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.
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.VC Fred Wilson
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
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.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
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.
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?