Business - Written by Haydn Shaughnessy on Friday, May 14, 2010 9:53 - 0 Comments
The future of free, and other prices
Friday last I got talking to Nick Black over at Cloudmade in London. Subject: How does a start-up compete with Google or Nokia? We talked about other things too, like Free.
Cloudmade is a great example of “business as platform”. From the ground up, day 1, Cloudmade’s founders set out to create monetizable services around free mapping. That’s what lines them up against the likes of Google and Nokia, true behemoths of the mobile space. For those who are new to mapping, briefly, mapping’s popularity began with in car navigation in high end saloon cars (BMW for example) where the nav app could be charged out at a fraction of the saloon car price and still be worth $3,000. That was less than a decade ago. Navigation is now free, and maps – or geo-data – are the next big wave of content and applications.
Cloudmade’s platform makes it easy to create any kind of map, or geo-data-related app for any mobile device or web service. Apps range from games to locators to, in future, opportunities that might include delivery companies coinciding with their customers in mutually convenient places rather than delivering door-to-door, and devising more of an any time any place offer.
Still, you might say of Cloudmade, just one more API project, and one more ecosystem.
The difference is that Cloudmade is out to create the reward structure for its eco-system, rather than leaving all those app developers (10,000 of them now) to sink or swim in the market. Because Google sees dominance in advertising as its right (in return for all those things it gives away like free search) Cloudmade’s business plan also involves out thinking the Google business model.
Nick pointed out that Google is fantastic at creating new tools around its free services and giving these away, all in the name of increasing ad revenues. What it tends not to do though is create business opportunities for app developers (if you are an ad words professional then you know it does create opportunity in the ads world).
Cloudmade’s unspoken pitch is therefore to take the moral framework of free beyond what Google has enshrined in its business practices. This is not just about giving stuff away so the platform owner can pocket billions of dollars. It is driven by a model where everyone shares the revenue growth.
Cloudmade could then be in the process of redefining what it means to be a platform business. Not only does it reach beyond Google, it also extends the platform model beyond Apple, who, like Google, do not help apps developers monetise their apps beyond the iTunes download.
In Cloudmade’s model apps developers can sell their apps (on iTunes or elsewhere) but also have ad revenue potential – by using the Cloudmade SDK’s they are inextricably linked to Cloudmade’s platform, which includes a contextual advertising service. Cloudmade is in fact an ads aggregator that places geo-contextual ads for merchants via the growing network of Cloudmade developer apps (700,000 people accessed Cloudmade geo-apps in March and the figure is growing at 15% per month).
Two more points are worth making around the Cloudmade model.
First it reflects the fact that open collaboration carries responsibilities. Cloudmade’s founders are openstreetmaps‘ founders. Openstreetmap – with Cloudmade’s support – provides the means for anyone to upload mapping information. For “mapping information” read anything that relates to a place. Openstreetmap and Cloudmade are crowdsourced map, direction and place related databases and the rewards structure needs to be fair.
Secondly a new wave of entrepreneurs is taking free in new directions.”Cloudmade’s support of openstreetmap is driving the cost of data collection down to zero,” says Nick after recounting how much Nokia paid for mapper NAVTEQ ($ 8 billion).
By driving the cost of data collection towards zero Cloudmade can fight on Nokia’s turf. By creating an ad network for its app developer network Cloudmade represents a low cost competitor in the world of Google.
Looking to lessons for the larger economy, I had a few days this week in Stockholm where the rumour is that the large European mobile infrastructure players are facing price reductions of 30% per annum from Chinese competitors.
If that’s the case then finding radical ways of taking cost out of US and European product is an imperative as the economy begins to revive. The question is does it mean that more companies need to work through the moral framework of free, and the reward structure of the eco-system platform. Somehow, somewhere we need to claw back the idea that we can export cost reductions and instead begin devising new pacts around prosumer and developer activity.
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