These are some half thought out ideas I've been considering recently...

Why is Microsoft the big and successful company is today? One reason goes back to the original vision that Bill Gates was preaching back in the day. While I couldn't find an exact quote on-line, it was something like this:

A PC in every home and on every desktop running Microsoft software.

Given their nearly complete dominance of the market for PC operating systems and office productivity software, they've come shockingly close to achieving that vision--at least in some countries.

Yesterday's Lesson

Bill realized early on that there was great power (in many forms) to be had in getting on as many desktops as possible. The resulting near monopoly has allowed them to crush competition, make record profits, and enter other lines of business as a force to be reckoned with.

As the installed base of Microsoft software grew during the late 1980s and early 1990s, their ability to extract more money from it increased even more. Their growing power and abuse of it resulted in the famous anti-trust case brought by the United States Department of Justice.

The lesson was clear: To become ubiquitous was to become insanely profitable and powerful.

In Today's World

But we live in a different time. The PC is no longer the only battleground. The Internet is the new medium and it has the effect of leveling the playing field. While this isn't a new insight, let me say it in two specific ways:

  1. The web enables infinite distribution of content without any special effort or infrastructure.
  2. The web extends the reach of our apps and services as far as we're willing to let them go.

Both notions come back to ubiquity. If your stuff (and your brand) is everywhere, you win. The money will follow. It always does.

The closer to everywhere you can reach, the better off you'll be.

Where is everywhere?

The notion of everywhere has changed too. It's not just about every desktop anymore. It's about every Internet-enabled device: cell phone, desktop, laptop, tablet, palmtop, PDA, Tivo, set-top box, game console, and so on.

Everywhere also includes being on web sites you've never seen and in media that you may not yet understand.

What to do?

So how does a company take advantage of these properties? There are three pieces to the puzzle as I see it:

  1. do something useful really really well
  2. put the user in control by allowing access to your data and services in an easy and unrestricted way
  3. share the wealth

It sounds simple, doesn't it? Unfortunately, there are very few companies who get it. Doing so requires a someone with real vision and the courage to make some very big leaps of faith. Those are rare in today's corporate leadership. Startups are more likely to have what it takes, partly because they have less to lose.

Let's briefly look at those three puzzle pieces in more concrete terms.

Kicking Ass and Taking Names

Without a killer product, you have no chance. Three companies that come to mind here are Amazon.com, Google, and eBay. Each has one primary thing they do exceptionally well--so well that many users associate the actions they represent with the companies themselves.

Need to buy a used thingy? Find it on eBay. Looking for some random bit of information? Google for it. Shopping for something? Check Amazon.com first.

The financial markets have rewarded these companies many times over for doing what they do very well. And users love them too.

Web Services and Syndication (RSS/Atom)

Giving users the ability to access your data and services on their own terms makes ubiquity possible. There are so many devices and platforms that it's really challenging to do a great job of supporting them all. There are so many web sites on which you have no presence today. By opening up your content and APIs, anyone with the right skills and tools can extend your reach.

Two good examples of this are Amazon.com and Flickr, the up and coming photo sharing community platform. Amazon.com provides web services that make it easy to access much of the data you see on their web site. With that data, it's possible to build new applications or re-use the content on your own web site. The end result is that Amazon sells more products. It also reinforces the idea of Amazon being the first place to look for product information.

Flickr provides RSS and Atom feeds for nearly every view of their site (per user, per tag, per group, etc.) and also has a simple set of APIs on which anyone can build tools for working with Flickr hosted photos. The result is that Flickr is becoming increasingly popular among early adopters and the Flickr team doesn't have to build tools for every platform or device in the world. (Of course, it helps that their service is heads and shoulder above other photo sharing services like, say, Yahoo! Photos.)

Giving users the freedom to use data and services they way they want gives them a sense of ownership and freedom that few companies offer. It helps to build some of the most loyal, passionate, and vocal supporters. And some of them will put your data to work in ways you never dreamed of.

If this stuff sounds familiar, maybe you picked up on the Web 2.0 vibe?

Affiliate Programs

The final ingredient is money. It's the ultimate motivator. If there's a way to let your users help you make more money (there probably is), you need to find it, do it, and give those users a cut of the action. Affiliate programs are one way of doing this, but not the only way.

Amazon.com has been doing this for a long time now. Their affiliate program provides an easy way to earn credit at Amazon in return for leads that result in sales. Affiliates advertise or promote products that Amazon sells and provides the referral link.

eBay provides cash if you refer a bidders to their auctions. However eBay's program hasn't resulted in the sort of huge adoption one might expect. I won't speculate on the cause of that here.

A relative newcomer, Google's AdSense program has provided thousands and thousands of small publishers with cash on a monthly basis in exchange for advertising space on their sites. Oh... and a bit of Google branding too.

Companies that do all Three

Let's briefly look at three companies that are exploiting all three of these ideas.

Amazon.com built the gold standard of on-line shopping. They followed up by providing easy to use web services that allow anyone to get at much the data on Amazon's web site. This, coupled with their affiliate program, gives them very wide distribution and a good chance at capturing the long tail of users on the Internet.

eBay's auction platform is used by millions of people every year to buy and sell anything you can think of. Their incredibly large audience has served to cement their lead in this area over the last few years. Sellers have access to an API that makes listing their goods trivial. Hopefully they'll begin to offer RSS feeds or very simple web services aimed at making their listings more accessible to the other half: buyers or small publishers who'd like to refer them. That could greatly enhance their reach into the world of users who'd be willing to pimp a few eBay auctions if they can get a percentage of the sale.

Google followed the same model too. They began by setting the new standard for how web search should look, feel, and work. With that position solidified, they rolled out a web service to provide access to their search results. They also launched their wildly successful AdSense program. The fact that Google's ads are contextually relevant without any extra effort on the part of the publisher means puts them in the lead position to monetize that long tail.

User Generated Content

I didn't list this separately as a necessary ingredient because it's really part of point #1, building a great service. However, it's worth calling it out here to reinforce its importance. As you look around the web to see which services you use over and over, it can be hard to truly appreciate the effects of user generated content.

Amazon? Sure, they have reviews and ratings of products. But look deper. There's wish lists, the recommendation engine (it would be useless without without data from others), list mania, and more.

Flickr? Users own the photos. But they also do the tagging, organize the photos, leave comments, form groups, and so on. Flickr provides the platform.

The more your service can be affected by user input, the more users are likely to come back again and get involved. This is personalization taken to the next level.

What's this all mean?

We're in the early days of all this, so there are still huge opportunities. Luckily a few companies have shown us the way--the new formula that works. But they each have room to improve.

Who will be next on the list?

Beats me. Your guess is as good as mine. But I'd like to see Yahoo on that short list by this time next year. Microsoft and AOL both have potential but I've seen little evidence from either. Apple is an interesting case. With iTunes, the iPod, and the iTunes Music Store, they've done #1 and #3 but really need to figure out how to open up their stuff. Netflix has done #1, part of #2, and none of #3 yet (that I've seen.)

In the blogging world, Google's Blogger has hit all three of the requirements. TypePad from SixApart has #1 and #2 nailed. I wonder what they'll do about #3. Maybe just AdSense integration?

In Summary

Go forth, build a great service, open it up, and share the money. The best services will win. And so will the users.

See Also:

Posted by jzawodn at November 01, 2004 06:48 AM

Reader Comments
# john said:

Good post. I think another thing for me that makes a great online app is the ability to do all that without making it look like they're trying to make money. One of the things I love about Google is that there never seems to be a point where I have to put up with something to use their great tools. Their ads integrate nicely into sites and the idea that they're in it to make money isn't the first thing I think about, unlike people such as MS whose sites full of popups and banner ads make it impossible to forget that fact.

Flickr too. I'm not entirely sure how they're model works, but I think they have a pay for version with more bandwidth? It's a great site, and for free I can upload, edit and tag pictures using tools that as a geek I look at and think "wow", and my family as non geeks can use without too much hassle. I'm sure I'll end up paying for the extra features.

Rambling on...but I love all these new sites appearing that seem to do exactly what's needed.

on November 1, 2004 07:49 AM
# IEqualCrap said:

How does Ebay conform to your second point "open it up"??? Like MLS, Ebay's reward has followed from strict control of a closed sequence of network elements. Same for iTunes.

I would offer that "opening it up" is a great way for a #2 to destabilize a #1, but not a great way for a #1 to keep its margins.

on November 1, 2004 08:54 AM
# Jeremy Zawodny said:

eBay has opened things up to their sellers, just not their buyers yet. They're part way there but farther along that most others.

on November 1, 2004 11:37 AM
# Sadagopan said:

Extremely well written - have capturred all the essentials for the new gen enteprises and related ideas to implementation quite well - how about a succession piece with some data about the volumes acheived by the winning companies against the ideas and how much time thay have taken to cross the threshold - some insights may be hidden there as well.

on November 1, 2004 01:16 PM
# Ubaldo said:

In a world of data data openness plus api to access the data., how do you prevent competitors from appropriating your data, especially in places outside the ba, where terms of services arenít even read?

For example, I run (wrote the code) while idle here in Barcelona for a site very much similar in spirit and style of bayareaís famous cl. Itís called http://www.loquo.com (sorry for the plug) Now that it has a small but growing user base, I want to open up the data, provide rss for the listing categories, etc. Soon Iíll change the license to CC, to encourage data pollination hoping to get a greater mind share.

But, as it is today, without RSS and a typical copyright license, competitors copy data from loquo liberally, for their own benefit. So what would it happen when full RSS feeds are provided (with contact info, etc)? I donít even want to see. Should I just provide a partial feed, or a feed with no contact info so they always have to come back to loquo? That seems silly, and defeats the point of fostering creative uses of the data.

My point is that all the cases of openness that I see so far are very calculated moves. Take one of your prime examples, ebay: what happens to the reputation data, is it transferable? Who owns it?

on November 1, 2004 02:11 PM
# IEqualCrap said:

more comments:

there is no mention of time to market
there is no mention of barriers to entry
there is no mention of market inertia
there is no mention of brand-affinity

jeremy do you not think you are oversimplifying things? a very large wave makes all of the surfers look good. lets see how many of these firms fare next time there is a red tide. google for example will feel a hit when ad dollars inevitably take a breather, and you will once again here calls for "diversification of revenue" against an ad dollar drought. tech alone can't save these firms - i give you PARC and Bell Labs for two famous counterexamples. i give the best odds to ebay, for once again having a closed network.

on November 1, 2004 03:06 PM
# Stephen Mayer said:

Excellent post! Extensionable tools and API's to a site make an interface more useful in the long run. A company could be built on this philosophy ... and perhaps I'll go and do just that.

I do want toa dd that I believe that many companies shy away from this philosophy because it moves the data (gold in some of their eyes) without moving ability to control the data and the revenue the data generates. But I agree that being everywhere is the wave of the future and can only help you in the end ... just like the link I'm about to add from my Blog to this article ... Cheers!

on November 1, 2004 10:33 PM
# justin said:

open up yahoo finance
open up yahoo finance
open up yahoo finance
breath in...
repeat mantra..... and begin again
open up yahoo finance
.....

on November 2, 2004 01:43 AM
# justin said:

way hey!!! Dunno if anyone has noticed this, but if you hit yahoo.com with Konqueror, you automatically get focus in the web search bar, rather than having to click into it before typing...

i.e. now you can go to yahoo.com, type search string, hit return.

cool! thanks Jeremy!

on November 2, 2004 04:09 AM
# Mike said:

Thanks for the link! There is no doubt the path Flickr and others are taking by opening up their data is the correct one!

on November 2, 2004 08:07 AM
# Ram said:

I heard Eric Schmidt say during an interview that Google mindset is such that, they don't work on a project to a monetize it. But, rather the later part, after the product in itself turned to be useful and popular. Their extended beta phase gives them an invisible competitive edge that neither Yahoo or M$ understands.

Also no one understands the elements of "suprise" marketing better than Google.

>>Our two chief competitive advantages are surprise, innovation and an almost fanatical devotion to our users. Well, you get the idea.

From: http://www.google.com/corporate/history.html

It's right out there, and when was the last you were geninuely suprised by Yahoo or Amazon or Ebay?

on November 2, 2004 11:02 AM
# Justin Mason said:

Great article! I'll be forwarding that, I think.

BTW, one aspect that you may be omitting, is that it can be used as a tactic *against* Microsoft.

You can be sure that MS has the closed-closed source case wrapped up, but they'll never open their source, their APIs, or their wealth, enough to be useful. They're inherently a company with an "all mine!" mindset. As such, it's interesting how this relates to open source, too. The "openness" anti-MS tactic was pioneered by Netscape with Mozilla, after all...

on November 2, 2004 11:20 AM
# phil jones said:
on November 2, 2004 05:44 PM
# Dave said:

It looks like Six Apart has addressed #3 by agreeing to partner with Kanoodle, allowing TypePad users to include "content-targeted sponsored links" on their weblogs. Go to http://battellemedia.com/archives/001019.php for more details.

on November 9, 2004 01:31 PM
# Jason wallace said:

well i totally agree with the author of the post that marketing is getting crsuhed b'coz of those spammers .

on July 7, 2008 01:24 AM
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