Comments for Can Browser Add-ons Be Businesses?

Can Browser Add-ons Be Businesses?

2008-07-09T09:14:45Z

Full disclosure: Alex Iskold runs a browser add-on company called AdaptiveBlue. Also Fred Wilson, who is cited in this article, is a partner in Union Square Ventures - an investor in Alex's company.

VC Fred Wilson asked recently on his blog if there is a business in browser add-ons? I have a vested interest, since my company is in the add-on business. Adding a bit of functionality to your browser can be fun and customization makes software more personal, yet there are issues such as privacy, performance, and the inability of mainstream consumers to manage add-ons.

]]> So, can browser add-ons become viable businesses?

The browser is a web battlefield. Microsoft will do everything in its power to keep on top of the browser game, but it's been losing ground to Mozilla's Firefox - where security and add-ons are a differentiating factor. Firefox is not only the early adopter browser, but it is also being marketed as the people's browser.

Add-ons help Mozilla foster its vibrant community. Redmond recognized this and a year ago started a major push for browser add-ons. Both major browser makers now focus on add-ons and this support offers the opportunity for startups to reach millions.

Can this result in a business built around add-ons? In this post we take a detailed look.

Browser as a Platform

Every major browser offers a plug-ins infrastructure. Mozilla and Opera made add-ons fundamental to their strategy, while Microsoft has recently started to focus on add-ons. These are the reasons why it's important for the browsers to support this:

1. Keep the core browser light to avoid feature creep.
2. Foster a community of innovators and entrepreneurs, helping to evolve and define the next generation browsing experience.
3. Enable users to customize and personalize the browser.

There's another major driving force: webification of the desktop. Some 2 years ago one of my first articles discussed the convergence of the desktop and the web. Desktop applications have become more web-aware and in a sense every app is now a web app. Why not make such applications browser based?

Browser add-ons are easier to deliver than desktop applications. Every major browser player becomes a sought-after distribution point. The Browser War also becomes the Desktop War.

Users: It's all about utility

Browser makers know what's at stake. Modern users seek convenience and utility; they're looking for contextual software that helps them get things done. And they don't want to pay for it.

Because the add-ons are compact and update mostly automatically for consumers, they feel very different compared to heavy desktop apps, where people had to manage large chunks of software on Windows machines. These days users do one-click installs of the recommended, popular and new-add ons from the gallery. The experience is the same regardless of your operating system and the add-ons update automatically. In a way it's what Sun has been doing with Java, except there is no virtual machine to download. The Browser is the Virtual Machine.

Businesses: It's all about numbers

In evaluating business opportunity, we need to consider scale and monetization. Popular Firefox add-ons enjoy tens and some even hundreds of thousands of downloads a week. Firefox itself had a record number of downloads recently and it's pushing add-on downloads along with it. Since Microsoft has been focused on add-ons lately as well, popular add-ons are getting great exposure via the IE community as well. Browsers have opened a massive distribution channel for application delivery and companies are starting to leverage it.

Not all add-ons will do well. The power law argument applies. A relatively small number of add-ons will dominate, and most will have just a few hundred users.

What is the shape of this power law curve? Just how many add-ons can be successful businesses? And how many add-ons can one user have? It's difficult to imagine more than 10 per user.

Only great add-ons will stay permanently and will have a chance of being a business. The same is true about every online/software business: iPhone apps, Facebook apps, web services and desktop applications.

The add-ons of today have a much clearer shot at the user base compared to the desktop applications of the 90s. Everybody uses a browser so the target market is massive.

How will add-ons be monetized?

Assuming that an add-on gains users and becomes popular, how will it be monetized? Four ways come to mind: Charge the users; sell advertising; use an affiliate model; be a data/service provider.

Charging users is not really an option. We've written about the danger of free, but this is just the state of today's market, where consumers don't pay for software. It would be difficult to fathom the model where consumers would willingly pay for premium features. Flickr manages to do that and 37signals has managed to build a business around paid premium services, but these are exceptions.

Advertising is the de facto choice to make money on the web, but for add-ons this is not a natural. Users are okay with banner and link ads in pages, but if browsers start to advertise on top, that could irritate. An advertising model would need to be delivered in a way that fits the functionality of the add-on.

An affiliate model seems more feasible. Many add-ons focus on enhancing shopping; having smart contextual product experience wired into the browser makes consumers happy. This model is fine for add-ons that focus on books, music, movies, travel, and other verticals. The affiliate game is all about scale, and being part of the browser gives the businesses presence around the web.

The last model is essentially a data play. As users browse the web, they reveal their preferences and habits. Individual, group and aggregate information about user's attention can fuel services, from personalized alerts and improved search to web-wide popularity and recommendation engines. The issue here is privacy; sites and ISP providers track people, but people hate being tracked.

In order for the data businesses to thrive, they need to have a clear stand on information ownership. One strategy is to make personal information completely private: i.e., put the user in control. The aggregate and group information can still be used for business purposes, but not traceable back to individuals. There is opportunity to enable users to leverage personal information on their terms. Add-ons can enable pipe businesses that faciliate connection between the users and other web services.

All these opportunities are not well understood today, since the promise of the Attention Economy has never really been fulfilled.

Conclusion

Browser add-ons are increasingly interesting ways to reach consumers. Since the browser is the most used application on the desktop and major browsers are platforms, businesses are looking for opportunities to reach consumers through this new channel. Better than desktop applications, browser add-ons are light and update automatically.

As with any vertical business, only a few add-ons can become real businesses. The competition is tough and the business models have not been mapped out that well. Yet if there's a shot at reaching users via a download, browser add-ons seem to be it.

What is the future of browser add-ons? Do you think business will be built around them? What business models will we be seeing around add-ons?

Comment from Marcin Grodzicki on 2008-07-09

2008-07-09T11:09:43Z

Alex, I have to disagree. You can't compare browser add-ons, Facebook and 37Signals products, because they aim at different user groups (and uses). Facebook is all about advertising, because it basically is an entertainment platform. With advertising you have to be on top (like the big Media companies) to scale your business, and achieve substantial revenue. With products like 37S, or even Flickr you are providing a solution to a problem, which is why people agree to pay for it. And there are many companies like that, you just don't hear about them because they are typical small businesses, rather than big flips. The problem with monetizing add-ons in this way is the barrier of entry - most add-ons are really simple, so you'll always get a free version of anything you can buy (power of the opensource community).
The data aggregation can be a business model for add-ons, only if people actually get something from this data (like book suggestions on amazon) - otherwise, they'll always be pissed about being watched. Unless your product is ultimately superior to others (Google, Gmail).
Summarizing my thoughts: you just can't throw all add-ons into one revenue basket. Those that are truly complicated and bring important value to customers - can be simply sold. Those that are entertaining, or too simple will probably have to be free, or very lightly branded. Those that have related business behind them - affiliate model.

Comment from Raskin on 2008-07-09

2008-07-09T11:58:13Z

I disagree - when building Combo, we specifically avoided going the add-on approach because our research and conversations with industry veterans indicated that add-ons present one more barrier to entry for the end user.

Add to that the psychological factor that what you've built is JUST an add-on to another application, not a standalone app, which comes into play during valuation.

Add to that the limited real estate issue - power user's often already have essential "add-ons" open, such as Bookmarks, web code / debug plug-ins, various browser toolbars, bookmarks, etc.

While it is a lot easier to build an add-on, I just don't think it has the same reach or the potential reward.

Comment from Posao Beograd on 2008-07-09

2008-07-09T12:26:52Z

I create CMS add-ons and it can be business. Browser add-ons? Well, why not?

Comment from Kevin on 2008-07-09

2008-07-09T12:48:56Z

It could be. Browsers become the essential part of our daily life and add-ons are something that add on the top of them to provide some useful functionalities. It could be a good business when add-ons are out-of-box and innovative, however the sametime it will more competitive as there are lots of free add-ons available then why people think to invest in purchasing them. More over the development cost as well as maintaining license and support will be a headache. If someone has extra moolah, go ahead !

Comment from Alex Iskold on 2008-07-09

2008-07-09T12:52:56Z

@2 I do not think that it is easier to build add-on, than a web site. It depends on what the application is, and in general building add-on is not trivial.

Comment from Matt Ellsworth on 2008-07-09

2008-07-09T13:07:08Z

I think that you can plan on a lot of addons being done for business. Not necessarily monetized directly - but rather helping to build a brand of a company. Just look at the google toolbar... or the alexa toolbar. both were designed to give the user some functions - but also help ensure the visitor is always staring right at their logo. That alone is worth a lot of money.

Comment from Raskin on 2008-07-09

2008-07-09T13:23:56Z

@5 - of course it depends on the app, but just look at it from the wide angle view: Add-ons are just that, adding on to an existing application that has already laid the groundwork in many respects. While you still need some of the same backend in terms of database, the frontend and middleware aren't nearly as difficult.

Comment from Raskin on 2008-07-09

2008-07-09T13:28:14Z

That being said, there is a bit of form follows function in the add-on market, as most of those apps (AdaptiveBlue included) ONLY make sense as add-ons because of the unique way in which they relate to the user browsing experience as a whole.

OK, now I really have to run to work!

Comment from Alex Iskold on 2008-07-09

2008-07-09T13:29:06Z

@7 Once again it depends. Many addons have complex backends. Think about Clipmarks, delicious and me.dium for example.

Addons that focus on dealing with people's behavior around the web are challenging in a different way, because they need to deal with heterogenous information around the web.

So I do not think we should be generalizing that addons are easier. There are degrees to addons and web apps.

And this is really not the point of the post. The question is whether addons can become viable businesses.

Comment from Ben on 2008-07-09

2008-07-09T13:52:38Z

Doesn't StumbleUpon demonstrate pretty conclusively that a browser add on can be a business?

Comment from Raskin on 2008-07-09

2008-07-09T14:57:37Z

Like I said, backend can be complex, frontend and middleware not so much...there just isn't much blank canvas to work with.

As for whether they can be businesses - can you point to any that HAVE become businesses (as in, make money outside of an exit strategy)?

I don't have a clue either way.

Comment from Alex Iskold on 2008-07-09

2008-07-09T15:05:40Z

@11 Not that I am aware of.

I would say that monetization of the addons is not radically different from web sites. The argument in the post is that the same challenges face both, same monetization is available to both and in the end of the day, the question is what is the best way to reach your audience.

Creating a web site these days that draws substantial traffic (to be monetized via ads) is a huge challenge today.

Alex

Comment from andraz on 2008-07-09

2008-07-09T15:12:48Z

I believe add-ons first have to be separated in two groups. The first are add-ons that do not depend on some kind of a "background service" where the brains lie. Those kinds of add-ons are really hard business, since barrier to entry is basically zero to none. It's a shareware business, maybe.

Then there are add-ons that usually depend on some background database or elaborate processing done somewhere else. Those add-ons generally are just an interface to that service and that service is provided via other means also (via widgets, bookmarklets, destination sites, instant messaging...).

The good thing about those services is that barrier to entry into the market is building that database, network or processing that runs in the background. While its easy to write an extension it is far harder to do something with natural language or large (specialized) databases or get the amount of data needed for a service to bring benefit to the user.

So I think we should stop talking about add-ons, but rather about services they provide. If the only way to provide the service is through an add-on, there might be a problem. If your service can live independently from add-on, than you are on much safer grounds.

Monetisation is also more tied to the service than to the delivery vehicle. We should be asking "Can this service be a business or not?" That's the right question.

Andraz Tori, Zemanta

Comment from Jams Levy on 2008-07-09

2008-07-09T19:11:43Z

I use a few machines throughout the day as a student.

It's really too bad that I can't store my extensions in the cloud, and easily load them from any FF browser.

The problem, of course, is that it's a security disaster.

From what I understand, there are a couple companies attacking this problem, Mozilla included.

Comment from Basil Hashem on 2008-07-09

2008-07-09T19:12:46Z

Alex, thanks for opening up this topic. (Full disclosure, I'm the Director of Add-ons for Mozilla). I'd like to cite a few example businesses that I've been keeping track of. Clearly, these companies had some value to them. Those with successful exits: StumbleUpon (acquired by eBay), PDF Download (acquired by Nitro PDF) and FoxyTunes (acquired by Yahoo).

Companies with venture-backed funding: Cooliris, Adaptive Blue, Xoopit, yapta, Mahalo, Yoono, WebMynd, Foxmarks, Vivaty, PMOG & Me.dium

Independents trying to make a go at it: Glubble, Feedly & Interclue

Companies charging for their add-ons: Attensa, DrawLoop, some theme authors.

Of course then there are the big players who have built add-ons: Google (toolbar & Lively), Yahoo, eBay/Paypal, Kodak, Intuit and many others - most drive traffic to their properties and don't explicitly charge users a fee for using the add-on.

Comment from Ben Kepes on 2008-07-09

2008-07-09T19:51:45Z

Alex - I came away feeling a little scared for you and the browser add on industry in general. If you, an add on company entrepreneur yourself, don't have a clearly defined way to monetise your product what hope is there

Glad I'm not in the add on business!

Comment from Alex Iskold on 2008-07-09

2008-07-09T19:55:52Z

@16 Ben,

I think you are misreading this. The post is generic, not specific and the monetization depends on the nature of the service. Just like not all web sites make money in the same way, neither do the addons.

Alex

Comment from OLL on 2008-07-09

2008-07-09T20:52:36Z

@16 : I second.

Comment from aurora72 on 2008-07-09

2008-07-09T20:53:43Z

That'a cool topic really.

The toolbars are sometimes meant to facilitate say, filling a questionnaire... or filling in purchase information , i.e. entering the credit card numbers, etc.

Can you remember how many times you had to (re)enter your credit card number? Well as for me, I might have entered that 16 digit number maybe more than a thousand times! Well lots of sites require you to enter your card info just to make sure that your info is not stored at the website (just to be a "secure" web site)

If only there was such an extension in my browser which automatically entered my card number, the life would be better.

There are many other situations where a user can save his/her time and avoid tedious / repetitive work while browsing.

And think of IE7Pro. Have any one not heard of it? It makes using IE just easier and more useful. It, for example adds the session recovery feature to IE, like the one in Firefox. And I guess it's being used by a huge number of users.

And here's my answer to the question

"What is the future of browser add-ons? Do you think business will be built around them? "

The future of browser seems bright. Why not? They have potentially got several other develeopment paths yet to be discovered. However in the near future, building a sound business around them might be just tough.

Comment from chris Jangelov on 2008-07-09

2008-07-09T22:32:22Z

Take a CRM system that's SaaS. It includes some different roles. Each role could be technically created as a browser add-on. Easy to install and you always see the system from your roles viewpoint. The rest of the system is invisible.
It's $49 / month / user.
My point is that the metaphor "add-on" might be easier to use, and sell, than the metaphor "client" or "system login".
It's just like my FF add-on for gmail that is much more convenient to use than to actually log in to gmail via the browser.
An add-on like that for the dashbord of a CRM system might make more people buy a CRM system as SaaS.
Thats $49 / month / user.

Comment from Robert Reich on 2008-07-09

2008-07-10T06:00:39Z

@9 Happy to see this conversation in the public.

Like any new market, it takes time. I remember people saying Amazon would never make it.

Me.dium launched it's Search Alpha this evening and it leverages the 2 million downloads of our sidebar. I posted a blog http://scandium.wordpress.com/, if you want more details on how we are combining web presence with a sidebar to create a search business.

Robert