Thursday, 14 January 2010

Why walled gardens are a limited strategy in online ventures

This story prompted me to think about the longevity of Apple's App Store. Apple's secretive and power-crazy ways may yet be its undoing (again - that's why it lost the PC wars: because it insisted on vetting every piece of hardware you plugged into your Apple computer).  In its effort to ensure its customers are truly locked in Apple vettes all App Store apps. Not only has it garnered criticism for:-
  • taking too long to vette apps
  • blocking apps that may compete with its own products (god forbid!)
  • being laughably draconian about age ratings for apps
  • allowing wholly inappropriate apps
.. but it has now added to that list with allowing legally questionable apps.  That's the trouble with dictatorship, even beautifully designed, "lickable", "insanely great" dictatorship: too much control is not sustainable.

Take Facebook, another walled garden.  You can put your content in and share it, but don't expect to take it out again, or have any rights to it.  Now, in the short term who cares?  Sharing your thoughts, pictures and affinities is much more exciting and interesting than how they might be used by an unknown third party.  But what about the longer term?  The biggest demographic in Facebook is 30-40 year olds. The youngsters are not using it.  Is it because it's a 'certain age' tool, or because the yoof have more sophisticated views about their online interactions and privacy?  Facebook's business model (what there is of it) is based on loyalty: its main advantage over Google as an advertiser is that its users stick around for a lot longer - minutes vs the seconds we tend to hover at most other sites.  How does it protect that loyalty?  By subtlely manipulating your privacy and removing your rights to any content you submit.  Effectively, your loyalty is not to Facebook, but to your friends on Facebook - the wisdom of the crowd.  That's not very sustainable as a business model.

Google, for all their dominance and the fear that invokes, have got it right, I think.  They have no walled gardens: there are APIs everywhere and you can move data out as well as in.  Fundamentally, they win and retain market share by offering customers what they want, efficiently.  They want your loyalty but appreciate that the core of that is transparency: you're making choices based on the best possible information, not based on coolness factor, or lock-in because Apple didn't mention that you can only use iTunes with your iPhone or Facebook didn't tell you that there's no easy way to export your personal data, or even see how it is being used.  Don't expect bells & whistles and "lickable" user interfaces.  Just solid, simple products that play nicely with others and gradually evolve - like nice children.  Now there's a sustainable business model.

I'm really not a Google-vangelist: I don't think that they can do no wrong. But I do think that they appreciate that walled gardens weaken you in the long term because just as they hoard super-normal profits, they also breed complacency.
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