Ian Holsman writes:

Google has just released a free service to do web site analytics which is/was their ‘urchin’ product. sorry all you startup’s who were in that space?.. maybe next time ;(

It wasn’t too long ago that developers and VC rushed into the Internet to escape this pattern on the desktop, where Microsoft methodically vacuums up any idea likely to have wide applicability – turning them into features of one of their hubs.

It’s very common for hubs to absorb adjacent universal functions. Three forces, at least, drive that: appetite for features, keeping your complements commoditized, and scale efficiencies. In the Microsoft story one of them is/was the need to find new features that can drive upgrades. Another, also seen in the Microsoft story, is the strategic necessity of keeping competing hubs from emerging in their market – for example if they hadn’t taken the word processing network away from competitors then they would have been forced to negotiate with a powerful partner rather than lead of weak developers (“chasing tail lights”). Finally there are pure production and demand side scale advantages.

Of course in some cases the story doesn’t demand a complex model like that. Adding analytics to your ad network is just a feature, like adding footnoting to your word processor.

I liked a line I read recently about how so many ventures in there days are “built to flip,” but that the speaker’s firm was being “built to last.” When strong hubs emerge in a market, like Google, Yahoo, Amazon, eBay, etc. flipping becomes a valid move in the game. There was a time when one of the more dominate models for a venture was to flip it into Microsoft, and while that’s still a common model it’s not as rampant on the land as it used to be. In those days the Microsoft developer network could be productively viewed as an extension of their acquisitions or R&D strategy.

When this happens in a market it has two consequences. The ventures become much more winner take all games; since there is rarely more than one place to flip a particular effort into. That kind of risk drives developers to look for other markets to play in. The customer also changes; if you know that your firm’s future is very likely to lead to flipping into Yahoo, or Microsoft, then they become the customer and the day to day customers are no longer job 1. That creates lousy dynamics for seeking really useful innovations – you’re now innovating for the hub, not for the user.