Argumentative Topics: Making Money Software

Editor’s note: The following guest post is written by Phil Libin, CEO of Evernote, which is currently the No. 5 app in the Mac App Store. It also didn’t hurt that the app has been prominently featured by Apple.

We just finished our first week on the Mac App Store and it might have been the most important week in Evernote’s history. Here’s how it went and what we learned:

1. Meritocracy is sweet

I remember one of the first computer articles that I ever read (maybe it was in Byte Magazine in the early 80s while I was in junior high). It had a little survey aimed at my fellow nerds. “Do you buy software for your computer?”, was the first question. The choices were, “A) Yes, frequently. B) Yes, sometimes. and C) Rarely, I prefer to write my own.” The fact that C was a viable choice pretty much sums up the early euphoria of the consumer software industry. You just had to make something great and the rest would follow. That was a long time ago.

The following twenty or thirty years brought us monopolies and barriers to entry and this happy state of affairs became a dim memory. Then came the mobile app explosion.

Over the past year, about 70% of Evernote’s new users came from mobile app stores, mostly iOS and Android. This led us to the understandable conclusion that mobile was the crucial thing that made a platform attractive to independent developers. Last week made us realize that the reality is a little bit more nuanced. It isn’t mobile that’s overwhelmingly important, it’s the app store. Until a week ago, all the good app stores just happened to be on mobile devices, but someone with a shiny new Macbook is just as eager to get the best apps as someone with a shiny new iPhone.

A platform without a well-formed app store presents a huge challenge to developers. To succeed on such a platform, the developer has to spend as much time and money on channels, logistics, partnerships and advertising as on actually making a great product. Once an app store takes hold, the software market on a platform starts moving towards a meritocracy. This is imperfect, of course, but focusing on building a great product is the best strategy for succeeding on an app store. This is a huge boon for software nerds of all types, and has resulted in the explosion of mobile apps and services in the past two years. It’s about time that desktops joined the party.

2. Desktop software is viable again

It took a few weeks of non-trivial effort to get our existing Mac application ready for the app store. There’s never a convenient time to take a few weeks out of a busy development schedule, and December is as inconvenient as it gets, but Apple’s developer relations folks were helpful and the approval process itself worked reasonably well once we’d worked out the kinks.

The results speak for themselves. About 320,000 people downloaded Evernote in the first week of the Mac App Store. Of this number, about 120,000 had never used Evernote before, and created new accounts. This represents more than 50% of all the new Evernote accounts created last week. The Mac platform—which used to be in fourth place for new user registrations behind iOS, Android and Windows—has now jumped to first.

It’s obvious in hindsight, but the presence of a well-formed app store is the single most important factor for the viability of a platform for third party developers. If you want to take this a step further and say that a robust third-party software market is the most important factor for the success of the platform overall, well…

I hope Windows gets a good app store soon.

3. Multi-platform users are the best kind

Not only is the Mac App Store getting us new users, it’s making our existing users more valuable. Neat, but how?

So 320,000 people downloaded Evernote in the first week and 120,000 of them became new users. What happened to the rest? Well, about 80,000 people were either switching their Mac client from our direct-download version to the app store version or had simply downloaded the app and didn’t complete registration. Another 100,000 people were existing users who had previously used Evernote from other platforms (mostly the iPhone) and added the Mac version for the first time.

This is both interesting and important. Interesting because the vast majority of these people must have (1) already had Macs, and (2) known about our Mac version from previous interactions with Evernote but hadn’t bothered to install it until the Mac App Store appeared. Important because people who use Evernote from multiple devices are much more likely to stick around and to eventually pay for the premium version. This makes intuitive sense and the data is clear: in a Freemium model, people choose to pay for what they love and the more devices they use Evernote from, the more likely they are to fall in love with it.

The Mac App Store effect works the other way as well: many of the new users who first found us on the Mac App Store went on to also download Evernote on their mobile devices. Our iTunes downloads for iOS devices were up by 54% during the same week that the Mac App Store came out and that’s without any new versions or noticeable change in iOS app visibility.

4. A strike against lowest common denominator

If Evernote’s desktop clients were written in Adobe AIR, I’d be worried right now. The immediate popularity of the Mac App Store, and the iPhone App Store before it, reinforces my belief that in a world of infinite software choice, people gravitate towards the products with the best overall user experience. It’s very hard for something developed in a cross-platform, lowest-common-denominator technology to provide as nice an experience as a similar native app.

As the CEO of a software company, I wish this weren’t true. I’d love to build one version of our App that could work everywhere. Instead, we develop separate native versions for Windows, Mac, Desktop Web, iOS, Android, BlackBerry, HP WebOS and (coming soon) Windows Phone 7. We do it because the results are better and, frankly, that’s all-important. We could probably save 70% of our development budget by switching to a single, cross-platform client, but we would probably lose 80% of our users. And we’d be shut out of most app stores and go back to worrying about distribution.

Does this mean that web apps are doomed? Not at all, but the most successful web apps will be the ones that emphasize unique benefits—sharing, communications, integrations—that are better implemented on the web than in native code. This is the main design goal for the next version of the Evernote web client, by the way.

Lost among all the gloomy economic news of the past few years is the fact that there’s never been a better time to be in software. Sure, the emergence and inevitable dominance of app stores will permanently disrupt existing industry practices—I’m glad we’re not in the business of preventing people from making copies of bits, shipping shrink-wrapped boxes or charging people for periodic upgrades—but a company like Evernote simply could not have attained a fraction of our current momentum even three years ago. App stores, cloud services, cross-platform users and Freemium economics made it all possible. The download numbers are certain to decline a bit as the excitement of the first week finds a sustainable steady-state, but the launch of the Mac App Store will have a major, and permanent, positive impact on developers.

It was worth the wait.

Social Networks

According to Cisco, criminals are targeting social network users more aggressively. In particular, criminals are spending more time and effort trying to steal users' social networking credentials, since that makes it possible to exploit the trust of all that users' friends.

Although the exploitation of trust is crucial, Cisco predicts a decline in simple phishing and social networking scams. The company expects instead a rise exploits similar to the Zeus trojan, which steals banking credentials and propagates on social networks, mobile devices and more.

Social Engineering

Cisco warns of the "seven deadly weaknesses" exploited by social engineers:

Sex Appeal

Greed

Vanity

Trust

Sloth

Compassion

Urgency

Even the most savvy users can fall prey to social engineering. For example, Thomas Ryan of Provide Security created fake identity called "Robin Sage." Ryan was able to get hundreds of government officials and security professionals to friend this imaginary person on social networking sites and, as a result, share personal information with Ryan.

According to the report:

Clickthrough rates for most malware or spam incidents consistently hover at around 3 percent, according to data from Cisco ScanSafe. While 3 percent may not seem high, imagine the impact of repeated waves of spam to which 3 percent of workers consistently respond to and click on. Even this small percentage is the equivalent of having a gaping hole in the network firewall that cannot be closed. Instead of trying to change human behavior, security researchers are exploring the possibility of changing the way we use software to reduce risks.

Java: The New Number One Target

Java and PDF are both frequently exploited, but according to Cisco Java exploits rose last year and PDF exploits fell. Java surpassed PDF as the most commonly exploited technology.

Cybercrime in the Post-PC Era

According to the report, Windows has been so prevalent and so easy to exploit that there was no need for criminals to try to exploit other systems. However, the proliferation of other devices and OSes along with improved security in Windows 7 has changed that.

However, this move is happening slowly. A report from Forrester on security in the post-PC era notes that mobile device OSes are inherently more secure than desktop OSes due to sandboxing. This means that even jailbroken iPhones and rooted Android phones will be harder to compromise than older Windows PCs. However, social engineers can prey on anyone, regardless of the device they are using.

The Cloud: Friend or Foe?

The report cites the cloud as having both benefits and drawbacks for security. The drawback is that data can be intercepted while traveling between a server and the devices that access it. The advantage is that having data stored off-device makes it hard to extract sensitive information from lost or stolen devices.

Money Mules

The report has an interesting section on "money mules." Once a criminal has stolen a victim's bank account information, they need a way to get the money into their own accounts without getting caught. Money mules are people who transfer money from a victim's bank account to a criminal. One way to do this is to transfer money into the mule's account, then have the mule wire it via Western Union to the criminals overseas. The recipient of the wire from Western Union might not have to provide bank account information to receive the money, making them more difficult to trace.

Some mules are low-level criminals who participate for the money. Others are duped by work at home job ads. Students and people with large debts are often targets.

However, there's a shortage of mules. "Currently, the ratio of stolen account credentials to available mule capacity could be as high as 10,000 to 1," says the report.

Winners of the Cybercrime Showcase

Cisco highlights two winners in this year's "Cybercrime Showcase" - a "good" winner and an "evil" winner.

The Good winner is Thorsten Holz of the security firm LastLine. Holz identified the top 30 servers that the botnet Pushdo/Cutwail used for sending spam. Holz got ISPs to shutdown those servers and, as a result, the rate of spam decreased from 350 billion messages per day to 300 billion per day.

The Evil winner is Stuxnet, which we've covered frequently.

What, No Malvertising?

Surprisingly, there is no discussion of malvertising in the report. You can read our post "What You Need to Know About Malvertising" for more about this threat.

bench craft company credit card

Tuesday, February 15, 2011

Making Money Software

Social Networks

Social Engineering

Java: The New Number One Target

Cybercrime in the Post-PC Era

The Cloud: Friend or Foe?

Money Mules

Winners of the Cybercrime Showcase

What, No Malvertising?

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