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Thursday, November 10, 2011

Lessons From the Failure of Flash: Greed Kills

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Lessons From the Failure of Flash: Greed Kills

Adobe's decision to stop development of mobile Flash has deservedly gotten a lot of attention online.  It's a sad story for Adobe and Flash developers: a dominating standard on the PC web failed to get traction in mobile, and will now be abandoned gradually in favor of HTML 5.  But the story's not limited to mobile -- without a mobile growth path, I think Flash itself is destined to become a dwindling legacy standard everywhere (link).  I think the whole Flash business edifice is coming down.

How did Flash go from leader to loser?  There are a lot of explanations being floated online. Erica Ogg at GigaOm has a good list (link):

--Mobile flash didn't work very well
--It was opposed by powerful people like Steve Jobs
--It was out-competed by HTML 5

(And by the way, how in the world do you get out-competed by something as slow-moving as HTML 5?)

I agree with Erica, but it's more a list of symptoms than root causes.  It's like saying an airplane crashed because the wings fell off.  Yes, that's true, but why did the wings fall off?  If you look for root causes of the Flash failure, I think they go back many years to a fundamental misreading of the mobile market, and to short-term revenue goals that were more important than long-term strategy at both Macromedia and Adobe.

In other words, Flash didn't just die.  It was managed into oblivion.

The story of Flash is a great cautionary tale for companies that want to create and control software platforms, so it's worth looking at more closely.


A quick, oversimplified history of Flash

In the software world, there is an inherent conflict between setting a broad standard and making money.  If you have good software technology and you're willing to give it away, you can get people to adopt it very broadly, but you will go broke in the process.  On the other hand, if you charge money for your technology, you can stay in business, but it's very hard to get it broadly adopted as a standard because people don't want to lock themselves into paying you.

Clever software companies have long realized that you can work around this conflict by giving away one technology to make it a standard, and then charging for something else related to it.  For example, many open source software companies give away their core product, but charge for hosting and support and other services.  Android is another example -- it's a free operating system for mobile phone manufacturers, but if you use it in your phone Google also tries to coerce you into bundling its services, which extract revenue from your customers. 

In the case of Flash, the player software was given away for free on the web, and Macromedia (the owner of Flash at the time) made its money by selling Flash content development tools.  The free Flash player eventually took on two roles on the web: it was the preferred way to create artistically-sophisticated web content, including an active subculture of online gaming, and it became one of the most popular ways to play video.  Flash reached a point of critical mass where most people felt they just had to have the player installed in their browser.  It became a de facto standard on the web.

Enter Japan Inc., carrying cash.
  The rise of mobile devices changed the situation for Flash.  Long before today's smartphones, with their sophisticated web browsers, Japan was the center of mobile phone innovation, and the dominant player there was NTT DoCoMo, with its proprietary iMode phone platform.  The folks at DoCoMo wanted to create more compelling multimedia experiences for their iMode phones, and so in early 2003 they licensed Macromedia's Flash Lite, the mobile version of Flash, for inclusion in iMode phones (link).

The deal was a breakthrough for Macromedia.  Instead of giving away the flash client, the way it had on the PC, Macromedia could charge for the client, have it forced into the hands of every user, and continue to also make money selling development tools.  The company had found a way to have its cake and eat it too!  In late 2004, the iMode deal was extended worldwide (link), and I'm sure Macromedia had visions of global domination.

Unfortunately for Flash, Japan is a unique phone market, and DoCoMo is a unique operator.  The DoCoMo deal could not be duplicated on most phone platforms other than iMode.  Macromedia, and later Adobe, was now trapped by its own success.  To make Flash Lite a standard in mobile, it would have needed to give away the player, undercutting its lucrative DoCoMo deal.  When you have a whole business unit focused on making money from licensing the player, giving it away would mean missing revenue projections and laying off a lot of people.  Macromedia chose the revenue, and Flash Lite never became a mobile standard.

Without fully realizing it, Macromedia had undermined the business model for Flash itself. The more popular mobile became, the weaker Flash would be.

Enter the modern smartphone.  Jump forward to 2007, when the iPhone and other modern smartphones made full mobile web browsing practical.  Adobe, by now the owner of Flash, was completely unprepared to respond.  Even if it started giving away Flash Lite, the player had been designed for limited-function feature phones and could not duplicate the full PC Flash experience.  Meanwhile, the full Flash player had been designed for PCs; it was too fat to run well on a smartphone.  So the full web had moved to a place where Adobe could not follow.  The ubiquity of the Flash standard was broken by Adobe itself.

To make things worse, Adobe was by then in the midst of a strategy to upgrade Flash into a full programming layer for mobile devices, a project called Apollo (later renamed AIR).  The promise of AIR was to make all operating systems irrelevant by separating them from their applications.  At the time, I thought Adobe's strategy was very clever ( http://profsmythe.blogspot.com /2006/05/flash-versus-windows-can-adobe-break.html">link), but the implementation turned out to be woefully slow. 

So here's what Adobe did to itself:  By mismanaging the move to full mobile browsing, it demonstrated that customers were willing to live with a mobile browser that could not display Flash.  Then, by declaring its intent to take over the mobile platform world, Adobe alarmed the other platform companies, especially Apple.  This gave them both the opportunity and the incentive to crush mobile Flash.

Which is exactly what they did.


The lesson: Don't be greedy

There are a couple of lessons from this experience.  The first is that when you've established a free standard, charging money for it puts your whole business at risk.  Contrast the Flash experience to PDF, another standard Adobe established.  Unlike Flash, Adobe progressively gave up more and more control over the PDF standard, to the point where competitors can easily create their own PDF writers, and in fact Microsoft bundles one with Windows Office.  Despite the web community's broad hostility for PDF, it continues to be a de facto standard in computing.  There is no possible way for Adobe to make money directly from the PDF reader, but its Acrobat PDF management and generation business continues to bring in revenue.

The second lesson is that you have to align your business structure with your strategy.  I think Macromedia made a fundamental error by putting mobile Flash into its own business unit.  Adobe continued the error by creating a separate mobile BU when it bought Macromedia (link).  That structure meant the mobile Flash team was forced to make money from the player.  If the player and flash development tools had been in the same BU, management might have at least had a chance to trade off player revenue to grow the tools business.


What can Adobe do now?

The Adobe folks say the discontinuation of mobile flash is just an exercise in focus (link).  They point out that developers can still create apps using Flash and compile them for mobile devices, and that Flash is still alive on the desktop.  Viewed from the narrow perspective of the situation that Adobe faces in late 2011, the changes to Flash probably are prudent.  But judged against Adobe's promise to create an "an industry-defining technology platform" when it bought Macromedia in 2005 (link), it's hard to call the current situation anything other than a failure.

I think it's clear that Flash as a platform is dying; the end of the mobile Flash player has disillusioned many of its most passionate supporters.  You can hear them cussing here and here. Flash compatibility will continue to live on in AIR and other web content development tools, of course, but now that Adobe doesn't control the player, I think it will have trouble giving its tools any particular advantage.

What Adobe should do is start contributing aggressively to HTML 5, to upgrade it into the full web platform that AIR was originally supposed to be.  That's a role no one in the industry has taken ownership of, web developers are crying out for it, and Adobe implies that's what it will do.  But I've heard these broad statements from Adobe before, and usually the implementation has fallen far short of the promises.  At this point, I doubt Adobe has the vision and agility to pull it off.  Most likely it will retreat to what it has always been at the core: a maker of software tools for artistically-inclined creative people.  It's a nice stable niche, but it's nothing like the dominant leadership role that Adobe once aspired to.



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