Monday, August 25, 2008

Genie In The Bottle

Interesting Harvard Business Publishing article entitled "What Apple Knows That Facebook Doesn't". Umair Haque wrote the article and contends that markets, networks, and communities "are strategic weapons of shock and awe". And his thinking on platforms is that "the most useful way to think about platforms today is simply as markets."

The article contends that Apple's iPhone 3G platform is not about a platform to be manipulated, but rather a market to be made. The iPhone's App Store is at the heart of that statement; it's the genie in the bottle with potential for great magic. Apple and its partners are able to bring products to market in a way that provides value to consumers.

On the other hand, Umair thinks Facebook has effectively let its genie OUT of the bottle by focusing on making Facebook a platform instead of a market. "If advertisers are subsidizing apps for people, Facebook's market will always be distorted - because advertisers need consumers more than consumers need advertisers today."

This implies that Facebook partners (ex. app developers) are limited in how they can participate in a way that truly provides value to consumers. Moreover Facebook appears to be trying to put the genie BACK IN the bottle by identifying and highlighting great applications; this move could cause a negative backlash by app developers and Facebook users if not handled properly.

If Facebook spent some significant time thinking about how they can extend the reach of their platform so that it provides value to lots of websites (not just and visitors to those websites (not just Facebook users), then that could be a powerful genie. Facebook Connect is a step in that direction, but it still feels too much "platform" and not enough "market".

I do not want to imply that platforms are unimportant; you just need to structure them properly so the market potential is optimal. Google, for instance, has built a platform (i.e. Indexing and Search) upon which an Adwords ecosystem flourishes.

On a related note, this platform vs. market thinking got me thinking about open source business models. In Matt Asay's "Sifting open-source wheat from the chaff", he rightly points out that paid-for support of open source technologies "is not a compelling enough argument for most would-be buyers".

While open source technology and support can provide the basis for a core platform and business, it is the commercial, differentiated offerings built on top of and around that core that drives the enduring market opportunity for customers, vendors, partners, etc. Easy to say, but in may cases hard to do, since it requires a delicate balance.

As Jim Whitehurst of Red Hat states: "If the open-source movement, now in its second decade, is to realize its promise for vendors and investors, more of its purveyors will need to get the message soon."

Bottom-line: Thinking in terms of platforms and markets helps ensure business plans are designed to keep the proverbial genie in the bottle...the results of which can be quite magical. A bottle without a just a bottle.

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