Valentine’s Day has come and gone, but the weeklong “Loves Me” or “Loves Me Not” series on PYMNTS.com is just beginning. The final stop for the Market Platform Dynamics team is ‘Open Platforms’: loves me or loves me not?
David Evans: Loves Me
Wouldn’t you love to have a business where everyone else does all the work, they take all the risks, they sweat out all the great ideas, and you make a ton money? It almost sounds too good to be true—like the spring of eternal life. And it is but stay with me for a minute to see why I love open platforms. This nirvana business I’ve just described sounds a lot like the life Apple is living—yup, there’s an App for you, but there’s 30 cents on a $1 app going into Apple’s pocket every time someone downloads an app. Then there’s Facebook which gets paid every time someone buys something to decimate others on Mafia Wars. These nickels and dimes and sometimes dollars add up to a ton of money. And this is also the gift that not only keeps on giving but keeps on giving more and more. All these apps get more people to come and makes more developers sweat more time into more great ideas and apps.
The Apple iPhone, Facebook, Microsoft Windows, Google Maps, and many more are examples of “open software platforms” that allow developers to erect any application that want on top of the platform and, here’s the critical part, link into the platform so the application can use the features of the platform. Open platforms have an open door policy although in some cases there’s a toll (Apple does, Google doesn’t) and quality control (Apple does, Microsoft doesn’t). Of course nothing in life is free and this isn’t the easy money it sounds like. It requires an immense amount of work and creativity to create a “platform” that application developers can use. The real problem though that app developers won’t spend time writing unless there are a lot of users and it might be hard to get users without apps. So even mighty Microsoft has been an utter flop in mobile phone platforms after a decade of trying. But unlike the spring of eternal life the money machine of open platforms really is there if you can manage to surmount all the obstacles to creating a successful one. Oh, by the way, it isn’t just about money.
Margaret Weichert: Loves Me Not
Everyone is in love with open platforms these days. Facebook embraced open platforms with spectacular results, and even traditional “walled garden” player Apple has benefited from opening its application platform to hundreds of thousands of new suitors. Payments players like PayPal, MasterCard and Visa have also jumped on the “open” bandwagon. Clearly there are many benefits of “playing the field,” and open platforms let major network players keep their options open without committing to specific applications or solutions before they achieve critical mass.
Call me old-fashioned though, there is still something to be said for “exclusive” platforms. Closed networks have several key benefits including security, ease of integration and quality control are all important benefits of a closed network that drive consumer loyalty, partnership momentum and profitability.
Closed platforms like the Mac have managed to differentiate themselves through enhanced security positioning. People with Macs don’t need to battle the ever changing (often competing) chore of running and updating malware, spyware, anti-virus, patch of the week downloads that slow processing speeds and annoy innocent consumers. By contrast, open platforms like Windows are subject to constant security attacks that attempt to exploit the complexity of the Windows operating environment to compromise security. So those of us with PCs put up with the inconveniences and occasional bad security compromises that are the price of admission for the open Windows environment. Of course it stands to reason, since in an open relationship, its harder to make sure that everyone who comes calling can be trusted.
Similarly, closed environments bring the ease and comfort of a custom solution. Peripherals are purpose built, integrate easily and don’t have lots of complicated software downloads and setup parameters to navigate. Even when potential partners seek to integrate with closed solutions, they are forced to tailor and optimize their solutions to work easily and seamlessly. For example, Intuit, the acknowledged leader in small business financial services serves as a gatekeeper and quality arbiter on any solution that integrates with Quickbooks. Small businesses know that what they get via the Quickbooks platform may be more expensive, but it will work well and provide good value. Open platforms are much more complicated, potentially requiring more time and resources to integrate. And quality levels are much more uneven without a “best of breed” solution already integrated.
Perhaps the most obvious benefit for the lucky few who find love in a “closed” environment is financial. When players like Apple, Intuit, Western Union, and American Express manage to establish a quality offering in a major growth market, they can generate significant and sustainable margins, even without establishing dominant marketshare.
So, much like in more romantic endeavors, the price of admission to a closed relationship might be high, but the reward is there in establishing a reliable, trusted relationship that brings value over the long haul.
And yes, I absolutely believe that open platforms have their place, they drive growth, innovation and dynamism. But sometimes, in payments, as well as in romantic affairs, an exclusive relationship can have its benefits.
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