Oct 23 2007

AppExchange is the new black . . . again

The big news coming out of Web 2.0 (other than Facebook’s Evan Zuckerberg somewhat obliquely announcing that FB is going to create its own ad network and dodging a few questions about their developer agreement – see coverage here) was MySpace following in the steps of Facebook and opening up their site to developers. It’s no secret that MySpace has struggled – especially relative to Facebook (at Web 2.0 Murdoch also lowered guidance for MySpace revenue and there have been many reports of MySpace’s significantly lower growth rates than that of Facebook). Facebook’s decision this May to create a standardized development platform for 3rd party app builders has without question been a huge success. MySpace has now jumped on the platform bandwagon and will begin to better support their developer ecosystem.

I wrote a post about this 18 months ago (see AppExchange is the new black from June 2006) applauding companies such as eBay and SalesForce for cultivating their developer networks. While Metcalfe’s law suggests that the power of a network increases exponentially with the number of nodes on that network, there is perhaps an adjunct to Metcalfe’s which would state that this power increases by another factor as you add functionality across that network. Think of the programs developed for a networks as additional nodes, but where the number of ‘nodes’ to factor into Metcalfe’s equation equals not one for each new program, but one for each program multiplied by the number of users it has. Networks that serve as platforms become ecosystems. Networks that don’t are silos.

So what’s next? In my June 2006 post about I referenced Oracle (and didn’t but could have referenced SAP) – they are both migrating down the stack and building systems that are both applications and middleware. They should start thinking about how to better create an ecosystem around their systems rather than continuing to believe they can develop (or buy) all the functionality their customers need. Thinking a little bit more broadly, the Yahoo, Microsoft, AOL and Google all have large numbers of email users that are huge potential networks and which are completely untapped (see this WSJ article from last week; hat tip to Ric for the pointer). Without question the social networks are adding messaging and mail like functionality to their systems – the mail guys, with a wealth of data about their users and with a more broadly ‘sticky’ application, should start looking to fight back. Perhaps we’ll see the first of this with iGoogle.

I’m definitely a platform guy – I see the power of building a foundation and having others add to it. And while I may be overstating the future opportunities here, the predictions I made 18 months ago and the moves by the large networks since then would suggest otherwise.