Battle of the business models

November 17, 2011 by Leave a comment

Wired magazine has a fascinating interview with Jeff Bezos, CEO of Amazon, to coincide with the first shipping of the Kindle Fire, Amazon’s rival to the iPad.

What the interview highlights is the way the internet (at least in the English-speaking world) is increasingly concentrating into four “ecosystems” – Google, Apple, Facebook and Amazon – with each of these having a distinctive business model:

  • Apple’s model is hardware-centric. The content it sells through iTunes and the App Store is a means to an end, the end being to sell its highly profitable, premium-priced devices such as the iPhone, iPad and Mac. Its lower-priced devices such as Apple TV and the iPod Touch serve the same end, operating (as I can testify from personal experience!) as a “gateway drug” to the more expensive models by ensuring people buy into the ecosystem.
  • Amazon’s model is content-centric. This is the polar opposite to Apple: Amazon makes money from selling content, and it therefore keeps its device prices at rock-bottom in order to draw people into its content ecosystem. In his interview with Wired, Bezos doesn’t rule out literally giving away the Kindle in future.
  • Google’s model is data-centric. Its mission statement is “to organize the world’s information and make it universally accessible and useful” – not least to make it useful to its advertisers. Hence Google generally gives away its products for free, whether that’s services like Gmail and Picasa for consumers, or the Android operating system for mobile phone developers and networks. The products are aimed at encouraging people to put more and more of their information into Google’s servers.
  • Facebook’s model is social-centric (sorry!). Like Google, its aim is to collect as much data as possible about people so that it can then sell advertising. However, it comes at this at a different angle from Google, building out from people’s social relationships – highly valuable information that is donated to it by its 800m users.

It remains to be seen which of these models will win out or how they will coexist. However, a couple of questions come out of this.

First, you’ll notice that the above list makes no mention of Twitter. Twitter may be a hugely popular service, but it’s a long way from constituting an ecosystem or dominant business model to compete with Apple, Amazon, Google and Facebook. It’s something that people use, not somewhere that people live.

Second, what does this mean for smaller companies seeking to make money online? Increasingly the routes to do so lie through one or more of those ecosystems: through developing apps for Apple, Android or Facebook, through ensuring a strong presence on Google, through having content available through Amazon. This provides people with a lot of opportunities – just see how the App Store can make software available to tens of millions of potential customers – but also reflects something of a reduction in the “free for all” that has driven innovation online to date.

Something of that concern for a reduction in freewheeling innovation can be seen in Bezos’ criticism of the software and business method patents that helped Amazon in the past, but which he now clearly sees as more of a threat:

For many years, I have thought that software patents should either be eliminated or dramatically shortened. It’s impossible to measure the toll they’ve had on the software industry, but on balance, it has been negative.

Whatever your view on software patents, they are certainly playing a central role in the concentration of internet business into a small number of ecosystems, between which fierce battles rage in patent courts around the world. Again, it remains to be seen what effect this will have on innovation for smaller companies.

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Death of the domain name?

May 25, 2011 by Leave a comment

Interesting article on plans for forthcoming releases of the Google Chrome and Mozilla Firefox browsers to “deemphasise” the address bar, so that the URL of the page you’re viewing is not visible in normal browsing.

As the report puts it:

Google’s motivation to reduce your dependence on the URL bar is clear, since the company would rather that you think of using the web the same way you use your iPhone or Android device.

As Google sees it, the Web isn’t a collection of sites such as nytimes.com, mail.google.com or Facebook.com. Instead these are all software applications called The New York Times, Gmail, and Facebook that happen to live online instead of on the desktop.

From an online safety point of view, this has pros and cons. Critics will argue that hiding the URL will make life easier for scammers to direct people to phony sites. Against that, the linked report suggests that removing human error (typing the wrong address) will reduce some opportunities for scam sites.

I remember suggesting at an event some years ago that search would ultimately displace URLs/domain names as the main means by which people navigated the web. It’s taken longer than I thought, but it does now seem to be happening: I’ve noticed a number of offline advertisements in recent months (such as billboards and magazine ads) that invite people to search for a keyword rather than giving the advertiser’s website address.

Add to that this new trend to treat websites as apps, and it may well be that the URL is on its way towards becoming a purely technical feature working in the background.

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Google’s “superphone”: who’s in control?

January 11, 2010 by 1 Comment

The Google Nexus One “superphone” has been attracting a great deal of media coverage since its launch last week – though the coverage has turned sour for Google today, with widespread reports of customer dissatisfaction as early adopters receive their new purchases.

Most complaints relate to technical problems (such as getting the phone connected to a 3G network) or to the availability (or otherwise) of discounted deals. A further layer of “meta-complaints” then quickly sprang up as people expressed their dissatisfaction with how Google had handled their original complaints. However, the complaint that caught my eye was the seemingly more minor one of the 190 MB limit on installed applications.

The Nexus One’s storage capacity can be expanded to 32 GB using a Micro SD card. However, at present applications have to be installed on the phone’s internal memory of 512 MB. In practice the amount of space available is reported at only 190 MB. Google explained at the Nexus One launch event that this is to “protect [software developers] from piracy”, and that they are working on other means to achieve this through encryption.

The point is that it is Google that has imposed this restriction, not the customer who buys the device. If I buy a netbook – a concept seen by some as threatened by the rise of the smartphone – I can install any software I like on it and use the hardware as I choose. (Indeed, the netbook on which I’m typing this has an entirely different operating system from the one with which it was supplied). If I buy a smartphone, I’m subject to whatever restrictions the manufacturer and/or network operator decide to impose on it (a point made eloquently by Jeff Atwood in this post).

This highlights a wider problem as we move into an era of mobile technology and cloud computing: who’s in control? As computers move into our pockets and our software and data move out into the cloud, we gain a great deal in convenience, but we may be losing out on control. At the very least, we need to make sure we understand the trade-offs we’re making, whether as individuals or businesses.

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Chrome OS: the browser as operating system

July 8, 2009 by 3 Comments

Widely predicted for some time, and now official: Google is to produce its own operating system, Chrome OS. Google describe this modestly as an “attempt to re-think what operating systems should be” in a world of cloud computing and web applications.

On a “traditional” operating system, the browser is just one application among many. In Chrome OS, the browser will be the main interface, with applications being run through the browser as web applications. As Google put it:

For application developers, the web is the platform. All web-based applications will automatically work and new applications can be written using your favorite web technologies. And of course, these apps will run not only on Google Chrome OS, but on any standards-based browser on Windows, Mac and Linux thereby giving developers the largest user base of any platform.

Is this a “Windows killer”, as some have predicted? The focus on web applications and netbooks suggests otherwise. It sounds like Google  is aiming at providing an alternative experience for those who want access to web-based applications while on the move, and who will probably continue to have Windows running on their main PCs.

I wonder if versions produced for larger PCs will be designed for “dual booting”, so that people can turn their computer on within a few seconds to access the web using Chrome OS, and then boot into Windows for more substantial work requiring conventional, installed software such as Microsoft Office. Chrome OS is built on an underlying Linux platform and – however much it may frustrate those who, like this writer, use Linux quite happily for their everyday computing – most consumers have proven stubbornly resistant to using non-Windows OSes on their PCs, to an extent which even Google may struggle to overcome. Presenting Chrome OS as quick-to-use alternative sitting alongside Windows may be an easier sell.

What Chrome OS does illustrate is how relatively unimportant operating systems are becoming in a cloud computing era. Google clearly sees the OS not as an important revenue-generator in itself, but as a means to increasing use of its revenue-generating services online. As Google put it:

any time our users have a better computing experience, Google benefits as well by having happier users who are more likely to spend time on the Internet [looking at Google advertising, as they might have added].

Chrome OS will accelerate the trend towards our computing experience being conducted through our web browsers, regardless of the operating system.

It will also no doubt increase the scrutiny of Google from privacy regulators and competition authorities in the US, Europe and elsewhere. The Department of Justice in the US is already investigating Google’s deal with book publishers, and Microsoft will no doubt be asking the European Commission why it is wrong for Microsoft to bundle a web browser with its operating system, but OK for Google to bundle an operating system with its web browser.

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SaaS and cloud computing: a low priority for 2009?

March 13, 2009 by Leave a comment

I was interested to read Silicon.com’s “CIO Agenda 2009″, summarising the priorities for 2009 IT spending as identified by twenty-five IT directors and CIOs.

Security came top of the list (I wonder if it ever doesn’t?), followed by virtualisation and IT governance & measurement. Software as a service (SaaS), and grid and utility computing, came a long way down the list. So does this mean that claims about the growth of SaaS and other hosted services are hype?

It clearly shows that some of the more enthusiastic claims made for cloud computing are over-hyped. As another article pointed out recently, there are good reasons to doubt that enterprise software is going to disappear into the cloud en masse. Locally-installed software – whether on an internal server or individual PCs – continues to have many benefits over systems accessed over the internet, ranging from speed to resilience.

In any event, much of the move to SaaS and hosted services is supplier-driven rather than customer-driven. I’m not surprised that CIOs are making SaaS a low priority, because in most cases the driver for their decisions is not going to be, “How can we get this functionality off our local systems and into the cloud?”

However, when they come to address the higher-priority issues, in many cases they will find that the solutions that vendors are offering them are cloud-based hosted systems, rather than traditional, locally-installed software. That may lead to decisions as to whether cloud-based systems are appropriate for a particular business function, but the end result is that the overall use of hosted services increases, even if that is not a priority in itself for CIOs.

Indeed, the fact that decisions about IT investment are driven (quite rightly) by other priorities is one reason why the crucial differences between locally-installed and remotely-hosted systems can be overlooked. But that’s a matter for future posts.

Filed under SaaS, Technology Tagged with , , , ,

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