How SMS set back the mobile internet by ten years




Why SMS was awesome





Why MMS is so bad





Why i-mode never took off elsewhere




Jobs delivers us the keys to the new kingdom






The backstory behind Opal or Not.


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Instead, I wanted something that would:



Half the Donut: Why an entrepreneur earning $100k gets to keep over $99k in Singapore but under $57k in San Francisco

The donut of doom: Total earnings vs total tax in California

You’re about to quit your job and start living the life of a one-man entrepreneur. Living in your basement, you have no rent and no employees, and since you’re selling your skills you don’t need venture capita yet, but you’re still dreaming big. All things being equal, where should you base your business?

Tip: Probably not in the place where the taxman takes a red bite like this out of your income donut.

More specifically, in each of San Francisco, Helsinki, Sydney, Tokyo and Singapore, if your business earns $100,000 in net revenue and pays you a “ramen-profitable” $2000 monthly net salary:

  1. How much post-tax profit will your company make in a year?
  2. If all of this profit is paid out in dividends, how much does will you have left after taxes?

If you’re wondering why I picked those five cities, part of the reason is that it’s a nice geographical, cultural and political spread, but mostly it’s because I’ve either founded a company or worked for a company based in each of them.  The $100k net revenue/$2k net salary model, funding product development on the side, is basically what I modeled my one-man consulting company on back in 2006.

To jump straight to the answers, click here. If dividend imputation and municipal inhabitant taxes get you all tingly and excited, read on. Hardcore masochists who’d like to double-check my math are also invited to examine the gruesome innards of this Google Docs spreadsheet.


This is a hypothetical exercise, so I’m going to simplify as much as I can, the accounting is still stupidly complicated and there’s a whole lot of cramming square pegs into round holes going on.  In particular:

  • I ignore all non-financial considerations. Visas, availability of talent, infrastructure, economic prospects, legal and political environment etc are all important real-world factors for locating a business, but out of scope for today.
  • $100,000 is net revenue, we ignore all expenses aside from salary and tax. In other words, $100,000 is what’s left over after business registration, accounting, stationery and whatnot, and we also assume that those costs are the same across all countries.
  • We assume sales tax does not apply.  This is not as unfair as it seems, since most countries exempt companies until they reach fairly high yearly sales thresholds and exclude online and/or international/interstate sales.
  • The business has no tax deductible expenses. This is particularly unrealistic for the United States, where 72,500 pages of federal tax code means creative deductions are a national pastime, but them’s the breaks.
  • Pensions are accounted for on a defined contribution (what-you-pay-is-what-you-get) basis, so $1 put in now is worth (at least) $1 later. This is true for Singapore, Australia, US 401(k)/IRAs and some Japanese corporate plans;  this is manifestly not true for US Social Security or the national plans in Finland and Japan, but for lack of a better measure we assume it is anyway.
  • Taxes are computed assuming that pension and health insurance contributions are tax-free, which allows me to ignore the distinction between employer and employee contributions.
  • The owner is a full-fledged local resident under 40 for the purpose of tax, pension, insurance etc brackets.
  • For the sole purpose of minimizing futzing about with exchange rates, for income tax thresholds etc I’m going to merrily assume that 1 USD = 1 SGD = 1 AUD = 1 EUR = 100 JPY. This is obviously not correct, but is not all that much worse than picking actual exchange rates that’ll be out of date in moments anyway.

Last but not least, this is a work in progress, a revision history is at the bottom of the article.   Now, let’s roll up our sleeves, channel the spirit of the late great Herbert Kornfeld, and balance this shit wit’ a quickness.

Round 1: Paying a salary

$2000 x 12 = $24,000, leaving $76,000, right? Not so fast. There are four main things to worry about here: income tax, pension fund contributions, payroll taxes and health insurance. Both pensions and health insurance are tricky since our countries’ systems vary so widely, so we’ll just attempt to standardize the legislative minimum. And since all these fees are usually percentages of salary, we have to work our way backwards starting from desired post-tax income to get to the employer’s cost.

Golden Gate BridgeIn San Francisco, I’m going to cheat a bit and outsource the otherwise horribly complex income tax computation to the MIT Living Wage Survey, which figures that for a single adult, it takes pre-tax earnings of $26,692 to have $1,929/mo left over after tax, an effective tax rate of 13.28%.  Optimistically assumes that rate stays the same at $2,000/mo, we now need $27,675.  Next, we add in a 6% employee pension contribution with 6% employer matching (+$3203) and boost medical from $149/mo to a post-Obamacare estimate of $368/mo (+$2628).  On top of this, employers have to pay 6.2% of wages for Social Security, which I’ll lump as a “pension” for the purposes of this article; 1.45% for Medicare; 3.4% for CA unemployment, plus 1.2% and 0.1% of the first $7,000 only for federal unemployment and employment training tax respectively. (Huge props to ZenPayroll.)  In a rare bit of good news, SF’s payroll tax (1.5%) only applies once total salaries exceed $150,000, so we can ignore this.  We thus arrive at $36,773.

Ice, HelsinkiIn Helsinki, personal income tax is so complicated the only sane way to compute the effective rate is to punch numbers into the official tax calculator.  A gross income of €29,000 and zeroes for everything else, including being a godless pagan who avoids church tax, nets income of €23,978, for an effective rate of 17.32%.

As a >30% shareholder of his own company, our hero can apply the lower “YEL” pension employer contribution of 17.55% for two years.  On top of this, we have the employee side pension contribution of 5.15%, 2.04% mandatory health insurance, and 0.80% employer/0.60% employee unemployment insurance.  We thus arrive at €36,615, which is, rather incredibly, a hundred bucks less than SF, and this gets you a cradle-to-grave Scandinavian welfare state!

Expressways in Shinjuku, TokyoIn Tokyo, national income tax (shotokuzei) is 5% for the first Y1.95 million and 10% above, plus a flat 4% prefectural and 6% municipal tax (which combine to form jūminzei, resident tax), which works out to 16.6%.  For pension, you can pick the national plan (kokumin nenkin) at a fixed Y14,980/month regardless of income, or a standardized company pension (kōsei nenkin) at 17.120% split evenly between employer and employee; being cheapskates, we pick the national plan.  National health insurance is 80% of municipal and prefectural tax paid, which in Tokyo equates to 9.97% split between employer and employee. Phew!  (Dōmo arigatō to Japan Consult.)   Final damage 33,448 hectoyen, and I’m delighted to find out that I’m apparently the fifth person in the history of the Internet to use that lovably awkward term.

Sydney Opera HouseIn Sydney, the Tax Office says the first $18,200 of income are tax-free and the next bracket until $37k is 19%, for an effective rate of 5.36%.  The minimum pension (superannuation) contribution is 9.25% and Medicare (public health insurance) levy is 1.5%, and since our total income is under $84k, we’re not required to pay the Medicare levy surcharge for not having private insurance.  Payroll taxes in Australia are administered at the state level, but New South Wales only applies its rate of 5.45% once payroll exceeds $750,000, so that particular bullet is dodged, and at $28,087, the end result is easily the lowest of the bunch.

Shophouses in Katong, SingaporeIn Singapore, income tax is easy: 0% for the first $20k, 1.4% for the next $10k (usually 2%, but they’re discounting 30% in 2013), for a scarcely believable effective rate of 0.24%.  Mandatory pension (CPF) contributions for employees under 50, which include a health insurance component, are 16% for the employer and the 20% for the employee, with a maximum contribution of $1800/mo (not applicable here). The only other obligatory cost is the Skills Development Levy at 0.25% of salary, capped at $11.25/mo.  This equates to $32,777.

We can now compare the total cost of employment, ie. how much it costs the company to pay the owner that $2000/mo salary:

Employer cost vs take-home pay

But while taxes disappear into the gaping jaw of Leviathan, pensions are retained by the owner in some form of another (see Disclaimer), so a more instructive comparison deducts salary and pension from total cost to arrive at what I’m calling “employment overhead”:

Employment overhead

At the end of Round 1, Singapore is the clear winner ($117!) and Sydney a close second, followed by Helsinki and, at the back of the bus, Tokyo and San Francisco, where nearly $8k disappear in a puff of smoke.

Round 2: Corporate tax and dividend taxation

In our idealized mini-company, everything that was not paid out to the employee is pure profit. If the company wants to dish them out to its sole shareholder, how much do they get after the taxman takes his share?

Cable car, San FranciscoIn California, a C corporation pays 8.84% corporate tax.  (A pity we’re not in Nevada, where it would be zero.)  Pile on federal taxes at 15% to $50k and 25% to 75k, noting that you can deduct your state corporate tax first, and we get 23.7%. Since California treats dividend income as ordinary taxable income, in the $36k-to-87k tax bracket you’re looking at 25% to Uncle Sam, 12.3% to California, 3.8% to Medicare and 1.2% for “deduction phaseouts” (wat?), totaling a whopping 42.30%. Tot these up, and our entrepreneur is left with 44% of what the company earned, or $27,828.  And if that sounds bad, here’s a calculation that arrives at 26% when you max out both tax brackets!

That said, if you’re going to do this in real life and do not have ambitions to grow to be the next Google, you should almost certainly opt for an S corporation or an LLC instead.  These don’t pay corporate taxes: instead, they pass their income (or loss) onto their shareholders, who then pay normal income taxes.  This is good if you’re keeping the money, but terrible if you were planning to reinvest it.  However, since all other corporation types in this little survey are “real” companies that can choose to reinvest or issue dividends, I felt that a C corporation is a fairer comparison point.

Geese in Hietaniemi Bay, HelsinkiIn Helsinki, both corporate tax and the tax treatment of dividends was revamped in 2013.  From January 2014 onwards, corporate tax is 20%, leaving €63,385 in post-tax profits.  The basic capital gains tax on dividends is 30% (but 32% above €40k), with a tax break of 75% on the first 8% of “free capital”, which for our newborn company equates to the total yearly profit.  This works out to an effective rate of 28.59%, leaving €36,211 in our hero’s bank account.

Cherry blossoms in Korakuen Garden, TokyoIn Tokyo, corporate taxation makes Japanese payroll and income taxes look simple.  Based on this handy summary from JETRO, for “a small company in Tokyo”, corporate tax is 15%, “restoration corporate surtax” (read: Fukushima surcharge) is 1.5%, prefectural and municipal “inhabitant taxes” in Tokyo are 0.75% and 1.85% respectively, “enterprise tax” is 2.70% (I presume this is meant to discourage entrepreneurship?) and as a cherry on top “special local corporate tax” is 2.19%, for a total of 23.99% but an effective rate of 22.86% for reasons I won’t even claim to understand. But wait! Once your earnings top Y4m, new rates apply and you now get socked for 24.56%.  In effect, the effectively effective rate is an ineffective 23.54%.

So that’s taxes, now dividends, which are even more like tentacle porn. To quote Japan Tax, “As so often seems the case with Japanese individual taxation, what would be expected to be a simple tax matter is made overly complicated by a range of expiring tax benefits (that are often revised or extended) and a range of alternative obscure reporting elections, deductions or exemptions.” The short of it is that the withholding tax rate for unlisted shares is 20%. The long of it is that you can then choose to report or not report it as ordinary income. If you do report, you have to pay income tax, but receive a dividend deduction of 12.8% for overall income of Y10m or less but 6.4% above which offsets the withholding tax and, you know what, fuggedaboudit. Pay 20%, end of story, and keep 40,709 hectoyen.

Sydney Monorail on Darling BridgeIn Sydney, company tax is a flat 30%, no if ands or buts, and the highest rate in our survey.  Dividend income is treated the same as ordinary income and taxed at same rate, except that thanks to dividend imputation you get “franking benefits” that are meant to offset the corporate tax already paid.  Acting on the optimistic assumption that they do, this means all that’s left is the difference between the corporate tax rate and the receiver’s marginal income tax rate, in our case 32.5% (for the $37k+ tax bracket) plus 1.5% levy, or 4%.  This leaves a rather juicy $48,326.

Singapore city at duskIn Singapore, corporate tax is usually 15%, but new companies in many sectors including IT pay zero (0%) tax for the first three years for their first $100k in profit, no special applications needed.  There’s also a whole slew of other tax incentives, including 4x deductions of IT gear and, most incredibly, cash transfers of up to $5,000/year from the tax man for companies that make a loss despite earning over $100,000 in revenue, but that’s another story and our rules exclude this kind of thing anyway.

Singapore has no capital gains tax, so Singapore company dividends are also tax-free. The company can thus pay out $67,223 in dividends, and the shareholder gets every last cent. This means our entrepreneur’s yearly earnings after tax are $91,223, and adding in the $8,640 sitting in their pension fund, they have managed to hold on to $99,883 of it.

Company profit vs dividends after tax

Dear reader, if you made it this far, I salute you. Now all that’s left is to sum up your salary, your pension and what’s left of your dividends to see how much of your $100,000 you still have left over.


Total left over from $100k

Singapore romps home as the undisputed winner, with the entrepreneur keeping a scarcely credible 99.9% of what they started with. It’s just a real shame that, for political reasons, the government has recently gutted the EntrePass scheme and thus made it close to impossible for a foreign one-man entrepreneur to set up shop.  (If you’re keen anyway, check out the Singapore Expats “Business in Singapore” forum or drop me a line.)

Somewhat to my own surprise, Sydney rocks up in second place with 74.6% left over.  Australia’s not what you’d call a low-tax (much less low-cost) country, but income tax is highly progressive and the dividend franking system means you only pay tax once on dividends, meaning that at low incomes you get to keep most of what you earn.  The calculus would change pretty rapidly if you earned $200k and found yourself in the 45% income tax bracket.

Helsinki and Tokyo show up neck and neck in 3rd and 4th place, with 66.8% and 66.5% respectively. Both have heavy taxation of income, payroll, corporate profit and dividends, but no total clangers. (Except Finland’s 24% value-added tax, the exclusion of which makes Helsinki unrealistically rosy, unless you can source all your income from outside the EU.)  The canny entrepreneur could nudge up both of those figures: in Tokyo, you’d actually want to pay yourself more salary since income tax is lower than corporate tax, while in Helsinki the reverse applies.

And trailing the pack with barely half left over is poor old San Francisco with 56.9%.  Now obviously there’s more to deciding where a company sets up than taxes, because otherwise Silicon Valley would be empty… but unless you really need to be there, from a financial point of view setting up pretty much anywhere else seems to make a whole lot more dollars and cents.


Thanks to corporate law ninja Joe & serial entrepreneur Juha for a sanity check of the US, Finland and Japan calculations, Tuomas Talola for corrections to Finnish calculations, and my Singaporean accountant, the infatigable Ms Tan, for clueing me onto this stuff back in the day.  If you spot any mistakes, drop me a line.

Incidentally, Joe says that a fairer version of this exercise would model the corporate and personal taxes of each country and then solve for the optimal combination of salary and dividends.  Any takers?

Revision history

31 Oct 2013

  • Recomputed Finnish income taxes with tax office calculator.
  • Adjusted Finnish employer pension to use YEL rate instead of TyEL rate.
  • Corrected Japanese pension to pay national pension (kokumin nenkin) only.

Lonely Planet: This is Not the End






But what if people don’t want e-books?


But what if people stop buying printed guidebooks?





Time is money: How Clash of Clans earns $500,000 a day with in-app purchases

Confession time: While I like to rationalize my blog’s recent silence with changing jobs and moving to a new city, the truth is, the single biggest drain on my free time lately has been Supercell’s Clash of Clans.  While this apparently puts me in good company, I decided it’s about time I shared what I’ve learned about how this “free” game apparently manages to spin well over $500,000 a day for its creator Supercell.  (Update: Forbes reports Supercell now earns over $2.4m a day, the majority of that from Clash of Clans.)


The core of Clash of Clans is a bog-standard resource management game: mine “gold” and “elixir”, use gold and elixir to buy improvements to your town so you can build stronger armies, raid other players in order to loot their gold and elixir, rinse and repeat.  If you’ve ever played Starcraft, Age of Empires or pretty much any other real-time strategy game, you’ll know the drill, and the buildings and units come off as almost painfully derivative.  There’s a Barracks for new troops and Archer Towers for defense, you’ve got Zerg-like cheap and disposable Barbarians, weak but ranged Archers, slow Giant tanks for soaking up damage, etc.  But formulas are formulas because they work, and it’s fun to set up your little village, win your first battles and watch your (thoroughly meaningless) levels and experience points rack up.  The touch-screen interface is a pleasure to use and the smoothly zoomable 3D graphics are beautifully animated with cute little touches; for example, when you tap to select an army camp, every unit salutes their leader in a different way.

Show Me the Gems

“So that’s all well and good”, I hear you say, “but where’s the money coming from?”

In the standard Zynga playbook for making money off with freemium games, you would let players buy gold, elixir or the items they want directly.  But Clash of Clans adds a twist: you can’t buy anything directly, but you can buy a third resource called “gems”.   Unlike gold and elixir, gems are not necessary for building anything functional, they’re simply a type of “power-up” that serve as a shortcut.  Need more gold to finish a building? Buy it with gems.  Need more elixir to add a dragon to your army?  Buy it with gems.  Don’t want to wait a week for a building to finish?  Complete it instantly with gems.  In other words, gems mean instant satisfaction.  What’s more, their cost is neatly obfuscated: purchased gems come in big, oddly numbered stashes (500, 1200, 2500, 6500, 14000), and once you have the pile sitting in your account, it’s easier to whittle it away 834 gems at time, whereas you’d probably think twice if asked to punch in your credit card details and confirm that you really want to pay $6.98 (just a sliver under the U.S. federal minimum wage) to upgrade your Wizard Tower.

Yet this formula’s beauty is that none of this is immediately apparent.  You start the game with 500 gems, which is plenty for the initial stages, and there are many easily earned “achievements” that reward you with more, so that you don’t initially appreciate their value.  The initial buildings are fast to build, with some building instantly and others taking a minute here or five minutes there.  And you’re shielded from enemy attacks for three days, so you can take your time building up your base and raiding the AI’s goblin bases for easy loot.

As you advance through the levels, though, the time and expense of everything ramps up exponentially.  A level 2 Town Hall takes 5 minutes to build and costs 1,000 gold; a level 8 Town Hall takes 8 days and costs 2,000,000 gold.  And you soon encounter the next twist: on the later levels, patience is no longer enough.  A maxed-out set of Gold Mines can produce 360,000 gold a day, meaning you could theoretically accumulate the sum neeeded for that Town Hall upgrade in 6 days.  However, you’re being continually raided by other players, and since other players can see your wealth before they choose to attack, a fat bank account means you’re a fat target.  What’s more, since successful raids award percentages of your wealth, a single “three-star” attack worth 25% can see 500,000 gold disappear in a flash.

coc-gold-vs-loginsThere’s more.  In your typical RTS, collected resources immediately go into your central storage.  In Clash of Clans, though, they stay in the collectors, vulnerable to attack both by location and design (up to 50% can be stolen, vs. 20% for central storage), until you log in to manually transfer them to relative safety with a tap.  This, too, makes it difficult to accumulate large amounts and encourages you to login at least several times a day.  The chart shows why: if you start with 1,000,000 gold in storage, earn 360,000 daily, and get attacked once daily, losing 50% from your collectors and 20% from central storage, the player who doesn’t bother logging in for two weeks will see their pile drop 75% to under 250,000, while the player who logs in religiously four times a day will increase their wealth by over 50% to 1,550,000 — but even their earnings flatline well before two million.

What this means is that, once your bankroll is over 1.5 million or so, the only free way to keep the balance growing is grinding, a tedious non-stop cycle of raiding and army rebuilding, with nervous logins every five minutes to keep raiders at bay (you cannot be attacked while online).  In their grandmotherly kindness, though, Supercell provides you a whole wealth of alternatives.  Can you spot the pattern?

  • You can use gems to buy “shields” that stop you from getting raided: 250 gems ($2.50).  Lest that seem too cheap, you’re preventing from using more than one week of shield per month.
  • You can use gems to fill up your gold or elixir storages instantly: 834 gems ($8.34)
  • You can use gems to upgrade your gold mines to the next level, where they will work faster: 966 gems ($9.66)
  • You can use gems to buy additional “workers”, so you can upgrade your production faster and earn gold/elixir faster: 1000 gems ($9.98)
  • You can use gems to double your production of gold or elixir for a 6-hour period.  Repeated across six mines for three days: 1368 gems ($13.68)
  • You can use gems to rebuild your armies instantly, so you can keep raiding and racking up loot without anybody having a chance to steal their money back via the handy “Revenge” button. Assuming 50k elixir to rebuild and 50k profit per raid: 2760 gems ($27.60)

And once you’ve finally earned those 2 million and clicked the “Build” button, it takes another 8 days to build the thing — unless, that is, you fork out another 1123 gems ($11.23) for instant completion.  It’s little wonder most players start “to gem” (it’s a verb in Clash of Clans parlance) by the time they reach Town Hall level 7 or so, the stage when most costs are measured in millions and building virtually anything unassisted takes days.  Jorge Yao, the game’s undisputed champion, figures he has spent north of $2500 in real money on buying gems, and according to back-of-the-envelope calculations, the cost of fully fitting out your virtual village is on the order of $5000 when you include walls.  It’s little wonder the top clans leaderboard is full of players like “>< Royal ><” from Kuwaiti clan “Q8 FORCE” and clan UAE’s “khalifa” (presumably from Bahrain’s ruling House of Khalifa).

Your Pain is Supercell’s Gain

Unsurprisingly, the entire game has been warped in subtle ways to encourage buying and using gems.

For example, in your average real-time strategy game, you have fine-grained control deploying and directing your troops, and units that survive can be used in the next battle.  Not so in Clash of Clans: once deployed, units fight according to their hardcoded strategy (most commonly the harebrained “bash closest building”, regardless of what it is or who is firing at them), and every unit deployed disappears at the end of the battle, even if they are victorious.  This means it’s essential to rebuild huge armies and to attack with massive force every time.   And since building those dragons can take several hours, during which time you’re wide open to attack, there’s another massive inducement to solve the problem with a few gems.

Probably the most blatant case of tilting the table is the recent introduction of “Dark Elixir”, a third in-game resource geared squarely at high-level players.  Collected at the glacially slow pace of 20 units per hour, even in an raidless pacifist world it would take 21 days of waiting to accrue the 10,000 units needed purchase its main selling point, the Barbarian King, and the table is stacked further yet by subjecting collectors to 75% raid losses.  Who wouldn’t pay $6 to skip the tedium and uncertainty?

In comparison, the “clans” of the name seem almost like an afterthought.  Their primary function is to be a gifting circle, where players donate units to others in their clan, and receive units in return.  And that’s it: clan players cannot share gold or elixir, much less gems.  But they do provide another handy lever of extra social pressure to ensure you log in regularly, since clan troops defend your base, die when attacked and can only be received on explicit request, and since most clans enforce minimum per week donations and kick out “freeloaders” who have not paid their dues.

But It Could Be Worse…

Some credit where credit is due: unlike Zynga’s notoriously annoying games, Clash of Clans does not require Facebook signup, cram the game full of ads, spam you and your friends, or pimp your personal information to random third parties.  And while you’ll be reminded that “Hey, you could use gems for this” whenever you try to do something you can’t afford, if you stay within your means and have the patience of an ascetic saint, you’ll never even get asked for money.


At the end of the day, my feelings towards Clash of Clans are distinctly mixed.  Being a penny-pincher whose in-game purchases have been limited to a single $4.99 gem pack, even that largely as a token of appreciation to the game’s makers, I can’t really complain about the hours of entertainment I’ve gotten in exchange.  Yet I still can’t help but cringe as I run into all the ways the game is intentionally crippled to get you to pay up, and the way its Pavlovian triggers to come back for more operate on fear.   Would Minecraft have been any fun if it required you to log in every six hours or you’d lose parts of your inventory?   And how much more awesome would Clash of Clans be if the effort of squeezing every last cent out had been put into improving the game itself instead?

Down, down, down: Books, e-books and apps all trending to zero

“We expect DVD Subscribers to decline every quarter.. forever.”
— Reed Hastings, CEO, Netflix

Does your business model rely on selling paid content?  Welcome to Mr. Hastings’s world.


Many publishers continue to operate under the assumption that printed book sales are declining gradually or perhaps even plateauing.  Unfortunately the data tells a different story: the decline appears to be accelerating.  Here’s Nielsen Bookscan for the travel market:

Printed guidebook sales, millions/year

That’s from the “Guidebook Category Report, Rolling, Period 13” for 2006 to 2012.  The trendline is a simple polynomial (n=2) best fit, and if it’s accurate, the market will halve by 2015.  And while that sounds drastic, it’s by no means unprecedented, as the sales of CDs did pretty much the same thing in 2006-2009.

Of course, the market’s not quite homogenous: Lonely Planet’s been beating the trend, mostly by continuing to invest in print and absorbing customers from the rapidly-disappearing Frommers. But that just makes LP an even-bigger fish in an ever-shrinking pond.

So can the white knights of digital paid content, e-books and mobile apps, save the publishing industry?


Finding good data for e-books is a pain, so I ended up rolling my own: I grabbed Amazon’s Kindle Store Top 100 bestsellers lists since 2007, using snapshots from the Internet Archive that record the actual prices at the time, and computed average prices and the proportion of under-$5 titles, the vast majority of which are self-published.  (Source code in Ruby here.)

Average price of e-books in Kindle Store Top 100

Despite that December 2012 spike, the trend is clear, and while the decline looks gentle, my personal suspicion is that the trend line is too optimistic and that there’s a collapse looming.  For one thing, the data above is only for best sellers, meaning new books by well-known authors who command a distinct price premium; the average price of an average e-book is both lower and falling faster.  Yet even in the Top 100, the share of “cheap” books, the vast majority of which are self-published, is growing exponentially:

Books Under $5 in the Kindle Store Top 100

While I didn’t use their data directly, I owe tips of the hat to Piotr Kowalczyk, who wrote a very detailed report on the growth of self-published books on Kindle, and Digital Book World, which has been keeping tabs for the past half year (albeit looking only at the top 25).  DBW also has a credible explanation for the spike, which boils down to publishers yanking up prices in the period before they had to start allowing discounting, and further reinforces that shrinking prices are the new normal.


The collapse of prices in the mobile app world has been even more drastic, to the point that outside an  elite circle of bestsellers and the odd very specific niche, making money by selling the app itself is a pipe dream.  (All data courtesy of and the Internet Archive.)

Average price of paid applications in the Apple Store

By the end of the year, the average app will cost under 99 cents, and even that’s pulled up by every $999 BarMax and wannabe in the store.  The median price is already zero:

Share of free applications in Apple Store

In other words, over half of all apps are already free.  On current trends (and look how beautifully that line fits the data!), that will be over 80% within two years.  This is for the “premium” Apple Store widely opined to have less stingy customers; the equivalent figures for Android will be even more brutal.

What to do then?  The only answer is to figure out a way to make money that doesn’t involve readers paying for content.  Here are some ideas:

Farewell Lonely Planet Melbourne, hello Google Sydney

On the Metro, Helsinki, FinlandAt 18, I spent the summer delivering mail at minimum wage minus 15% (it was “training”, you see), and promptly blew my meager savings on a frenzied one-month Interrail trip through Europe.  When my parents read through the angsty, near-incoherent notes I’d scribbled into a diary while waiting for trains in Holesovice or Ljubljana, complaining about expensive yogurt and Hungarian orthography, they ruffled my hair the same way I now praise our two-year-old for going potty and said “This is amazing!  You should go work for Lonely Planet!”

“Ha”, the cynical teen thought.  “Fat chance of that ever happening.”

Sri Veeramakaliamman Temple, Little India, SingaporeYet 15 years later in Singapore, as I sat warming my hands over the dying embers of Wikitravel Press and glumly contemplated a return to the grim meathook world of telco billing systems, I received an e-mail from Lonely Planet.  A few days later, I took Gus to Komala Vilas for roti pratas, and he outlined the vision for what would become the Shared Publishing Platform and why they could really use a travel wiki kind of geek for it. A few weeks later, I was in the Melbourne suburb of Footscray, staring at the world’s largest accumulation of travel knowledge in the Void and pinching myself: “Holy crap. This is for real, I’m standing inside the HQ of Lonely effing Planet, and these people want me to come work here.”

Industrial Science Laboratory, U. of Tokyo, JapanNow I sit here in equal disbelief, voluntarily saying farewell to the best company and best team I’ve ever had the privilege of working for, and that’s not just the kind of hyperbole expected for these public farewells.  The past three years of replacing a jet’s engines in mid-flight have been an intense learning experience, and the work is nowhere near done, but unlike the company’s three previous attempts, it’s now over the hump.  All authors are now writing directly into the content management system, where editors and curators weave their magic, with printed books, e-books, apps and the website being pumped out the other end, and Lonely Planet can now start fully focusing on its shiny digital future.

Sydney Opera House
And me?  I’m joining Google’s Geo team in Sydney, where I’ll be working with the world’s most popular travel application, Google Maps.

I plan to continue to write this blog, although there will be less idle speculation about what the Big G is up to next and less of a focus on the print publishing business I now depart. That said, my next post ought to give some food for thought to those in the industry, so don’t unsubscribe just yet!