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Update: new iPhone pricing plans

noreply@blogger.com (David Wertheimer) — Wed, 02 Jul 2008 15:13:00 +0000

AT&T has officially detailed its 3G iPhone pricing, and it's actually a bit worse than I noted last month.

The cost of data has gone up $10/month, as previously discussed. What I forgot to include was the loss of free text messaging--current owners get 200 SMS messages included in their $20 data plan. Now those 200 texts cost an extra five bucks.

Redoing the comparison, what I had outlined as

Old: 399 + (24 x 20) = $879
versus
New: 199 + (24 x 30) = $919

is, for users interested in the same level of access, actually

New: 199 + (24 x (30 + 5)) = $1039

Sure, the price increase includes the upgrade to 3G service, which can rightly be considered a premium. But the pricing strategy feels almost bait-and-switch-esque in its execution. They're trumpeting a $200 savings in the price of the phone, yet users are paying $160 more for usage.

Ironically, what is classified as a win for the mobile phone industry--Apple's moving to a subsidy model to make its prices more attractive--ultimately leaves AT&T with a horrible jack-up-the-prices publicity nightmare on its hands.

See you when the third-gen comes out in '09.

Update: AT&T is not raising data rates on original iPhones with new activations, suggesting that the 3G network is the justification of the price bump. Well, that and the fact that they already made their money on the profit split of the initial iPhone sale.

Switcher Angst

noreply@blogger.com (Loren Davie) — Tue, 24 Jun 2008 18:30:00 +0000

Apparently switching operating systems isn't easy. Besides the issues that people talk about (Can I run my apps? Is it faster? Is it better?) there are all sorts of personal identity issues tied up in the operating system one chooses.

(Pausing a moment for full disclosure: my personal operating system history, in reverse order, is Mac OS X, SuSE Linux, Red Hat Linux, Windows 9x/NT, Mac 6/7/8/9, TRS-DOS, PET, and whatever happened to be running on the DEC-10 with the dumb terminal and the roll of paper. Also there have been a few side-dalliances with FreeBSD and Win 2k.)

Initially I didn't think of an OS as a separate entity from a computer. It was just part of the computer, what showed up when I turned on the old TRS-80. We can thank Microsoft for making us think of the operating system as a thing in itself, other than an inherent attribute of a computer.

At the beginning of the 90's I started to work on Macs because that's what was going on in the music world, where I was operating. This was about when Windows 95 came out, and in retrospect it was a pretty dark time for Mac. People were crowing about how Windows 95 eliminated any need to get a Mac. They really took it personally.

(A couple of years later, I abandoned the Mac because I was getting into Java programming, and the Java runtime sucked on the Mac. Macintosh Runtime for Java. MRJ. I remember it well. Bleh.)

Working on the Internet led me to discovering UNIX. I wanted it. I suddenly came to the realization that the Internet was really a UNIX-centric place. UNIX and the Internet just seemed to go nicely together, in a way that Windows simply did not. I downloaded the super-cool, incredibly indie Red Hat distribution (wow, times have sure changed) and pretty soon was installing it everywhere, including on my IBM laptop.

Fast forward to more recently - when Mac OS X came out, and I realized I could have UNIX on my laptop, and all of the shiny Mac stuff (including commercial audio production software) all on one OS.

Now I've never used XP much, and don't have an opinion about Vista. Apparently some otherwise happy Windows users don't like Vista. The complaints I'm hearing are along the lines of "too slow, fancy UI chrome doesn't actually enhance usability, security features drive me insane" and so on.

One of the biggest sins seems to be that after 5 years of nothing from Microsoft (and during the course of many, many OS X upgrades), Vista simply wasn't as jaw-droppingly amazing as it should have been.

Well for whatever reason, a number of people I know, who were previously staunch Windows users, are bailing. But they're bailing under protest. They hate the idea of being part of the herd, and joining those dirty hippies in the cult of Mac.

The idea that one's consumer habits are part of their identity isn't terribly new, but it is kind of fascinating for me to watch people struggle with reconciling the apparent conflict between the technical and user experience benefits associated with switching to Mac, with the danger that they'll become yet another latte-swilling zombie, wandering aimlessly under the influence of the mighty Steve Jobs Reality Distortion Field tm.

To which I say: folks, its all temporary anyway. Apple makes the best stack right now, but someday they'll get knocked off by something easier, faster, more powerful and yes, sexier. And then you'll find me switching. And I won't be losing sleep over it.

UX Critic: photo stamps

noreply@blogger.com (David Wertheimer) — Fri, 20 Jun 2008 20:10:00 +0000

Editor's note: today marks the first of our UX Critic features, where we'll be giving rapid-fire critiques of multiple players in a single industry vertical. Today we start with online photo-stamp creation, for soon-to-be obvious reasons....

One of the subtly fun developments of the online era is the introduction of photo stamps, where individual consumers can custom-create official US postage. Having started and stopped a few years ago, the segment has commoditized nicely, with even the US Post Office offering its own online and offline stamp-creation tools.

This writer, having recently had a baby, and having been sent by the new mother to buy stamps at the post office and found a fairly abysmal selection of 42-cent stamps, decided to make his own. (The original image can be viewed here; the stamp snapshots are included below.)

First stop: Zazzle, the popular custom printer. Zazzle's online tools are easy to use and extremely fast. I was able to upload multiple images, move and size them with ease, and compare multiple images atop each other. Their discount pricing model kept costs reasonable ($12.95 a sheet for 10 sheets of 20 stamps). I liked the 24-hour turnaround time. But the large ZAZZLE.COM imprint on the stamp turned me off, so I kept looking.

I next went to photo.stamps.com, the official outlet of the US Post Office. But their stamp layout, a large square, didn't serve my image well. (It should be noted that zazzle.com seemed locked into a horizontal layout--not useful for vertical images.) The site required registration for anything beyond basic image positioning, so I was unable to compare pricing without going into the FAQ--they turn out to be $14.95 for my quantity. They also don't ship for 3-5 days.

Last stop: yourstamps.com. Their site identified my image as horizontal and created a layout that matched--nice! They had custom borders and designs--nice! But they don't have discount pricing, making my order nearly twice as expensive ($18.95/sheet) as stamps.com and Zazzle. Worse, the site logo switched twice midstream, from Fujifilm to Cooper Imaging and then to Epixel, making me nervous about placing an order there. Finally, the site needs 7-10 days to process orders, even for local pickup. Too many negatives despite the visual appeal.

In the end, despite that ZAZZLE.COM imprint, their site had the most compelling offer. They gave the best price, layout, and turnaround time, and their tool was a cinch to use. Even a few of these would be good differentiators; having them all on one site is a real victory for the Zazzle team.

Fire From the Gods

noreply@blogger.com (Loren Davie) — Thu, 19 Jun 2008 13:46:00 +0000

Can lightning strike the same place twice? Can we get some more angels to dance on this pin? How about re-creating the PC demand explosion on another hardware platform, hopefully resulting in the same wealth creation that coincided with the PC revolution?

Hm. I think I'll take the angels. Looks easier.

The 90's was filled with venture capital firms looking for someone to be the next Microsoft. The effect of that particular tornado was so wide and so long lived that most people lost sight of what an anomaly it was. People kept making business plays based on creating an equivalent to the PC explosion, while glossing over the fact that the odds of doing so were quite a bit worse than winning a lottery. In a lottery, at least someone is guaranteed to be the winner. It could be a long time before something like a new hardware platform explosion occurs again.

Let's look at the forces that combined to create the original Intel-based IBM PC Clone + MS Windows market explosion:

Rapid standardization of business on an open platform (which was open by accident: it was based on the PC reference specification put out by Intel)
A proprietary product (MS Windows) was attached to the explosion, but only because it was a significantly undervalued part of the supply chain. No one had thought seriously about an operating system for a computer as the high ground in technology before then.
A radically open platform for application development. For a retail-level offering, there was a remarkable lack of centralized control over what you could run on top of it. You didn't need Microsoft's, IBM's, or anyone's permission to write an app.

Alone these factors would have been significant, but together they created a firestorm that is extremely rare. In fact, a firestorm that is practically impossible to re-create. What everyone now knows is that IBM screwed up. To let these factors coincide is against the basic instinct of business, and it wouldn't have occurred in this case if IBM had understood properly what was happening, and had executed properly.

So in an environment where key players in an industry are not massively screwing up, the conditions to create the firestorm just don't happen. Fire does not get stolen from the gods.

In the business world, people keep wanting to use the razor blade model. They catch the customer and then extract recurring fees. This is the way that game consoles, cell phones, cable tv and so many other things work. This can be a great way for a business to make money, but it essentially guarantees that the firestorm and the associated wealth explosion will not occur.

I started thinking about this topic when I was speaking with a co-worker here about his Zune. (Yes he has a Zune. He's the only person I've ever met in person with a Zune. Actually he owns two of them, a black one and a coveted brown Zune.)

Initially Microsoft's response to the iPod was to initiate Plays For Sure - an attempt to re-create the firestorm. The idea was Plays For Sure was a program in which Microsoft supplied the software and independent manufacturers supplied the hardware. The plan was that they would displace the iPod just as they had the original Macintosh.

But relying on re-creating the firestorm is a weak bet. Not surprisingly, it didn't pan out, and Microsoft abandoned the strategy (screwing their Plays For Sure partners in the process) and released the Zune instead. An integrated, closed, offering instead. The Gods continued to keep fire to themselves.

The consumer cost of the iPhone

noreply@blogger.com (David Wertheimer) — Tue, 10 Jun 2008 18:34:00 +0000

Everyone is all abuzz, as they always are, about Apple's latest product news, in this case the $199 3G iPhone. As expected, the focus is on the price: $199 for an iPhone! What a deal!

Yet it's not that great a deal. The entry price has been lowered but not the true cost. Of course, Apple and AT&T know this; it's the foundation of the cellular industry, and AT&T Wireless is happy to exploit it here.

Full disclosure: I am a wildly satisfied iPhone owner. I'm not buying the new one, though, in part due to the economics. Here's why.

The current (now previous) iPhone cost $399 for the device and $20 per month for a required AT&T Wireless data plan. Over the life of a two-year (24-month) contract, the total cost of ownership amounts to

399 + (24 x 20) = $879

This number excludes taxes, regulatory fees and marginal inflationary adjustments, but it's an accurate gauge of what Apple and AT&T get from the consumer across two years.

For the new phone, the price drops to $199, but the monthly data fee has risen to $30. Sounds small, but over the course of two years, guess what?

199 + (24 x 30) = $919

By the end of two years, total cost of ownership for the new phone is actually higher for the half-price iPhone. Apple managed to get monstrous press coverage of its $199 price point with little mention of the data charge, which substantially affects the equation.

Now, I'm obviously simplifying a conversation with many other variables. (For example, over two years, "real cost" including inflation and float may benefit the monthly plan; people who renew contracts in less than two years have altered ownership costs; etc.) But my point is simply put: list price and true cost are not the same, and the 3G iPhone is no cheaper than its predecessor.

Putting Your Web Site in the Cloud

noreply@blogger.com (Loren Davie) — Fri, 06 Jun 2008 21:14:00 +0000

How many CPUs do you have?

One of the most interesting changes to the web in the last couple of years is that computing hardware is moving beyond mere commodotization and into the realm of the metered service. Companies that formerly would have had to heavily invest in hardware (and the associated system administration costs) in order to deploy web sites are beginning to have a viable alternative: cloud computing, available in various flavors such as Amazon's EC2, Slicehost's virtual machine based hosting, or quick set-up hosts like WebFaction.

Instead of buying hardware to host your website, it is now possible to rent computer time at any capacity level. This allows businesses to essentially pay for only the computer power they need.

This is great, but implicit in this is that we need to change the way we build web applications. What is rapidly becoming the predominant hardware paradigm (via cloud computing) for web applications is in a direct disconnect with the technologies that we're using to build them.

It has to do with how many CPUs (processors) the technology can handle.
The approach-du-jour in web apps is rapid development through frameworks that take advantage of powerful, dynamically typed languages like Ruby and Python. These frameworks allow people to build web applications very, very fast.

However, these languages are executed in runtimes that are not SMP (symmetrical multi-processing) enabled. In other words, the runtimes can only handle one processor at a time. There are numerous hacks in the web development world to get around this, mostly involving running multiple instances of the runtimes. However problems creep up - the well known scalability problems that Twitter has encountered have their roots in these issues.

So up on the bleeding, ragged edge of web development, we're starting to look at alternatives from other industries. In the telephony world they've had to deal with these kind of scalability and reliability issues long before we were around, and they have some pretty impressive solutions.

Erlang, developed by Ericsson, is a language and runtime created from the ground up to live in an SMP world (originally its "cloud" was telephony equipment). There is a famous Erlang app which claims nine nines of reliability. That's 99.9999999% uptime, or a few seconds every 30 years. Way more than any website needs.

Unfortunately, Erlang is, well, kind of weird. People coming from said Python or Ruby background will have to re-learn some very fundamental approaches to problems, and that's not going to be easy. In fact it might not even be possible. Fortunately, Erlang compiles to bytecode (similar to the way Java and Python work) meaning that its possible to write a different compiler and perhaps uses a different language on the Erlang runtime (called BEAM).

So just today I noticed, (in what is clearly a really, really early incarnation) - a little project called Reia. Its pretty raw now, but it purports to be a Python/Ruby-like high level language that compiles to Erlang BEAM format, giving it all the SMP-loving, fault-tolerant and distributed goodness that comes with Erlang. I don't know if Reia is the winner, but I feel pretty confident that creating a friendler programmer interface to the Erlang runtime is a winning proposition.

SaaS and Appliances

noreply@blogger.com (Loren Davie) — Fri, 30 May 2008 18:26:00 +0000

Want to be able to use Google to search your corporate intranet? You can sign up with it as a service, letting its spiders crawl over your side. Or you can buy their hardware. So the product range takes an interesting leap from a remote hosted service, to a piece of rack hardware.

Noticeably missing is the middle-ground of shrink-wrap software to be installed on your own hardware. This is a significant departure from the way software used to be sold.

This is the end-game of hardware commoditization at work. Against the price of developing and marketing software, the cost of hosting the app in some off-the-shelf hardware is pretty minor.

Compare the cost of hardware against that of installation support. Imagine if there was an installable "Google Intranet Search" product, designed to go onto a server run by the IT department. Well, first off, there would have to be a version for Windows, because some companies are Microsoft-only shops. That means at least two platforms to support. And then, now matter how fast and easy installation was, there would be a deluge of installation support calls coming in, because someone has the wrong version of the operating system, weird hardware or a conflicting application. This can get expensive.

The alternative is simply to bundle a computer with the software. This guarantees that the software is always installed on an appropriate operating system, with the appropriate hardware. It also dances around IT Department requirements for tech stacks, such as "we only support Microsoft". Generally with appliances the operating system is hidden away from view (it's usually Linux, but it doesn't matter). The IT Department is simply told - "there is no operating system for you to support - just turn on the box and run the setup wizard".

Put this together with software as a service (SaaS) and you have a pretty good offering. You can offer your app in basic, pro and enterprise flavors, or you send them a box. The software vendor doesn't waste nearly as much time with installation support and the customer doesn't have to maintain the software.

The Web Cycle

noreply@blogger.com (Loren Davie) — Tue, 27 May 2008 17:05:00 +0000

Whats hotnewwebsite.com?
Are you on/do you use hotnewwebsite.com?
We're building the hotnewwebsite.com for our obscure niche.
Whats hotnewwebsite.com?

(Apologies to the "hollywood cycle" of which this is an obvious rip-off.)

UX in the world of food

noreply@blogger.com (David Wertheimer) — Fri, 23 May 2008 16:33:00 +0000

Some user experience examples I've seen lately, all while eating and drinking:

Good: JambaJuice's queueing system. Unlike Starbucks, where one has to remember what the heck one ordered, then scan the baristas as they call out your drink (me: "tall caramel frappuccino light no whip"), if Jamba Juice has a wait, the cashier asks the buyer for a name. That name gets put into the order system, so the Jamba Juice drink preparers look at the screen, and say, "David?" Only after they've identified me do they check that they've made the right drink.

Bad: These pizza boxes with ads on them. Good for the advertiser, and fairly innocuous on the consumer end, but a terrible thing for the pizza parlor.

I got lunch from a place that handed me one of these boxes today. I then brought it to a conference call, where my coworker so loved the look and smell of my lunch that she got a slice for herself. But did she go to my pizza joint? No, because when closed, my pizza was from Blockbuster By Mail Get Discounts On In-Store DVD Rentals. A good marketing opportunity wasted.

Good: The widespread adoption of CRM systems at local restaurants. Thanks, no doubt, to the success of sites like OpenTable and SeamlessWeb, the majority of restaurants in Manhattan keep computer systems that maintain lists of phone numbers with addresses attached to them. Now, when I order a meal from a usual spot, I don't have to reiterate cross streets or apartment numbers; my phone number is all they need to identify me.

Bad: Styrofoam plates and cups are still routine with many of my deliveries. We need more green delivery.

Good: The just-right chewiness of Ricola Breath Mints.

Bad: Those breath mints' side effects.

F3 so far

noreply@blogger.com (Loren Davie) — Fri, 23 May 2008 15:21:00 +0000

Some time ago at Ai we started running an experiment that eventually became called "Fuss-Free Fridays", or F3. The core of the idea was that we wouldn't allow meetings to be scheduled on Fridays (barring emergencies), thus ensuring that people would have time in which they could be assured they could get work done. We gave people the "right of refusal" for Friday meetings.

Here's what we've learned so far:

Creating "protected" time zones is great - during the course of the week it's possible to segment my tasks in a way that I can direct them towards the part of the week that is the most appropriate for them. If I find something that requires a long uninterrupted period of time then I tend to shoot it towards Fridays.
For me there's an additional reduction of stress involved in knowing I'm not going to be interrupted. Some things require deep concentration, and when I get pulled out of that it drives me crazy. F3 protects this.
One unintended consequence is that its made the other four days of the work week very meeting-heavy. I guess that's because we're compressing 5 days of meetings into 4 days. That makes some days (like yesterday) back to back meetings.

Some people complain that "F3" is dead whenever a meeting gets scheduled on a Friday. But that's not the point: Fridays are now meeting light, providing a protected zone of high-productivity time during the week. And besides, there's bagels when I come in in the morning.

UPDATE: Another side effect of F3 is that Wertheimer and I keep posting on the same day.

More on recruiters (say it fast)

noreply@blogger.com (David Wertheimer) — Fri, 16 May 2008 16:13:00 +0000

Ai is currently hiring a user experience lead to add to its UXD resources. (We're hiring a freelance IA, too... email me if you know anyone for either position. But I digress.)

I have gotten an unsettling amount of recruiter contacts in the days since we posted the job ad. Most of them are polite enough, and I turn them down, politely. This is nothing new; Loren and I have a long history of frustration with muscle-in tactics.

But I occasionally get inquiries that just blow my mind. Consider this, which came to me via LinkedIn, which is usually a good place for targeted communication:

While Linked In is a great resource, it cannot give you access to the most elite talent in the Internet arena. We can. Our difference is that we aggressively call directly into your top competitors and leading firms in your field to source candidates who are among the top 10% in your industry.

Holy smokes! Here I am, trying to wisely use networking to extend the reach of my job ad. And I get a networking reply that suggests I use them to cold-call the competition until they unearth some good candidates.

Underneath the letter was some marketing copy, equally flabbergasting:

* Aggressive cold call recruiting.
Our recruiters make 150 or more calls per day. We directly call into your competitors to recruit the top 10% in North America.

The company promises quantity and quality! I was still working on the math behind that one as I read the last bullet:

* We work exclusively for you.
The candidates we recruit are exclusively yours, and we will never send someone we recruit on your behalf to any other company.

Somehow it's hard to believe that a recruiter with hard-nose tactics like these won't be sharing what little bits of successful entry it finds with every client it recruits.

I suppose there are employers out there who employ, and enjoy, these tactics. But I'm not on that list. (I wonder if I'm on the call list, though....)

Starbucks: Opportunity Cost

noreply@blogger.com (Loren Davie) — Fri, 09 May 2008 13:34:00 +0000

With the return of the prodigal Schultz, Starbucks seems to have made the choice that it's about good coffee, and not necessarily fast coffee. To that end, they dump their coffee (which was in a thermal carafe to start with) every 30 minutes, whether its been consumed or not.

As a consequence it seems like they're always out of coffee now. Every time I get up to the front its, "sorry, we're brewing a new pot, it will take a few minutes". What? This is New York City! Not some laid back fish market in Seattle! I need my caffeine fix NOW.

But they've made their choice. They will not be slinging coffee as fast as possible, in order to assure quality.

(No if they would just purchase more coffee brewer machines and stagger the brewing frequency they could have it both ways, but never mind...)

Opportunity Cost

noreply@blogger.com (Loren Davie) — Thu, 08 May 2008 16:03:00 +0000

You have to focus. Doing one thing really, really well is infinitely better than doing many things merely adequately. That means selectively choosing which activities to engage in. This is true whether it's a business or a private individual doing the choosing.

In business, doing everything ensures mediocrity. This rule seems to hold true regardless of the size of the business. As companies like Yahoo and Microsoft have found out, as they try to find new horizons to conquer it becomes difficult for them to maintain the compelling nature of their original offerings. Additionally, people have a hard time accepting the company as a business that exists outside of their original space. For example, most people view Microsoft as an operating system and office suite company, or at least a maker of desktop and server applications. Far fewer think of them for their online offerings, such as Office Live or MSN.

I hear a lot of ideas for Internet start-ups, and I see a lot of people making the mistake of trying to do everything. It's gotten to the point that when I hear a pitch for a business that contains a bundle of the currently hip buzzwords ("social networking" is the term du jour), I instinctively start to wonder if there's a real idea in there. It's just too easy to start building an Internet business without establishing the business part.

Sometimes this comes from start-ups comparing themselves to established businesses. They assume that they have to launch with all of Amazon's e-commerce features, all of Google's search capabilities and all of Facebook's social networking features. Not only is this a way to wrack up an enormous development bill, but it won't particularly serve the start-up in the marketplace. The Internet rewards great new ideas, or at least ideas done in a great new way.

So the secret is to not do everything. Strategically choose features not to implement, business areas in which not to engage. If your core idea is good then you'll have a foundation on which to build, and if it's not then all those additional features won't save you anyway.

Tracking Distributed Art

noreply@blogger.com (Loren Davie) — Wed, 07 May 2008 21:01:00 +0000

A while back I had mentioned I was making a recording, collaborating over the Internet, with my old band. I've started a blog on Tumblr where I'll be tracking that project, in case you want to follow it. The blog is called "The Sound of One Amp Exploding", and can be found here: http://oneamp.tumblr.com/.

Sports Museum of America

noreply@blogger.com (David Wertheimer) — Wed, 07 May 2008 13:54:00 +0000

The long-awaited Sports Museum of America opens to the public today.

It is an experiential place, full of tangible exhibits and games. One can hold Alex Rodriguez's baseball bat, compare the weight of an Olympic javelin and shotput, and do skill tests in cycling, skiing, rowing and--most interesting--Nascar pit crew.

SmA is an Ai client, and a few of us had the pleasure of attending their opening night gala last night. (I posted a few photos after the event.) Having toured the museum firsthand, I can confirm that it's great fun for any sports fan. We expected to just poke around during cocktails but wound up spending more than an hour reading, watching and playing.

Congratulations and best of luck to the Sports Museum of America and its founding team.

The auto opt-in

noreply@blogger.com (David Wertheimer) — Tue, 06 May 2008 13:31:00 +0000

I have been surprised in recent months by the number of ecommerce sites that have defaulted to opt-in upon completion of a purchase.

Opt-in is, of course, supposed to be a voluntary and user-defined action. But it hasn't been that way for me as much as it used to.

As consumer spending slows, retailers, anxious to retain traffic and minimize customer acquisition costs, are taking steps to reach out to shoppers that fit their profiles. And what better way to do that than by hitting up previously converted users?

Interestingly, the sites that have opted me in recently are not uninformed small businesses; they're major corporations with major legal departments, all of whom should presumably know better. Among the offenders:

Barnes & Noble, where I haven't shopped since 2007
Citi, for a credit card that gets less than $1000/year in charges
Home Decorators Collection, after a recent purchase (a Home Depot subsidiary)

Have you been spammed--I mean, opted in--recently? By whom?

Cost of Leadership

noreply@blogger.com (Loren Davie) — Wed, 30 Apr 2008 18:04:00 +0000

Part of leadership is finding the opportunity to lead. Some contexts crave and reward leadership, others do not. Leadership blossoms when it finds fertile ground. (A little spring analogy for you.)

(For the purposes of this post I'm defining leadership pretty broadly. It could be leadership in the context of business, community, technology, professional or academic areas. The sky's the limit.)

It's tempting to shoot for the biggest target; to attempt to establish leadership in the biggest market, in the most popular meme, or the latest craze. However there is a cost to leadership - it takes time, energy and skill (and sometimes money) to lead within a context. The more established that context is, the more of those resources it will require from a leader.

In the web world, for example, the leaders of the biggest segments get a lot of press. Amazon and Ebay are e-commerce leaders. Google is the search leader. Apple is definitely a leader of something, although we're not sure what to call it ("coolness?"...ew...). Notice, however, that these leaders are also giants. Because they operate in such large, well-established spaces, they need to have immense resources in order to maintain their leadership position.

I'd like to propose that the benefit of being a leader follows a kind of "S"-curve. If you look at the graphic, the straight black ascending line represents the amount of investment (time, energy, money) necessary to attain leadership within a context. The red line is the benefit to the leader to hold that position. Notice that there are two places on the graph where the red line exceeds the black line. Those are the sweet spots.

The first spot, on the far right, is the one that gets all the press. This is the geometric value afforded to Amazon, Google and so forth, because they hold a leadership position in a well-known established space. The benefits here are obviously huge. Unfortunately it requires an enormous investment, which is often not an option for smaller companies, or individuals, making it seem like it's an impossible task to get ahead through leadership.

However, there is a second, less noticed sweet spot just left of the middle of the graph. This represents a space in "early adopter" territory. A new idea that is beginning to get some traction, but hasn't yet entered the mainstream is an area where a modest investment in time, energy and perhaps money can yield a significant benefit. One can "hitch their wagon" to the new thing, and become recognized as a leader for doing significant things at a modest scale. For individuals, small companies and organizations this is the acheivable sweet spot.

When the space matures and moves along to the middle of the graph the return on investment of leadership evens out: the idea has entered the mainstream, and the benefits of displaying leadership are no longer attractive in proportion to the amount of investment that has to be made. At this point it's too easy to be accused of just "jumping on the bandwagon", in other words - not a leader.

To sum up, the opportunity for benefit from leadership comes in identifying an idea, meme, technology or whatever that has significant momentum behind it, but isn't quite ready for prime time for non-early adopters. Get involved, make things better somehow, contribute to any surrounding community. The benefit that comes back will exceed the cost of leadership.

Continuous Breakage

noreply@blogger.com (Loren Davie) — Wed, 23 Apr 2008 14:01:00 +0000

When I started working at Ai there were about 6 people. Now there is about 40. In speaking with a colleague yesterday, I stumbled upon the essential mechanism of a scaling company: breakage. A scaling company is one in which good, working processes break. Continuously.

The mechanism itself is simple: business processes put in place when there are 6 people stop working when there are 12. Processes that work at 12 people then strain under 24. Processes at 24 fail at 35. Failing processes are a normal part of a growing company. It's healthy. Painful, but healthy.

The role of good management is to be ready for process failures and respond actively: either by adjusting or replacing business processes to fit the needs of the company at its new size. Unfortunately, this can't be done prematurely - it can be just as destructive to roll out a process that is optimized "too large" than it is to cling to one that is optimized "too small". The balancing act is to wait until the appropriate time to adjust a business process, recognizing that occasionally it will feel like overkill when it is initially implemented.

The other factor that can be easy to overlook is that there are people involved. Processes shape people's jobs and thus their experience at work. If a person's job description changes as a consequence of a process adjustment, it can be interpreted as a change in their prestige or status. Great care needs to be taken in order to not unduly ruffle feathers in the pursuit of a working organization. The people have the same value they've always brought - its the organization that has changed.

What we have here is...

noreply@blogger.com (David Wertheimer) — Mon, 21 Apr 2008 16:16:00 +0000

PayPal is dealing with some unintended fallout regarding a smart policy decision.

The online money folks made a smart decision last week and put out a press release. The original news: PayPal to Block Users With Old Browsers. All well and good; PayPal is a regular phishing target.

But the news items and press around the announcement were not clear enough. From the article above: "PayPal said a 'significant' group of people still use Microsoft's Internet Explorer 3, released in 1996, and IE 4, which debuted in 1997. Those browsers lack a phishing filter, which can block users from accessing a reported phishing Web site." The article later notes that "Apple's browser -- Safari -- does not" have a phishing filter.

Cue melodrama, and the follow-up news this morning: PayPal Denies Plan to Block Safari. Which, of course, was not the original news item. But PayPal neither a) provided a list of blocked browsers nor b) listed modern browsers like Safari as safe for use, at least nowhere I've looked.

The lack of clarity created a situation that ran far afield of the original intent. Instead of being heralded as encouraging safe ecommerce, PayPal found itself dispelling rumors that angered the Macintosh audience. A little more communication and transparency would have ended the excitement before it began.

Fenders and Benders

noreply@blogger.com (David Wertheimer) — Wed, 16 Apr 2008 13:16:00 +0000

The tech team at Ai is split into two parts. Roughly two-thirds of our staff are developers, the behind-the-scenes programmers and creators of software and rich applications.

The other third are front-end engineers, handling the HTML, CSS, and scripting languages rendered by browsers. Both teams are tight-knit and collaborative, particularly the front-end team.

In this spirit the smaller crew coined itself a little ways back: they are the Fenders, short for "front-enders" (obviously). They take great pride in their work, compete for compliancy accuracy, and play some mean foosball. Most importantly, they work as a team. With a great name.

By extension, the developers are Benders, for back-end, although the term hasn't made the same impact. The Fenders, on the other hand--or "Fendas," as our Bronx-style lead Fender likes to say--are really making a name for themselves. Two of our clients have started using it regularly.

The next time you hear about web page creation, don't think simply in terms of client-side coding or web design. Think: fender.

Micro-Problems

noreply@blogger.com (Loren Davie) — Mon, 14 Apr 2008 15:12:00 +0000

Micro-payments. Cool huh? The term was thrown around for awhile as the solution to content providers looking to find a revenue stream. People could show up on a website and buy some content for a tiny amount - insignificant to them. But the tiny amounts would add up and the content provider would make some real money.

Unfortunately this is a case where the brick and mortar world has held the web back. There are fundamental issues with accepting micro-payments that can threaten the very business model of companies that have planned on charging, say, $1.00 per transaction. The problem is the cost of the transaction itself.

Before we go any farther though, let's first define what we mean by micro-payments:

$3 to $5 The Starbucks Range: It's arguable whether this range is really micro-payments. It's more like mini-payments. Equivalent to an espresso bar drink in terms of cost, this range has a relatively low resistance to sales for items that are perceived to have value. Movie rentals on iTunes are in this range.
$1 to $2: The iTunes Range: Long been considered the range of acceptable pricing for music and TV shows ($1 and $2) respectively. This range seems to be low to no resistance for downloadable goods - at least for those who are willing to pay for digital media at all.
Less than $1:The Mythical Range: The realm of the original micro-payments range. A price point considered to be so low that no one could possibly object to it. Not much in the real world lives at this tier, for reasons we'll see in a minute.

From a marketing perspective, the original idea of micro-payments was to set the price for digital goods low enough that paying for them wasn't a big deal. There would be no appreciable pain to the consumer, and volume would create a revenue stream for content providers. The "true micro-payment" range (less than $1) was often cited in the context of this usage.

However there is a hard-to-solve problem lying in the heart of micro-payments - and that's the cost of the transaction itself. It costs money for a merchant to take a transaction. This money is generally trivial in a "regular" size transaction, but it becomes an unreasonably large part of gross revenue when micro-payments are involved.

The problem is middlemen. When one takes money on a website there are at least two other parties involved besides the merchant and the customer. The first is the transaction gateway, such as Payflow Pro (owned by PayPal, which is in turn owned by Ebay) or Authorize.net. These are the people that connect the banking system to the Internet, allowing only credit card processing to be possible.

The second group is the merchant bank. In order to receive credit card payments, a company must hold a merchant bank account and sign up for merchant services, usually provided by the same bank that issued the account.

Both of these two parties levy fees on each incoming transaction. And fees are always structured as a few cents minimum, plus a percentage of the transaction. It's the minimum fee that's deadly to micro-payments.

About a year ago I went shopping for a bank that could set me up with a micro-payment deal to accommodate purchases of $1. The best I could come up with, after speaking with almost a dozen banks, was a deal that added up to about 37 cents of transaction fees on the dollar (that's the gateway cost, plus the bank charges). That's 37% of the gross revenue going to bank charges.

One strategy to address this is transaction aggregation. This is (probably) being used by iTunes. How it works is that when you purchase the first micro-payment item, your credit card is authorized for an amount beyond what you actually purchased. Subsequent purchases that take your total to an amount below the authorized amount cause no further activity with the gateway.

Then at the end a a certain time period, all the transactions that you did in that period that fall under the original authorization are run as a credit card capture, all at the same time. This will usually be less than the amount that was originally authorized. In the end there is only one completed credit card transaction performed by the gateway and the bank, which hopefully contains several micro-payment purchases by you.

The first catch is that credit cards limit the amount of time a merchant can hold an authorization on a credit card without capturing it. It looks like the most restrictive version of this is about a week, which is why if you buy stuff on iTunes you'll see a charge go through at the end of the week.

The second catch is that aggregation only works if the customer buys more stuff during the aggregation period. So it means that iTunes only gets the advantage when you buy more than that first song during a one week period. If your purchases are spaced out over a longer time - iTunes is out of luck, they need to run a new transaction.

The problems with the micro-payment structure may be one of the driving reasons behind the enthusiasm for subscription models with content. The obvious advantage (besides the "reliable revenue stream" thing) is that the entire content income is balled into one big monthly transaction, making the relevant transaction costs pretty insignificant by comparison. Unfortunately the big transaction also has a big price tag, which brings with it increased buying resistance with consumers, also known as "sticker shock".

I don't have a great solution packaged up for you, unfortunately. However I would urge caution when evaluating any business plan or idea that has micro-payments at the center of it. Often thrown around as an idea, they have some real brick and mortar problems attached to them.

Fun with focus groups

noreply@blogger.com (David Wertheimer) — Fri, 04 Apr 2008 19:50:00 +0000

Ai is conducting informal usability testing for a client this week. We've had a small procession of strangers come to our office for 45-minute sessions, and in exchange, we're handing out American Express gift cards.

This is the first time we've done tests on-site, and it may be our last. The testing has gone great, but we've had one person double-air-kiss our moderator and another demand twice as much compensation as we offered in our ad.

Then there's the job candidate who stopped at our front desk on her way out. Our office manager, Katie, was in deep discussion on the phone, and handed the woman a gift card, inadvertently paying her $50 for her job interview.

Imagine Katie's surprise when she got off her call and discovered the usability tester still in her session.

(The interviewee kept the card. What would you have done?)

Wither Windows?

noreply@blogger.com (Loren Davie) — Fri, 04 Apr 2008 19:10:00 +0000

So quite recently, the Ruby on Rails open source web framework announced that they would be migrating from the Subversion code repository they had to a new one managed by Git. Git is a version control system created by Linus Torvalds to manage the Linux kernel. Linus had several requirements in mind when he made Git, requirements that involved specific sets of features, scaleability, stability etc.

As might be expected from the creator of the Linux kernel, none of these requirements included running well on Windows.

Git does technically run on Windows, but its kind of a hack, and Redmond's favorite platform is definitely treated like a second class citizen (ooh... irony...). So naturally when Rails moved to Git, there was a number of Windows users who were concerned they were being left behind. Interestingly, the Rails maintainers responded that amongst the core developers of Ruby on Rails, Windows users were a small minority.

So then, in this other piece I was reading (I need to see at least two things before I declare an Official Trend) John Dvorak rips on Dell, claiming they're stuck in a 90's mentality. In the article, he says Dell isn't keeping up and startups in Silicon Valley these days tend to use laptops, and many many of these laptops are Macs.

Even Senator Schmelkin, a long time Windows guy, switched completely over to a Mac a couple of months ago (I tried to get him to blog it...sorry, no luck...).

Okay - I knew Apple was getting a boost from the whole iPod thing, but I never expected to see quite this level of momentum (and yes, yes...I'm sure in the accounting and parking facility businesses Windows still has 18456% market share...). There seems to be an accelerating trend, especially in the software and web world where not only is it more desirable to work on a Mac, but its beginning to look like people are beginning to take the position that Windows doesn't matter. It's like it's deprecated.

(Disclosure - I was a Mac guy from before it was cool, except for a span of about 5 years that I spent trying to install Linux on a laptop).

The Rails guys do tend to be a bit religious at times - "my way or the highway". But I do find the basis for their switch interesting. The lack of first-class support for Windows was simply not a consideration. Has the world finally changed? Is the wicked witch finally dead?

Ai at the Circus

noreply@blogger.com (David Wertheimer) — Thu, 03 Apr 2008 17:28:00 +0000

We took a little field trip yesterday. (The guy in the clown suit is our front-end tech lead.)

The new guy

noreply@blogger.com (David Wertheimer) — Wed, 02 Apr 2008 18:12:00 +0000

Our newest developer is an affable California actor/musician named Mike. He came to Ai very deliberately: not just to take on a new job, but to have a new experience, shifting from freelance life on the west coast to a full-time gig at a boutique agency in Manhattan.

We thought it'd be interesting to hear Mike's take on joining Ai. Here is his story.

It's 80 degrees in California. The sun is shining, the surf is epic, and I'm enduring a bone-chilling winter in New York City; I've accepted a job here at Alexander Interactive, and these are my reflections on my first couple of months here.

Prior to taking this job, I've spent a long time freelancing, largely because I wanted the flexibility to pursue music and acting, but also because there's a certain stubborn pride in flying solo.

As a freelance developer you have opportunities to interact with so many different kinds of organizations. You see their strengths and weaknesses; the star players that make them great, and the mediocre-types that weigh them down. You bounce in for a while to launch a new web property or maybe to incubate a fledgling app idea with a prototype.

But then when it comes to evaluating these engagements as full-time employment opportunities, you start to sound like Goldilocks - this company's too big; that one's too small. This one's too structured or limiting; that one's too disorganized or perhaps underfunded for their expectations. Some companies define us too rigidly, while still others lack enough methodology and process for us to grow as individuals, team members, decision-makers, artists and engineers.

At the end of the day, the choice of employment is an exercise in personal branding ... and I was fundamentally unwilling to marry my personal brand to that of an organization, big or small. Was it a fear of commitment? Was it that I felt the other "hats" or interests would somehow be lost upon taking a "full-time" job as a web developer? Did I think that somehow an employer would dismiss my range of possibilities? Or had I simply not found an organization that I was going to be proud to be a part of?

Some people said I had the perfect LA life - 5-minute commute to my own office, flexible schedule to surf and rehearse with my band, coding through my twilight primetime as I pleased. I had complete flexibility, which was great, but it was a lonesome existence. Encounter a problem? Just me and The Google, baby. I was lacking community, challenge, and direction; and I knew it.

What makes this Ai place special, isn't that everyone here is excellent at some piece in the web development puzzle. It's that the people here are real people, bringing their talents as "individuals" to the team - and trying to excel in disciplines beyond those called upon at work.

A tech lead is leaving work with a violin amidst a 60-hour week, on his way to orchestra rehearsal. Another dude is reading Chekhov ... in Russian! Yet another has made a career change from teaching, and enjoys discussing philosophy. One of the javascript gurus plays bass like Jaco! The list goes on, of course, but already it's sounding contrived. My point is that people here are fascinated by a lot more than just elegant code and sleek design - they're drawn in by the patterns of the world at large.

And this drive to see order in the world and in our work pays off big for clients. People here kill themselves to build things the right way. Folks here groan when clients stubbornly choose less-than-usable solutions. Everyone here hang their hats on goodness, and it's not in a taking-credit or competitive sense - it's in the genuine appreciation of a solid product.

I'm really fortunate (and stoked, in the California vernacular) to have discovered a group of 40 men and woman that are doing solid work, and having fun while doing it. If my fooseball skills can improve half as much as my programming has, I'm going to be all set -- actually strike that -- my fooseball skills need a pretty severe overhaul.

When I came in for interviews in December, my final interviewer had googled me and found a goofy YouTube video of me dancing at a wedding a couple of years ago. I shook my head and thought "Oh man, that's it - there's no way I'm getting that job" as I left the interview. Upon recounting this episode now to one of the founders, he responded "Are you kidding me? That video's *why* we hired you." Amen to people with a sense of humor in an age with no *real* privacy.

There's great stuff going on here. We've just built a social network using Ruby-on-Rails, we're building beautifully-usable websites, and we're helping our clients extend their brands everywhere from Facebook to the iPhone. And you know what? It feels really good to say "we". And for my old colleagues and clients reading this - I'm happy to say, I'm still available to build to help build your digital idea. Because now I'm part of a killer team, doing just that. No longer a solo artist - I'm with the band, man.

And for all you maverick freelancers out there that could never imagine ever setting foot in an office again, consider that this is a golden time to be at this company of this size - a delicate balance of freedom and know-how accountability. And though I'm miles away from "home", it feels a bit like a homecoming.