Dead as a Doorbell
Platforms are the holy grail of software development because they offer the promise of creating an entire ecosystem that revolves around intellectual property that you own and control. As I argued in my last post, it’s getting harder to charge directly for using a platform because the internet has made it so much easier to develop and deploy free platforms in a distributed manner. But this doesn’t mean you can’t make gobs of money. Companies like eBay and Google have demonstrated how to generate huge, scalable revenue streams without using a simple-minded “just pay $29.95/month” pricing strategy.
So how do you know when your platform has made it? A useful rule of thumb is this: when you’re fighting to establish your platform, if user doesn’t have your software it’s tough luck for you. You can’t sell them complementary products and services and so you can’t make money from them. Once your platform is established, if a user doesn’t have it then it’s tough luck for them. All the cool applications are targeting your platform so the onus is on the user to get with the program or miss out. Once you reach this point you’re smiling all the way to the bank.
A cute analogy from the world of telecommunications occurred to me while in the States over the holidays. After a fun and relaxing trip to see my family in Connecticut (including my first meeting with my three-week-old nephew… he’s tiny!), I visited a friend in New York on my way back home.
“Call me on my cellphone when you get here,” she said. “My doorbell doesn’t work.”
It is evident from this that the mobile phone network in the United States now meets the criteria for a successful platform. Cellphone adoption in the U.S. has been slower than in Europe and Asia, and I imagine that even two years ago this would have been a case of tough luck for the platform. In other words, my friend would have had to go out and get her doorbell fixed or risk missing visitors. Now that cellphones have crossed that magic usage threshold, it’s the underequipped visitor who is out of luck. In essence, the wireless phone network has become sufficiently prevalent to take over the role of a lot of wired infrastructure (like that silly wire attached to your doorbell). And since essential “applications” (like getting into someone’s apartment) rely on owning a cellphone, the pressure to get one has become practically irresistible. As a result, the phone companies are making out like bandits.
Of course, none of this tells us how to create a successful platform, but at least we can recognize one when we see it.
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