9 ms·

If you own the infrastructure you get to charge rent

70 points by dwynings 16y ago

YooLi 16y ago
Here is the rent Amazon charges for using their infrastructure to sell with (i.e. selling your stuff on their website). http://www.amazon.com/gp/help/customer/display.html?nodeId=1161240 http://www.amazon.com/gp/help/customer/display.html?nodeId=1... Selling a $9.99 book would end up with Amazon taking 28.5% or 38.5% (the lower percentage only if you enroll in the Pro Merchant subscription program for $39.99/month) of the price.
- YooLi 16y ago
  Ebay takes $2.00 minimum (~ 20%) from selling a $9.99 book plus you have to pay for payment processing yourself. http://pages.ebay.com/help/sell/fees.html http://pages.ebay.com/help/sell/fees.html Payment processing with PayPal is another 6% (2.9% + $0.30) of the $9.99 price (and that's just for domestic payments; international is more). https://www.paypal.com/cgi-bin/webscr?cmd=_display-receiving-fees-outside https://www.paypal.com/cgi-bin/webscr?cmd=_display-receiving... So chalk it up as 26% minimum to sell your eBook through eBay.
- garry 16y ago
  Wow good point. Marketplaces at scale become infrastructure !
  - JoeAltmaier 16y ago
    Apple's store is not really a "marketplace" - at least not a free market. There's no competition allowed, in a market that's everywhere else free and open. And as for Infrastructure - what does Apple own except the web site? They don't own the iPhone - I bought mine for cash, I own it. They don't own the network - ATT and Verizon own that, and I contract to them. They don't own the apps - they just try to. That leaves them in the position of market predator - trying to make a buck by warping the market in their favor, throwing up roadblocks to anyone using their own hardware on their rented network for anything that Apple can't scam a buck from.
    - YooLi 16y ago
      And how did those apps get on your phone? That's the infrastructure part. Those apps can be sold in 100+ countries around the world with payments processed and on a platform that Apple is selling with catchy commercials and by ensuring a certain level of quality. That's the infrastructure and value Apple is adding with the app store. Do you seriously think there would be 350,000 apps for the iPhone if each developer had to set up distribution and payment handling for 100+ countries around the world, and be able to do it for small payment amounts ($0.99)?
      - JoeAltmaier 16y ago
        Yeah, but people on this site are pretty familiar with putting up a web sales site, and aren't going to be very impressed by that - certainly not to the point of paying their entire margin to Apple for it. Yes its a popular site - hey! could that be because its the only site?
- markszcz 16y ago
  Google's market will also be takeing about 30% of in app purchases.
- JoeAltmaier 16y ago
  The argument is off the mark; Apple artificially restricts the iPhone app market, SOLELY so they can skim money from all the apps. Sell your stuff on Amazon, your own store, whatever; Amazon can compete in that free market, and if its worth it to you, pay their premium. Apple monopolistically freezes out any possibility of competition; skims off of apps that have nowhere else to go. Then they want to set your prices outside of their store too!
  - YooLi 16y ago
    Perhaps you should actually read the Amazon terms first: "By our General Pricing rule, you must always ensure that the item price and total price of an item you list on Amazon.com are at or below the item price and total price at which you offer and/or sell the item via any other online sales channel."
    - JoeAltmaier 16y ago
      So, you choose to NOT sell on Amazon. Try that with your iPhone app.
      - herval 16y ago
        You can sell on Cydia...
      - YooLi 16y ago
        That's easy, you don't develop an app to sell on iPhones.
      - muhfuhkuh 16y ago
        "Hey kids, go to html5-instead-of-native-app.com, subscribe to our service, and have fun or something!" Problem. Solved.
      - superuser2 16y ago
        Sell to people who jailbreak. Take advantage of Cydia. You just won't be able to reach people as easily (just like if you don't like Amazon's terms you make people jump through hoops to put your books on a Kindle).
deleted 16y ago
[deleted]
dpapathanasiou 16y ago
Would you extend the same argument to net neutrality? I.e., are the telcos right to be against it?
- endlessvoid94 16y ago
  From their perspective, of course they should be against it. It vastly improves the value of their infrastructure. Same market, more profit. In this case, they're sacrificing the "user experience" part of their market.
- T-R 16y ago
  It's a glass half full/half empty thing. If the (only) owner(s) of infrastructure or a limited resource offers access for only a select group, do you consider them to be offering a service to that group, or to be starving non-members of access? What do you do about it? Do you hope for competition, or create rules against discrimination? If you create rules, how can you prevent the rule-maker from using the rules to do its own discrimination? If you hope for competition, what if there's not enough of the resource, there are network effects or other high barriers to entry, or everyone in the market decides to do the same discrimination? So, who do you trust less to be the gatekeeper, the government, or the ISPs? Neither answer is really a good one. The telcos are doing what's best for their business, but that's not necessarily what's best for their customers - positioning yourself as the owner of infrastructure is a powerful and profitable place to be, but if you get to be in too good of a position, the same debate will come up again - the parallel to the 1800's is a good one.
nomurrcy 16y ago
A phone is a physical device. You own your phone. This argument is tantamount to saying MSFT owns windows and so deserves 30% of all purchases made through IE. This is insane. If Apple wants to provide infrastructure developers can use for handling in-app purchases, and give them the option to do so, that is fine. Forcing people who write software for their platform to use their APIs for in app purchasing, and to pay 30% is wrong. Apple does not own phones it has sold. The owners do, that is why they paid for them.
- mikeknoop 16y ago
  A better analogy would be Lenovo, Dell, HP requiring all software installed on their laptop or desktop machines to be purchased through them and skimming 30%.
  - Synaesthesia 16y ago
    If they can add value then they would be able to do that.
    - T-R 16y ago
      According to whose definition of value? Their view of "adding value" may be my (and my customer's) view of "imposing".
    - mikeknoop 16y ago
      I didn't imply a positive or negative view (though I do disagree with it). I was simply offering a better hardware analogy since I disagree that Apple's hardware lock-in would be similar a Microsoft Windows lock-in.
- Synaesthesia 16y ago
  They already force people who wrote for their platform to use their API's for everything, and charge 30%, and on top of that $99 a year. I don't see anything new. They provide the payment infrastructure and the back-end.
ajessup 16y ago
What absolute bollocks. While I take the argument that being an infrastructure player rather than a traditional 'make something people want' business is a good idea in the long term, I disagree with the advice that it's a good idea for a new startup to try to be doing this from day one. That's suicide. It's worth noting that none of the companies that are 'infrastructure' players today started out that way. Amazon sold books, and needed to buy lots of servers to do it. The cash from book sales justified buying servers, which some time later allowed them to spin off EC2. Apple sold personal computers and music players. Eventually they owned such a dominant position in music players that they could build a compelling online music store. Later they sold lots of phones, and used THAT position to justify the app store. Facebook were, if anything, anti-platform. The original Facebook was for a single university. Later a few. Only some time later did they even allow anyone to sign up, and later still (by the time they were well on the road to being the dominant social network worldwide) did they roll out a 'platform'. This is why the Internet platforms of today aren't like railroads of old. As a founder you absolutely should NOT be trying to raise lots of money to build infrastructure from day one. You should raise it to build a product that kicks ass that people will buy. That's hard enough for most if us. If you get your startup to that stage then the platform opportunities that you can use to consolidate your position should be pretty obvious. Don't get me wrong, dreams of platforms are what get entrepreneurs out of bed in the morning. They're important for that reason, but you're crazy to put it in your buisness plan. Keep it simple - build something people WANT. Sent from my iPhone
jhancock 16y ago
Apple's single app store can only exist in the economic distortion created by U.S. government regulation which provide severe penalties for unlocking an iOS device. If it were not for these regulations, we would see kiosks in Wal-Mart sponsored by EA Games to get a free game by just plugging your iOS device into the kiosk, which would give a free game, unlock your device and install the "Wal-Mart apps store" all in one go.
- dnsworks 16y ago
  "Apple's single app store can only exist in the economic distortion created by U.S. government regulation which provide severe penalties for unlocking an iOS device." I wonder if Jobs understands this, if so, he would probably invest a fortune into defending the DMCA.
- herval 16y ago
  I wonder why didn't that happen on any of the several "open" mobile platforms beside iOS (including Android)? Or in the cases where they existed (carrier-specific app stores for symbian/javame), is there any case where ANYONE made any money out of it at all?
  - jhancock 16y ago
    These types of markets have only been around a few years. I don't think you can extrapolate much. Its a very short time frame.
    - herval 16y ago
      I work on "this kind of market" since 2003, when there were already millions of smartphones out there. And even now, the Apple Store has been constantly proving as the only successfull app store out there, specially compared to Android and OVI...
- superuser2 16y ago
  I know we love to complain about this, but has this actually happened? Has anyone actually been sued by Apple for jailbreaking? Last I checked, the worst that happens is you void your warranty, and even then, people have restored iOS and gotten warranty service.
arihelgason 16y ago
Good analysis, though I'd point out that Modcloth is not strictly speaking an infrastructure business. Modcloth is closer to the traditional retail model. They buy inventory and sell it. Their innovation is in getting user feedback before committing to holding inventory. What we're doing at Fabricly is building an infrastructure business, with a distribution and production network for fashion designers.
- garry 16y ago
  Oh definitely, I never said Modcloth was infrastructure. =)
rdouble 16y ago
If you are a big company like Amazon this sucks. However, if you're an indie developer Apple's infrastructure is pretty awesome. You don't have to set up your own payment system, which sucks nuts, or use one of the existing retarded payment services, which have worse terms and worse user experience. Neither rolling your own nor using someone else will get you 99-cent payments. I do wonder how this affects rdio, though.
joe_the_user 16y ago
From the article: "Further, Facebook has one of the most sophisticated targeting technologies for ads ever created. Some retailers can make 2x-4x returns on their ad spend. That's real." Considering this is a point that's been debated, some references would be good. Further, SOME retailers making 2x-4x investment doesn't sound impressive - the really smart, clever retailers should make that amount on any medium. That doesn't say what the average is at all. What is "real" in this context?

70 points by dwynings 16y ago

YooLi 16y ago

Here is the rent Amazon charges for using their infrastructure to sell with (i.e. selling your stuff on their website). http://www.amazon.com/gp/help/customer/display.html?nodeId=1161240 http://www.amazon.com/gp/help/customer/display.html?nodeId=1... Selling a $9.99 book would end up with Amazon taking 28.5% or 38.5% (the lower percentage only if you enroll in the Pro Merchant subscription program for $39.99/month) of the price.

YooLi 16y ago
Ebay takes $2.00 minimum (~ 20%) from selling a $9.99 book plus you have to pay for payment processing yourself. http://pages.ebay.com/help/sell/fees.html http://pages.ebay.com/help/sell/fees.html Payment processing with PayPal is another 6% (2.9% + $0.30) of the $9.99 price (and that's just for domestic payments; international is more). https://www.paypal.com/cgi-bin/webscr?cmd=_display-receiving-fees-outside https://www.paypal.com/cgi-bin/webscr?cmd=_display-receiving... So chalk it up as 26% minimum to sell your eBook through eBay.
garry 16y ago
Wow good point. Marketplaces at scale become infrastructure !
- JoeAltmaier 16y ago
  Apple's store is not really a "marketplace" - at least not a free market. There's no competition allowed, in a market that's everywhere else free and open. And as for Infrastructure - what does Apple own except the web site? They don't own the iPhone - I bought mine for cash, I own it. They don't own the network - ATT and Verizon own that, and I contract to them. They don't own the apps - they just try to. That leaves them in the position of market predator - trying to make a buck by warping the market in their favor, throwing up roadblocks to anyone using their own hardware on their rented network for anything that Apple can't scam a buck from.
  - YooLi 16y ago
    And how did those apps get on your phone? That's the infrastructure part. Those apps can be sold in 100+ countries around the world with payments processed and on a platform that Apple is selling with catchy commercials and by ensuring a certain level of quality. That's the infrastructure and value Apple is adding with the app store. Do you seriously think there would be 350,000 apps for the iPhone if each developer had to set up distribution and payment handling for 100+ countries around the world, and be able to do it for small payment amounts ($0.99)?
    - JoeAltmaier 16y ago
      Yeah, but people on this site are pretty familiar with putting up a web sales site, and aren't going to be very impressed by that - certainly not to the point of paying their entire margin to Apple for it. Yes its a popular site - hey! could that be because its the only site?
markszcz 16y ago
Google's market will also be takeing about 30% of in app purchases.
JoeAltmaier 16y ago
The argument is off the mark; Apple artificially restricts the iPhone app market, SOLELY so they can skim money from all the apps. Sell your stuff on Amazon, your own store, whatever; Amazon can compete in that free market, and if its worth it to you, pay their premium. Apple monopolistically freezes out any possibility of competition; skims off of apps that have nowhere else to go. Then they want to set your prices outside of their store too!
- YooLi 16y ago
  Perhaps you should actually read the Amazon terms first: "By our General Pricing rule, you must always ensure that the item price and total price of an item you list on Amazon.com are at or below the item price and total price at which you offer and/or sell the item via any other online sales channel."
  - JoeAltmaier 16y ago
    So, you choose to NOT sell on Amazon. Try that with your iPhone app.
    - herval 16y ago
      You can sell on Cydia...
    - YooLi 16y ago
      That's easy, you don't develop an app to sell on iPhones.
    - muhfuhkuh 16y ago
      "Hey kids, go to html5-instead-of-native-app.com, subscribe to our service, and have fun or something!" Problem. Solved.
    - superuser2 16y ago
      Sell to people who jailbreak. Take advantage of Cydia. You just won't be able to reach people as easily (just like if you don't like Amazon's terms you make people jump through hoops to put your books on a Kindle).

deleted 16y ago

[deleted]

dpapathanasiou 16y ago

Would you extend the same argument to net neutrality? I.e., are the telcos right to be against it?

endlessvoid94 16y ago
From their perspective, of course they should be against it. It vastly improves the value of their infrastructure. Same market, more profit. In this case, they're sacrificing the "user experience" part of their market.
T-R 16y ago
It's a glass half full/half empty thing. If the (only) owner(s) of infrastructure or a limited resource offers access for only a select group, do you consider them to be offering a service to that group, or to be starving non-members of access? What do you do about it? Do you hope for competition, or create rules against discrimination? If you create rules, how can you prevent the rule-maker from using the rules to do its own discrimination? If you hope for competition, what if there's not enough of the resource, there are network effects or other high barriers to entry, or everyone in the market decides to do the same discrimination? So, who do you trust less to be the gatekeeper, the government, or the ISPs? Neither answer is really a good one. The telcos are doing what's best for their business, but that's not necessarily what's best for their customers - positioning yourself as the owner of infrastructure is a powerful and profitable place to be, but if you get to be in too good of a position, the same debate will come up again - the parallel to the 1800's is a good one.

nomurrcy 16y ago

A phone is a physical device. You own your phone. This argument is tantamount to saying MSFT owns windows and so deserves 30% of all purchases made through IE. This is insane. If Apple wants to provide infrastructure developers can use for handling in-app purchases, and give them the option to do so, that is fine. Forcing people who write software for their platform to use their APIs for in app purchasing, and to pay 30% is wrong. Apple does not own phones it has sold. The owners do, that is why they paid for them.

mikeknoop 16y ago
A better analogy would be Lenovo, Dell, HP requiring all software installed on their laptop or desktop machines to be purchased through them and skimming 30%.
- Synaesthesia 16y ago
  If they can add value then they would be able to do that.
  - T-R 16y ago
    According to whose definition of value? Their view of "adding value" may be my (and my customer's) view of "imposing".
  - mikeknoop 16y ago
    I didn't imply a positive or negative view (though I do disagree with it). I was simply offering a better hardware analogy since I disagree that Apple's hardware lock-in would be similar a Microsoft Windows lock-in.
Synaesthesia 16y ago
They already force people who wrote for their platform to use their API's for everything, and charge 30%, and on top of that $99 a year. I don't see anything new. They provide the payment infrastructure and the back-end.

ajessup 16y ago

What absolute bollocks. While I take the argument that being an infrastructure player rather than a traditional 'make something people want' business is a good idea in the long term, I disagree with the advice that it's a good idea for a new startup to try to be doing this from day one. That's suicide. It's worth noting that none of the companies that are 'infrastructure' players today started out that way. Amazon sold books, and needed to buy lots of servers to do it. The cash from book sales justified buying servers, which some time later allowed them to spin off EC2. Apple sold personal computers and music players. Eventually they owned such a dominant position in music players that they could build a compelling online music store. Later they sold lots of phones, and used THAT position to justify the app store. Facebook were, if anything, anti-platform. The original Facebook was for a single university. Later a few. Only some time later did they even allow anyone to sign up, and later still (by the time they were well on the road to being the dominant social network worldwide) did they roll out a 'platform'. This is why the Internet platforms of today aren't like railroads of old. As a founder you absolutely should NOT be trying to raise lots of money to build infrastructure from day one. You should raise it to build a product that kicks ass that people will buy. That's hard enough for most if us. If you get your startup to that stage then the platform opportunities that you can use to consolidate your position should be pretty obvious. Don't get me wrong, dreams of platforms are what get entrepreneurs out of bed in the morning. They're important for that reason, but you're crazy to put it in your buisness plan. Keep it simple - build something people WANT. Sent from my iPhone

jhancock 16y ago

Apple's single app store can only exist in the economic distortion created by U.S. government regulation which provide severe penalties for unlocking an iOS device. If it were not for these regulations, we would see kiosks in Wal-Mart sponsored by EA Games to get a free game by just plugging your iOS device into the kiosk, which would give a free game, unlock your device and install the "Wal-Mart apps store" all in one go.

dnsworks 16y ago
"Apple's single app store can only exist in the economic distortion created by U.S. government regulation which provide severe penalties for unlocking an iOS device." I wonder if Jobs understands this, if so, he would probably invest a fortune into defending the DMCA.
herval 16y ago
I wonder why didn't that happen on any of the several "open" mobile platforms beside iOS (including Android)? Or in the cases where they existed (carrier-specific app stores for symbian/javame), is there any case where ANYONE made any money out of it at all?
- jhancock 16y ago
  These types of markets have only been around a few years. I don't think you can extrapolate much. Its a very short time frame.
  - herval 16y ago
    I work on "this kind of market" since 2003, when there were already millions of smartphones out there. And even now, the Apple Store has been constantly proving as the only successfull app store out there, specially compared to Android and OVI...
superuser2 16y ago
I know we love to complain about this, but has this actually happened? Has anyone actually been sued by Apple for jailbreaking? Last I checked, the worst that happens is you void your warranty, and even then, people have restored iOS and gotten warranty service.

arihelgason 16y ago

Good analysis, though I'd point out that Modcloth is not strictly speaking an infrastructure business. Modcloth is closer to the traditional retail model. They buy inventory and sell it. Their innovation is in getting user feedback before committing to holding inventory. What we're doing at Fabricly is building an infrastructure business, with a distribution and production network for fashion designers.

garry 16y ago
Oh definitely, I never said Modcloth was infrastructure. =)

rdouble 16y ago

If you are a big company like Amazon this sucks. However, if you're an indie developer Apple's infrastructure is pretty awesome. You don't have to set up your own payment system, which sucks nuts, or use one of the existing retarded payment services, which have worse terms and worse user experience. Neither rolling your own nor using someone else will get you 99-cent payments. I do wonder how this affects rdio, though.

joe_the_user 16y ago

From the article: "Further, Facebook has one of the most sophisticated targeting technologies for ads ever created. Some retailers can make 2x-4x returns on their ad spend. That's real." Considering this is a point that's been debated, some references would be good. Further, SOME retailers making 2x-4x investment doesn't sound impressive - the really smart, clever retailers should make that amount on any medium. That doesn't say what the average is at all. What is "real" in this context?