Recent changes in the Terms of Use for Application Programming Interfaces (“APIs”) highlight the ways law and technology can work together to promote business innovation. While in the past web platforms have been relatively care free about how their data is used through APIs, such platforms have recently taken up a significant interest in controlling how the data is subsequently used. These policy changes, firmly within the discretion of such platforms, are a sign of things to come for web and mobile services.

Facebook, through its platform offering, ushered in a wave of website application innovation. For large web and mobile technology ventures, it is no longer enough to focus just on user adoption—developer adoption of a platform has become just as important. No amount of users can substitute for a cadre of independent developers. The most successful companies, such as Twitter and Facebook, now prioritize their API users the same way first generation web companies catered to unique website visitors. By supplying a platform for third-party developers to build upon, companies can harness outside creativity to drive growth on their platforms. API adoption has led to follow-on innovation and, in many cases, development of critical features that redefine the underlying platform.

For example, Facebook looked to platform application developers like RockYou and Slide to create new ways for users to interact with each other and entertain themselves on Facebook. From 2007 to 2008, the number of applications on Facebook’s platform grew from 7,000 to 33,000.

Access to platforms such as Facebook’s are governed by an agreement familiar to anybody who has used the web—the Terms of Use (“TOU”). While most people gloss over TOUs, platform developers have no choice but to pay attention. These contracts reflect a bargain between a host company and third-party developers. In return for access to the host’s data “fire hose,” developers agree to abide by certain terms and conditions. Like with users of websites, these terms are generally not subject to negotiation. Some API providers charge a fee while others provide data for free. All APIs, however, come with terms. Through such control, platform providers carefully monitor and modify their users’ experiences with applications. In the world of application platforms, legal contracts thus function as instruments of UX (user-experience) innovation.

Most platform TOUs change frequently. The experimental nature of APIs often leads to permissive rules at first, and tightening restrictions over time.

Facebook’s platform was once considered somewhat of a wild west. Developers brazenly utilized aggressive advertising and email campaigns to capture users, in essence “misleading users.”   In response, the platform tightened its API Terms of Use, instituting stricter new guidelines. Developers were prohibited, under the new rules, from excessive user notification and advertising on profile page features. Some applications suffered and were even suspended.

From its launch, Twitter’s platform has been a major tool for third-party developers. Its API fueled growth for a plethora of applications by providing access to the fire hose of tweets. Independent developers built Twitter’s first and best clients on mobile platforms, such as Apple’s iOS and Android, via its API. Over time, Twitter modified its contract with developers by expanding access to Twitter’s underlying data. As the platform matured, however, proliferating applications offering Twitter clients made it difficult to maintain a consistent UX. After years of such proliferation, further API TOU changes followed.

When viewed through the lens of governing third-party developers’ relationships with a host company’s users, API TOU changes such as Twitter’s and Facebook’s are no surprise. One hallmark of the user-generated-content, viral, or ‘Web 2.0’ set of technology companies has been rapid growth. To this end, APIs are an effective marketing tool when leveraged by “growth hackers.”  As host companies mature, however, so must their platforms. The resultant trend, exhibited by both Facebook and Twitter, is towards more closed platforms governed by increasingly restrictive TOU. It remains to be seen whether the world of restrictive API TOUs is the new normal, or if an alternative solution will emerge. For now, platform companies such as Facebook, Twitter, and LinkedIn seem to be turning to more mature and strictly governed contracts with their application developer users.

In the Platform 2.0 world, developers can no longer utilize platforms as a loose user acquisition tool or data pipeline; they must now operate in a more defined and limited space. Many applications once produced by third parties will now be created and maintained in-house. Ultimately, from consumers’ perspectives, the current trend of raising the bar for platform application development through TOU changes hopefully portends higher quality user experiences.