Before getting into gaming, Farmville's father was a player in the glam world of online tech support.

Before Zynga, there was SupportSoft.

Pickus (not Pincus) discusses his company's new model. Photo: Support.com

Prior to launching the hot social gaming outfit that spawned Farmville and Café World, Mark Pincus founded a trio of companies: Social networking company Tribe.net, downloading service FreeLoader, and SupportSoft, a company that began providing support software for enterprise companies in 2001.

Today, SupportSoft is called Support.com (SPRT) and its current CEO is named Josh Pickus. (The similarity to the name of the company's founder is eerie but purely coincidental.)

The company’s focus has also morphed; the company earlier this year sold its enterprise division to Consona Corporation — a daring move, considering that sales to corporations made up a big chunk of Support.com's revenue in recent years.

After coming on board as CEO in April 2007, Pickus instituted a strategic shift aimed at ensuring Support.com's continued growth. He decided the company should pursue in earnest the consumer segment of the market.

Digital home tech support services are expected to grow from $3.2 billion in 2008 to $6.4 billion in 2013, according to Kurt Scherf, principal analyst at Parks Associates. After all, as our world becomes more digital by the day, the possibilities for technology snafus are endless.

The fleet is out

Support.com now focuses on providing tech support for devices like PCs and mobile phones, similar to Best Buy’s (BBY) ubiquitous Geek Squad. However, unlike the Squad’s “agents,” who arrive at customers’s homes in VW Beetles, Support.com’s technicians take the virtual route, accessing computers remotely via the Internet. A more convenient solution for the consumer and the provider, says Pickus. (Update: Geek Squad offers tech support remotely through a partnership with SupportSpace, which offers services like those available from Support.com).

Most consumers probably have never heard of Support.com, but that doesn't mean they haven't encountered the company's support services. It provides "white label" service for retailers such as Staples (SPLS), product manufacturers like Sony (SNE), and anti-virus providers like AVG.

At Office Depot (ODP), for example, the service is known as Office Depot Tech Depot Services.

Why don’t each of these partners draft their own platoon of geeks? “It’s too non-core, no one wants to do it themselves,” says Pickus. After all, Best Buy didn’t invent the Geek Squad, but acquired the company in 2002 for $3 million.

Under the white label set-up — made possible by the remote access subterfuge — Support.com’s partners get a cut of the revenue and just as important, the chance to establish their brand as a trusted adviser to consumers, who are then more likely to return for future purchases.

Outsourced, but not offshore, tech support

It’s this latter benefit that’s attracting scores of players to the tech-support market. In addition to the Geek Squad, Support.com, and a handful of other startups, “Verizon, Dell, AT&T, and Wal-Mart are all poking around in this space,” says Pickus.

Indeed several telecoms have begun providing technical support along with their broadband service — some in-house, some outsourced. It’s both a new revenue source and a way to retain customers who might be on the verge of defecting or even going completely wireless.

Support.com may win contracts with the telecoms and seek to grow its partnerships in other channels, but its success will ultimately depend on two things: the quality of service it delivers and the ability to automate as much of the support transaction as possible.

Pickus says the company relies heavily on what it calls “support automation.” Through software, it helps computers repair themselves so customers don't actually have to call a help desk. If automation doesn't do the trick, a Support.com staffer is available for live support.

Support.com’s technicians are in constant contact with the company's R&D team, providing feedback that helps refine the diagnostic tools used to assist customers. The better the software, the faster the problem gets resolved, which serves the company, the customer and the technician (billing is not based on time but on a flat fee per incident or a monthly subscription).

“Tech support is difficult,” Pickus acknowledges. “But if I fund R&D as if I’m a software company, I can create margins that don’t look like service company margins.”

Still, says Parks Associates analyst Scherf, “If you’re not fully implementing automated tools, those margins don’t exist.” He cautions that thorny, time-consuming problems beyond removing malware and clearing out caches could be costly.

Adding to the challenge ahead for Pickus, Support.com is publicly listed and trading at less than $3 per share. That’s down about 40% from two years ago, when my colleague Jon Fortt wrote about the company's effort to find a new game plan.

But Pickus remains optimistic. “We’ll grow into it rather than take the time to go private.”

His prediction? “In the future everyone will have one of these subscriptions and you’ll get a free computer with the service.”

Source: NPD Group

The NPD Group on Tuesday issued what at first appears to be a pair of contradictory facts:

• Apple (AAPL) now controls the largest share of the music business, its iTunes Store accounting for 25% of unit sales in the first half of 2009, up from 14% in 2007.
• Compact discs are still the most popular format for paid music, accounting for 65% of unit sales.

How can this be? The trick is that Apple controls the lion's share — 69% — of paid downloads, whereas CD sales are spread out among many players, chief among them Wal-Mart (WMT), Best Buy (BBY), Amazon (AMZN) and Target (TGT).

To see better how this works, let's put the data into pie charts:

Source: NPD Group

Source: NPD Group

Source: NPD Group

Not covered in the NPD report, of course, is music piracy, which according to a recent U.K. report accounts for roughly 18% of music downloads — which would put it ahead of Amazon but well behind iTunes.

We're getting an unusually sharp divergence of expert opinion on how well the iPod is likely to do this holiday season.

The conventional wisdom — reflected in Arik Hesseldahl's "Apple's iPod Problem" in Businessweek — is that everybody who wants an iPod already has one, and doesn't see much reason to upgrade, especially with the economy in the dumps. "As a result," he wrote, "some analysts believe this will be the first quarter since the iPod was introduced in 2001 that sales will decline from the year-earlier quarter."

Piper Jaffray's Gene Munster is one of those analysts. He's projecting sales of 18.6 million units in Apple's December quarter, down 16% from 2008 Q1.

A cooling off of this magnitude would mean that Apple' (AAPL) other business units — chiefly the Mac and the iPhone — need to pick up the slack if the company is to continue the quarterly growth to which investors have become accustomed.

But the reality on the ground, according to Kaufman Bros.'s Shaw Wu, is that iPods are selling like Christmas hotcakes.

In a note issued earlier this week, he reported that Amazon (AMZN), whose giant warehouses tend to have plenty of iPods in stock, was reporting a backlog of several models.

"iPod touch was surprisingly stocked out and now has lead times of 11 days for the 8 GB model and three to five weeks for 16 GB," Wu wrote. "This is likely due to unexpected strong demand and we find this interesting as iPod touch is Apple's highest-end iPod." (link)

Now AppleInsider's Katie Marsal reports that Apple is "scurrying to restock some of its reseller channels" as those iPod shortages spread.

In a new report to clients issued Wednesday, Wu writes that spot checks are turning up shortages at Best Buy (BBY), Target (TGT), Wal-Mart (WMT) and Crutchfield.com.

"Frankly, we find these sell-outs on iPods surprising, given how difficult the macroeconomic environment is," he told clients. "From our assessment, we believe iPod is holding up better than most, due to its relatively low [selling price] and strong consumer understanding of the value it provides." (link)

Wu estimates that Apple will sell some 21 million iPods this quarter — less than the 22 million it sold the year before, but not by much.

[UPDATE: Apple has published its Black Friday sale prices, and while the savings on MacBooks and iPods are in line with last year's, there are steep discounts -- 50% and more -- on third party products. The resellers, meanwhile, are offering unually steep price cuts. See MacRumors, AppleInsider and Gizmodo for some of the best bargains. To see what shoppers ended up buying over the first weekend of holiday sales, see Apple's Black Friday bestsellers.]

You know times are tight when even Steve Jobs starts cutting prices.

Apple (AAPL), which keeps the tightest reins on list prices in the business, seems to have loosened them significantly this holiday season. Authorized resellers who normally wouldn't dare chop a nickel off Apple's suggested retail are cutting prices, offering rebates and plastering the Web with gaudy ads.

By Wednesday morning, the white MacBook that still lists for $999 on the Apple Store was selling for $899.99 at BestBuy, $899.95 at B&H Photo, $899.00 at Amazon and $868.99 at Club Mac and Mac Mall.

Apple store managers, meanwhile, are offering to match any advertised price — a policy they quietly followed in the past but now openly acknowledge. (see here)

And Apple.com has posted a pea-green teaser for a one-day Black Friday shopping event that promises unspecified bargains for shoppers willing to brave the crowds the day after Thanksgiving. Kaufman Bros. analyst Shaw Wu predicts Apple could be offering discounts of up to 15% on Macs, iPods and accessories, compared with 5%-10% in previous years. (see here)

It's not a price war worthy of Crazie Eddie Antar, but it's more retail aggressiveness than we've seen from Apple, which usually keeps its resellers on a short leash and limits its sales to Black Friday, Back to School and the occasional close-out.

We knew retailers were hurting this year. Now even Cupertino seems to be getting nervous.

The mystery of Steve Jobs' iPhone retail strategy deepens with reports that Apple (AAPL) will begin selling its smartphones at Wal-Mart (WMT) three days after Christmas.

According to the Boy Genius Report, a blog with relatively reliable backchannel sources at AT&T, Apple will start with select Wal-Mart and Sam's Club outlets on Dec. 28, and eventually roll the iPhone out to 2,500 Wal-Mart owned stores.

The deal, if confirmed, would represent the fourth major expansion of the iPhone's retail presence outside Apple's own 200-plus stores — first to AT&T's (T) 2,000 retail outlets, then to nearly 1,000 Best Buy (BBY) outlets (see here), and then to the tens of thousands of points of sale (many of them no more than mom-and-pop kiosks) that carry iPhones for Apple's overseas partners.

This is a move of different magnitude. Wal-Mart is the world's largest retail chain — by far — with more than 7,000 mega-stores around the world and some 2.1 million employees. It finished its last fiscal year with nearly $380 billion in sales – earning it the No. 1 slot in the Fortune 500.

All of which raises the question of timing. If you're going to bring the iPhone to Wal-Mart, why not do it before Christmas — as originally rumored — rather than after?

Below the fold: An AT&T memo with a timeline of the Wal-Mart rollout, as posted Wednesday by the Boy Genius Report:

We are pleased to announce that Wal-Mart has reached agreement with Apple to offer iPhone 3G in Wal-Mart and Wal-Mart-managed Sam’s Club* Connection Centers nationwide beginning December 28, 2008.  AT&T will support Wal-Mart and Sam’s Club with the activation process for iPhone 3G, and we need all National Retail employees engaged to ensure a successful launch.

*NOTE: This product launch DOES NOT apply to SC Kiosks within Sam’s Club managed by Radio Shack.

Wal-Mart has communicated the following launch plans and execution timeline to their employees:

• iPhone 3G will be available in-store only beginning 12/28/08
• New and existing customers in good standing can purchase iPhone 3G with a 2 year contract
• iPhone 3G transactions only will be processed through POS.com, not the kiosk

Execution Timeline:

• 12/2 – 12/5:  AT&T / Wal-Mart MEM Classroom Training for Store Leads
• 12/3 – 12/19:  AT&T In-Store Training
• 12/26 – 12/27:  AT&T In-Store Refresher Training
• 12/28: Nationwide Launch
• 12/28 – 12/30:  Wal-Mart and AT&T War Room Support

(link)

In a move that will significantly expand its retail presence in time for the holiday season, Apple has agreed to let retailing giant Best Buy sell the new iPhone 3G through its nationwide chain of Best Buy Mobile outlets starting early next month.

Best Buy markets cell phones in the United States through 970 full-size stores and 16 stand-alone Best Buy Mobile shops. All U.S. Best Buy stores will carry the iPhone except for a handful of outlets located in areas where AT&T does not provide cell phone coverage.

The deal, first reported on Tuesday by Apple Insider and confirmed by Best Buy Mobile president Shawn Score (see here), could serve both companies well.

For Apple (AAPL), which has been struggling to meet the extraordinary demand for its second-generation iPhone through its smaller network of Apple and AT&T retail stores, the deal puts its hottest-selling product in the hands of one of world's savviest retailers. Best Buy, a Fortune 100 company, is the world's largest consumer electronics retailer, with a 21% share of the U.S. electronics market and a 3.6% share of the cell phone market, up from 2% last year.

For Best Buy (BBY), which has been angling for the iPhone business for more than a year, the deal will add Apple's cachet to its expanding smartphone offerings and help drive traffic to new Best Buy Mobile departments within its stores. Best Buy is aggressively marketing a variety of smartphones, from RIM (RIMM) BlackBerry Curves to Palm (PALM) Treos, and is the exclusive reseller, with Sprint (S), of the Samsung Instinct, one of the iPhone's nearest competitors.

Apple and Best Buy have been slowly expanding their relationship since the retailer began carrying iPods in 2002. Best Buy started selling Macs in selected stores in 2006, and recently expanded the program to more than 600 outlets.

The deal can be seen as a victory for Best Buy's "consumer centricity" marketing strategy, by which it caters to the needs of specific types of customers in specialty boutiques within its full-size stores. Last week Best Buy announced that it had completed a nationwide roll out of its Best Buy Mobile store-within-stores, a joint venture with Britain's CarPhone Warehouse that began in 2006 and has led, according to Best Buy, to a 10-fold increase, year-over-year, in high-end multimedia phone purchases (link).

Best Buy, based in Richfield, Minnesota, operates more than 1,150 stores in the United States, Puerto Rico, Canada, China, Mexico and Turkey. Earlier this year it purchased a half-share of CarPhone Warehouse, which has 2,400 outlets in nine European countries.

Apple operates 219 stores, 187 of them in the United States, where customers have been queuing up for the iPhone 3G since early July. AT&T (T) sells iPhones in some 2,000 stores, but the current waiting period for customers who want to buy one from AT&T is 7 to 10 days.

UPDATE: Apple on Thursday issued a press release declaring itself No.1. See here.

- – - -

It happened one week in January, according to a memo sent to Apple employees on Wednesday and intercepted by Ars Technica (link). The memo contained weekly data from a NPD Group Music Survey dated Jan. 8, 2008, and showed Apple's (AAPL) iTunes store passing Wal-Mart (WMT) for the first time to become the No. 1 music retailer in the United States.

By Feb. 26, however, something must have changed, because that's when Apple announced that it had passed Best Buy (BBY) to become, for the first time, America's No. 2 music retailer.

What's going on?

The most likely explanation is that the January results represent a blip in the data, a short-term peak caused by recipients of iTunes gift cards cashing in their Christmas presents. Music gift cards sold through Wal-Mart and Best Buy in December may also explain why Amazon (AMZN) dropped to No. 4 in the Jan. 8 survey.

But the long-term trends are clear, as sales of physical music continue to give way to digital downloads. The Ars Technica report cites other NPD data showing that 48 percent of U.S. teens — the primary engine of new music sales — didn't buy a single CD in 2007, compared with 38 percent in 2006.

Despite growing competition from Amazon's new digital music service, Apple's position in the legal download market is still strong, given the iPod's 70 percent share of MP3 player market and its tight integration with iTunes. Apple became the No. 3 music retailer in June 2007 when it passed Amazon, the No. 2 in February when it passed Best Buy, and it may yet overtake Wal-Mart for more than just that one week after Christmas.