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.
HP officials have repeatedly said that automation, not lower labor costs, are the key to increasing margins.
“As we look back over the last five to 10 years, most of the activity in the services organizations as a broad industry statement was focused on the location of jobs, geographic locations of jobs and a lot on labor arbitrage,” said Anne Livermore, the executive vice president of HP’s Enterprise Business, in an HP transcript of Tuesday’s investor call.
“We think the next five to 10 years is all going to be about who can best use technology to automate the delivery of services and that no company is in a better position than HP given our technology leadership to use technology to automate the delivery of services,” said Livermore
It is an old news, but I could not believe my eyes when I read it. James Gosling left Oracle and it looks like it was not very peaceful. The disagreement came up over the JCP process. I am really concerned about the future of GlassFish, not to mention OpenESB and other projects. Even more troubling as Gosling said that “lots of talented folks leaving and trying to figure out what to do next in their lives”. Personally, I take this news as there will be less open-source development. Although things got a little bit softened, but nonetheless, Java would be stronger with Gosling working at Oracle.I wish him the best.
JDK is open-sourced, but there should be an efficient governance process with multiple sponsors similar to the Eclipse Foundation. But having multiple JDKs from different vendors, I do not see much support for a single platform. I think more likely Java will start forking into multiple dialects, similar to C. I would be happy to be wrong, but time will tell.
I recognize that the subject is very controversial, especially after the April unemployment report got released with “alarming” numbers showing that the US national unemployment rate is at 9.9%. But this post is about what one should be aware of so he/she does not join those who are desperately looking for a job. Hopefully, it will also help those who is looking for job.
I will leave obvious things not related to competition per se (e.g. inappropriate behavior).
- Poor performance. This sounds very straightforward at the first glance. It is very broad and can be applied to organizations as well. For example, someone works very efficiently and produces a product that no one needs. This example falls also into this category.
- Division of Labor. It comes in different forms. For example, outsourcing for services, build vs. buy for products, etc. In the first case, if the job is not directly related to the primary business, it is likely it will be outsourced. In the second case, if you create/develop a product, that helps the primary business, but is similar to existing ones, the chances are very high that the product available on the market will replace your product sooner or later (this is known as the threat of substitute products or services in Michael Porter’s five competitive forces). The only viable alternative in this case is to spin off that product, but one should be aware of consequences of direct completion (in essence, this is a move from one Michael Porter’s forces to another – competitive rivalry). Speaking of outsourcing abroad, there is some temptation to protect the local job market, but doing so we would get some relief at the cost of our future. But Murray Rothbard put it in a more elegant way (see Myth 10).
- Automation. Even though this is one of forms of division of labor, I decided to list it separately. Humans started to lose badly to machines. There is an opinion that unemployment in early 2000s was caused more by automation rather than outsourcing. So if the job can be automated, it will not last long.
- Merger of direct competitors. There is not much you can do as this a threat of direct competition with counterparts from the other company.
- New entrants. This is another Michael Porter’s competitive forces. If the job position is well paid and it is a known fact, likely it will drive demand to take it. To maintain the job in this case, the entry level should be very high.
In general, from the economics point of view unemployment is a form of resource misallocations. But this does not mean that the unemployment rate is a good economic indicator as it may be misleading and resource misallocations tend to change from one form to another.