First it was blogs, and then it was social networks. But that was so yesterday – today you need an open platform if you want to be hip. If you don’t believe me, just check out how Digg, MySpace, LinkedIn (sort of), and Google (yep, their platform is not open enough) have all joining Facebook in making their platforms more accessible for developers. While the idea of openness (or near openness) sounds good in theory, there are two recent cases that have proven the “wisdom of the crowd will make this site more relevant” pill is not so magical.

Alexaholics vs. Alexa

In February 2006, Ron Hornbaker created a tool that used the Alexa engine (owned by Amazon) that compared and ranked the traffic patterns of up to 5 different websites . The site was called Alexaholics.com and it became an overnight sensation among people that practiced Search Engine Optimization (SEO). While the initial relationship was warm, the situation turned sour in March 2007 when Alexa tried to shutdown Ron’s tool by demanding back the domain name through ICANN and blocking the graphs from appearing on his website. At the end of the day, Amazon/Alexa won and Alexaholics (now known as Statsaholics.com) shifted to using the graphing engine of alternate companies.

Photobucket vs. MySpace

In 2003, a photo and video sharing service called Photobucket was founded. The service was used on many sites, including Facebook, eBay and MySpace. On April 10 2007, reports surfaced on Techcrunch that MySpace started to block videos originating from Photobucket. It seems that MySpace decided that the service was so good that they rather own it, and about a month later Photobucket was owned by MySpace for $250M in cash. (Credit goes to Webb Alert for recently bringing this example to our attention).

Conclusion

The fact of the matter is that opening your platform too much can change your business model. One must strike a balance between what information you expose through your interface (aka API) and what information you keep to yourself. Otherwise, you may find that someone else is either doing it better than you or has a superior product is generating significant revenue.

In both cases, this signals time to go back to the “how to monetize this website” drawing board.

WRITER’S NOTE: To the defense of Amazon/Alexa, there is no API call for exposing site traffic graphs.