Platform Power Is Underrated

Platform Power Is Underrated

  • 5 hours ago
  • stratechery.com
  • Keywords: AI, Apple, Meta

Ben Thompson reflects on Apple’s App Store policies, highlighting its anticompetitive nature and the impact on developers and users. He argues that platforms like iOS are so powerful they dictate terms, stifling innovation while maintaining dominance. The essay underscores how platform control shapes tech ecosystems, often undervaluing competition and developer freedom.

Apple NewsApple ProductsAAPLsentiment_dissatisfiedMSFTsentiment_satisfiedMETAsentiment_neutral
open_in_newOriginal article

Estimated market influence

Apple

Apple

Negativesentiment_dissatisfied
Analyst rating: Buy

Apple's App Store policies have been criticized for being anticompetitive and restrictive, impacting developers and user choice.

Microsoft

Microsoft

Positivesentiment_satisfied
Analyst rating: Strong buy

Microsoft faced challenges in building a platform but learned valuable lessons that influenced their approach to software development.

Meta

Meta

Neutralsentiment_neutral
Analyst rating: Strong buy

Meta's focus has shifted from platforms to product development, particularly with hardware like glasses for AI integration.

Context

Analysis of "Platform Power Is Underrated" by Ben Thompson

Key Insights and Market Implications

Apple's Power

  • Anticompetitive App Store Policies: Early concerns about Apple's restrictive App Store policies date back to 2008, with critics like John Gruber warning against anti-competitive practices.
  • User Base Strength: Despite criticism, Apple's App Store remained dominant due to its large user base, which created significant demand for apps.
  • Revenue Model: Apple's high commission rates (up to 30%) and strict rules have been lucrative but controversial, particularly in cases like Netflix and Kindle.

Competitive Landscape

  • Chicken-and-Egg Problem: Microsoft faced challenges building the Windows App Store due to the lack of both users and developers. This problem is less relevant today due to large user bases on established platforms.
  • Developer Incentives: Developers are primarily motivated by user demand, not platform incentives. This explains why Apple's restrictive policies didn't hinder app development.

Platform Dynamics

  • Products vs. Platforms: Thompson argues that modern platforms like iOS are symptoms of successful products (e.g., iPhone) rather than the other way around.
  • Vertical Integration: Mark Zuckerberg's shift from building a developer platform to focusing on hardware (e.g., Oculus glasses) highlights the changing nature of tech companies.

Regulatory Considerations

  • Public Interest in Regulation: The concentration of power in platforms raises concerns about innovation and competition. Proposed regulations aim to balance platform control with developer freedom.
  • Proposed Law:
    • Define a platform as a product with an API running third-party apps.
    • Mandate economic and political freedoms for developers on platforms with over 25 million users.

Long-Term Effects

  • Innovation Incentives: Regulating platforms could encourage experimentation and competition, benefiting society by fostering innovation.
  • Shareholder Value: Platforms with strong network effects can extract significant value, but excessive control may stifle growth and competition.

Conclusion

The analysis underscores the critical role of user demand in sustaining platforms and highlights the tension between regulatory intervention and market-driven innovation. While Apple's dominance is a testament to its business model, ongoing scrutiny of platform power is essential to ensure fair competition and continued technological progress.