Pitfalls of Building on Someone Else's Platform ? Part 3 | VentureStab

Pimp Penguin by loppear via Flickr

In this, the final segment of the series, we examine developments in social media platforms, the future for developers in social media and finally, the ramifications diminished developer participation may have on the ecosystem.As of November 2012, the top five social media sites were Facebook, Twitter, LinkedIn, MySpace and Google Plus+ in that order. With these platforms in mind, I would like to direct your attention to Lauren Hobson?s article ?Don?t Build Your Business on Borrowed Property?. This article, directed to online entrepreneurs, carries a message that should resonate with developers and entrepreneurs of all stripes. Lauren cautions her readers:

?if your small business has invested a lot of time, design work, and/or customization on your Facebook page, you could see these efforts wiped out the next time Facebook decides to change its page layout, its publishing guidelines, its features, or any number of other variables over which you have no control.?

Make no mistake; my purpose here is not to discourage developers and others from taking advantage of these platforms. Quite the contrary! I want you to make these platforms your b!tch!?

In my view, Zynga, Inc. (ZNGA) is an example of one company that has managed to do this remarkably well. Zynga has a market capitalization of around $1.7 billion. In 2011, Facebook?s S-1 filing with the Securities and Exchange Commission revealed that Zynga was responsible for a whopping 12 percent of Facebook?s revenue in that year. I ask you, ?Who?s the b!tch now??

As of November 2012, Zynga held the top spot in a list of the fifteen most popular gaming websites on the Internet. Zynga?s business model is using Facebook and other platforms but Zynga has not sold its soul to them and this is exactly the point I am striving to drive home in this series. The Zynga business model derives revenue from dual sources: direct payment from players and business partnerships with the likes of Facebook. Only by maintaining a critical level of independence can you guarantee your survival. Zynga has done a reasonably good job of this, making Facebook dependent upon Zynga for a significant portion of its revenue. Developers and entrepreneurs must emulate this model because a symbiotic relationship is preferable to a parasitic one. In an eco-system like this, all can thrive.

Now if this sounds inconsistent with what I?ve said previously, I assure you it is not. Integrating a platform into certain aspects of your business model is not the same as building your business on a platform that you do not control.

Social media platforms are continuously evolving. New ones arise; others fade into irrelevance, and some morph into something entirely different (Friendster is one example). Not surprisingly, the driving force behind this evolution is profit. In the chart below, courtesy of eMarketer, the trend could not be clearer.

These are just U.S. revenues. Worldwide, revenues will reach almost $6 billion annually.

In my view, Twitter, Facebook and other social media platforms run a very real risk to their continued viability and profitability if they choose to raise barriers to developer participation. I can?t help but speculate that the drop in the year-over-year revenue percentage gains from 2011 to 2012 are linked, at least in part, to policies and other changes which adversely impact developers.

Developers have been a significant driver of the organic growth of these platforms. It is nothing less than counterintuitive to believe that making developer and entrepreneurial participation less attractive and more difficult will foster a positive result.

Social Media has evolved into an essential tool of marketing an online business. It provides a platform to interact and inform people about yourself and your brand in a way simply creating a website cannot. Social media is a powerful means for establishing a brand image and creating a global presence. As such, it is, and will remain, a powerful draw for developers and entrepreneurs of all stripes.

Your takeaways from this series should be these:

• Create a business model that insulates you from total dependency on platforms you do not own.
• Integrate your business with these platforms in a manner that makes their business success dependent on yours to the greatest extent possible.
• Strive to retain your identity in the marketplace, the eco-system, if you will, by working across multiple platforms beholden to none, while taking full advantage of all.

Taking a cue from Fred Wilson?s colorful vernacular, the pimp always enjoys life more than the working girl, so, ?Be a Facebook Pimp.? It will most certainly serve your interests better than being Facebook?s ?b!tch.?

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Source: http://www.venturestab.com/2012/11/pitfalls-building-elses-platform-part-3/

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