Web 2 winners start as free apps and become platforms

By December 9, 2009 No Comments

I’m at the Le Web conference in Paris for the next couple of days and this morning I caught a panel chaired by Mike Arrington with the platform people from Facebook, Twitter, Myspace, LinkedIn, Ning and Six Apart.

The first observation is that these companies have been very successful in getting people to use their ‘platforms’.  There are now 50,000 apps built on Twitter, 60 million people use Facebook Connect every month, and the Ning numbers are also very impressive.

The second observation is that with the exception of Ning these companies all started as applications and have backed into a platform model over time.  Traditionally in IT the move has more been in the other direction – e.g. Microsoft started with the Windows platform and then moved downstream into applications afterwards.

I think the difference this time round is that the web 2.0 success stories built wildly popular free apps which generated the enablers for their platforms as a by product.  The social graphs are the main asset here, although Facebook has something akin to an authenticated identity system as well.

This, of course, is the ‘free’ business model in action, or at least it could be.  Make a popular service that is free to use and then find a way to make money in a related area.  Facebook have achieved this with their application platform and Twitter is saying it will make money by finding a way to generate cash that flows up and down the Twitter ecosystem.

I expect we will see higher and higher percentages of businesses that are able to sell something because of something else they give away.  In fact I interrupted writing this post to talk with a VC about just such a company.

There is a Techcrunch report on the whole panel here.

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