The sad (but respectable) demise of Microsoft Spot

Microsoft announced last week that it's discontinuing its Spot data watch program.

The trouble with predicting the future is that it's always easy to do in retrospect. Looking back, it's obvious that Microsoft's Spot products were a dumb idea. The concept was that Microsoft would send small bits of wireless data -- weather forecasts, stock prices, etc -- to specially-equipped watches and other small devices like refrigerator magnets, which would display the information. On the face of that, it sounds kind of appealing. There are definitely people who want information like that when they're on the go, and Microsoft had a clever plan to use some unused FM radio bandwidth to deliver the information to the devices. You'd use your PC to pick which data feeds you wanted, and Microsoft would take care of blasting it onto your watch or other device.

The problem, of course, is mobile phones. Five years ago, when Spot was announced, the handset vendors and operators were already getting hot on delivering small bits of data to mobile phones. The market for Spot, rather than being everyone who wanted data on the go, turned out to be everyone who wanted data on the go who didn't carry a mobile phone.

In other words, almost no one.

Like I said, it's easy to point out that problem in retrospect. But Spot was probably in development for a couple of years before it was announced, meaning it was probably started in about 2001 -- before the real rise of wireless data in the US. I think someone who was paying close attention to the mobile market could have predicted Spot's troubles. But it was much less obvious then than it is now.

Once you as a manager put people on a project and spent some money on it, it's very easy to talk yourself into ignoring emerging signs that the product might fail. You want the thing to succeed, so you have an incentive to rationalize away any concerns. Besides, business history is full of stories about products that succeeded despite adversity and critics. How can you tell the difference between a "normal" pothole in the road, and an impassable rift?


Lessons from Spot's demise

In the early 1990s, a number of companies developed specialized wireless modems and private wireless services for delivering data to personal computers. Internet connectivity at the time meant slow dial-up connections for most people, which could not be left active at all times. The idea of blasting data to PCs in real time seemed very attractive, and indeed the products sold well for a few years -- until Internet connections became faster and didn't require dialing out on a phone. Spot ran into the same basic process in the mobile space.

So one lesson is that when you're potentially competing with other sorts of networks is to look very carefully at where they'll be in three or four years.

How to manage convergence. It's very hard to predict how "convergence" will affect a product category. Fifteen years ago many people thought it was obvious that printers would soon be built into every PC, but it never happened. Convergence seems to happen only when there is absolutely no downside to it. So you can combine a printer and scanner -- or a mobile phone and a Spot watch -- because there is no loss of functionality in the resulting product. But put a printer in a PC and you have to sacrifice too many things (or the PC gets too darned big).

Because a mobile phone has a larger screen than a watch, it's actually a better data device than a watch. That should have alerted Microsoft to the danger.

Solve real problems. I've mentioned this before, but it's worth repeating: Products have a much better chance of succeeding when they solve major problems for customers. Spot was cool and convenient, not life-changing. That made it much easier to absorb into some other product.


Microsoft often gets criticized by people in the tech industry for failing to innovate. According to this perspective, all Microsoft does is copy things that others have already proven. But initiatives like Spot are an exception to that rule. I wish Microsoft had chosen its battle a bit more carefully, but I respect that fact that it tried. I wish it would take more chances like this, rather than just focusing on ways to imitate the iPod and copy Google's advertising business.

Some other commentary on Spot:
An early discussion of the technology, from InfoWorld (link)
Engadget's article (link)
Watches vs. mobile phones (link)
Enthusiastic review in 2004 of the Tissot $750(!) Spot watch (link)
An obituary in 2006 for the discontinued Tissot Spot watch (link)

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By the way, I apologize for being away from the blog for so long. Family and work issues have to be my top priority, and the blog is in line after that.

Written by Prathik on April 28th, 2008 with no comments.
Read more articles on Microsoft and convergence and mobile data.

Mobile applications, RIP

Summary: The business of making native apps for mobile devices is dying, crushed by a fragmented market and restrictive business practices. The problems are so bad that the mobile web, despite its many technical drawbacks, is now a better way to deliver new functionality to mobiles. I think this will drive a rapid rise in mobile web development, largely replacing the mobile app business. This has huge implications for mobile operators, handset companies, developers, and users.


The decline of the mobile software industry

Mobile computing is different from PC computing.

For the last decade, that has been the fundamental rule of the mobile data industry. It was the central insight of Palm Computing's "Zen of Palm" philosophy. Psion came up with similar ideas, and you can hear echoes of them from every other successful mobile computing firm: Mobile computers are used differently from PCs, and therefore must be designed differently.

We all assumed this also meant mobile devices needed a whole mobile-specific software stack, including an operating system and APIs designed specifically for mobility, and native third-party applications created from the ground up for mobile usage.

That's what we all believe, but I'm starting to think we got it wrong.

Back in 1999 when I joined Palm, it seemed we had the whole mobile ecosystem nailed. The market was literally exploding, with the installed base of devices doubling every year, and an incredible range of creative and useful software popping up all over. In a 22-month period, the number of registered Palm developers increased from 3,000 to over 130,000. The PalmSource conference was swamped, with people spilling out into the halls, and David Pogue took center stage at the close of the conference to tell us how brilliant we all were.

It felt like we were at the leading edge of a revolution, but in hindsight it was more like the high water mark of a flash flood. In the years that followed, the energy and momentum gradually drained out of the mobile applications market.

The problem wasn't just limited to Palm; the level of developer activity and creativity that we saw in the glory days of Palm OS hasn't reappeared on any mobile platform since. In fact, as the market shifted from handhelds to smartphones, the situation for mobile app developers has become substantially worse.

That came home to me very forcefully a few days ago, when I got a call from Elia Freedman. Elia is CEO of Infinity Softworks, which makes vertical market software for mobile devices (tasks like real estate valuation and financial services). He was one of the leaders of the Palm software market, with a ten year history in mobile applications.

I eventually moved on from Palm, and Elia branched out into other platforms such as Blackberry. But we've kept in touch, and so he called recently to tell me that he had given up on his mobile applications business.

Elia gave me a long explanation of why. I can't reproduce it word for word (I couldn't write that fast), but I've summarized it with his permission here:

Two problems have caused a decline the mobile apps business over the last few years. First, the business has become tougher technologically. Second, marketing and sales have also become harder.

From the technical perspective, there are a couple of big issues. One is the proliferation of operating systems. Back in the late 1990s there were two platforms we had to worry about, Pocket PC and Palm OS. Symbian was there too, but it was in Europe and few people here were paying attention. Now there are at least ten platforms. Microsoft alone has several -- two versions of Windows Mobile, Tablet PC, and so on. [Elia didn't mention it, but the fragmentation of Java makes this situation even worse.]

I call it three million platforms with a hundred users each (link).

The second technical issue is certification. The walls are being formed around devices in ways they never were before. Now I have to certify with both the OS and with each carrier, and it costs me thousands of dollars. So my costs are through the roof. On top of that, the adoption rate of mobile applications has gone down. So I have to pay more to sell less.

Then there's marketing. Here too there are two issues. The first is vertical marketing. Few mobile devices align with verticals, which makes it hard for a vertical application developer like us to partner with any particular device. For example, Palm even at its height had no more than 20% of real estate agents. To cover our development costs on 20% of target customer base, I had to charge more than the customers could pay. So I was forced to make my application work on more platforms, which pushed me back into the million platforms problem.

The other marketing problem is the disappearance of horizontal distribution. You used to have some resellers and free software sites on the web that promoted mobile shareware and commercial products at low or no charge. You could also work through the hardware vendors to get to customers. We were masters of this; at one point we were bundled on 85% of mobile computing devices. We had retail distribution too.

None of those avenues are available any more. Retail has gone away. The online resellers have gone from taking 20% of our revenue to taking 50-70%. The other day I went looking for the freeware sites where we used to promote, and they have disappeared. Hardware bundling has ended because carriers took that over and made it impossible for us to get on the device. Palm used to have a bonus CD and a flyer that they put in the box, where we could get promoted. The carriers shut down both of those. They do not care about vertical apps. It feels like they don't want any apps at all.

You can read more of Elia's commentary on his weblog (link).

Add it all up, and Elia can't make money in mobile applications any more. As he told me, "Mike, it's time for you to write the obituary for mobile apps." More on that later.

Although it's a very sad situation, if Elia's experience were an isolated story I'd probably just chalk it up to bad luck on the part of a single developer. But it mirrors what I've been hearing from a lot of mobile app developers on a lot of different operating systems for some time now. The combination of splintering platforms, shrinking distribution channels, and rising costs is making it harder and harder for a mobile application developer to succeed. Rather than getting better, the situation is getting worse.

I've always had faith that eventually we would solve these problems. We'd get the right OS vendor paired with a handset maker who understood the situation and an operator who was willing to give up some control, and a mobile platform would take off again. Maybe not Palm OS, but on somebody's platform we'd get it all right.

I don't believe that any more. I think it's too late.


The mistake we made

We told ourselves that the fundamental rule of our business was: Mobile is different. But we lost sight of an even more fundamental law that applies to any computing platform:

A platform that is technically flawed but has a good business model will always beat a platform that is elegant but has a poor business model.

Windows is the best example of inelegant tech paired with the right business model, but it has happened over and over again in the history of the tech world.

In the mobile world, what have we done? We created a series of elegant technology platforms optimized just for mobile computing. We figured out how to extend battery life, start up the system instantly, conserve precious wireless bandwidth, synchronize to computers all over the planet, and optimize the display of data on a tiny screen.

But we never figured out how to help developers make money. In fact, we paired our elegant platforms with a developer business model so deeply broken that it would take many years, and enormous political battles throughout the industry, to fix it -- if it can ever be fixed at all.

Meanwhile, there is now an alternative platform for mobile developers. It's horribly flawed technically, not at all optimized for mobile usage, and in fact was designed for a completely different form of computing. It would be hard to create a computing architecture more inappropriate for use over a cellular data network. But it has a business model that sweeps away all of the barriers in the mobile market. Mobile developers are starting to switch to it, a trickle that is soon going to grow. And this time I think the flash flood will last.

If you haven't figured it out yet, I'm talking about the Web. I think Web applications are going to destroy most native app development for mobiles. Not because the Web is a better technology for mobile, but because it has a better business model.

Think about it: If you're creating a website, you don't have to get permission from a carrier. You don't have to get anything certified by anyone. You don't have to beg for placement on the deck, and you don't have to pay half your revenue to a reseller. In fact, the operator, handset vendor, and OS vendor probably won't even be aware that you exist. It'll just be you and the user, communicating directly.

Until recently, a couple of barriers prevented this from working. The first was the absence of flat-rate data plans. They have been around for a while in the US, but in Europe they are only now appearing. Before flat-rate, users were very fearful of exploring the mobile web because they risked ending up with a thousand-Euro mobile bill. That fear is now receding. The second barrier was the extremely bad quality of mobile browsers. Many of them still stink, but the high quality of Apple's iPhone browser, coupled with Nokia's licensing of WebKit, points to a future in which most mobile browsers will be reasonably feature-complete. The market will force this -- mobile companies how have to ship a full browser in order to keep up with Apple, and operators have to give full access to it.

There are still huge problems with web apps on mobile, of course. Mobile web apps don't work when you're out of coverage, they're slow due to network latency, and they do not make efficient use of the wireless network. But I believe it will be easier to resolve or live with these technical drawbacks in the next few years than it will be to fix the fundamental structural and business problems in the native mobile app market.

In other words, app development on the mobile web sucks less than the alternative.

Here's a chart to help explain the situation. Imagine that we're giving a numerical score to a platform, rating its attractiveness to developers. Attractiveness is defined as the technical elegance of the platform multiplied by how easy it is for developers to make money from it. The attractiveness score for native mobile app development looks like this over time:



This is why mobile app developers are in trouble. Even though the base of smartphones has been growing, and the platforms themselves have become more powerful, the market barriers have been growing even faster. So attractiveness has been dropping.

Now add in mobile web development:



Based on what I'm hearing from mobile developers, the lines just crossed. The business advantages of mobile web development outweigh its technical limitations. More importantly, if you look at where the lines are going, the advantage of mobile web is going to grow rapidly in the future.

I'm not saying all native mobile development is dead. In fact, we're about to see the release of Apple's native development tools for the iPhone, and as Chris Dunphy just pointed out to me, they are sure to result in a surge of native development for that platform. But I think even a rapidly-growing base of iPhones can't compare to the weight of the whole mobile phone market getting onto a consistent base of browsers.


What it all means

If you're a mobile developer, you should consider stopping native app development and shifting to a mobile-optimized website. That's what Elia did, and he said it's amazing how much easier it is to get things done. Even mobile game developers, who you'd think would be the last to abandon native development, are looking at web distribution (link; thanks to Mike Rowehl for pointing it out).

See if you can create a dumbed-down version of your application that will run over the mobile web. If the answer is yes, do it. If the answer is no, try to figure out what technology changes would let you move to the web, and watch for those changes to happen.

There are exceptions to any rule, and I think it makes sense to keep doing native development if your app can't work effectively over the web, and it's a vertical application so popular that you can get about $50 or more in revenue per copy. In that situation, you probably have enough resources to stay native for the time being. But even you should be monitoring the situation to see when you can switch to the web, because it will cut your expenses.

If you're a mobile customer, make sure your next smartphone has a fully functional browser that can display standard web pages. And get the best deal you can on a flat-rate data plan; you'll need it.

If you're an operator or a handset vendor, get used to life as a dumb pipe. By trying to control your customers and make sure you extract most of the revenue from mobile data, all you've done is drive developers to the Web, which is even harder to control. You could have had a middle ground in which you and mobile developers worked together to share the profits, but instead you've handed the game to the Google crowd.

Congratulations.


Oh, about that obituary...

In loving memory of the mobile applications business. Adoring child of Java, Psion, Palm OS and Windows Mobile; doting parent of Symbian, Access Linux Platform, and S60; constant companion of Handango and Motricity. Scared the crap out of Microsoft in 2000. Passed away from strangulation at the hands of the mobile industry in 2008. Awaiting resurrection as a web service in 2009. In lieu of flowers, the family asks that you make a donation to the Yahoo takeover defense fund.

Written by Prathik on February 24th, 2008 with no comments.
Read more articles on Applications and Developers and OS and Symbian and Windows Mobile and iPhone and internet and mobile data and platforms and web apps.

Questions about Verizon’s new “open” attitude

More than half of the traffic to this weblog comes from outside the US, so there are times when I feel obligated (and a little embarrassed) to explain how the mobile market works here. This is one of those moments.

Verizon, the largest US mobile carrier, made headlines in the US today by announcing that by the end of 2008 it's going to make its network available to any device and any application that the user chooses to install (link).

This will seem remarkable to people living in GSM countries where it's normal to choose any device you want. But in the US, it's an unusual idea. Here mobile usage is split between GSM and CDMA. GSM phones have SIM cards, which technically allow you to switch your account to any phone you want. But in practice, almost no users are willing to give up the several hundred dollar subsidy for buying a phone and service plan together, so they only choose phones that come through the operator.

Things are even more restrictive in the CDMA space, where there are no SIM cards. If you buy a Verizon phone, it can only be used with a Verizon account. Same thing for Sprint.

So Verizon's announcement is a nice change, on the face of it. It's also something of a pleasant shock, since Verizon has the reputation of being the most conservative and controlling US operator. But the announcement's actual impact on the market is going to depend on several questions that Verizon hasn't answered yet:

--How will open access be implemented? Verizon says it's going to define a process by which phones can be certified to work on its network. That could be routine or it could turn into a huge barrier to entry. We also don't know how a user's account will be switched between phones. Is Verizon planning to start installing SIM cards in its phones (something that has been done with CDMA in China)? If not, will you have to take the phone to a Verizon store to get it activated? How much will that cost?

Verizon apparently said something about doing activation through a toll-free number, which could be cool.

--How will the service be priced? Verizon's service plans include recovery of the several hundred dollar subsidy for hardware. You pay for the subsidy as part of your monthly bill. Since Verizon doesn't have to recover a subsidy cost on its open access phones, there's about $10 or more a month that it could pass along to consumers in the form of lower bills.

If Verizon doesn't price the open service lower, what happens to the extra money? Does Verizon pocket it? Or will they offer some sort of rebate on purchase of open access phones?

The answer to this one is critical. The US GSM carriers are technically open, but the subsidy prevents significant sales of alternate phones. If Verizon pockets the subsidy money, very few people will take advantage of the open service. The whole thing could turn out to be a PR gesture rather than a genuine change.

But in the hope that Verizon wants it to be more, here's what they ought to do:

--Make the monthly cost of the open plan lower than a traditional service plan, reflecting the absence of a subsidy.
--Make the handset certification process simple and low cost.
--Make it easy for users to switch their account to a new phone (preferably via a SIM card or website or that 800 number, so they don't have to come to a store).

That's an announcement I'd stand up and cheer for.


Impact on the industry

Until we hear the answers to the questions above, it's impossible to guess how impactful this announcement will be. The most important factor may be how the other US operators react. The best result would be if they start competing with each other to see who can make their network more open. If that dynamic takes hold, competitive forces might drive them to really open up even if they don't intend to.

Written by Prathik on November 28th, 2007 with no comments.
Read more articles on Verizon and mobile and mobile data and operators.