Utility Platforms attract users by providing a useful, typically free service. Contrary to Marketplaces, high variety of services is actually damaging for On-demand Service Platforms. Computing Platforms develop strong bi-directional network effects once the platform reaches critical mass. Airbnb) create value: (2) Social, media and content platforms (e.g. We hope to make Platform Hunt even more useful to entrepreneurs by tapping into the wisdom of the crowds. But not as big as tech magazines suggest. But it involves less efforts (still talking about Uber here). They do not provide the services that get offered on their platform (e.g. Ebay): Yes, you can make money (a lot of it) from getting others to create all sorts of content on your platform. Facebook), encourage exchange with friends through the creation of user-generated content: (3) Facilitate the exchange of goods and services (e.g. As a result, Technology Platforms are much easier to launch because there is no need to solve the chicken and egg problem seen in multi-sided or peer-to-peer platforms. In 2006 he bought an already floundering MySpace (previously the web page with the highest annual traffic). Here is one example that shows you the sophistication that search algorithms move towards. They don’t hold any inventory themselves, let alone develop/manufacture any products. They are all platforms businesses! That is users are not directly attracted by the number or variety of service providers. Search costs can mean a lot of things, including having to spend time and effort. And the list could add all companies mentioned in this article. The Commission states clearly that the regulations are not in the public interest (this was in 1999 and yet nothing much has changed, though since Uber has entered the country discussion may have been invigorated). A tech startup is a company whose purpose is to bring various forms of technology-based products and services to the market. The platform owner will typically seed the platform with the initial content, then work to acquire users and motivate some of them to contribute more content. Click here to learn more, Like Uber, Airbnb is a Sharing Economy company using the Platform Business Model. At the same time, these platforms are very different in how they create network effects, interactions they enable, approaches to solving “chicken and egg” problems (do you build the demand side first or the supply side? Multisided platform (MSP) businesses are hot, no question. Amazon already had substantial number of buyers on its online retail service, when the company allowed 3rd party sellers to sell to Amazon’s buyers. The more content is available on the platform, the more attractive the platform is for the owners of the touch-points.User reach and accuracy of content matching are the main quality metrics. * Some economist are presenting this as indirect network effects. Based on this insight, OpenTable changed their overall approach. Because on the other end of the spectrum, governing the platform to reduce negative network effects plays a very big role. The example uses a marketing agency completing the redesign for GLSEN. Businesses alone consume 12-20% of the total US energy supply on food production, processing, manufacturing, distribution, and preparation. Having just participants that rarely engage is not sufficient to achieve network effects. The list of 170+ (and growing) platform examples is open and is stored in a public Trello board at data.platform-hunt.com. In Technology Platforms the developer “owns” the user. Apple’s iOS is an MSP, since it connects application developers and users. Plus example Airbnb, How to create a Sharing Economy App and its business model. These platforms tend to be very transaction- or task-focused: Express a need, get a response, do the deal, and move on. by displaying them higher up in the search results). Ooops, does that sound a lot like our transaction cost list from above? Facebook’s advertisers can thus use their money to advertise in a more targeted ways than traditional (broadcast) channels allow. Computing Computing services such as a cloud infrastructure platform. By buying or … Don’t stop here. Many traditional businesses, for example, optimise integrated supply chains and manufacturing processes (and supply side economies of scale). The network effect is between content contributors and content consumers of the platform. How to attract users when there are no developers? I have explained in great detail here and here, that preventing collaborative innovation will often lose big time. From your feedback, I know what you want help with. Very few examples of learning platforms exist in business yet, but we can find very large-scale learning platforms in arenas as diverse as online war games (for example, World of Warcraft) and online platforms to help musicians develop and refine their remixing skills (for example… But it also has to have enough economic benefits as a whole in order to be able to be relevant. Google AdSense, Outbrain, Smaato and Millennial Media are examples of Content Distribution Platforms. Developers started to make apps even before physical devices were available, using an Android emulator. Examples include Uber, Airbnb and Pinterest. All platforms are not created equal. The network effect of On-demand Service Platforms manifests itself in service availability. Facebook, WeChat and Bitcoin are examples of Interaction Networks. One key characteristic of the platform business model is the reduction of search cost for its participants. They do all this at much lower capex and overhead costs. Help the demand side (travellers): find cheaper, more individual, less “clinical” accommodation. No coincidence here. Medium, Wikipedia, like many other user-generated content platforms, have confirmed the: 1-9-10 Rule:  1% of participants write, 9% edit; 90% read only. The benefits they offer to both sides allows them to do so (though they also face the problem that participants may take their transaction outside of the platform). The algorithm learns based on previous preferences which type of booking requests different types of hosts are more likely to accept. Platforms like Uber and Airbnb have created a whole new supply (sub-)category. By voluntarily sharing our posts, our data and our likes, we give Facebook around 2000 data points about us (demographics, income, education, interests and many other things). One economic benefit is that it helps to utilise better idle-sitting assets. This is an epically long article on the topic using search / social media platforms as an example. Ask Mr Rupert Murdoch. The availability needs to be predictable and aligned with customer expectations for the particular type of service. The reason we included Technology Platforms in Platform Hunt is that platforms like AWS are routinely lumped together with multi-sided platforms like Uber or AirBnB. Big thing! But even a crude assessment with an optimistic and a pessimistic case is better than skipping any economic assessment altogether. Don’t confuse this section with the economic value add metric (EVA) known in accounting. This is why I say that Uber’s key achievement is to develop a new supply (sub-)category. And we have tailored our premium resources to help you with this: When search cost reduction helps matching two (or more) parties, lower transaction costs help them to enter an exchange between the two parties. Operating systems provide the basic services required to use hardware. Edit the text to make the plan your own and save hundreds of hours. Freemap built its initial user base by offering free navigation using crowdsourced maps. Opening too widely, to the wrong parties or in the wrong way invites havoc. The digital interactions can take form of a message, voice call, image, or money transfer. Identity plays a secondary role in the platform. In modern Computing Platforms the connection between users and developers is through an app store/marketplace, which streamlines discovery, recommendations, activation and monetisation of apps/bots/extensions. Thus, Uber had to expend significant efforts in order to make sure the new supply is safe, complies with laws, is insured, can process payments, locate the passenger and so on. Computing Platforms, like Apple iOS, Google Android or Microsoft Windows, allow developers extend the platform with new use cases, making the platform more valuable to users. The network effect in Content Distribution Platforms is between owners of the user touch-points and the content owners. Getting the demand side on board is not cheap. This 10-step guide can be applied to most types of apps & their business models. Once their user base (demand side) reached critical mass, Apple opened the platform to 3rd party developers (supply side) and the rest is history. In economic theory, companies have a competitive advantage against individuals endeavouring the same (yes, economists really wonder about such weirdly-intriguing questions) by internalising most relevant transaction costs (this is where the wider definition of this term comes into play) and leveraging economies of scale on these transactions. Or as we argue here, you can't experiment your way from Turo or Zipcar to Uber. Uber Eats Business Model. For entrepreneurs, intrapreneurs and other talented people. ‘The public or consumer interest has suffered an estimated $20.67 million annual loss of wealth in 1993 [this refers to the city of Brisbane only], while between $11 million and $19.1 million of this loss has been picked up by the politically powerful licence holder lobby and between $1.48 million and $9.55 million has been lost to society with no group directly benefiting [the deadweight loss]’. You may also like business plan guidelines examples. A much-noticed New York Times article described “. If you want to buy something online, you know you can jump on eBay and most likely find what you are after. Launching Content Crowdsourcing Platforms is fairly straightforward. Learn from: How to develop a business model for your App. Platform businesses reduce search costs almost by existence. The network effect in these kind of platforms is based on data rather than users. GLSEN. There is little correlation between the first inventor of a particular platform and who takes the longer-term victory on that technology platform. The platform business model is relevant for startups, young companies and established companies. Tactic 1 by subsidising them in some cases for just being available rather than performing a ride (until demand follows suit). On our innovation pages, we are not covering technical implementation details. But to get to critical mass, Uber uses a number of the above tactics: Network effects need to be actively fostered. Click here to learn more. Sellers attract buyers, who attract more sellers, and so on. We decided to help platform entrepreneurs understand these tradeoffs, find their role models and learn from numerous examples of other platforms. SAP is a really big company, so much so that its offerings span multiple service models. Demand-aggregating platforms establish themselves as middlemen between existing businesses and consumers, take: What can go wrong when the monetisation is set up poorly? In this article, I use the terms “platform business model,” “platform business” and “platform” interchangeably. Best way to contact me is LinkedIn (click here). Amazon Business Model. But the platform owner as such does not manufacture the products that get sold (e.g. The product/service can be offered by multiple sellers who compete on price, reputation and experience. They need to add additional value to the overall exchange – and still be able to extract value – in order to be relevant. Uber measures availability in minutes. Examples of transaction platforms include Amazon, Airbnb, Uber, and Baidu. Uber Business Model. A second type is the "innovation platform", which provides a common technology framework upon which others can build, such as the many independent developers who work on Microsoft 's platform. When you join Business Manager, coworkers can't view your personal Facebook profile unless you approve their friend requests. Anyone can comment in the Trello board. As opposed to Interaction Networks, where interaction is anchored on specific accounts, in Content Crowdsourcing Platforms users interact with the platform and the interaction is anchored on the content. Expedia is in also in the hospitality and lodging industry. Instead, Technology Platforms monetize by selling their services to developers and are typically invisible to the end users. Every business model and industry has its own set of important business management concepts. Uber and Airbnb have become the most commonplace examples, and in this post they served the purpose to outline the platform business model, but … Airbnb captures value by charging a percentage on each booking. As we’ve defined before, a platform is a business model that facilitates the exchange of value between two or more user groups, typically a consumer and a producer. The platform then grows from there with most efforts devoted to bring buyers to the platform. If you are not sure, you may be able to start with approach 4 and experiment. The demand side: are advertisers (from a monetisation perspective). We are creating user-generated content. Such platforms connect owners of user touch-points (web sites, mobile apps, devices) with content owners wishing to deliver the content (or ads) to the users. But established companies too can use it with vast success. We strongly believe that your early decisions will set your startup and app on a trajectory that will decide where you will end up in 2, 5 or 10 years time. If this wasn’t exactly what you expected in the “design” section, check out the links mentioned for more details. The supply side: From a monetisation perspective, the supply side are the users (you, me and 1.5b others). Ebay, Alibaba). An enormous need exists for dramatic reductions in energy consumption. Utility … It is largely running some expensive marketing campaigns and providing free ride vouchers. in Australia a Productivity Commission came to the conclusion that taxi plates (costing the taxi owner somewhere between $200,000-$300,000 depending on the location) translate into. Platforms make transactions cheaper and simpler. To understand these tradeoffs you must have a good grasp on what kind of platform you are building. And platform businesses have become some of the most powerful businesses in modern economies. Here are your 4 options to monetise according to Prof Parker et al. But from a business management perspective, the below is a great starting point. It ended up being what a senior MySpace manager called “the last nail in the coffin“. Economists also call them multi-sided platforms (MSP). YouTube, Yelp and TripAdvisor are examples of Content Crowdsourcing Platforms. For the success of a platform, all same/cross-side effects need to be taken into account and managed accordingly. Tactic 4 every time they enter a new city by ‘recruiting’ among previous taxi drivers. Note that Technology Platforms are not two-sided markets. The network effect between iPhone users and iOS developers then fueled explosive growth of the platform. Other On-demand Service Platforms can measure availability in hours, days or even weeks. ), openness levels, growth dynamics, subsidies, competitive strategies and monetisation methods. Here 8 tactics that have helped some of the most successful platforms to get to critical mass: Some of this seems to be overlapping with the previous section on the overall strategy. Google Search, Facebook, Amazon Web Services, Amazon Marketplace, Android, Uber, AirBnB, Waze, WeWork, Twilio and even Bitcoin are all platforms. Help the supply side (home owners/hosts): to increase utilisation of their existing assets (unit/room/house) in order to generate additional income or to get more yield out of those than through other ways. By comparison, hotels chains design, build and own a large amount of their real estate. They grow linearly with adoption by developers and do not rely on the interaction between a demand side and a supply side. Many platforms have been struggling because they have not been able to do this. The efforts of developing the platform are often more concentrated on one side. Its tradeoffs are very different from those of Marketplaces. Amazon Web Services is a technology platform that is not based on a platform business model. Freelancer, Taskrabbit, Uber, Airbnb). For example, Apple iOS was launched without any 3rd party apps or developer ecosystem. Operating Systems. Whenever this happens, it is a missed opportunity for the participants and the platform. The decision thus will often be to which degree, what and how. Identity is the foundational characteristic of Interaction Networks. Google, on the other hand, took a different approach when launching their Android platform. The search algorithm promotes those more likely to lead to a conversion in the results (e.g. Management Management services such as a facility management service. This platform type is about collecting content from a subset of users (video, blog posts, reviews, ratings, etc.) data, targeted engagement, etc. We are talking about an assessment of the market opportunity. They derive value from getting started easily, save on advertising, be able to use Ebay’s legal and commercial framework and their payments platform Paypal. Buyers look for a specific product or service, not a specific seller. Launching a marketplace and solving the chicken and egg problem is a difficult balancing act. On the residential side, the Energy Information Administration estimates that the average US household uses 11,280 kWh per year. The network effect in Marketplaces is between buyers and sellers. In most cases, it helps to distinguish between supply and demand side. The supply side (sellers, online merchants): are composed of individuals that sell pre-owned stuff, online merchants, small businesses, etc. Tactic 2 by handing out free-ride vouchers to potential passenger and running free and paid campaigns in the city. They say that writers are on the other side than readers. The external app: build success with initial apps for external customers. Not only are they subject to the whims of the commercial real estate cycles but also does it take much longer and more capital to ramp up their supply (and write-offs/impairments in downturns). In that sense, the platform is a one-sided platform connecting participants of the same type. They are not designed to connect platform participants (for example, producers and consumers, or people in a social network). At the outset, platform play… But it is not really a yes/no decision. when special events are on) when all hotels are booked out. The platform owner would typically target groups of people who already interact with each other, create a critical mass of interactions on the platform and build up the network effect adding more and more users to the platform. Google Search, Kayak and Zenefits are examples of Utility Platforms. Engaging is essential to keep participants come back to the platform. Global sources is one of the first B2B platform that was listed in NASDAQ under … Global Sources. iPhones only had Apple’s own apps and services (Safari, Mail, iTunes) or those developed through direct partnerships. Availability and predictability of the service are essential quality metrics of On-demand Service Platforms. Google first focused on attracting an initial population of developers (supply side) by rallying them with open source slogans and running competitions with substantial prizes. The common element is that this type of platform facilitates interactions between specific participants (people and/or businesses). Among them is their Cloud PaaS which is an open business platform. Waze, OpenSignal and InsideSales.com are examples of Data Harvesting Platforms. By comparison, traditional media outlets, such as newspapers, hire journalists to create content among which they place their ads. Once a network reaches sufficient size, its network effects start to pull in new users and growth takes off.” [Source: “Modern Monopolies“]. They would already by obsolete by the time I would publish them. Professor Andrei Hagiu describes Multi-sided platforms (=platform businesses) as: “Multi-sided platforms (MSPs) are technologies, products or services that create value primarily by enabling direct interactions between two or more customer or participant groups.”. There is no network effect in the useful service itself. The difference is that a taxi company is a registered business entity. On an aggregate level, in 2015 this has led to economic benefits of: There are several other economic savings associated with Uber. Marketplaces enable transactions between demand-side participants (buyers) and supply-side participants (sellers). In traditional competitive strategy, it is generally assumed that customers can determine their willingness to … Some common characteristics of a platform business model include: Allowing users to both create and consume value. Price, quality standards and the fulfillment processes are all set by the platform. Prices of goods and services offered on the platform are set by the supply-side participants. Platform business models case studies. Amazon has a diversified business model. The platform is solely focused on building and facilitating a network. Based on this, Facebook imported contacts from people’s mail, suggested connections and further engaged users with games, media, etc. Develop innovation ideas you can be proud of. Becoming a platform-based company is ultimately a question of mind-set. To get inspiration for your business, understand the trade-offs and find your role models, dig into the platform examples on Platform Hunt. The following are illustrative examples of business services. Microsoft Xbox, gaming consoles, app stores are technology platforms that are based on a platform business model. Opening up your platform to integration of 3rd party elements will be one of the most critical design decisions. This type of platform is designed to deliver end-to-end services fulfilled by a network of independent service providers/contractors. Wikepedia, Medium). Marketplaces like eBay, Amazon Marketplace, AirBnB, Kickstarter or UpWork are two-sided platforms connecting supply with demand. And to complete the picture here, it is prof Hagiu who warns of over reliance on network effects. For example, while Netflix runs its video streaming services on top of Amazon Web Services platform (AWS), end-users interact solely with Netflix. Project Manager of multi-billion dollar projects and business cases. Uber realised a high rate of drop-out rate of driver prior to completing 25 rides. On the surface, they are being compared to the large hotel chains but on their balance sheet, they look much more similar to an online travel portal. For some platforms this is on the demand side, for others, it is on the supply side. Now, you are getting a comprehensive summary. E.g. Let’s first be clear what we are talking about: not every technological platform is a platform business. Uber is a platform business that develops a new supply (sub-)category within the transport industry (called ride-hailing). Please check out our homepage which will give you a great overview of all our articles. 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