I love Instapaper. It was one of the first apps I downloaded when I got the iPhone 3G last year, and I’ve used it as much or more than any other app since. Hundreds, or possibly even thousands, of articles have passed through there, including every edition of BusinessWeek and the Economist.

I’m a power user, and being that as it is, I’d be more than willing to upgrade to pro, or at least look at some advertising, if it meant that the product would continue to improve. And there was a very simple way to get me and others like me to do that: stop developing the free version, and add awesome features to the pro version. Eventually, that would be too enticing to pass up.

But instead, Instapaper chose a really strange path, releasing an update to the free version that is a downgrade in a number of ways: only your last ten articles are visible, it doesn’t save your place when you leave an article, and it’s now ad-supported (I don’t really have a problem with this, but taken with the former two, it’s a little ridiculous). There are some added features, including background updating, but not nearly enough to make it a net positive.

The idea, of course, is to make Instapaper Free just objectionable enough to encourage people to upgrade. But now I just feel annoyed, and upgrading almost feels like rewarding bad behavior. As I said before, the right approach would have been to stop developing for the free version, and make the pro features so great that the free version would just feel stale.

As it stands, I’ll probably try out a couple of other tools, including ReadItLater. Honestly, I really want to upgrade to Instapaper Pro, but I’m still put off by that “upgrade,” and the last thing I want is to encourage other companies to do the same later.

The calculus on this one is pretty simple. Google needs a new source of income, on top of search ads. Almost all of their core products outside of search and YouTube are cloud-based SaaS applications, none of which they’ve been able to monetize. Salesforce’s own set of SaaS products mesh so well with Google’s that they have actually been using Google Apps as their default productivity suite. The synergies here are simply overwhelming.

Today’s news is just another drop in the bucket. The two companies are bridging the APIs for Google’s App Engine and Salesforce’s Force.com, which will allow developers to build applications for both. Considering how linked these companies already are, this was a natural.

It’s important to note that Google isn’t Salesforce’s only partner. Part of Salesforce’s model is to hook up with any company that will expand their range of services, while they focus on growing their client-base and developing core products. They have deals with Amazon and Facebook, among others, and have even entertained the idea of partnering with Microsoft when they launch their Azure service.

But Google is the obvious fit. Google Docs & Spreadsheets (as well as Gmail, for that matter) are the key apps that Salesforce lacks. And if need be, Google has the scale to replicate Amazon Web Services, or any of Salesforce’s other existing partners.

Most of all, though, Google desperately needs to grow its services division. As the economy goes, so goes advertising, usually in multiples of two or three. So if GDP contracts 4% this quarter, expect U.S. advertising to shrink 8-12%. Search ads should hold up better than other forms, and there are still places in the world that are growing, but expectations for Google have rightfully been tempered (and its stock has taken it on the chin).

Acquiring Salesforce would be a rapid and effective way for Google to finally turn their productivity apps into actual revenue. Salesforce is growing extraordinarily fast, and its stock has been hit hard by macro issues the past few months (down 55% from its 52-week high). With Google’s size and clout, the business could be a fantastic growth engine in the coming years.

Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com

LinkedIn is a fascinating company. It’s a pretty ugly looking social network, but one that has actually figured out a way to monetize its user base. They have been profitable since 2006, and recently recently raised about $75 million at a $1 billion valuation. And what’s most interesting is that they’ve done all this in ways that Facebook and MySpace seemingly can’t: premium memberships, and high CPM rates.

The reason LinkedIn has been successful with this approach? Simple: their users feel they are getting a return on their investment.

Unlike Facebook and MySpace, which are used almost entirely for entertainment and social purposes, LinkedIn is a business networking platform. Users make contacts, get recommendations, and even find jobs. With everything on the web moving toward free, people are still obviously willing to pay a fee if it will help them advance their professional careers.

The paywall also creates a tremendous environment for advertisers, since the site’s heaviest users are generally professionals looking for ways to move up in the world. This means that a) the average LinkedIn user will be more well-to-do than the average Facebook or MySpace user, and b) the average LinkedIn user will be infinitely more likely to click on an ad for a product that helps them along the same lines.

What does this say about the notion that everything will soon be free? Well, most software and digital media will be free, but a product with a direct ROI to the end user may always warrant a premium.

Keep in mind that LinkedIn has done all this with a pretty poor design, and a less-than-intuitive interface. This is a business with a lot of room for growth, and a clear business model that should be sustainable for a good bit of time. The question is: will they be able to take online business networking mainstream, and win in this space long-term?

Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com

Via SAI, Lookery CEO Scott Rafer is claiming that Facebook’s latest redesign will effectively kill the Facebook Platform. He’s not entirely wrong; many popular Facebook apps will die.

But this isn’t the the end for the Facebook Platform. It’s actually just the beginning.

The redesign has fundamentally changed the way people utilize Facebook apps, which are no longer featured prominently on users’ profiles. To access them, a user must click the applications tab, or open them via the toolbar on the bottom of the page. With these increased costs, users will need greater incentives to use applications. Like on a traditional desktop operating system, a Facebook app will need to provide real value in order to become relevant.

Because of this shift, we may see less apps, but the ones that remain will likely be far more useful. This could include an office suite (like Zoho or Google Docs), a video chat center, or existing apps that let users share media (i.e. iLike). Apps will become less about adding “cool stuff” to your profile, and more about providing real value to your network (and in turn back to yourself).

In the early 1980s, Atari dominated the small, but established, home video game market with a system that offered a flood of cheap and simple games. Five years later, as Atari and the industry was nearing collapse, an upstart video game maker brought out a new system with a new business model: make the barriers for game developers high, so that only quality games make it into the consumers’ hands. In doing so, Nintendo created a whole new industry, bringing quality video games to the masses.

Whether it’s entertainment, or productivity, Facebook’s redesign raises the bar for application developers. In doing so, Facebook isn’t killing its platform, it’s making it infinitely more useful.

Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com

Collaborative tools for enterprise customers are all the rage right now. Microsoft, Google, Cisco, IBM, HP, and Oracle, among others, are all getting their feet wet in this space. And there have countless Twitter-for-enterprise startups popping up in the past couple of months, including TechCrunch50 winner Yammer.

But it’s Facebook that already has the killer platform. No, this has nothing to do with the social graph; this has only to do with their technology, which already includes instant messaging, full messaging (although this is still subpar), micro-blogging, full blogging (through notes), and countless other social applications (a number of which are actually useful).

So what can Facebook do to create a sellable enterprise product? Here are some ideas:

• Create company-specific portals. Essentially, allow customers to create their own internal site (with their own domain) running Facebook’s software.
• Build (or buy) productivity tools, analagous to Google’s Docs, Spreadsheets, and Presentations. The files should be fully encrypted, so that only the customer will have access to them.
• Make the mail system able to integrate with the customer’s internal e-mail.
• Make all employees on the system friends by default. Allow the customer’s management to create groups.
• Ditch the regular News Feed, in favor of the all-inclusive Live Feed. Create another tab for group Live Feeds.

This is a product a company could get a lot of value out of. Employees could engage each other socially in a familiar format, while also increasing their own productivity.

Facebook’s new design (emphasizing feeds and featuring an applications bar on the bottom) is perfect for this type of usage. And most of those above points could be done within a couple months, if not weeks.

With that said, Facebook could be facing an uphill battle in changing its brand from a 21st century timewaster, to a premium efficiency tool. And it’s not easy to create a major footprint from scratch, especially when existing players like Cisco are getting into this same space.

But Facebook is sitting on a terrific product, and could create a great business with it. That is, if recently departed co-founder Dustin Moskovitz doesn’t beat them to it (anyone else have that thought?).

Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com

“The iPod has sort of lived a long life at number one. Things like, that if you look back to transistor radios and Walkmans, they kind of die out after a while.”

- Steve Wozniak, Apple Co-Founder

The iPod isn’t quite dead yet. But it’s certainly closer to its endpoint than its inception.

Just like transistor radios and Walkmans, the iPod is being rendered obsolete by more powerful devices. The primary one, of course, is Apple’s iPhone. But smartphones in general are becoming cheaper and, in turn, more pervasive in the market. As more and more phones become media players, the standalone iPod is becoming a bit superfluous.

For the same reason, Amazon’s Kindle, a standalone e-book reader, is facing an uphill battle.

I don’t want to shortchange the Kindle. It’s a good product with a lot of cool features, and has generally gotten very favorable reviews. It also has some important competitive advantages over the iPod Touch, such as the electronic-paper screen, and immediately accessible content (including all the major newspapers, and just about every new best-selling book). Jeff Bezos has done a fantastic job evangelizing it, and it has sold better than I would have figured when it was announced.

But it’s not a phone, and I need to carry my phone with me. Bringing along another device (and paying $359 to have it), when my iPhone has just about all the same capabilities, is a hassle.

And make no mistake, the iPhone is a very good e-book reader. It may not be the perfect screen for reading long books on, but your eyes won’t fall out either. And while Stanza’s collection may seem out-of-date, its desktop client allows you to upload any e-book to your iPhone’s library.

There’s certainly some disagreement on this. But in the end, the reality is that people won’t carry an extra device (let alone an expensive one like the Kindle) when there is a pretty comparable product on the device they already own.

It’s too bad, in some ways, since the Kindle could have been a tremendous seller had there been great demand for e-books in the pre-smartphone era. Cellphone novels have already taken off in Japan, and I have a hard time believing Americans won’t be reading books on their wireless device soon enough.

But it’s already too late for the Kindle to become anything more than a niche product. E-books may thrive soon enough, but they will have to do so on phones, not standalone readers.

Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com