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The problem with this reasoning is that, in simplifying everything, you may get more users but you may make your product less useful for some, because you've removed features. And what if they're the most valuable customers? What if Adobe made Photoshop much, much simpler, by removing lots of tools that aren't used by everyone?

There are many ways to make something successful. Simplifying for the masses is one way. It's not the only way.

I think this article is on the right track, but I agree with you that you shouldn't necessarily minimize the number of features you have. I think, like the article said, your app should be known for doing one thing really really well (i.e. Google = search) but it could also have a lot of other features. These features should augment the one major feature that the app is known for and they should be simple to learn so you don't overwhelm your users.
the trick is in augmenting a simple interface with powerful technology a.k.a added functionality.
i agree that there are a set of users that are much more hardcore than the masses. it's a delicate balance. if you only cater to the advanced users your growth curves will parallel.
I think this article doesn't do too good of a job distinguishing a conversion funnel and the actual features of an app.

For a conversion funnel, simplicity is better. The less a person needs to do to sign up or make a purchase, the more people will do it. It'd suck to repetitively fill out a form with your address, name, etc. every time you wanted to buy a song on iTunes.

On the other hand, if you're designing an application, the key is to have layers. Not layers like a conversion funnel, but layers of complexity. An app needs to be simple on the surface (i.e. Google), but have features available (but not prominently displayed) for people who want them. For example, Google searches the web. For a first-time visitor, that's all it does. For me, it's a calculator I use when I don't want to open up my application bar, it's a dictionary, it's a meteorologist, it's a way to search Hacker News, etc. There's a lot Google does with one input box, but it doesn't at any point in time force you to notice what it does. It just does it.

exactly, the technology is built into the initial layer though. you aren't clicking a calculator link are you? you just input it into the same field. so google's initial layer is as effective as it is because the underlying technology is powering that layer. versus an app that has a seperate link to calculator, dictionary, weather etc.