Paying Developers is A Bad Idea

The companies that make the most profit are those who build virtuous platform cycles. There are no proof points in history of virtuous platform cycles being created when the platform provider incents developers to target the platform by paying them.

Paying developers to target your platform is a sign of desperation. Doing so means developers have no skin in the game. A platform where developers do not have skin in the game is artificially propped up and will not succeed in the long run.

The Windows Phone 7 team was in a very, very desperate situation. I was quoted in the NY Times:

Charlie Kindel…compared the pain caused by starting over to the predicament of Aron Ralston, the hiker who amputated his own arm in 2003 after it was it pinned under a boulder in the Utah desert.

“This boulder comprised of Apple and Blackberry rolled on our arm,” said Mr. Kindel, who left Microsoft last summer. “Microsoft sat there for three or four years struggling to get out.”

We were willing to do just about anything to get apps on to the platform. And we did just about anything.

Alec Saunders, who runs BlackBerry’s developer evangelism, understands this rule as well as anyone else on the planet. He & I worked together on Windows in the late ‘90s. I’m sure he knows paying developers to target BlackBerry 10 is a bad idea.  BlackBerry is that desperate. So he’s effectively paying $10K per app that gets written. Bad idea. But he has no choice.

I’ve discussed platforms here many times. The word platform is one of the most misused terms in our industry. Here is what I mean when I discuss platforms:

A Platform is a cohesive combination of technology and marketing that provides the means for a multi-sided market to operate in a virtuous cycle.

This, of course begs the question of what a virtuous platform cycle is:

A virtuous platform cycle exists in a multi-sided market when each side of the market both gives and receives positive value from the other sides.

So much positive value is exchanged, with low friction, that the cycle grows and grows, like a snowball rolling down hill.

The more sides to the market that exist, the more complex the system and the harder it is for the cycle to start. However, once started, a market with many sides will accelerate faster.

Examples of successful platforms we’ve seen and are currently seeing:

  • IBM System/360
  • Windows (big Windows, not Windows Mobile/Phone)
  • The iPhone
  • Amazon.com shopping
  • Google Search

In each of these cases, and other examples I’m sure you can come up with, there was a multi-sided market, and, at least for a while, a virtuous cycle existed because one vendor created a platform with the characteristics required to allow the sides of the market exchange value efficiently.

I think the example most people understand is Windows. The market sides were (are): Windows, Intel, OEMs (e.g. Compaq, DELL), IHVs (e.g. ATI, SoundBlaster), ISVs (e.g. Lotus, Adobe, Office), retailers & channel (e.g. Egghead), and of course, end users.

The ISVs of today are the app developers. For Windows to continue to be a platform that enables a virtuous cycle (and therefore to generate the historical profits it has in the past) there must be an efficient and natural exchange of value between app developers and the other sides of the market.

Apple accomplished this with the iPhone: It enabled app developers to very efficiently provide value to end users (one side of the market) and in return receive value from end users via payments.  Apple provided value to developers (a marketplace). Developers provided value to Apple (non-native functionality). Because of luck, tactics, and great marketing, Apple ended up creating a virtuous platform cycle around the iPhone platform. And they didn’t have to pay for apps.

Those developers were motivated by other things to get started. The promise of an efficient marketplace, the chance to do something cool and different, and the promise of lots of users are all examples. They also weren’t really doing anything else. There was no other efficient market where they could participate and profit before the AppStore. Once they got started their investment in time and resources meant they had skin in the game. Thus they continued, and are less likely to move to other platforms.

Now, let’s talk about Windows 8. As of right now there are 2,000 apps in the Windows Store according to Win8Update. The goal Microsoft has for launch (in about a month) is ‘5 digits’.

Microsoft got those apps using the following tactics:

Microsoft Employee Moonlighting

Allow Microsoft employees to build apps in their spare time (we used this to great success with Windows Phone 7; I can’t tell you the percentage of early apps that were built by employees but it was more than you probably think).

Promise Windows 8 Will Do Very Well

This is actually a pretty easy sell. As Steve Ballmer was quoted as saying yesterday

“There will be customers coming and looking for apps. That I can assure you,” he said. “If 400 million PCs get sold in a year, at least two-thirds get sold in the Windows market. That’s 250 odd million, plus whatever we get in the consumer upgrades.”

Even if Windows 8 is a failure, it will sell hundreds of millions of copies in the next 12-24 months. Heck, there are already 16 million devices running the preview versions of Windows 8. “That’s more than the number of iPad 1s Apple sold!”

If it weren’t for already having resources tied up focusing on iOS (and to a lesser extent) Android, just about any sane developer would jump at this opportunity.

Talk About The Tools

Microsoft’s Visual Studio tools are really quite good, especially for building against Microsoft platforms. Developers who have built substantial apps for iOS using Xcode and then built for either Windows Phone 7 or Windows 8 with Visual Studio have told me they are more than twice as productive. You can find all sorts of articles like this as well.

The “sell” from a Microsoft evangelist to a (non-Microsoft employee) developer is thus:

“Don’t be late to the party. Within just a few months there will be 10s if not 100s of millions of people looking at the Windows 8 Store for something to buy. Yes, I know you are busy, but Visual Studio is so good that it will take you far less time than you expect to move your app to Win8.”

Will this be enough to get 10,000+ apps by October 26? I don’t think so.

Of course, the numbers of apps in the store is not the most important metric. What apps and their quality is far more important. But Windows 8 is going to struggle there too. Big brands and names are focused on iOS and Android; and are already reaching sufficient eyeballs today via those channels. The lure of future eyeballs on Windows 8 is not strong enough to cause them to shift budgets and move developers off of their iOS and Android projects.

So far, according to my sources, Steven Sinfosky who runs the Windows Division at Microsoft has steadfastly refused to pay for Windows 8 apps to be developed. I have not agreed with much of what Steven has done, but on this point he’s got his principles right.

However, as I predicted last Spring, it is highly likely things are about to change and Microsoft is going to start directly incenting developers to build apps with cash. If I’m right, and we start to see clear evidence that Microsoft is paying for apps then Windows is in even more trouble than most of us already believe.

If I’m wrong, and Steve & Steven keep the checkbook in their pocket then my assertion is they have confidence in the long-term.

Time will tell.

Let me know your thoughts below.

© Charlie Kindel. All Rights Reserved.