Why Web OS Really Failed, and What it Means for the Rest of Us

The New York Times has an interesting article this week explaining why HP's adventure with Palm failed.  The latest explanation is that Web OS just wasn't ready for prime time, according to Paul Mercer, who was senior director of software at Palm (link).

Paul's an extremely bright software guy.  It's unusual for someone with his seniority to go on the record with criticisms of his former product, and I applaud him for it because it helps us all learn.  If Paul says Web OS was unready, I'm sure it was.  But respectfully, I don't think that's why Web OS failed. I think the company's business strategy was fundamentally flawed, in ways that would have almost certainly doomed Web OS no matter how it was built.

The point is important because other companies planning similar products might take away the wrong lesson from Palm's demise.  (For example, Information Week concludes that it's too hard for any startup to play in the mobile device market [link]; MIT Technology Review says the lesson is that you have to retain key employees [link].)  To explain what the right lesson is, I need to give you a little background on the dynamics of creating a new operating system.


New operating systems always suck

Sorry for my language, but sometimes it's best to be blunt.  An operating system is an incredibly complex piece of software, just about the most complex software you can write.  In the first version of an OS, the list of features you want to add is always much longer than what you can implement, there are always bugs you can't find, and performance is always a problem.  What's worse, there is a built-in tension between those three problems -- the more features you add, the more bugs you create.  The more time you spend fixing bugs, the less time you have to improve performance.  And so on.  As a result, every new operating system, without exception, is an embarrassing set of compromises that frustrates its creators and does not deliver on the full promise of its vision. 

Remember these beauties?

--The original Macintosh can't create a word processing document longer than 10 pages.

--The original version of Windows can't display overlapping windows.

--The original iPhone doesn't allow third-party native apps, and lacks 3G and MMS support.

The operating systems that succeed are the ones that survive long enough for their big flaws to be fixed.  That happens if the OS's supporter has a deep, multi-version commitment to it (Windows) or if the OS does something else so compelling that customers are willing to buy it despite its flaws (graphics on the Mac).  Your chances are best if you have both patience and differentiation.


Palm's problem: Lack of a compelling advantage

The Palm Pre and HP TouchPad had neither advantage.  Palm was not rich enough and HP was not patient enough to keep investing after the first versions showed a lot of flaws.  And more importantly, there was nothing compelling enough about either product to make people buy it despite those flaws.

Think about it, what was the one special thing Web OS devices could do that absolutely compelled you to go out and buy them?  And don't say "multitasking;" I'm talking about a genuine, easily explained benefit that would appeal to normal people, not technophiles.

I wrote about this problem back in 2010 when the Palm put itself up for sale (link).  To recap: you don't run TV ads featuring a Borg hive queen if you have something compelling to say about your product (link).

Hi, I'm here because the ad agency couldn't figure out anything concrete to say

Contrast those ads to Apple's current iPhone ads in the US, which are basically a 30-second demo of Siri (link).


The original Palm OS succeeded because it made a great appliance for managing your calendar and address book.  That jump-started the market, and all the additional stuff empowered by the OS came later.

iPhone succeeded, in my opinion, because it was the first device to make PC-style browsing work well on a smartphone.  That killer feature bought Apple the time and market credibility it needed to enable native apps, fix the phone's problems, and add a raft of additional features that fleshed out the product vision.

Android succeeded (in part) because Apple stupidly left a void in the marketplace that Google could fill.  In the wake of Steve Jobs' death, there has been a lot of well-deserved praise online for the brilliant decisions he made.  But I think one of Steve's biggest mistakes ever was the decision to wed Apple exclusively to AT&T in the US for multiple years.  That forced Verizon to find an iPhone competitor and market it aggressively.  Verizon's choices were Windows Mobile (unpopular with customers, and a vendor with a history of shafting its partners), Nokia/Symbian (unpopular in the US, and a vendor with a history of shafting operators), or Google (sexy web brand, believed at the time to be open and non-controlling).  People outside the US don't realize this, but in the US Verizon was the main marketing muscle behind the success of Android.  It forced the product into the market and kept pushing for a long time, giving Google the time it needed to improve Android and get it past the crucial first release.

The Pre and TouchPad had no patient sugar daddy.  And they had no breakthrough feature that would compel people to buy the first versions despite their inevitable flaws.  I think Palm's product strategy was broken, and so Web OS was probably doomed no matter how well it was implemented.


The lesson: Who's your daddy, and what's your killer feature?

Two companies are working on new mobile platforms scheduled to ship in 2012:  Nokia's next-generation Windows phones, and RIM's BlackBerry 10.  In both cases, the press has been focusing on their development schedules.  The schedules are very important, of course.  But the real questions to ask are:

1. Do they have the financial backing to complete versions 2 and 3, which will be needed to fix the inevitable flaws in version 1? and

2. Will the products do anything unique and compelling that will cause at least some customers to prefer them even if they have other drawbacks?

I think Nokia can probably say yes to question 1; RIM is in doubt.  And as far as I can tell, neither vendor has even started to address question 2.  If they don't, in a year or two we'll probably be doing more post-mortems.

A New Survey on Information Management

I'd like to interrupt the usual programming here to ask you a favor.

The startup I'm working on will ship its first product in 2012.  As part of our development, we'd like to get some data on how people are affected by information overload.  We hope our product will help with that problem, but we need to understand better how people feel about the problem and what they're doing about it today.  So we're doing a survey.

I think that you, the folks who read Mobile Opportunity, are a very good cross-section of technology users, so I'd like to ask you to take the survey.  I know you have much better things to do with your time than fill out a survey, but we could really use your help.  It'll take about ten minutes, and it's almost all multiple choice.  I'll share the results here, so you can learn more about your fellow readers and how you compare to them.

To go to the survey, click here.  Note: The survey is now closed.  You can read about the results here.

Once our company gets closer to launching, I will start up a separate weblog to talk about the product.  I'll also keep on writing Mobile Opportunity, with its current focus.

Thanks in advance for your help.  I really appreciate it.  And I'll have a new post for you next week.  It's a pretty long one that I've been working on for a while.

Lessons From the Failure of Flash: Greed Kills

Adobe's decision to stop development of mobile Flash has deservedly gotten a lot of attention online.  It's a sad story for Adobe and Flash developers: a dominating standard on the PC web failed to get traction in mobile, and will now be abandoned gradually in favor of HTML 5.  But the story's not limited to mobile -- without a mobile growth path, I think Flash itself is destined to become a dwindling legacy standard everywhere (link).  I think the whole Flash business edifice is coming down.

How did Flash go from leader to loser?  There are a lot of explanations being floated online. Erica Ogg at GigaOm has a good list (link):

--Mobile flash didn't work very well
--It was opposed by powerful people like Steve Jobs
--It was out-competed by HTML 5

(And by the way, how in the world do you get out-competed by something as slow-moving as HTML 5?)

I agree with Erica, but it's more a list of symptoms than root causes.  It's like saying an airplane crashed because the wings fell off.  Yes, that's true, but why did the wings fall off?  If you look for root causes of the Flash failure, I think they go back many years to a fundamental misreading of the mobile market, and to short-term revenue goals that were more important than long-term strategy at both Macromedia and Adobe.

In other words, Flash didn't just die.  It was managed into oblivion.

The story of Flash is a great cautionary tale for companies that want to create and control software platforms, so it's worth looking at more closely.


A quick, oversimplified history of Flash

In the software world, there is an inherent conflict between setting a broad standard and making money.  If you have good software technology and you're willing to give it away, you can get people to adopt it very broadly, but you will go broke in the process.  On the other hand, if you charge money for your technology, you can stay in business, but it's very hard to get it broadly adopted as a standard because people don't want to lock themselves into paying you.

Clever software companies have long realized that you can work around this conflict by giving away one technology to make it a standard, and then charging for something else related to it.  For example, many open source software companies give away their core product, but charge for hosting and support and other services.  Android is another example -- it's a free operating system for mobile phone manufacturers, but if you use it in your phone Google also tries to coerce you into bundling its services, which extract revenue from your customers. 

In the case of Flash, the player software was given away for free on the web, and Macromedia (the owner of Flash at the time) made its money by selling Flash content development tools.  The free Flash player eventually took on two roles on the web: it was the preferred way to create artistically-sophisticated web content, including an active subculture of online gaming, and it became one of the most popular ways to play video.  Flash reached a point of critical mass where most people felt they just had to have the player installed in their browser.  It became a de facto standard on the web.

Enter Japan Inc., carrying cash.  The rise of mobile devices changed the situation for Flash.  Long before today's smartphones, with their sophisticated web browsers, Japan was the center of mobile phone innovation, and the dominant player there was NTT DoCoMo, with its proprietary iMode phone platform.  The folks at DoCoMo wanted to create more compelling multimedia experiences for their iMode phones, and so in early 2003 they licensed Macromedia's Flash Lite, the mobile version of Flash, for inclusion in iMode phones (link).

The deal was a breakthrough for Macromedia.  Instead of giving away the flash client, the way it had on the PC, Macromedia could charge for the client, have it forced into the hands of every user, and continue to also make money selling development tools.  The company had found a way to have its cake and eat it too!  In late 2004, the iMode deal was extended worldwide (link), and I'm sure Macromedia had visions of global domination.

Unfortunately for Flash, Japan is a unique phone market, and DoCoMo is a unique operator.  The DoCoMo deal could not be duplicated on most phone platforms other than iMode.  Macromedia, and later Adobe, was now trapped by its own success.  To make Flash Lite a standard in mobile, it would have needed to give away the player, undercutting its lucrative DoCoMo deal.  When you have a whole business unit focused on making money from licensing the player, giving it away would mean missing revenue projections and laying off a lot of people.  Macromedia chose the revenue, and Flash Lite never became a mobile standard.

Without fully realizing it, Macromedia had undermined the business model for Flash itself. The more popular mobile became, the weaker Flash would be.

Enter the modern smartphone.  Jump forward to 2007, when the iPhone and other modern smartphones made full mobile web browsing practical.  Adobe, by now the owner of Flash, was completely unprepared to respond.  Even if it started giving away Flash Lite, the player had been designed for limited-function feature phones and could not duplicate the full PC Flash experience.  Meanwhile, the full Flash player had been designed for PCs; it was too fat to run well on a smartphone.  So the full web had moved to a place where Adobe could not follow.  The ubiquity of the Flash standard was broken by Adobe itself.

To make things worse, Adobe was by then in the midst of a strategy to upgrade Flash into a full programming layer for mobile devices, a project called Apollo (later renamed AIR).  The promise of AIR was to make all operating systems irrelevant by separating them from their applications.  At the time, I thought Adobe's strategy was very clever (link), but the implementation turned out to be woefully slow. 

So here's what Adobe did to itself:  By mismanaging the move to full mobile browsing, it demonstrated that customers were willing to live with a mobile browser that could not display Flash.  Then, by declaring its intent to take over the mobile platform world, Adobe alarmed the other platform companies, especially Apple.  This gave them both the opportunity and the incentive to crush mobile Flash.

Which is exactly what they did.


The lesson: Don't be greedy

There are a couple of lessons from this experience.  The first is that when you've established a free standard, charging money for it puts your whole business at risk.  Contrast the Flash experience to PDF, another standard Adobe established.  Unlike Flash, Adobe progressively gave up more and more control over the PDF standard, to the point where competitors can easily create their own PDF writers, and in fact Microsoft bundles one with Windows Office.  Despite the web community's broad hostility for PDF, it continues to be a de facto standard in computing.  There is no possible way for Adobe to make money directly from the PDF reader, but its Acrobat PDF management and generation business continues to bring in revenue.

The second lesson is that you have to align your business structure with your strategy.  I think Macromedia made a fundamental error by putting mobile Flash into its own business unit.  Adobe continued the error by creating a separate mobile BU when it bought Macromedia (link).  That structure meant the mobile Flash team was forced to make money from the player.  If the player and flash development tools had been in the same BU, management might have at least had a chance to trade off player revenue to grow the tools business.


What can Adobe do now?

The Adobe folks say the discontinuation of mobile flash is just an exercise in focus (link).  They point out that developers can still create apps using Flash and compile them for mobile devices, and that Flash is still alive on the desktop.  Viewed from the narrow perspective of the situation that Adobe faces in late 2011, the changes to Flash probably are prudent.  But judged against Adobe's promise to create an "an industry-defining technology platform" when it bought Macromedia in 2005 (link), it's hard to call the current situation anything other than a failure.

I think it's clear that Flash as a platform is dying; the end of the mobile Flash player has disillusioned many of its most passionate supporters.  You can hear them cussing here and here. Flash compatibility will continue to live on in AIR and other web content development tools, of course, but now that Adobe doesn't control the player, I think it will have trouble giving its tools any particular advantage.

What Adobe should do is start contributing aggressively to HTML 5, to upgrade it into the full web platform that AIR was originally supposed to be.  That's a role no one in the industry has taken ownership of, web developers are crying out for it, and Adobe implies that's what it will do.  But I've heard these broad statements from Adobe before, and usually the implementation has fallen far short of the promises.  At this point, I doubt Adobe has the vision and agility to pull it off.  Most likely it will retreat to what it has always been at the core: a maker of software tools for artistically-inclined creative people.  It's a nice stable niche, but it's nothing like the dominant leadership role that Adobe once aspired to.

Amazon vs. Apple? No, it's Amazon and Apple vs. Everyone Else

To me, there's something magnificent about a well-executed product strategy.  Features and price and marketing all come together to delight a particular type of customer, and everyone wins.  The developer gets to sell a lot of products, and the users get something that improves their lives.

In the tablet market right now we have the privilege of watching two companies do great strategy, Apple and Amazon.  The press wants to label the Kindle Fire an iPad killer, but really it's the first sensible iPad counterpoint, a tablet device with its own unique design center and business model.  I don't think either one's going to kill the other, but I think together they're likely to chop up almost every other company that gets in their way.  In particular, that means Microsoft, RIM, and Google.

Let me start by talking about the new Kindle line, and then its likely impact on the market.


Two tablet paradigms

When Apple entered the tablet market, it asked "what can we do to redefine computing for tablets?"  It re-thought the user interface, application model, and an endless set of other details to create a unique new computing experience.  Apple has been rewarded with explosive sales growth.

With the Kindle line, Amazon asked a different question: "What can we do to redefine content distribution?"  The answer led it to a tablet computer, but one with very different hardware specs, user experience, and a vastly different business model.  None of the Kindles can match the iPad feature for feature (link), but they're not intended to.  At $499 and up, the iPad is a serious investment for most people, a lifestyle statement.  At $199 and down, the Kindles are impulse buys, the sort of thing people will get under Christmas trees or just buy for themselves because it looks neat and why the heck not?

Apple makes money from the sale of the iPad and its accessories, with a bit more coming from applications and content.  Given the breath-taking pricing for the Kindle line, Amazon will probably lose money on the hardware, or at best break even.  Its main profit will have to come from the sale of ebooks and movies and all sorts of other media products, plus some apps.  Those revenues may take years to fully develop, so Amazon is playing a very long game.  That's why I see Kindle as a strategy rather than just a product.  The company is betting that by subsidizing the Kindle now, it can dominate electronic media distribution for the indefinite future.

To keep iPad successful, Apple will need to continue to add wonderful new features to it, constantly refreshing the "magical" experience.  It will also continue to drive it into markets where tablet computing can make a big difference.  Apple is already making a huge push in education; some people tell me Apple has almost completely refocused its education salesforce on selling iPad to schools rather than Macs.  And there are plenty of reports of iPads moving into other verticals like aviation.

I'm sure the Kindle Fire will also show up in schools, but at heart the Kindle line is a Volkspad, priced to be the tablet thing that everyone eventually gets for basic content access.  Already about 40% of tablet owners also own e-readers according to Pew Research (link), and I expect that percentage to increase. 

Over time we might see Apple and Amazon compete more directly; it all depends on how much Apple is willing to subsidize hardware to get long-term revenue from content.  There is also potential for product line conflicts -- if Apple makes a lower-priced iPad, it might cannibalize iPhone sales.  In the past Apple has tried to keep its product lines separated in price, and it hasn't used the subsidy model.  This is a very interesting test for Apple's new CEO Tim Cook, and I'm glad Steve Jobs is still on the scene to advise him.

But in the meantime, it's very likely that iPad and Kindle will coexist nicely in the market.  The losers, I think, will be everyone else trying to play in the tablet space.


Hammer and Anvil

Companies trying to sell tablets against Apple were already suffering from slow sales.  Now instead of just being pounded by the iPad hammer, they've been undercut by the Kindle anvil.  For most of them, there's no place to go.  It's very hard for me to picture how somebody like Samsung is going to get market traction with its current tablet line, and I think the RIM PlayBook, due to its size, is going to suffer against Kindle Fire.  Between slow sales of its current phones and now the PlayBook's dwindling prospects, I hope RIM has been very very careful about managing its inventory of parts and finished devices.  Otherwise it could end up with a massive inventory writedown in a couple of quarters.

I will be very interested to see what Barnes & Noble does next with its Nook Color tablet.  Nook Color is similar in many ways to Kindle Fire, but B&N was reluctant to add a lot of Android apps because it was afraid people might buy it as a tablet rather than an e-reader.  Amazon appears to have overcome this fear, and there's a danger that B&N may have let its opportunity for leadership slip away.  On the other hand, if the next Nook Color has better features than Kindle Fire, Amazon's announcement might validate B&N's product and help it sell.

And then there's Microsoft, which has a beautiful-looking new Windows 8 tablet interface coming maybe late next year.  I'm excited, I hope it'll be wonderful, but I'm starting to wonder if any customers will still be available by the time it ships.

There is still plenty of room in the market for competing tablets, but they'll need to be aimed at different usages than the iPad and Kindle.  The biggest opportunity is for a stylus-equipped business productivity tool, an info pad (link).  But none of the major hardware companies are working on that; they seem to prefer to bash their brains out competing directly with the iPad.

You're not the licensee Droid is looking for.  Google's reaction to Kindle Fire speaks volumes about its goals for Android.  Kindle Fire is based on Android, and will run Android applications.  Android has been struggling in the tablet space, so you'd expect that Google would be delighted to have Amazon on the Android bandwagon.  But you'd be wrong.  Let's look at the press release Google issued today to welcome Amazon to the Android family.  Wait a minute, there is no press release.  Okay, so let's look on the Google blog.  Nothing at all.  Maybe a tweet from Andy Rubin?  Dead silence.

The problem is that Amazon is using Android as just an OS, not using the Google-branded services and application store that Google layers on top of the OS (link).  Although Google touted the openness of Android when it was first launched, the reality is that Google is using it as a Trojan horse to force its services onto hardware.  What Amazon did with Android is very threatening to Google, and so you're not likely to hear a lot of supportive words from them.

Silken dreams.  Speaking of threats to Google, we should discuss Amazon's new Silk browser.  It supposedly integrates Amazon Web Services with the browser to produce a faster, more efficient browsing experience on Kindle Fire.  Given the inefficiencies of web browsing over the wireless networks, this is potentially a compelling innovation that also might make it possible for future Amazon tablets to browse over 3G networks using less bandwidth than competing devices.  That might lock in a structural cost advantage for Amazon's tablets.

Kindle Fire today is a WiFi only device, but I'd be very surprised if we didn't see a 3G version sometime in 2012.

Silk potentially gives Amazon a very powerful position (link).  I can picture a couple of ways it could be used to disrupt the mobile market.  First, Amazon could tie the browser to its own content services and distribute it to other hardware vendors.  Basically, it could try to make Silk the content layer on Android that Google wants to be.  This could be a good business move for Amazon, since it's not making money from the hardware anyway.

Google would hate this passionately, but with the company already under antitrust scrutiny, it would have to respond very carefully. 

Amazon's other play could be to expand Silk into an enhanced platform for mobile web apps.  I've been waiting for someone to make web apps work properly on mobile, and many smart people have been getting more and more depressed about the lack of leadership in mobile web APIs (link).  Amazon has the expertise and the incentive to fill that gap.  The question is whether it wants to. I think it should, I hope it will.  If it does, Silk could become the platform for the next great generation of applications, giving Amazon enormous power in the computing market.

This will be a fun space to watch. Apple and Google will both feel pressure to respond to Silk to prevent Amazon from getting a decisive lead in mobile web apps.  Maybe just the threat of Silk will be enough to finally drive some innovation in the mobile web platform.

I may be indulging in wishful thinking, but there's a possibility that ten years from now we'll look back on Silk as the single most important thing in today's announcement.

Or not.  It depends on what Amazon's agenda is, and they're not telling.

Slouching toward Bethlehem.  One revolution I'm sure is coming is the remaking of the print publishing industry.  As I've said before (link), once about 20% of the reading public has electronic devices, an established author can make more money bypassing print and selling direct through e-readers.  I think the new Kindle line, and especially the entry-level Kindles at $99 and below, will finally push us past the 20% threshold.  It will take a couple of years to play out, but this will force the long-awaited restructuring, or destruction, of the traditional book publishing industry.

(Note:  I wrote this before I read John Gruber's take on the new Kindles.  He and I are thinking along similar lines. link )

Happy Birthday, Business Computing

September 5, 2011

On this date sixty years ago, September 5 1951, the world's first business computing program was first tested on the world's first business computer, the Lyons Electronic Office (link).

LEO was inspired by wartime computers that calculated things like artillery aiming tables for the military.  Lyons was a massive restaurant chain in the UK, and realized that the new digital computers could simplify its human-driven accounting operations.  So it built its own computer, consisting of 21 racks with 6,000 vacuum tubes and occupying about 5,000 square feet.  The company's first use of LEO was to calculate the cost of all the baked goods produced by its 12 bakeries (link).

From that humble beginning...wait, that wasn't a humble beginning at all, it was a very cool beginning.  The first use of a business computer was to solve a real-world problem faster and more accurately than people could do it on their own.  That's exactly what you're supposed to do with computers.  LEO was quickly adapted to other tasks, where it achieved impressive results.  For example, it cut the time needed to calculate an employee paycheck from eight minutes to 1.5 seconds.

It's hard to believe that many people believed for years that computers didn't increase business productivity (link).

From that very auspicious start grew most of the computing industry we know today (link).  So take a moment to contemplate that dinner roll or slice of pie you eat today, and say a quiet thank-you to David Caminer, John Pinkerton (link), and the other pioneers who got it all started sixty years ago today.



More about Lyons
More about LEO