Zynga made news last month when it announced its new gaming platform. The asserted goal is to make social gaming easier. The actual goal is to wean Zynga’s gamers away from Facebook.
Understanding this actual goal is critical. The tense but symbiotic relationship between Zynga and Facebook epitomizes the contemporary software industry. Facebook, along with Apple (the iPhone), Google (Android), Microsoft (Windows), and perhaps a few others, build platforms. Almost all other software companies—including, until now, Zynga—develop apps that run on top of those platforms. In economic terms, these app developers operate inaftermarkets that exist solely because of the platform developers. What many app developers fail to realize, however, is that aftermarkets also operate at the sole discretion of the platform developers.