“Platform” risk(eugenewei.com)
eugenewei.com
“Platform” risk
http://www.eugenewei.com/blog/2015/3/14/platform-risk
5 comments
That isn't a summary, that's actually more accurate than the article.
The article suggests that you don't have to worry as long as you're paying your platform for use. Against which there's a huge counter-example called Microsoft in the 90's. The real distinction between platforms and Platforms is the word 'monopoly' that you use, and that is prominently absent from the article.
But even that doesn't quite feel like a complete theory, because there are monopoly Platforms that are real utilities, like the electrical grid. PG&E doesn't embrace, extend and extinguish. Why not? How can we arrange for more healthy seeking of monopolies and less rentierism? Are those even well-posed concepts? There might be something more valuable than the OP in this direction.
The article suggests that you don't have to worry as long as you're paying your platform for use. Against which there's a huge counter-example called Microsoft in the 90's. The real distinction between platforms and Platforms is the word 'monopoly' that you use, and that is prominently absent from the article.
But even that doesn't quite feel like a complete theory, because there are monopoly Platforms that are real utilities, like the electrical grid. PG&E doesn't embrace, extend and extinguish. Why not? How can we arrange for more healthy seeking of monopolies and less rentierism? Are those even well-posed concepts? There might be something more valuable than the OP in this direction.
I'm not sure which specific time period you're referring to with respect to Microsoft, but I've worked for several companies who had paid for Microsoft support contracts, as of the mid-90s, and Microsoft support was always phenomenal, most especially SQL Server support.
How good the phone support is is orthogonal to whether Microsoft will buy/kill your line of business.
> PG&E doesn't embrace, extend and extinguish. Why not?
Regulation?
Regulation?
Ah, such a simple word, but such complexity hidden under its hood. Regulation can create rentier institutions like the taxi medallion system[1] alongside PG&E. So another way to phrase my question is: how can we distinguish regulations that result in PG&E from those that result in taxis? When do the benefits of regulating an established player outweigh the costs in reduced incentives for others to attempt to create future monopolies?
One potential resolution to the question is that you can't, that PG&E's failure to grow is just a temporary failure of imagination. Rentierism is a weed that, uh, finds a way, to quote Jeff Goldblum from Jurassic Park (https://www.youtube.com/watch?v=SkWeMvrNiOM). Under this worldview, a utility is merely a monopoly that nobody wants to compete with anymore -- for now. It has temporarily exhausted its growth/optimization curve, leading to predictable revenues. For a while the predictable revenues are divided between existing players (shareholders, govt, employees, etc.) in a stable equilibrium. But eventually, institutions that fail to grow (taxis) will run into hacks that do (Uber/Lyft).
An alternative solution would be that there is a distinction between good and bad regulations, perhaps that you have to weigh the size of the regulator against the size of the regulated industry. Taxi regulations were bad because they were suppressing a small industry. Regulation of large industries on the other hand, is more likely to do good than harm. Provided public attention can outlast private lobbying. That tension then becomes the new frontier for the eternal battle of public policy.
[1] More examples here: http://www.cloverfoodlab.com/blog/2008/09/05/licensing-and-o...; http://en.wikipedia.org/wiki/Licence_Raj
One potential resolution to the question is that you can't, that PG&E's failure to grow is just a temporary failure of imagination. Rentierism is a weed that, uh, finds a way, to quote Jeff Goldblum from Jurassic Park (https://www.youtube.com/watch?v=SkWeMvrNiOM). Under this worldview, a utility is merely a monopoly that nobody wants to compete with anymore -- for now. It has temporarily exhausted its growth/optimization curve, leading to predictable revenues. For a while the predictable revenues are divided between existing players (shareholders, govt, employees, etc.) in a stable equilibrium. But eventually, institutions that fail to grow (taxis) will run into hacks that do (Uber/Lyft).
An alternative solution would be that there is a distinction between good and bad regulations, perhaps that you have to weigh the size of the regulator against the size of the regulated industry. Taxi regulations were bad because they were suppressing a small industry. Regulation of large industries on the other hand, is more likely to do good than harm. Provided public attention can outlast private lobbying. That tension then becomes the new frontier for the eternal battle of public policy.
[1] More examples here: http://www.cloverfoodlab.com/blog/2008/09/05/licensing-and-o...; http://en.wikipedia.org/wiki/Licence_Raj
PG&E had its share of dubious practices; I'm not sure they should be examples to imitate.
yeah, if aws achieves something close to a monopoly we'll be fucked.
And of course this is BOUND to happen. If its not AWS it'll be someone else. But it's inevitable.
And of course this is BOUND to happen. If its not AWS it'll be someone else. But it's inevitable.
I think it's a question of who your users are. When people build on Facebook or Twitter, their users are the same users as the platform's. Zynga and Facebook both are pulling from the same pool -- it's pure competition. When you use AWS, you are very directly Amazon's customer. They have a much stronger incentive to support you, because you're a direct revenue stream to them.
Plus Amazon is a large business with many divisions. If you compete with Amazon Instant Video, the AWS folks aren't going to like having their profit centre sacrificed for the sake of the video division.
> AWS doesn't do this
They don't, but don't forget their recently released Dropbox (who use a bunch of AWS) competitor.
They don't, but don't forget their recently released Dropbox (who use a bunch of AWS) competitor.
Isn't that the same as the Netflix example? Amazon have their own version, but they're still happy for their competitor to run on AWS.
A big difference between AWS and a social site is that all except the most basic level of API access is paid, and that payment is the main revenue source of AWS.
Over the last several years, what we're seeing is all the big companies doing their damnedest to prevent any new company from coming along and taking over eyeballs. Don't be fooled: there is a vicious commercial war afoot.
Facebook wants you to build apps in their walled garden -- which they own and will change the rules as they please. Google would love to buy your startup that looks like it might be huge -- so they can make you an employee and let your product either live or die in the Google ecosystem, not the market. Yahoo is willing to absorb that great business you're running -- so they can own your work and relationships and keep the eyeballs.
Comcast wants to provide internet service to your house -- as long as it can create some byzantine tiered billing system to obfuscate what you're getting and charge providers for getting it to you. All of the tech industry is now getting very politically savvy. Who is one of the top visitors to the White House? The Google guys. Political campaigns on the left -- but I suspect the right won't be far behind -- are more and more powered by tech money and tech volunteers. No matter how much "Don't be evil" you're able to swallow, people tend to see things from inside their own tiny worldview.
Just so I don't sound completely paranoid, note that platform risk is an issue even for purely technology platforms built on FOSS. Any time one set of folks build something and another set of folks use it, the two interests do not always align. Systems tend to become more and more complex and unwieldy. Users of the platform spend more time appeasing the platform architecture than they do providing value. It just gets worse when you add money to the mix.
Facebook wants you to build apps in their walled garden -- which they own and will change the rules as they please. Google would love to buy your startup that looks like it might be huge -- so they can make you an employee and let your product either live or die in the Google ecosystem, not the market. Yahoo is willing to absorb that great business you're running -- so they can own your work and relationships and keep the eyeballs.
Comcast wants to provide internet service to your house -- as long as it can create some byzantine tiered billing system to obfuscate what you're getting and charge providers for getting it to you. All of the tech industry is now getting very politically savvy. Who is one of the top visitors to the White House? The Google guys. Political campaigns on the left -- but I suspect the right won't be far behind -- are more and more powered by tech money and tech volunteers. No matter how much "Don't be evil" you're able to swallow, people tend to see things from inside their own tiny worldview.
Just so I don't sound completely paranoid, note that platform risk is an issue even for purely technology platforms built on FOSS. Any time one set of folks build something and another set of folks use it, the two interests do not always align. Systems tend to become more and more complex and unwieldy. Users of the platform spend more time appeasing the platform architecture than they do providing value. It just gets worse when you add money to the mix.
"Yahoo is willing to absorb that great business you're running -- so they can own your work and relationships and keep the eyeballs." ==> This doesn't sound like anyone getting "fooled".
This is a really good article and I agree with a majority of the thesis. Basically, if you try to build a service on one of the major players platforms, you are susceptible to being cut off or damaged in one way or another. This occurred with Meerkat-Twitter, Zynga-Facebook, Demand Media-Google and many others.
However, it is possible to succeed. And the counterpoint is paypal and ebay. Most people don't remember that paypal was building their service inside of ebay and ebay was not at all friendly about it. In fact, ebay bought a rival payment company and tried to offer incentives to their sellers to switch from paypal. But paypal still won out. They key is to get major support from the platform's own users - like paypal did with ebay's sellers.
So it is possible to succeed on someone else's "p"latform.
However, it is possible to succeed. And the counterpoint is paypal and ebay. Most people don't remember that paypal was building their service inside of ebay and ebay was not at all friendly about it. In fact, ebay bought a rival payment company and tried to offer incentives to their sellers to switch from paypal. But paypal still won out. They key is to get major support from the platform's own users - like paypal did with ebay's sellers.
So it is possible to succeed on someone else's "p"latform.
Paypal and ebay is not a clean counterpoint.
The backstory (I worked at ebay in 2000) is that Billpoint (ebay Payments) was an ebay-Wells Fargo joint venture with a good CSR staff but no marketing funding and limited ebay integration. (I was laughed at when I asked if there was a mktg. budget for a billboard, or anything else.)
ebay used ebay Payments to learn about payment risk mgmt., then when they were comfortable bought Paypal.
The backstory (I worked at ebay in 2000) is that Billpoint (ebay Payments) was an ebay-Wells Fargo joint venture with a good CSR staff but no marketing funding and limited ebay integration. (I was laughed at when I asked if there was a mktg. budget for a billboard, or anything else.)
ebay used ebay Payments to learn about payment risk mgmt., then when they were comfortable bought Paypal.
Good point. However, eBay was a classified and auctions site and paypal was complimenting it. The examples suggested by OP are more competitive in nature. The only case I can think of is Instagram on Facebook. However, even in that case, Instagram was providing an equivalent, if not superior, user experience within Facebook. I believe it turned out to be a smart choice in the end.
I've been working on a project lately that uses search APIs and various social APIs to gather information about a given term. I'd like to add Twitter and Facebook and other support, but I worry about things that put me at the mercy of those providers. I would like to think this kind of "maybe I will kill you, maybe I won't" attitude of Twitter and Facebook (in particular, but others also do it) is counter-productive for them, but I guess they have a strong business case for their decisions to cut companies off when those companies start encroaching on turf that Twitter or Facebook thinks of as theirs.
In my ideal reality, we'd have an open Internet free of this kind of near-monopoly on specific types of content. Lots of small, federated, data feeds, and people free to move about between commercial and open options and interconnect regardless of who's hosting the content. But, that Internet is still pretty far off, and maybe getting farther away, as the biggest players build bigger walls to protect their data silos.
In my ideal reality, we'd have an open Internet free of this kind of near-monopoly on specific types of content. Lots of small, federated, data feeds, and people free to move about between commercial and open options and interconnect regardless of who's hosting the content. But, that Internet is still pretty far off, and maybe getting farther away, as the biggest players build bigger walls to protect their data silos.
Would it be better to modularize your design to allow for multiple search providers, two of which are Facebook and Twitter? Build on them while you can. If, in the future, they decide to kill your access, let your users know. Tell your users how to contact the offending provider. Get a small grass roots movement going.
In the mean time, build something that at its core is yours. Build it out. Make it a following.
In the mean time, build something that at its core is yours. Build it out. Make it a following.
I doubt spending on AWS scales linearly with company revenue so I'm not sure why the author thinks amazon is getting a "cut" from competitors.
AWS doesn't do this, because the second they cut off a customer based on their type of business (even if it competes with Amazon), they'll lose their marketplace credibility. Facebook, Twitter, and Apple have near monopolies, but AWS still has lots of competitors.