app marketplace
29 September, 2015

7 mins

Gain a competitive advantage with an App Marketplace

It’s a jungle out there. Customers and clients want more from products. Competitors are moving faster. Development teams are spread thinner and thinner. Every company wants to gain an advantage, but how? How can you gain a sustainable competitive advantage, especially without pulling your development teams off of other critical projects? Did you know that the Shopify’s App Store generates over $800M (2018) in revenue and is seen as one of their main competitive moats?

The constraints, and the range of options, can be paralyzing for technology companies. In order to stay competitive, companies must adapt to a diverse set of needs across different verticals, while the product remains simple enough to plug-and-play. Such a balance is difficult, but achievable, with an app marketplace.

The market demands that we marry speed with versatility in an intuitive, elegant package. But with limited resources and the unstable terrain of technology, how can start-ups topple larger, entrenched competitors? How can fortune 500 companies pivot to keep pace with a world that is changing faster than ever?

Over the past few years partner marketplaces (commonly known as app marketplaces or app stores) have made a big impact especially in SaaS, IaaS and the internet of things. Some of the world’s most advanced startups, like Hootsuite, DigitalOcean, Salesloft and ServiceTitan are using their platform as the leading growth hack to out-innovate the competition with great success. After all, for every app, plugin or extension that is built on a competitors marketplace, that’s another feature that will be quietly stealing users away from you.

As partner and app marketplaces become more common, companies that ignore this trend will be at a dangerous disadvantage. Here’s why:

1. Nothing Innovates Faster than an App Marketplace

By definition, your marketplace lets companies crowdsource innovation and features. No matter how big a company, no matter how much money is in the bank, no matter how many MIT developers they have, no company can innovate faster or more efficiently than the developer community.

Salesforce recently celebrated the 3rd anniversary of their AppExchange, its partner marketplace where developers and partners alike can build apps for Salesforce. With 3,000 apps available, the AppExchange has given Salesforce an insurmountable competitive advantage over any other CRM. In fact, Salesforce spares no expense when it comes to partnerships and as a result, has been rewarded with the largest software conference on earth — Dreamforce.

The 21st century Apple success story, while one of the most overused anecdotes in Silicon Valley history, is nonetheless a perfect example of the power of platforms. They democratized product development. Vision, foresight and the developer community helped turn the telephone from a single function device into a platform with nearly limitless potential.

2. When Building your Marketplace, Simplicity Wins

It starts off innocently enough. A few customers ask for a new feature and you are more than happy to oblige. After all, the more features you build, the better your product becomes. Right? Wrong. The product becomes more complicated, users (previously delighted with the product’s simplicity) become increasingly confused and frustrated and the growth that was experienced early on begins to slow as users churn. It’s a sad story that plays out every day and most products can end up becoming a victim of feature creep in as little as two years.

“Do not try and do everything. Do one thing well.”

–Steve Jobs

Feature creep has been the Achilles heel, and even demise, of many technology companies. Myspace’s struggle to keep up with Facebook in its twilight days was a very clear instance of feature creep. Although they’d initially solved different problems (Myspace introduced users to new people, Facebook-connected users to people they already knew), Myspace tried retaliating to Facebook’s arrival by building features targeting Facebook’s users. Myspace’s new features overrode their original value proposition. Profiles grew more cluttered, and users were bombarded with unusual requests. After a certain point, Myspace became almost impossible to use. In contrast, Facebook provided a crisp, clean, UI (despite fewer choices for users) and a clear set of core features which, to their credit, have remained front and center.

The more buttons a product has, the more likely prospective customers are to reach for another solution. Partner and app marketplaces have an amazing ability to externalize features without complicating the user experience. When users need a new feature, they can go to the marketplace and install the plugin that suits their needs. It’s the only way that a product can provide 3,000 features without frustrating users.

In fact, even if a product is already bloated, it’s never too late to make things right. If a feature is used by less than 20% of your customers, pull it out of the product and made into a plugin.

3. App Marketplace Purchases are a Win-Win-Win

Apps, plugins and extensions let companies upsell and cross-sell individual features as opposed to selling features in bulk (known as plans or packages). When partners are brought on board, external developers and designers — all experts in their fields — are incentivized to contribute to the product by giving them autonomy and a scalable way of generating revenue. Ultimately, this means more revenue and less cost for both companies and partners.

For example, consider Shopify’s theme store, and one of their more prominent partners Pixel Union. Before Shopify was a billion-dollar company, it was a startup with a small team that needed beautiful themes for its stores. Their value proposition is, “Shopify is everything you need to sell everywhere,” not “Shopify provides beautiful themes for your stores.” It would’ve been challenging for Shopify’s relatively smaller team to improve on its core proposition while investing time and energy into a theme design team that would rival the quality of Pixel Union.

Pixel Union took care of another key component of a versatile product: support and support can be more of a burden than you might think. At the end of the day, Pixel Union creating a plugin on Shopify’s App Store = Pixel Union taking on the responsibility of supporting their app and all its features.

4. The Most Popular App Marketplaces

Want some great news? When building a marketplace, there are already lots of successful and growing examples for you to learn from. These companies had a strong core product and knew a thriving ecosystem of apps and add ons was key to long term sustainable innovation.

We’ve praised the Zoom App Marketplace before, with their simple and easy to navigate design, uses can quickly find what they need and connect it to their Zoom account. Add to that, a strong focus on app developers and helping them through the submission process, and Zoom have decades of community driven innovation ahead of them.

Need another, the Slack App Directory stands out. Slack made the strategic (and very smart) choice of making their platform roadmap public. For developers looking to innovate on top of Slack, this gives them confidence for the future of their app, and for innovation on top of Slack as a whole.

Want even more? Many of the products we all know and love have proven this formula. Look no further than the G Suite Marketplace, Hubspot Marketplace or Atlassian Marketplace when you’re looking to build a marketplace

What This All Means for You

Partner communities have provided some of the most valuable contributions to innovation and companies in every industry are beginning to see the value they provide. Even though needs evolve over time, companies don’t need to roll-out new, feature-heavy, versions of products to stay ahead. Keep focused on your core product and unique value proposition, and leave the rest up to the community.

Many companies out there feel that they are too small to attract developers and partners but this is simply not true. In fact, 90% of developers in small communities are hobbyists that are focused on building apps to solve their own problems and not to make money.

App marketplaces are simple, but they’re not easy. OpenChannel takes care of the technology supporting your partner marketplace so that you’re free to manage partner relationships and bring more partners to your platform.

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