Emerging Ecosystems & Platforms

I’m at David Kirkpatrick’s iMeme conference in SF. It’s likely going to be a treat. The speakers and the attendees are of great caliber.

As an ex-platform guy who’s recently spent a lot of time thinking about social infrastructure, I’m was particularly interested in the opening panel on emerging online platforms, moderated by David who kept the conversation moving swiftly. The panelists were:

  • Marc Benioff, CEO, Salesforce.com
  • Marissa Mayer, VP Search & User Experience, Google
  • Mark Zuckerberg, CEO, Facebook
  • Philip Rosedale, CEO, Linden Labs (maker of Second Life)

The discussion centered on what it means to be a platform company on the Net and to get people to use your platform.

Philip and Mark acknowledged that they are in the very early phases of truly understanding what it means to be a platform yet there are some underlying principles for success.

Philip stressed that it is foolish not to allow your users to do what they want. Sometimes, that requires making some seemingly uncomfortable decisions. Traditionally, platform companies have tried to protect and leverage the core platform IP. However, if a platform enables network effects (which make it harder for users to leave), the platform owner can benefit by opening up and applying only a few key controls. Mark pointed out that there is a huge issue of trust between users, the platform provider and third party developers. That’s one key area of controls that the platform vendor should maintain control over for the benefit of all.

There are at least two other areas that IMO the platform provider should establish clear rules, if not controls, over.

The first one is around the question of who owns the data. Esther Dyson asked the panel a question along these lines and nobody provided a satisfactory answer. Mark’s response was “users have all the controls” but that doesn’t answer the ownership question. I’ve written about this before as one of the key issues underlining the emergence of social infrastructure.

There has been much debate recently on the topic of user data ownership. The information in question is the user-generated data and the attention data generated while using a site. There are three issues to consider. The first one is legal. Users implicitly assume that the profiles and the information they create on community and social networking sites is theirs. Most terms of service and privacy agreements are either mute on the topic or outright state that the operator can repurpose the data for their own use. Attention data is often not called out and its treatment therefore is unclear. The second issue is privacy. Facebook recently faced a huge backlash from their users when they made information about user activities on the site public. The specific outcry was less about the features Facebook had implemented and more about the fact that the information in question was gathered while the users thought it would be kept private. The company had to backpedal and put new privacy features in place.

The second one has to do with the notion of who is the law. Who provides the framework of what’s good vs. bad, what’s legal vs. not. Is there a notion of enforcement? By whom? If there are spillover effects into the real world (financial fraud, privacy violations, etc.) how is the real/virtual linkage managed. Release 2.0 had a good piece on this topic in its last issue.

Marc’s take is that the Net has become the OS and the killer apps (Second Life, Facebook, Salesforce.com, etc.) are becoming platforms. As an aside, none of these have any dependence on the “old” platform–the Microsoft OS. He further claimed that killer app companies that do not make the transition to platforms become irrelevant. His examples were Seibel vs. Salesforce.com, Oracle vs. Cullinet, etc.

One interesting question that comes out of this is whether one can build a successful platform company without ever building a killer app. Would Windows have been as successful without Office/Outlook? Unlikely. Could Facebook have launched as just a set of Web services? I bet not. I can’t think of many examples where a platform company has been successful over a long period of time without some ability to create user lock in + lead by the example of its killer apps. My personal experience at Allaire, which was a pure platform company, agrees with these observations.

In addition, everyone agreed that platforms only become successful if they give rise to successful ecosystems. One of the metrics Philip is watching is how many businesses in Second Life are cashflow positive. Facebook now has thousands of apps on its platform and some of them have millions of users. Marissa’s work at Google has enabled a huge monetization of content and traffic on the Net by many thousands of businesses. Beyond that, Google has been very successful with Maps, iGoogle and gadgets (10,000+ developers). I’ve written before about the Ecosystem Test that a platform must pass in order to be successful.

The ecosystem test asks whether a platform can enable a large group of average, poorly funded players with little to no domain experience deliver compelling solutions. It’s based on the observation that no platform has become hugely successful without a corresponding ecosystem of vendors building significant businesses on top of the platform. Typically, the combined revenues of the ecosystem are a multiple of the revenues of the platform.

The panel was followed by a short speech & interview with Catherine Cook, co-founder of myYearbook. She sees myYearbook, Facebook and others establishing the infrastructure for a new wave of media companies that will give old media a big challenge. One example she gave was myMag, a 100% UGC teen magazine they’ve launched. Teens contribute the content but professional editors package it.

About Simeon Simeonov

I'm an entrepreneur, hacker, angel investor and reformed VC. I am currently Founder & CTO of Swoop, a search advertising platform. Through FastIgnite I invest in and work with a few great startups to get more done with less. Learn more, follow @simeons on Twitter and connect with me on LinkedIn.
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5 Responses to Emerging Ecosystems & Platforms

  1. tharwood says:

    Computer Corporation of America is an interesting trial your “platforms must have killer apps” theory. CCA is definitely a platform company, and their ecosystem, as far as I know, remains entirely devoid of a killer app; but they continue to survive, and thrive within their niche, and I get a nice little dividend every year.

    But their [mainframe] environment is a slowly changing one, so their intense specialization — and, for that matter, their employee-owned state — is an adaptation to a different situation than something like the Net 2.0 goat rodeo.

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