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Joel Assumes Incorrectly That Wide Adoption=Good.

In the Platforms article Joel berates Groove Networks which makes a product which he'd like to build his application upon. I can see why Joel would like the Groove folks to make their development platform free since it means his CityDesk application gets enhanced functionality with less development costs for him and probably no price increases passed on to his users. However, what Joel fails to do in the article is explain why besides increasing adoption rates this benefits Groove's bottom line.

Since we are no longer in the Dot Bomb Era simply telling a company that giving away a product for free will garner them more users sounds like poor business sense. After all, I'm pretty sure Macy's would get more customers if they charged $1.00 for everything they sold regardless of cost to themselves but it would be a disastrous business plan.

In Joel's article he uses Sun's behavior with Java as a positive example of how to make a successful development platform while using Apple's behavior as a negative example. However, even Joel himself admits that Sun's Java strategy is full of mistakes. Specifically, Sun created a kickass development platform by improving on already existing concepts thus commoditizing hardware and operating systems in a single blow. Although the platform became widely adopted, Sun really didn't have a sound strategy for making money from Java except as a very expensive ad campaign for selling over priced servers. At the height of the dot bomb boom, sales people could say "Java is the best development platform and Sun's expensive hardware/software is the best way to run it" even though this was never absolutely true it sold servers. However, now that people actually carefully scrutinize their purchasing decisions in the wake of the economic downturn they've realized that they don't need Sun's expensive server/OS combo to run Java and now the Java Big Two are IBM and Bea.

The most telling part of the Apple/Sun comparison is that although Apple pulled in $1.43 billion in revenue in the third quarter of the fiscal year versus Sun who pulled in $3.1 billion in revenue it turns out that Apple posted a net profit of $.09 per share against Sun's net loss of $.01 per share. Looking at it from that perspective, it does seem that Apple is making smarter business decisions than Sun and Joel's case isn't as open and shut as he presents it.

PS: Does anyone else think that a Groove partner telling Joel intimate details of their deal with Groove and possibly loosing them revenue with the bad publicity probably violates whatever NDA type deal they signed with Groove. Of course, this assumes that the Groove folks were smart enough to sign their partners to some sort of disclosure related agreement.

Carnage4Life
Sunday, September 01, 2002

"Since we are no longer in the Dot Bomb Era simply telling a company that giving away a product for free will garner them more users sounds like poor business sense. After all, I'm pretty sure Macy's would get more customers if they charged $1.00 for everything they sold regardless of cost to themselves but it would be a disastrous business plan. "

You are forgetting something very important about the "platform" arguement.  And it shows in this paragraph. Macy's doesn't sell it's base products for $1.00 because they don't have a market in selling developers editions to people who want to develop for their products. You are comparing apples to oranges.

What you give away free is the basic runtime to use something created with your platform - e.g. Acrobat Reader.

What you charge a fortune for and make your money with is the development tools - e.g. Acrobat itself.

Or the free outlook express and the expensive Exchange Server. Actually this is a good example because theres also the enhanced functionality "player" for exchange, the full blown outlook client. Speaking of "dot-bomb" as you did earlier, I'd you can show me where the free outlook express client is killing Exchange Server. I'll wait.

It's easier to convince people to buy your development tools and develop for/using your platform if you give away your player and you have good distribution channels; the developers don't have to worry about whether or not people will be able to use the fruits of their labour, or worry overly much whether it will run across all platforms you've targetted, etc because you've already taken care of that.

Robert Moir
Sunday, September 01, 2002

Interesting.  I was about to ask around if Groove really wants to introduce competition on its own platform.  Is this preferable to huge "enterprise-level" contracts?

Joel presents a hypothetical:  If Notes were more open, CLEARLY we'd all be surfing the Notes instead of the web.  But is that true?  From what I hear, Notes is wildly successful despite not having achieved ubiquity.  Especially if it's such the nightmare people make it out to be.  Hard to second-guess them.

Aside from introducing competition to your own platform, you also have more people attacking the platform itself, once it gets out of the comforting niche you made for it.  Rebol might be profitable now for selling Scheme+netlibs and Sassenrath's name.  But could it go against Java?

Joel says Groove management is clearly "greedy or clueless."  That may not go without saying.

Sammy
Sunday, September 01, 2002

I agree with your point Robert, but Outlook Express has nothing to do with either Outlook or Exchange. Outlook Express used to be called Internet Mail And News (I believe the exe is still msimn.exe). It is a SMTP/POP/IMAP client with a news reader built in. It has a few similarities with the UI of outlook (what email program wouldn't) but thats it.

That said, one could view Outllook as being given away "free" with each copy of Office Pro.

Chris Altmann
Sunday, September 01, 2002

True enough Chris - and I know this because i happen to spend 50% of my time working with email servers and clients. I really really hate using Outlook Express for email, as it happens.

But it is a free viewer for Exchange - albeit a very limited one, and one that also works for any other email server that supports SMTP and either pop or imap.

But it does count to the point that someone can hire me to setup their internal email system using exchange, and because they have office they can take advantage of the feature rich outlook client, and additionally they can tell people they've also allowed POP and/or IMAP access, safe in the knowledge that the vast majority of their people will either run Windows with Outlook Express at home - and they can provide a guide for these people with screen shots, and people who prefer eudora(or whatever) are used to adopting outlook express config instructions to work with eudora because they have to do this to configure their preferred email client to work with their ISP which also assumes they are using OE.

Robert Moir
Sunday, September 01, 2002

"What you give away free is the basic runtime to use something created with your platform - e.g. Acrobat Reader.

What you charge a fortune for and make your money with is the development tools - e.g. Acrobat itself."

We all know how the strategy is supposed to work, people have been yelling give away the razors and charge for the blades for years now. However it isn't open and shut no matter how much you repeat it.

The interesting thing is that your example is the exact opposite of Joel's. He is arguing that you should give away the development platform (a la Sun & Java)  then make money from the end users. The problem with this scenario is that all you might end up doing is building a platform for your competitors and partners to take advantage of while living you with double the work maintaining the platform and your end user apps.

Chris has already pointed out why your Outlook Express analogy is similarly off.

Carnage4Life
Sunday, September 01, 2002

This is from another thread, but here are slightly more specific numbers...

Playstation has sold over 100 million consoles, about 35 milllion the ps2 (I beleive that is more than XP in a similar time frame, not sure though). You could add Nintendo and Sega sales to that if you like, as they are similar enviroments. Sony charges developers a LOT to develop for the PS2, has extremely strict requirements and quality control, and it is quite difficult to program. It is certainly one of the most popular (and most closed) platforms in the world, full stop. How does this fit in to the idea that give it away and you'll be the next microsoft? Next Linux maybe... Piracy also isn't near as common as on PC's - people buy the console, and buy expensive games, so I'm not sure about encouraging people to steal your stuff either. I think that is just a way of casting a wide net into the big world and hoping for the best, rather than having a real sales plan.

Microsoft also never gives away things without a clear strategy, usually to destroy a competitors revenue stream. It works well for them, because they can afford to wait while netscape, lotus, novell, apple, sun etc wither on the vine, and then make up for lost time once the competition is sidelined. I love .Net, but I'm well aware that if it manages to snuff out Java, the price will rise...

I think the key things to a successful platform are excellent developer support, and a giant effort to get the product into the hands of paying customers. That is something MS always 'got', as did Sony for that matter. It isn't just because developers are happy. For example, if you don't have good documentation, then you are the worst off, being the platform your create and work on 24/7 isn't well documented.

Free and everywhere is a strategy, but the downside of having no barrier to entry, is you end up with a lot of low quality products around your platform. Most of windows reputation for instability (vs similary structured macs, not unix) was due to the sheer number of poorly written programs available. Look at the reputation flash has - most of it is garbage because it is so easy to use and publish. Something like Director or autoCad has a much higher barrier to entry, thus the average results are better. As the computer world matures, people get more and more wary of junk software. So I don't think you can translate "tons of free apps!" into a paying customers (like you could in the early windows days anyway). Maybe still in cell phones, but not on PCs I think. The other think is, just because your product is free, doesn't mean its everywhere. It probably saves you something like 20% of the needed push, assuming you even have something that many people actually want.

What was the line from the dot com days? "Sell at a loss and make it up on volume". Well at least with software you don't have to sell at a loss (unless you are really 'selling' that is : ).

Robin

Robin Debreuil
Sunday, September 01, 2002

"Chris has already pointed out why your Outlook Express analogy is similarly off. "

The analogy works just fine. I think he was pointing out to me that they are different technologies, which I knew already.

As for the rest of it, the dev tools vs. user engine thing works both ways, does it not? The cost of the dev tools for a game console, while not cheap, are quite a steal vs the amount of money a hit playstation 2 game can pull in.

Robert Moir
Sunday, September 01, 2002

"The cost of the dev tools for a game console, while not cheap, are quite a steal vs the amount of money a hit playstation 2 game can pull in. "

No question, whew! : ). The trick is having the hit cover you for the two that broke even, the five that were dogs, and the others that never saw the light of day. Movies work the same...

I think what you get with the high cost is a bit more predictability - the game will cost around X, if released you can expect a minimum of Y sales, if you buy exclusive rights to the NBA console game (or hire Harrison Ford), your costs and predictible revenue go up even more. By supermario III, or Episode IV, you can actually sleep at night it is so predictable. That's why Hollywood loves sequels, and software loves versions.

Most businesses, even the fleeting entertainment industry, aren't looking for possible ways to increase their investment 100 fold in one shot. They are looking for sure ways to get 115% back within a year. That would usually be a well positioned product, a good marketing plan, and a solid execution.

Dropping $200,000 on something with no clear revenue channel, but a 5% chance of wild success is crazy. You would be way better off taking the money, going to Vegas, and putting it all on one round of blackjack. 48% chance of doubling your money, and its a lot less work. Who knows, you might even get comp'ed a Wayne Newton ticket doing that kind of thing...

Robin Debreuil
Sunday, September 01, 2002

Slightly OT, but we are Groove development partners and I just checked my referrer logs. I'm getting about ten times the level of hits from Groove.net that Joels Groove "partner" is saying he's getting.

A lot of emails too.

I don't think my referrer logs are subject to any disclosure stuff, BTW (duh!).

Mark Smith
Monday, September 02, 2002

"Who knows, you might even get comp'ed a Wayne Newton ticket doing that kind of thing... "

Actually, I think one time massive betting streaks are a casino's worst nightmare (if they have any nightmares).  More than likely you'd just receive the ire of the pit boss, and possibly get a helping hand out the door (unless you lost).  Most casino's would rather have you lose your money slowly and methodically.

Of course, if you were to have a *reputation* for gambling all of your venture capitalist money away every time you got a new one, they'd welcome you with open arms, and comp you more than just Newton tickets, to be sure...

Dignified
Tuesday, September 03, 2002

you are totally right - I used to work around the casino industry, and the absolute best odd you will ever get gambling is if you only do it once in your life, probably in blackjack. The more you gamble, the more you are likely to have lost money - until it is pretty much a sure thing.

Unless you count cards, but that can be bad for your health!

Robin Debreuil
Tuesday, September 03, 2002

Well, if they have craps w/ good odds (and you can't count cards), pass line bets with odds give you the best odds in the casino. In fact, with 100x odds (which the horseshoe used to offer) the house edge is only 0.021%.

Of course, all you astute engineers will notice that the edge is still in the houses favor....and with 100x odds you need a serious bankroll to manage the variance.

Gambler, Anonymous
Monday, September 09, 2002

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