The Enshittification Lifecycle of Online Platforms
This piece by Cory Doctorow on TikTok’s enshittification (also available at Wired) contains some of the best and simplest descriptions of how online platforms like Amazon, Facebook, Uber, TikTok, Twitter, etc. evolve as they grow and then eventually die.
Here is how platforms die: First, they are good to their users; then they abuse their users to make things better for their business customers; finally, they abuse those business customers to claw back all the value for themselves. Then, they die.
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This is enshittification: Surpluses are first directed to users; then, once they’re locked in, surpluses go to suppliers; then once they’re locked in, the surplus is handed to shareholders and the platform becomes a useless pile of shit. From mobile app stores to Steam, from Facebook to Twitter, this is the enshittification lifecycle.
The Amazon example he uses is really easy to follow. Early in the company’s history, the site used to be a great place to shop; their customers loved Amazon. But then Amazon’s sellers became their real customers and the user experience started to suffer. And now, much of the value generated by the users and customers goes to the shareholders (which, functionally speaking these days, means several dozen people who run hedge funds or large investment funds).
This strategy meant that it became progressively harder for shoppers to find things anywhere except Amazon, which meant that they only searched on Amazon, which meant that sellers had to sell on Amazon. That’s when Amazon started to harvest the surplus from its business customers and send it to Amazon’s shareholders. Today, Marketplace sellers are handing more than 45 percent of the sale price to Amazon in junk fees. The company’s $31 billion “advertising” program is really a payola scheme that pits sellers against each other, forcing them to bid on the chance to be at the top of your search.
Over at Techdirt, Mike Masnick riffed on Doctorow’s piece, arguing that enshittification, this playing of various parties against each other while siphoning off the value, is bad business because it focuses too much on short term gains.
Because maximizing revenue in the short term (i.e., in the 3 month window that Wall Street requires) often means sacrificing long term sustainability and long term profits. That’s because if you’re only looking at the next quarter (or, perhaps, the next two to four quarters if we’re being generous) then you’re going to be tempted to squeeze more of the value out of your customers, to “maximize revenue” or “maximize profits for shareholders.”
He uses early Amazon as an example of long-term thinking:
Once you go public, and you have that quarterly drumbeat from Wall Street where pretty much all that matters is revenue and profit growth. Indeed, it’s long forgotten now, but Jeff Bezos and Amazon actually were a rare company that kind of bucked that trend, and for a while at least, told Wall Street not to expect such things, as it was going to invest more and more deeply in serving its customers, and Wall Street punished Bezos for it. It’s long forgotten now, but Wall Street absolutely hated Amazon Prime, which locked in customer loyalty, but which they thought was a huge waste of money. The same was true of Amazon Web Services, which has become a huge revenue driver for the company.
They created a tremendous amount of value for their shareholders by playing the long game, which for whatever reason they aren’t willing to do anymore.
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