November 26, 2005

Internet Connected Components

What do you call things like Flickr, Microsoft Gadgets, Google Maps, Amazon Affiliate parts?

Ive been struggling to communicate with others what the new Internet ecosystem is made up of and it hit me a few minutes ago.

They are Internet Connected Components.

When you go to Kayak Buzz or ZVents, what do you see? Two ICCs. One is a Google Map. Another is a AdSense bar.

When you go to Dave Winers blog, what do you see? One ICC. Its the Community Directory on the right side that points to an OPML file somewhere else on the Internet.

When you go to Gabe Riveras blog, what do you see? One ICC. Its the Memeorandum box that you can put on your own site.

When you go to Caterina Fakes blog, what do you see? One ICC. Its the Flickr bar to the right side of her blog.

When you go to Naked Conversations, our book blog, what do you see? Two ICCs. One from Amazon and one from Google.

Price as Signal

Joel Spolsky writes:

People have come to believe that you get what you pay for. If you lowered the price of a movie, people would immediately infer from the low price that it’s a crappy movie and they wouldn’t go see it. If you had different prices for movies, the $4 movies would have a lot less customers than they get anyway. The entertainment industry has to maintain a straight face and tell you that Gigli or Battlefield Earth are every bit as valuable as Wedding Crashers or Star Wars or nobody will go see them.

Now, the reason the music recording industry wants different prices has nothing to do with making a premium on the best songs. What they really want is a system they can manipulate to send signals about what songs are worth, and thus what songs you should buy. I assure you that when really bad songs come out, as long as they’re new and the recording industry wants to promote those songs, they’ll charge the full $2.49 or whatever it is to send a fake signal that the songs are better than they really are. It’s the same reason we’ve had to put up with crappy radio for the last few decades: the music industry promotes what they want to promote, whether it’s good or bad, and the main reason they want to promote something is because that’s a bargaining chip they can use in their negotiations with artists.

SaaS Business Models

Amy Wohl offers ideas on how to make money through software-as-a-service:

Advertising: Consumer-oriented SaaS generally is given free to customers. The idea is to build huge volumes of users and then to make money by directing paid advertising to them as the “fee” for using the “free” software. This model has already been perfected by Google and Yahoo and Microsoft is eager (might we say anxious) to join them. While some would call Microsoft late to the market, others, such as tech writer David Coursey thinks the market is so nascent that Microsoft could still come in (as it did with the Internet Browser market) and take over. You can read his thoughts here http://www.eweek.com/article2/0,1895,1885565,00.asp

A Two-tier Model : ISVs who are offering consumer or small business software for free against an advertising model often hope to convert some of their users to a premium SaaS. This could be as low-key as a small monthly fee for an advertising-free version of the software. But it might be a much more feature-rich version of the product, with lots of goodies,as well as better support reserved for paying customers.

Subscription Models: ISVs who offer sophisticated software to larger businesses are generally not interested in advertising models. They expect to charge for their software on a subscription basis. There are, however, so many varieties of subscriptions that choosing the right one(s) to offer is quite a trick.