In a recent interview, Wozniak basically agrees with my assessment in an earlier blog that the Android vs iOS market dominance struggle playing out in front of us today is a replay of yesterday’s PC/Mac wars.
App Stores and the new business model
MacRumors has a good article how the “freemium” business model is becoming more popular among iPhone app developers.
The “freemium” model is where a basic version of a software or service is available for free. A version with more features is available as a paid product or service. Wikipedia has a more complete description here. This model is not a new concept. Shareware has been around for awhile and a lot of shareware developers use the “freemium” model.
With the advent of the Apple app store and other similar mass market, easy-to-use application market places (Android Market etc), the “freemium” model has become more important.
Part of this is due to the price of software. When the first PCs appeared, off-the-shelf software cost hundreds of dollars. Today, the most popular non-free apps on the Apple App Store cost 99 cents. Users can also choose to view only the free apps.
This means that to generate reasonable profits, the volume of users is more important than ever. To generate this volume, the barrier to a user trying out the app has to be as low as possible. Today’s app stores take the technical barrier out of the way: you don’t have to be a genius to install software from the Apple App Store. The only other significant barrier to adoption is the price. Hence, the importance of making a free version available.
The challenge for the product manager, when considering the “freemium” model, is how to determine what features/functionality goes into the free version and what goes into the paid version. On one hand, you want the free version of your product to be sufficiently useful and attractive and consumers will actually want to use it. On the other hand, you want the paid version to be sufficiently differentiated so that some (hopefully large) subset of the users will actually want to pay more for the additional functionality. Considering that it is already difficult, from a time and resource point of view, to create a single, compelling product, here you have to create not one, but two compelling products!
There are also challenges, from the engineering standpoint, in terms of creating a migration or upgrade path from the free to the paid version: whether the user simply “unlocks” the new features with a serial number or an installation of a new version of the product is necessary.
Challenges notwithstanding, the “freemium” model may be the best approach. The MacRumors article concludes by saying that app developers are finding that the “freemium” model is more lucrative than other monetization strategies like advertising.
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Android and the future of software
The Register had an article about how Microsoft is trying to hold back the open source tide by levying royalty payments on Acer and Asustek for their use of Android.
The article also talks about how Microsoft is failing to come out with a business model to compete against open source projects/products like Android.
I think though, that the question is not really one of open source versus proprietary or closed source.
The real Microsoft vs Android question is what is today’s new business model?
Is it one whether the software product itself is the end to itself? Or whether it is a means to an end? Whether or not the product uses open source is irrelevant.
For traditional Microsoft products (Windows, Office etc), the software is the end. Microsoft gets its revenue at the point of purchase of the software.
For Android, the software is the means to the end. Google does not get meaningful revenue when you buy an Android device. Rather, Google gets its cut when you use the device.
This difference reflects the economics of the new millenium: the product itself is no longer the major part of the business model. It is only a means to executing on the business model.
With the old approach, the consumer lifetime value is limited. Once the product is sold, there is no additional revenue. That is why companies like Microsoft come up with frequent and sometimes useless version upgrades: to get additional revenue from existing users. A subscription model is a variation of this.
With the new approach, the consumer lifetime value is practically limitless. As long as the consumer is using the product, she is generating revenue for the company. Since the product is basically “free”, there is almost no barrier to user upgrades and continued usage.
As a product manager, this new approach presents its challenges. You can no longer just focus on the product itself. The latter is now part of a larger ecosystem: the business/revenue model. This will mean integration with other services and products.
On one hand, you have to make sure that your product is usable, that consumers want to use it. On the other hand, you also have to make sure that the product is sufficiently well integrated with your company’s monetization products and that the users will use your product in such a way that they will generate meaningful revenue.
The upside is that the revenue potential is enormous. Just look at Google.
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T-Mobile G2
I am a long time T-Mobile subscriber and was able to sign up to pre-order the G2.
Unfortunately, probably because I am not eligible for an upgrade, I was unable to actually pre-order the G2 until the day before it was released in the stores. Other T-Mobile customers were able to pre-order a week in advance.
If you have not been able to follow the frenetic pace of releases of new Android devices, the G2 is one of T-Mobile’s latest Android phones. It is a Google-experience device. This means that it has an almost stock version of Android 2.2 (aka Froyo). Other devices like the Samsung Galaxy S or the various Droids, are built with custom graphical user interfaces e.g. HTC’s Sense UI.
Unboxing: The few photos below show the unboxing of my G2. I bought it at a Radioshack store for a $50 markup over the T-Mobile price. Ouch!
Box view
Another box view
The phone in the box
View of the phone
Accessories: AC adaptor, USB cable, headset
Battery, battery cover...
I upgraded to the G2 from a MyTouch Slide. I like the available of a physical keyboard. It allows me to enter text faster and with fewer errors. An onscreen, touch keyboard is also available for occasions where I am using the device in portrait mode.
The pics below so the differences in size between the Slide and the G2.
Left: G2, Right: MyTouch Slide
The G2 is slightly thinner
With the keyboards out, the G2 is definitely thinner
Again, overall, the G2 is smaller than the Slide
The other big deal about the G2 is that it is HSPA+ capable. HSPA+ is T-Mobile’s 4G-ish network and is meant to compete against Sprint’s WiMAX-based 4G and (in the future) Verizon’s LTE.
On the MyTouch Slide, you get a little 3G symbol when you are using the HSPA network and an E symbol when only EDGE is available. On the G2, you get an H symbol (see picture) when HSPA is available.
H symbol -> HSPA
I installed the SpeedTest app to test the network connection speed.
HSPA+ is supposed to be available in the San Francisco Bay Area/Silicon Valley, but where I work and live, I was only able to get download speeds of less than 1Mbps. Ouch.
The only place where I was able to get the advertised HSPA+ speed was while sitting outside the Borders bookstore in download Palo Alto/University Avenue. There, I got something like 4Mbps download, even faster than my home DSL!
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