Is Advertising The Future Of Software Revenue, Part I

There is a strong movement toward Internet-based software applications. Of this, there is little doubt. I have written on the SaaS trend in the past, and believe it is real. But sometimes market trends such as the move toward SaaS are overstated, both in terms of the speed of change, and also how much change the trend will ultimately affect a market. We have a word for this overstatement of a trend: “hype”. So, is traditional software revenue model of licensing dead? Will all software eventually be “given away” to the end user, and supported solely by advertising revenue?

If you believe many of the pundits in the computer trade press, the answer is a resounding “yes”.

What do I believe? It’s a bunch of hooey.

I’ve got a few gray hairs, and have been in the technology business for a while. In technology, this type of hype is neither unusual nor infrequent. For background purposes, let’s backtrack a bit, to few recent, major “trends”, which were heralded as the “next big thing” by the mainstream technology trade press and associated analysts.

JAVA What was predicted: Java was going to take over the world, it was a Microsoft killer. Sun Microsystems was to ascend to the position of King of the technology world.

What actually happened: There was tremendous PR hype far in advance of mature, usable technology and products. This was followed by headlines detailing the dismal failure of Java in the market, and the beginning of yet another down cycle for Sun. Java technology eventually matured and found a nice market space, although not a dominant one, and one that Sun seems to have failed to capitalize on directly. The most recent estimate I’ve seen of Java revenues for Sun is $10M annually.

BLUETOOTH What was predicted: Bluetooth was going to be the next great wireless standard, blowing past the expensive and inferior 802.l1 standard. It would extend from cable replacement all the way to “smart networking”.

What actually happened: Unlike Java, which people saw as proprietary to Sun (with good reason), no one company “owned” Bluetooth. It was backed by a large consortium and standards committee. Unfortunately, like Java, it was grossly oversold very early on, both on its maturity and its ultimate potential. The trade press once again declared this new technology a failure–far before the development cycle was even able to deliver stable, useful products. 802.11 became the dominant wireless networking standard. Bluetooth has found a small niche in short cable replacement, primarily in the market for hands-free devices attached to mobile phones. Newer emerging standards such as UWB threaten to usurp in many of the market niches that Bluetooth has been able to establish, and is the new challenger to 802.11 for the wireless networking space.

PEN AND VOICE COMPUTING (TAKE YOUR PICK): What was predicted: Many times over the years, tech industry pundits have proclaimed that by year xxxx, Pens and or Voice Recognition technologies will have rendered the trusty keyboard and mouse obsolete. We will be able to engage our computing platforms in a more natural manner, much like we do in “real world” interactions. The Apple Newton was to be only the first generation of soon to be ubiquitous pen-based computers, which would dominate our everyday computing world. Later, Bill Gates told us during a stage introduction in 2001, that he was “already using a tablet PC as his everyday computer.” Certainly all the experts, over the years, expected these technologies to mature and become mainstream, long before the year 2006.

What actually happened: We’re still waiting. I’m guessing that Bill G.’s clunky Tablet PC is sitting somewhere in the corner of his office–gathering dust. I haven’t tried to add it up, but I’m sure that many billions of dollars have gone down the drain (along with a bunch of high profile startups, and careers), trying to bring these technologies to the mass market. In the meantime, the technologies have continued to mature, and have found important niches. Pens have become useful in mobile computing, although keyboards have recently mounted a comeback in that area. Voice recognition continues to mature and has become very useful in the market for people with disabilities. The maturation of voice recognition can also be seen when you call a company using one of the newer automated attendants, as entry points to their call centers. They are much smarter and quite a bit less frustrating to use than the earlier attempts in the market, which helped coin the phrase “voice mail hell”.


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