Platforms Part 2 (Check here for Part 1)
We used to go to the market for our needs, now we surf to a platform on the internet. Today there are a lot of platforms in different branches as in the table below:
In addition to the specific business models, there is something what counts for all these platforms, namely data.
All platforms work with data to improve their business model and by selling data to or sharing data with third parties services. When we are talking about space and time, it’s data which pulls the strings. Data is the gravity in the universe of platforms. The more data it has the more users they are pulling in. Users can apply to producers as well as consumers.
The most powerful platform company is one that can gather data from multiple platforms, for example Amazon with retail (Amazon.com) and media (Amazon Prime), Apple with the app store and Apple pay or Alibaba with retail and Alipay. For those platforms there is not a big division between sellers and buyers as long as they are using the platform. Especially Amazon and Alibaba like it when big retailers use their platform and are happy to share data with those parties.
Most of the platforms in the list have become world-wide brands. Not with content, not with products and not with services, but with platforms you can make really big money. That’s why a lot of companies try to reach platform level. However, this is not easy at all.
Platforms are easy to use, but still belong to the most advanced pieces of software in the world. For apps there are many hurdles to overcome to really become platforms. Mass adaption is only done when a platform:
· Offers something valuable
· Offers something recurring
· Offers something for free or low cost
· Operate world-wide, but localize
· Is easy to use
· Is trusted
· Is in the mind of users
· Is backed by investors/believers
· Is technological scalable and reliable
· Grows in users
· Grows in revenue
Platforms are only interesting and valuable with a critical mass of adaption. With mass adoptions comes big data. Data=Gravity.
Where is the competition?
We concluded in last blog that platforms at the end are competing for your time, anywhere you are. In this sense platforms are more in competition with each other as with similar products. Netflix is competing with Facebook and Google just as much (or even more) than they compete with traditional television. For example television loses its place as it doesn’t operate within the space and time of platforms. They cannot offer any content anywhere anytime. Netflix makes it really easy to get content. This also counts for other platforms. Google makes it really easy to access information. However, it’s not in competition with libraries. If it’s not easy, people will not spend time and come back to the platform.
It’s not about selling as many products or services, but to keep you as a user as long as possible in their ecosystem. As this ecosystem becomes big enough they are the middle-man for all transactions. In a way platforms are what banks are for the financial system. The platforms get a fee on the transactions or the money comes from advertisements. The valuable and recurring thing is that they act as the space of a certain type of transaction.
Platforms change the way business is done. Product disruptions are often enhancement or replacements. With platforms, the fundamental rules of business change. Platform shifts from controlling to orchestrating resources, from optimizing internal processes to facilitating external interactions and from increasing customer value to maximizing the value of the ecosystem.
Another characteristic for mass adaption is that platforms must be accessible everywhere. When Google only works in my country or in my language it’s not as powerful as a world-wide accessible service. Netflix would rather show everyone the same content (as this is only the case with their own productions). Uber wants to provide customers worldwide the same service. That’s why a lot of companies spent so much money on lawsuits. Countries, governments and borders get in their way to really get world-wide adaption.
When apps are reaching the level of a platform then they have almost a world-wide monopoly.