Wednesday, 27 August 2008

"Platform" as "Markets"?

A hat tip to The Bankwatch for pointing out Umair Haque's interesting post "What Apple Knows That Facebook Doesn't".

My sense is that there's really not much in this, and there are more similarities between the Apple and Facebook approaches than substantive differences.

I understand Umair to be saying that Apple has adopted a "market" business strategy, whereas Facebook is taking a "platform" approach. Apple facilitates an increase in flexibility and utility for its customers, while Facebook channels its users into functionality of its choosing and exposes them to advertising. Apple will dominate, Facebook is somehow doomed. Specifically, Apple's approach will alter the basis of competition, irrevocably alter the market by unleashing a domino effect and open the value chain to myriad new entrants.

But how does this improve on O'Reilly's explanation that the success of Web 2.0 businesses stems from their "architecture of participation"? He sees the internet as a "platform" but with a different set of rules for success. So it seems we should see platforms as a feature of markets or certain market phases, rather than "platforms as markets", as Umair would have it. Perhaps this is nothing more than saying that markets consolidate around 2 or 3 large participants (platforms?) and fragment again over time.

And you could easily switch Umair's examples.

Facebook has actually made the internet and internet technology more usable for people who want to network, socially or otherwise. Yes, there are crappy apps, but VC's are funding some of those because of their ability to acquire signficant numbers of users overnight, hence the notion of the Facebook economy. It may be hype, to some extent, but what VC-fest isn't? The basis of competition has changed, because you can launch a business today with a tenth of the funding you needed 3 years ago. The domino effect might be seen in the way incumbents are forced to enter the social network services space and in the numbers of start-ups and early phase businesses relying on low-cost services like cloud computing to reduce their "burn", helping making those services viable in turn. Similarly, Facebook is encouraging new entrants, and opening up the long tail of apps and content for all those niche communities you see in the groups.

Apple, on the other hand, sought to make its iPod and now the iPhone the dominant platform in its space. Apple drip-feeds new functionality, new versions and content deals with the majors as a way of trapping people on those platforms. The result is a standards war between device manufacturers, by any other name, and it's boring for anyone who wants truly interoperable mobile applications and music that will play on any device.

Actually, I sense that the approaches of Facebook and Apple may be more similar than different. Each has created an architecture of participation, and time will tell which is more successful at sustaining it - perhaps both will be.
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