Chris Dixon

True, it depends on how the “status update” market shakes out. The more hubs there are, the better for the app makers.

I think the meme on commoditizing your complements is perhaps an over-simplification. Aren't there really three distinct motives at work in these kinds of situations?

Controlling the platform – Microsoft and Google getting into browsers, for example. A new or evolving platform may turn out to be important, perhaps as a disruptive innovation, so incumbents feel they have to get in the game. It seems like this usually turns out to be a bad idea. Microsoft has spent tons of money on IE without getting much benefit out of it (I don't think bankrupting Netscape counts). If the platform does turn out to be a disruptive innovation, the odds are it'll squeeze much of the profit out of the market anyway, at least on a per unit basis. Red Hat makes good money on Linux, but it's orders of magnitude less than proprietary Unix or Windows Server. Also, incumbents usually aren't that great at executing on disruptive opportunities.

Commoditizing complements – Microsoft and IBM in PCs are the classic example. Each company wants to provide the value add and get the lion's share of the revenue. This seems like a classic phenomenon when vertically integrated stacks get broken into horizontals. No one really knows which part of the stack drives the value, so everyone's trying to claim it. Content providers and pipes/software providers are in a complementor battle, too.

The land grab – I think this more accurately characterizes moves like Facebook, Apple, and Microsoft horning in on app providers. The platform company sees a chance to earn some additional money by going into app markets. The goal isn't necessarily to bring down the price of apps but rather to maximize profits. So while Microsoft for example may have brought down the cost of certain app categories over time by entering those markets, it wasn't because they thought the additional value would accrue to the operating system. It was because they thought that the market was price elastic and that increasing volume would more than make up for a lower price point.

Where do Twitter and its ecosystem fall? I haven't given it enough thought, but I'd say it's probably going to be a land grab. Twitter won't put apps out of business to get people to commoditize complements per se, but rather just to earn some extra money by taking over a bigger part of the value chain.

BTW, I was struggling with this idea but didn't have the patience to express it until I saw your retweet, Chris. So it did do some good.

Interesting post on competition between complements.

How does this compare to a franchising model? You own the main product but get partial revenues from other sites who rely on your brand/platform? I would think that this sort of arrangement would only become unattractive if a) the other sites actually cannibalize your own profits, b) the NPV of the marginal revenues you would earn from creating your own version of what the 3rd party is currently doing is greater than the development (and other) costs of building it. Which do you see being the case here?