With yesterday’s news about the takeover offer Facebook reportedly made to Snapchat, a lot of people focused on the money (is it insane?) or the strategy on Snapchat’s part (are they insane for turning down that kind of money?).
But I was more struck by the take that came from Peter Kafka:
I think this is the more interesting point. What if Mark Zuckerberg has learned a valuable business lesson that has eluded the likes of Bill Gates, Steve Balmer, Eric Schmidt and Larry Page?
Ever since Microsoft was able to leverage its DOS/Windows OS monopoly/platform to slay related software fields (word processing, spreadsheets, etc.) everyone has been obsessed with platform strategies. The tech industry so internalized the bloodied carcasses of Borland, Novell, et al that it feels like a platform strategy is the only one anyone ever attempts in the Internet Era. Think of any major internet company of the last 20 years. I challenge you to think of a major internet play which was not on some level a platform play. And I’m going all the way back to the “web portals” of the late 90s or even (maybe especially) Netscape.
But do platform plays work anymore? Have they ever really worked? The idea being, once you have your platform, everyone has to play in your ecosystem and then you are free to leverage that platform.
Excepting Microsoft Office, Internet Explorer and the server business, I would argue that it hasn’t really ever worked for Microsoft. Think of the Microsoft Network, Bing, the Zune, the me-too list goes on. For 15 years, the might of Microsoft was always supposed to be coming to crush some newcomer just as soon as Redmond entered the market. Except, it never actually happened.
Or look at Google. Early successes, sure. Gmail. Maps. But no matter how much Google insists, we can all pretty much agree Google+ isn’t really a thing, right? Android is successful, sure. But that’s not based off of Google leveraging it’s own platform so much as giving away really great software for free. (I can already hear the counter argument in my head so let me acknowledge it here: the ability to give away a product for free, subsidized by your platform’s cash cow is part of the classic platform strategy.)
But for the sake of argument, let me continue. What if Mark Zuckerberg has seen this and come to the conclusion that the platform strategy has no clothes? He’s probably learned this lesson through personal experience. Facebook has arguably the largest software platform on the planet. How’s that working out for Zynga? Where are the dozen billion dollar companies that have come from Facebook’s ecosystem? And the few times Facebook itself has tried “kill” competitors with their own me-too copycats (Places, a Foursquare killer and Poke, a Snapchat killer) it hasn’t exactly worked out.
What has worked out? Buying Instagram and leaving it alone.
The platform as a strategy is based on 4 key bits of hubris: 1) you can leverage your dominance in one area to dominate another area 2) you can leverage your brand to dominate in a new area 3) you’re so smart, and you’ve been so successful dominating this one area, surely once you put your brain to the problem, you can do it better in another area… certainly better than some young upstart; and 4) you can enter a market you have zero competence in.
I think that the platform strategy fails for a lot of companies because they run afoul of some or all of the four points above.
The famous rumor is that Microsoft’s original corporate motto (before the lawyers told them to tone it down a bit) was: A computer on every desk and in every home, running Microsoft software. The platform strategy was not the key to Microsoft’s success—it was just a happy accident and a tool that Bill Gates used to ensure that success. Gates’ original motivation was just to get his software on every machine that sold. The problem was, once Microsoft had success with the Platform as a strategy, it never stopped trying to use it again and again… with diminishing returns. Microsoft certainly—and maybe the entire valley— needs to realize this is a broken model. Or, if it’s not broken, let’s just say it’s not a panacea.
So what if I’m right, and Zuckerberg knows that the platform as a strategy is not all it’s cracked up to be? Bill Gates liked software; he just wanted to own all of the software. Mark Zuckerberg likes social networking; maybe he can own all of the social networking, in whatever flavors or forms that concept evolves into. All he needs to do is just buy up the new permutations of social networking that bubble to the surface now and again. And then let them do their thing.
That might actually be a smart play. It would cure Facebook of the tendency to chase the flavor of the moment and possibly ruin it’s core product by trying to contort and be like the new guy. It would save Facebook the wasted resources of scads of “me-too” copycat products. And it would help Facebook resist the temptation of entering businesses its not very good at. Facebook is good at social networking. If it really can do something better than the new guy, then do it. If it can’t, then just buy it.
That might be the healthy play for the long term. But whether Facebook shareholders would agree with me is another story.