In good times everyone wants to
be a platform. But when times are bad and platforms are just an expense, the resources suddenly
shift away. The recent re-design of Facebook, the slow down of Google's
Open Social, and Flock closing
its extension site - these are all part of the same pattern. Platforms that don't
have monetization wired in are only good
for marketing. This is why the platforms of the future
need to think about not just short-term marketing and buzz, but
long-term sustainability
and monetization.
Last week Flock's community manager Evan Hamilton emailed all developers who had submitted extensions to Flock to announce that Flock will no longer support most of the extensions hosted on extensions.flock.com.
The justification was that Mozilla was doing a better job hosting and promoting the add-ons, and the majority were the same for Flock and Firefox. Since Flock does not have enough resources to support the extension site, Evan announced the decision to "cut the fat that is our unwieldy extensions system". (Note the keyword 'fat', it will be important in the rest of the post).
In itself this move was not surprising. Flock's team has just released version 2.0 of its social browser and has other battles to fight. IE8 is coming out soon with innovative features. Mozilla is racing forward with Ubiquity and the upcoming Geo-aware Firefox 3.1. And Google threw its hat into the browser ring with Chrome, so competition is getting tight. For Flock to be a player in the browser market, it needs a razor focus on building a base of diehard fans. Extensions are not helping much in that respect, they're an expense, so it was logical to cut them.
When the Facebook platform was unveiled in 2007, it was called genius.
Never before had a company in a single stroke enabled others to tap into
millions of its users completely free. The platform was hailed as a game changer
under the famous mantra "we built it and they will come". And
they did
come, hundreds of
companies rushing to write Facebook applications. Companies and VC funds
focused
specifically on Facebook apps.
It really did look like a revolution, but it didn't last. The first reason was that Facebook apps quickly arranged themselves on a power law curve. A handful of apps (think Vampires, Byte Me and Sell My Friends) landed millions of users, but those in the pack had hardly any. The second problem was, ironically, the bloat. Users polluted their profiles with Facebook apps and no one could find anything in their profiles. Facebook used to be simple - pictures, wall, friends. Now each profile features a zoo of heterogenous apps, each one trying to grab the user's attention to take advantage of the network effect. Users are confused.
Worst of all, the platform had no infrastructure to monetize the applications. When Sheryl Sandberg arrived on the scene and looked at the balance sheet, she spotted the hefty expense that was the Facebook platform. Trying to live up to a huge valuation isn't easy, and in the absense of big revenues people rush to cut costs. Since it was both an expense and users were confused less than a year after its glorious launch, Facebook decided to revamp its platform.
The latest release of Facebook, which was released in July, makes it nearly impossible for new applications to take advantage of the network effect. Now users must first install the application, then find it under the application menu or one of the tabs, then check a bunch of boxes to add it to their profile (old applications are grand-daddied in). Facebook has sent a clear message to developers - the platform is no longer a priority.
Apparently Google was threatened by the Facebook platform. Its quick
response was OpenSocial,
the open platform for social applications. Unlike Facebook, which was
proprietary and closed,
Google's was open to everyone. When OpenSocial was announced, techies
raised their eyebrows -
it looked raw and unpolished. Some of the existing iGoogle container
APIs were mixed in with
a new contact sharing library. But, being Google, a lot of people
signed up to support it.
Fast forward one year later and how much has been done? Well some companies did implement some elements, but the overall buzz died. Why wouldn't Google put more resources and marketing behind it? Because now it doesn't matter. The Facebook platform play is over and so the marketing strategy called Opensocial is not a top priority for the search giant anymore.
Next we turn to the latest platform getting buzz, Apple's iPhone App Store. At first glance it's much like Facebook, but in reality it isn't. Firstly, the user profiles aren't visible - you can't see applications installed on your iPhone. Each user can decide which apps to get, based on a simple review-based dashboard. There's no promise of a massive network effect, although there's a simpler user experience.
Importantly, Apple wired the monetization into the App Store right from the start. Sure there are free applications, but for companies that want to invest resources and play on the iPhone for a long time, there is an instant, simple opportunity to monetize. Note that paid applications get priority listing in the App Store, which is no accident.
Apple took care of the most important part of the equation - the transaction. It was also able to insert itself in the middle and recoup some costs associated with building the App Store. In the future, if it takes off and sustains the growth, App Store will ring in significant revenue for Apple. Jobs and his team were smart to wire monetization into the platform at the outsert.
Where does all this leave us? Certainly it's absurd to say that having Web platforms is a bad idea. Yet we're left with a bitter taste in our mouths after the latest moves from some big platform players. The platforms of the future need to think about not just short-term marketing and buzz, but long-term sustainability and monetization. Here are some questions that companies need to ask themselves before delivering a platform:
Our culture of sensation and free makes it much harder for platforms to think deeply and be disciplined. Google felt they had to come out with something to stop Facebook's momentum. Facebook rushed to create a completely open infrastructure; and it backfired both for users and developers. Having been burnt by Facebook, small and large companies alike will now think twice before investing in a presence on platforms. This is a shame, for we need platforms and we need them to work well.
Let us know what you think about the opportunities to plug into major platforms? What are your thoughts on the recent platform dynamics that we have witnessed?
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Very interesting articles. I agree with most of your point. However, I wonder how's the monetization strategy for music platform, such as the one from imeem and myspace. With major labels backing those up, are they going to be more sustainable?
Posted by: YouBlog | October 22, 2008 7:49 PM
Two thoughts I have about the platforms:
1) All of them, prominently Apple's, are going to get themselves into trouble for fair trade. We've seen it with Windows when it reduced or blocked functionality that threatened other Microsoft products. I'm surprised the FTC or the aggressive ASIC in Australia haven't said anything yet. Maybe it's for the reason you say: monentisation isn't hardwired yet, so technically no restraint to trade...yet
2) Apple's platform via what's become the Apple operating system of iTunes is amazing. First of all, it's changing the culture associated with software. People expect things on the web to be free (which has made advertising the revenue model, which in the process, has changed the dynamics of advertising but that's a separate issue). But the big thing is that people expect to pay for content and software over iTunes. That's massive, and may be the biggest saviour to the web industry. It's killing the culture of free, which although ideal in a perfect world, is not sustainable.
More importantly though, is that payment mechanism. As people have bought songs and movies off iTunes, they have their credit card details available on Apple. This allows the consideration of buying app's an afterthought, as the biggest struggle for the conversation of a customer is the first step of actually getting their credit card. The implication of this, apart from what I raise above about the culture, is that Apple's platform may enable the first true micropayments system. And that's a Big Deal.
Posted by: Elias Bizannes | October 22, 2008 8:14 PM
Excellent points Alex. Now I hope the tech press, RWW included, remembers this the next time we see a hot, hyped platform. Ask these questions. Press them. Don't just go all rah rah and start freaking out over the Facebook API, Opensocial, etc etc. Yes, they had potential and being enthused about them is fine - but take a step back and ask the questions above when the platform's being pushed as the next hot thing and VC are creating investment funds to ride it.
Posted by: rick | October 22, 2008 8:25 PM
The phone companies have always done better in monetizing apps than internet companies. Take ringtones for example -- they were coining money while the p2p networks took over delivery of full length songs (there are 10 times as many songs shared through p2p than sold online).
We'll see how well the walled gardens of the phone companies do when telephone calls become all-VOIP all the time.
Having said that, I think your point that longevity is dependent on a profitable business model is absolutely correct. The internet itself is not at risk, because the ISPs and the hardware companies have profitable business models. E-commerce, keyword search, and classifieds work fine as business models.
Those are the areas all new internet companies should be looking to latch onto -- ecommerce, search, and classifieds. jmo.
Posted by: Ted Murphy | October 22, 2008 8:31 PM
An excellent post.
The single most important element is the recognition of the importance of long-term sustainability. That is the nature of a catalyst...and the goal of a platform company.
The concept of a platform is often treated as a feature. It cannot be...it is a business strategem and must be approached with appropriate planning and consideration.
Perhaps my biggest concern is the belief that API creation, or release, is sufficient to refer to a platform. A platform, at its heart, must accomplish several things. But chief among these is decrease the cost (or complexity) of interaction between multiple audiences while, simultaneously, ensuring value is created for all participants.
Thanks for a thought provoking missive.
Posted by: Tyler Hannan | October 22, 2008 8:32 PM
I like your point about Apple's App Store. Built in system to handle cashflow puts them at a great advantage for sustainability. I have been mulling over some of the micro-loan sites such as ebay's microplace, kiva, prosper, zopa etc, and thinking that although ebay was a little later to the game, they might have a huge advantage in ebay & paypal. I'm interested to see how it plays out.
Posted by: michaellambie.org
|
October 22, 2008 11:19 PM
Why should a platform worry about monetization ? If the platform is standardized, open and decentralized, each participant will come with his own reasons for participating - some of them directly monetary, others indirectly monetary, others not monetary. Only anachronistic closed centralized and proprietary platforms worry about how they are going to survive - the users don't want the platform to wield power other them. Did anyone ever worry about what the monetization strategies for the SMTP, HTTP or TCP/IP platforms are ? Establish an open standard with a working implementation - if it adds value, the users will develop it and some of them will monetize it on their own terms as citizens of that platform. End-users and developers have a symbiotic relationship, but centralized proprietary platforms are merely parasitic. Openness and decentralization is in everyone else's best interests.
Posted by: Jean-Marc Liotier
|
October 23, 2008 2:07 AM
Maybe it will take a Microsoft to get it right. A successful platform is right balance of openness (to let developers buit on and around it), control (so it doesn't fragments into 100 variants), vision and monatization. And, it is very difficult to get it right.
Posted by: anon | October 23, 2008 2:52 AM
Great article! I think it's rather interesting that the one that started it all, MySpace, hasn't even been mentioned. I believe that part of Facebook's popularity was it's plain and simple interface, exactly the opposite of the 'customize your myspace' page, which ultimately led to overcrowding and a lot of poor design aesthetic. While MySpace creators cashed in the the gigantic sale to Murdock and co., have they found a way to monetize it...even now?
Agreed with Elias that Apple has singularly changed the way that people view web content. They've grown accustomed to actually, dare I say it, PAY for something from the web. Looking at it from a different angle, it might even be easy to say that iTunes and Apple have paved the way for a growing trend in the gaming industry: free-to-play titles, but monetized via microtransactions. While some platform applications have capitalized on this model, perhaps it's something the platforms themselves should be looking at?
Posted by: Time Tracker | October 23, 2008 3:04 AM
the internet is 'the platform', and its becoming more social
Posted by: ray | October 23, 2008 3:59 AM
Very interesting and relevant points.
Until real monetized applications are created that are actively used in the mainstream this may continue to be the case.
Posted by: YouPage Local Search Ltd | October 23, 2008 4:33 AM
i agree with chris ;)
Posted by: telefon | October 23, 2008 4:38 AM
The AppStore may already be more profitable for Apple than on-line music sales.
Having said that, as a platform, it is similar to Facebook - it is already difficult for new apps not in the Top 10 to get attention, and many iPhone users report that they download and ditch many apps.
YouBlog
> With major labels backing those up, are they going to be more sustainable?
Possibly not, seeing as record labels themselves are still bleeding cash. Warners walked from last.fm because it basically made no sense to them financially (yes, like many readers here I think last.fm is a great idea and I love music discovery sites, but if they don't convert into sales rather that downloads, then there is no point wasting money on supporting them).
>Jean-Marc
You are using a different definition of a platform - SMTP, HTTP, et al are standards - you can't actually host or run an application on them, which is what we're talking about here. Even if you use a wholly free open source stack to run your application, out of ideological zeal, you're still going to need hardware and bandwidth (it's no wonder, for instance, that IETF have been sponsored by Comcast and Cisco) - and the more successful your app, the more you will need.
Even non-profits needs a source of revenue - the likes of the IETF and W3C who define these standards DO have budgets and a 'monetisation' strategy - in their case it is the simple one of getting the vendors who benefit to donate staff, time and sponsorship money.
Of course, what would sort this all out would be static IPs for everyone and always on home servers so that we could all host our own sites/apps which would then work purely p2p within our social network (which would address scalability issues) - the very opposite of the centralised 'cloud' being pushed by vendors - but the cloud may be the stage to get there (by creating a standard for hosted apps).
You also need to consider the difference between an ideological position ('freedom is the ultimate good') and how people react - how many people host their own open source blogging or forum software vs using Blogger, Yahoo Groups, etc. Step back and ask why do they do that? Why did people start creating pages on mySpace rather than using a HTML editor client (even FrontPage) and then FTP upload to their ISP?
Why don't people use W3C's Amaya. These are the vital questions to ask, rather than saying 'open must be better'.
Posted by: JulesLt | October 23, 2008 5:55 AM
This post, and the many thought provoking comments, really got my attention because it seems to hit at something quite deep with regards to the meaning of ‘openness’ as well as its implications on usability and usefulness.
Being increasingly involved with the open source Drupal platform I’m a big supporter/fan of the Open Source movement. Coming from a background of corporate software/platform development I’ve certainly experienced the struggle to dominate in a competitive marketplace.
What I enjoy most about Drupal, as one of many open source projects, is the sheer determination of its community of active volunteers to evolve the platform for the good of everyone involved (directly and indirectly).
This article leaves me thinking about how the word ‘open’ has two fundamentally different meanings that seem to have come into play in the rise and fall of the Facebook platform and the Google response.
From a technological point of view, ‘open’ means the engine is available for third parties to play with. There is an implication of possible usefulness behind that. But if ‘open’ means a way to go viral, then a different set of interests and motivations kick in for marketers who these days see ‘going viral’ as something of a Holy Grail.
You’ve described here the conflict between those types of interests with the technological spectacle of an open API from Facebook, and an essentially marketing driven, and temporary, response from Google. In neither case is the user served well as you indicated in the account of Facebook’s usability breakdown and Google’s abandonment of their efforts.
So all that is to say that if, as we always knew, necessity is the Mother of invention, then raw technological enthusiasm and marketing self interest are the ‘dead beat Dads’ of innovation.
M Baynger
The User Advocate Group
Posted by: useradvocate | October 23, 2008 7:53 AM
@JulesLt : "platform" is quite a broad term, broad enough that everyone feels comfortable with it without the hassle of agreeing on a definition. As a lowest common denominator we can agree that a platform is a set of technologies that enables functionality. You will find definitions that consider such different things as marketplaces, chipsets, hardware standards, operating systems and API as platforms. So I defend the idea of protocols as platforms : they provide a technological foundation on which users can interact to add value.
You are also confused about the definition of a user. A user is not necessarily a end-users. Take for example blogging : to the end user, the platform can be services such as Wordpress.com or Blogger. But these services themselves stand as users on platforms such as the TrackBack specification, RSS, a bunch of microformats and innumerable other protocols - and I'm not even starting with the software stack.
To the user, open means retaining control and freedom. He may sacrifice
Posted by: Jean-Marc Liotier
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October 23, 2008 10:19 AM
As much as I'm a fan of social apps, and the ever-expanding creative industry that's piled on top of the widget-as-container-for-social-interaction, there's a point worth making here about the decline and fall of the Facebook app platform. That is, simply, that they ceased being interesting.
All social media innovations rise on a wave of interest piqued by the novelty of the innovation, and curiosity about their use. And these waves roll on like any other in the social technology space. Only a handful of the users who check out social apps continue to use them regularly, and facing a declining number of friends who pick up the interaction (game, play, etc), it's only natural that they lose interest.
Social applications are governed by the same rules that govern any offline social interaction: they're episodic. They take time and time is spent engaging in them. When the interest that sustains an interaction fades, the episode comes to an end. That's just simply how we spend our time together (when it's structured).
In other words, I think there's a social interaction dynamic in play here -- not to discount the technical or business dynamic, but in our world social rules still apply.
Posted by: Adrian Chan | October 24, 2008 9:56 AM
FAT! Yeah right. I think they ar ebeing more mean than lean imo. But seriously. I used to be a big fan. Tried it in the last month. It is so bloody slow. It will never get better. It is off my list of things to do.
They have a really talented team. But this will not happen, sorry guys. It would be cool if I were wrong.
Posted by: dc crowley | October 24, 2008 10:41 AM
Platforms are a tool for vendor lock-in, but might be useful for a publisher to more easily reach an established user base.
The ultimate open platform is the Web itself.
[TrackBack]
Posted by: impl.emented.com
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November 4, 2008 1:17 AM