With the rise of 'open platforms' on the web, particularly on popular consumer-oriented services like Facebook and Twitter, it's never been easier for individuals and small upstarts to get their applications in front of millions of consumers quickly and efficiently.
The appeal of open platforms is easy to understand: instead of having to deal with the dreaded chicken and egg challenge most new consumer internet upstarts have to contend with, you can leverage the existing userbases of popular services.
When you throw in the fact that this distribution is often free, it's easy to see why so many entrepreneurs are building businesses around applications that only exist on them and why investors are funding them.
But as we've seen, open platforms aren't without risks. An application can be terminated at any time for any cause. Getting a hold of customer service can be just about impossible. In one fell swoop, an entire business can be threatened with extinction.
In my opinion, this isn't effective distribution; it's dependence. And entrepreneurs should understand this.
Many if not most companies in a wide range of industries rely on third parties for distribution. But smart companies have more than one distribution partner and seek diversity in their distribution channels; some even build their own distribution channels, which can be quite time consuming and costly, but worthwhile in many cases.
Being solely dependent on one third party (or multiple third parties who operate similar channels) is not something that smart companies aspire to, for obvious reasons. It's kind of like building a business around one customer; even if that one customer pays the bills today, you are in real trouble if that customer isn't there to pay the bills tomorrow.
When it comes to popular platforms like those offered by the Facebooks and Twitters of the world, there are a number of reasons to be concerned:
- There's no formal relationship that guarantees that the relationship you have with them today is the relationship you'll have with them tomorrow. They hold all the cards and you're at their mercy.
- These companies are themselves still upstarts and most aren't exactly on the most stable financial foundations. In an effort to monetize, they could easily change their policies to the detriment of businesses that operate on their platforms.
- Trends come and go and while I doubt that today's most popular consumer internet players are going to go out of fashion tomorrow, it's hard to build a long-term business on top of a business whose prospects and positioning in the marketplace could change dramatically over time.
Because of these things I think it makes sense for entrepreneurs to consider that building a business around the Facebook and Twitters of the world is not a smart move.
Instead, the platforms they offer should be used wisely with standalone web services for the purposes of promotion and interaction.
To do this, you should evaluate your standalone service and look for possible integration points that enable you to introduce your service's core functionality to users of third party services.
How can you leverage Twitter's API to give users the ability to interact with your service from the comfort of Twitter? How can you make use of a Facebook application to give users the ability to access your service's most important functionality from within Facebook? How can an iPhone app extend your service to the mobile realm? These are the type of questions you should be asking; you shouldn't be asking "How can I build a really cool app for ________?"
When done properly, open platforms can do two things: boost user loyalty and user acquisition by making it easier for users you acquire on your own to remain active on your service by giving them the ability to use it elsewhere and by serving as a marketing tool to introduce users of those third party services to your service.
This is the true opportunity offered by today's open platforms and unfortunately too many entrepreneurs make the mistake of choosing dependence over distribution. Don't be one of them.
Photo credit: Annie Mole via Flickr.