The internet started as a network of networks. We already had local networks (computers in a given building or organization connected physically) and then we found a way to interconnect the local networks with each other in one giant mesh. Hence the word interconnected network. Seen from a network perspective, the internet has 3 major components. The computers that host the content, the companies that lay intercontinental cables to bring the content closer to you, and the edge providers.
The internet initially hosted websites. It served static content. Then came commerce, or e-commerce we called it. Finally we had social media. Over time, social media monetization models have co-evolved with e-commerce models and we now have “social commerce”. Social media and e-commerce feed on each other in a self-serving feedback loop of data. It goes as follows.
The more information you have about people, the better your machine-learning process to help you understand your users and predict their needs. Better understanding leads to better emotional engagement with the users, and what will make them act. The more you can engage users, the longer they will use your service, enabling you to gather more information about them. Knowing what makes your users act allows you to convert views into purchases, increasing your economic power. This economic power can be directed to building more services on the website, restarting the self-serving loop.
As this virtuous cycle continues, the websites evolve into platforms. For e.g., Google, Amazon and Facebook are platforms. I would argue that every successful digital business is a platform. Platforms can take advantage of the network effect. As more people connect with a platform, the value of the platform increases exponentially because the information held within the network increases exponentially.
In theory, the internet is still a network of networks. But in practice, the Sandvine report says that in 2022, six companies (Google, Facebook, Microsoft, Apple, Amazon, and Netflix) generate almost 57% of Internet traffic – more than everyone else, combined. Those who are located at the center of the network can gather the most information. They can offer unique value-added services from the data they have.
How does a traditional company become a platform? The good news is that if you have the content, the intercontinental cables and edge services can be rented out.
The journey from a website to a platform is what happens on the cloud.
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