Platforms Trade Distribution for Developer Adoption

Facebook's Platform Strategy: The Open-Close Growth Cycle

Facebook's early platform strategy represents one of the most powerful examples of how emerging platforms create explosive growth opportunities before eventually closing down for monetization.

In 2007, Facebook was significantly smaller than competitors like Myspace and Friendster. They identified that direct network effects would create powerful lock-in - the more friends on the platform, the more valuable it became. To accelerate this flywheel, Facebook opened their platform to third-party developers through what they called "the canvas."

The value exchange was brilliantly simple: developers could build any application or game within Facebook's canvas, monetize it however they wanted, and in exchange, Facebook would provide access to powerful distribution channels - notifications and news feed placement. This created a gold rush of developers building social applications and games that grew virally at unprecedented speeds.

The distribution mechanism was incredibly effective. Developers could reach millions of users organically through Facebook's notification systems and feed visibility. This symbiotic relationship benefited both sides: developers got instant distribution for their products, while Facebook gained more engagement, use cases, and users through these third-party applications.

However, as Facebook established dominance and outpaced competitors, they began systematically closing down the platform. First, they demanded a percentage of revenue from canvas applications. Then they gradually suppressed access to the organic distribution channels that had initially attracted developers. Eventually, they absorbed the highest-value use cases into their own first-party applications (events, photos, etc.) and effectively shut down the platform for third parties.

By the time Facebook started closing these channels, they had built such a significant lead over competitors that they could afford to change the rules. The network effects they'd established through third-party developers had created sufficient defensibility.

This four-step cycle (market conditions, identifying a moat, opening a platform, closing for control/monetization) has repeated across every major distribution platform - Google, iOS, LinkedIn, and others. The key insight for companies is that these cycles are getting shorter, giving you less time to capitalize on the opportunity.

The strategic implication is clear: don't opt out of these new distribution platforms when they emerge. It's a prisoner's dilemma - if you don't participate, your competitors will, and customer expectations will shift. For startups especially, being early to these platforms can create escape velocity before incumbents can copy you. The opportunity to disrupt established players comes when you ride these new distribution waves before they close.

Key Takeaway

When a new distribution platform emerges, there's a brief window where it offers generous organic reach to attract developers and content creators. This creates a massive growth opportunity for those who move quickly, but you must anticipate the eventual closing of the platform and build a strategy to maintain independence when that happens.