Yesterday I wrote about the risks that come with depending on solely on platfrrms such as facebook, twitter and iphone. Techcrunch and CNET have posts along a smiliar line:
What has pushed iLike’s valuation down is a problem with control. The company’s managers have no way to prove to potential acquirers that their business model has a bright future because they can’t predict from one day to the next which direction Facebook’s Platform will go. The source said that leaders at iLike, or any other company on the platform, are not truly in control of their fate–Facebook’s Mark Zuckerberg is.
“The cash flow of any company doing business on Facebook’s API, or Facebook Connect, or Facebook platform is inherently at risk,” said the source. “The multiple that an investor can place on that cash flow is not that much greater than 1, because you never know at which point Facebook could change the terms of the relationship or change the technology and cut off that cash flow.”
There is no question that plenty of other factors may have contributed to iLike’s meager sales price, but the questions raised by the music service’s predicament may be a warning to companies that have banked on the developer platforms created by Apple, Twitter, and Facebook. It only makes sense that potential buyers of these pilotfish start-ups would demand a price that reflects the risks. After all, what happens if Facebook or Apple decides they want to compete in your sector? Click, off go the lights.
Facebook representatives did not respond to an interview request. Ali Partovi, iLike’s CEO, on Tuesday issued a terse statement: “Twitter and the iPhone are the platforms of the future.”
A true platform must satisfy two conditions for me to build applications/product on them. 1. They must have cleat sustainable business model that is already producing billion dollar reveneues for the platform 2. The platform must have proven track record of letting 3rd party apps flourish and make money. None of the platforms I mentioned, twitter, facebook and iphone satisfy either of these consitions let alone both.
This doesn’t mean one should ignore them all together. They can be leveraged to make a quick buck like some iphone apps are doing or use them to seed users for viral growth like youtube did with myspace. Don’t bet the future of your whole company on these platform yet.