Archive for the ‘Web Business’ Category

Windows and Learned Helplessness

Sunday, March 15th, 2009

It’s interesting, initially tragic and eventually uplifting, to watch non-technical friends and relatives use Mac after years on Windows.  Like rats who have been shocked at random intervals in the lab, they exhibit persistent learned helplessness at the keyboard, fearing to tread outside the few simple use patterns they are familiar with.  When presented with a new situation, they simply freeze.

But I have developed a solution, one that could only work on Mac.

“How do I get my computer to do X?” I am asked at regular intervals.  If the inquirer is on Windows, I give them a lengthy step-by-step answer, involving 12 levels of nested menus and dialogs, right clicks, genuflecting, etc.

But if they are on Mac, even when I know the answer, I first ask, “What do you wish were the answer to that question? What would be the most logical, dead-simple, effortless answer?  Try that.”  Nine times out of ten, it works.  After this happens a few times, the user is unstuck, and can enjoy computers for the first time.

Nokia didn't get this memo?

Thursday, February 19th, 2009

Nokia signs €500 million loan for Symbian R&D – Engadget, Feb 18 2009

Er, Symbian is a 10-year failed effort with low installed base and no market power.  Some perfectly good mobile operating systems are available free, right now.  Why on earth would one spend half a billion on something with no economic value?

The information technology strategy playbook is quite clear on what to do in this situation.  Once you are losing with a closed standard, you never catch up.  You are certain to lose.  If you are certain to lose with a closed standard, immediately embrace an open standard.  This lowers your costs and helps prevent rivals from winning with a closed standard.

This has been widely understood for at least 10 years.  What can they be thinking?

Why GetSatisfaction is great

Monday, December 22nd, 2008

Suddenly even Fortune 500 firms like Apple are using GetSatisfaction, a sort of specialized social network for handling customer support.

GetSatisfaction transcends simple cost cutting.  Whether they know it or not, they are applying the “quality is free” ideas of W Edwards Deming to web-based support.  GS saves money and time for both vendor and user, while offering better support and lower cost, and actually improving the product at the same time.

How could it do all that?

To see, consider the challenges Eric and I faced with the products we created at Whitehorse Games in the 1990s.

Whitehorse was one of the early Web-based video game vendors, offering softgoods and Web-based software unlock in 1999.  This created new problems and opportunities:

  1. Customer feedback on a new release was instantaneous.
  2. Free downloads increased support requests by at least a factor of 10.
  3. 5% of problems created 95% of support requests, and you could discover this almost immediately.

Email load quickly became overwhelming:  users of demo software can be shockingly strident and demanding, considering that they have received something for nothing.  There is a tendency to just disengage:  forward the customer to a static FAQ that answers the most common problems, and deliberately delay personalized response in the hope they would go away.  This sounds harsh, but there are only so many hours in a day.  Whitehorse “solved” the problem by ending free trials — this reduced support load by over 90%, and did not hit sales at all, because, it turns out, most users of freebies will never pay for anything.

But I recall thinking, even then, that this missed a huge opportunity to improve the product.  Freebie users sometimes offer you something valuable when they take the time to complain.  If there were just some way to efficiently collect product suggestions, categorize them in a way that did not consume human time, the product cycle could be compressed to radically improve things in much shorter time.

In fact, in 2001, I briefly developed a startup idea around this, but my version was too complex (attempted to systematize the entire software process, including an outsourcing marketplace like Elance), too centralized (outsource support by direct-selling to individual vendors), and too narrowly marketed (attempted to deal only with software vendors).  

GetSatisfaction fixed all those problems and more.  They are a simple, broad solution to product support, with an efficient suggestion box built in.  Clever.  Hope they do well.

A new gorilla wakes

Wednesday, July 9th, 2008

Microsoft CEO Steve Ballmer was publicly ridiculing Google Docs as recently as May 2008. This may prove premature.

As I have written before, the killer app in Google Apps is not its dubious Word or Excel knockoff, but rather the fantastic hosted email. Anyone who spends a week on Google Apps email will never go back, it’s that simple. The key functions — massive storage, instantaneous search, and bulletproof spam detection — run circles around Microsoft Exchange Server and everything else. Not even close. Please don’t bother disputing this unless you’ve tried it.

Spam detection now enjoys network effects, because Google employs group intelligence to detect spam. If you spam Google Apps email, thousands of recipients will instantly mark it as spam, and the message will be rejected for all remaining recipients. The more Google users, the better it gets.

Google’s dominance in email appears foregone. Does that matter? Yes, because whenever you receive a Word or Excel attachment through Google mail, you now see an “Import to Google Apps” button.

Conclusion: Google Apps hosted email has moved upstream from Microsoft Office.

Optimization creates inflexibility

Friday, June 27th, 2008

Programmers know this, but I’m not talking about code.

In any field, it seems, optimization creates inflexibility. This is because optimization (maximization of performance) generally requires assumptions about the continuity of conditions.

In computer programming, you gain great speed benefits by writing graphics software in assembly language, rather than a compiled language such as C. But assembly is purpose-designed for a single microprocessor family. Change families, and all your work must be thrown away. So this optimization require one big assumption about future use of your software.

In investing, you can gain higher returns with leverage. But the greater the leverage, the more central your assumption of price stability or continuity, the greater your reliance on avoiding one really bad day, and its associated margin call.

In advertising, you can maximize conversion rates by having each CPC ad click through to a specific landing page designed for that ad. But the amount of work required to make a campaign-wide change increases by an order of magnitude.

Maximizing international trade optimizes economic output but greatly increases exposure to common-factor economic collapse, such as a discontinuity in the oil supply.

Thus optimization increases performance (narrowly measured), but also exposure to Black Swans.

Wrong Business Model

Friday, June 20th, 2008

T-Mobile, which has supplied Wi-Fi service for years at Starbucks shops, is now suing the coffee chain over its plan to let AT&T Wireless deliver competing Wi-Fi service for free. T-Mobile alleges harm to its “substantial investment” in its Wi-Fi network.

Let’s stand back a moment and consider the economics of charging money for Wi-Fi access.

Every Starbucks already has a broadband line in the back room. Adding a Wi-Fi hub costs $80 in hardware, plus 30 minutes of installation time by a high school graduate, say another $20, for a total of $100 per store.

So, to provide unsupported free Wi-Fi at 7,000 Starbucks stores would cost a non-recurring onetime $700,000, or less than 0.1% of the operating income of either Starbucks or Deutsche Telekom (the owner of T-Mobile). After that initial expenditure, such a network would be essentially free to operate.

Obviously, then, T-Mobile’s “substantial investment” is not in the actual Wi-Fi service infrastructure. Instead, essentially all effort and expense goes into guarding the gates: building and maintaining a billing infrastructure to charge for, and control access to, all those Wi-Fi hubs from a central location.

A controlled-access Wi-Fi infrastructure of this scale likely costs 100 times more to build, and thousands of times more to operate, than the free version. If over 99% of the recurring operating cost is in guarding the gates, the whole enterprise is perilously exposed to a free competitor. As Wi-Fi becomes ubiquitous, you’ll always be able to poach a connection from the store across the street.

In short, this is a bad bet. Wi-Fi access is not a business, it’s a feature. Uncontrolled access, possibly with advertising, is the most likely outcome.

How to destroy Google

Wednesday, May 21st, 2008

I like Google.  They are brilliant, non-evil, I use their various services daily, my best friend from college works there, etc.  No complaints.  The following is merely an academic exercise in business strategy.  

If you were a loser in pay-per-click search advertising (e.g. Microsoft), how would you fight back?  Taking Google’s customers is too hard, because there’s no real reason to switch.  Instead, why not just destroy the entire PPC ad market by open-sourcing the web search industry?

Imagine that MSFT and other also-rans funded a truly independent, nonprofit, open-source-based search site, which ran no ads. Computer makers could easily be convinced to use it as their default search engine, because it would reduce their dependence upon Google, without increasing their dependence on Microsoft.

This strategy would steal page views from Google.  It is not necessary to kill Google to end its dominance:  a 30-point loss in market share could drive Google into the red, throwing its virtuous cycle (earnings, stock options, recruiting) into reverse:  share collapse, layoffs, reduced retention, etc.

There are no anti-trust concerns — this would be a truly independent entity, jointly funded by a consortium, rather like Mozilla.

The technical hurdles are low.  Search engines long ago reached the “good enough” stage.  The insights of Page and Brin in the mid-1990s were so great that little has changed in the past several years.  There already exist reasonably good open-source modules for web search.  

The main hurdle is the capital expense of a big server farm.  Assuming a consortium pays for this, all that’s needed is to plug some GPL modules together, scale them up, and set this as the default search engine on all new HP and Dell computers.

Such a service would not work as well as Google.  But it would be good enough, and would be the default on every new computer.  By thus sucking revenue out of pay-per-click, MSFT could sustain the Empire for a few more years.

Why would I write this, if I love Google?  First, because it’s the truth, and second, because there is no risk that paralyzed, rudderless Microsoft would actually do it.



Traditional Strategic Advantages of Google

Tuesday, February 26th, 2008

None other than Hal Varian, luminary technology strategy guru, argues that Google has no traditional sources of strategic advantage, only a temporary knowledge curve advantage.

This seems overstated. True, Google ads do not enjoy the network effect often ascribed to them, but the company has at least the following traditional strategic advantages.

Web searches rely upon giant data centers. Google’s massively parallel data center architecture facilitates the fastest web searches, most frequent index rebuilds, etc. It also facilitates the cheapest hosted services, such as email, photos et al. They have way more computing power than anyone else. As Varian might point out, this architectural advantage is temporary. However, when everyone else inevitably copies this architecture, data centers revert to a pure scale contest. Whoever buys the most boxes wins. Google can currently outspend everyone but Microsoft; by the time Microsoft builds a similar architecture (probably years), Google will be able to outspend them, too.

For 10 years, Google has defined web service innovation. They are increasingly trusted outside the narrow field of search (email hosting, for example). As a result, increasingly, when Google releases a new web service, other things equal, they will automatically win.

The anti-spam system in Google’s hosted email enjoys network effects, because it relies upon group intelligence to decide what is spam, then rolls out the answer to all users simultaneously. The effectiveness of this system improves dramatically with scale. The largest network has the best spam control. Yes, anyone can copy the architecture, but again, by the time they do, Google will already be the biggest. They are probably #2 or #3 already, and their most logical competitors — Yahoo and Microsoft/Hotmail — are asleep at the wheel. By the time they figure it out, Google will be #1, and able to run away with this network effect.

No suggestions being made here. Just observing.

Hotmail defeated

Friday, January 18th, 2008

This blog has previously chronicled Hotmail’s unsuitability for business. Now, at last, we have a solution to Hotmail’s error-prone spam filter.

To restate the problem: Hotmail has a terrible spam filter, which makes it hard for a legitimate business to deliver mail there. Hotmail misclassifies spam in both directions, but mainly rejects too much legitimate mail, failing to make the most obvious, basic inferences from user behavior. For example, if a user marks a message from A as “not spam,” then any other mail engine would assume all future messages from A are not spam. Not Hotmail. It doggedly continues to mark all mail from A as spam. Worse, every message in the spam folder is deleted without warning after only 72 hours, making it impossible for a legitimate e-goods business to prove delivery.

My efforts to register with Microsoft as a legitimate sender, via SenderID and other initiatives, were ignored. MSFT appears not to actively support these initiatives, and they certainly do not respond to inquiries. What to do?

Google Apps.

Google Apps provides hosted email, using Google’s mailserver to send your messages. Because Google is too big to ignore, Hotmail dutifully delivers whatever you send. Done.

Now, if you are a spammer, this probably will not work. Google will catch you and shut you down. But for legitimate senders, this is a total solution that costs $50 per year.

Windows is cheaper than Mac

Sunday, January 6th, 2008

…if you place no value on your own time.

On the other hand, if your time is worth anything meaningful, the Mac is cheaper, because of the time saved in fiddling with printer drivers, software updates and other compatibility problems.

For a professional, the difference is dramatic. Saving 1 work hour a month is to save thousands of dollars per year.