Thanks to books like the Innovators Dilemma it is now an oft repeated bit of business lore, especially within the technology industry, that you should kill your cash cows before two guys in a garage do it for you. The skeptic in me suspects that this bit of industry truism is part of The Halo Effect at work. People have sought out examples that confirm this statement and ignored the hundreds of counter-examples that show how dangerous this kind of thinking can be to a business.

Recently I wrote a blog post entitled Arguing Intelligently About Copyright on the Internet which addressed some of the most common anti-copyright arguments you see on the Web on sites such as TechDirt. Mike Masnick of TechDirt, took umbrage at my post and followed up with a comment to my post as well as a TechDirt article entitled The Grand Unified Theory On The Economics Of Free. In the article, Mike Masnick makes a number of assertions that are similar to the truism around killing your cash cows.

Mike Masnick writes

First off, and this is key, none of what I put forth is about defending unauthorized downloads. I don't download unauthorized content (never have) and I certainly don't suggest you do either. You may very well end up in a lawsuit and you may very well end up having to pay a lot of money. It's just not a good idea. This whole series is from the other perspective -- from that of the content creator and hopefully explaining why they should encourage people to get their content for free. That's because of two important, but simple points:
  1. If done correctly, you can increase your market-size greatly.
  2. If you don't, someone else will do it correctly, and your existing business model will be in serious trouble
If that first point is explained clearly, then hopefully the second point becomes self-evident. However, many people immediately ask, how is it possible that giving away a product can guarantee that you've increased your market size? The first thing to understand is that we're never suggesting people just give away content and then hope and pray that some secondary market will grant them money. Giving stuff away for free needs to be part of a complete business model that recognizes the economic realities. We'll get to more details on that in a second.

As a business, increasing your market size is nice but maintaining your profits is even nicer. If you have 200,000 customers and make $80 profit per customer, would you be interested in doubling your customer base while making $20 profit per customer due to lowering your prices? The point here is that simply increasing the size of your market or the number of your customers does not translate to increasing the business's bottom line. As for the second point listed above, healthy paranoia is good but it shouldn't replace good business sense. After all, the list of successful fast followers includes some of the biggest companies in the world. If it worked for Google and Microsoft, it can work for your business.

Mike Masnick also outlines his business advice for purveyors of intellectual property digital content which is excerpted below

So, the simple bulletpoint version:
  1. Redefine the market based on the benefits
  2. Break the benefits down into scarce and infinite components.
  3. Set the infinite components free, syndicate them, make them easy to get -- all to increase the value of the scarce components
  4. Charge for the scarce components that are tied to infinite components
You can apply this to almost any market (though, in some it's more complex than others). Since this post is already way too long, we'll just take an easy example of the recording industry:
  1. Redefine the market: The benefit is musical enjoyment
  2. Break the benefits down (not a complete list...): Infinite components: the music itself. Scarce components: access to the musicians, concert tickets, merchandise, creation of new songs, CDs, private concerts, backstage passes, time, anyone's attention, etc. etc. etc.
  3. Set the infinite components free: Put them on websites, file sharing networks, BitTorrent, social network sites wherever you can, while promoting the free songs and getting more publicity for the band itself -- all of which increases the value for the final step
  4. Charge for the scarce components: Concert tickets are more valuable. Access to the band is more valuable. Getting the band to write a special song (sponsorship?) is more valuable. Merchandise is more valuable.
What the band has done in this case is use the infinite good to increase the value of everything else they have to offer.

The implicit assumption that Mike Masnick makes here is that losing the profits from cheaply copyable and easily distributed digital content will be made up by selling goods and services that is related to the digital content. I am highly suspicious of the theory that replacing the profits CDs, digital music and ringtone sales with the profits from increasing concert ticket prices ends up being a net positive for successful musicians.  The key reason for this is that,  there are physical limits on how many concerts a band can have or how many people can attend in a given location but such limits barely exist with regards to distributing digital content.

A concrete example is comparing the relative profits of the proprietary software companies with the Open Source software companies. In a recent blog post entitled The 'we win by killing' days are passing Tim O'Reilly wrote

1. Pure open source software businesses are orders of magnitude less profitable than their closed source brethren even as they close in on them in terms of the number of customers. (Compare Red Hat and Microsoft, MySQL and Oracle.) Meanwhile, companies built on top of open source but with new layers of closed source (iconically, Google) are building the kinds of outsized profits that once were the sole province of old style software companies. As growth slows, as it inevitably will (even if it takes another decade), these companies too will seek to maintain their outsized profits.

2. Outsized profits come from lock-in of one kind or another. Yes, there are companies that have no lock-in that gain outsized profits merely by means of scale, but they are few and far between.

The experiences of the software industry seem to contradict Mike Masnick's diagnoses and recommendations for the music industry. Giving away your most valuable asset and hoping to make it up by selling peripheral services and add-ons is more likely to destroy your company than become your redemption.

Counter arguments welcome.


Categories: Ramblings

May 22, 2007
@ 02:44 AM

Pete Lacey has a blog post entitled Rethinking Apollo where he writes

So I dug around in Apollo a little bit, and I did a little bit more thinking about my reflexive dismissal of the technology. And I admit to misunderstanding and miscategorizing Apollo. Here’s what I learned.

Apollo is not a browser plugin, nor does it leverage or extend your browser in any way. It runs completely outside the browser. It is a run-time environment for building cross-platform desktop applications.
Lets say you want to build a RSS/Atom reader...But lets add a requirement: my news reader must be cross-platform. That eliminates .NET as a development platform, but still leaves C++. However, with C++ I have to carefully separate my common functionality from my OS-specific functionality and become more of an expert on OS and windowing quirks then I would like, so that’s out. Fortunately, there’s quite a few other ways to go:

  1. Browser based
  2. Java based
  3. Dynamic language based: Perl, Python, Ruby, Tcl
  4. Native cross-platform development environment, e.g Qt
  5. Apollo
  6. Others, e.g. Eclipse RCP

All of these have pros and cons. Browsers are limited in functionality, and quirky. Java is a pain to develop towards-especially GUI apps, has spotty HTML rendering ability, and a non-native look and feel. The dynamic languages are far from guaranteed to be installed on any particular machine—especially Windows machines, and (likely) also have their own look and feel issues. Qt still leaves me in C++ land; that is it’s hard to develop towards. Apollo also has its own look and feel, and will require a download of the runtime environment if it’s not already there (I’m ignoring its alpha release state). I don’t care about any others cross-platform techniques right now.

I think I've found interesting is how a lot of blogosphere pundits have been using Microsoft's Silverlight and Adobe's Apollo in the same sentence as if they are similar products. I guess it's more proof that the popular technology blog pundits don't do much research and in many cases aren't technical enough to do the research anyway.

Although Pete does a good job of explaining the goals of Adobe Apollo with a great example, I think there is a simpler and more cynical way of spelling out the difference between Silverlight and Apollo. I'd describe the projects as 

Apollo is Adobe's Flash based knock off competitor to the .NET Framework while Silverlight is Microsoft's .NET Framework based knock off competitor to the Flash platform.
A lot shorter and more to the point. :)

PS: Shame on Pete for equating dynamic languages with the runtimes for certain popular Open Source dynamic programming languages. The programming language is not the platform and vice versa. After all, both Jython and IronPython are instances of a dynamic programming language that don't have any of the problems he listed as reasons to eliminate a dynamic programming language as a choice for building a cross-platform desktop application. :). 


Categories: Programming | Web Development

I believe we're on track to release a new version of RSS Bandit by the end of the month. Besides the bug fixes there are two minor features we are adding. The screenshot below showss the options dialog that controls them.

The first new feature, is a fix that should fix a number of the performance problems people have when they read feeds with lots of unread items. Currently we display all the unread items in the reading pane when you click on a feed. Although this makes it convenient to read the unread items in the feed, it can take a while to render in the embedded Web browser if there are a lots of posts. To remedy this, we've introduced pagination to the reading pane. By default, we'll now show only 10 unread items per page and users can configure this to what best suits their needs.

The second feature, is actually the ability to turn off an existing feature. In the current release, the default stylesheet mimics Google Reader in that items are automatically marked as read as you scroll through the reading pane. Although a lot of our users liked the feature, a number of our users asked for a way to disable this feature. You asked, so we've delivered.

Our main problem now is how to change the CSS/HTML for the reading pane to introduce [previous page] and [next page] navigation links without making it look ugly. My CSS design skills are pretty lame.


Categories: RSS Bandit

A couple of months ago, John Montgomery gave me an invite to test drive a new Microsoft project that was billed as a mashup builder. It's been on my list of "cool things at Microsoft I've been asked to check out but never investigated deeply enough" for about three months [until recently this list also included Microsoft Scout]. Thus I was quite surprised when I found out that the project was already ready for release and had been renamed Popfly.

The most succinct description of the project I've seen is Mike Arrington's writeup in his post Microsoft Launches Popfly: Mashup App Creator Built On Silverlight which stated

Microsoft will announce the private beta launch of Popfly this morning, a new Silverlight application that allows users to create mashups, widgets and other applications using a very cool and easy to use web-based graphical interface.
Popfly is a big leap forward from the competitors above because it lets you do so much more, and it is one of the nicest web application interfaces I have ever seen. With Popfly, you can create applications, mashups, web pages and widgets (gadgets) and it is all tied together in a social network (as part of the Live Spaces platform) where you can connect with other users and publishers of applications. Mashups are created by dragging in and connecting ‘blocks’ which produce an output. Blocks are modules that connect to various web services API’s, and even today there are dozens of different blocks that work with a whole variety of different web services.

See additional screen shots and a link to a screencast on the Popfly overview page here.

The application is an impressive mashup builder. It's at least on par with Yahoo! Pipes or maybe even better since it lets you mash up not just RSS feeds but also APIs from dozens of different sources including Flickr, Digg, Twitter, XBox Live and Windows Live spaces among others. Did I mention that it is also a great demo of the capabilities of Silverlight? Damn, the Microsoft developer division folks are outdoing themselves in 2007 and it isn't even June yet.

John Montgomery has a roundup of all the recent posts about Popfly in his blog post Some of the Popfly News So Far. I've been told I have three invites to the service to give out. The first three non-Microsoft people to ping me at my work email address can have them. The invitations are gone.

Kudos to the Popfly team on such a kick ass release.


Categories: Web Development

This movie might not suck after all.

Just in case this gets taken down, you can also find the trailer (in HD) at


Categories: Movie Review

From the Microsoft press release entitled Microsoft to Acquire aQuantive, Inc we learn

REDMOND, Wash. — May 18, 2007 — Microsoft Corp. today announced it will acquire aQuantive, Inc., for $66.50 per share in an all-cash transaction valued at approximately $6 billion. This deal expands upon the Company’s previously outlined vision to provide the advertising industry with a world class, Internet-wide advertising platform, as well as a set of tools and services that help its constituents generate the highest possible return on their advertising investments.
The aQuantive acquisition enables Microsoft to strengthen relationships with advertisers, agencies and publishers by enhancing the Company’s world-class advertising platforms and services beyond its current capabilities to serve MSN. The acquisition also provides Microsoft increased depth in building and supporting next generation advertising solutions and environments such as cross media planning, video-on-demand and IPTV.
aQuantive, which has approximately 2600 employees, will continue to operate from its Seattle headquarters as part of Microsoft’s Online Services Business. The combination of Microsoft and aQuantive takes the Company’s advertising platform to the next level in its ability to serve Microsoft’s first party audience assets like MSN, Windows Live, Xbox Live, and Office Live, as well as for third party publishers and applications such as Facebook and Activision game titles.

The first thing I thought when I heard this news is that it is quite telling that Microsoft's biggest acquisition ever is for a Web advertising company. The second is that it seems that Google's overpaying for market share disease ($3.1 billion for DoubleClick and $1.65 billion for YouTube) is contagious. And finally, Microsoft now has offices in downtown Seattle. Oh. Yeah. :)

I worked with some of the Avenue A/Razorfish folks as part of the Social Networking feature in Windows Live Spaces. They seemed like good folks. I'm glad Microsoft has decided to open the pocketbook instead of just rolling over when it comes to buy versus build. Sometimes you really just have to suck it up and buy.

Excerpts from the conference call at TechCrunch.


From the InfoWorld Article Hilf: Microsoft won't sue over Linux, for now we learn

Microsoft ignited hostility following its assertion in Fortune magazine on Monday that Linux and other open-source software infringe on 235 of the company's patents.
In an exclusive interview, Bill Hilf, general manager of platform strategy and director of Microsoft's work with open-source projects, spoke with IDG News Service on the effects of the declaration on the open-source community.

IDG News Service: The Fortune story has caused a lot of concern over how Microsoft may proceed in regard to its patent claims. Did you know Microsoft officials were going to reveal the number of patents?

Hilf: We did. [But] the Fortune article does not correctly represent our strategy. That's what has people so inflamed. It looks like our strategy changed and we are moving in a new direction, but it hasn't. In the Novell deal, we said we had to figure out a way to solve these IP issues and we needed to figure out a way for better interoperability with open-source products. The Fortune article makes it look like we are going out on this litigation path.

Our strategy from everyone in the company -- from [Steve] Ballmer to Brad Smith to me and everyone in between -- has always been to license and not litigate as it relates to our intellectual property. So we have no plans to litigate. You can never say we'll never do anything in the future, but that's not our strategy. That article spins it on the attack. The only new piece information in that article is that it just put a number on the patents.

Your thoughts?


Categories: Life in the B0rg Cube

I'd assumed that by now it is common knowledge that if you are building any sort of social software, the users and community are more important than the technology. MySpace is probably the biggest example of this phenomenon. I was reminded again that not everyone gets this fundamental truth about social software when reading Dave Winer's post B. Mann loses it where he writes

He says he lost it when he read my post about federating Twitter last night. He says "Forget Twitter. It has a bunch of users, that's about it." And goes on to say someone should rebuild Twitter using Jabber.

But having a bunch of users is very important feature. You can't just skip over it as if it didn't matter, because imho it's all that matters. Jabber is a good technological foundation. But we've learned over and over that that isn't enough to get people to use something.

So many people who know technology think they know better than users. The trick is to forget that and just go where the people are. Jason wants to use Twitter. So do a lot of people. That's good enough for me.

An example of a recently debuted service that didn't pay attention to this lesson is Truemors. VentureBeat covered what happened to the site when it launched in the article Truemors, the Twitter for rumors, smothered by spam which stated

Guy Kawasaki’s new company Truemors, has launched, and it is a sort of Twitter for rumors.
However, the site has been overrun largely by nonsense and spam — for example, rumors that a war is going to break out in the Middle East, to spam for “Sportiki” and “Dafun.”

Here’s how it works: You can call in a message to Truemors (or you text, or email), and leave your rumor. Kawasaki, a long-time consultant and investor in start-ups, was philosophical about the negative response even in the chatter leading up to the launch.

There’s a lesson here. The site had no focus, and thus no community. A moderator is also a good idea for such sites, because otherwise spam will prevail.

That's pretty good advice from VentureBeat. You have to seed a fledgling social site with the kind of users you would like to have, preferably the folks working on the site should be using it regularly at least until it hits critical mass and can survive without constant parental supervision. There's a lot more very good advice on running a "social" site in Matt Haughy of MetaFilter's post Some Community Tips for 2007.


Categories: Social Software

Robert Scoble has a blog post entitled Google to Yahoo and Microsoft: the $1.65 billion was worth it which contains the following excerpt

Ahh, now you all understand what I meant when I said YouTube is a moat, not a revenue generator. By putting YouTube results into Google’s main engine Google ensures it will have better searches than Yahoo and Microsoft (who were, truth be told, getting damn close to matching Google’s quality). And it does it in a way that Yahoo and Microsoft will not be willing to match. Seriously, can you see an executive at Microsoft advocating putting YouTube videos into Microsoft’s search results? I can’t.
Anyway, Google just distanced themselves from Yahoo and Microsoft. And they just provided a way to monetize YouTube videos.

I love Google’s strategy. It continues to mess with Microsoft’s strategy. Microsoft still treats each team as something that must make money. Google doesn’t do that. They didn’t care one bit that YouTube didn’t have any revenues. They knew that there’s other ways to make money off of YouTube than to force YouTube to monetize on its own.

Interesting analysis, too bad it doesn't pass muster when you look at the facts. So let's do that
  1. Google didn't need to spend $1.65B on YouTube to integrate their search results. An existence proof of this are video search startups like Blinkx and Dabble that index video from practically every major video source on the Web including YouTube and definitely didn't spend billions doing so. Secondly, Google has already announced that they'll index videos from sites they don't own. Does Robert believe they plan to buy every site whose video content they'll index?

  2. If Google doesn't care about monetizing YouTube why did the company transfer Shashi Seth to YouTube to work on monetization and what about the ads within videos they prototyped a few days ago?

A better analysis of Google Universal Search is that it is the ultimate manifestation of the Features, Not Products initiative. Google had too many search verticals with no way for users to find them (I used to do Google searches for Google Music Search before I could use it) and now they've remedied that in one fell swoop. Just look at what  their users had to deal with before they changed the search engine results page.

In case you were wondering the even more link goes here


May 17, 2007
@ 12:16 AM

Danny Sullivan over at Search Engine Land reports on the Google Searchology Day in his entry Google Searchology Day: Recap Of Announcements where he writes about one of the new announcements called "Universal Search" which is excerpted below.

Universal Search: Do a "regular" search and books, news, video, image and local results blended into one single page. It will still mostly be web pages that dominate, but the verticals will be more noticeable. See our very long article detailing this, Google 2.0: Google Universal Search.

So I tried the query bon jovi always and got the following results page.

Notice how there is no tab for music search results even though they are showed inline as integrated results? This seems like a bug given that it works as expected for other queries like virginia tech (which shows a tab for "news" which is also shown inline) and britney spears (which has tabs for six categories including music)  Interesting...