iPhone Apps and the war for the web

There are a couple of items that have come to my attention recently that suggest change is on the way for app stores (perhaps the iPhone app store in particular):  The first comes by way of Seeking Alpha.  In it, the author cites this item from Gizmodo, which argues that, in the not to distant future, apps will be very cheap or free.  This has been a significant profit center for Apple, but may not be in the future.  The second item, from GigaOm, discusses the opaque approval process for iPhone apps which can be frustrating for developers.

Taken in tandem, the second item suggests higher than necessary transaction costs for developers (since the approval process is uncertain) and the first item suggests lower prices (tending to $0) because of competition.  High transaction costs for no profit suggests that developers will seek to monetize their investment in other ways, through advertising or through other kinds of tie-ins (where price is not $0) that are outside of the control of the app store.

But as O'Reilly points out, there are limits to this too.  Apple is not shy about blocking apps that try to escape their business model.  The O'Reilly article is interesting in that it argues for the shape of competition to come and makes the case for the tendency toward market concentration that we see in the Internet.

Economics of content on the web

I only follow this topic in a casual way, but I found this article to be interesting, especially given the challenges being faced by the traditional news organization. Quoting the article:

The vast majority of the value gets captured by aggregators linking and scraping rather than by the news organizations that get linked and scraped. We did a study of traffic on several sites that aggregate purely a menu of news stories. In all cases, there was at least twice as much traffic on the home page as there were clicks going to the stories that were on it. In other words, a very large share of the people who were visiting the site were merely browsing to read headlines rather than using the aggregation page to decide what they wanted to read in detail. Obviously, this has major ramifications for content creators’ ability to grow ad revenue, as the main benefit of added traffic is the potential for higher CPMs.

So, as always, the big question is how you get the incentives right so that people can be compensated for creating valuable content?

More on standards rivalry

In this previous post, I described an emergent standards rivalry. Shortly after I posted it, this item appeared over at GigaOm.

Standards rivalry in online multimedia platforms

If you were one of the many viewers who watched video clips of the Beijing Olympics online, you may recall that you were asked to download the "Silverlight" software to view it. While the financial side of the Microsoft/NBC transaction to use Silverlight instead of Adobe's Flash player is unknown (at least to me), the motivation for this is clear: to build up an installed base of Sliverlight software. This article from Reuters (via Yahoo News) does a good job of describing this. Quoting the article:

Microsoft's Silverlight technology and rival Adobe's Flash format are currently locked in a race over who delivers the world's online video, but the ultimate prize may be who powers the next generation of Web software.

Using Silverlight, the NBC site offers a glimpse of what is possible with future Web applications because viewers are able to watch up to four videos at once or follow the action with an online commentary that runs alongside the video.

By building up Silverlight's user base, the world's largest software maker is looking to win over developers who see Web platforms such as Silverlight and Flash as a new way to deliver powerful Web-linked programs incorporating rich graphics.

Microsoft, which said nearly half the visitors to NBC's site did not have Silverlight, plans to expand its reach to close the gap on Flash, which is already running on most of the world's Web-connected computers and powers over 80 percent of the video on the Internet.

Taking advantage of Flash, Silverlight and other more simple Web-coding technologies such as AJAX, a new breed of interactive Web software -- known as rich Internet applications (RIAs) -- has emerged.

Like other Web applications, RIAs are cheaper to deploy and maintain than traditional software, but they differ from more simple Web programs by employing rich graphics, running faster and creating a seamless experience that does not require the application to constantly reload or refresh.

Gartner analyst Ray Valdes said 90 percent of the top global 1,000 companies have yet to deploy any sort of RIA, while 90 percent of the top 100 consumer Web sites have already done so using the nonproprietary and more simple AJAX format.

That opportunity has Microsoft eyeing current leader Adobe for business that extends beyond Silverlight and into the sale of design tools along with server and database software to enable these new applications.

Microsoft is approaching Silverlight from the opposite direction. It plans to take advantage of its legions of outside developers experienced in writing for its ubiquitous Windows operating system.

The next version of Silverlight, being tested now and due later this year, will support Microsoft's .NET framework -- tools used by developers to create desktop applications that work on Windows.

Micropayments

This article is interesting. There have been numerous schemes over the years that have been designed to facilitate micropayments, but none of them have taken off.
Quoting the article:

Amid the disdain, and without many people noticing, micropayments have arrived — just not in the way they were originally envisioned. The 99 cents you pay for a song on iTunes is a micropayment. So are the tiny amounts that some operators of small Web sites earn whenever someone clicks on the ads on their pages. Some stock-photography companies sell pictures for as little as $1 each.

“Micropayments are here,” said Benjamin M. Compaine, a consultant and lecturer at Northeastern University who specializes in media economics, “they just have not evolved in the way that everybody expected.”

Why do you think they have "not evolved in a way that everyone expected"? Do you think micropayments will continue on their present trajectory, or do you see big changes coming?