Strategy: Windows Phone 7

The good news is Microsoft's new phone platform doesn't suck.  Being a believer that more market competition benefits me as a consumer, this makes me happy.

Microsoft offers deep integration with its other offerings:

The integration with Microsoft services appears top-notch, ranging from OneNote in the cloud to Zune for media, Xbox Live for gaming and Bing for navigation and search.

I think this is 100% the right strategy; at the same time, I'm not convinced it will be successful.  Apple did very well by simply integrating iTunes with its iPod, and grew that into the phone business.  Apple's platform continues to be the easiest and best music experience, to the extent that they might be able to leverage that further into the social space with Ping.  Microsoft has a richer stable of apps that people rely on, and building in and on them gives them the greatest chance for competitive advantage.

But the size of Microsoft -- the innumerable products they have -- will make getting integration right difficult.  Even integration between Excel and Word, which have been around forever and have hardly changed recently, is clunky and superficial.  Integration into Sharepoint was another opportunity to dazzle us with unimaginable convenient and features, and instead every time I use Sharepoint, it feels like a distraction, something I need to get around.


Another confounding aspect: which integrations carry the biggest upside?  Is Zune really a partner you want to be tied to?  Is OneNote so compelling that integrating with it brings value?  Do you even know anyone using either?

Despite these concerns, Microsoft has to travel this path.  Otherwise, they're just another company (yes, with a lot of money, but that didn't help Kin, Zune, or their other failed new products), and definitely not the nimblest or most risk-taking -- two required features of successful new ventures.

Is Google braindead about social apps?

Filed under "your strengths are your weaknesses":

why can't Google build social apps? Because Google's core values ("be useful", "do good by users") reject the very notion of lobster traps, bacn and toast, a dozen dimensions of junk food, and giant blue ball machines. Understanding those concepts is not easy. It takes lots of practice, and lots of patience, and lots of learning...

Google is responsible for Orkut, Wave, and Buzz. Ex-Googlers are responsible for Facebook, Foursquare, and Twitter...

Googlers who wanted to develop great social applications had to leave Google to do so... because Google's culture has no respect for successful social applications. YouTube's office is still far from the Google campus to avoid the toxic attitude described by a former Orkut employee, "[Google has] an environment that viewed social networking as a frivolous form of entertainment rather than a real utility, and I'm pretty sure this viewpoint was shared all the way up the chain of command to the founders."...

Google FAILED in acquiring and integrating other social products. Blogger, Picasa, JotSpot, Dodgeball, are dead.

Obviously, this dogma can't be entirely correct, but the line-up of failed apps speaks pretty loudly.  Even their successful apps -- gmail, google phone, google reader, and maybe blogger and picasa -- succeed only in one-to-one interactions, and fail as places to do interactions with multiple people.  They don't resemble social hubs in any way.

But, if as the author says, practice, patience, learning, and failing are key, then Google can definitely turn this around.  They excel at putting new things out and seeing what works.  As long as they don't get driven by the immediate payoff to shareholders in every project, they can continue avoid Microsoft's fate.

Apple vs the world

Apples lawsuit against HTC / Android is old (well, a week old) news, but this may be the only good part of it:

not everyone is convinced that Apple's strategy is a wise one, and many are concerned this battle is another example that the US patent system—especially where software patents are concerned—is fundamentally broken.

One can only hope that the visibility of this fight will lead to change.  Maybe Apple wins points on legal basis, but the whole point of patents was to encourage innovation -- the idea that someone won't invest in something unless they get some benefit out of it.  There is some truth to that, which is why Thomas Jefferson eventually established the patent system, but he would be deeply opposed to this lawsuit.

So, perhaps this fight will lead to a rallying cry, much like Amazon's 1-click patent eventually slowed down the silliness going on in e-commerce.

Unfortunately, Apple has always been short-sighted in its understanding of its market.  Today we don't have any Mac clones because Apple wanted 100% of that pie.  Despite having a product out years earlier, it was dominated by IBM's open architecture system.

It is not always appreciated just how fast the rise of the IBM clone market was, and the degree to which it took the industry by surprise. 

Think about how much smaller the PC market would be if we had continued down a path of only proprietary systems.  Meanwhile, IBM has built entirely new businesses around the exponentially larger computer market of today.

Android parallels IBM in that it invites the entire industry to participate.  Apple parallels, well, Apple, in that they seek to own all the revenues in a market where they own all the vertical businesses. 

As usual, I'm pulling for the network, the open market, the combined power of the entire industry, not just the geniuses at one, focusing on turning a small market into a gigantic one.  The end of Apple's reign is inevitable, though the lawsuits may make that painful for the rest of us. 

Killer handheld tools

The Palm was almost the first killer handheld tool.  As a glorified datebook / contact manager, it ran out of steam fairly quickly.

Blackberry was the first real killer handheld.  It married the power of email (the first killer network app) with a phone, and did it so well that you bought the thing just for that.  As a professional tool, it still has legs, though its reached the end of its consumer market.

iPod was the next.  It married your Walkman / mp3 player with access to online music.  No more disks.  It did it so well, you bought it just for that.

iPhone was an easy next step.  It married your iPod to your phone to a bunch of mini-apps.  Truly revolutionary.  It was also brilliant as a build-on strategy for iPod: even if you don't want the phone, you might still want some of the apps.

The Kindle is a hot tool right now, but you wonder whether reading books will be a narrow market like contact management.  Amazon (the book web site) with Kindle is functionally the same as iTunes with iPod.  The question is whether Amazon has an iPhone up its sleeve, which would bring the hammer down on all the wannabes.  Amazon's iPhone might not necessarily be a product; it could also be a service.  I just don't see what that is, though I suppose if I did, I would have a much different position in life.

A lot of phones are trying to marry themselves to online apps, again looking for that iPod + iTunes magic combo.  That was a big selling point of the Palm Pre, with its Facebook connection.  Dave Winer suggests a Twitter camera.  These are all well and good, but in the age of mini-apps, it's hard for a single company to defeat the rest of the market.  As long as Facebook and Twitter remain independent, a single vendor will have difficulty obtaining an advantage.  Apple owned iTunes.

Google has the best shot.  They have a very hot set of online applications -- email, docs.  They have the hottest OS, which means more features and more mini-apps.  And they have their own phones, which will work seamlessly with their products.  So, they own the whole chain, which they can turn into a great user experience.

Squeezing into this mix is the upcoming Apple Tablet.  I suspect this will mostly be an iMac tablet notebook with lots of multi-touch.  Is that enough to make it a winner?  As a build-on strategy to iPhone, it's a good chance to take, and this is the time to do it.  But with Android coming on strong, iPhone may not have the coattails.

Microsoft paying for search content is unbelievable stupidity

Microsoft's impending deal to allow Bing to be the exclusive search engine for The Wall Street Journal and other Murdoch sites can only be described as stupid. 

Forget about whether the price is too high (reports peg it at $50mm), if it includes Fox News and MySpace, or if gating news can every work as a long-term strategy.

The real question is: what's in it for Microsoft?  Absolutely no one is going to use Bing more often because the results will include those sites, or a different search engine because they won't.

The die-hard WSJ and Fox readership will simply go straight to the source.  No one else will notice.  Maybe you could argue that the search quality will be infinitesimally lower quality on Google.  It's a weak argument, but still no one will notice.  Tomorrow there will be more free sources of news than there were yesterday.

By the way, I tried to use Bing exclusively when it came out, just to encourage industry diversity.  But after about a month I gave up. 

I liked the pop-up extra text when you hover.  Unfortunately, it takes a second to load, which doesn't sound like a lot, but every extra second or step is a disincentive, especially when you might have to scan through dozens of entries to find the one you want.  I frequently forgot to use it.  Then, the hover text usually didn't have enough info.  Finally, the little bar that prompts the extra text to pop-out is too small.  Again, another second wasted finding just the right spot.  Why not start caching all the hover text as soon as the page loads and then show the text automatically when you mouse over any part of the result?

The killer, though, was that I found I had to go through more entries to find "good" results.  I found myself paging to additional sets of results more often.

If Microsoft has $50mm to spend to improve their search position, how about improving the hover usability?  Or implementing some other innovations?  Or improving their algorithms?  These ideas are too crazy?

If this deal goes down, it will be clear sign that Microsoft simply has too much cash that it doesn't know what to do with, and they should pay it out as a one-time dividend to shareholders.

Free software: IntelliJ

In case you missed it, IntelliJ is now free.  JetBrains has adopted the freemium strategy: a free version and a paid enhanced version.

At one level, the strategy responds to the fact that the arguably best two IDEs are already free.  So, the free version helps get their foot in the door, and maybe you'll get hooked.

JetBrains's free version is offered under an open source license, a critical factor.  Clearly, this is actually all about a user-developed add-ons strategy.  It's called "the community version" after all.

So, this isn't quite freemium, it's actually open core licensing.

The unanswered question about open core licensing is whether the original developer (JetBrains in this case) can offer enough additional bang to encourage users to pay.  At the same time, they want their users to donate valuable features for free. 

Open core licensing is a fairly new free strategy, and it involves walking a real tightrope.  On the one hand, a strong user community means a strong platform, but less likelihood that the the proprietary version stands above far enough to elicit upgrades.  Meanwhile, the core version looks better if the community doesn't add as much, but then the platform doesn't add up to much.

Firefox and iPhone has taught us that add-ons make the platform far more valuable than the platform by itself.  Chrome and Android will emerge as serious competitors, in large part because they will have serious add-ons as well.

Similarly, IntelliJ has to compete with Eclipse.  Trying to spark a community as robust as Eclipse's presents a major challenge by itself.  Unlike Eclipse, they also have to simultaneously try to keep ahead of it.  It will be interesting to watch how IntelliJ, and open core licensing, evolves.

Why Pandora should allow user-provided content

Youtube got big on free user-provided content.  Later, after they had millions of eyeballs, they found they had to add professional content as well, so they started paying for that.

Music differs from video in critical ways.  Everyone makes videos all the time.  I probably have several hundred hours of videos of my kids.  (A few might be youtube-worthy.)  Meanwhile, like most people, I have never made a single song recording, much less of an original song.

So, if you were going to set out to build a youtube empire for music, you'd do it in reverse.  Start with the professional content.  Once your user-base stabilizes, then expand into the fringe.

Music marches (inevitably, I believe) to its future where most music will be free.  Some bands have tried MySpace pages and personal websites to find an audience, but they lack scale.  Musicians are still looking for the right venue.


Pandora is uniquely positioned to become the big player in the middle.  First, they are a leader in on-line music broadcasting.  Second, one of their missions is to introduce its listeners to new music.  They have the listener base, and the right listener base, to build on. That combination creates an entry barrier for would-be competition. 

Allowing users to upload content fits in perfectly with their strengths.  Pandora can continue to be the go-to site to hear your favorite music.  And they'd become the go-to site get introduced to the newest music.

Free software: Pandora

Now that I listen to music again at work, I've been using Pandora heavily.

Pandora offers free music through freemium and advertiser strategies.  As you listen to songs, Pandora recommends structurally similar songs.  The ultimate idea is to introduce you to new music, something the founders are deeply concerned about.

Despite what I'm about to say, understand that I have greatly enjoyed using Pandora, and will gladly pay the $1 monthly fee.

Two aspects of Pandora's business, as described in a recent article, really surprised me.

First, their entire playlist only numbers 700,000 songs.  Even though some competitors have many more, it doesn't seem to be a limiting factor yet. 

More surprising is that they don't use or even plan to use the "wisdom of the crowd".  As a listener, I vote on whether or not I like the songs that are chosen for me.  If the users who liked "Stairway to Heaven" also tended to like "Paranoid Android", you could use that information to drive recommendations.  Pandora can use these links between songs, created by its user crowd, to build their song trees, just as web site linking builds the search lists on Google.

Instead, Pandora has professional musicians who decompose the structure of each song in hundreds of elements.  The next song recommended to you will have a similar structure. 

To me, that sounds ridiculous.*  

Mainly, I think Pandora is thinking too small.  They need to break away from thinking of music as driven by the record labels and more driven by music listeners.  Music is being decentralized like everything else, and they're in a unique spot to take advantage of it.

Pandora should just start adding songs with some high level categorization, let the votes roll in, and create links between songs that way.  Categorization could be done by letting its users tag songs.

Once you do that, there's an opportunity to become the youtube of music.  Small bands could upload their recording, tag it, and if enough people like it, slowly get more "airtime".  If people dislike it, it will fade into oblivion. 

Now, you're really introducing people to new music.  You draw people in with the established acts, and they end up listening to some genre-defying garage band from Podunk.  You can also scale up your playlist very quickly.

If you add a donation button, some mainstream acts would likely upload their songs too, particularly the vast, not well known middle tier.  Eventually, instead of paying 50% of their revenues to the record labels as they do today, record labels will be coming to them.

And if Pandora doesn't do it, someone else will, and will eat Pandora's lunch.

------
* The manual labeling reminds me of the Open Directory Project -- an effort to create a "definitive catalog of the web" using manual labor.  While ODP, aka DMOZ, has been successful so far, I'll frankly be surprised if it's still around in 10 years.

Free software: Twitter

Of course, Twitter is free, and recently valued at $1bn. So far, Twitter closely follows the Google and Facebook playbook: bring the users and the data, and figure out revenues later. Skeptics believe revenues may never happen.

Felix Salmon reports they may start selling their data, with access costing several million dollars. Also, like other systems (e.g, Nasdaq, high-frequency trading), perhaps the fastest access will be provided at much higher prices.

Twitter could easily sell its data. It's not clear the super-fast data would be that much more valuable. I also question whether selling its raw data would be more valuable than selling analyzed data. Maybe they can do both; Google could use the raw data, but Sears and Southwest Airlines would want summary capsules.

Another option that occurs to me is they could tier their data. The most popular topics at any given moment would be available for only much higher prices. Breaking tweets about Obama's Nobel prize would be delayed or available only after the hysteria died down and turned into stale news.

Twitter clearly has some options. We'll have to wait and find out whether that adds up to a $1bn company.

Who owns your free online account?

Answer: not you.

a federal judge has ordered Google to deactivate the email account of a user who was mistakenly sent confidential financial information by a bank.

Try to follow the logic: a bank accidentally sent out confidential data, so the random person that happened to receive it is punished. Since that person doesn't pay anything for the account, he has few rights in the matter.

The problem of account ownership will only grow.

Facebook user recently revolted over changes in content ownership. But the problem still exists: some people get kicked off and have their accounts closed on them, while others try to get off but can't get their accounts closed. Because Facebook owns the accounts, not the users.

Maybe you could live without Facebook, but what about things you invest serious time in? Like writing a blog everyday. Or applications you use for school or work, like Google Apps.

Scarier still: apps that have all your personal data, like mint.com. Maybe you feel comfortable with this company, you like how they do business. But what happens if they get bought?

Scariest of all: apps that have all your business data, like Amazon's S3 storage. Amazon couldn't go out of business, right? But it was only a few years ago that we thought they would never turn a profit. And only a year ago it was inconceivable that Lehman would be gone. In this case, as a paying customer, you have a few rights, but Amazon still owns the switch.

Thin, free software remains the inevitable future destination, but you might think twice about being the vanguard.

What does free software look like? Socialwok

Scoble argues that the future of office productivity software is moving to mobile phones. A new toolset built on Google Apps convinces him.

Partly, this is due to the thinness of Google Apps. But I think the fact that Google Apps is free makes it very attractive to developers to build around. Intuitively, we know that free is coming and that free is the playing field.

If MS Office came out with a completely online version tomorrow, all for $25, what percent of the nascent web-based office market would they capture? My guess would be less than half, and those would basically be users who wanted interactivity between the online and installed versions. Perhaps that is the money-making strategy for them now -- build on their strengths and installed base -- but the window is closing.

Eventually, and sooner than we might think, MS Office must have a highly functional, free online version to compete. Otherwise, they cannot get online market share. And without the market share, they can't get developer apps and plug-ins. The iPhone and Firefox and Facebook (and increasingly Android) have shown the value of third-party apps.

Socialwok may or not be free, but it's part of the ecosystem that gets created around a big successful free app.

What does free software look like? Rock Band

You probably heard about how Rock Band will allow anyone to upload new songs. Could be a big deal:

By blowing it open so that any musician can get on this platform, it changes the way the world perceives what we do, which is now just an expected part of music entertainment. If there's a band you love that releases a new album, you're not only going to want to go see them in concert or listen to them on your iPod, you're going to want to play with that music. Launching Rock Band Network is a way for us to open new fundamental form of music entertainment.

Though the lowest price is 80 cents, this would even be a bigger deal if it were free. In other words, if Rock Band could enable the sellers to pay for the fee, that would be truly revolutionary. Turning this into a seller-driven phenomenon would create a much bigger market than just tapping into the already interested buyers.

Remember, in a digital economy, the scarcity is not distribution or product, but attention. How can you attract attention to your obscure band, your fledgling music label in a ocean of music? By making it free, particularly in new channels more likely to be populated by younger, exploratory types.

If you put your new Rock Band download out there for free, it only costs you $800 to get a thousand people to sample your product. That's pretty effective marketing. In this case, the Rock Band play-along acts as a feeder to paying customers for the music -- an inversion of the free music business model.

The writer of the article focuses on how big hits will get bigger. But that's the history of the music industry.

Tons of free content creating a vibrant music community that allows lots of small songs to get
more attention, that's new.

Software stories: Firefox paradox

Imagine you're Firefox. You were birthed to weaken the evil IE, and you succeed magnificently.

Thanks to your trailblazing, other competitors, including a shiny new one created by your primary financial sponsor, have taken root and formed a vibrant browser market for the first time in years. IE used to enjoy over 90% market share, now settles for 50 - 60%.

As a result of the competition, some are saying you've lost your edge. Looming in the background is a likely loss of funding as your sponsor focuses on their homegrown product.

Now you face an identity crisis: you have basically fulfilled your mandate, so what do you do next? A company without a vision is a sinking ship, and that goes double for one that relies heavily on volunteers.

Here are some options:

1: stay the course. As a vision, aim for nothing less than dominance in the browser market. If you lose funding, try to find another sponsor or use the wikipedia model, relying on personal donations.

2: partnership with other "free software", such as a version of linux or an "Office" suite, to be included as the bundled browser. Grow the installation base through new distribution channels. Another version of this would be tightly integrating with email clients, like Thunderbird, or other tools.

3: expand into new markets by creating new applications. Creates a new vision to rally around. Potential markets would be an on-line "Office" suite that works within Firefox, or follow Google's lead and try to turn Firefox into an OS.

There are frankly no great answers here. Lining up with partners will be very difficult -- these projects like their autonomy, users like to mix and match, and OS + browser bundling was the catalyst for Firefox's birth. Options 2 and 3 put Firefox on a collision course with Google, possibly hastening the cut-off of funds, and increase the need for even more volunteers.

Option 1 gives the greatest likelihood of short-term success, but could easily result in a steady decline. There is a wildcard to play here: a strong, cheap, tribal marketing plan -- one that highlights and encourages add-in apps, which is Firefox's primary competitive strength -- could turn Firefox in the browser equivalent of the iPhone. Such a marketing plan might run counter to the understood rules for open-source software.

Free, by Chris Anderson

I've been thinking a lot about free software, because I think that is where the industry is inevitably headed, so I figured I should read the written authority on the matter, Chris Anderson's Free.

The basic premise: the problem of the future, particularly with digital goods, is abundance not scarcity. Because I already believed, I'm actually not sure how convincing he was. I was totally convinced, of course.

Basic economics takes a hit. No more even, upward sloping demand curves. Instead, it's zero demand until a certain point your product becomes valuable enough, and then everyone wants it. Thus, the free economy frequently yields near-monopolies by its nature.

Getting people's attention in a wasteland of abundance is the main challenge, and then just make sure you have a good free business strategy. The book offers a full list of them. Yahoo's response to the Gmail threat provides a great example in the software world. Yahoo successfully combated Gmail's free gigabytes with free unlimited storage.

One thing completely confounded me. Here's what he writes about books:

For nonfiction books, especially those on business topics, free books are often more closely modeled after free music. The low-marginal-cost digital book is really just the marketing for the high-marginal-cost speech or consulting gig.... (Yes, that's my model, too. Speakers Bureau details are on my Web site!)

Given that, where's the free version of this book online? Not to be found. Sure, they posted an audio version here, but the recordings are abridged, and I still think that's a cop-out.

So, free is the future, but it's not here yet. Yup, that sounds like where we are.

What does free software look like?

Evernote is a tool makes it easy to save your data to web-accessible storage. Like a lot of web companies, it uses the freemium model: charge nothing for the basics, fees for premium services.

The beauty of Evernote's business is that continued use results in increased likelihood to pay:

About 0.5 percent convert to paying customers in the first month. But after about a year, 4 percent have converted... The shoebox of data is more valuable to the customer as it becomes larger. In addition, compelling uses — like photographing those business cards — quickly eat up the monthly allotment of memory, inducing a person to start paying.

This is similar to Google's gmail / storage strategy, but seems more direct and more effective.

But one thing nags at me. What happens if Evernote runs out of money or parks their cash with the next Bernie Madoff?

It's almost as if the business model works too well if it works well: if Evernote makes it so easy to store things, you will store a lot of things. That will in turn make you nervous to keep storing things there. In other words, if your data becomes so valuable to you that you're willing to pay monthly fees to store it, at some point doesn't it become so valuable that you fear keeping it at Evernote?

Software wants to be free

In the not too distant future, there will be two price points for software: customized software that you have paid someone to build just for you, and free. Everything not customized will be free.

Right now, we're at the transition point. Software is lagging newspapers, but people are starting to notice and have various reactions. Jeff Atwood celebrated more software at lower prices, but recognized that some disparage this as a "race to the bottom". Another columnist noted that the next Office will have a free online version, and blamed Microsoft's desire to push Silverlight.

I disagree that moving to very low cost software is a bad trend. All digital media -- newspapers, magazines, music, phone calls -- is moving to free. Free is the future. Why should software be any different?

Frankly, Microsoft faces a real threat to Office. One day, within three years or less, a free, on-line spreadsheet and document app suite will challenge them*. Gmail is the first breach in the Office product line. If you could get apps that supported Word and Excel formats seamlessly, cost you nothing, and did a few other things like enabled on-line collaboration and integration with IM, gmail, etc., how quickly would sales of Office fall to zero? Microsoft has to make versions of Office free, because someone else will. Silverlight is just along for the ride.

The question remains: how do you make money on free software? No simple answers have emerged. Giants such as Twitter, Wikipedia, Facebook haven't quite got it figured out, though they're working furiously on it. Even Apple doesn't make much money on the apps; the apps drive sales of the phone.

It's safe to say that the survivors will have figured out how to compete at the free level.

*Edited on Sept 8: Just to clarify, of course we have Google docs and some others today, but I'm talking about a competitor taking significant market share like Firefox takes from IE.