Big Trouble in the Application Economy

The social innovation space is more wired and connected than ever, and with that connection has come a recognition of how interlocking and mutually-reinforcing successful social change efforts must be. In that context, some have looked at the emerging platform-application web economy as an example for how different groups can work together. Recently, however, there have been major challenges to that economic paradigm, and we're only just beginning to see the consequences.

In the first generation of the web, everyone wanted to own the platform. The platform for books. The platform for pets. The platform for news. A platform, in this case, means the gathering place that centralizes all activity in an interest area or ecosystem. In today's web, a few key platforms have spawned massive application economies, in which third party developers build games, utilities, and other programs that sit on top of Facebook, Twitter, iPhone, Android, and other platforms.

Some of these applications are simple tools like URL shorteners for Twitter or basic weather programs for the iPhone. Others have spawned massive economies and communities, such as leading social game company Zynga, which will make an estimated $450-$600 million dollars this year on the backs of games like FarmVille and MafiaWars.

Yet in the last few months, three of the biggest platforms have all experienced major tension with their developer ecosystems.

On the one hand, Apple's iPhone platform has been an incredible boon for developers. It opened up the mobile market like no phone before it and has created a distribution channel to tends of millions of app store customers. At the same time, Apple exerts extreme control over the standards for its applications, and is not against denying applications that don't meet it standards (or that are competitive to a core Apple functionality). Most recently however, it has released new rules that actually dictate what programming languages its developers have to use.

The micromessaging service Twitter has always been a darling of the developer community. The bare-bones tool has from the very beginning focused on only the essential element of its service, and let developers take care of everything else. Last month, however, Twitter began to make it clear that applications that were "filling the holes" of what should be core functionality may be in trouble. Since then, Twitter has purchased an iPhone Twitter client which it plans to turn into the official "Twitter for iPhone." This has developers scrambling to figure out which applications the platform might add, in turn undermining their businesses.

Facebook has been in the news a lot in the last week or two for its massive attempt to become the defacto social standard for the web. But one equally interesting stories is the rumbling that Facebook and game company Zynga are at odds over the forthcoming Facebook Credits - a default virtual currency system that all FB apps will be required to use, and of which the massive company takes a 30% cut. It has gotten so tense that Zynga is considering leaving the platform all together.

In each of these cases, the platform is making a judgement call that it holds the upper hand because it controls the keys to a massive audience. They are -- as corporations do -- trying to maximize profit. At the same time, the question is at what point the terms that they put on their developers become so onerous that they are pushed to an alternative platform (such as Google's Android instead of the iPhone), or find the incentives do not outweigh the hardships of development.

The lesson is that even in relationships with apparently aligned incentives, the power dynamics of collaborative partnerships are constantly being renegotiated. Small changes can make a huge difference in the decisions that people and organizations make, and the cost and challenge of working together should never be underestimated.

Photo credit:LaMenta3