Still one click away? Lessons from Yahoo on lock-in & competition


[Full disclosure: This blogger worked on MSFT and Google security teams]

The tar pit of platform lock-in

“Our competitors are just one click away.”

That used to one of the oft-repeated slogans at Google. On its face, this is the type of cliched motivational line senior leadership likes to throw around for rallying the troop: warning against complacency, with visions of users walking away, lured by the siren song of a more nimble competitor. But read at another level, it was a subtle dig at MSFT and their business strategy. MSFT had become an industry juggernaut by relying on the lock-in effects created by the Windows platform. Once consumers bought a copy of Windows, they were caught hook-and-sinker in the entire ecosystem, buying more applications written for Windows. (Microsoft Office suite ranking near the top of that list did not hurt either.) Many of those applications were either not available for other platforms or the porting job was at best an after-thought- as is still the case for Office on OSX today. Trying to switch from this ecosystem to an alternative platform such as Macintosh OSX or Linux became the IT equivalent of getting out of the tar pit. In fact the challenges MSFT faced deprecating Windows XP suggest that even movement within the ecosystem can be a daunting challenge for participants.

Such lock-in effects are even more pronounced in enterprise software. A company with thousands of employees running Windows inevitably finds itself setting up Active Directory to manage that fleet. AD in turns comes with an array of auxiliary features, and before long the IT department is shelling out $$ for more Windows Server licenses to operate VPN services for remote-access, Sharepoint for internal collaboration, Exchange for hosting email and that is only the beginning. Coupled with a slew of proprietary undocumented protocols which discouraged emergence of competing implementations (at least until the EU settlement forced MSFT’s hand in open documentation) these dependencies all but assured that any attempt to migrate out of the ecosystem would be an expensive and painful project for any large enterprise.

Lower switching costs online?

Online services were supposed to be different— in theory. If Google search quality went downhill, it is not that difficult for users to surf over to a competing search engine to run the same query. Everything goes through a standard web browser: no new software to install, no dependencies to untangle, no compatibility nightmare involving other applications breaking because the user decided to search on Bing.

This is not to say that the market for search engines are immune to inertia in consumer preferences or brand-name effects. For years MSFT ran a campaign involving “blind comparisons” designed to prove that Bing search results were at least as good as, if not better than, Google. (Leading to the insider joke at MSFT that Bing stands for “But It’s Not Google” to explain why users continued to favor Google.) The campaign did not seem to have convinced many people outside Redmond, but at least it was predicated on a reasonable assumption: search-engine choices can be swayed. If consumers were convinced they had a better option, nothing prevented them from switching.

Except that assumption had long been under assault. Search-engine preferences were increasingly becoming part of software configuration with varying degrees of control. Once it became clear that search was strategic, software designers decided it was too important to leave it up to users to navigate to the right website and type a query. Instead search functionality was integrated into toolbars, web-browsers and in the case of Windows, the operating system itself. Consumers only had to type their query into a magical search field and results would come back. Part of that convenience involved a decision by software authors (as opposed to users) on which search engine gets to provide those answers. Not surprisingly queries from Google toolbar were routed to Google, those from Internet Explorer went to Bing and Yahoo toolbar seemingly routed to whoever paid Yahoo more that year. Naturally that lead to plenty of disgruntlement and accusations of anti-competitive behavior from the provider who did not come out on top. Regulators got involved. In the case of the European Union, an investigation prodded by Google resulted in MSFT agreeing to change Internet Explorer and forcing users to choose a search engine on first run. The micro-management did not stop there: to prevent any bias the list of search options had to be randomly ordered for each user. (Some behavioral economics experiments suggest consumers have a preference for picking the first or last object out of a line-up)

Random ordering of search engines in IE

Random ordering of search engines in IE

Personalization: lock-in through data

Particularly puzzling feature of this episode is that online search is not even a personalized service at its core. Google has aggressively promoted its ability to return search results tailored to each user, and not coincidentally encouraged/nagged/bribed users into staying logged-in online while performing those searches to build a more comprehensive history. But online search can be carried out fully anonymously, with the service provider having no idea about the person behind the query. Reasonable people may disagree to what extent this degrades quality of results. One data-point: there are search engines such as DuckDuckGo which promise to not save search history or engage in other privacy-infringing user tracking. The corollary is that switching search providers does not “leave behind” much with the previous provider. There is a surprising asymmetry in the value attached to search history. It is a priceless asset for search engines which they can use to mine for patterns and improve their own accuracy. On the other hand it is not something that users get attached to or wax nostalgic over, wondering “what was I searching for last Thanksgiving?” There is no concept of downloading your search history from one provider and uploading it to another to maintain continuity.

Holding users hostage

That brings up the subject of Yahoo Mail and the (possibly inadvertent) “hostage taking” the company engaged in by disabling email forwarding at a particularly inopportune moment in the middle of a PR crisis with users heading for the exits en masse. Unlike search, email is intrinsically personalized. Switching email providers comes with the prospect of leaving some resources behind. There is all the past archive of messages to begin with, which may run into the gigabytes, not a trivial amount to download. Some protocols such as IMAP can make it easier to retrieve all messages in bulk, although the consumer is still stuck with locally managing this stash—making sure it is properly backed-up, confidential messages encrypted etc. More subtly there is the email address itself. Registering for a new email address is easy; updating every place where the previous email address was used is hard. Luckily there is a standard solution for this: email forwarding. If Alice can forward all incoming messages from alice@yahoo.com to her new account at alice@gmail.com, she can bid farewell to Yahoo and only use Google going forward. Meanwhile her friends and associates can continue writing to her former Yahoo address until they gradually update their address books. Message delivery will not be interrupted; Alice will receive the forwarded messages and reply from Gmail.

This is good news for consumers who want to switch providers. It is also good news for fostering competition among email providers to lure away users from their rivals. On the other hand, it is bad news for email providers who are on the losing side of that competition. Case in point, Yahoo. Plagued by a scandal over having sanctioned NSA mass-surveillance of all email, the company found itself facing a mass exodus of users, complete with step-by-step guides published in mainstream media explaining how to close a Yahoo account. (Not surprisingly, there is no link to closing an account from the Account page where one would actually expect to find it.)

Coincidentally around this time, the company decided to disable email-forwarding citing improvements in progress:

“While we work to improve it, we’ve temporarily disabled the ability to turn on Mail Forwarding for new forwarding addresses,”

In keeping with Hanlon’s razor, let us give Yahoo benefit of the doubt and assume that decision is indeed motivated by engineering concerns, as opposed to strategic maneuvering to hold users hostage until the PR crisis blows over. (Indeed the functionality was restored a few days later, prompting an Engadet headline to declare “you can finally leave.”) It is nonetheless a staggering demonstration of how deceptive that “one-click away” premise for competition can be. Many Yahoo users may have been outraged enough to register a new email account with Google or MSFT after reading the news but that is not the same abandoning ship altogether. As long as they are still receiving email at their Yahoo address and they can not forward those messages automatically, they are still chained to Yahoo. These users can be counted on for visiting the Yahoo web-properties,  seeing banner ads chosen by Yahoo (in other words, generating advertising revenue for the company) or running the mobile app on their phones. It is not until email forwarding is operational or customers decide they can afford to abandon any messages sent to their old email address that they can fully sever their ties with Yahoo.

That raises the question: does Yahoo have any obligation to provide email forwarding for the lifetime of the account? After all there is some cost to operating an email service. The unstated, if not deliberately obscured, assumption is that users indirectly pay for “free email” with their attention and privacy, being subjected to advertising while providing the raw-material of clicks for the data mining required to fine-tune the delivery of those ads. Arguably users who are no longer visiting the website or seeing ads are not holding up their end of this implicit bargain. They represent a net negative to the cloud provider. However the economics of carrying such inactive users may shake out, major providers do not appear to have embraced the Yahoo logic. Both Gmail and Outlook.com allow forwarding messages to another address chosen by the user. That seeming generosity may have something to do with the relatively small number of users taking advantage of the feature, representing negligible cost to either service. While both MSFT and Google were implicated in the NSA PRISM program revealed by Edward Snowden, neither company has quite faced the type of persistent backlash Yahoo experienced over its own surveillance debacle, or for that matter the gradual but steady decline in the company’s fortunes over Mayer’s tenure.

In fact Google goes above and beyond mail forwarding. In 2011 the company introduced a feature called Takeout, as part of the aptly named “Data Liberation Front” project. It allows users to download data associated with their Google services. The list which has been expanding since its introduction now includes not only the usual suspects of email and Google Drive files, but also search history, location, images, notes, calendar and YouTube videos. This is an upfront commitment to customers that their data will not be held hostage at Google. In fact Takeout seems to go out of its way to play well with rivals: it has an option to upload the resulting massive archive to Dropbox or MSFT OneDrive.

Screen Shot 2016-12-12 at 22.10.10.png

Google Takeout results can be saved to competing services

The bad news is that the dynamics of competition for cloud services has shifted: dreaded switching costs and lock-in effects associated with old-school enterprise software arise in this space too. The good news is that cloud services can still voluntarily go out of their way to offer functionality that restores some semblance of the conventional wisdom: “Our competitors are just one click away.”

CP

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