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The Age of the Platform by Phil Simon (Motion Publishing, 2011)
The Internet is constantly changing. And yet, this book that was written (and rushed into print) seven years ago is still remarkably current. Some of the specifics have changed, certainly. Twitter doubled the maximum size of a Tweet about a year ago. Facebook abandoned API support for posting by third-party applications just this month.
But most of the principles remain the same, and all companies in his “Gang of Four”—Amazon, Apple, Facebook, and Google—not only remain robust but have continued to expand. And each also shows some significant problems.
Even in 2011, Simon saw Amazon as a company offering integrated shopping across many categories, far beyond books. Many people still thought of Amazon as a bookstore back then; now it’s a retail giant more akin to Sears; it even owns Whole Foods. Jeff Bezos, Amazon’s founder, personally owns the Washington Post. Yet anticompetitive practices and less-than-friendly labor policies continue to show up.
Several years after Steve Jobs’ death, Apple continues to innovate—and develop non-price-sensitive markets—in computers, telephony, music, and other areas. It’s now the most highly valued company in the world. Yet that value could tumble at any time. Simon discusses why companies like Microsoft and MySpace have lost the competitive edge. Apple, especially on the hardware side, is a company I personally see as vulnerable.
Facebook has grown its user base enormously and competes with Google not only as an advertising venue but also in video (Facebook Live), images (Instagram), and chat. But as in 2011, it still faces privacy scandals, and now, content scandals like trollbots as well.
Google, in turn, has a social network (Google Plus) very similar to Facebook, although nowhere near as popular. And Google also has moved outside the computer world. While continuing to dominate search and (via Youtube) online video, it’s also gone into such wildly divergent technologies as driverless cars. You could argue that this is a logical extension of products like Google Maps and Google Earth. But it’s a pretty big leap from GPS to vehicle operation. The driverless vehicle project has had its share of pitfalls, too—including a fatality. It wouldn’t shock me if Google bought Tesla at some point; I see many parallels between these two companies.
In the 2011 book, Simon is enthusiastic about open APIs that allow outside developers to easily build new utility into the platforms. Since I was reading his book just as Facebook was restricting posting access from third-party apps such as HootSuite, I wrote to him and asked what he thought of the changes. He directed me to a blog post he wrote in 2012: https://www.philsimon.com/blog/platforms/the-gradually-closing-platform-strategy/
But enough about what’s changed since this book came out. Let’s discuss the content that remains relevant.
Simon argues that these four giants—three of which were recent startups (mid-1990s to mid-2000s)—got their preeminence because they switched from one-trick ponies (Amazon=books, Apple=computer hardware, Facebook=seeing what friends were up to, Google=Internet search) to much broader capabilities integrated in a “platform”: an “ecosystem” of interrelated applications and capabilities that allows a user to perform many and diverse functions without leaving…that can add new capability simply by adding “planks” either developed internally or integrated from outside providers (pp. 22-23). Successful platforms keep raising the bar on technology, both to create more powerful user experiences and to scale up; they’re happy to build more capacity than they need now, so that it’s ready when they need it—and until then, they can use the excess to charge other companies for services (e.g., pp. 134-135).
Key to this model is the concept of “prosumer” (p. 6): a person who both produces and consumes. The Gang of Four have made us all into prosumers; each of us creates lots of content, and consumes even more. And every time we do something in either of those roles, at least one of these four companies is likely monetizing it somehow. Even if there’s no cost to the user (and that’s often the case), someone is collecting marketable data…selling ads…and integrating those two functions to serve ads directly related to that user’s activity patterns: searches, clicks, photo tags, downloads, video views, etc. (e.g., p. 122). For me, as a business writer and consultant, and for my wife, as a novelist, this often has humorous results; we’ll see ads for things we have no direct interest in. But for the average consumer, the computer can seem scarily prescient, serving ads for a new freezer after mentioning on social media that you had no room in your current one, for instance.
Another key is the network effect: the more people use certain technologies or platforms, the more useful they are to other users. If you had email in the early 1990s, you had a tiny circle of contacts—and you needed different email addresses to connect with people on different systems. And you did this from a desktop computer in a fixed location, over slow and balky dial-up phone lines. I got my first email address in 1987: a long string of numbers running over Compuserve. I gave up my account within a few months and didn’t try again until 1994. By that time, AOL made it easy to do email. And then the original Netscape browser made it just as easy to explore the nascent Internet. And then there was enough critical mass to pursue broadband, which in turn made it possible to do far more online.
One thing Simon doesn’t really discuss but fits in very well with his concept of platform is the interrelationship between number of users and ease of use. The whole idea of the platform is to make it easy and comfortable for users to stay within the system, as Google and Facebook do so well (e.g., pp. 113-117)—and as AOL tried to do but failed once Netscape opened up the rest of the online world (pp. 181-183). When the system is easy to use, more people use it. When a user base reaches critical mass, developers make it easier. Thus, with more users, developers figured out how to send email across different networks, and most people could get by with just one email address. And as email became the standard, and more people turned to the Internet for information, more websites sprang up, and ways to exchange information over the Net became more sophisticated. You could send documents! You could FTP videos and other large files! You could check your email from a remote location! And as first Apple and then Google built a user base for smartphones while the cloud allowed off-site data storage, suddenly you could do all this on a device that fit in your pocket, creating another revolutionary wave.
Much of this is because of something he does discuss, in some detail: successful platforms innovate constantly. Google even requires employees to spend up to 20 percent of their time on non-core projects (p. 120)—and that’s led to many new products. Simon shows 78 different Google application icons (p. 117), a number that’s probably much higher now.
Why are these platforms so successful? They make things easier for the user, who has to master far fewer interfaces. They encourage collaboration and build community. They put a lot of resources into both technology infrastructure and technology innovation. They’re willing to try things that fail in order to get to things that win big (p. 200)—and are preparing for Web 3.0, the “semantic web” (p. 239).
He also looks at why some other companies didn’t achieve this type of success, and what the risks are to these four giants as they become larger and more bureaucratic.
No matter what type of business you’re in, you’re likely to find this book useful in understanding how business in the first quarter of the 21st century is different than even the last quarter of the 20th. |
