How to Launch a New Platform

On Friday, I alluded to the importance of hits to drive the success of a platform. It occurred to me in the shower this morning that VCs undervalue this insight.

If you listen to any VC, or any smart investor, they'll tell you that you don't want to create content. It's too risky. Who knows what people are going to like. They call this content risk.

Instead, they advise building a platform. Let other take on the risk of creating content. The platform builder reaps the benefit of the hits and avoids the losses of the losers. I've always thought this made a lot of sense.

Then it occurred to me, as a platform builder, you're completely reliant on others to create a hit for you. Without that hit, be it an amazing game or a killer app, then no consumer is actually going to want to use your platform.

So in fact, you're not avoiding content risk at all, the downside (not having a hit) is still there. The odds are better if twenty teams are working to create a hit for your platform vs. just your own team. However, it is not guaranteed that any of you will create a hit, so the risk doesn't magically go away because you're a platform.

So as a platform builder you're dependent on attracting great content creators. For a new platform that's not easy. Most people do not want to pour resources into building something for a platform that could easily fail.

To solve this problem, platform builders often have to create a hit themselves to validate the platform. When Nintendo entered the console market, they bundled the NES with Super Mario Bros.

Or you can license a hit from another platform. Atari was initially bundled with Combat and sold decently. Soon after it was bundled with superhit Pacman, licensed from Namco. The version sold and branded for Sears was bundled with Space Invaders, another superhit licensed from Taito. These games had already seen massive success in the arcades.

Or you can acquire hits. This has been the Zynga/SGN approach in building out their social gaming networks.

Or you can offer money, like Kongregate does. Kongregate offers money to developers in the form of contests and publishing deals.

Or you can leverage existing relationships. Boonty uses its existing relationships with casual game developers to encourage them to create games for its new Cafe.com platform.

Once you're an Apple or a Google, all you have to do is announce that you have a new platform and developers flock to you. We should all be so lucky.

I'm sure there's more that didn't occur to me between rinse and repeat, so as always comments are welcome.