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ATPM 13.02
February 2007


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by Wes Meltzer,

Holy Cow!

It’s here.

That’s right, ladies and gentlemen: at Macworld Expo San Francisco, Steve Jobs stood before the audience and introduced the iPhone. But you probably already knew that. So I have something to apologize for: I’m sorry I doubted you, Steve, and if my hubris in all but guaranteeing there would be no such device is what drove you to release it, I am doubly sorry.

I have actually taken up a fork and knife and have pierced my hat in recognition.

Before you get giddy about the prospect of watching me eat my grimy white Northwestern baseball cap, let me just note that I am not going to videotape it. You’re going to have to take my word that I sampled the taste of it, though I could not actually digest it and so I stopped after just a little bit.

The most tragic part is that I was prepared to write a column about MacHeist and MacZot, and then Jobs had to ruin my plan at MWSF. Thanks for nothing, Apple! I’m not even a Cingular customer!

If you somehow missed the announcement itself, or you want to read a little more useful information than the admittedly nifty demos on Apple’s Web site, you should probably start with Time’s primer on the iPhone and move to Paul Boutin’s awfully good Slate article about the device. These are highly general articles, and can get you up to speed for the rest of this column.

I’ll wait here.

Oh, you’re back already? Well, hello again!

David Pogue, writing in the New York Times, had an excellent two-part FAQ he calls the “Ultimate iPhone Frequently Asked Questions,” parts one and two. So far, I have yet to see anyone ask a question that David Pogue hasn’t answered, other than, maybe, “Can the iPhone help keep my parents from sleeping on my futon couch for two weeks whenever they come to town?” (I think the answer is yes.)

And now a moment of irreverence before we get to the serious analysis, from the Macalope. Actually, it’s pretty good analysis too, one of the reasons I always enjoy it/him.

Now, moving along. Our first stop is Bruce “Tog” Tognazzini’s column, Ask Tog, in which he takes a look at the iPhone and concludes (surprisingly) that it’s pretty impressive:

iPhone is revolutionary, not a big surprise coming from Steve Jobs. He knows how to gather a tiny team of brilliant young minds and work them half to death until they innovate beyond any reasonable expectations. He has the common sense to know what will ultimately find favor. And he has the hardened-steel man parts to take a chance and roll with it. What’s a pity is that so few others in this industry share those triple strengths.


I could go down through the other “innovations” in iPhone and slowly knock them off. Yes, it’s the first cell phone with a visual display of voice-mail messages, so you can randomly move among voice-mails, etc., etc. However, such lists have been displayed, in an identical fashion, on enterprise-level voice-mail systems and, of course, such lists have been a standard feature in e-mail for decades.

The origins of these bits and pieces, however, is not what’s important about the iPhone. What’s important is that, for the first time, so many great ideas and processes have been assembled in one device, iterated until they squeak, and made accessible to normal human beings. That’s the genius of Steve Jobs; that’s the genius of Apple.

And Khoi Vinh, who is a serious design guru, seems very impressed by the fusion that Apple provides by putting the software in a box they control. It’s an advantage, he says, that Palm had and squandered. As the owner of a Windows Mobile Smartphone, which is Microsoft software in an HTC device, I can throw in my two bits here and say that he who controls the hardware and the software, on a closed platform, can provide a vastly better user experience. Vinh says:

In Jobs’ presentation, he repeated Alan Kay’s advice that those who are serious about software should make their own hardware. Apple has benefitted from this wisdom for years, stubbornly remaining in the hardware business even as the market has, until recently, consistently urged the company to focus only on software.

Few technology companies can claim to make “the whole widget,” and Palm, like Apple, is one of those lucky few. Given their early lead in the portable devices market, Palm should have been able to parlay their hardware and software advantage into a truly innovative device long before now. Instead, they’ve been caught apparently sleeping by this iPhone, and Apple looks set to eat their lunch. Shares in the company were down almost six percent yesterday.

The real question, though, is, what will the rest of the industry do? If history (viz., the iPod) is any guide, they will completely misinterpret the success of the iPhone and start churning out look-alike devices while adding a thousand features. Sometimes, less really is more, as Thomas Fitzgerald notes:

The electronics industry is obsessed with features, while Apple is accused of form over function, but Apple’s supposedly “form over function” iPod has been a huge success. When the iPod was first released there were other MP3 players on the market. None were the size of the iPod or as easy to use, but manufacturers didn’t think it would matter to consumers because the iPod was more expensive than their players, which offered pretty much the same basic functionality. I think part of the problem too, was that many early MP3 player manufacturers saw their products as computer accessories rather than an “appliance” type of pure consumer electronics product. It never seemed to occur to anyone other than Apple that the “user experience” was an important issue; after all if you could use a computer you could use an MP3 player. So why didn’t anyone learn that lesson before it was too late? I believe it is because companies are so set in their ways that they simply failed to grasp the simple truth of why the iPod has been a runaway hit. The answer lies in a nursery rhyme that is taught to children the world over. “It’s not what you do, it’s the way that you do it.”

And then, there’s the really radical commentary. Dan Benjamin believes that, like the last paradigm-shattering Apple product, the Macintosh, Apple has removed the user-device interface limitations that have been holding back cell phones with the iPhone’s UI:

Just like a calculator, their capabilities and limitations are determined by the way we’re forced to interact with them.

Apple has removed that limitation, tossed out the keypad and replaced it with something that can change on the fly, based on the task you want it to perform at any given moment. It makes for a device that’s very cool and seems to have its own reality distortion field just like its creator. People seem spellbound by it.


Is the flexibility of this new type of interface worth giving up [the] muscle memory [of keys] for? Only time will tell, but I’ll bet the answer is yes.

Last but not least, Andy Ihnatko of the Chicago Sun-Times actually got his hands on an iPhone, and spent “about 45 minutes noodling around with the device.” First of all: how is this fair? Am I not as important a Macintosh pundit as he is? (No comments from the peanut gallery.)

Second: damn.

Third: he seems awfully impressed by the phone, in general, including the soft keyboard, which is one of the things holding a lot of people back for the time being. He says that the keys are larger than Treo keys, because they’re not limited by microscopic physical space, and this leads to a vastly better experience. Among other things, like a “beautiful freakin’ display,” and the usual impressive attention to detail that Apple gave the software interface. He says that the e-mail client, for instance, “make[s] you feel like you’re using a powerful desktop application, not a cell phone that can kind of send e-mail and browse the Web (depending on how you define ‘e-mail’ and ‘the Web’).”

I’ve pooh-poohed the idea of an iPhone in the past, but Apple seems to have genuinely nailed the device. I think the various factors that caused me to dismiss it in the past, like the form factor of cell phones versus iPods, have been pretty conclusively resolved by making the entire device touch-sensitive; it’s more like my iPAQ than either a conventional cell phone or iPod. And when I wrote that column, in 2003, Apple had yet to release a flash-based iPod at all; a 1.5-inch hard drive in a cell phone would have been preposterous.

At the same time I am skeptical, still, as technically impressive as the iPhone seems to be. It remains to be seen whether I’m really going to want to listen to music on the same device as I receive calls, since one of the selling points of using a standalone iPod is being freed from a lot of earthly distractions. Add to this my skepticism at fitting this into my jeans pockets, and I may have to wait a while.

I still regret signing a two-year contract for my current phone.

Original Sin

This column was originally supposed to be about MacZot and MacHeist, the software discount programs for Mac shareware and payware. MacZot is a sort of discounted shareware clearinghouse, which regularly posts new software with a developer markdown, to get more product exposure. MacHeist was a one-time bust, a bundle of 10 pieces of software selling for $49, which was ostensibly a sort of combined discount program and charity give-away.

The problem is that the numbers don’t seem to add up to benefit for developers, and some of them started noticing it. And I can see why.

When I was in college, which feels like a long time ago already but only ended seven months ago, I took courses on advertising and marketing. We talked about all of the various reasons to offer product discounts, and one of them is indeed to get better exposure. But, of course, I’m sometimes reminded of the old joke about the chapelier who sells his hats at a loss and intends to make it up in volume. Discounting is a whole different ballgame when it’s physical goods. Software’s per-unit production cost decreases with the more copies you sell, but that makes it much harder to set a value for it. And that’s where the trouble lies.

Steve Harris started the fire, in November, when he observed that he hadn’t increased his volume of regular-priced sales on KIT, a sort of Yojimbo-alike, after offering a discount via MacZot. What he had done is sold a lot of copies at a discount, which came with the same user- and technical-support costs as the regular-priced copies. That’s not necessarily a bad thing, but it didn’t make financial sense, and it didn’t get him the exposure he had hoped for with MacZot: the kind of user who frequents a Macintosh shareware-discount site is the kind of user who (a) probably already knows about your software and (b) is buying it at a discount because he or she knows about it but isn’t willing to buy it at full price.

John Gruber (you knew he was coming sooner or later) saw the comment, and he made Harris’ implication explicit. As he sees it, there’s a very real floor on the cost of your software, and lowering its cost to or below that floor doesn’t benefit you, because all it does is cut into your margins, without increasing your sales to users who are paying full price. (See above.)

No matter what this application does, no matter who the target audience is, there are some potential users in that audience who will want to use it but who will not want to pay for it. Most of these cheapskates will not come right out and tell you this (i.e. that they don’t want to pay anything for your software). If you charge $40 per license, they will say, “This is a great application, but it’s too expensive. I’d buy it if it were $25.”

But if you had set the price at $25, they’d tell you it should be $15. If you charged $15, they’d tell you it should be $10. If you charged $10, they’d tell you it should be free. And on that last point, the cheapskates would actually be right. $10 is not enough money to charge for professional quality software. If you, the developer, don’t think it’s worth ten bucks, you really should just release it as freeware. An excellent, popular piece of freeware might help you professionally even if it doesn’t help you monetarily.

The point here is that you can’t set a price low enough to please the cheapskates. If you can’t create software that’s worth at least $20, you’re not going to make it as a full-time indie developer. And if you look at the indie Mac developers who have made it, you’ll see that they typically charge at least $25 for their software.

A few weeks later came MacHeist, the heavily discounted bundle of software, and at that point the floodgates simply opened up, ensnaring almost every Mac-centric or Mac-relevant voice on the Internet. (Which is why, two months later, I’m writing about it.) A little more background was the clever Christmas-related peg for the promotion: they would donate 25 percent of the proceeds to charity. I laud them for that; it turns out that they raised $200,000 for charity.

But that isn’t the whole megillah, literally. It isn’t even the whole first verse.

Gus Mueller, who wrote the excellent VoodooPad, notes that he was offered $5,000 to include his application in the bundle, which is really not that many copies of VoodooPad at full price; his objection was that he got $5,000 whether MacHeist sold 100 copies or 100,000 copies. That’s a raw deal any way you cut it, and it meant that the MacHeist guys were going to make out like bandits.

Gruber saw those numbers and wrote about how he simply couldn’t believe it:

Mueller was right to ask for a percentage rather than a flat fee; the economics of paying the developers a flat fee in exchange for an unlimited number of licenses tilt grossly in the favor of the MacHeist team… [B]ecause these payments are for a flat fee, as sales goes up, additional profits all go to the MacHeist organizers.

He then crunched the numbers after the promotion ended, too, and computed that MacHeist took in $760,000, paid $66,500 to software developers, and then ended up with its organizers pocketing a cool $463,500. That’s 87.5 percent of the non-charity total, which would make even Drew Rosenhaus salivate in jealousy. (Note to Rosenhaus: try this with Terrell Owens. The ensuing fight might take you both out of the arena. We will be grateful.)

Paul Kafasis at Rogue Amoeba saw the same double-speak:

It’s been argued that this can be good for developers by providing more exposure. Personally, I just can’t see that, but maybe it’s true. Declaring this “The Week of the Independent Mac Developer,” however, has left a sour taste in my mouth. The people who stand to benefit directly here aren’t the developers, but the people behind MacHeist. Urging people to buy this bundle to support the developer is disingenuous at best.

He adds, to this, that developers are really getting a one-two punch: they could very well undercut their full-price sales of their product, and they are saddled with ever-decreasing per-unit profits while the MacHeist organizers make a profit that increases at a linear rate.

That doesn’t stop Uli Kusterer, for instance, from defending MacHeist. As he put it, maybe the developers really did see a publicity benefit. Kusterer is still skeptical, but he’s willing to give MacHeist-participating developers the benefit of the doubt, something Gruber isn’t:

I think they were well aware of what they were doing, and considered it a good deal because they’d get what they expected out of it. Maybe they even made a tactical decision to take some damage for future benefits.

Not everyone was negative. Wil Shipley (to be fair, a participant) defends MacHeist as good publicity for developers and all of the bloggers and media outlets that have been gladly opining on it—but my grandmother would call that a compliment with the back of your hand. (This is the usual knock on the press, and I think it’s unfair.) Oh, and CARS proposes that the next MacHeist promotion be the “Week of Sweatshop Mac Developers.” CARS may be the Macintosh community’s very own “Daily Show,” proving truth through comedy, but this is also a genuine comedic gem:

VoodooPad developer Gus Mueller said “For every dollar a developer makes on this deal, MacHeist makes 25. Also, part of the contract says they get to punch you in the groin. What’s that about?”

How can I top that? Good night and good luck.

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Reader Comments (2)

Gregory Tetrault · February 2, 2007 - 12:52 EST #1
I saw the MacHeist promotion but bought nothing because I had no interest in most of the bundled applications. The developers got more exposure, but, in my view, unfavorable exposure: they had to be desperate, dumb, or both to agree to MacHeist's terms.
Pascal Hos · February 21, 2007 - 00:13 EST #2
Although it is true that the MacHeist guys made out like bandits, they were very clear of their terms up front. Any developer could have done the simple calculations that were done after the fact by Gruber et al. and decide for themselves that it would not work for them.
I bet most of them did actually do this, however nobody (not even the organisers themselves) seems to have anticipated the popularity of the program and the publicity that it received.
So in my view it seems childish to blame the organizers for the lack of money generated for the developers. The organisers took a calculated risk and gained massively. Could they have changed their terms and given more to the developers? Sure, but that is not how business works.

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