By: Gigaom
In the platform wars, open is ultimately more valuable than closed, says Betaworks
In his annual letter to shareholders of the seed-stage incubator Betaworks, founder and CEO John Borthwick argues that while closed platforms can be valuable in the short term, open systems and services will ultimately prevail.

When it comes to the future of the web, there are a few incubator-style seed investors that are worth paying attention to, and New York-based Betaworks is likely at or near the top of that list — founder and CEO John Borthwick has been an early proponent of some of the foundational shifts in social media and web services, including the rise of Twitter. In the latest version of his letter to shareholders and in a phone interview with GigaOM, Borthwick said that one of the themes he finds most compelling is the ongoing tension between the open web and closed platforms like Facebook, Apple and even Twitter. And in the end, he says, open will prevail.

Although Facebook may look indestructible on the social networking side, with its $70-billion market cap and its billion-plus user base, and Twitter may seem equally dominant in another aspect of the real-time information economy, Borthwick argues in his letter that these big, incumbent platforms “are not as well positioned for the future as you might think.” For one thing, he says the drive to monetize these platforms is pitting the needs of those companies against the interests of their users:

“One of the big stories of 2013 is the rising tide of tension between what the users want to do on a platform and what that platform’s owners want their users to do, in order to expose them to an adequate quantum of advertising. Platforms feel they have to impose controls to get users to do what the users don’t want to do naturally. It is reasonable to expect that some of these platforms will overplay their hands, creating significant opportunities for new social networks to emerge.”

The islands won’t prosper like the oceans

In an era when bandwidth is so readily available, and users have become accustomed to all of their data living somewhere in the cloud — a philosophy that has ironically been encouraged by those same incumbent platforms — Borthwick argues that many users are “ready, willing and able to move” to another network or service if push comes to shove. Having attracted users so rapidly in part by teaching them how “rootless and transient” their relationships can be, he says, some of these companies will ultimately learn how easy it is to lose touch with their user base.

“Platforms are typically trying to control and centralize experiences with the opposing tension being the pull of their users at the edge. As billions more users join these networks over the next few years, the pull of the edge will get even stronger. That pull will make centralized architecture models hard, if not impossible, to execute against. There will be exceptions, but the islands won’t prosper like the oceans.”

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Even with a company like Apple, which many would say is the quintessential closed and controlling platform, Borthwick argues there is evidence of how powerful open can be: namely, the response when Apple shut out Google’s map application in favor of its own lower-quality application. The response from users seems to be part of a larger trend in which many are switching from Apple apps and services to Google ones (I wrote about some of my own experiences in that area recently, and why I am considering switching to an Android).

In our interview, Borthwick made it clear that openness does not necessarily equal free, and that some bastions of openness such as Google are only free at certain layers of what he calls the application “stack” — so, for example, Gmail and Google Maps are open, but the search algorithm is not. The Betaworks founder also agreed with Benchmark partner Bill Gurley, who said in a post last year that Google is very good at building “moats” around its core properties by offering free versions of software and services that integrate with them. Android arguably fits that strategy, Borthwick said.

Open systems are more resilient and more valuable

In any case, for Betaworks and its companies and offerings — which include the revived version of Digg and a range of experimental apps like Tapestry, as well as established companies like Chartbeat and Bitly — Borthwick says that open will remain the key to long-term viability and success. And closed platforms such as Facebook (and Twitter, which he argues is becoming more and more closed in an attempt to monetize its user base as quickly as possible) are growing more and more risky:

“It is a core Betaworks conviction that open systems will prove more compelling, more resilient and more valuable to users than closed. Or to say it perhaps a bit more precisely: In a multiplatform world where open and closed systems will always co-exist, the force and power of openness will ensure the existence of a viable ecosystem for application and service builders like betaworks.”

There are plenty of other things worth reading in the letter, including an assessment of the evolution in financing for venture-backed startups (something the company and its seed-stage, incubator-style focus are clearly a part of) as well as the implications of the “contextual internet,” in which apps and services respond more intelligently to what we are doing and where we are doing it. And Borthwick argues that data will be the killer factor for any company that wants to become successful, whether with advertising or any other content. Read the whole thing here.

Post and thumbnail images courtesy of Shutterstock / Luis Santos and Flickr user Dunechaser




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