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Mac Rumors reports on a new Safari feature in Lion called Reading List:

Reading List lets you collect webpages and links for you to read later. To add the current page to your Reading List, click Add Page. You can also Shift-click a link to quickly add it to the list. To hide and show Reading List, click the Reading List icon (eyeglasses) in the bookmarks bar.

I’ve known about this for a little while (I’m not privy to the Lion betas since I only have the iOS developer membership, but friends have told me), and I’m not worried about it. It might even be a huge boost to my business if I’m doing my job well.

I talked a lot about the Reading List’s potential impact to Instapaper in last week’s podcast, from timestamp 21:48 to 30:37. But I know nobody listens to podcasts (or at least, nobody pays attention to podcasts) while browsing the web at a computer, so I’ll explain my thoughts here, too.

What’s an Instapaper competitor?

I’ve always considered Instapaper’s core appeal to be the combination of three pillar features:

1. Saving articles to read later — timeshifting — like a DVR for the web.
2. Synchronizing the reading list between computers and mobile devices.
3. Presenting the articles in a stripped-down text format on those mobile devices for optimal reading on their screens.

If another product doesn’t implement all three, it’s not really an Instapaper competitor.

The first version: not a competitor

Assuming Reading List is activated in 10.7.0, which seems likely, I suspect that it won’t have much more than what we already know about: a “read later” reading list (pillar 1) and optionally viewing these links in the “Reader” text-optimized view that we already know from Safari 5 (the desktop version of pillar 3).

So far, it’s much more of a Readability competitor. (Safari Reader is based on Readability’s open-source code.) Without the mobile and sync components, it’s not really an alternative for most Instapaper customers.

The next version: maybe a competitor

It’s easy to assume that Apple will extend the Reading List feature and Reader text view to Mobile Safari in iOS, syncing it all via MobileMe or iCloud (whatever that turns out to be).

I wouldn’t necessarily assume that this is in the near future. Mobile Safari’s interface is packed full, especially on iPhone, and Apple adds to it very conservatively. They haven’t even added Reader to it, despite being nearly a year old, even though it would be far more useful on iOS than in desktop-Safari.

And Apple’s not known for liberally adding syncing features, or building web services particularly well. (That might change in the future. For many other reasons, I hope it does. But, as of today, it hasn’t.)

But it would be irresponsible for me to ignore the possibility that they will eventually implement these features in Mobile Safari and sync your reading list between your devices (pillar 2), maybe even as soon as iOS 5.

Likely long-term limitations

Assuming they do all three pillar features:

• It’s almost certainly going to remain self-contained in Safari, not a systemwide service that other browsers will have access to, so only Safari users can use it. Safari is Instapaper’s most-used browser, representing 40% of visits to the Instapaper site. That’s a lot, but it’s not the majority.
• A major part of Instapaper’s appeal is its integration in so many other apps. Apple would need to build a public API to make this possible for their Reading List, and I think that’s unlikely.
• Apple leaves large markets open for the taking, even in areas in which they compete, since they rarely implement enough features that “power users” want.

The RSS features in Safari and Mail are great examples: they’re so basic that they probably haven’t reduced the overall demand for RSS readers. (Although Google Reader has, but that’s a different article.)

And granted, “power users” aren’t the majority of the market. But as I said, I don’t need the majority of the market — it’s so huge that even 1% is enough to make a fortune.

The Starbucks effect

Starbucks practices extremely predatory site selection for their stores: they’ll intentionally move in right across the street from or immediately next door to independent coffee shops, in an unnecessarily aggressive effort to drive them all out of business.

It puts the bad ones out of business, but it actually helps the good ones:

“[Starbucks] just flat-out said, ‘If you don’t sell out to us, we’re going to surround your stores.’ And lo and behold, that’s what happened—and it was the best thing that ever happened to us.”

[…]

Soon after declining Starbucks’s buyout offer, Hyman received the expected news that the company was opening up next to one of his stores. But instead of panicking, he decided to call his friend Jim Stewart, founder of the Seattle’s Best Coffee chain, to find out what really happens when a Starbucks opens nearby. “You’re going to love it,” Stewart reported. “They’ll do all of your marketing for you, and your sales will soar.” The prediction came true: Each new Starbucks store created a local buzz, drawing new converts to the latte-drinking fold. When the lines at Starbucks grew beyond the point of reason, these converts started venturing out—and, Look! There was another coffeehouse right next-door! Hyman’s new neighbor boosted his sales so much that he decided to turn the tactic around and start targeting Starbucks. “We bought a Chinese restaurant right next to one of their stores and converted it, and by God, it was doing $1 million a year right away,” he said.

My biggest challenge isn’t winning over converts from my competitors: it’s explaining what Instapaper does and convincing people that they actually need it. Once they “get it”, they love it, but explaining its value in one quick, easy-to-understand, general-audience sentence is more difficult than you might imagine.

If Apple gets a bunch of Safari users — the browser that works best with Instapaper — to get into a “read later” workflow and see the value in such features, those users are prime potential Instapaper customers. And it gives me an easier way to explain it to them: “It’s like Safari’s Reading List, but better, in these ways.”

How much the Reading List affects Instapaper is up to Apple. If they give it as much attention as they’ve given Safari Reader so far — fairly little — it’s not going to have much of an effect at all. And if they build a large enough feature-set and backing service to make it a true competitor, they’re likely to create a lot of potential Instapaper demand.