When we started Open Market in 1994, the Internet was pretty much the Wild West. Everyone was figuring out what it “meant”, and it was a time when a 2-person company could have the on-line presence of IBM (and often did).

Now, fast-forward 15 years.  We have an Internet ecosystem dominated by the “Gang of Four”:  Google, Apple, Amazon, and Facebook.  Combined, these “gorilla” companies have a $750 billion market cap, employ over 100,000 people, and extract most Internet revenues and profits.  And increasingly, this group is controlling the devices we use to get on-line.

It’s not the Wild West anymore, and the new “GAAF” ecosystem has added new constraints around building Internet companies:

• There’s a tax.  It’s overt (e.g. 30%) or indirect (e.g. ad dollars, hosting fees, API fees, etc)

• There’s the threat of copying.  The gorillas use the ecosystem to source new features and products.  See what Apple copied into iOS 5.
• There’s an upper-bound on success.   If you get too big, the gorillas change the rules (e.g. Facebook with Zynga).

I’m reading Steve Jobs’s biography, and though I’ve heard many of the Apple stories, it’s amazing to me how involved he was in fine details of Apple’s product design.  It reminds me that details matter, great products are about details, and great products will make great companies.

It also helps me understand why I reacted so negatively to Gmail’s new design.  It’s easy to trash changes (complaining about Facebook UI tweaks is practically a national sport), but I’m trying to put my finger on why it’s so bad.

There are some nice usability improvements, such as the ability to reply by just typing into a box.  But by going “cleaner”, Google eliminated many of the subtle but essential visual clues that defined page elements.  Consider the old design:

Now, look at the new design:

Note how the most important part (the message body text) gets more “lost” in the page.  Button coloring and shading is now too muted, losing important navigation hints.  The rounded box around messages is gone, causing more work to figure out where messages end and begin (and it’s even worse when messages contain quoted replies).  Sender names are no longer colored, making them harder to find as well.   (And themes don’t address the problem — that just provides color and highlighting on the top and left bars).

Considered together, these changes force the user to do much more “visual work”.  For an email app, which is often used in a scanning or skimming mode, this is a critical issue.   It’s also my biggest problem with many UI designs:   most designers do not undertand how our eyes work.  They frequently focus on “aesthetics”, and miss important contrast, color, grouping, layout, and flow details.

I hope Google lets us keep the old design!

Steve Yegge’s post about Google’s platform strategy has been making the rounds lately, and buried in it is something very interesting:

Jeff Bezos is an infamous micro-manager. He micro-manages every single pixel of Amazon’s retail site. He hired Larry Tesler, Apple’s Chief Scientist and probably the very most famous and respected human-computer interaction expert in the entire world, and then ignored every goddamn thing Larry said for three years until Larry finally — wisely — left the company. Larry would do these big usability studies and demonstrate beyond any shred of doubt that nobody can understand that frigging website, but Bezos just couldn’t let go of those pixels, all those millions of semantics-packed pixels on the landing page.

Steve Jobs was also an infamous customer experience manager, involved with all Apple products to an intense level of detail.  He has his name on over 300 Apple patents.

It think it’s interesting, and not a coincidence at all, that Apple and Amazon are two of the most powerful companies in the Internet ecosystem.  In the end, it’s all about the user experience.

It helps when the “CEO” is also the “CUXO”, but it’s not the only way to do it.  But it’s hard when there’s not one person that owns the UX, with the authority, vision, drive, charter, energy, charisma, and respect to lead it, throughout the organization.  Committees don’t work.

I first read about C in the early 80s in BYTE magazine, when they had a full issue on the language.  (According to the archives, it was August 1983).  After learning BASIC, pointers and function declarations really opened my eyes.  It would be several years before I could actually compile anything, but it quickly became my main development language.   My early copy of K&R is quite worn now, and I could quote it, chapter and verse.

In a world of iPhones with one-year half lives, it’s amazing to consider that C has been in use, in nearly original form, for over 40 years, and it’s the basis or major influence for many of today’s mainstream languages.  It’s even more amazing that most machine instructions executed world-wide are compiled C (and C++) programs (and I suspect this is by a wide margin).

C is a simple but brilliant language, and Dennis Ritchie taught us the importance of finding solutions and designs that are simple and elegant.  We will miss him.

I’ve always loved Netflix.  I was a very early subscriber, and we still carry the DVD plan even though we rarely use it (we’ve had some DVDs out for years).   And Reed Hastings has done something that few CEOs and companies have done:  start business A, then successfully build and enter new business B.

But I think they’ve entered a very vulnerable period.   Their streaming deal problems have been well-reported, but there’s a much deeper (and fundamental) issue looming:  they don’t control any user “on-ramp”.

The consumerization of access devices, like tablets, mobile phones, and e-readers gives companies like Apple (and soon, Amazon) immense control.  In some cases, it’s overt (e.g. lack of Flash support, the app approval process, etc.)  In other cases, it’s done by controlling the preferred user experience:  given the new subscription support in iOS 5, why would users want to do subscriptions any other way?

It will be increasingly easy (and cheap) to watch movies on Apple and Amazon devices, gradually squeezing Netflix out of the party.

I just upgraded my iPad to iOS 5 — wow!  There’s lots of stuff in there.

What’s most interesting are features that Apple’s pulled in from their app ecosystem. This is great for users (Apple gets to cherry-pick the best ideas).  But it’s risky for app developers who can see their hard work turn into free features, and then deeply integrated in a way that only Apple can do.

I’m making a running list of who’s impacted:

• Instapaper.  Safari how has a “Read later” feature, and a nice “reader” mode that defeatures Web pages, showing only the content.

• Web advertisers.  The Reader mode presents text content beautifully, free of ads.  I was wondering when we’d see a main-stream browser with an ad stripper.

• Twitter.  Deep iOS integration pushes Twitter further into utility space.  More tweets will flow through Apple-controlled UIs, moving Twitter closer to being just a tweet packet router.

• Wunderlist (and all the other task managers).  Apple can do a TODO list like no other, with location based reminders and voice input (presumably coming with Siri).

• Wireless carriers.  iMessage (Apple’s response in part to BlackBerry Messenger) is an end-run around text messaging.  It looks like it can work on email handles as well as phone numbers, so kids can start using it with their iPods.

Long term, I see threats to:  

• Dropbox (and all other file sharing companies).  File sharing is begging to be an OS feature, and iCloud (and Amazon’s Cloud Drive) are moving in that direction.

• Laptops.  You can now (finally!) activate and use an iPad without a PC, making it a compelling Internet device for users with no other computer. 

Following up on my work on digital fabrication and related areas, I tried Ponoko’s fabrication service.  I didn’t design anything myself (I’m lazy), but I bought a tabbed Arduino enclosure from their marketplace, cut from 3mm clear acrylic.

Here’s the 20cm x 20cm laser-cut sheet I got from them:

The cut width was very fine (Ponoko says the line width is about 0.2mm):

And here’s the final case (not glued, and assembled not entirely correctly):

Not bad for $5!  I’m impressed.

I think they’re definitely onto something, but there’s still more work to be done.  In particular:

• The parts took too long to arrive: 19 days.  In a world where you get stuff from Amazon in 1-2 days, this is way too long.  It took four days to start making my part, 8 days to make and ship it, the 5 days for delivery.  Digital fabrication really sings when you can iterate quickly on mechanical designs (like software does).  At some point, someone will do fabrication overnight and offer “designs submitted by 5pm will ship the next day“, with East and West coast fabrication centers and cheap 1-2 day shipping to most of the US.

• For 2d/sheet goods, support CAD formats.  Ponoko supports EPS and SVG formats — they’re probably targeting hobbyists and artists.   For mechanical design, they need to support DXF and other CAD formats.  And, they should consider the cut line width with offsets, so they can offer “cut to specified dimension“, which will make it easier to fabricate mechanical parts (such as tabbed enclosures).  Finally, please don’t make me lay out my parts in a fixed format sheet.  Ponoko should optimize the sheet layout (across orders) and just cut out my parts.

When Google announced they were buying Motorola, it was widely speculated that they did it “for the patents”. Now, Eric Schmidt is reported as saying:

“We did it for more than just patents, .. The Motorola team has some amazing products.”

Of course they did it for more than the patents.

Apple has repeatedly demonstrated what’s possible with integrated hardware and software design. As computing devices have matured, the old “wintel” model of separating things is just not competitive anymore.  I have several friends that live on ecosystem boundaries (OS-to-hardware), and it’s brutal.  The combinatorics alone (supporting a wide range of vendor hardware configurations with a single OS) are hugely expensive.

My bet is that Google will start integrating product design with Android/Motorola.  They’ll still license to other Android partners, but I’m betting the most interesting stuff will come first out of Motorola.  Now the question is:  do they have the design talent?

Continuing my ad-hoc series on avoiding the entrepreneurial lottery, another way of avoiding lottery odds is to require real capital for your project (and to get it funded).

When we started Open Market in 1994, a basic Unix server and SQL database cost $100-200k.  It took real money to build Internet companies, and that meant competition was limited by available capital.

Now, anyone with a $500 laptop can start an Internet company (or copy your idea).  Tools are free, and hosting starts out free.  As a result, there seem to be as many would-be Internet entrepreneurs as there are aspiring novelists.

If your idea needs real capital (beyond salaries), you’ll have a much narrower competitive field.  Sure, there’s a lot of venture and angel funding available, but getting funding is a filtering function and barrier to entry.

VistaPrint is a great example:  though they initially outsourced their printing, they ended up spending millions on their own print operation (fed with custom software).  They weren’t going to find any serious direct competition from a Y Combinator project team.

(Note:  raising capital for customer acquisition is not enough of a differentiator.   You’ll still compete with companies finding customers in capital-efficient ways.  See my article on customer acquisition.)

I don’t know any entrepreneurs that love raising money.

It’s usually a necessary part of startups, but most entrepreneurs I know have their passion directed at their product, market, and customers, NOT at investment deal minutia.  Also, for funding rounds, entrepreneurs have to deal with a skill and experience imbalance.  A startup entrepreneur may raise funding every other year or so, while her venture investors are doing many investment deals a year. It’s no wonder that many entrepreneurs rate the funding process like a dental visit.

But, there’s some good news for entrepreneurs:  I just got Venture Deals by Brad Feld and Jason Mendelson.  I will be handing this book out like candy — I can’t recommend it enough.  It’s an excellent overview of how venture deals work, combining a perfect blend of investment mechanics with practical advice.  We’ve needed a book like this for a long time.

Even if you’ve been through the funding process a few times, it’s worth reading.  If you don’t agree, I’ll buy your copy.