What Prodigy Taught Me About Walled Gardens

I watched Prodigy rise and fall in the 1990s. The lessons from that walled garden collapse remain relevant three decades later - and the tech industry keeps ignoring them.

Prodigy was founded in 1984 as a joint venture between CBS, IBM, and Sears - three giants who believed they could own the future of consumer computing. According to Funding Universe's corporate history, by 1993 it was the largest online service in America. By 1999, it was dead. The $1 billion IBM and Sears invested bought them nothing but a lesson in what happens when you build walls instead of bridges.

After 30 years in tech, I've seen this pattern destroy companies repeatedly. I learned the hard way at Spry what happens when platforms pivot. That lesson has been repeated many times since. We're repeating it again now.

What Made Prodigy Different

Prodigy wasn't just another online service. It was the first with a fully graphical, point-and-click interface when competitors were still text-based. It was designed for regular people, not techies - colorful screens, simple navigation, family-friendly content.

The feature list sounds modern:

• Email. Send messages to other Prodigy users (but only Prodigy users).
• Forums. Moderated discussion boards on thousands of topics.
• Shopping. Browse and buy from Sears and other retailers.
• Banking. Check balances and transfer money online.
• News and weather. Real-time information delivered to your screen.
• Stock quotes. Track your portfolio from home.

This was revolutionary in 1988. But every feature came with a limitation: it only worked within Prodigy's walls. The same pattern CompuServe followed - a mini-internet that connected to nothing outside itself.

The Walled Garden Model

Prodigy's architecture reflected its business model: control everything, monetize everything.

Content was curated by Prodigy staff. Forums were heavily moderated - sometimes to the point of censorship that drove users away. Every screen was an opportunity to show ads (Prodigy pioneered persistent advertising on online services). Users couldn't reach anything outside the wall.

This created something valuable: a safe, predictable, beginner-friendly environment. Families could let children explore without worry. The interface never surprised you with something unexpected.

But it also created something fragile: an ecosystem that depended entirely on one company's decisions. Users had no alternatives for communication - Prodigy email only reached Prodigy users. Content existed only if Prodigy approved it. Features appeared only if Prodigy built them.

The platform dependency lessons from CompuServe apply equally here. Build on someone else's platform, and you're subject to their constraints.

Why Users Chose Walls (Initially)

Walled gardens succeed initially because walls have genuine value:

Simplicity. One interface, one account, one bill. No configuration, no compatibility issues, no learning curve. For people who found computers intimidating, this mattered enormously.

Safety. Curated content meant no viruses, no scams, no inappropriate material. The internet of the 1990s was wild - walled gardens felt secure by comparison.

Community. Everyone you could talk to was also a Prodigy user. This created shared context, shared expectations, shared culture. The forums built real relationships.

Support. When something broke, you called one number. No finger-pointing between vendors. One company responsible for everything.

These benefits weren't imaginary. They explain why millions of people paid $12.95/month (later more) for access to something the open internet would eventually provide for free.

How the Walls Became a Prison

The same features that made Prodigy attractive became liabilities as the market evolved:

Censorship backfired. As TechRepublic documented, Prodigy's heavy-handed moderation drove power users to competitors. You couldn't even mention other users by name in some forums. The family-friendly environment felt suffocating to anyone who wanted real conversation.

Pricing couldn't compete. AOL switched to flat-rate monthly pricing. Prodigy's per-hour charges (which once seemed normal) suddenly looked predatory. When the open internet offered unlimited access for less, Prodigy's value proposition collapsed.

Innovation stalled. Every new feature required Prodigy to build it. The open internet innovated faster because anyone could build anything. Prodigy's curated approach couldn't match the pace of distributed innovation.

The walls prevented escape. Your Prodigy email address, your forum posts, your contacts - none of it transferred outside. Leaving meant abandoning your digital identity. This lock-in was supposed to retain customers. Instead, it bred resentment.

The acquisition failed. In 1995, Prodigy bought Spry Inc. for $100 million to gain internet capabilities. When I was at Spry, I watched this acquisition happen from the inside. The acquisition was supposed to help Prodigy compete with AOL's web access. It didn't work. By the time Prodigy integrated Spry's technology, the window had closed. Here's what actually happened: you can't buy your way into a market you fundamentally don't understand.

The Open Internet Won

The World Wide Web offered something walled gardens couldn't match: openness. As The Silicon Underground analyzed, the technical and business model failures that doomed Prodigy were inherent to its walled garden architecture.

Anyone could publish. No corporate approval required. If you had a server, you could create content. Innovation exploded because the barrier to entry collapsed.

Links connected everything. A page could point to any other page. Knowledge accumulated through connection, not curation. The whole was greater than any company could create alone.

Standards enabled interoperability. Email worked across providers. Browsers worked with any server. You weren't locked into one vendor's ecosystem.

Competition drove improvement. When users can switch, providers have to keep improving. Prodigy's captive audience received whatever Prodigy decided to build. The open web's users voted with their feet.

The truth is, open ecosystems beat closed ones over time. The initial advantages of curation and control erode as open alternatives mature. The BBS culture I lived through evolved the same way - decentralized networks eventually outcompeted proprietary services. I've built on both types of platforms and the pattern is consistent.

Modern Walled Gardens

Today's platforms repeat Prodigy's patterns with better technology:

Social media silos. Your Twitter/X followers, Facebook friends, LinkedIn connections - locked inside platforms that don't interoperate. Leaving means starting over.

App store control. Apple and Google decide what software you can run on your phone. They take 30% of transactions and can remove apps at will. Developers build at the platforms' sufferance.

Messaging fragmentation. iMessage, WhatsApp, Signal, Slack - each with its own network, none talking to the others. The same problem Prodigy had with email, repeated with fancier interfaces.

Cloud platform dependency. AWS, Azure, GCP - build on their services, and migration becomes increasingly expensive. The walls are higher-tech but still walls.

The justifications echo Prodigy's: safety, simplicity, user experience. The underlying dynamic is identical: control creates value extraction opportunities.

Why the Pattern Persists

If walled gardens eventually lose to open alternatives, why do companies keep building them?

Short-term incentives. Wall-building extracts profit now. Openness creates value later, often for others. Public company executives optimize for quarters, not decades.

Network effects create defensibility. While the walls hold, the moat is deep. Facebook's wall persists because everyone you know is inside. The switching cost is social, not technical.

Openness is expensive. Interoperability requires standards, coordination, and accepting that competitors benefit too. Walls are simpler to build than bridges.

Users choose convenience. In the short term, walls feel easier. One account, one interface, one company responsible. The costs of lock-in appear later, when it's harder to leave.

What Actually Breaks the Walls

Prodigy didn't die because users demanded openness. It died because a better alternative emerged that happened to be open. The web won not because of ideology but because it was better.

The same dynamic will eventually break today's walled gardens - not through user activism but through superior alternatives. When something open and better appears, the walls fall fast.

Regulation might accelerate this. The EU's Digital Markets Act mandates interoperability for some messaging platforms. But regulation follows market shifts more than it causes them. The walls will fall when open alternatives become compelling enough.

"The truth is, open ecosystems beat closed ones over time."