Apr 14, 2010

Escapin' through the lily fields I came across an empty space

There has been much debate in the last week over platforms, holes, products and ecosystems.

All of it made me think back to my youth, the days of AOL, around 1995-1997. Back then, one of AOL's innovations was a publishing platform (Rainman - Remote Automated Information Manager) which allowed thousands of content producers - of all sizes and skills - to publish into AOL. As a result, back then the breadth of content on AOL was remarkable and filled every possible niche. It was a wonderful, rich, vibrant community of content. I joined AOL back then because Geoff Gould published his Grateful Dead forum on AOL (keyword: Grateful Dead, I recall) - one of the first online communities. Indeed you can still see today he uses the same modified AOL logo he used back then:

As a platform, this worked precisely because AOL provided the two key components every platform must deliver to create value: distribution, and monetization. AOL offered distribution through its thousands and then millions of users. It delivered monetization through its pricing scheme: users paid AOL for Internet access by the hour ($6.95 or $9.95, I can't recall) and content providers got paid a percentage of the hourly rate related to the time users spent on their AOL pages. It worked, it worked well, and literally thousands of flowers bloomed (think about the analogies to the Facebook platform, or iTunes store, or Windows OS - offering distribution and monetization always works). The platform succeeded . . . .

Until it didn't.

The Internet business changed, completely, in 1996 when the AT&T WorldNet Service began offering"all-you-eat" (unlimited access) pricing for Internet access. AOL (as an ISP) soon followed suit, as it had to do.

This destroyed AOL's original platform, as it could no longer share variable usage revenues with its content partners. We spent much of 1997 renegotiating thousands of these deals. The revenue stream for these guys ended. I can only imagine the outrage and headlines and hating if this happened today. But AOL too had to change its business.

A funny thing happened, however. Smart content providers realized they could - indeed had to - move to the nascent web. Over there - using HTML - much more rich content experiences and applications and commerce services could be launched. And over time more users would migrate to an open web entry point. The good ones created good businesses, even some iconic ones (early on we negotiated hard with the NY Times - an early AOL partner - as they considered moving their content off AOL - and onto the web!). Others failed. AOL had to flip its business model outside of access fees into advertising, commerce other services. Web browsers became the primary presentation layers, not the ISPs.

Innovation didn't die - instead it flourished into new, related and unrelated, spaces.

History tells us that markets get flushed, always and often. It doesn't matter what we call them - holes, ecosystems or whatever - but things change, business landscapes alter their foundations, and companies themselves are often the catalyst for those changes. But each time good execution survives, and more opportunities are created than those that are filled. It always happens this way.

Comin', comin' around, comin' around, in a circle, indeed.

blog comments powered by Disqus