We’ve written extensively about why Digg is launching an RSS reader and how the company’s knowledge about news junkies and early tech adopters will help inform its approach. Betaworks, the NYC-based incubator and investor, purchased Digg last summer and has been working on revamping it since then to be the ultimate social news source.

The RSS reader will launch in beta next week on both desktop and mobile, and the team at Digg said they would be working on adding an Android app and integration with other news reader services very soon.

Here’s how the company described it in the blog post Monday:

“And so next week we will begin rolling out Digg Reader, version 1. We’re doing the launch in phases because, as you might have guessed, RSS aggregation is a hard thing to do at scale, and we want to make sure the experience is as fast and reliable as possible. Everyone will have access by June 26th. With all this in mind, we thought now would be a good moment to come up for air and share a little bit about the product you’ll see next week, and what else we’ll be adding over the next few months.

Given the compressed time frame for this sprint, we decided early on that we needed to focus on one type of user. We asked ourselves who had most to lose from the shutdown of Google Reader, and the answer was fairly obvious: the power user, the people who depend on the availability, stability, and speed of Reader every day. The good news is that these users are also the most eager to contribute to the development process. (Over 18,000 people signed up to provide feedback on the product.)”

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We’ve already seen apps like Feedly, Pulse, and NewsBlur gain a whole bunch of new followers as a result of the news, but there’s still one more app we’ll be waiting to try before picking what RSS camp to join in July: Digg’s news reader, scheduled to launch in late June. Digg executives haven’t said a lot about the product, but they shared a few details with me in a recent interview.

While Digg went into a steep decline in recent years that was evident as early as 2009, the NYC-based incubator Betaworks has brought the site back to life in recent months since acquiring the site last July. Digg announced just after the Google Reader announcement that it too would be launching a competitive service, and considering the team’s success in taking the previously defunct social news site and making it relevant again, there’s a good chance that its RSS reader could be a win as well.

I recently sat down in the large, airy Betaworks office in the heart of the Meatpacking District in New York, where the walls are covered in paper lists and small groups were holding brainstorm sessions all over the high-ceilinged space. Programmers and designers sat around the three rooms at different tables, which were organized by company, from Digg to Dots to Instapaper (some of which were just a few people.) When I visited, CEO John Borthwick was busy explaining what Betaworks is all about to a group of visitors through the Open.Co visitor program, and there was Chinese food on the counter from a group lunch. It felt like a more energetic, collaborative version of any co-working space I’ve visited in San Francisco.

I sat down with Jake Levine, formerly of News.me and now the general manager for Digg, and Andrew McLaughlin, the SVP of Betaworks and CEO of Digg, who was formerly a VP at Tumblr, Deputy CTO of the United States, and Director of Global Public Policy for Google. Levine and McLaughlin talked about the evolution of their thinking toward social news, and how the new Digg RSS reader project was a long-planned feature that is essential to Digg’s goal of creating the best social news experience on the web.

The re-birth of Digg

Digg has been around for a while — younger users, like myself, might not remember it from its heyday, when it practically introduced the idea of social news.

Founder Kevin Rose (now a partner at Google Ventures), was the subject of a now-infamous cover of Businessweek in the summer of 2006. Though the company later spiraled downward, caught between the rise of Facebook and Twitter, as Om wrote, it had a lasting impact on modern media.

Parts of the company were sold off to different companies like The Washington Post and LinkedIn, but it was Betaworks that bought the consumer-facing site and reader base for reportedly just under $500,000 dollars in July 2012.

“If there’s any company that understands the real-time nature of the web, it’ll be the people that brought us all these really cool things like bit.ly and Chartbeat,” Rose said when he reflected on the sale.

Re-imagining Digg from lessons learned with News.Me

Betaworks advises and invests in companies that are associated with the concept of social news. Some of its brainchildren, acquisitions and investments include Bit.ly, Chartbeat, Instapaper, SocialFlow, Dots, and Tumblr, just to name a few. CEO John Borthwick, who most recently spoke at our paidContent Live conference in April, has talked about the group’s unique approach to fostering startups, which is to launch them quickly in their early form, then killing the ones that don’t catch hold and putting people, servers and data insights behind the ones that do.

So when Betaworks acquired Digg, the timing couldn’t have been better. The group was getting ready to shutter News.Me in October 2012, in part because of Twitter’s API restrictions that were becoming a burden. But the app, which provided users with the top five tweeted articles among the people they follow on Twitter, had already given Betaworks useful data from news geeks and early adopters that could help the group create consumer-facing news site for a wider audience.

Levine explained that News.Me was an excellent product for the Twitter power users, and while it didn’t ultimately scale into a project that worked for everyone, the data, when combined with the stats from Chartbeat (measuring real-time publishing analytics) and Bit.ly (measuring analytics for links shared across the web), provided some interesting insights.

“We realized that the vast majority of people don’t have access to that kind of news,” Levine said. “But we had the parallel realization that we’d accumulated Twitter data from the 100,000 or so early adopting power users: what they were sharing, and what was shared in their networks. We realized could build an awesome network based on those people who were on Twitter for the people who weren’t.”

So the team quickly put together the new Digg in a matter of a few weeks, stripping down the design to a basic grid of stories that are selected both by algorithms and human editors, and letting users perform a few basic functions like sharing and saving. It was a quick start to putting Digg back on track, but the team’s plans didn’t end there.

How RSS fits into the ultimate plan

While adding an RSS reader might seem like an odd choice for the group re-inventing social news — after all, there wasn’t much in terms of social features on the old Google Reader (Google killed the one social feature the thing had) — McLaughlin and Levine explained that in reality, adding an RSS feed was always part of the plan for Digg. Google’s announcement just accelerated it.

“It was on the roadmap and we knew we wanted to eventually have a more comprehensive way to consume,” McLaughlin said. “We just jacked it up to do that now.”

While the two couldn’t yet reveal what Digg’s reader will look like exactly, and said it’s still in the works, slated for a June launch, they described it as two different parts to one Digg site: one part being the current homepage of socially-driven stories generated by algorithms and editors, and the other being an RSS reader of a user’s feeds, with updated features that someone following blogs in 2013 would want (save to Instapaper options, etc.) The two sections will be unified by a common design.

“For now, it’s aimed at power users and we’ll see if we can nail that. It’s going to be super clean and very uncluttered. Very fast,” McLaughlin said.

Users who don’t want the RSS feature and don’t create logins will still be able to visit Digg.com, so that experience won’t change for people who are happy with it. But ideally, people who care about following particular blogs and news sources will be able to get that kind of news from Digg as well.

“What we’re working on in the Digg reader, and what we think is now the integral part of a good reader, is speedy management,” McLaughlin said. “We’re trying to make it very easy to sort and just distill all of your items, or any feed down to the most popular items or the most popular in your social circles.”

Reading a business?

They said they’re extremely optimistic that a quality news reader could actually make money and create a sustainable business. While Digg’s  reader likely won’t be a paid product at first, they said they could see subscriptions or download fees as a way to make money in the future when the product is more solidified. As of early April, about 40 percent of survey respondants said that they’d be willing to pay for the product — a remarkable number, even if only half of them are telling the truth.

“Our goal is not to make everyone a power user. There are users who want that highly personalized reader experience. But the next year for us is exploring all of the options in that space,” Levine said. “There are plenty of products for power users. Our mission of making the social web more accessible for news discovery is something that transcends just this product.”

For those of us who obsessively check Twitter every day to find and re-tweet the latest news, it might be hard to understand the problem that Digg is trying to solve. But while we may think we have social news figured out, it’s time for a reality check: as of December 2012, only 16 percent of online adults were using Twitter, and far fewer are actually tweeting. If Digg succeeds, it could both attract the power users who care about RSS feeds and power the types of products like Google Reader, and then take that news data derived from those users to create a smarter general news site for everyone else.

Pre-Twitter Digg, say hello to post-Twitter Digg.

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This transformation is occurring because with the rise of cloud computing and the modularization of the underlying networking technologies, much of the value in web and mobile products has shifted to the interaction with the user. It is no surprise then, that the business model for these digital products could start to look increasingly like the hits-driven business of movies, music or video games.

The bad news is that those are pretty difficult, high-risk businesses that rely on churning out hits and pumping an increasing amount of money into individual products in an attempt to find the summer blockbuster of the season. Replicating hits over and over again is a hard business to sustain over the long run and is something that fundamentally will change the ecosystem of Silicon Valley and the way innovation is created (as Stacey put it in Silicon Valley is Motown and the web is a hit factory).

The Summer Blockbuster

If you think the hits business sounds awesome to you — filled with Will Smith alien movies and Rihanna singles — look no further than Zynga for the uglier side. The company announced this week that it’s cutting 520 people, or 18 percent of its staff, closing some offices in the U.S. It saw its stock fall below $3 per share. As Kevin Kelleher put it on PandoDaily:

Stocks of gaming companies have always been notoriously volatile because their income depends on capturing lightning in a bottle. Zynga tried to get around this by designing data-driven games, but it’s losing its edge. . . Meanwhile, hits remain unpredictable enough that the lightning is showing up in other bottles – like King, the maker of Candy Crush Saga . . .

The movie industry has long suffered from this hits syndrome as well. Back in the early days of film, the movie industry actually tried to use technology as a differentiator, adding sound, color, CG, 3D, and even some technologies that never took off (Smell-O-Vision was a real thing). But nowadays movies are a commodity, and the movie makers turn to content tools to attempt to minimize the risk and maximize the chance of a hit. Some of these things include: formulaic scripts, known star power (Ryan Gosling is in it!), sequels, and the old mainstay of turning a comic book into a movie.

How scary is this Men In Black wax figures scene?

This business model is why a lot of new movies are not worth the price of the popcorn. Is this the future of mobile apps and consumer web products?

The Gigli of the web

Well, there are some key factors that make it a little different. Namely, on the technology cost curve, mobile apps and web products are at some of their cheapest points in history to build. Entire sectors have been built off of cheap computing, broadband and web hosting. So at this point, they’re a far cry from a movie studio spending a hundred million making a movie.

But on the other hand, as mobile apps and consumer web sites become ever more commoditized, the expense to build ones that stand out above the noise — and become hits — could grow considerably. And good design isn’t cheap.

Mobile app startup Sunrise announced it has raised $2.2 million to continue to build out its design-centric calender app that is supposed to rival the free calender app you already get on your phone. The designers behind the app say they looked at the calender as “a design problem, not an engineering problem.” The hot startup behind Mailbox, which redesigned the mail app for the iPhone, was recently sold for a reported $100 million to Dropbox, which wants to expand beyond online storage & syncing and act as your online presence and center for your apps.

But these apps are just the ones that have actually hit some success milestones. As Stacey wrote “the internet has become a wasteland of lame-duck startups and acqui-hires that couldn’t make it to the next level in popularity.”

As this hits-driven mentality emerges, it will continue to transform the more traditional Silicon Valley ecosystem. Inc Magazine put it recently as “venture funds now bet on hackers the way record labels bet on rising pop stars, hoping that someday soon, they will make something wild, new, and insanely lucrative.”

Some of the new mobile app shops are increasingly feeling the necessity of churning out hits more than anyone. The New York investor group Betaworks is already in the business of cranking out mobile apps at a breakneck pace and seems to be doing a decent job at it so far; mobile game Dots is everywhere. But not all the mobile app labs are going to succeed — as a designer I met with last week said to me, how many gorgeous mobile weather apps do we really need?

Mobile app development has really only started, so we’re a long ways off from the crush of the hits-driven industry that now plagues Hollywood. But I think down the road, the pressure of the hits business will increasingly weigh on the internet industry as smart phones and web usage move into utter mainstream usage.

And while this trend is inevitable, it’s not wholly positive, as it will deliver an even greater shift to “the cool,” “the trendy,” and “the celebrity.” Let’s face it: real innovation is often not cool, trendy or made by a celebrity.

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The team behind Dots plans to announce Thursday that the game hit 250 million game plays, up from 100 million about two weeks ago, and it’s been making rapid improvements to the app since then.

Dots is launching a native iPad version, as well as multi-player option that will let several players play the same board at different times, providing a way for people to accurately compare scores. The new version also accomodates players who are color-blind. And the team said Android, and maybe an un-timed version of the game, are in the works.

Dots came out of Betawork’s hacker-in-residence program, which was designed to test out a variety of startup ideas in a short period of time to see which ones would be a success. Dots was one of the successes, and Betaworks CEO John Borthwick talked about this strategy and at our paidContent Live conference in April.

While it’s unclear how long people will remain interested in Dots, the rapid adoption and transformation of the game over the past month highlights the Betaworks strategy of quickly iterating on a good idea and putting resources behind it.

Our review of the game can be found here, and Quartz has a good dissection of the different ways to do well at Dots (just focus on the squares). The game was created by Patrick Moberg, who was experimenting with different iOS interaction designs and decided to build a game. Dots is pretty simple, giving the user 36 colored dots to connect and remove from the screen before the time runs out, and the game demonstrates the flat aesthetic that’s become so popular in mobile design recently.

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Betaworks CEO John Borthwick and Om Malik talk about the future of Betaworks and testing new products at paidContent Live 2013 Albert Chau / itsmebert.com

The game came out of experimentations with iOS interactions and designs, and it’s sort of like a mobile version of Connect Four. The main screen on Dots displays 36 colored dots that users have to connect to remove from the screen, and the simplicity of the game’s design emphasizes the flat aesthetic that’s become popular in mobile design recently.

Dots comes from Betaworks as the NYC technology incubator has set an agressive schedule for releasing beta products each week for six weeks in hopes of seeing what works. Betaworks CEO John Borthwick talked about this strategy and said a game was in the works at our paidContent Live conference last month.

Our review of the game can be found here, and Zach Seward wrote a guide for Quartz dissecting the different ways a user can excel at Dots. (Hint: it’s all about the squares.) The game is free to download from Apple’s app store, with in-app purchases that gives users a few additional features. Betaworks reported that the game hit 25 million games played about a week ago.

Here’s the company’s description of how Dots got started:

About 3 months ago, Patrick Moberg started experimenting with various iOS interaction designs as part of the hacker in residence program.  We didn’t set out to build a game, but quickly realized there’s a desire for well designed mobile entertainment so that’s where we focused.  Patrick worked for a few weeks to build something that looked beautiful and provided you some level of stimulation.  After a few days playing one of the initial concepts, we were all completely hooked.  Several betaworks employees and their partners clocked hours and hours of playtime off a fairly rudimentary pilot.  Over the next few months, we refined the scoring, design, and overall aesthetic to come up with what we simply call Dots – a game about connecting.

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Initially Dots seems like something of an odd fit for Betaworks. The young media incubator is probably best known for its acquisition of Digg last summer, followed by its recent gain of a majority stake in popular read-it-later service Instapaper. The company simply doesn’t have a history in gaming, and as detailed on the Betaworks blog, Dots’ introduction was, in fact, something of a happy accident.

Betaworks’ resident hacker Patrick Moberg ended up creating the game following several interaction design experiments. It’s experiments like these that Betaworks hope will help the company in gaining valuable user engagement insight. Speaking to Mashable, Betaworks’ Paul Murphy explained that the release of Dots will help the company learn “how to keep people engaged,” adding that what it gains will be applied to Digg and other Betaworks products.

So, is the free game worth your time, or is it just a bare-bones experiment aimed to help Betaworks better its other products? Well, as it turns out, it can be both.

How it works

The straightforward, visually pleasing puzzler tasks you with clearing your game board of as many colored dots as possible within 60 seconds, all in the pursuit of gaining a leading high score.

To clear the dots you must match a minimum of two, dragging your finger in a straight line from one corresponding colored dot to another. Once a link is made the dots promptly disappear and the board refills, replacing them as quickly as you can remove them. A point is awarded for each dot you manage to clear.

Things get interesting when you manage to connect four or more identical dots in a square formation. Doing this will clear the board of all dots of that squares given color. After a few play-throughs, the importance of making squares becomes overly apparent, as they are key to ensuring that you set a respectable high-score that linear connections alone can’t assure.

Comparing your high score to those of your friends is done via Twitter or Facebook. You can chose to connect to just one service, or both, as a means to see your friends results. Support for Apple’s Game Center is sadly lacking, which is a shame as the ability to challenge friends to beat your tally would be a nice addition, especially considering the connections to Twitter and Facebook are underused — you can’t tap on a friend’s name to fire off a challenge via a tweet for example.

Gaining an even loftier score can be achieved by use of power-ups. Dots presents you with three choices to advance your game further, all of which add a certain degree of strategy into the mix. The first, Time Stops, pauses the one-minute countdown for five seconds, giving you extra time if you feel you’re having a particularly good run, and would like just a little longer to rack up some more points. The second power-up is known as a Shrinker, offering the ability to remove a single dot from the game board just by double-tapping it — these come in handy if one dot is standing in the way between you and completing an all-important square. Finally, the third power-up is known as an Expander — these do the same as a completed square, removing all dots of a chosen color.

To use these power-ups you need to purchase them with your gained dots. You soon amass a decent number from just regular play, as each high score is added to your dots total at the end of each game.

For the impatient, dots can also be bought with real cash — 5,000 will cost you 69 cents, 15,000 will set you back $1.49, whereas 50,000 are priced at $2.99. However, due to the ease of which dots can be attained from normal play, buying extra with real money is in no way essential, and instead just a nice way to add to the tip jar for an otherwise free game.

There are times during play when you’ll see a square for the taking made up of more than four dots, and yet despite how tempting it may be to take the time to join the additional points up, especially due to the delightful feedback you receive with each connection, it is a misuse of your ticking seconds. Whether you score a square of four dots or nine, the end result is fundamentally the same — all those colored dots are going to be added to the tally and disappear regardless, so chaining a larger square is purely wasted time. Initially this lack of reward for forming larger squares may seem like a frustrating omission, yet the truth lies in Dots’ clean and clear simplicity. One dot equals one point, and it always will.

Clearing dots is as simple as it sounds, at times captivating and calming, at others frantic and frustrating. The addition of a few select power-ups give this lightweight game just enough in terms of depth to make the high-score objective appealing and incessantly addictive.

Dots is a wholly satisfying pick-up-and-play game, perfect for those fleeting free moments.

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Betaworks has developed a model for these rapid launches and development cycles (100 to 150 days), and the company relies heavily on data to see if they stick in the marketplace. On Wednesday Betaworks launched Poncho, a super simple weather app; a couple weeks ago there was Giphy, a search engine for GIFs, which Borthwick said was so popular that 2 million users crashed the system when it first launched. Before that there was tapestry, a collection of mobile tappable stories.

But when Betaworks isn’t churning out its own content, it’s slicing, dicing, merging and mixing the content of others. One of the things that Betaworks is most famous for is its acquisition of the former social reading site Digg for a reported $500,000. Betaworks then merged it with some of the tools of its sluggish News.me creation.

Borthwick said that when the company bought Digg it had $250,000 a month worth of legacy costs, with $10,000 in monthly operating profits. Digg was jacked up and it had to pull out the needle, said Borthwick. After switching over to Amazon, building a new stack and relaunching with Betawork’s algorithms, Digg now costs closer to $20,000 a month to operate. “That’s the math of the cloud,” said Borthwick.

The overhaul seems to be working. The new Digg, and its users, are highly mobile-centric. Fifty percent of the traffic during the week and 55 percent on weekends comes from mobile traffic, said Borthwick. It was closer to 5 to 6 percent mobile before the relaunch. Digg now has a couple of million “active, rabid” users, said Borthwick. The Betaworks team pays particular attention to the amount of engaged users on Digg, which is high.

Attention is being fractured into a bipolar fashion, leading to condensed, fractional content on one hand and uber long-form content on the other. It’s Twitter vs House of Cards and Homeland, explained Borthwick. To build media companies and products in this era, you have to keep an eye on both, said Borthwick. To address that long form content market, Betaworks has created some tools over the past year around long-form story telling.

Not all of the innovation will come from newly launched media projects. Borthwick said he admires the work that Forbes and Bloomberg have done, as well as new media sites like The Huffington Post, Buzzfeed and Upworthy.

CHeck out the rest of our paidContent Live 2013 coverage here, and a video embed of the session follows below:

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Lerer co-founded the Huffington Post and now serves as managing director at Lerer Ventures. “It’s the best time in the last eight years to invest in digital content companies,” he said. With the technology for the web as well as mobile having been more or less built out, it’s now time to fill those pipes, he argued. “Content is king at a certain time. And I think content is king now.”

However, Lerer also cautioned that digital media investments are risky, with timing being everything. “If you’re too early, you lose all your money. If you’re too late, you don’t make any money,” he explained. And when you give cutting-edge companies seed money, it’s hard to predict how their business plans are going to pan out. “You have to kind of take the measure of the person,” he admitted.

So what are the big trends Lerer is seeing in media, aside from a huge shift to mobile? Video will play a huge role going forward, but there’s also a more fundamental shift in how consumers look at media properties. In short, they ignore everything media execs hold dearly. Instead of expecting a curated front page, they’re much more comfortable with a social feed, Lerer said. “When they see a Buzzfeed – to them, it’s just normal,” he added.

In the end, the companies that aren’t married to those old rules will prevail, Lerer argued: “I think the world is ending for traditional media companies, but it’s just beginning for digital media companies.”

Correction (04/19): A prior version of this story quoted Kenneth Lerer saying that 65 percent of Buzzfeed’s traffic is coming from mobile devices. We were subsequently contacted by a Buzzfeed spokesperson, who clarified that Lerer misspoke and that the site gets 50 percent of its traffic from mobile devices.

Check out the rest of our paidContent Live 2013 coverage here, and a video embed of the session follows below:

A transcription of the video follows on the next page

Go to page 2 (of 2) on GigaOM .

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Reuters had reported Wednesday night that the Betaworks-owned company had something in the works, and on Thursday the company released a blog post explaining that it has been working on something around Reader, but will speed up production in light of Google Reader’s imminent demise on July 1:

“We’ve heard people say that RSS is a thing of the past, and perhaps in its current incarnation it is, but as daily (hourly) users of Google Reader, we’re convinced that it’s a product worth saving. So we’re going to give it our best shot. We’ve been planning to build a reader in the second half of 2013, one that, like Digg, makes the Internet a more approachable and digestible place. After Google’s announcement, we’re moving the project to the top of our priority list. We’re going to build a reader, starting today.

Since 2010, when we started working on News.me at betaworks, we’ve been obsessed with building tools that surface the most interesting things on the Internet, in real-time. That’s what has guided our approach to rebuilding Digg, and it’s with that experience behind us (including a whole load of mistakes), that we will build the new reader.

We hope to identify and rebuild the best of Google Reader’s features (including its API), but also advance them to fit the Internet of 2013, where networks and communities like Facebook, Twitter, Tumblr, Reddit and Hacker News offer powerful but often overwhelming signals as to what’s interesting. Don’t get us wrong: we don’t expect this to be a trivial undertaking. But we’re confident we can cook up a worthy successor.”

Om published an interview Wednesday night with Google Reader creator Chris Wetherell, who’s working on his startup Avocado now, and Wetherell explained that Google Reader always lived on borrowed time. But as Buzzfeed’s John Herrman pointed out, the RSS reader was still driving significant traffic for many publishers, and as Laura Owen wrote for PaidContent, Google Reader’s demise could have a significant impact on digital publishers and news outlets.

Whether Digg’s new product solves the problems that Google Reader’s exit creates is unclear, but creating a news reader built on RSS from scratch could allow for some innovation around a product that hasn’t changed much since the mid-2000′s. If you’re interested in following Digg’s progress, the company has a sign-up list … along with a highly depressing countdown until Google Reader is really dead.

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Although Facebook may look indestructible on the social networking side, with its $70-billion market cap and its billion-plus user base, and Twitter may seem equally dominant in another aspect of the real-time information economy, Borthwick argues in his letter that these big, incumbent platforms “are not as well positioned for the future as you might think.” For one thing, he says the drive to monetize these platforms is pitting the needs of those companies against the interests of their users:

“One of the big stories of 2013 is the rising tide of tension between what the users want to do on a platform and what that platform’s owners want their users to do, in order to expose them to an adequate quantum of advertising. Platforms feel they have to impose controls to get users to do what the users don’t want to do naturally. It is reasonable to expect that some of these platforms will overplay their hands, creating significant opportunities for new social networks to emerge.”

The islands won’t prosper like the oceans

In an era when bandwidth is so readily available, and users have become accustomed to all of their data living somewhere in the cloud — a philosophy that has ironically been encouraged by those same incumbent platforms — Borthwick argues that many users are “ready, willing and able to move” to another network or service if push comes to shove. Having attracted users so rapidly in part by teaching them how “rootless and transient” their relationships can be, he says, some of these companies will ultimately learn how easy it is to lose touch with their user base.

“Platforms are typically trying to control and centralize experiences with the opposing tension being the pull of their users at the edge. As billions more users join these networks over the next few years, the pull of the edge will get even stronger. That pull will make centralized architecture models hard, if not impossible, to execute against. There will be exceptions, but the islands won’t prosper like the oceans.”

Even with a company like Apple, which many would say is the quintessential closed and controlling platform, Borthwick argues there is evidence of how powerful open can be: namely, the response when Apple shut out Google’s map application in favor of its own lower-quality application. The response from users seems to be part of a larger trend in which many are switching from Apple apps and services to Google ones (I wrote about some of my own experiences in that area recently, and why I am considering switching to an Android).

In our interview, Borthwick made it clear that openness does not necessarily equal free, and that some bastions of openness such as Google are only free at certain layers of what he calls the application “stack” — so, for example, Gmail and Google Maps are open, but the search algorithm is not. The Betaworks founder also agreed with Benchmark partner Bill Gurley, who said in a post last year that Google is very good at building “moats” around its core properties by offering free versions of software and services that integrate with them. Android arguably fits that strategy, Borthwick said.

Open systems are more resilient and more valuable

In any case, for Betaworks and its companies and offerings — which include the revived version of Digg and a range of experimental apps like Tapestry, as well as established companies like Chartbeat and Bitly — Borthwick says that open will remain the key to long-term viability and success. And closed platforms such as Facebook (and Twitter, which he argues is becoming more and more closed in an attempt to monetize its user base as quickly as possible) are growing more and more risky:

“It is a core Betaworks conviction that open systems will prove more compelling, more resilient and more valuable to users than closed. Or to say it perhaps a bit more precisely: In a multiplatform world where open and closed systems will always co-exist, the force and power of openness will ensure the existence of a viable ecosystem for application and service builders like betaworks.”

There are plenty of other things worth reading in the letter, including an assessment of the evolution in financing for venture-backed startups (something the company and its seed-stage, incubator-style focus are clearly a part of) as well as the implications of the “contextual internet,” in which apps and services respond more intelligently to what we are doing and where we are doing it. And Borthwick argues that data will be the killer factor for any company that wants to become successful, whether with advertising or any other content. Read the whole thing here.

Post and thumbnail images courtesy of Shutterstock / Luis Santos and Flickr user Dunechaser

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