New services upstream need user scale downstream

This week Facebook crossed the 500 million registered users for the social network.  I’m personally spending more time communicating with friends on this network, and less time communicating by voice and addressed messaging.  The number of third-party apps and content providers on Facebook’s web platform are growing rapidly.  The platform delivers over 500,000 third-party apps from the cloud, with over 1 million external websites integrated with Facebook’s own web services.  An important linkage connects these two sides of Facebook’s growth.  This linkage illustrates a relationship between enabling services for upstream customers and partners, and strategic scale of downstream users.

Speaking of two sides, TM Forum keynoted Management World 2009 conference in Nice on the topic of two-sided business models.  This event last year began our member’s active collaboration to close a gap between strategies, new business models, and TM Forum Frameworx.  We still have a long way to go as an industry and membership to fill this space in between strategy and operational practice.  The industry still needs real best practices that can be implemented as business processes and technology, at least without using a “bus load” of high priced consultants.

Market scale and operational efficiency in a downstream “retail” business are becoming essential, in one way or another.  Before the Internet, large CSPs have had unusual scale and competitor barriers in that they had “assets in the ground and air” to reach many physical end points (premises and mobile devices) and the users of voice and early data services.  But today, the open Internet (and data access to it) has created a global marketplace for web and application level.  Global Internet services brands like Facebook, Google, Apple, and even CNN reach the same users across many “ground and air” access territories.  Scale advantages have moved from the individual CSP to these Internet brands and this type of digital service provider.

With the challenge of diminishing relative scale on their own assets, leading CSPs are adopting more partnerships and platform-centric approaches to develop web-facing and enabling services of the future.  Regardless of the estimates, evidence like Facebook's success is proving that upstream businesses and developers are the growing, monetizeable customer market of tomorrow.  These customers are interested in simple enabling services as “raw materials” for their own digital goods (products) and the ability to distribute product to downstream customers.  This requires a whole new front, style, and portfolio of operational capabilities facing the upstream side of developers, partners, and business customers in the two-sided business model.   Operators who try to contain them as suppliers or suppressed partners will eventually lose out significantly on market share and the financial value of enablement.

For an interesting interview with one of the masters of this model at Facebook, a good video interview with Facebook’s new CTO is available at this link.  Enjoy and enable!