Two weeks ago Google retired Google Reader. One week ago Google announced that they retire Google Latitude and offline maps.
While it certainly did not make me a happy Google user, it made me start asking some fundamental questions about the lifecycle of free internet services as I start seeing familiar patterns.
I will focus on services oriented to the mass audience.
From a concept to market. While developing a service the owner has to have a rough idea what functionality the service should have when making it available to the audience and what is the business model. The owner has to choose the audience growth vs revenue. With the current technologies one does not have to have too much money to make a service available to the audience. Thus, there are many new entrants, often motivated by some cool technology and inflated expectations. It is not uncommon to postpone the decision about the business model.
Introduction to the market. The service is ready and cool. The owner uses it, recommends their friends, asks friends to recommend the service their friends, collects feedback, improves, and so on. If the owner asks themselves about the business model at this point, the choice is obvious, let the service be free to support the user base growth.
Growth. The user base is growing. In order to keep growth new features are needed to attract new users. Now the owner cannot do it themselves. Need more development, support, operation costs are rising. If the owner has enough cash, it looks like the growth is a good problem to have. If the owner does not have enough cash, the owner either have to search for some funding, start charging for the service or just face the painful decision. If the owner starts charging for the service, this is the first moment of truth what the service is worth for. There are alternatives. For example, introduce a paid premium service or try to gain non-monetary benefits like make use of collected data (initial or ongoing).
Maturity and Crash. At this point all excitement about the cool technology disappears. There is no too much to do on the product. Just fixing bugs here and there. The market is saturated now. Very slow growth. If the owner did not think about the business model, now this is the most important question. This is when services get discontinued. The owner at best has some experience and moves on to a new service to repeat the cycle all over again.
Not all services get discontinued. Making the right decisions and thinking about the business model, first of all, in the early stages is a key for the success. Do not let your excitement to suppress your wisdom.
Google Latitude and Google Reader are good example of this lifecycle. None of the services had a good business model, if any. Google Latitude collected some geospatial data from the users. Google Reader collected some user reading preferences. Google could not monetize that in any way. So they decided to discontinue the services. Somehow, that reminded me removing features from MapQuest after AOL acquired it. We all know what happened with AOL.
Another example. In early 2000 free email providers started removing POP3/IMAP access. In 2007 Lycos decided to delete all of customer’s email.
This should be a friendly reminder to those who uses free, but unsustainable services. If you use a service to keep your family pictures, remember to may go black. Email, calendar, contacts, important documents… The same thing. We have a sheer number of free well known services with a large user base, but are not profitable. It is just a matter of time when their owner decides to put a plug. And to add an insult to an injury, it is difficult or impossible to get your own data back.
Those who offer services should not only have a clear and sustainable business model, but also make sure that their users know the value they get from those services. Ideally, service providers should help their users to gain even more from the services.
Monitor Group, co-founded by Michael Porter, filed for bankruptcy a couple of months ago. That bankruptcy was somewhat puzzling. Like a few financial companies, ones that are expected to know how to manage assets, went bankrupt in 2008, Monitor Group preaching other businesses on strategy and competition, sadly struggled to manage its own strategy and lost to its competitors. While certainly other factors played their roles in Monitor Group bankruptcy, there is an obvious general question – why does division of labor fails here. How much should we trust a consulting company and believe the consulting company is competent enough? In my opinion, that largely depends on how much of moral hazard is involved. If that’s true, consulting as a form of business will become very tricky until consultants take more responsibility for their actions and consequences of those actions.
Today Deloitte has acquired Monitor Group. I hope Deloitte will make better decisions based on Porter’s framework, which I still believe is good, but not as sufficient to achieve success.
My news feed today was full of news about Apple’s WWDC. And it is no surprise. However, I am getting more and more concerned about Apple’s leadership. Reading Bloomberg, I felt that Apple is focused on Google rather than making existing and new customers happy. Users and developers are just a tool to beat Google. But it should have been clear for Apple executives that their customers fill Apple’s pockets for good products, not Google. I guess, Apple clearly belongs to the group of companies that work to try to charge more. I thought this is my opinion that might be wrong.
But later I read another article on Barron’s that appeared to be more disturbing to me. According to Barron’s, Tim Cook dropped this phrase of the day in front of a crowd of loyal Apple developers:
Only Apple could make such amazing hardware, software and services.
I guess, in Apple’s opinion, no one in the audience at WWDC (those who grow Apple’s ecosystem) is capable of making software better than Apple does. Unless they are employed by Apple. Let consumers decide what is amazing and what is not. Okay, this is about the insult. The injury (kind of)? Used MacBooks flooded the market. Yesterday’s treasure is today’s trash. I wonder how much an average Apple customer spends to get comparable functionality available on other platforms.
All above is my opinion as a user of Apple products.
I am having difficulty understanding the outrage against JPMorgan. Well, I understand the story and what media is trying to say. But that is not the whole story. More importantly, if any measures are taken and they are based on incomplete information lead to unintended results, ironically, similar to JPMorgan loss, again. That is, the “monster” replicates itself over and over again.
Let me clarify my point.
- JPMorgan made bad decisions.
- JPMorgan lost the money.
- Other parties made the money – no one bothers even to suggest who made the money. I do not even mention suggesting why other parties made a good decision. But it is clear, wealth does not disappear that easy.
- The government wants to introduce more regulation based on incomplete information. Sadly enough, that regulation would apply to those who make bad decisions and those who make good decisions, but would cost almost equally for many market participants.
- If regulation is based on incomplete information, it leads to unintended results.
- Like I already said, the situation repeats.
So I do not understand why it is okay for other investors to loose money and not okay for JPMorgan and why it is okay for JPMorgan to profit and not okay for other investors.
There are some things that raise your eyebrows. If you hear news here and there and do not relate them, they are just news. But when you relate them, this is a different story. Like this one.
This summer-fall Apple was trying to convince the government to spend more on research and development projects saying that many great things came out of defense projects (I guess, they liked Siri). Let me say it this way. Apple asks the government to spend more money on research and development hoping to get some benefits. A few weeks later Apple, Google, and Cisco (yes, no fight there, full agreement) tries to press the government for a 1 trillion tax holiday (or roughly $3.3K per capita). What is wrong in this picture? The companies want to get benefits from the government spending on research and they do not want to pay for this. Guess, who is going to pay for this? You, taxpayer.
How about spending your own money on research? Should I mention that Apple, if it were a hedge fund, would be the largest one? Apple has more money to spend than the US government. And this is a company (along with others though) that asks the government to spend on research and $1T tax holiday???
Disclaimer: I am not one of the Occupiers.
I was about to write about something else, but when I heard the news, the other topic became less important. Sad news. Borders is going out of business.
I was a frequent visitor of the Borders bookstore in downtown Boston. A very cozy store where I bought many books. I cannot imagine downtown without the Borders store.
Putting personal feelings aside, it is a sad story not only for Borders customers. It is sad for its competitors. Obviously, there will be a loss in revenues for Amazon and other online stores since many customers browse books in bookstores before going online and placing an order. In other words, online stores benefit from bookstores without actually spending a penny there.
Borders should have reinvented itself by mixing regular book sales with online store and e-book sales. May be Borders considered that and this model did not justify expenses.
But I think this is a form of the tragedy of the commons. Bookstores have a good impact on the society. Kids like to come to bookstores, explore books and play. This is how they learn. This is how they develop curiosity to knowledge. They cannot yet browse online books. They like to touch them, explore their different forms and shapes. There is no replacement for this.
One may argue that Barnes and Noble is still around. But loosing a competitor is bad for the consumer.
Borders will be missed and its disappearance will have a noticeable impact to the society, although, not attributed directly to Borders as it will take years to notice that impact. Sad.
Epsilon reported a data breach on Friday. This breach made a lot of shock waves last a few days as new information about impacted clients became known. Banks, retailers, you name it. I received an email Saturday morning informing me that my first and last name along with my email address were exposed (what a wonderful news for Saturday morning, isn’t it!?).
What is disturbing to me is how this breach was communicated. While it is good that I was notified, the notification I received was confusing. It stated that I may start getting spam. What is not clear to me whether information linking an email address to an Epsilon customer was exposed. This creates a possibility of more dangerous attacks – phishing – where you start getting emails “on behalf of” an Epsilon customer prompting users to reveal more information, for example, “You heard our database was breached. Please click *this link* to reset your password”. This information was not communicated at all and it may not be very obvious to the users of Epsilon customers.