Developers Repeat After Me: App Platforms are Not Your Friend

Remake of Apple's 1984 Super Bowl commercialThe numbers speak for themselves- apps are popular. Facebook now has over 350,000 active apps on its platform with 70% of Facebook’s users engaging with these apps on a monthly basis. Apple recently announced that the number of downloads from its App Store had surpassed 2 billion for the 85,000 applications on its platform. Add in 30,000 apps from Google-backed initiatives Android and OpenSocial, and over 11,000 apps being built off of Twitter’s API, you have nearly half-a-million apps out there across the most popular social platforms!

Consumers have benefited greatly from the entertainment and utility value provided by developers on these platforms, propelling applications to the forefront of the user experience for many of these services. The value to these mobile and web platform providers has been evident in the accelerated user growth these services have seen since opening up access to developers.

Developers for the most part haven’t shared a comparable level of success as these platforms though. With VentureBeat pegging the value of Facebook’s app ecosystem at approximately $500 million this year, similar in size to Facebook’s expected 2009 revenues, little opportunity is left for the remaining 350,000 applications once you get past the success of Zynga, Playfish and Playdom, the leading developers on Facebook and OpenSocial platforms. A similarly distorted distribution of applications and success exists on Apple’s platform where the size of the app economy has been projected as high as $2.4 billion per year by GigaOM. Based on this optimistic projection and assuming only 50% of downloaded apps are free, there still isn’t enough money for the average developer to prosper over the long-term. The opportunity for most developers in the long-tail of the App Store is further skewed when you consider some of the outsized success stories from the most popular apps on the platform. Because Android’s ecosystem is relatively young and Twitter lacks its own business model, it’s too early to see if developers can make a living off of these platforms.

Even the virtual goods sub-economy that has been allowed to emerge on centralized platform ecosystems like Facebook and MySpace, which Inside Network has valued at $1 billion in the U.S. this year– even before Apple’s announcement of in-app purchasing capabilities for all App Store applications, the opportunity is disproportionately concentrated with the most popular applications and largest multi-app, multi-platform developers.

Making matters even more difficult for developers is the not-so-friendly actions being taken by platform companies in wielding power over their ecosystems:

So why do developers keep building apps for these platforms? Because of the effort (low development threshold and time commitment  to launch) and opportunity (built-in, captive audiences) compared to building a stand-alone business. Fortunately for developers who want to build their own audiences, and not be reliant on a particular platform, there are two primary ways to leverage these mobile and web services for their own benefit:

  1. Port your success. If a developer has been fortunate enough to find success on any of these platforms, they should convert those users into visitors of their own domain or service like LivingSocial has done. LivingSocial was a big benefactor of Facebook’s redesign of their home page back in March, vaulting LivingSocial into the top 10 most popular developers on the platform in the month following the change. The company was able to turn some of those users into customers of LivingSocial.com, which saw its unique visitors to the site almost triple between March and April of this year.
  2. Port the platform. Foursquare have leveraged social graph data from Facebook and Twitter via Facebook Connect and Twitter OAuth respectively to enable users to build their own unique social graph on Foursquare.com. Additionally the mobile service encourages its users to send notifications of their whereabouts into their Facebook and Twitter streams, which results in free exposure and viral marketing for Foursquare’s service.

Though the threshold for success will vary for developers, based on whether or not they have taken institutional funding, the risks associated with developing on another entities’ platform or costs associated with developing for multiple platforms remain the same- the long-term value of a product or service cannot be maximized when its business success relies on a platform it can’t control or pay for service level assurances. Look no further than MySpace’s acquisition of iLike this past summer, for a small premium to its invested capital, for market validation of this. While these social platforms should absolutely be leveraged as part of any web or mobile strategy, remember that each platform’s goal is to maximize its own value and not that of the application developer. Luckily, as Andy Weissman, founder of Betaworks, points out, some of the most successful applications can and do become platforms themselves, so a bigger opportunity awaits those developers that understand the ecosystem relationship.

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