Postulates on the Economics of Flash

Introduction

Theorms was too nice of an implication that I even was close to forming a conclusion. I was in my economics class this morning, and it got me thinking about how my small stints at contracting apply in the grand schemes of what I’ve been learning.

The class is so far is all about the graphs. We’ve covered supply & demand, price vs. widget created, marginal costs, total costs, average total costs, optimal efficiency, profit gain, profit loss, and showcasing shifts and the “u curve” across all situations. Today was the continutation more in depth of market structures; perfect competition, monopolistic competition, oligopoly, and pure monopoly.

Monopolistic Competition

The monopolistic competition one caught my interest because I feel that its characteristics are very similiar to what I’ve experienced the past 2 years, and heard about happening 2 years before that. The characteristics are:
– many sellers (as opposed to many buyers)
– heterogeneous product (as opposed to homogeneous like stock)
– perfect flow of information
– relatively free entry and exit

Dot-Kizzohm Supply & Demand

When you compare it to the other 3 market structures, you’ll see what I mean. From the graph below, the early dot-com days were high in demand, and low in supply of qualified (or not) individuals to create interactive products and services. Thus, the price for such services was high in what developers/designers could charge.

As time went on, one would think things would come to equilibrium, price structures would start to emerge, and people would start to see some form in consistency of price vs. quality/quantity.

That wasn’t the case however, and with marketing being the forerunner, it only added to the confusion. You went with one ISP over another because they were “bigger”, and had a more trusted brand, even though the local, small guys running internet service out of their house probably had less overhead and therefore faster and consistent connection services. Even today, you still have no real clue where you stand salary wise as a professional, and can only use government sites that are annual, tech sites which you pray don’t have stuffed entries on average salary, and co-workers which are really tight lipped, over blow what they make, or are somewhere in between. There is a lot of trusted information, but the mis-trusted and lack of logic behind even some of the trusted doesn’t really build a solid foundation to know where one stands.

‘course, technology isn’t the only industry. Getting my house painted, and had her majesty on price reacon. One gent charged $4000 for 4 rooms, while another charged $1500 abouts. Uh… ok… what I am I getting for the price difference?

Same holds true in web design. You had your programmers and then designers charging good money for their services, and then had big businesses charging upwards of $50,000 dollars for a total of 4 months in a 12 man & woman team for a simple, nicely designed website. You have do-it-yourself sites complete with e-commerce extensions charging in the low hundreds with a minimal, less than $10 fee for monthly hosting. You used to pay $70 or so to register a domain name, and now you can pay as little as $9 in some cases.

Now, as the supply of individuals, institutions, and web sites increase in their ability to deliver these services to customers, the price you would think would go down. Going off of the last quality of monopolistic competition, it is very easy to get into technology creation nowadays. You can get a $200 machine with internet access, teach yourself some basic HTML and OS navigation skills, and you can produce products that clients will pay for. The more time you invest, the higher quality your products will be. Whether it be knowing a hard ROI on search engine results, knowledge in hardware so as to be a better ColdFusion programmer, more astute desinger from pouring over the history of font technology books to increase the usability of your designs as a designer, or studying pragmatic design pattern implementations to make you a better programmer. You get what you pay for, although still developing, is starting to surface in our industry. If I pay some college kid enough money for a new XBox to make my website, the potential is high that if I were to invest a few thousand more, I’d probably end up with a better product if I were to hire one of my contractor friends instead. It’s easier now to quantify real returns on the quality and quantity of functionality and services rendered from hired talent/institutions.

The monkey wrench was a downturned economy, lack of new investment capital due to broken promises, outsourcing, and a general negative connotation associated with some technological endeavors right when maturation of some important concepts was occuring. A tsunami of biblical proportions on a constantly changing terrain.

Suddenly the supply exceeded the demand. When a company could sell a client a pre-processed website design, and the only thing truly unique beyond the client-entered copy being a modified .css file, thus changing the look of the entire site (colors and text formatting), and having a client happy started to make creating a custom solution for a client each project look stupid. It’s different from hiring an architect yourself when building a new house, in that you as a buyer know the end result will be widly different from the cookie-cutter designs some house builders will produce, thus you take matters into your own hands as a consumer. This, however, implies you know what your getting, and understand the process somewhat as well as what architect A can offer over cliche B. A lot of companies really didn’t see the ROI quantified in a nice report clearly stating what to look for, thus, why pay a lot when you can pay a little for the same product? Obviously, this changing everyday, and consumers are way smarter than they used to be. When it reachers Human Resources, you know your doing good.

Regardless, high profile cases merely make things more complicated in knowing where your business stands, such as the 11 year old that created that Flash intro and made Macromedia Site of the Day, or my favorite is “Flash Kid“, who with a world-wide team of friends made $400k on seanjohn.com. And yet, people expect the same quality of work for a mere fraction of the cost. Course’, assuming if you can charge that much for a website, you’ll have no problem adjusting your cost structure in the blink of an eye to take their project… yeah right. Just reading the debates of upset clients makes your head spin.

At any rate, with some context, you can at least see where Flash was, is, and is going.

The Rise of the Flash Development Market

In mid 2002, with Flash Intro’s looked down upon, but still work out there to make them, and links Flash 99% Bad floating about the corporate world (via a friend; she forwarded me an email someone from another team member who didn’t understand the project, and thus found that article in hopes that the project would their way, or just crash I guess), the demand for Flash work in general, not just development work, was at an all time low. Most clients didn’t even know what Flash was capable of, and had been for awhile. I couldn’t even charge $2 an hour for some projects… the clients I managed to tackle amidst the mad frenzy of 2-faced creative moonlighter.com (clients used to have to pay… now you as a contractor had to pay to view client proposals…) were just tight arsed crackheads with even more crackhead ideas. I didn’t really care about the quality of their vision; with no source of income and a high priced apartment eating my savings, I just wanted their money so was willing to forgo the education on how technology’s supposed to work. The work I did get was for a digustingly low price, not to mention the fact that I had little clout anyway since my X-job had left me with no work.

Thus, the graph looks like so with the supply shift increased and the demand lowered because of the economy.

Things were changing for the better. IBM knew what was capable in Flash games they had seen on the internet. Upon spending 3 months doing nothing but Flash MX building up my skills in that arena, knowing it to be a fun future I wanted to be a part of, regardless if it payed or not, I was finally contacted by 3 recruiting agencies who had seen my resume on monster.com. It appeared that about a hundred or more other people had as well, but was whittled down very quickly to 4 candidates, me being the 4th. With that many people desperately seeking work, the interviewers were already scared from the lies the previous candidates had portrayed in their ability to “code”, not design in Flash MX. The resumes all nicely printed via the help of her majesty, the business cards, the pressed suit with new white business shirt, the coffee-induced smile of a caffeine high… all of it fell on deaf and defended ears. All the saved me was the CD-ROM in my pocket containing an MXP full of components I had created over the past few months. It got me the job.

Now, I had been receiving the monster.com email for about 4 months at that point, and every day I could see what job hunters were looking for. With the creation of my blog, and my name + contact info strategically marketed into everything I did, I was suddenly getting job inquiries from other companies directly, and all wanting a Flash “developer”; keyword there. The same held true for contracting gigs. Every single one of them had design covered… twice on Sundays. The economy & industry supposedly sucked, but here I was seeing me and many of my online friends having a brighter and brighter future every day.

Present State of the Market and New Demand Creation Frontiers

At present, the need for qualified Flash programmers is at an all time high. With the threat of Avalon/Sparkle(sp?), looming in the future, the need for a good looking, cross-platform, dyanamic GUI now has seen a huge influx of other disciplines of programmers… true programmers, not just converts like me.

My guess, however, from various statements about quality and new frontiers is that Macromedia is not seeing the influx/demand increase they want, want more, and/or are just further entrenching themselves to better surf the wave of Longhorn and other Apple, Sun, and *nix initiaitives & opportunities that may arise.

– Mike’s new title & quality initiative
– JD on SWF developer opportunity expansions
– JD on Rich Media Acceptance & increased demand
– JD on future initiatives for creating demand

For example, the term “Flash ecosystem” was a phrase tossed around for awhile. A lot of Macromedia’s initiatives are based around the SWF format itself, building upon creating products and services upon the format. Since the format then becomes widly accepted, integrated, there becomes an increased need for people & institutions to create content for it. Whether it be custom Breeze pods, component development for Flex, or a plethora of disposable Central apps (saying the disposable part with no shame), all increase the demand for Flash development related work, and thus increase our desire for more expectations from Macromedia, and when most of those are met, to purchase the next version of Flash. But, more selfishly, more demand for our skills.

From hearing from colleagues in the field, there is still a strong need for design based work (intro’s, product demo’s, game design, and advertising), which is where the Rich Media Advertisting initiaitive is really taking off. Marketing people are always quicker to respond, it seems. At least, a lot more, to me, appears to go into the creating of the developer demand vs. the designer one.

The Future

Hopefully, if all goes as planned, we should see a shift in the demand continuing for Flash developers (shown below) as well as designers. If the supply of the current amount of qualified individuals stays the same because of the lucrative skillsets we must have, we can then charge higher prices to compensate for the increase in demand… or diversify our work load from Rich Apps to more niche projects like Flex component, Breeze Pods, Central Apps, like mentioned above… all of which still require the same person. With the increased demand, the market should theoretically respond even more favorably, thus we should see a greater influx of more developers looking to capitalize on the growth of the rich media market, buy more products from Macromedia, and hopefully see more innovation on said products.

Conclusion

So, as much as I’ve griped about things like Breeze, Flex, RoboHelp, and other products in the past from Macromedia, and wanting more attention spent to my discipline, I suddenly “get it”, and know things will definately only improve from here on out, but not only that, last longer than I thought they would with the threat of Longhorn.

…if not, fuggit, Plan B is to continue to develop my .NET skills, and when the new rich media tools based on Microsoft’s new OS come out, I’ll be prepared to hit that market instead.