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Meerkat: Another reminder of why building on other people's platforms isn't smart

(a remake of my 5 year old article "“Navigation Nightmare: The Deadly Danger of Facebook, Twitter, Google and the IPhone)

The recent discussion about video-streaming platform Meerkat (well summarized here) shows that history repeats itself over and over again: companies built on open systems - aka the Internet itself - might grow a little slower, but are much more resilient than companies built completely on other people's platforms.
About five years ago, at the time when some companies went as far as abandoning their web site for a social presence, at the time when Zynga built - and lost - an empire based on Facebook's platform, I wrote and published the following thoughts:

Possessing a memorable domain name still is considered to be essential to any successful business, especially any successful online business. Just do the ‘billboard test’ anywhere the world: look at a billboard, or any other company advertising. Most likely you will see the company’s or the product’s domain name, either a .com, or a local top-level-domain like .in in India or .co.uk in the United Kingdom.

But in recent years, an interesting development has happened around the globe. Instead of promoting their domain name, companies advertise their Facebook or Twitter address, their IPhone application or even a search at a search engine like Google. Furthermore, those advertisings aren’t even limited to activities aiming at drawing new customers. Also existing web sites and existing communication is used to promote those new channels.

I’ve caught myself that I’ve been encouraging the very same behavior – why shouldn’t we, besides promoting our web site (the domain name sedo.com, which we bought for the handy sum of $80,000 in 2003), promote our twitter account (twitter.com/sedo) and our facebook page (facebook.com/sedo)? The answer is: Because of the long-term danger that looms on the horizon: namely the “Navigation Nightmare”.

So here’s the problem: While it’s smart – and very “web 2.0” – to use all of the above channels as additional means of advertising and customer interaction, if you look beyond the 2.0 horizon it’s inherently wrong and dangerous to use them as means of navigation and therefore as ‘provider’. It might mean loose of control, it might mean potential huge costs in the future, which can go as far as wiping out all of a company’s profits. Businesses fully switching their front door to 2.0 giants Facebook, Twitter, Google or the iPhone, put in all four examples their entire fate into the control of those providers. Those three things can happen:

  • Providers can kick any business or entire industries out, with or without reason. Consider Apple’s adult ban – while the pros and cons of the act itself can be debated, it certainly shows how an entire industry is at the mercy of a giant.
  • Providers can go out of business, and there is no regulative environment in place. Seems unlikely? Still remember FortuneCity or Geocities? Much hyped early predecessors of social communities combined with an easy site hosting. Think Facebook without the six-apart concept of linking people and at a time with much smaller Internet penetration. Nevertheless, Yahoo just terminated Geocities in 2009 – after having bought it for a whopping 2.87 billion $ in 1999.
  • But here’s the most real threat: Providers can and will maximize profits, once lock-in is sufficiently big, and profitability goals will follow growth goals. If your company has a million Facebook or Twitter followers, how good will be your negotiation position if suddenly the provider starts charging hefty fees? If you have tons of happy iPhone users on your app, how good will be your negotiation position if Apple suddenly wants a slice of all your transactions? If you get all your business through Google, how good will be your negotiation position if suddenly you won’t be listed in the organic search any more, but Google offers you to appear on top of the results for a fee?

All of the above threats are real, and still seem to be very much ignored in all the hype.

The domain name system on the other side can avoid all of these pitfalls – as much as it has its problems with still existing cyber-squatting, a somewhat cumbersome governing body called ICANN. Pricing is regulated to avoid that domain name Registries can charge prices just aiming to maximize their own profits. Turn the examples above around, and image for one second for example how wrong it would be if suddenly Facebook.com would have to pay $50 million registration fee per year for its very own .com domain name. They could certainly afford it, and it would even be the right business decision for them to spend that money opposed to losing their key domain name. But Facebook has built the company by being innovative, so it’ll be wrong and stifling future innovation, if a monopolistic organization like any Registry is could charge arbitrary amounts. And so for a good reason they can’t. Individual fighters for the openness of the Internet and governments around the world alike have ensured that this won’t happen, which makes the domain name system a safe harbor for the future.

Compared to this, Facebook, Twitter, Google’s Ad Network and iPhone Apps are proprietary wallet-garden approaches, which present a danger for any business over-extensively relying on it for navigation and addressing mechanisms.

In regards to every business’ own strategy, to sum things up: Building an online business on top of primarily Facebook, Twitter, Google or IPhone Apps, is like building a house on rented ground, with the landlord being completely in control – and you might one day hear “Thanks for building that beautiful villa, now your rent increases from $1 to $100.000 per year!” Don’t let that happen to you. Otherwise, you can all but hope that history repeats itself and that innovative newcomers will continue to challenge the position of those wallet gardens. Just think of the first big one in the early days of the web: AOL.

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