were using it to see what we got right and what we got wrong. We managed to learn a tremendous amount from both user feedback and by examining usage analytics and then took all of that data to help us figure out what issues we needed to address and which new features we needed to include in the next version of the app to give it a better shot at success. 

The number one feature request we received from users was that they wanted to be able to create custom “pips” (i.e. a pip with a short message that they created themselves). This was something we’d considered offering prior to launch, but we were concerned this would make Pip a bit too much like a free-form messaging app and those pips wouldn’t be “special” enough. It looks like we were probably wrong to be worried about that, so for Pip 2.0 we made it possible added to create any number of custom pips. (The interface we designed for custom pips is pretty nice, too, we hope you check it out!) 

Another mistake was to launch without international support. We relied on an internal solution for phone number verification that didn’t work outside of the US, and while we knew this wasn’t optimal, we mistakenly assumed we could get away with it for this initial MVP release on the grounds that we were just testing the idea, so limiting it to users of the US store would not be a big deal.

We quickly discovered that there are many people outside of the US who set the country for their app store to the US so they can download apps not available to them in their home country. The result was a large number of users who installed the app but couldn’t verify their accounts and actually use Pip because they didn’t have a US phone number to verify against. I’m sure you can imagine how frustrating that is.

Although we managed to disappoint a lot of people early who wanted to use our app, the good news is we’ve since switched to another messaging solution (Twilio), so just about everyone in the world can finally use Pip. For those folks out there who tried it before and couldn’t register, we hope you’ll give it another shot!

We also made it too difficult for users to invite their friends to use Pip and to find their friends on the service, and we’re fixing that too, since the whole point of Pip is to be able to send quick messages to your friends. We thought we had done a good enough job here in the original version of Pip, but after examining usage data and seeing how people were actually using the app we had to accept that we had made it too complicated. We’ve made some changes to friend finding and friend adding in Pip 2.0 which hopefully address this, but this feels like one of those parts of the product that we’re going to always be working to improve. 

Starlike’s challenges have been completely different. Downloads have been solid, though not spectacular, and time spent per user session has been high, which is a good indication, generally speaking, that the people who are using it do like it. (I know that it’s become a part of my daily routine, though admittedly I’m a little biased.) That’s not to say that it was all smooth sailing, as shortly after launch we had some users who encountered issues with the feed updating very slowly or not being able to authenticate their Facebook account, but those problems have mainly subsided as we’ve introduced fixes and enhancements to the app. 

The real challenge for Starlike is that Facebook and LinkedIn, which are two of the three social services we’ve incorporated into the service, are making changes to their APIs that will make it difficult for us to continue to include them (Twitter, by contrast, has been very supportive of the product). We have been talking with both Facebook and LinkedIn about what we can do, but it may be that we have to remove both and stick to just Twitter. If so, we are going to have to decide whether Starlike is a product we continue to actively work on. 

Meanwhile, we’ve already begun the process of building several new apps (including one that might be best described as a spin-off from Pip) and we’re constantly kicking around new ideas for products for our pipeline. It’s been exciting to see new stuff like Meerkat and Periscope coming out of nowhere and seemingly blowing up overnight because it reminds us all that anything is still possible, which is exactly why Alpha exists in the first place. 

I’m not totally sure what possessed me to create this list, but sometime in 1990, when I was 15 years old, I decided to use the dedicated word processor my parents had bought a few months before to create this list of my CD collection.

I found this when I was back in Merced last year visiting my family, and I’m struck by how many of these bands I still listen to — I think my parents assumed I would outgrow this music as I got older — and also by how much MTV’s 120 Minutes influenced my taste (and by extension, purchases). Growing up in a small town in central California there weren’t that many avenues for discovering new music to listen to. There was no alternative or college radio stations, no clubs where touring bands might play, no iTunes or Spotify, not even a decent record store, I had to go to Fresno or San Francisco to find a Tower Records where I could find what I wanted. 120 Minutes was on too late for me to stay up and watch it live — I believe it aired from midnight to 2am every Sunday (technically Monday morning) — and I learned how to program my our VCR just so I could tape it each week.

Every Monday afternoon my ritual was to rush home from school to watch last night’s episode and (hopefully) find new music that I hadn’t ever heard before. I had a couple of other friends that were interested in the same kind of music who would sometimes watch with me, but otherwise it was a lonely activity. Growing up in rural California the world where New Order and Morrissey and Ride and the Cure lived may as well have been a parallel universe. For me, a nerdy kid who had trouble making friends and who everyone thought was a little weird, it was like I’d stumbled upon some kind of secret knowledge, and possessing it made me feel special in a way that I really needed when I was fourteen and fifteen. It’s funny now to look back and see how huge a lot of these bands were (or still are) and try and reconcile it with how personal they felt to me, like they existed just for me and for no one else. 

Click the image to see the next image in the gallery

You may have read a bit about Alpha, the new experimental product group at AOL that I’m co-leading with Ryan Block, around the launch of our first mobile app, Pip. Ryan and I talked a little about the purpose behind Alpha in the piece TechCrunch did on Pip, but I thought I’d go into some more detail here and expand on how we’re approaching product development now that we’ve just launched our second app, Starlike.

Alpha itself is made up of about twenty people, primarily developers and designers. Besides Ryan and myself we have three other people helping us lead the group: Evan Fribourg, our director of technology, Michael Cosentino, our director of design, and Drew Lesicko, our director of mobile product. It’s not a huge team, but we are fortunate to have many of the most talented people at AOL as part of Alpha.

Our sole objective at Alpha is to conceptualize and build new experimental products, with the primary long-term goal of bringing new — and hopefully large — audiences to AOL. We’re focusing primarily on mobile, though we’re not limited to that and could certainly make something that wasn’t mobile-first if we thought it made sense. Our plan is to favor creating entirely new products with entirely new brands, over extending any existing AOL sites or brand.

Anyone building new mobile apps or services these days knows that it isn’t easy and that you’re playing in an increasingly crowded and competitive space. Over the past few years the mobile apps market has come to resemble the hits-driven entertainment industry. Just like there’s no way to guarantee a number one song or a blockbuster movie, no matter how much money you spend, when it comes to mobile apps there’s no surefire method for creating a sustainable hit app, no matter how much money you can throw at marketing. Success or failure can be completely unpredictable or feel even arbitrary, with plenty of great products going nowhere, while ideas which initially seem trivial going viral and blowing up.

Most of the breakout hit mobile apps of the past few years have come out of startups, and that’s in large part because startups, because of their nimbleness and lack of bureaucracy, are generally better suited to taking risks on new products and then getting them out the door quickly. It’s not easy to replicate that methodology within a big internet company (even if we’re going to try our best), but it’s important to acknowledge that difficulties that any product, whether it comes from a startup or a big company, has when it comes to finding product/market fit. It’s easy to see just the hits and forget the huge number of other apps that go nowhere. If you look at the market in the aggregate you’ll see many more misfires than hits, that’s just inherent in the process.

Given that, our strategy with Alpha is to try and build as many quality products as we can, as quickly as possible, and in the most startup-like way we’re able to. Instead of making one big bet on one big idea, only to see it crash and burn, we want to take a bunch of smaller ideas, spend a few months turning each into a minimum viable product, and then just put them out there and see whether users take to them or not. Our goal is with each initial release is to test a hypothesis, so we’re not spending any money on marketing or promotion, we want to learn how users respond first. If after a few months something isn’t getting any traction or connecting with users in any meaningful way — we’re basically looking for significant organic growth and/or really high engagement rates, even if the overall numbers are still low — we’ll take an honest look at where we’re at. If we still think there’s a possibility of finding product/market fit, we’ll either iterate the product or pivot it. If not, we will cease working on it entirely.

In terms of our development process, we start by going through tons of different ideas for products. The most promising ones go through an exploratory process where we scope out the features and design, including wireframing. Sometimes at this point we’ll also do some initial prototyping to see if we can actually build what we we want to build, and we’ve had products get this far and then been killed because the tech wasn’t coming together. Once we feel confident that we can build it (in a reasonable amount of time), and that the core concept is still interesting enough to continue pursuing, we take a moment to step back and make a final decision on whether or not to move forward. If so, we assemble a team of designers and developers to work together on the product and then push ourselves to ship an MVP as soon as possible!

We’ve already released two apps through this process, with a pretty great pipeline in the works for later this year. But as promising a portfolio of products as I think we’ll have, I’m under no illusions about how challenging it will be to create a hit. We’re striving to make things that are as good and interesting as anything you’d read about on Product Hunt, but the reality is that being awesome isn’t enough any more. If we’re going to see the kind of success anyone building consumer products hopes for we’ll need a little bit of luck as well.

It’s been almost two years since gdgt was acquired by AOL and I figured I was way overdue for an update on what I’ve been up to.

The big news is that Ryan Block and I are running a new group called AOL Alpha that’s charged with building experimental new products. We’ve got an awesome team of designers and developers — including a handful of original gdgt team members — all working together to create some cool new stuff. Our first couple of apps will be out soon, so look out for those!

The other thing I’m excited about is that Ryan and I have started podcasting again. Our new show is called “MVP” and it’s all about new tech products. If you follow me on Twitter you might remember a tweet from back in March where I wondered aloud if it was time for Ryan and I to start a new podcast. I hadn’t actually mentioned this directly to Ryan — it was just one of those off-the-cuff things — but in September Ryan finally came around to the idea and we figured we’d just do it. If you remember the gdgt podcast, or even go as far back as the days when when we hosted the Engadget podcast, you’ll know the format. It’s basically us discussing new and interesting products for about an hour. 

Lastly, after six years, I made the decision this month to step down as board chair of Rhizome. I’m remaining on the board, and will continue to be involved in organizing our yearly Seven on Seven conference, but it seemed like a good moment to pass the baton and I’m very happy to see Greg Pass bring some new energy to the role.

A lot was written in the wake of Facebook’s purchase of Oculus Rift last month, but Fred Wilson’s analysis was the one that stayed with me, especially this part here:

The next thing was mobile. Mobile is now the last thing. And all of these big tech companies are looking for the next thing to make sure they don’t miss it. And they will pay real money (to you and me) for a call option on the next thing. It isn’t clear if the next thing is virtual reality, the internet of things, drones, machine learning, or something else. Larry doesn’t know. Zuck doesn’t know. I don’t know. But the race is on to figure it out. 

I actually hadn’t intended to write anything myself about the deal, but I’ve been thinking a lot about why exactly virtual reality could be the big thing and what the implications of that might be. Fred didn’t really go into the reasons why there’s going to be a race, apart from the usual one that there will potentially be lots of money to be made. But I think it’s something worth exploring, because it’s not just that virtual reality could go beyond games and entertainment and become the next big wave of computing. It’s that if VR takes off — and I agree with Fred that we still don’t know how this will all play out — it will also mean a substantial transformation in how we interact with computers. It’s precisely this shift to a new mode of interacting that is going to be a big part of what makes VR so interesting from a business standpoint, because changes like these always create massive opportunities for new players to disrupt and destroy incumbents. And you can bet that Facebook bought Oculus Rift because they would very much like to not be one of those incumbents that gets disrupted and destroyed. 

One challenge when thinking about how this new form of computing might be employed is that the name “virtual reality” implies that it’s exclusively about experiences that involve simulated environments, like you’d find in video games or virtual worlds like Second Life. My preference is to use the term “immersive computing”, since immersiveness doesn’t always equal verisimilitude, and we’ll surely see plenty of distinctive new applications that employ immersiveness to create different kinds of experiences that aren’t at all like being inside a video game. It’s not hard to conceive of ways in which you could use an Oculus Rift for visualizing data and information in new and more efficient ways than we can do currently on a computer screen. 

You don’t have to look very far back in time to see an example of this. All the craziness that’s come with the explosive growth of mobile is because computing’s center of gravity has been moving away from PCs and towards smartphones and tablets. That shift from desktop computing to mobile computing didn’t simply mean we started doing things the same way, only on a smaller screen. It led to the emergence of a new type of user interaction paradigm, one not just shrunk down for smaller screens, but one that also replaced desktop computing’s windowed, point-and-click, mouse-and-keyboard user interaction paradigm with a touchscreen-oriented, full-screen, gesture-and-tap based interface. It was like hitting a giant reset button in the computing world, one that created an opening for all sorts of new players to come in and build new operating systems, devices, apps, games, and services that were native to mobile and its new and different interaction mode, all while the old guard were stuck in desktop mode and had yet to wake up to the new reality. 

What is so exciting is that if VR (or immersiveness) is going to be computing’s next major user interaction paradigm, it means we could see the same pattern play out, with none of the current incumbents in mobile (like Apple, Google, Samsung, etc) necessarily having any more of an advantage in this new field than the desktop incumbents (like Microsoft, Dell, HP, etc) did when mobile emerged. Just as a smartphone isn’t a PC, only smaller, VR isn’t going to be a smartphone, only attached to your face. It’s going to be something new and different, where immersiveness leads to entirely new ways of interacting. 

For Facebook — which was a little late in mobile, but has now more than caught up — making an early bet on VR acknowledges that being successful on today’s platforms isn’t necessarily going to give them a leg up in whatever comes next. Facebook could have easily screwed up as they turned their focus to mobile, I’m sure that it was way too close for comfort for Zuckerberg and that he very much wants to lower the risk of them missing out on whatever comes next. 

Buying Oculus Rift is a way to try and point themselves in the right direction, but just because they’re trying to catch the next wave early doesn’t mean they’ll be able to ride it. It can be very difficult for the companies that dominated an earlier era to master what comes next, since being entrenched in one mode of computing can make it harder to build for or recognize when a new interaction paradigm is emerging, even if you try. Microsoft was plenty early to mobile — remember the Pocket PC? — but they got too many things wrong and are still trying to catch up with both Apple, which nailed the new interaction paradigm with the iPhone, and Google, which pivoted Android quickly enough to create a competitive platform. 

To be clear, I’m not arguing that some day virtual reality helmets are going to replace smartphones or that mobile is in any way going to stop being most people’s primary mode of computing. That’s simply not going to be the case. The portability and ease of use of mobile devices means they are going to be constant present in our lives in a way that a VR headset, which you’re probably only going to want to use while safely ensconced at home or at work, could never be. If VR catches on it’s going to co-exist with mobile, much like desktop and mobile co-exist today. You’ll use each in different, though occasionally overlapping, contexts.

My main point is that whenever a new user interaction mode comes to computing it leads to entirely new kinds of experiences and applications, ones that can be hard to envision until someone invents them — and then after the fact they’ll often seem completely obvious and feel so “native” to the platform that you’ll wonder how we ever did without them. That it’s so hard to predict what those will be at this early stage is part of what makes all of this both exciting and a little scary, but I think it’s safe to say that there will be existing experiences that make a lot of sense for immersive computing because it adds value of some kind (like in terms of visualizing large amounts of data or information) and lots of stuff where it probably won’t make sense (I’m guessing that walking around a virtual mall will probably not be an easier or better buying experience than simply going to Amazon.com). I don’t know what direction immersive computing will go, but if it does go anywhere it’s going to lead to a new language for interaction, and like with any language, it’s going to help to speak it fluently. 

There’s lots of talk today in the tech world about ecosystems and how users can get locked into them. Typically what we’re talking about is how consumers can be incentivized to keep buying or using one company or platform’s products and/or services over another company or platform’s because there is some cost in terms of time, money, or simply hassle to switching to something else.

This kind of customer lock-in is very desirable thing to build when you’re a tech company, not just because it (usually) helps you make more money, but also because it makes your business seem a lot easier to protect against competition. Competitors don’t need to just have better products, they need to attack that other thing that’s keeping your customers in place.

That other thing is what I like to call an “anchor”. An anchor is whatever it is about an ecosystem that draws someone in and then helps keep them there, holding them in place like an anchor keeps a ship from drifting away.

Every successful ecosystem has its own anchor or set of anchors. An anchor can be a lot of things: a specific app, a collection of media, a device, a user identity, etc. It’s not always the same one for all users in a given ecosystem and just like ecosystems can overlap, anchors can overlap in all sorts of ways. But whatever it is, it’s usually something that people find a great deal of value in and often continue to value or prioritize even as the quality of the product or service declines (think about how many people dislike Facebook but keep using it because “all of their friends and family” are there — that social graph is Facebook’s anchor).

A few years ago Apple’s anchor was iTunes, which they used to cement the iPod as the dominant portable media player. It’s easy to forget that having access to a massive legal catalog of music and being able to easily transfer it to a portable media player was a big deal. They’ve since rather gracefully transitioned to the App Store as their anchor, with many iPhone users citing their investment in paid apps or the lack of availability of key ones as a reason for not switching to Android or Windows Phone.

Kindle e-books and Prime have been successful anchors for Amazon. Though Amazon makes very little money from selling hardware, offering cheap e-ink readers and tablets, while also offering Kindle reading apps on everyone else’s platforms, has been an effective way to keep even iPad owners within Amazon’s ecosystem when it comes to buying e-books. I know there are lots of people like me who even though they own an iPad will only buy e-books from Amazon because they can read them on a Kindle e-ink reader as well as any iOS or Android device. Despite its huge installed base of devices, Apple’s iBooks store sells considerably fewer e-books than Amazon does.

Google has invested heavily in recent years in extending its ecosystem, notably with Google Plus, but for me, and I suspect many others, it’s Gmail that is the anchor keeping me within their ecosystem. Whether or not I can get a good Gmail experience has become a major factor in my gadget purchasing decisions and the primary reason I use an Android phone rather than an iPhone.

An anchor is in essence, something that you can use to get people to buy your stuff over someone else’s stuff. And that means you better make sure you have one before you base your strategy around it. Microsoft made a very serious strategic mistake in thinking that it had an anchor that would draw people into its mobile ecosystem: Office. Microsoft was a few years late in coming up with viable responses to the iPhone and iPad, but they figured that the presence of Office on Windows Phone and the Surface RT would offer a big point of differentiation and would appeal to users enough to get them to chose Microsoft’s mobile offerings over the competition’s. That meant keeping Office off of iOS and Android and focusing much of their marketing efforts around promoting the inclusion of Office (and just the general idea of productivity and how their mobile devices enabled it).

It hasn’t worked. Office just isn’t an anchor for very many consumers and not something that locked in consumers in a way that would compel them to purchase a device offering it over one that didn’t. It’s possible that if Microsoft had moved aggressively to make Office available on iOS and Android that they could have made developed it into a multiplatform ecosystem which they could have then leveraged into adoption of Windows Phone and Surface. But the reality is that whatever Office is, and however valuable it might be at the enterprise-level, it has not on its own been enough to lure consumers into Microsoft’s mobile ecosystem. The reality is that “productivity” isn’t much of selling point for the average person buying a tablet or smartphone.

That leaves Microsoft in a tough spot, because this lack of an anchor has kept them from gaining a strong foothold in the mobile space. What’s funny is that they got this right when it came to gaming, and were able to build Xbox Live into an anchor that not only kept users within the Xbox ecosystem, it drew in their friends in as well (since if you want to play online with your friends you all have to be on the same platform). I don’t know if this means that they should have entered the mobile market with a portable Xbox and used that to get established with consumers — it’s not easy to say with any certainty how that would have worked — but what is clear is that in the battle of ecosystems, you better not go to war with the wrong anchor.

As I mentioned on Twitter this morning, I’m still forming my opinion on the Microsoft/Nokia deal, but I can think of one good reason why Microsoft did this: when it comes to mobile their options are to win or to die.

Everybody already knows that mobile is the future of computing. For a company like Microsoft, not being a major player in mobile means an inevitable slide into irrelevance. As good as Windows Phone might be, its ecosystem is still small compared with those of iOS and Android, and no matter how you slice it, the rise of Apple, Google, and Samsung (among others) in mobile has created an existential challenge for Redmond.

If buying Nokia’s handset business would give them even a slightly better chance of overcoming this challenge, well, that’s certainly not so hard to understand. Especially because if it doesn’t work out, it won’t matter because Microsoft will be dead.

Or at least the Microsoft that we’ve known will be dead. I don’t think it’s overstating things to say that as mobile becomes synonymous with computing, being the company that defined computing for a good 15 years, not having significant marketshare in handsets and tablets is a big problem, as sooner or later sales of Microsoft’s twin franchises of Windows and Office will erode to a point where the company collapses. I’m sure there are probably plenty of ways that Microsoft could survive without being a dominant player in mobile. But for the company to abandon its mobile pursuits would mean retreating and becoming some sort of IBM-like enterprise services business. If all this doesn’t work out that may be where Microsoft ends up, but for the time being it’s hard to imagine them not charging forward with mobile.

Now it’s clear that buying Nokia’s handset business doesn’t automatically solve their problems — the reason they could afford to make this purchase is because Nokia hadn’t yet been successful at selling Windows Phones — but it does give Microsoft greater control over its destiny when it comes to mobile (there is speculation that Nokia was threatening to switch to Android), not to mention a bigger slice of the revenue from each handset sale.

Will it work? I don’t know. But unless a radical course correction is forthcoming — and I don’t see any evidence that is being seriously considered — when it comes to mobile and buying Nokia’s handset business, Microsoft has nothing to lose that it wasn’t already going to lose.