Yesterday the Wall Street Journal had an article entitled Why So Many Want to Create Facebook Applications which gives an overview of the burst of activity surrounding the three month old Facebook platform. If a gold rush, complete with dedicated VC funds targetting widget developers, around building embedded applications in a social networking site sounds weirdly familar to you, that’s because it is. This time last year people were saying the same thing about building MySpace widgets. The conventional wisdom at the time was that sites like YouTube (acquired for $1.65 billion) and PhotoBucket (acquired for $250 million) rose in popularity due to their MySpace widget strategy.
So, why would developers who’ve witnessed the success of companies developing MySpace widgets rush to target a competing social networking site that has less users and requires more code to integrate with the site? The answer is that MySpace made the mistake of thinking that they were a distribution channel instead of a platform. If you are a distribution channel, you hold all the cards. Without you, they have no customers. On the other hand, if you are a platform vendor you realize that it is a symbiotic relationship and you have to make people building on your platform successful because of [not in spite of] your efforts.
Here are the three classic mistakes the folks at MySpace made which made it possible for Facebook to steal their thunder and their widget developers.
Actively Resent the Success of Developers on Your Platform: If you are a platform vendor, you want developers building on your platform to be successful. In contrast, MySpace’s executives publicly griped about the success of sites like YouTube and PhotoBucket that were “driven off the back of MySpace” and bragged about building competing services which would become as popular as them since “60%-70% of their traffice came from MySpace”. In a sign that things may have gotten out of hand is when MySpace blocked PhotoBucket widgets only to acquire the site a month later, indicating that this was an aggresive negotiation tactic intended to scare off potential buyers.
Limit the Revenue Opportunities of Developers on Your Platform: MySpace created all sorts of restrictions to make it difficult for widget developers to actually make money directly from the site. For one, they blocked any widget that contained advertising even though advertising is the primary way to make money on the Web. Secondly, they restricted the options widgets had in linking back to the widget developers website thus driving users to where they could actually show them ads. Instead of trying to create a win<->win situation for widget developers (MySpace gets free features thus more engagement from their users, widget developers get ad revenue and traffic) the company tipped the balance excessively in their favor with little upside for widget developers.
Do Not Invest in Your Platform: For a company that depends so much on developers building tiny applications that integrate into their site, it’s quite amazing that MySpace does not provide any APIs at all. Nor do they provide a structured way for their users to find, locate and install widgets. It turns out that Fox Interactive Media (MySpace’s parent company) did build a widget platform and gallery but due to internal politics these services are not integrated. In fact, one could say that MySpace has done as little as possible to making developing widgets for their platform a pleasant experience for developers or their users.
This is pretty much the story of all successful technology platforms that fall out of favor. If you do not invest in your platform, it will become obsolete. If people are always scared that you will cut off their air supply out of jealousy, they’ll bolt the first chance they get. And if people can’t make money building on your platform, then there is no reason for them to be there in the first place. Don’t make the same mistakes.
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