From Closed To Open: iPhone App Developer Skepticism Highlights Platform Trajectory

from the closed-vs.-open dept

I've been getting into some interesting discussions with people lately concerning open vs. closed platforms -- especially in light of the supposed "success" of Apple's iPhone app store, which is a very closed platform. And the point that I've tried to make is that you have to understand the trajectories of these things over time. At any given time, it's never difficult to find a closed platform that is successful. In fact, I'd argue that if you are reshaping a market, often it helps to have a closed platform initially to drive that market in a useful direction -- though, this can really only be accomplished by someone visionary (Steve Jobs certainly counts). The question is how does this play out long term. And the answer is that you can't stay closed too long, or open solutions will catch up and surpass you. We've seen this pattern multiples times (closed AOL --> open internet?).

Where this gets trickier is that the open solutions are almost always substandard to the closed solutions initially. In some ways, this is by design. The closed solution is often much cleaner and slicker, and so it gets a lot of the initial use. But, overtime, the limitations of the closed solutions become increasingly clear, and as people bump up against those limits, frustrations increase, and more and more effort is put towards making the open solutions better -- even to the point that eventually they exceed the closed solution. It's a messy process, but the point where momentum shifts is often a subtle one, and the proprietors of the closed solution usually don't recognize it's a problem until way too late.

I believe that's the case with the App Store. The iPhone itself did an amazing job pushing the state of the mobile phone/portable computer market forward. There are some people who like to mock it as nothing special, but that's unfair. The device itself was a huge leap forward in demonstrating what a phone could be, and many others are just starting to grasp what this means more than two years after the original was introduced. That said, we're seeing more and more evidence concerning frustrations on the limits imposed by Apple's closed system, such as the arbitrary rejections of apps.

James points us to a worthwhile post from an iPhone developer, noting how the process is getting to the point where it's less and less worth it to develop for that platform. You have to put in a ton of work, and then you have to wait for quite a while just to get the app approved (or rejected), and the whole process is quite arbitrary. With that in mind, developers have a lot less certainty, and it shows a growing interest in other platforms.

To date, admittedly, such alternatives really haven't been very good. There are other app stores (some more open than others), but none has really been able to build up much traction yet on other devices. But there's a huge opportunity here if someone else can make this happen (or, if there were a way to standardize across some of the competitors) and start doing a better job serving both developers and consumers. The closed solution helps define the initial market -- but the open solution almost always wins in the long run.

Filed Under: app store, closed, developers, iphone, open, platforms
Companies: apple

L'Oreal Keeps Trying: Appeals French Ruling Against eBay

from the can't-stop dept

It appears that L'Oreal just refuses to give up. The company has sued eBay in a bunch of different countries trying to get a court somewhere to admit that eBay is somehow liable for actions of its users. To date, it's been a clean shutout against L'Oreal, who has lost cases in Belgium, the UK and France (I believe cases are still pending in Germany and Spain, though it's hard to keep up). The ruling in France was the biggest surprise, given that French courts have ruled the other way in the past. Given that, it looks like L'Oreal isn't done yet on its home turf, as it's appealing the ruling in France. At some point, one would hope that L'Oreal would realize that going after eBay is targeting the wrong party, but it appears that no one at L'Oreal seems all that interested in actually understanding the issues, and wants to see how many shots it can get at making eBay pay up.

Filed Under: auctions, liability, platforms, trademark, users
Companies: ebay, l'oreal

Topspin Shows That Premium Offerings Get Sales: People Will Pay For Value Beyond The Music

from the a-reason-to-buy dept

It's really been great over the past year or so to see more and more bands adopting business models that involve tiered "premium" options that add real value for fans -- the key to creating a real reason to buy, as discussed in my MidemNet presentation a couple months ago. We've seen all different variations on the tiered theme from Trent Reznor to Kristin Hersh to Jill Sobule to John Wesley Harding and many others. Personally, I still think that the most creative of the bunch is Josh Freese's tiers that go from just fun to ridiculous (one option lets you keep his car -- after you drop him off at home).

One of the companies that's doing a good job helping some musicians make this model work is TopSpin, who we've discussed before. In fact, TopSpin has helped Reznor and Freese with their offerings (as well as the Beastie Boys, who recently launched something similar, as well). With TopSpin's platform coming out of beta this week, the company has released some data on its success so far, and it's impressive -- especially for those of you who keep insisting that fans these days just want music for free and are unwilling to pay for anything.

• Its campaigns have certainly helped bands grow their audience and improved ways to connect with fans. One of its first major projects was the release of David Byrne's latest album, and it increased his email list by 3000%. (Update: Originally we said 37%, but that was wrong. It's actually 30x, or 3000% as per Topspin).
• The various projects have shown that people are quite willing to pay if they're provided with real value and given a real (rather than artificial) reason to buy. The average transaction price is $22 -- significantly more than what people are paying for "just the music" and even more than what an average CD costs.
• Perhaps the most appealing stat: on a recent project 84% of the orders were premium offers above the lowest tier. People will pay more for being given real value, rather than just being forced to pay for the music.

This is great news. Unfortunately, TopSpin is still rather limited right now to bigger name artists (they pick and choose who they work with). I think the world is open for another player to come in and disrupt the market by making such systems available for anyone. Also, in the various projects that TopSpin has run so far, I still think the pricing is a little off (Reznor's was the exception, and he only used TopSpin's backend, rather than its whole program). Also, it seems pretty rare for artists using TopSpin to offer a free option, which limits opportunity greatly (and drives folks to file sharing, rather than opening up a better relationship with those fans, and maybe gaining an email contact and the ability to create sales later). This is (I hope?) an issue from the musicians' side, rather than TopSpin's.

It's also worth noting that the company has also announced a program with Berklee College of Music to teach courses to musicians in how to leverage TopSpin for better business models. Hopefully at least some of that class will include an explanation of how using free as a part of your business model can extend it even further.

Filed Under: business models, music, platforms, premiums, reason to buy
Companies: topspin

UK Ad Standards Group Says Publishers Are Still Responsible For Auto Generated Ads

from the uk-needs-section-230 dept

It continues to amaze me how important a law like section 230 of the CDA is to keep ridiculous situations from occurring. Fundamentally, we shouldn't even need a section 230 -- which notes that online service providers aren't responsible for the actions of users -- since it should be common sense. The person liable for violating a law should be the person who actually violated the law, and not the tool they used to violate the law. Yet, as we see time and time again in other countries that have no Section 230 equivalent, such common sense doesn't always play out.

Take, for example, a ruling by the Advertising Standards Authority in the UK, that says that any online publishers are responsible for the text of any ads they display -- even if those ads are automatically generated, such as by a system like Google's AdSense. That puts publishers in a really tricky position. The whole benefit of using something like AdSense is the fact that it easily fills in mostly relevant remnant ad inventory, without requiring the publisher to carefully review and sell the ad space. Making those publishers liable for the content of those ads is only going to drive them away from using such ads altogether, which doesn't benefit anyone. Yes, you can understand that the ASA doesn't want questionable ads out there, but then the liability should fall on those actually responsible: the advertiser who created the questionable ad. Not the publisher who had no control over it.

Filed Under: ads, automated ads, liability, platforms, section 230, uk

Apple Now Banning Potentially Competitive Apps From The iPhone

from the pissing-off-developers dept

Yet another day and yet another odd attempt by Apple to arbitrarily control what's in the App Store for the iPhone. A bunch of folks have submitted the news of a podcasting app that's been blocked because Apple claims it competes with iTunes. This should, of course, scare of iPhone developers even more than previous bans. After all, it means that should an app get particularly popular, Apple would most likely just create its own competing version and remove the popular app from the store.

While some are decrying this as being an abuse of power, Apple certainly has the right to do it. It's just not a particularly good long term strategy -- and likely to backfire badly. Pissing off your developers or making them worry isn't going to get very many good apps written going forward. Also, limiting competition is actually going to hurt Apple, because it no longer has anyone driving them to be better. What if this podcasting app had certain features that were really cool and useful -- and not available in iTunes? Right now, Apple has no incentive to include that functionality, thus making its own software worse.

In the meantime, you've got to imagine that a number of iPhone developers may be eagerly awaiting the launch of Google's Android platform which won't have such arbitrary restrictions.

Filed Under: app store, applications, competition, iphone, platforms, podcasting

Opening Amazon's Walled Garden Could Prove Tricky

from the wireless-worries dept

Mike Arrington offers some unsolicited advice to Amazon about how to expand the market for the Kindle. In a nutshell, he thinks Amazon should aggressively license the Kindle hardware specs to third parties, and allow authorized vendors to use the Kindle brand. Amazon would require licensees to use the Kindle store, and would share the associated revenues. There's a lot to be said for a plan like this. The key to long-run dominance of many high-tech industries is to be the platform around which other firms build their products. Amazon's got a solid product with a fair amount of buzz at the moment, but that could easily evaporate if another company comes along with a more compelling product. Getting a lot of third-party vendors to build products around the Kindle ecosystem could help establish it as the standard e-book platform.

The difficulty with opening up the platform is that the Kindle business model—particularly the wireless aspect—depends on limiting the Kindle's functionality. Amazon is able to offer free cellular access for the life of the product in part because it controls the applications that will run on it, and can therefore guarantee to cell carriers that users won't start running bandwidth-hogging applications on it. And Amazon is willing to pick up customers' bandwidth bills in part because it charges premium prices for content, some of which is available for free off the open Internet. So if Amazon licensed the Kindle name to third parties, it would have two choices. It could tell the vendors they're on their own in terms of negotiating their own wireless plans, which would be a headache for the vendors. Or, if Amazon wants to bring third parties in under its own wireless umbrella, it will presumably need to impose some draconian restrictions on the functionality of the Kindle clones. And how many vendors are going to want to sell Kindle clones that have all the same limitations as the original?

Filed Under: kindle, open, platforms, walled gardens
Companies: amazon

Reverse Engineering Can Resolve Conflict Between Standardization And Competition

from the dmca-for-example dept

Over at the Technology Liberation Front, my co-blogger Adam Thierer discusses the trade-offs between platform competition and standardization, a subject Mike has written about in the past. Adam explores the mobile phone and console markets, and points out that the proliferation of incompatible devices has created real costs for developers who want to build on top of those various platforms. He makes some good observations, but I think he's missing the importance of reverse-engineering in resolving the dilemma he identifies. If a platform is proprietary, then we really do face a trade-off between standardization and competition. But open, flexible standards allow both: many firms can offer competing products, but they all work together because they're all designed for a common platform. Moreover, if the standard is well designed, the competing products can offer a wide variety of different features, and the standard can grow and evolve over time as vendors propose and adopt new extensions. That's the story of the web, for example, which features both competition and interoperability. The standard has evolved organically, as various vendors proposed and adopted new standards and often adopted those of their competitors.

The question, of course, is how to reach this "sweet spot" of an open, flexible, and universal platform. Sometimes (as with the web) we just get lucky, and the designer of the initial standard has the foresight to make it open and extensible. But when that doesn't happen, and it often doesn't, the next best hope is reverse engineering: a company (e.g. IBM) develops a proprietary platform which achieves popularity and is then reverse-engineered by competitors, transforming it into a de facto open standard. The modern PC platform isn't really controlled by anybody, although Microsoft and Intel have more influence than most other vendors. And because nobody controls it, it's both fiercely competitive and highly interoperable.

Because reverse engineering is so important in transforming closed standards into open ones, we should be especially worried about laws that stand in the way of that process. I've written before that the Digital Millennium Copyright Act is one such roadblock. For example, one would expect companies to be working hard to reverse-engineer Apple's iTunes-iPod ecosystem in order to sell iPod clones. We might expect the emergence of a de facto open standard around Apple's platform, with a variety of iPod clones and drop-in iTunes replacements. Unfortunately, in part because the DMCA limits the reverse-engineering of FairPlay, Apple's DRM technology, few vendors have attempted this. Hence, the DMCA is helping to perpetuate the competition-versus-standardization dilemma Adam laments.

Filed Under: competition, platforms, reverse engineering

US Courts Recognize That eBay Isn't Responsible For Auctions By Users

from the a-good-ruling dept

Unlike last month's awful ruling in a French court, costing eBay millions, a US court has correctly recognized that eBay should not be found responsible for auctions of counterfeit goods. This case involved Tiffany Co., who wanted eBay to be held liable for others selling fake Tiffany goods on eBay auctions. The court sided with eBay on every single charge, and smacked down Tiffany over and over again in the ruling. It noted that eBay is not responsible for the actions of its users, and Tiffany is wrong to suggest that eBay has the responsibility to monitor the auction site for infringing auctions. eBay does take down such counterfeit auctions when made aware of them, and that is all that the company is required to do. The court specifically points out that the Supreme Court had already rejected the idea of a "reasonable anticipation" standard that would have made eBay liable, even though Tiffany tries to suggest otherwise. The court also notes that eBay didn't infringe on Tiffany trademarks in mentioning Tiffany in advertisements for the site. This is an excellent overall ruling, and nearly the complete opposite of the terrible French ruling.

Filed Under: auctions, counterfeit goods, liability, platforms
Companies: ebay, tiffany

Advertising Isn't A Mobile Strategy

from the content-comes-first dept

ReadWriteWeb has an article claiming that the way to beat Google is by having a better ad platform (via Matt Asay). It says that "the company that can corner the mobile web ad market is going to be able to go toe-to-toe with Google." This is getting things completely backwards. Google doesn't dominate the search engine market because it has the best advertising platform. It dominates the advertising market because it has the best search platform. Other companies, such as AOL, that have seen themselves as an advertising company first and a content/applications company second have gone nowhere. This is especially true because the best advertising platforms are tightly integrated with their associated applications. One of the reasons Google's search advertising is so lucrative is that Google figured out how to make its ads highly relevant to users' search terms. This had two benefits. It increased click-through rates, obviously, but more importantly, it made the ads more useful -- and therefore less annoying -- to users. The same principle applies to the mobile space. Mobile advertising will only work if companies figure out how to make the overall user experience positive so that the ads don't scare users away. The way to do that is not to focus on building the best possible mobile ad platform, but rather to build the best possible mobile services, and worry about monetizing them after they've built up a significant user base.

Filed Under: advertising, business models, platforms, strategy

If You've Got A Platform Strategy, It Helps To Put Out The Welcome Mat For Third-party Developers

from the open-for-licensing dept

The New York Times Saul Hansell takes a look at the business model behind the Chumby, an Internet-age replacement for your alarm clock. Apparently, the plan is to keep the price of Chumbies low and make money by demanding a cut of any ad revenue generated by third-party applications. Hansell seems skeptical of this business model, and so am I. Chumby did the right thing by making its device relatively open and trying to provide a platform that other companies will build on. But its plan to demand a cut of other firms' advertising revenues seems like it might undercut that strategy. Especially when it's still trying to get the platform off the ground, it should want to make it as easy as possible for third-party developers to participate in the Chumby ecosystem.

Requiring third party developers to license access to the platform both increases the red tape required to enter the market for Chumby applications and reduces the potential profits from doing so. Potential third-party developers are going to think twice about betting on a platform whose owner may demand a bigger cut in the future. Obviously, there needs to be a way to recoup their investments on the Chumby platform. But if the Chumby becomes a hit, there will be all sorts of ways to monetize that success. Most obviously, the company can raise the price of the Chumby, or sell premium Chumbies with extra functionality. It can install its own applications by default and sell ads with those. It can sell accessories, or create a certification program for accessories like Apple's "Made for iPod" program. It can offer seminars and consulting services to people wanting to develop Chumby applications. It's never difficult to monetize a successful platform -- especially when you're selling the hardware. Putting up roadblocks to the development of new applications is a mistake, even if it generates a bit of extra revenue in the short run.

Filed Under: business models, chumby, developers, platforms, third parties