OnStartups

From Wikipedia:  A mashup is a website or web application that seamlessly combines content from more than one source into an integrated experience.

From Dharmesh Shah:  A gnashup is a mashup that eventually causes gnashing of teeth because the developer thought she was building a viable business, when in fact, she was really conducting a controlled experiment for the benefit of Google and others.

Mashups are all the rage.  Many new startups are creating applications that leverage available web applications that provide APIs (like Google Maps).  These mashup applications put together pieces of web functionality like search, mapping, photos, news, shopping, etc. into a single, composite application.  These applications weren’t easy to construct “back in the day” as the web services required to power them simply didn’t exist.  Now, more and more companies are making interesting web services available for the aspiring mashup developer.

So, what do I have against mashups?  Nothing.  I think mashups, as a concept, are a fine thing.  As a user, I find them fun and interesting (and sometimes even useful).  My issue is that from an entrepreneurial perspective, too many mashup startup founders seem to be working under the misguided notion that they’re building a viable business – when in most cases, they’re not…

Here are my issues with mashups, and what might cause them to become gnashups. 

1. Dependencies Abound:  At the heart of the mashup is the use of one or more “key” services that make the mashup possible.  In essence, the mashup depends on the existence of a set of web services in order to work.  If one or more of these services becomes “unavailable”, everything breaks down.

2. Lack Of SLAs (Service Level Agreements):  The above dependencies wouldn’t be so bad if you could somehow have assurances or guarantees of certain “uptimes” and availability.  But, in most cases, there is no such guarantee.  In fact, many of the available services mashup developers use today can’t even be “purchased” (i.e. paid for), and hence there is little motivation for the providers to offer guarantees or assurances.

3. No Good Way Of Dividing Up The Value:  Assuming that there was some possible business model here (I’ll put on my simple business guy hat and suggest that you might actually charge for your application someday), its still unclear how the value gets divided up and who gets paid what.  Even if you’re building a revenue model on advertising, how do the other service providers make any money?

Absence Of Malicious Intent Is Not Enough:  One of the common arguments I hear from mashup developers is: “Hey, Google has no motivation to cut me off.  They’re running a multi-billion dollar business.”.  I could even support this argument further by noting that part of Google’s core philosophy is “do no evil”.  However, as it turns out, this doesn’t really mean much.  

For example, lets assume you were writing an application for Microsoft Windows.   This application would be “consuming” software services (core operating system features) through an API and doing (hopefully) interesting things.  Sound familiar?  Remind you of mashups?  That’s because it’s a similar concept.  Software developers have been using third-party platforms and services for a long, long time.  Now, here’s what makes this interesting:

1. Microsoft doesn’t know who you are:  When you write Windows applications, there’s no registration process.  You can simply buy the tools and build your app.
2. Microsoft doesn’t charge you (directly):  There’s no “tax” to you as the software developer.  Microsoft makes its money from the customers that buy Windows.
3. Microsoft doesn’t charge the customer (extra):  People that are buying your application don’t pay more for Windows.  More importantly, Microsoft can’t charge customers extra for using your application.  This is subtle, but critical.  Stick with me.  

Now, lets explore this a bit.  What if Microsoft made you “register” with them before you could develop Windows applications and use their API?  What if Microsoft could (from a technical perspective), turn off your access to their platform at will?  What if Microsoft could charge you a different fee for access to the Windows API than your competitors?  What if Microsoft could charge its Windows customers more if they are using your product vs. someone else’s?  Would you write Windows applications?  I certainly wouldn’t.  It’d be hard to build a business in these circumstances that was going to succeed beyond a certain point.  The other party (Microsoft) would have too much power.  [Note:  I’m going to be writing about strategic partnerships and dealing with 900 pound gorillas in a future article].

That’s the situation we have now with mashups that are based primarily on Google and similar platforms.  Back in the day, even if Microsoft hated your guts, it was very, very difficult for them to do anything about it, because if you were selling applications running on Windows, they had no real control over you as a developer.  Their software was already running on millions of desktops, and they couldn’t easily change it just to spite you.  Even then, companies like WordPerfect and Lotus felt vulnerable because Microsoft could have an unfair advantage over them. 

In a Google mashup world, lets see where we as developers stand:  They make APIs available.  But, to use their API, you have to register with Google and get an account.  Not a big deal.  Easy enough to do.  But, here’s the catch:  Every time your application does anything with the API, it’s getting implicit approval from Google to do so.  Though they don’t (currently) have any motivation or incentive to cut you off,  they could if they wanted to.  They could also charge you a fee, if they wanted to.  They could charge their customers a fee for using your product, if they wanted to.  They have the ability to perfectly price discriminate (a neat economics concept I learned at MIT) if they wanted to.  As such, your destiny is in their hands.  Sure, they’re likely a benevolent dictator, but as a business guy, that doesn’t give me the warm comfies (my own term, I didn’t learn this at MIT).

What surprises me most is that the same community of developers that is pushing for open standards and open source (Linux, PHP, Ruby, etc.) is also the same community of developers that at some level is willing to build on a closed platform where the platform provider has complete control.  What am I missing here?

Moral Of The Story:  Putting too much power in the hands of a few doesn’t seem particularly prudent for software developers and startup founders.  We shouldn’t let the current wave of innovation cloud the need for sound business strategy.