Last week, nearly the entire technology industry cheered as Facebook announced that it had finally decided to become a public company, in what will undoubtedly be one of the richest IPOs in Wall Street history. We can certainly forgive the tech world’s irrational exuberance. After all, it’s kind of like one of our hometown heroes just got selected as the No. 1 pick in the draft and is about to sign a groundbreaking contract with the New York Yankees.

Meanwhile, Apple recently revealed that its products generated $46 billion in revenue in the final quarter of 2011 and the company walked away with $13 billion in profit. It was the most profitable quarter ever for a tech company, and one of the most profitable quarters in the history of U.S. business — only oil companies such as Exxon have ever made more money in a three-month period. If Facebook is the tech world’s No. 1 draft choice, then Apple is its triple-crown-winning slugger and MVP.

On the surface, these two companies have very little in common. Apple is a finely-tuned hardware and software juggernaut while Facebook is a young, free-wheeling, highly-experimental web platform. Apple is one of the most secretive public companies on earth while Facebook believes that privacy is a relic of a bygone era.

However, the tech world’s two hottest companies have one major factor in common — they’ve both spurned tech’s legacy of open ecosystems in favor of building a massive walled garden. Previously, the conventional wisdom was that the walled garden approach could be very profitable but couldn’t attract the masses and would never scale. Apple and Facebook have both aimed straight at the conventional wisdom and steamrolled it. They simply built bigger gardens, and taller walls.

In many ways, the popularity of Apple and Facebook is a reaction to the problems that average users encounter with open ecosystems. In other words, it’s no coincidence that these are the two most popular companies in tech right now.

Keep in mind that open ecosystems bring important benefits to users:

  • Similar user experiences across products from different companies
  • Commoditization, which drives down prices
  • User-centric controls and customizations
  • Portability of apps and data across competing systems

However, open systems also have their problems, and as technology has multiplied and ended up in the hands of a lot more people, those problems have become more acute.

Because the product needs to run across lots of different environments, it inevitably gets dumbed down to the lowest common denominator. This often means missing out on the opportunity to quickly and broadly implement cutting edge technologies and innovations. In proprietary environments where one company controls the whole process, that company doesn’t have to wait for consensus on standards, it can move quickly and unilaterally. That can be translated into a competitive advantage in a quickly-evolving industry.

Open systems can also lead to the “Wild, Wild, West” effect. By design, open ecosystems almost always have low barriers to entry to participate in the creative process so that the community can help refine and extend the product. However, that also opens the door for malicious attackers and other knuckleheads to intrude on the user experience.

For example, in the PC world (a semi-open ecosystem), this resulted in the rise of spyware and malware problems that have bogged down computers and compromised user security and privacy. Apple’s closed systems (Macs, iPads, and iPhones) occasionally suffer from some of the same issues, but not nearly to the same extremes as Windows PCs, or now Android devices. However, the price of that peace of mind is that you are locked into Apple devices. Any apps you buy for an Apple system will not run on a system from any other company.

On the open web, you don’t usually have to spend much time on blogs, photo sharing sites, or message boards to experience the unpleasantness of nasty, anonymous jerks who like to launch themselves into conversations in order to harass people for sport. One of the reasons for Facebook’s rapid rise was that created a way to have online conversations with the people you wanted to talk to, without the jerks. It is a private, proprietary network where two people have to mutually agree to see each other’s content and be able to comment on it.

Of course, as Facebook rose to become the Internet’s largest site and accepted more and more money from investors, it veered away from that original mission. It now wants users to make most of their information public (so Facebook can better monetize it), while still keeping that data locked up in Facebook’s servers and not allowing users to export it. This is one of the main reasons why I think Facebook is destined to be disrupted. Users don’t like it when you change the rules on them in the middle of the game, and that’s one of the reasons why consumer satisfaction with Facebook is lower than the IRS. Nevertheless, there’s no denying that the meteoric rise of Facebook was partly a reaction to some of the problems of the open web.

Now, the general expectation in the tech world seems to be that the pendulum will swing back in favor of open systems once people get annoyed and tired of the lock-in of closed, proprietary systems. I’ll admit that’s been my assumption for the past couple years. But, there are no signs that it’s going to happen any time soon. The mounting successes of Apple and Facebook are evidence that closed systems are still on the ascent. In fact, as the ownership of the tech world passes from the hands of the geeks and into the hands of the masses, the more alarming question is, “Are the masses simply more comfortable with closed systems?” If the answer turns into an unequivocal “yes,” then we are in for a bigger and longer-term sea change than most of us are talking about right now.

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