The Social Web Economy: Distribution Companies (Platforms)

This is a continuation in the series “The Social Web Economy“

On the social web, widget companies and application platforms are the primary distribution companies. Facebook, MySpace, Clearspring and Gigya are all examples. These companies strive to expand their reach either through partnerships or through sheer force. Facebook for instance has enough momentum that they can grow virally.

Widget platforms on the other hand are forced to sign agreements with large product organizations and media companies to expand their reach and incentivize developers to build on their platforms. Just as there is tension between product and distribution companies, so too are there tensions between widget platforms and broad social platforms.

The reason is that they are all battling for developer attention as well as the attention of large product companies. This is an extremely challenging role because not only do they need the developers and product companies (which are essentially large teams of developers), but they also need to attract the attention of advertisers.

The benefit of this position is that attracting advertisers is as easy as calling them. Most brands managers will pick up the phone if somebody from Facebook calls. The problem that many of these companies are running into is that the product companies who are building reach through the platforms are now undercutting their run rates on advertisements. Whoops!

This isn’t completely horrible though as a side-effect is that it is in everybody’s best interest to work together to try to increase the overall run rates (cost per thousand impressions (CPM), etc) across the board. Unfortunately there are some substantial hurdles to get past before this happens.

One other interesting note about distribution companies/platforms is that these are the companies that attract the largest investment dollars. Investors are looking to put their money in platforms for the most part, not product companies. That’s not to say that product companies don’t get funding, it’s just that they don’t receive as much funding. That’s because platforms will always be larger (at least they should be).

Next Post: “The Social Web Economy: Social Web Agencies“

Join Baratunde Thurston (left), The Onion’s Director of Digital and author of How to Be Black, for an entertaining look at creative social media campaigns in our Social Media Marketing Boot Camp starting February 16. Other speakers include Morin Oluwole (Facebook), Tim Devane (bitly), and SocialTimes' writer Devon Glenn.   Register now.