This approach has two particularly appealing aspects. First of all, the articles are formatted for easy reading on a small screen. Images, sidebars and the like are stripped off, leaving the raw text in a nice big font. Secondly, the text is stored on Instapaper’s server and downloaded to your phone when you sync. This means that you don’t need a live net connection to access it, nor do you have to put up with MobileSafari’s slow loading times and inadequate caching behavior. The latter is particularly irksome because I don’t always read an article in its entirety in one sitting. With Instapaper, my reading list is accessible at the click of a button, and when I select an item that I was already reading, it pops up immediately in exactly the spot where I left off.

I did a bit of hacking on a very basic Firefox extension called Instabutton that adds a toolbar button (rather than a bookmarklet) with the “Read Later” functionality described above. So now I have a context menu item in Firefox called “Instapaper” that I can select for any link on a webpage. When the Economist comes out on Friday, I go to their website and load up the table of contents of the new issue. With a click, select, click, select, I cruise through the articles picking the ones that catch my eye. The whole process takes a few minutes. The Economist erudite prose sits alongside various other publications and blogs in my Instapaper reading list, meaning that I have access to a broad range of material whenever I have my iPhone with me. Which is always.

With all the morbid commentary about the imminent death of the publishing industry, my first reaction was to see this as further proof that traditional newspapers and magazines are doomed. The few remaining advantages that print has to offer — convenience and portability — are vanishing with the advent of portable reading devices (something I predicted five years ago). Now that I can get my weekly Economist fix in my pocket for free, why would I waste my money on dead trees?

My second reaction was to see this as a huge business opportunity for publishers and for enterprising software developers looking to attach combine an Instapaper-like app with an iTunes-like payment model. This is particularly easy to imagine in the specific case of Apple and the iPhone. Naturally publishers would have to restrict free access to their content in some way, but assuming they do, wouldn’t readers be willing to pay a fee for the great user experience I now enjoy, in the same way they’ve shelled out billions for songs on iTunes thanks to the full service convenience of Apple’s service?

Not according to Clay Shirky they won’t. In a post entitled “Why Small Payments Won’t Save Publishers“, he argues that publishers will not be able to save themselves by charging for their content. (And he helpfully links to a number of articles in the mainstream press that outline ideas very similar to my own, if only to debunk them.) Clay’s post did not convince me that the charging for textual content is a non-starter, however. Quite the contrary, the piece struck me as ideal fodder for a merciless fisking.

As background for his argument, Clay first contends that the term “micropayment” is misplaced in describing a putative paid content system, citing an upper limit for payments that are truly micro that I suppose he extracted from somewhere in the nether regions of his anatomy. Well, who cares? Whether we choose to call them micropayments or floozlebeezies has no material impact on the potential merits of such a system.

His second piece of background is that small payments won’t fly because users don’t want them:

The other key piece of background isn’t about small payments themselves, but about the conversation. Such systems solve no problem the user has, and offer no service we want. As a result, conversations about small payments take place entirely among content providers, never involving us, the people who will ostensibly be funding these transactions.

The implication is that paid content can only succeed if it is actively sought by us, the “users”. Perhaps I’m missing something, but in this context I don’t see any difference between paying for content and paying for anything else. Carmakers charge for cars because they need revenues to pay for capital, labor and to provide value to their shareholders. Car buyers aren’t clamoring to pay for vehicles, in fact I’m quite sure that few indeed would say no to a free SUV or Prius. Publishers have costs and shareholders as well, and it is quite natural that they would like to charge for their wares whether their customers want to pay for them or not.

As far as the analogy to successful paid content systems like iTunes is concerned, Clay rejects it by claiming that these systems have thrived only because they rely on “closed systems” that give consumers no other choice than to pay for a particular good (ringtones, online avatars or whatever). Regarding iTunes, he states that:

Apple’s ITMS (iTunes Music Store) is perhaps the most interesting example. People are not paying for music on ITMS because we have decided that fee-per-track is the model we prefer, but because there is no market in which commercial alternatives can be explored. Everything from Napster to online radio has been crippled or killed by fiat; small payments survive in the absence of a market for other legal options.

Potentially convincing if it were true, but the evidence suggest that it isn’t. Rhapsody, for example, is an all-you-can-eat music subscription service that has some passionate adherents. In iTunes I can choose from dozens of free online radio stations offering music. If iTunes has succeeded with a pay-per-download model, this isn’t due to lack of competition. It is because listeners consider the product and user experience to be superior to alternatives.

The meat of Clay’s argument comes in the last few paragraphs:

Meanwhile, back in the real world, the media business is being turned upside down by our new freedoms and our new roles. We’re not just readers anymore, or listeners or viewers. We’re not customers and we’re certainly not consumers. We’re users. We don’t consume content, we use it, and mostly what we use it for is to support our conversations with one another, because we’re media outlets now too. When I am talking about some event that just happened, whether it’s an earthquake or a basketball game, whether the conversation is in email or Facebook or Twitter, I want to link to what I’m talking about, and I want my friends to be able to read it easily, and to share it with their friends.

In other words, articles hidden behind a paywall will fail to attract readers because we can’t link to them or share them with our friends. Searchability and linkability are certainly important, and publications that charge for articles currently tend to address this by offering the first few paragraphs of an article for free so that it can be linked to and crawled by search engines. But still, the point is valid. If heaping servings of free content are only a google away, getting people to pay for your content is going to be a daunting challenge.

One thing I don’t like about this line of reasoning is that it implies that all content is basically created equal. Any plan to charge for articles rests on the inherent assumption that that content has a particular appeal that can’t be satisfied elsewhere for free. If that isn’t true, then Clay is absolutely right, and no payment system for textual content will ever make it off the ground. It beggars belief, however, that readers will abandon well-written, well-researched journalism and commentary written by professionals for amateur blog posts rather than pony up cash for the former. The reason print media is now struggling is primarily due to competition from the very same publications’ free websites, not from the amateur blogosphere. Otherwise, why are folks willing to pay for the latest Bruce Springsteen or Madonna album when there is plenty of free amateur music from wannabe rockstars available online?

Successful implementation of a payment system for online articles will be tricky. Proponents will have to get a lot of things right, just as numerous music services came and went until iTunes found the right balance of inobtrusive (and now non-existent) DRM, convenience of purchasing and smooth integration with portable listening devices. It will also require that a critical mass of content comes on board (another point I made a few years back). Publishers will start by dipping their toe into the waters of paid content, but when the proverbial tipping point is reached, and finding quality content for free is no longer trivially easy, they will dive in en masse.

It won’t be easy, and it will take a while to get right. Considering the surprising success of the iPhone as a reading device, coupled with its unique track record of confecting the right user experience and its existing content distribution and payment systems, Apple is a leading contender to be the first to market with a viable offering. Amazon, who is making headway in this market already with the Kindle, is another strong candidate. (Maybe I should mention that I own shares in both these companies, but then I only bought them because I believe them to be so well-situated to take advantage of ongoing shift to paid digital media.)

Rather than being a lost cause, payment for online articles has an air of inevitability. Clay underlines this point himself when he states, quite correctly, that “if small payment systems won’t save existing publishers in their current form, there might not be a way to save existing publishers in their current form.” Can you imagine a world without the well-crafted prose of the Economist or New York Times, without the type of informed journalism that depends on the deployment of trained professionals across the globe? I certainly can’t. And this alone is sufficient reason to believe that, one way or the other, we’ll be paying for much of what we read online at some point in the not so distant future.

This imitation of the for-profit IPO process may seem gimmicky, but in fact it is part of a new trend to improve how non-profits are financed, so that they can escape the obsession with short-term fund-raising that is pervasive in the charitable world. With money in the bank to finance the next three years’ operations, Ms Lublin and her team will be free to focus on reaching Do Something’s goals.

Now I’ve savaged the idea of a Mozilla IPO in the past as demonstrating a “total lack of understanding of the Mozilla community ethos.” The Do Something IPO is different, however, since it does not provide investors with any voting rights. An IPO of this sort would therefore provide Mozilla with additional funds without hampering its ability to pursue its altruistic goals.

Mozilla is unlike most non-profits, of course, because it generates significant revenues. At the same time, income is still paltry compared to the financial resources of its competitors (with the recent entry of Google into the browser space only serving to drive this point home more forcefully). An IPO-like event might make sense if a) it brings in a significant amount of capital relative to current revenues and b) that capital can be deployed effectively to increase Mozilla’s competitiveness.

Both are big ifs. If we assume that Mozilla can achieve turnover of around $100 million annually (not that much of a stretch considering that 2006 revenues were $66 million), the amount raised in an IPO would probably have to be in the order of hundreds of millions to make any real long-term difference. Would Mozilla be willing to float enough of its equity to achieve this, considering that the implied market capitalisation would reflect the fact that “investment” in the company would actually amount to a charitable donation in the absence of voting rights?

Besides which, we all know that throwing more money at a software development project or projects doesn’t necessarily lead to increased productivity. Access to, say, twice its current financial resources certainly wouldn’t make Mozilla’s products twice as good or half their time to market. Then again, managed correctly this extra money could have a real effect on Mozilla’s competitiveness.

A Mozilla IPO still seems highly improbable, even if structured in this way, but the idea and the questions it raises are certainly intriguing.

In the web browser space the situation is similar, but the main reason in this case is competition from operating system vendors. Apple and Microsoft provide a serviceable browser as part of OS X and Windows, respectively. Some percentage of the cost of buying an operating system (whether shrink-wrapped or OEM’ed with a new computer) could be considered payment for the bundled browser. This is makes it very difficult for an independent browser vendor to survive in this market, as Netscape learned in the late 90′s.

And yet there are a number of vendors attempting to do exactly this (and, to various degrees, succeeding). The most prominent example is Firefox, which has thrived through a combination of low costs (thanks to an open source development model that reaps free labor from a large fan community) and, famously, an agreement with Google to feature its search engine prominently in the browser’s user interface. Opera generates a similar level of revenue (about $50 million in 2006 versus Mozilla’s $66 million) through licensing to device manufactures, other software licensing, search partnerships and its Webmail service. Flock makes most of its money from a search deal with Yahoo.

Search partnerships form the bedrock of these companies’ income. Licensing looks to be an increasingly tough row to hoe, as there are two excellent open source browser engines (Gecko and WebKit) available for free, and both are aggressively targeting mobile and other devices. There are a number of other potential models that would help vendors grow their revenues, however. Assuming, of course, that they continue to innovate and attract users despite the fact that a built-in web browser is bundled with every major operating system.

Advertising

Search partnerships rely indirectly on advertising, but vendors could potentially make more money by hosting ads directly in the browser. The biggest obstacle is user acceptance of these ads; Opera gave up on in-browser ads in 2005 due to resistance from users. It’s a pretty safe bet that no one is going to be plastering banners willy nilly across their product’s UI. On the other hand, browser developers have a big efficiency advantage over web-based ad platforms because they have access to so much information about users’ surfing patterns. If this data can be used to provide highly targeted ads, the value to advertisers would be enormous, and if the ads are relevant enough users might even seek them out willingly.

Web services

In their role as the gateway to the web, browser vendors are in a perfect position to offer paid web services. Opera’s Webmail service is one example. Paid storage is another; it would be easy and convenient for users to buy online storage (for backup, media sharing, etc.) directly in their browser rather than seeking out a commercial service online. While Mozilla has given no indication that it intends to charge for web services in the future, its Weave project (which aims to explore “the blending of the desktop and the Web through deeper integration of the browser with online services”) would serve as a perfect platform should it choose to do so.

Freemium

Charging for a more advanced version of a free product (“freemium“, if you will) works well for many software products. Why not for browsers? As with advertising, Opera employed this model for years but eventually gave up under pressure from Firefox and less unusable versions of Internet Explorer. To attract a significant number of paying users, a browser would have to offer truly compelling advantages. And if I knew what these might be I’d be busy working on my own browser product instead of writing this.

Servers/Corporate

Netscape attempted to employ this model: provide the browser for free (once they gave up on charging for it) but license their server products to companies for a fee. The strategy failed because web servers became commoditized almost as fast as browsers had, subjecting Netscape to the deadly combination of competition from both Microsoft (with its Internet Information Server) and open source (most notably Apache). But there are plenty of server products that companies do pay for (messaging, content management, ERP, CRM, etc.). A tightly integrated browser/server combination could provide a vastly superior user experience and thus a profitable product in the enterprise market. Microsoft is very active in this space, but there is plenty of room for others to carve out a niche.

Blogged with the Flock Browser

Alright, Apple’s action is dastardly and underhanded, but then corporations have done much worse in the service of their strategic goals. A much more interesting question is why Apple considers it strategic to drive adoption of its browser so aggressively among Windows users. Larry Dignan presents what is frankly a rather artless take: it’s all about the money. Ironically, Larry undermines his whole arguments when he observes (correctly) that “Google’s fees to Apple aren’t likely to be material.” Understatement of the year, when you consider that Mozilla’s Firefox revenues (with four times the market share of Safari) for the entire year of 2007 are probably not much more than what Apple books every day.

Matt Asay’s explanation makes a lot more sense:

[Safari is] a great browser but…who cares? It doesn’t provide any differentiation that Internet Explorer or Firefox don’t already provide.

Except for its tie to the iPhone, of course. Safari is the application platform Apple uses for its iPhone. Why should Apple care about which browser you use? Because it cares about which phone you use. Apple won’t sell a single license to Safari, but it’s definitely hoping to sell you a boatload of iPhones.

But even this is an oversimplification. The real reason for Apple’s move is that it sees Safari as a strategic application platform on the whole range of computing devices, not just the iPhone. Despite continued gains in PC market share, its management realizes that they aren’t going to dislodge Windows from its entrenched position any time soon. So they are fighting to get more widespread deployment on Windows of their two application stacks, Cocoa and WebKit. It is a no-brainer that Apple is eventually going to launch some sort of Rich Internet Application platform, and overall market penetration of Safari will be a huge success vector. The hardest part of driving adoption of any new platform, after all, is getting your runtime onto the end user’s machine. Just ask Microsoft (.Net) and Sun (Java).

I like Matt Asay’s analysis because the iPhone is a significant part of this picture.  Mobile devices, game consoles and television sets will arguably be bigger targets for application deployment than traditional computers in as few years time. But the key message is not iPhone uber alles, but the need for Apple to get its runtime onto as many environments as possible to maximize economies of scale for application developers and cement its nascent but fast-growing control of the software development market.

John Lilly: A lot of times, people don’t know whether to compare us to very, very commercial organizations like Google and Apple and Yahoo! and Microsoft, compared to whom we look very small. Whether the comparison is with those or a comparison against the Red Cross or a soup kitchen and Amnesty International — more traditional non-profits, — I think that either type of comparison isn’t quite right. I think we’re more of a third way. And so I think that as the organization’s emerged, we’re all finding language to talk about it. And as we find the language, we’ll start to do it more and encourage it more in the States and of course all around the world.

I don’t think that nearly enough has been said and written on these topics. How did Mozilla get to where it is in terms of being an economically sustainable open-source business? What are the risks and opportunities inherent in its current structure? Where it is going to need to be in the future in order to continue to compete effectively? Does it represent a trend that is likely to be picked up by other organizations or is it just a highly successful aberration? This podcast is a great contribution to the discussion.

The interviewer, Sean Ammirati, clearly did his homework. He touches on a number of other subjects, including mobile browsing, Mozilla’s Weave project (and its relationship to dataportability.org), web censorship and, of course, Firefox 3.

In all seriousness, it’s hard for me to write this without lapsing into a cloying hagiography, but I can’t imagine any better news for Mozilla. For starters, they won’t be losing Mitchell’s valued involvement:

I will remain an active and integral part of MoCo. I’ve been involved in shipping Mozilla products since the dawn of time, and have no intention of distancing myself from our products or MoCo. I’ll remain both as the Chairman of the Board and as an employee. My focus will shift towards the kinds of activities described above, but I’ll remain deeply engaged in MoCo activities. I don’t currently plan to create a new title. I have plenty of Mozilla titles already: Chairman of the Mozilla Foundation, Chairman of the Mozilla Corporation, Chief Lizard Wrangler of the project. More importantly, I hope to provide leadership in new initiatives because they are worthwhile, separate from any particular title. We will probably create an Office of the Chairman with a small set of people to work on these initiatives. I intend to remain deeply involved with MoCo precisely because I remain focused on our products and what we can accomplish within the industry.

Furthermore, this move illustrates the maturity of Mozilla as an organization. How many big company CEOs would have decided of their own accord that someone else “will be a better CEO for the MoCo going forward than [they] would be”? Personally I’m just as convinced as Mitchell that John is the right person to lead Mozilla through the multitude of challenges and opportunities it is facing. As he explains on his blog:

It goes without saying that I’m excited by the challenge of my new job. I’ve thought an awful lot about the role of MoCo (our shorthand for the Corporation) in supporting the Mozilla mission and manifesto, as the coordination point for our work on the platform and on Firefox. We’ve got a lot to do in the coming years, starting with getting Firefox 3 out the door, and then swiftly followed up by our work in mobile and services. Mozilla2 will be a major step forward on the platform after that, not to mention our new experiments in Labs and the work that we’re doing to move the whole Web forward with Javascript 2, HTML 5 and other standards work.

More than anyone else, John appears to recognize that Mozilla is innovating on multiple fronts, not just in terms of browser technology but in building the first global brand around a hybrid organization that is (in the words of Mozilla evangelist Christopher Blizzard) “part open source, part business, part non-profit”. Success over the longer term could have a major impact on the way we think about business in general.

Congratulations, John, and good luck!