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Call Your Stuff a Platform, See If I Care

Dalton Caldwell is getting a lot of press these days. In some of this press, he said things I disagree with. Like this:

What’s the fundamental flaw of ad-supported platforms like Facebook and Twitter?
“Platform” implies providing a service that others are building on top of. Amazon Web Services provides a platform you can build services on top of. The platform doesn’t reach up and do weird things. In the Amazon example, you can build a competitor to Amazon on top of the platform. You can build anything. They’ll never charge you a percentage of business or threaten to get into your business. That’s a true platform because they’re getting paid to provide a service. There’s not this notion of retribution and reaching through the stack.

Err, so AWS will never get into the business of people that build on their platform? What if I built “management tools for people running AWS” that runs on AWS. They got into that business. What if I got into the “no-SQL database on AWS business”. They started offering data stores also.

Was Windows a platform? They consumed tons of companies. Every platform is constantly negotiating boundaries. To imply otherwise flies in the face of appreciating that customers like to buy complete stacks from single vendors. No one wants to have to cobble together solutions to meet needs, and certainly no company wants to feel dependent on the ecosystem to generate revenue. If you need functionality to create value, build it. That is capitalism.

To imply that Facebook has a “fundamental flaw” is to imply that it is a failure. I think $4 billion in revenue and $1 billion in profit have already proven that statement wrong. This is not some pyramid scheme. This is one of the biggest, most valuable, fastest growing companies in technology history. There are probably only a handful of technology businesses, that if you had to pick one to own, you would choose over Facebook. It is one of the two or three most widely used technologies in the world, fast growing, and wildly profitable.

It wasn’t all bad. The comment he made that I most liked was this:

You need to rely on your U.S., U.K. and European user bases to make enough margin to carry all your worthless foreign traffic. It’s a Faustian bargain. The people you need to keep the most you have to show the most ads.

That is interesting, isn’t it? If you build a global site, you have to be prepared to pay the tax.

One Response to “Call Your Stuff a Platform, See If I Care”

  1. Dave Sandrowitz Says:

    I like Dalton’s writing a lot and I agree with a fair amount of what he says. I think the core issue is this – that if you are a platform, a big part of your value is created by all those that build on top of you, in one form or another. If you start attacking them, attack clearly being defined in varying tones of aggression based on the victim, then you are undermining the value creation opportunities because you undermine the incentive to build on top of your platform. At least, if you don’t think that the only incentive is as an acqui-hire. So, Facebook and Twitter were platforms that have gotten both more restrictive about what you can and cannot build, particularly in terms of what you might have access to as a developer, and that have taken a number of steps to consume the created value through acquisition, competitive products, legal action, etc.

    Dalton may not be 100% correct, now or in the future, but I think the nature of our business requires guys like him poking at the gorillas.