Freemium Revisited

Earlier this year, I wrote about a WSJ article that covered the revenue model known as freemium which is a combination of free and premium. The idea is that you release a free version of your offering in order to capture a larger market share and depend on some segment of your market upgrading to a paid version.

I just read a NY Times article that used their coverage of a start-up that makes a product called Evernote to weigh in on the freemium topic.

I knew about Evernote back when it was just a freeware windows application that you could use to capture notes of various media types in one place that was searchable. Their biggest competition at that time was Microsoft's OneNote product which is now bundled with MS-Office and, frankly, I've never seen anyone use it.

Now, the windows app communicates with a centralized network which acts as a repository that you can access from multiple computers or share with others for the purposes of collaboration.

May I digress for a couple of paragraphs? A large part of my training as an engineer was in the black art of categorization. You learn to categorize things. You learn to categorize everything. The predilection to DnD is a natural one because engineers learn how to transform stuff. For example, software engineers learn how to transform specifications into working software. Transformations of that order are fancy sequences of simpler transformations. A simple transformation consists of the thing or things to be transformed (the operands) and the process by which the transformation is to be guided (the operator). The role of the engineer is to figure out that sequence of transformations and also which process to apply for each simple transformation. In engineer speak, this is called "finding the right tool for the job."

Because engineers are trained to categorize, they want a large toolbox with a wide variety of tools by which they can use to transform things. It gives them more choice, more freedom. Those who never received training on how to categorize see this as a liability instead of a benefit. They want only one choice of tool. They want a tool that does it all.

That is why I don't use Evernote. It is a single container by which you are supposed to put everything into. I doesn't appeal to me but I recognize that it does appeal to a very large number of people. How do you feel about it? Would you rather just open a document because you want to access it or would you like to choose which tool to open a document in because different tools have different specialties and you wish to pick the tool that is most conducive to the job at hand?

Anyway, back to freemium. What's really interesting about this NY Times article is that they put some numbers to the Evernote's take on the model. They currently have a half million active users. If you stay with the service for a year, then there's a four percent chance that you will subscribe at $5 per month. They claimed that they earned $79,000 in July which, according to their other figures, means that three percent of the total active user base subscribes. They project that this subscription rate could climb to as high as 22% which would yield a little over a half million on revenue per month.

They also claim that this will scale. They won't have to staff up further as more people subscribe. They claim that their current costs is nine cents per user per month and project a break-even date of January 2011.

Whether or not you believe these numbers, the freemium model is compelling and is most probably worth some exploration and consideration. I use it in my business where access to Code Roller (the community edition of a software development project life cycle management solution) is free for all (including my competition) but you have to pay if you want my company to develop the actual software being described by your project.

What is your take on the freemium revenue model? Is it an exciting way to gain market share or do the challenges of monetization and fear of commoditization of your product or service give you pause?

Understanding Google Wave

In late May of this year, Google announced a new technology initiative of theirs called Google Wave. What is this technology about and why should anyone care?

Early reports painted the picture of Google Wave being a hybrid between instant messaging and email with an emphasis on conversant collaboration. Because of that observation, people just thought it was an email killer and Internet attention went elsewhere. After all, who is dissatisfied with email?

Since then, many Internet pundits have weighed in on the subject. Some claim that it is too complicated for rapid adoption. Others see it more as a platform for enterprise collaboration than as an email killer.

Google Wave is scheduled to expand its beta audience in about a month from now. Many sources are now skeptical about whether or not the technology is stable enough to take that step.

So, why should you care? Whether or not Google can make its commitment by the end of the week is immaterial to me. What is important is that if they can carry this off and deliver on the promise of Google Wave, then I believe Google Wave can be a dramatic game changing innovation to those web properties that thrive on user generated content.

But innovation is not always well received nor easy to accept. I will go into more details about this in a future post but what Google Wave empowers is real-time conversations across multiple web properties. Imagine a world where discussion threads are transformed into persistent chat rooms that cluster around a particular topic instead of belonging to a particular article or blog entry. Each web page devoted to that topic could share in the discussion yet the participants could also track the complete conversation in a web GUI that does look like email on steroids.

So, what's the problem? What's the big deal? This means that web properties are going to have to be ready to let go of some traffic away from their site in order to open their site up to more traffic from other sites. This philosophy runs counter to the current practice of stickiness where web sites do anything to capture and retain visitors to their site.

I'm a big advocate of sharing information online as a necessary step to fostering healthy and prosperous communities of practice so here's hoping that this wave is one that catches on. Stay tuned for more developments in September.

The Browser Wars Circa 2009

If you have any understanding of computer technology and you haven't been in a coma for the past twelve years, then you already know that there has been a very significant trend in software application development from windows based applications to web applications.

The drivers for this trend aren't very hard to comprehend. A traditional windows application incurs a lot more development costs in terms of installation and testing on the various different types of client computers (i.e. PCs) than the same app delivered as HTML over the web. While there have been impressive advancements in reducing windows application testing and deployment over the years, there is still a higher TCO for windows apps than for web apps.

Not that web apps will completely take over windows apps. Some areas, such as graphics manipulation, VoIP, and video capture, will most probably always be in the province of windows apps. At a minimum, you will always need a web browser running on the client machine as a windows app in order to get access to the web apps. Without the web browser, the web apps are useless.

This is nothing new to the major technology vendors. As competitors over gaining IT market share, they have known this for quite some time. Own the web browser and you own the web. That is why Microsoft aggressively went after Netscape back in the mid 90s. Netscape was the corporation that formed around the original inventors of the web browser. This competition between Netscape and Microsoft eventually led to Netscape being acquired by AOL in 1998. Round one of the browser wars goes to Microsoft.

But the founders of Netscape were not willing to give up so easily. Even as the company was being sold, they created a non-profit foundation devoted to the proposition that innovation on the Internet would thrive only if there was available a web browser that was not so directly controlled by any single vendor. This Mozilla Foundation eventually spun off a for profit subsidiary in order to gain the revenue needed to continue to provide a quality web browser.

This "phoenix from the ashes" strategy worked well. While continued development of Microsoft's web browser languished, the Mozilla browser (called Firefox) continued to enhance and innovate on the web browsing experience. Mozilla was able to do this because they used the open source model to keep their development costs low. Recently, there has been much speculation about the mass migration of web browsing from Microsoft's Internet Explorer web browser to Firefox. Round two of the browser wars goes to Mozilla.

What about the other players in this war? Well, Apple has always had a place on the battlefield with their Safari browser. They don't have much in the way of market share, however. There's a few other minor players but their low market share numbers make it such that they are really not worth mentioning here. What is newsworthy is when Google announced their entry into this war with their web browser named Chrome. For one thing, a lot of the revenue for Mozilla comes from Google. The concern is that revenue stream will dry up now that Google and Mozilla are direct competitors.

Google Chrome currently doesn't have a lot of market share yet so why the concern about Chrome? Google is a big company with deep pockets. This coup has been tried before by another big company with deep pockets, Microsoft. Google is ratcheting up their marketing machine over Chrome.

There are also some noticeable difference between what Google has done with Chrome and what Microsoft did with Internet Explorer. The biggest difference is that Chrome is based on open source.

Recently, the NY Times published a story on the latest turn of events in the web browser wars. The war is very lukewarm now. Not a hot war at all. Google will continue to fund Mozilla, at least until 2011. Google's funding accounts for over three fourths of Mozilla's revenues. Mozilla recently moved their physical office away from the main Google campus.

Why do you care? If you are a software vendor or IT shop that makes and publishes web applications, then you want to make sure your applications run smoothly in the most popular web browsers. If your web applications suddenly stop working, then you have a serious problem.

That is why industry watchers keep up with the web browser wars. They don't want to be caught by surprise by the threat of a web browser upgrade or patch that was purposely designed to destroy the competition.

Linking is a Good Thing

Twenty years ago, Oxford University graduate Tim Berners-Lee wrote a memo to his boss while he was working at CERN. This memo was an information management proposal for a distributed hypertext system that we now know of as the World Wide Web. Note the major feature that he describes which was not video blogging nor banner ads nor even online chat. The major feature in this proposal was hypertext or "human-readable information linked together in an unconstrained way."

This past February, the same visionary gave a presentation at the annual TED Conference where he was still advocating for more or less the same thing. This time, instead of web pages linking to each other, the data that feeds web pages should also be available online and link to each other. This is what is called Linked Data.



Linked Data is collectively intelligent. Individuals contribute relationship information when they link. This relationship information aggregates into fantastic models of our world. Models that help researchers, journalists, and ordinary folk span problem domains in order to solve new and ever increasingly complex challenges.

But there are barriers in the adoption of Linked Data whose measure of success and effectiveness will depend directly on its ubiquity. One big problem is that many organizations value their data and quite naturally wish to protect it. Propriety and intellectual capital are profound cultural barriers to linked data that I, for one, do not understand how to overcome. I think that it's going to be a little more of a challenge than simply to ask you to stop it.

Here is another, even bigger, cultural problem to Linked Data. In our current web society where page rank is the coin of the realm, nobody wants to provide links anymore. Linking is passé. When you link out to another site, you contribute to their page rank. If you compete with that site, then that diminishes your page rank. It's some weird mind-share zero sum game. It's the new variation on the tragedy of the commons all over again. You're so protective of your own page rank that you dare not provide outbound links. Thus, the original, fundamental, collectively intelligent value of the World Wide Web is tragically subverted by individual or organizational greed. This mindset has gotten so bad that many sites automatically flag your content as spam if it includes a link in it. I link a lot in my posts so I can tell you from first hand experience that many prejudiced people will dismiss you as a spammer if you provide a link, even if you are linking to something that you have no official relationship with.

Once again, this noble visionary has provided a map to a more intelligent world but we are going to have to revisit our current values in order to completely embrace the gifts that he has given us.

Implementing Virtual Worlds in Business

I occasionally cover stories on enterprise focused virtual worlds technology because I believe that it shows some promise and could, therefore, become a relevant trend. Last week, I attended an event in Second Life hosted by Nokia on this topic.

This event had a question oriented talk show format in which representatives from IBM, Linden Labs, Nokia, and Remedy Communications promoted their respective company's efforts in enterprise virtual worlds.



I hope that I don't have to explain who IBM and Nokia is and why they might be interested in enterprise virtual worlds. IBM hosted their own two day conference on the subject not too long ago. Their representative at this event was Zha Ewry who is a male using a female avatar in a professional role.

Linden Labs is the company behind Second Life. They host a public grid and sell the platform to companies who want a virtual world behind the firewall.

Remedy Communications is a marketing company who specializes in developing marketing collateral in virtual worlds. They have recently become a reseller for Rivers Run Red who competes with Linden Labs in what they brand as the immersive enterprise collaboration space. Their representative at this event had an avatar named Dusan.

Someone from Sun Microsystems was supposed to be here too but never showed up. Considering their recent change in leadership, I can only assume that there was a sudden and last minute change in plans.

One of the biggest things I learned at this event is that there are now several video sites devoted to enterprise virtual worlds. Metanomics takes on an education based approach to fostering corporate appreciation for virtual worlds. Treet.tv will be launching later this summer. They have both an entertainment and a business focus and are a spin off of SLCN. All of these Internet video broadcast sites feature shows exclusively filmed in Second Life.

One of the advantages to a virtual world event is the presence of a back channel in which the attendees can comment amongst themselves while the event is taking place. The presenters get to monitor the back channel in real time. I learned in the back channel about an European conference called MetaMeets about the present and future of virtual worlds (also called the 3D web).

I go into more details on the content of this talk in my blog at the Toolbox for IT Knowledge Sharing Community.

Living in the Facebook Downline

Just ran across this NY Times article on an emerging trend in social networks where Facebook and Twitter are openly and actively encouraging third parties to consume their services and re-purpose their content. The article then covers several startups who are feeding off of this social knowledge ecosystem.

With regards to this ecosystem, what I have seen in the wild are three patterns. A lot of UGC sites now permit you to post non-anonymously via some kind of federated login system. The second pattern is publishing content in multiple places such as micro-blogs on both facebook and twitter. The third pattern is profile synchronization across multiple social networking sites.

With federated login (sometimes called single sign on), you don't have to register at every site that requires registration. Instead, you can participate on a site as a registered user by logging in to an already existing account that you have. Under the covers the system, where you have an account, shares some knowledge about you with the system you are trying to use. Both Microsoft and Sun Microsystems tried their hand at federated login over a decade ago. Both failed miserably. Today's big players at single sign on are Google, Yahoo, and Facebook. Google and Yahoo use the OpenID technology to carry this off while Facebook uses its own Facebook Connect technology.

In the second pattern, you post some content and the system provides a way for you to immediately promote your content on the various popular social networking sites. Originally, this was called Viral Marketing where the system would volunteer to spam your friends if you would let it access the address book or contact lists from your main-stream email accounts. In this iteration, you are presented with options to send facebook notifications or tweets.

The need for the third pattern has risen only very recently as people start spending a lot of time updating their profiles on all of the social networking sites that they use. This trend is still fairly recent but two examples that come to mind are Disqus and Gravatar.

As to the startups referenced in the original NY Times article mentioned in paragraph one here, I would be a little nervous in investing in these companies. After all, they use the facebook and twitter back-ends as their main entre whereas these other companies see it more as the icing on the cake. I mean, what are they going to do if Facebook ever decides to shut down their free API?

The Whuffie Factor

I just ran across this great talk at last year's Web 2.0 conference by Tara Hunt on a knowledge management blog that I frequently visit.

She talks about how the leveraging of the feeling of reciprocity and social capital and the nurturing of a gift economy in the design of your product or web site's user experience is the most efficacious way to promote your message. She calls it The Whuffie Factor which is a term inspired from a book written by Cory Doctorow called Down and Out in the Magic Kingdom.

She also contrasts this approach to traditional PR and shows how The Whuffie Factor is a logical extension to the prosumer approach of establishing authentic conversations.


The Whuffie Factor: The 5 Keys for Maxing Social Capital and Winning with Online Communities (Tara Hunt) from Steffan Antonas on Vimeo.