Charles Hudson’s Weblog

This has been a really interesting week in the world of platforms. Between Fred Wilson’s blog post on filling holes and the subsequent Tweetie acquisition announcement and Apple’s announcements about some of the social gaming features that will be part of the next iPhone OS release, it reminded me of some things I’ve thought about as it relates to building on someone else’s platform:

If you’re going to work on a feature that ought to exist (filling a hole, so to speak), you might end up in a single or zero winner situation – It seems to me that the danger of building an application on someone else’s platform that you think ought to exist is that there’s likely only going to be one (or possibly no) winners in the end. If it is in fact a hole, there’s probably one company that the platform owner could anoint as the winner and either give that company preferential treatment or acquire the company itself. Even worse, if it’s an obvious hole, the platform might build it on their own, leaving everyone out in the cold.

If you’re really just filling a hole that the chosen platform just hasn’t gotten around to filling, that might be okay if you’re in a build-to-flip type of opportunity. If you’re trying to build something sustainable, it seems like this is a tough way to go.

It’s very dangerous to build on platforms where the platform itself hasn’t figured out it’s own monetization strategy – I’m surprised nobody talks about this more often. If the underlying platform on which you’re building hasn’t figured out its own monetization strategy, you’re taking a lot of risk with your own business. Until you know the strategy and business model for the platform you’re on, there’s always the risk that your product and strategy could become obsolete once they do figure out a business model. Even worse, your chosen model could end up being at odds with their own strategy.

Make sure you understand the cultural orientation of the platform on which you’re building – Some platforms are really about letting a thousand flowers bloom (Facebook) while others are more tightly controlled (Apple). With that cultural orientation in mind, it’s hard to be surprised when Apple does something with the iPhone / iPod / iPad platform that feels like a land grab – they have a history of exercising tight control.

This is what makes the Twitter situation so interesting to me. They have historically (as in the last few years) been all about letting innovation flourish. It appears that they now might be changing their perspective. Living on someone else’s platform requires that you understand this stuff really well.

Something has been bugging me about social games of late. There are a lot of great games out there – I play a lot of them. And you know what many of them have in common? There isn’t enough chaos in most of today’s social games. Let me explain what I mean. I grew up playing two games where bad things can and do happen and they really impact game play. I played a lot of head-to-head Madden football growing up. Every now and then, one of your star players would get injured and go out for the game. There was nothing you could do about that – the player was gone and you had to soldier on. I also played a lot of SimCity. You know what used to really irritate me? When an earthquake would come along and wreck my perfectly designed city. It drove me nuts.

As frustrating as these seemingly stochastic elements were in the game, they made the games more fun. There was an element of chance and risk that was beyond the control of the player. And the consequences of those seemingly stochastic elements was often grave – losing your star QB in the first quarter of a game of Madden can be lethal. Recovering from a catastrophic earthquake in SimCity is not easy and can erase tons of progress. But those elements and risks are always in the back of your mind and they make those games fun.

Why haven’t we seen that in social games? Why isn’t there flooding, frost, drought, locust plagues, and other stochastic elements that can really wreak serious havoc on your farm in Farmville? Island games where volcanoes can erupt and cover the island in ash, erasing progress? Virtual pet games where pets are resistant to training, care, or any attempt to make them obedient? I’ve seen some movement toward light penalties in games, but when will someone really push the envelope and try something riskier here?

The only reason I can see why folks have been shy in terms of integrating these kinds of game mechanics is the belief that today’s crop of social game players have a high degree of loss aversion. Put another way, the belief among social games developers is that putting in real stochastic penalties in games or other forms of anti-progress activities would not be well tolerated by the folks who play these games today. Nobody *likes* losing things in games – it’s not fun. But it can make a game so much more vibrant and complex. I do think there are some players who would rebel against changes like this – but who wants to play a game that’s almost always up and to the right so long as you do what you’re supposed to do? I think we’re missing out on something by not having more random bad things that can happen to you in the current crop of games.

Do you build or play social games? If you have thoughts on this topic, feel free to leave a comment.

PS – Hat tip to Shanna Tellerman for the blog post title and Justin Hall for chatting about it over coffee.

One more quick events post. Two of my friends are organizing events that I think are both interesting and worthwhile – check them out if you can:

FailChat #1: The Pivot
March 3rd, 6:00pm – 9:30pm
PariSoma
What do Flickr, YouTube, and Nintendo all have in common? They each went through a pivot: the act of a company drastically changing their product and/or business plan to attract a larger and/or more profitable market to avoid bankruptcy or business failure. With proper planning, good advisers, and loyal users, it can still be an excellent way for any startup to bounce back. Come meet and network with industry leaders, founders, and more, then join in our panel discussion on how and when to pivot, what it entails, what to expect, and more! Tickets available at http://thepivot.eventbrite.com 10% off with code “Hudson.”

Flash Gaming Summit
Flash Gaming Summit is back for 2010 and better than ever in its second year! Join us for a one day conference dedicated to fostering the growth and success of the Flash games community. This conference will bring together leaders in the Flash game space to share industry insights and strategies for monetization, distribution and analytics. Speakers and panelists include Adobe, Nitrome, Zynga, Playfish, Pushbutton Engine, Papervision 3D, Three Rings, Kongregate, AddictingGames.com and more.
Site: http://www.flashgamingsummit.com
Register with 15% discount “15friends”: http://fgsummit2010.eventbrite.com/?discount=15friends

I’ve been hard at work on the Freemium Summit and it’s less than a month away. More importantly, for those of you interested in attending, Earlybird pricing ends on Friday. We’ve got a great lineup of speakers and topics (see below) – I hope you can join us!

If you read this blog or found this post via search, you’re in luck – you can save 10% on registration by using the code CHUDSONBLOG at checkout.

Conference Website: http://www.freemiumsummit.com
Registration: http://freemiumsummit-chudsonblog.eventbrite.com

The first Freemium Summit is a one day event focused on exploring what it takes to succeed under the freemium business model. Across all segments of the media landscape, entrepreneurs and executives are pioneering models that combine a free offering with a premium, paid offering. This hybrid business model is one of the most exciting areas of business model innovation impacting the world of media and the Freemium Summit will explore the most important topics on the minds of leading practitioners.

Confirmed Speakers
*Toni Schneider, Automattic (WordPress)
*Matt Brezina, Xobni
*Aaron Levie, Box.net
*Phil Libin, Evernote
*David Sacks, Yammer
*Tom Conrad, Pandora
*Drew Houston, Dropbox
*Hill Ferguson, Zong
*Ranjith Kumaran, YouSendIt
*Ben Chestnut, Mailchimp
*Lance Walley, Chargify
*Isaac Hall, Recurly
*Lincoln Murphy, Sixteen Ventures
*Shayan Zadeh, Zoosk
*Andrew Lacy, Tapulous
*Jeff Smith, Smule

Agenda for the Day
8:00 AM – 9:30 AM Registration
Join us for coffee and other assorted treats during registration. Bring your ticket confirmation and ID to help expedite registration.

9:30 AM Welcome to the Freemium Summit
Charles Hudson, Host, Freemium Summit

9:45 AM – 11:15 AM Freemium for Consumer Internet Businesses
Our consumer Internet content block features 20 minute talks from leading companies making the freemium business work in consumer Internet applications.
*Toni Schneider, Automattic
*Phil Libin, Evernote
*Tom Conrad, Pandora
*Drew Houston, Dropbox

11:15 AM – 11:40 AM The Abuse that Comes with Free
Switching to a freemium model isn’t always easy. What can go wrong when switching to a freemium model? How do you handle the influx of new users? Hear one company’s cautionary tale of what can happen when switching to a freemium model.
*Ben Chestnut, Mailchimp

1:00 PM – 2:00 PM Freemium and the Enterprise
Curious about what it takes to make freemium succeed when developing enterprise or business applications? Our group of esteemed experts will share their thoughts on what it takes to succeed in this space.
*Lincoln Murphy, Sixteen Ventures
*Aaron Levie, Box.net
*Matt Brezina, Xobni
*Ranjith Kumaran, YouSendIt
*David Sacks, Yammer

2:00 PM – 3:00 PM Making Freemium Work on Mobile Platforms
Mobile is a rapidly growing opportunity for people interested in the freemium model. What does it take to succeed using a freemium model in mobile? Our speakers will share their thoughts on this exciting topic.
*Andrew Lacy, Tapulous
*Jeff Smith, Smule

3:00 – 3:30 PM Break
Take a moment to recharge your batteries and top up your tank with sugar or caffeine.

3:30 – 4:15 PM Freemium Games – Succeeding with Free-to-Play Games
Free-to-play games are revolutionizing the games space. Why is this working? What does it take to succeed? Our pair of speakers will share their thoughts on how to build a successful freemium games business.

4:15 PM – 5:00 PM Building a Freemium Business on Someone Else’s Platform
Are you a developer looking to build a successful business on someone else’s platform? How do you mitigate risks? Is this something that is in fact doable? Join us for a set of interesting talks on this critical topic.
*Shayan Zadeh, Zoosk

5:00 – 5:45 PM Payments and Monetization for Freemium Businesses
We’ll close the day talking about what it takes to succeed in generating revenue from your users. Should you build your own billing system? Should you support alternative payments? Our closing panel will shed some light on this important topic.
*Lance Walley, Chargify
*Isaac Hall, Recurly
*Hill Ferguson, Zong

5:45 Closing

I’ve been playing with Google Buzz for a few days, mostly to get a better sense for the interaction model. I’m a heavy Gmail user, so I’ve been particularly interested in how the service integrates with Gmail. While I have enjoyed using Buzz, it has helped crystalize some of my thoughts about why using email to bootstrap a social graph is a really challenging proposition.

My Gmail inbox is really a catch-all place for communications. Its composition includes transient and long-term relationships, business and personal communications, and a host of other things that I file away for later review. I tend to treat my gmail Inbox like a big junk searchable junk drawer -it’s a good place to keep stuff for later use.

That being said, if you wanted to bootstrap a social graph from my inbox behavior, you would need to understand a few things:

Context – For any given person with whom i communicate, what’s the context? Are we friends? Colleagues? Business associates? Alums from the same school or program? All of this matters as it determines what I might want to share with them.

Flow – What’s the direction of the communication? How often do we communicate? Is it unidirectional or bidirectional? Take Amazon, for example. I receive and read a lot of email from Amazon. But I nee wrote back. I also have people in my inbox who send me lots of interesting stuff, but it’s mostly a broadcast relationship. Raw communications volume is not necessarily a good proxy.

The two issues above can easily be solved by making a system opt-in. That alleviates the need for Google to try to infer context and flow as I can do that heavy lifting for the system by choosing which people to include and invite.

The reality, though, is that Google is a bit late to this party. Let’s dissect the situation. Google’s best and biggest social graph (or the biggest and best social graph that they can access and index) is Gmail. They can’t get at Facebook or Twitter, so they have to work with what they have. While an opt-in system, would have been more privacy-friendly, it almost certainly would slow adoption and growth. Inviting people to something new is time consuming. And a service like Buzz isn’t interesting or useful until you have enough people on it, sharing information, and engaging to make it feel vibrant. So if Google wanted to try to catch up in social content sharing, the fastest path would be to put it in Gmail and make it default opt-in.

I’m also waiting for Google to start looking at what I’m doing in Gmail and starting to insert contextual Buzz prompts. For example, how long will it be before I’m sending out a link to a cool YouTube video to a group of friends and I get a prompt to post it to buzz in addition? The same is true of Picasa photos, Flickr photos, or any thee piece of web content. Gmail Labs already has some handlers that can detect and display certain types of content – why not apply those to Buzz?

In th end, Buzz will work of it drives traffic to content sites or helps people engage around content.

This is a really short post.

1. Earlier this week we announced that Serious Business, where I have been the VP of Business Development for the past 18 months, was acquired by Zynga. You can read more about it here. It’s a great outcome for the team and I’m excited to see what the two companies will do together.

2. At the end of last year I sold my conference business to Alan Meckler and the team at WebMediaBrands. So far it has been a great partnership and we have some cool new events coming to market later this year.

I would not recommend trying to work on two meaningful transactions at once – it’s very tiring. As such, I’m taking a short break from work while I mull over the next steps. I have a few cool ideas of things I’d like to do and should be able to say more about my future plans shortly.

My Google Nexus One is slowly starting to win me over. After a few errors in getting it set up (I’m willing to accept a good deal of the blame upon reflection), I really like the device. It’s not going to displace my iPhone as my primary device until they solve the entertainment experience and give me a better way to access my music, videos, and other entertainment content that lives in iTunes. Below are some initial thoughts on the device and my experiences using it.

You really need to commit to Google’s suite of cloud services to fully enjoy the device – I live on Gmail, Google Calendar, and Google Talk for personal purposes and Google Apps at work. If you can fully commit to those services, the Google Nexus one rocks. It’s not so much a phone as it is a portable cloud client. The one nice thing about the deep integration between the device and Google services, though, is you no longer have what I call “sync anxiety” – the fear that something you do on your mobile device won’t end up showing up in the other places where you want it to appear. With the Nexus One you’re basically operating on the live data – the concept of syncing isn’t really so relevant.

There is one area where I do find this frustrating and that’s contacts. I don’t use Google Contacts – I don’t think it’s a full-fledged product just yet and that isn’t where my contacts live. Having a good, free desktop sync product that would get my contacts from my Mac Address Book onto my Nexus One. I’ve been slowly but surely working on cleaning up my Google Contacts, but this is kind of a pain.

On a more positive note, the native Google Voice implementation is great. It has me considering dropping Phonetag – it’s not that translations are better but that its tightly integrated and getting the raw audio fies quickly and easily makes up for the less accurate translation.

This device is an email powerhouse if you like Gmail and are comfortable with a touch keyboard. I’m much faster dealing with email on this device than I am on the iPhone. There are two reasons why I say this. The first is search. Beauae you’re operating on your real Gmail inbox, I find that search and retrieval works much better and it works much faster. It also supports all of the booleans and search by label functions I use on the desktop version. This is a huge time saver if you have a large mailbox.

Speech to text is handy, but imperfect. I have been playing with the speech to text functionality and I like it. Apparently you have to be connected to the internet for it to work, but its great when you have the privacy of a car or office and have a longer email or blog post to do. It isn’t quite good enough to be a go-to but it does work.

As an iPhone owner, I really want the ability to run background applications. It is as awesome as advertised. That subject is worthy of its own post.

My last gripe is the lack of padding around the keys on the keypad. I can type much more quickly on the iPhone because the padding around each key seems larger, allowing me to type confidently and quickly.

To really love this device, you need to give it a week and approach it with an open mind.

Oh, and I composed this whole post on the GNO using WordPress’ android app.

I’ve been thinking a lot about this whole idea of “Pay With Facebook” and the ability for people to eventually use their Facebook credentials to pay for things on and off Facebook. When I was at Google, I worked on Google Checkout for a year and have also been spending a lot of time studying Amazon Payments as well. I wouldn’t describe myself as a payments expert, but it seems to me that a successful payments system or network has to have two things at a minimum:

1. A very large user base of people who have given you a payment instrument.
2. Publishers, merchants, or partners who feel comfortable surfacing your payment option to their customers.

Having a large base of customers is not enough – you need a large base of users who can and will provide you with some kind of payment instrument. When Google Checkout launched, there were quite a few people who already had Google accounts – if you use Gmail, Google Calendar, Google Docs, or just about any other product, you’ve probably created a Google account. But only a fairly small number of those accounts have any payment instrument attached to them. Having a relationship with a large base of consumers is good, but you still have to activate them and get them to connect a payment instrument to that account.

The publishers or e-commerce sites you want to target have to feel comfortable having your payment offering in front of their customers. I haven’t seen a lot of good analysis on why Amazon Payments haven’t taken off more widely in both consumer and business applications. I suspect the reason is not that there aren’t enough customers with Amazon accounts with payment instruments attached to them. The payment tiers are certainly competitive. I suspect the reason why it hasn’t taken off as much is that most small to medium sized e-commerce players view Amazon with a wary eye. Do they really want Amazon building a relationship with their customers? Do they really want to show that Amazon button and encourage their customers to think about looking for the same product at Amazon? Do they ultimately want a company that could end up being a competitor to control their payments flow? The answer to most of those questions is probably “no.”

So what can Facebook do to mitigate the risks mentioned above?

Lead with games – I think targeting games on Facebook makes sense. That’s where the money is. They should be able to get plenty of people to enroll credit cards, ACH, Zong accounts, or whatever other payment instruments they support as we know that people are already spending lots of money on social games today. Leading with games will not get them the entire Facebook audience, but it will get them in front of customers who do want to pay for things and are active Facebook users.

Beware of bundling – Facebook clearly has global aims in changing the world of advertising. At some point, I am sure (very very sure) that they will roll out a product that looks and acts like AdSense. It might even be tied to Facebook Connect or Pay with Facebook. If that is the case, I suspect there will be tremendous pressure to bundle the payments piece with the advertising piece. I’m not sure this is wise.

If you’re really into Facebook and Facebook games, I encourage you to check out “Inside Virtual Goods – Future of Social Gaming” as it goes deeply into these topics.

Thoughts? Feel free to leave a comment below. Thanks for reading.

Thanks to all of you who have recommended speakers and topics for the first ever Freemium Summit. The event is shaping up nicely – we have some fantastic speakers lined up and some really meaty topics to discuss. We already have confirmed speakers from Dropbox, Pandora, YouSendIt, Box.net, Mailchimp, Xobni, Evernote, and Automattic (WordPress). I’m really looking forward to the event and there are 3 more areas where I could use your help:

1. I am still looking for a few great companies who are experimenting with the freemium business model in the SaaS or enterprise space. Particularly, I’m looking for companies who are either big believers in the value of having a mix of paid and free users or those who are adamantly against it.

2. We’re also going to cover mobile as a freemium topic as well. If you know a good mobile developer with a strong point of view about how to succeed with freemium on the mobile, let me know.

3. If you know of a company who is doing great stuff in the customer service side of supporting a blend of free and paying users, I’d like to talk to them as well.

Feel free to leave comments below – thanks in advance for your help!

I have had my Google Nexus One for about a day. And I’m getting ready to box it up and send it back to them. It’s not because I don’t like the device – it’s kind of wonky in terms of UI, especially if you’re an iPhone user, but it’s still a very good device as you get used to it. It handles native Google apps well, with the notable (and mind-boggling) exception of Google Voice.

If you’re short on time, here’s the punchline – buying an unlocked Google Nexus One is horrible because neither Google nor T-Mobile can get you up and running quickly unless you know what to ask. If you want this phone, just get a contract and be done with it – the two companies haven’t figured out how to support users who come in with a device in hand. Here’s my saga in a few steps:

1. Ordered Google Nexus One unlocked from the online store.
2. Went into T-Mobile and got offered a FlexPay plan – no monthly contract and plenty of options for unlimited or metered voice, text, and Internet.
3. After a few clicks, I had everything up and running – Gmail, Google Calendar, and all of the other core services tied to my Google account. So far so good.

And then I got to Google Voice. Everything went fine until I went to set up my voicemail. All I wanted to do was to forward my voicemail from the Nexus One to my Google Voice number using conditional forwarding. The helper wizard on the device couldn’t make it work. The directions available on the Google Voice site didn’t work. So I picked up the phone and called T-Mobile. They were very pleasant, kind, and helpful, even though they regularly admitted they didn’t know much about the device.

I read the T-Mobile forums prior to the call and a lot of users suggested that you can’t actually do conditional voicemail forwarding if you’re on a FlexPay plan – they simply don’t allow you to do so. I broght this point up repeatedly during my roughly 1 hour call with their support folks. Finally, after some patient work by a Tier 3 unsupported deice rep, we both figured it out – it’s my plan, not the device. After about 30 minutes with the billing department, who kept trying to get me back to technical support, I finally just gave up and told them I wanted to cancel my account. It turns out there actually isn’t a way to convert from a FlexPay month-to-month plan to a postpaid account. And here’s the kicker – even if you bring your own device, signing up for a postpaid account obligates you to sign up for a contract. I don’t mind signing up for a contract if you’re subsidizing my device. But if I’m bringing my own phone, I find that to be a bit insulting.

So now I have this Nexus One and can’t use it seamlessly with Google Voice. It’s a phone, right? This should be a device that showcases how awesome Google Voice is, right? So what I’ve concluded is that buying an unlocked Nexus One is about the worst decision you could make for three reasons:

1. You pay more – the device costs almost $600
2. If you want to be able to use Google Voice to do everything, including voicemail, you need a contract as well.
3. Nobody seems to be able to support the unlocked version of the device and you’ll pull your hair out trying to get help.

Fixing this would be easy. Either Google or T-Mobile could simply direct people who want the unlocked device toward a plan that will actually allow someone to fully enjoy the device and provide a bit more support for those of us who want to get the device up and running quickly.

Overall, I can see the promise in this device. If you’re a power user of Google Apps, this phone is great. But I think I’ll sit this round out and wait until the support and setup issues get resolved before committing to this device.