The platform paradox

Six Apart is grappling with the inherent conflict in providing a platform (MovableType) and a service (TypePad). A most unhappy post from Suw Charman dissecting with a rusty scalpel SixApart marketing messages versus her experience with the company — and a defensive response from the company and a response, in turn, from its chief competitor — make this clear. And I think there are lessons in this for other platform companies — potentially even for the news industry as, I believe, journalism begins to look more like a platform .

I saw this conflict coming back in May 2004, when I wrote a post arguing:

You can’t be a software company and a service company under one roof, for you will inevitably end up competing with your customers. And that will not work. So I suggest that SixApart, the software company, divest TypePad, the service company, so that each can serve its customers optimally and so that each can become as profitable as possible.

The issue then was the limitations Six Apart put on Movable Type, the platform software, so as not to enable others to compete with Typepad, its service company using that same software. The issue today, in Charman’s post, is distraction: Who is being served first and best, platform or hosting customers? Doesn’t matter how the problem erupts, the cause is the same. There is an essential channel conflict here when you want to provide a platform for all to use and then when you use it yourself.

I said all this back when then in my blog post and I said it again when I advised one of the VCs who invested in (without pay, sadly). They could have put the platform and the service in one company but I advised strongly — among others, obviously — that they should be separate. The platform now resides with the open-source and, the VC-backed and for-profit hosting service, is merely one of any number of companies that use that software. The fact that is open-source has the benefit of motivating a community of developers to contribute to the platform. Back in 2004, again, I wrote:

I’ve seen other companies go through this and the answer is either to drop one line of business or to divest. I suggest divesting. Then SixApart, the software business, will come up with licenses that serve its customers well and will sell as many as possible. Rather then having your entire customer base scream in protest — as they are now — they would beat a path to your door to pay for your mousetrap (whenever your customers are screaming in protest, you know you are doing something very wrong). Meanwhile, TypePad — a licensee of Movable Type software — would offer no-hassle and reasonably priced hosting and would compete with other licensees. Competition would lead to more business for the two companies and happier customers and probably market dominance for Movable Type and its standards (e.g., TypeKey and Trackbacks). . . .

There is another advantage to divesting: The management of each company will not be distracted as the management of this one company is. I’m not a VC, but I have seen this in many companies as a corporate investor, board member, and corporate customer: Startups always try to do too many things and that means they will end up doing nothing extremely well. SixApart started by developing a damned fine product in Movable Type but it has neglected that product (as I’ve whined) as it built its hosting business at TypePad; now it is handicapping the software company to advantage the hosting company; and when the protests get loud enough, it will surely neglect the hosting company in turn. The company is small with extremely limited resources and management focus and trying to run these two very different businesses is difficult unto impossible.

I’m not linking this to beat up on SixApart three years later but to see the larger lessons in this. Being a platform is a powerful position but it also means that you will find yourself necessarily serving rather than competing with those who use you. That, I believe, is why Google has been smart enough not to be a content site in any meaningful way — contrasted once again with Yahoo — and even its announcement today about distributing content companies’ video inside advertising units on a distributed network of sites is a stellar example of creative platform thinking.

As I noodle around with the notion of a new architecture of news, I wonder whether news organizations start to look more like platforms and less like closed content compaies, enabling news to be gathered and shared across a wide network of contributors, owners, and distributors rather. And so you start to ask whether you are a platform or a creator and you ask whether it’s possible to be both.

Just noodling.

: LATER: In email exchange, Fred Wilson responds:

Is youtube a platform or a media property?

Is flickr a platform or a media property?

Is feedburner a platform or a media property?

In my view, the best way to create value is to be both, but give away the platform to any and all takers and monetize the resulting media property that is created in the process.

He asks whether I agree and I say, uncharacteristically, I’m not sure. Perhaps media is different from technology: You get to use one to build the other. But still, you have to be careful not to fall into channel conflict. Yahoo created that conflict by becoming a media
destination using others’ stuff. YouTube became a media destination by enabling others to distribute their stuff, eh?