eBay's Xcommerce platform

If you haven’t read Steve Yegge’s eye-opening rant about the power of platforms vs. products, you should. He rambles and gets a bit technical (he is a Google engineer after all) but he brilliantly explains the value of building platforms that can be extended by others vs. building stand-alone products. This matters to much smaller companies as well, even publishers. Taking a platform approach to infrastructure you already need (like a customized web CMS) will at minimum save money, and could turn into a business in its own right for you.

Yegge’s contention is that the big dogs like Facebook and Amazon are succeeding because they have built powerful platforms that many other businesses want to use. For Facebook, the platform is mainly the ability for 3rd-party developers to build and elegantly integrate apps into the enormous Facebook ecosystem. Powerful APIs, in other words. Facebook doesn’t have to think up Farmville to profit from its popularity, because they’ve made it easy for Zynga build it on the Facebook platform. Google+ was not built as a platform (it launched with only one very weak API) and therefore stands little chance of challenging Facebook in its current state.

Amazon didn’t start out with a platform play. They started out with a crappy website and a successful business selling books and lot of other stuff.  In the process they built up a huge infrastructure to support all those transactions. Then, apparently Jeff Bezos handed down an edict to all developers that they would henceforth build everything in a way that it would tie together into a massive platform. And now they have Amazon Web Services, a big business that lets other companies plug into and benefit from their platform in whatever ways make sense for their businesses.

Now comes news that Ebay is stitching all of those ecommerce acquistions like PayPal, GSI Commerce, Magento, Red Laser, Milo and WHERE into the Xcommerce platform, an end-to-end ecommerce operating system. So while they will still make a bunch of money from sales commissions on commemorative Alf glasses, now they are using their scale and capabilities to enable others easily to build out their own robust on-and offline commerce systems.

Are you seeing the pattern here? If you build a good platform and make it easy for others to extend, there is a multiplier effect. The more people come and use your platform to do things you never thought of, the stronger your platform becomes. Salesforce.com is an excellent example of this approach as is Bunchball. In fact Bunchball integrated their platform with Salesforce’s platform to make a new platform! Take a look at your own business and think about how you can take a platform approach. It takes more time and requires more discipline than building one-off products, but the payoff can be huge.