Application platforms are the hottest trend in all the social media sites such facebook, twitter etc. This seems to be the new battlefront where important wars are being fought for the attention of developers and users.
History of Social Platforms
Before there was myspace and facebook, there was friendster. Friendster was the cool hangout for a while, but myspace took over the leadership position by allowing users to customize their profile pages with various widgets. Youtube leveraged myspace user base by offering an emebddable video player to become the largest video site in the world and were purchased by google for $1.6B. Myspace themselves only got $580M from news corp. There were some other companies such as photobucket (photos) and imeem (music) etc. that leveraged myspace to establish a large user base for themselves. News corp later bought photobucket for $300M. So the first major social platform was the customizable profile pages on myspace. It was quite primitive and there was no way to tap into much of the power of the networks. Myspace maintained tight controls over the advertising and monetization of the widgets.
Then facebook changed the game with the release of their development platform in August of 2006. They provided a powerful platform that allowed the 3rd party developers to create social applications that tap into the power of ’social graph’ of users. But more imprtantly facebook (unlike myspace) allowed the developers to serve advertising in their applications and keep all the advertising revenues to themselves. This was quite revolutionary at that time and caused a frenzy among the developers. Thousands of facebook applications were created and many companies were funded to develop and monetize facebook applications. This helped facebook grow much quicker than myspace.
In this battle for social networking supremacy google was sidelined. Google owns orkut which is pouplar in india and brazil but not much elsewhere. Not to be out done by facebook, google partnered with myspace (google provides search advertising to mypsace) and other social networking sites threatened by facebook platform to create ‘open social’ development platform. It allows the developers to create applications once and have then run on all the open social member sites.
Google wanting to one up facebook identified one area of weakness in facebook to attack. Though facebook provided access to user social graph data to facebook applications they did not allow for it to be exported or used out of facebook. Google created ‘friend connect’ that allowed any third party site to add social networking functionality leveraging the social graph of open social platform. Facebook resposnded quickly with their own version called facebook connect.
Now the platform craze is in full swing. Most of the social networking sites call themselves ‘platforms’ and offer apis for application developers and third party sites to leverage the social graph data. This led to creationof companies that aggregate the user activity feeds from various social networking sites into once place. Friendfeed is an example of such a company.
While all this was going on, a small company called twitter was spun out, in 2006, from another failing podcasting startup called odeo. It is a microblogging and social networking site that allows the users to send out short updates (text messages up to 140 characters) called ‘tweets’ to each other. This has gained rapid popularity among the tech savvy and is continuing its fast growth even today. Twitter is also positioned as ‘platform’ where 3rd party applications are developed on top of twitter messaging system.
In all this frenzy, several companies are getting created for the sole purpose of developing and monetizing applications on these social platforms.
Challenges of social platforms
Despite all the hype and heavy traffic, social networking sites are still searching for a business model that can effectively monetize all the users. Most of them are yet to be profitable. They all cite google as an example of a company that ultimately found a great business model. However it must be remembered that google turned profitable in 2001, three years after its launch. Facebook is 5 years old and twitter is almost 3 years old. There is no sign of their ‘adsense’ equivalent. The advertising market is in a free fall and the economic outlook is bleak for the foreseeable future. It is time to ’show me the money’.
Google actually thrived in the nuclear winter of post dotcom crash. Can any of these social networking companies do a google and take off in the bad economic times? This will be the question that determines their survival as independent companies and more importantly as ‘platforms’.
Billion dollar question
Can social platforms support large (billion dollar) profitable companies when they themselves are not?
That is an interesting question.
Microsoft windows was a great software platform for a long time. IBM PC was a great hardware platform. They enabled the creation 0f billion dollar companies. Both microsoft windows and IBM PC products were hugely profitable billion dollar businesses.
Can we think of examples of platforms that created large profitable businesses while they themselves are not?
Opensource software comes to my mind. That may not be relevant to social platforms as all the major ones are commercial.
So why are all these companies and developers flocking to these social platforms. Access to huge number of users. Though it must be noted that very few applications actually get meaningful number of users.
Then there is the question of platform companies competing with application companies. If there is an application that becomes increasingly popular, what prevents the platform companies from launching a competing product. Take the example of iLike, a popular music app on facebook. Facebook is planning to offer a music service of their own. This is an important issue that may come in the way of creating a large profitable businesses on these social platforms.
Ultimately the jury is out on these social platforms. They are still evolving. But there is no question that social media is going impact everyones digital lifestyles.