Zonbu & The 3 year test…

Roudin, The ThinkerLooking through the various comments people have made, I wanted to share a little more insight in to where I am coming from when I comment on the Zonbu, and in particular some of the business decisions that they have made.

Often times people mistake comments that I make on Zonbu technical decisions, as being technical. They aren’t…

Ubuntu, U-schmuntu

The whole thread about switching to an Ubuntu base is a marketing/sales driven suggestion (as well as a development/driver cycle issue), rather than a technical one.

There is so much momentum behind Ubuntu it is a shame to waste it. Zonbu isn’t out to remake the base OS, so why not stick with the fastest moving (or at least most consistently released), best known base on the market? One that already has mind share in the home user space and is supported in the retail channel by Dell?

My best bet is that the small team at Zonbu are intimately familiar with Gentoo and are the most comfortable packaging things in that environment. That is a valid reason and you have to start somewhere. However, I think it comes at a significant loss of opportunity on the marketing front

Small start-ups need to ride on all the coat tails they can and the Ubuntu community has a lot of mind share in the desktop space. Gentoo, not so much. It doesn’t mean it isn’t a perfectly good base, it just means, from a corporate perspective, there is a real opportunity cost to continuing with Gentoo. And that is my point. Decisions have consequences, and this is a competitive market.

If you look closely, the other high momentum products at the low end of the market have Debian/Ubuntu bases. The N800/N810, the Asus 3e PC, the gOS desktop and some of the lesser known products like the Linutop.

I went to business school, not computer science school…

Via or bust? The three year test.

When it comes to hardware, it’s not that I have anything against the Via processor/chipset in the Zonbu, I’m really happy with my unit and I use it daily. My real issue is it doesn’t pass my three year test.

The three year test is where I stand back and look at the product from my experience and perspective in the broadband industry, and ask: “Is this product still going to be relevant for its primary purpose in 1, 2 and 3 years?”.

The challenge I see with the Zonbu hardware products is that the answer gets quite sketchy past 18 months (mid-2009 as I write this).

I’ve watched in amazement at the rise of Flash based embedded video on the web. I have access to detailed statistics about the types of traffic moving across our network and the shift towards flash video has been profound in the last year, both for the mundane and educational as well as the titillating.

Flash, Baby! Yeah!

One of the earliest indicators is that the Adult industry is aggressively embracing flash video (and for those of you old enough to remember, adult content drove the adoption of VHS which beat the technically superior Betamax product in the consumer market).

I recently learned of an immensely popular new site when scanning our logs and this site is leading the charge for adult flash video content. In fact, it is one of the top 10 sites visited from our network, and thousands of other networks. The site is YouPorn (link to Wikipedia).

From the Wikipedia entry: “YouPorn is the highest-ranked adult website according to Alexa, ranging in the top 35 globally visited sites, with the largest portion of visitors coming from Germany.”

You read that correctly. The highest ranked adult Internet site. And it is free.

Dirty little secrets

I’ll let you in on a dirty little secret. At least 40% of the traffic, in bytes, on any statistically significant network (and lots of smaller ones) is adult content. If someone in your house isn’t looking at adult content on the Internet, there is a good chance your neighbor is.

People like sex and people look at a lot of adult related material on their Internet connections. I’m not here to judge. But if I was Zonbu, and I wanted to sell an appliance that can be the primary computer for the average user, it would need to support adult video consumption.

The Zonbu has reasonably good file format playback, which would have solved the problem last year or the year before. But today, the adult consumer is watching a metric ton of flash video and the Zonbu is struggling to perform in this arena. The low proccesor speed and weak driver support for the Via chips on Linux is a major threat to Zonbu’s growth and widespread adoption.

And what will happen as MPEG4 encoded, flash delivered, high-def content becomes the norm on the ‘Net in the next 12-18 months.

Where to form here?

Zonbu has a revolutionary business model – “We’ll take care of your PC, cradle to grave. We’ll make your desktop work and we’ll handle all your upgrades. You won’t get viruses of spyware and all your files are protected in online storage. If you want to access you files elsewhere you can or if your unit dies we’ll replace it and all your files will still be there when you boot it up.”

Great model, I love it.

Nowhere in that model does it suggest that that you need to take arrows in your back using a unique and interesting, but underpowered CPU. And it definitely doesn’t make sense to create short life-cycles for the hardware you deploy. You don’t want people embracing the model only to have to replace the box in 18 months because the hardware can’t keep up. That creates an opportunity for someone to steal your hard won customer.

Zonbu’s business model, executed on a mildly more powerful (say 1.8-2.2GHz) Intel or AMD CPU with Intel, Nvidia or ATI mobile graphics and some more memory provides, I believe, a comfortable three year runway. It will also provide some more mainstream credibility for Zonbu. I think they are asking people to dive in to too many new areas at the same time.

Don’t attack Russia and China at the same time

Someone I used to work with was fond of saying, when too many projects were competing for resources and time:

“Don’t attack Russia and China at the same time.”

He was right. Asking users to accept a new OS (Zonbu/Linux), a new business model (pay monthly, store stuff online, don’t install any apps on your own etc) and a new hardware platform (Via), as all as the other unique aspects of the model, may simply be too much for the average person to bite off.

Napoleon was an immensely visionary French leader and his ideas and efforts changed the world. However, he also famously attacked on multiple fronts and paid the ultimate price.

Conclusion

Look for hardware and software partners that can accelerate your acceptance in the market.

If you’re selling a new technology, respect its role in the Adult industry (if applicable, of course).

Don’t attack Russia and China at the same time.

Follow the money.

Know when to hold’em and know when to fold’em.

-Mr. Zonbu

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9 Responses to Zonbu & The 3 year test…

  1. Michael Prescott says:

    About Ubuntu, it seems like the very people who would recognize and appreciate the Ubuntu-ness of an Ubuntu-based Zonbu, which would be mostly technical Linux people, are the exact opposite of Zonbu’s target market, namely technically unskilled people who want an easy to use PC and wouldn’t know the difference between Ubuntu and Proschutto. Why would such people care what Linux distro Zonbu used? They probably think Linux is a brand of shampoo anyway.

    Also, I’m no Linux expert, but it sounds like it would take quite a bit of work for Zonbu to switch over to Ubuntu; possibly long enough to give, oh say gOS, a tactical advantage. We don’t want Zonbu to go the way of Netscape, killed by a time-consuming rewrite.

  2. mrzonbu says:

    Michael,

    Thanks for your comments.

    I’m not sure you caught the point though. It’s not about Linux flavor religion and whether end users look too deeply under the hood. It’s about getting people to endorse, stock, recommend and buy the product first.

    There is a lot more to building a successful consumer supply chain than just the end user. You need to build distribution and retail relationships to succeed. Those partners also want to back products they can easily get behind and that have market momentum. You need to make it easy for them to embrace you and put their implicit stamp of approval on the box.

    In addition to the supply chain (which includes Walmart for the mass market, like it or not), the end users themselves don’t need to know or understand Ubuntu intimately, or even casually, to gain immediate comfort from the fact that other well known brand names have already embraced and endorsed it. Or that they have friends or co-workers or even relatives who have tried it.

    There is a strong element of credibility by association at play in the spread of Linux to the mainstream desktop.

    I don’t want to change the front end, I love what the team at Zonbu have done with the end user experience. My point is the value of momentum and finding ways to accelerate access to mainstream sales, which is the key to volume sales.

    I would like to see Zonbu win, but this low end/easy Linux desktop space is suddenly a very competitive market and other products, like the gOS machine, are demonstrating much stronger presence at retail and moving a lot more boxes.

    -Mr. Zonbu

  3. Michael Prescott says:

    Well, your argument seems to hinge on Zonbu pursuing the retail market, but from what I can find, they seem to sell exclusively from their website and not be interested in retail right now, so difficulty in courting retailers/distributors seems like a non-issue. Whether that’s a sound decision or not on their part is a whole other question.

  4. mrzonbu says:

    Zonbu are a retailer. Whether not they have any channels other than their website yet is a different issue, and opening those channels is one of the challenges for a start-up, thus my point.

    When you build a business based on an annuity revenue stream and you depend on material subscriber adoption, you’re a volume play. The entire model hinges on getting a significant volume of subs to stay with you so you can sustain operations.

    Let’s do some quick VC math.

    I’m going to take a stab at it and say that Zonbu has 12-15 people working for it at the moment. A rule of thumb is an average cost per employee on a fully allocated basis of $5000/month. So at 15 employees their monthly spend could be as high as $75,000/month. With a small number of employees that can skew down a bit so I’m betting $60K-$75K/month is a pretty close estimate to the operating expenses of the company.

    $60,000/$13 (avg. revenue) = 4615 subs paying monthly just to break even at the current level.

    Of course this is all back of the napkin stuff, but I suspect if you were able to look behind the curtain you’d find the metrics are fairly accurate.

    So, just to pay for the current monthly OpEx, not to expand and introduce new products, or to improve support, or to make any real money, they need to move 4600 boxes and keep the end users on the payment plan. Realistically there will be some churn, what that is I have no idea. But assuming 10% churn and you need to move 5000+ boxes to get your 4600 sustained subs.

    That may not sound like much but given the level of traffic that I’ve seen in the forums I’d say they’ve got quite a way to go yet.

    To be financially viable they need more retail muscle and lots of volume.

    -Mr. Zonbu

  5. Chad W Smith says:

    MrZonbu,

    As an IT guy, I can tell you that the Dilbert-style jokes about management and IT really not understanding each other have much basis in reality.

    What you refer to as the religious wars among Linux distros is a very accurate assessment. But what you fail to realize is that by asking an open source project, (like Zonbu), to switch distros, is like asking a missionary to change his religion. “But BeanieBabyism is so hot right now! I know you’d get a ton more converts if you preached BeanieBabyism instead of Pokemonism!” But, the guy is a Pokemon Preacher. “But they are both just denominations of the greater CollectableToyian faith!” You’re still talking to a Pokemon Preacher. There was some experience, some conversion process, that took place in that man’s life, and it has been reenforced, day after day, for years since. Until that man got to the point that he dedicated his life to preach the message he’d been given.

    I might sound like I”m overselling this – but that’s just because you haven’t sat down and listened to these inter-distro talks. Not every “geek” (which I consider myself to be one) has a religious devotion to every aspect of tech. Not every geek has those attachments to *any* tech. But most have some seemingly unshakable faith in some part of their tech lives.

    Whether its Linux vs Windows, or WIndows vs Mac, or Intel vs AMD, or Xbox vs Playstation, or DS vs PSP, or vi vs emacs, or BSD vs GNU/Linus, or Ubuntu vs. Kubuntu, WordPerfect vs MS Office, Google vs Yahoo, Digg vs Slashdot, the list goes on and on and on…. At one point, the young geek didn’t have a preference. They didn’t know there was a choice. They didn’t know what a Xubuntu was, much less if they should love it or hate it. But they came to the knowledge of its existence, had an experience with the technology, or learned through someone else’s experience, and made a choice. And everyday since that choice was made, they continued to gather knowledge that supported their decision, and reject knowledge that may have changed their mind. Again, not every geek and not in every decision is it that way, but on the ones that they have chosen to be that important, it is that way.

    Now, this is not really an issue to management. There’s a perfectly valid, logical, and important business reason to choose X over Y. You do what affects your bottom line. X will sell more. X will cost the company less. X comes with tech support. X is what our clients use. But Y is the golden calf of your IT department. In most companies, the IT department loses. But in an open source startup, the IT department *IS* management. So the IT department gets to use its golden calf, whether or not it is the “Best Business choice”.

    As another commenter said on the first post you mentioned making this change, one of the leading people at Zonbu is also one of the leading people at Gentoo. Not much of a chance getting Steve Jobs to sell Windows on his Macs, is there? Not much of a chance getting Bill Gates to make Windows work better with Linux. Could you convince Michael Dell to sell Macs? Maybe. He’s not a geek. He’s a business man. Steve Jobs and Bill Gates are geeks. Or at least they started that way, and are still pretty close.

    Now, I see your point with switching to a Ubuntu base. I really do. It’s a very solid platform technologically speaking. It’s easily the distro of Linux with the most headline grabbing power right now. Lots of other distros, for whatever reason, have switched to using it as their base. It has a regular release schedule. It has very good quality control measures in place. It’s flexible. It just works. But, as Michael Prescott points out, switching a distro’s base is not a snap decision. It’s not easy. And it takes work. Much more work than say, releasing an upgrade that’s still based on the same distro.

    From a business standpoint, I think you need to understand that at this point, Zonbu is a very small company. They don’t have a sea of tech people working around the clock to come out with the next release. Even Apple, who does have a sea of programmers, takes time to come out with a new OS. Heck, look at the 8 Billion Metric Tonne gorilla of Microsoft taking 6 years to come out with it’s OS. There’s a lot of work involved. I don’t think it would be as complicated as building Vista or creating OS X after only having OS 9.

    But there is work involved, and that’s work that, it seems to me that Zonbu would rather spend improving things that it wants to improve. Making the GUI easier to use, addinng features, squeezing every drop of processing power out of the boxes they have, etc.

    Now, the Via thing – there are three basic reasons, from what I can see, that Zonbu picked the Via.

    1. Low Energy Use
    2. Low Heat Emissions
    3. Low Cost

    Under number 1, remember that Zonbu both prides and promotes itself as a “Green” solution. Along with the low energy use, they have carbon offsets, a recycling program, they use less toxic chemicals, etc. The Via chip, because it is less powerful than Intel or AMD chips, uses less, well, power. So it *is* a part of their business plan. Just a part that you neglected to mention in this post.

    Number 2 is also a part of the Greenness. Not that Heat emissions from computers are adding to global warming or anything (although, who’s to say they aren’t?). But that by having a low amount of heat, they can avoid needing a fan to cool the system. The absence of a fan mean lower energy use, -and- less parts for Zonbu to have to buy, which leads nicely into the next paragraph.

    Number 3 is probably the one you will most associate with, as an executive. Intel and AMD cost more. It’s as simple as that. A 1.2 Ghz Via chip is far less expensive than a 2.2 Ghz Intel chip. In order for Zonbu to be profitable at its current price point, (and to keep that customer grabbing price point), they have to keep their own costs down. Could they get more customers if they sold a 2.8 Ghz Intel Core EXTREME Duo system with 8 GB of RAM a 128 GB solid state flash drive a BluRay and HD-DVD burner Wireless N Gigabit Ethernet a 512 MB Graphics card, etc. for $99? Oh yes! They’d sell tens of thousands the first day. They’d also go bankrupt that same day. Asking them to put a 2 Ghz processor in, especially a “name brand” one at that, at least at this point, is just about as likely as asking them to sell the system I described.

    I think they could and probably should up the power a little bit. Maybe a 1.5 Ghz Via CPU with 1 GB of RAM. Or at least the 1 GB of RAM. That really shouldn’t hurt their bottom line at all, and I think it would sell more units. But asking them to make a huge jump, at this point, is probably not going to happen. And remember, as time goes by – during your 3 year test – they will come out with newer systems. And with the 3 year replacement policy, just request a new system and get the upgrade.

    Now, my own conclusions – Don’t attack Russia and China at the same time. You are asking *Zonbu* to change something on every aspect of their business model – except online storage. You want them to change their software and their hardware, and you are basically asking them (by omission) to give up on their “go green” attitude and get the fastest CPU they can cram into that box.

    To be honest, even if Zonbu switched from Gentoo to Ubuntu, they’d still be asking customers to switch their OS. There are more Ubuntu users than Gentoo users, from what I can tell. But Zonbu isn’t marketed towards Linux users. Linux users, stereotypically speaking, like to do things themselves – Zonbu doesn’t let you upgrade existing software yourself, much less install any new software, (which really bugs me, since we’re stuck on a very buggy release of FIrefox that didn’t even last 5 days in the wild). Zonbu is targeted primarily towards WIndows users and those who have never had a computer before. For current WIndows users, it wouldn’t matter what distro they based it on, it would be a change. Some more than others, but from what you are describing, you want the OS to look and feel the same as it does now, which can be done under most distros including Ubuntu, so the distro’s base really won’t matter to them. And to people who’ve never used a computer before – any OS is going to have a learning curve, so again, the distro its based on won’t matter. If you really want to not ask much of the user, ditch Linux altogether and use WIndows CE or Windows 2000 or something as a thin client and there you go. Except that would add to the cost of the Zonbu, and you’d go back to asking them for an Alienware style PC at a 486 cost.

    If you are going to ask Zonbu to change, and the fact that they are sending you evaluation units, and commenting on your blog, tells me you have some sway with them, ask for things that you might just get. Maybe you’re trying the get a cat by asking for a pony approach. I don’t know. But try just getting them to upgrade the RAM, then move on from there.

    And, btw, basing your pleas for more power on the porn industry – I’m not sure if that’s the best argument you could have used. There are lots of other reasons to have more power. Many Web 2.0 sites need more power. Some of the software they have installed now (OpenOffice.org) needs more power. But claiming that its a good idea so the Zonbu can be better used as a porn surfer – I’m not sure if that’s the most convincing argument you could have used.

  6. mrzonbu says:

    Chad,

    Thanks for your comments.

    I’ll address them in detail at a later time, but I wanted to make a few quick points.

    1) I’m not asking Zonbu to change anything, I’m observing that some of the decisions may lead to limited commercial traction. I love the concepts they are focused on, but I am concerned about the large scale execution of the vision.

    2) Don’t confuse the business model with the hardware. Zonbu doesn’t make the hardware and can switch platforms relatively easily. Yes, they will take a bit of a hit because they pushed the Green approach very hard. Probably too hard, to be honest.

    3) I didn’t ask for a top line, quad core, power sucking processor. I have a quad core desktop already. I’d be happy with a 35W 1.8 or 2.0 GHz processor which would still be relatively green but provide a lot more firepower and a longer useful life for the box. Mated to the right graphics chip it would also solve a bunch of the outstanding issues with the Zonbu and give it broader immediate appeal.

    4) Whether you like it or not, when I speak about the importance of supporting adult content, that is an industry observation from someone who has been in the ISP business since 1994. You have to serve the market and the reality is, a large part of it consumes some level of adult content on a regular basis and that content is increasingly flash based and will be MPEG4 encoded in the near future. And I agree, some of the other apps will benefit as well, but they are quite usable as is, they would just be better. The Flash video is not consistently usable as is.

    More to come, I’ve got to get back to my network design for now – Mr. Zonbu is playing broadband Santa Claus and has visions of routing, switching, CMTSes and Gigabit ethernet dancing in his head.

    -Mr. Zonbu

  7. Hi Mr. Zonbu. First up, cool blog! Since you are the expert on the Zonbu, I was wondering if you could answer a question about the laptop. Does the Zonbu laptop have language support for East Asian languages, like Japanese, Korean and Chinese? So it can be typed natively (like in XP) without the need for inferior third party programs?

    This is a big consideration for me for as much as I want to ween myself off windows, without this support it would be absolutely impossible.

    Also, do you have any news or insider info about any coming models for Zonbu? I will not be purchasing a laptop until May (soon after I will go overseas) so I still have plenty of time to wait and see. Since technology is changing so much I expect that Zonbu could have a more advanced version out at that time. What do you think?

  8. whootowl says:

    Chad, Thanks for the excellent analysis! Very well said. I’m following both sides of the discussion. I totally understand and agree with Mr. Zonbu’s assertions, but I believe you have nailed a realistic assessment of the company’s business development.

    It remains to be answered, “Can Zonbu succeed if they stay on their current path?” I’ve got to think that the company must grow a much larger user base in order to be viable. In terms of marketing, the target is ill-defined. What would it take to appeal to a broader base? Certainly the browser must be capable of anything the web can throw its way. HD video decoding is on the risk radar. Ultimately, Zonbu will need to offer a more powerful platform to address this.

    For the short term, Zonbu must win over a following of vocal adherents. I’ve only lived with my Zonbu Mini for a couple hours. I’m not yet ready to render a verdict, but there seems to be “rough edges” to much of the software I have explored. I’m not looking for the software to be “insanely great”, but I am looking for baseline useability and robustness. On the other hand, I have been pleasantly surprised by a number of capabilities and the overall ease of the transition from Windows.

    Ubuntu, Gentoo, or otherwise, it is critical for Zonbu to include only apps and utilities that are rock solid, polished looking, and highly useable. I am exploring Zonbu because I am fed up with the crapware of Microsoft and the MS ecosystem. It is imperative that Zonbu shield its users from such.

  9. whootowl says:

    Well wouldn’t you know; the more I explore the software, the more I am impressed. It was unfortunate that the “rough edges” I’ve seen were caught so early in my evaluation. When I wrote the message above, I had not yet explored many of Zonbu’s included apps. It would not be accurate to suggest that the software suite, as a whole, is riddled with rough edges.

    The Zonbu desktop that wraps the application suite is masterfully done. The Zonbu environment is perfect for a person who is familiar with Microsoft Windows. In fact, the Zonbu organization of software is even more intuitive.

    My evaluation continues. I must decide in the coming week whether or not I can live with the Zonbu as a primary computer, or whether $15/month is worth it to support a secondary computer.

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