Monday, November 1, 2004


From Business 2.0's Future Boy...

Amazon, eBay, and Google Turn Themselves Inside Out
When big, successful companies let software developers use their data to build new businesses, everyone wins.

Business 2.0
By Erick Schonfeld

October 15, 2004

In software, if you own the platform, you own the empire. The platform is that layer of software on top of which all other applications are written. During the PC era, the platform of choice was the Windows operating system. The browser was supposed to replace the operating system as the preferred platform, but it failed to do so. Now nearly every major Internet company -- Amazon (AMZN), eBay (EBAY), Google (GOOG), -- is trying to turn itself into a software platform. That is, each one wants customers, software developers, and other companies to build new applications and new businesses based on the very same data that runs its website. In order to do that, they are literally turning their companies inside out and making available for free much of the information they use for their own businesses.

Can you imagine Wal-Mart (WMT) sharing sales data or pricing information with anyone other than suppliers? But that's exactly what these Web-based businesses do. And when they reveal their application program interfaces, they are in effect sharing some of their most critical business data. Their bet is that if other companies can build applications on top of their businesses, they will create miniature economies around the most popular platforms. And in the software world, that is how empires are built.

Why would a big company do that? Because it hopes to unleash the creative energies of people besides its employees to create new applications that tie into its website. That, in turn, will drive more sales. Amazon, for instance, makes available through Web services the product descriptions, pricing, product images, and customer-written reviews for every item available on its site. During the past two years, 65,000 developers have registered to access this data, and they are doing some creative things with it. A company called ScoutPal, for example, offers cell phones with bar-code scanners to Amazon booksellers, so that they can compare prices at book fairs or garage sales with the going rate on Amazon.

Some Amazon developers, though, are just building cool sites. One is Musicplasma, which prompts users to type in the name of a favorite artist and then displays a map of related artists based on the purchasing and clicking patterns of people who visit Amazon. Type in "Otis Redding," for example, and you will see that he is directly connected to Al Green, who, in turn, is connected to Barry White and the Isley Brothers. Each artist is visually represented by a planet. Click on the Barry White planet and it shifts to the middle of the screen to reveal other connections, such as Stevie Wonder and Patti LaBelle. On the left-hand side is a discography, with each album linked to the page on where you can buy it.

"Two people in France built this," Amazon CEO Jeff Jeff Bezos told an audience at last week's Web 2.0 conference. Because Amazon opened up its data through APIs, these two developers "were able to use very powerful assets that would be difficult for them to get access to any other way," Bezos noted. Developers have an incentive to link back to Amazon thanks to an affiliates program whereby they can get a cut of any sales they refer. The upshot: Amazon benefits as well. "We want to get people to use the guts of Amazon in ways that surprise us," Bezos said. "I think it is something every company can do, if they look inside and think what are some unique assets that others might enjoy."

He is not alone in this assessment. So far, 10,000 developers have tapped into eBay's auction data, mostly to create tools to help sellers manage their eBay auctions. Meg Whitman recently told me that expanding eBay as a software platform is central to her strategy. "We think it is important to open up the platform because it makes eBay stronger as other people develop applications to the platform," she explained. Similarly, Google is opening up its search APIs and lets customers and other software developers add new features to its Web-based customer-relationship management software.

Most of us may think of companies like Amazon simply as services we access over the Web. But to software developers, they are huge applications with vast databases of extremely valuable information that can be used to build other Web-based applications and businesses. These are the new platforms on top of which they want to write their software. "We are going to see the rebirth of the software industry," predicted CEO Marc Benioff at Web 2.0. "In this new architecture, the platform is really the Internet itself."

John Battelle, one of the organizers of the Web 2.0 conference (and a Business 2.0 contributor), perhaps sums it up best: By making the Web a software platform, you can now "build your business by letting your customers build your business." But it will require a measure of openness unheard of until very recently.

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