Default Desktop Apps Economics + Ponderings

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Originally uploaded by scobleizer.

I like Nicholas' Carr' referencing of Google's advisor Hal Varian re "the power of the default". Jason Calacanis has also got into the debate with the deals Google could do with PC manufacturers to license a free Goog O/S with Adsense paying a 10% annuity too : One of the big dot coms I worked at during the 90's was based around this insight : Virtual Communities Ltd - an Australian company that sold IBM PC's (locally) at no profit delivered and installed into the house for a low weekly fee - At Virtual we got our 6 figure salaries and offer for stock options at an inflated entry price, based on a triggering event (end value zero), and were told to build a "desktop portal" (CEO/Founder : "You know, a layer above the desktop. A floating portal, so you dont even go onto the internet...") All you as a consumer had to do was choose which computer, and after a liberal credit check, we'd send someone round and install the computer in your house (through a distributed expensive logistics network and call centre which ended up meaning we lost money on each PC because customers would talk on the phone for 50mins not 5 or keep the deliverers of the PC at the house for hours with connection questions) - Once you were up and running you were then (wait for it..) one click from your choice of "Virtual Communities" (vmoney, vsport, etc) - which was our 'pathway to profit' - by clipping the ticket as the saying went. We would break-even on the PC/ISP business and as communities increased in size (the viral effect eh), then group buying power would be used for financial, telecommunications and retail purchases. (a trend ironically which seems back in with talks of pooling ecommerce purchases ala accompany.com did back in the day - as well as this whole cheap/free pc movement which i can feel is back) In retrospect there were too many parts to the business model, too much risk. We didnt really know what we were getting ourselves into, a bit like Google Pack I suspect. ("They spent all afternoon setting them up. Hundreds of clicks and license agreements later, they had it the way they wanted,"" says Marissa re The Serg/Larry show, um ok like, whatever.)

Fortunately Virtual Communities is still running (raised enough capital, didnt spend like crazy and made enough money eg $50m+ VC / $40m rev YR1 to weather the downturn, although it was boughtout a year or two back fairly cheaply smartly pre 2.0 for its PC and ISP customers) Happily though, I type this blog post on an ibook I recently purchased (it was the cheapest seller with best finance terms and they had my details on file etc) from them. Virtual Communities however doesnt (any longer) control my (now ibook/imac) desktop(s). The Power of the Default. Not. In reality the battle for the desktop never goes away : Why compete for end users on the Internet, when ala MS pre-DOJ, just get control of the desktop and push your services; The biggest insight to me from this period is to not underestimate the insertia by customers and absolutre ignorance beyond sending email, using google, and doing some online banking. Some of our customers thought the CD-Rom drive was actually a coffee mug holder, I kid you not : We're pretty dumb here down under.

What do I think of Google Pack though ? I give it one tick for looking at the mass problems consumers have. My Mom's "default" machine is still a Virtual Communities IBM PC running Win ME and is using Outlook Express from 2001. I've had to install spambully.com for $30 US on this machine to get rid of all the phishing scams from pseudo-spam banks. (you forget on a mac, with firefox and gmail how bad it is) Now if google or microsoft had a better/cheaper/free solution for this spam, that was very easy for my mom, she would be converted to GOOG or MS. As it is, spambully is about to get $30 richer when the 14 day trial is over tomorrow - unless any1 can recommend an equivalent free product NOW because she wont switch to gmail - where spam filtering is free (or ISP mail redirect or an opensource spam filter) : Further adding worry to my mom is she has to worry about giving her credit card to a bully. (she actually likes the name because she is so sick of spam)

The problem I have with all these google 20% projects that appeal to the (far from funny on stage - what was he talking about up there with adaptors and usb etc, boooooring) goog founders (that edit out the funny bits from Robin Williams "Hit em again, Mensa-boy, its your turn."), is that it means 20% of any project will automatically be lost. And how many 80% projects succeed ? Google Pack reeks of a 20% project not a dedicated team of 20 engineers (discounted by 20% for other projects) so Google Pack doesnt have the look of a 16 engineer team effort. What is all that headcount on Firefox and OpenOffice really doing we wonder ? My guess is they're all working on 20% projects invented by the founders (Larry : "hey why dont you work on this kewl usb adaptor project ?"), when success as PageRank / Search / Adwords-sense (esp when trying to solve "the problem of the default" without control of the hardware or OS or even browser) takes 110%. This is the classic startup vs big co' debate about solving specifc complex problems.

Back to RuffTrade, RoughType I meant : "It's worth remembering that one of Google's top advisers is Hal Varian, the Berkeley economist, who has studied what he calls "the power of the default": the tendency of ordinary people to stick with what they're given, rather than spend time actively seeking alternatives. Defaults have a big influence over how people operate their computers and thus over which browser and search engine they use - and defaults are often set when you install or update a program."