Ecosystems In The Age Of The API

Walled gardens, Ecosystems, Platforms, call them what you will, but the mechanisms through which our digital content experiences are managed have evolved much over the last 15 years.

In the early days of the web, ISPs tried to control our entire online lives by building proprietary walls around users.  These so-called Walled Gardens were exemplified by  AOL.  But as Internet users got savvy  they banged away at those walls until they crumbled under the weight of inevitability in much the same manner as the Berlin Wall did.  Mobile carriers briefly brought Walled Gardens back from the dead (and there’s still an extended death rattle in some parts), but these days we expect our Internet journeys to be broadly free.  I say ‘broadly free’ because of course many of the destinations on our digital journeys are not open, and some of them are harder to get in and out of than others.  In fact the journey of the digital consumer is analogous to that of a traveller in Medieval Europe.  The highways are sometimes wild and unpredictable, while the coveted destinations are walled cities and heavily fortified castles.

Ecosystems are the success stories of paid content

The reasons the walls exist in the digital realm are not entirely different from that of Medieval Europe’s mercantile cities.   Walls protect their inhabitants from unwanted external intrusion, but most importantly they guarantee those inhabitants a quality of existence that could not happen externally.  This is why ecosystems are the success stories of paid content.  The xBox, Kindle and iTunes ecosystems have all succeeded in converting portions of their users into paid content buyers at rates unachievable elsewhere.

Walls alone though aren’t enough

As many a newspaper will tell you, simply throwing a pay wall up around your content doesn’t magically create a loyal paying audience.  The reason that iTunes et al work is because the priority of their walls is to create and guarantee a quality and consistency of experience within them.   Protecting against external intrusion is of secondary concern.  Once you have created a high quality experience within those walls, then you can start thinking about leveraging revenue.  Just in the same way a successful Medieval city state that could guarantee prosperous trade and commerce within its walls could also demand greater taxes from its subjects than one that could not.

Take the example of xBox Live, the networked gaming component of xBox.  When the service was first launched it was a gimmicky extra.  But when, years after launch, Microsoft turned off access to Live to xBox users who had pirated games on their consoles there was a massive outcry from jilted (pirate) users who claimed that their xBox experience was useless without Live.  What Microsoft had done was use the confines of their ecosystem to create a unique experience that could not exist externally and of which users quickly realized the emotional and monetary value.

A new generation of ecosystems

But as successful as closed, device-based ecosystems are, things are changing, quickly.  We are seeing the emergence of a new breed of ecosystem that doesn’t have the straightforward mechanism of a device operating system to define its boundaries.  Instead this new generation of ecosystem almost paradoxically uses openness to create its closedness.  These ecosystems use software developer APIs to create vibrant platforms in which a quality of experiences exist.  Nobody exemplifies this approach better than Facebook with their Socially Optimized Web Strategy. 

The net result is that we now have three key types of Content Ecosystem Models co-existing (see chart).

• Closed Door Ecosystems: these have the most impermeable walls, typically defined by the operating system of a family of devices.  Apple’s iTunes is the best of breed example.  User experiences and all externally developed experiences (typically Apps) can only exist within the ecosystem of supported devices. 
• One Way Ecosystems: these leverage software applications to define boundaries, but unlike Closed Door Ecosystems they do not have the benefit of proprietary hardware so rely upon the quality of the experience delivered by the software.  To help achieve this, One Way Ecosystems leverage developer communities via APIs.  This enables bite sized chunks of the  ecosystem’s experience to be delivered externally, though almost always with a view to ultimately encouraging users in, or back in, to the centre. Control is exercised by ensuring that a core level of experience, and Apps, can only be experienced internally.  A contemporary example is Spotify, who already support some externalization, but last week announced the creation of an internal, closed wall API platform.  Thus Spotify aims to benefit from the external reach of the API era while simultaneously reaping the rewards of the Closed Door model.
• Revolving Door Ecosystems: these are the true child of the API era.  Typically they exist without an OS or other proprietary software to define their boundaries.  Instead they leverage APIs to deliver a subtler but highly effective ecosystem that fully supports inward and outward flows of externally developed experiences and Apps.   What protects these ecosystems from disintegrating under this laissez-faire approach is tightly policing the flow of data, so that the ecosystem’s data and context is depended upon entirely to deliver the value of Apps and other experiences.  Facebook isn’t the only example of this approach but is simply leagues ahead of anyone else.

The value of uniqueness

The secret ingredient of success of any ecosystem is uniqueness,   a monopoly on control of uniqueness.  A uniqueness that consumers know they cannot experience anywhere else.  However uniqueness isn’t just valuable for the technology companies building ecosystems, it is a crucial commodity for media companies in the digital age.  Piracy and the wider Internet swept away media companies’ monopoly on supply, so now uniqueness is the most important tool they have left to create new senses of monetary value among audiences.  Only when uniqueness has been achieved, can other important assets such as context, convenience and curation be fully brought to bear.

It is easy to fear ecosystems (indeed there is much to give cause for concern) and there are growing issues about how competing  ecosystems will co-exist (if at all).  But they are also the key to successfully monetizing content in the digital age, and they will continue to evolve.  Devices transformed Walled Gardens into Ecosystems, and APIs have transformed Ecosystems into Platforms.  Change will inevitably continue at a bewildering pace, but  the challenge which media companies must rise to, is to become active participants in, nay, catalysts for that change, not shell-shocked observers.