The space and time of platform economy
Platforms (Part 1)
“I think a lot of the time there isn’t such a black-and-white difference between what’s a platform and what’s an app. It’s really just like the most important apps become platforms.”
Thinking of space and time, you may think of physics. However, in the realm of platforms it also applies to economy. Why? Do other laws on space and time apply for platform economy than in the world of traditional economy?
The best way to approach this question, is to compare platforms with traditional marketplaces. At a traditional marketplace people from around the region came to a specific place at a specific time to trade with each other. The market was the place where transactions happened.
Often a marketplace was the source of economic growth for a town. Today most business is still done this way. Take for example Enzo, who was born in Italy, but now lives in Amsterdam. A city with traditionally lots of trade, but nowadays also with lots of tourists. They visit the Anne Frank House or the Van Gogh museum. At night, after a long day of sight-seeing, they just want something simple to eat. A good place to open a restaurant? And that’s exactly what Enzo did. Soon every night of the week his pizzeria was filled with tourists.
As Enzo has only around 20 tables and high demand the price for Pizza on his menu rise. He didn’t need to advertise a lot and even his pizzas didn’t need to be that exceptional. Just something to eat after a long day of walking.
Of course Enzo’s success didn’t go unnoticed. So his neighbor Muhamad also started a pizzeria and now makes good business as well. Other pizzeria’s open, until the market becomes saturated. That’s the way the pizza market in Amsterdam works right now. Competition is fierce and the restaurants are fighting for customers.
Enzo needs to lower his price and Muhamad moves to another street with more tourists. All restaurants owners have a restaurant located at a certain place of certain size. Space and time are limited. They want their customers to be there as short as possible, so new customers can take their place (McDonalds is a master of this principle).
Two types of markets
Who are the competitors of Enzo and Muhamad? Of course other pizzeria’s and maybe other restaurants, like McDonalds, Döner or Wok2Go. You may say all food places. However, Enzo and Muhamad are not competing with a Sushi bar in Tokyo which is a totally different market. That would be a long walk… They also don’t compete with the Van Gogh museum as that’s a completely other business. So the market is local and specialized.
How does this apply to platform economics? The most basic definition of a platform is a technology that allows other businesses to connect and build on top of it. The core of a platform is that it exists on the internet where space is unlimited and can be accessed everywhere anytime. Also, the time that users can spend is limitless.
Two examples why this matter:
In Amsterdam you traditionally have a taxi station (Amsterdam Taxi Centrale). To be a customer you need the local number, you are greeted in the local language and pay the taxi driver in the local currency. Now to get a Taxi in Amsterdam with Uber, you just need to open the app and everything else is taken care of.
For Enzo who knows the local taxi number and have some Euros in his wallet there is not a big difference between the taxi station and Uber. OK, it is somewhat faster and more comfortable to use the app, but it really pays off when he goes to Tokyo. He still can use the same app with same user interface even if he doesn’t know any Japanese or have enough yen in his pocket.
Someone from Japan wouldn’t for example call a Taxi in Amsterdam, but with Uber there are no hurdles. So now it operates on a world-wide-scale and everywhere it works the same way. Space became limitless.
After a hard day of work, Enzo closes his restaurant and goes to sleep. The restaurant has opening hours. Platforms are always available. 24/7. So not only the space is limitless, but time as well. Any time you want to search for something you just go to Google. However, this is not the interesting point on time in respect to platforms. It’s not just about when you access a platform, but how long you’ll spend on it.
Google started as ‘just’ a search engine. In the early days you go to Google for a quick search. As they operate world-wide, they soon had a massive user base and earned lots of money showing contextual adds. Soon they realized that they need to diversify their products to assure future income. New products like Maps, YouTube and Gmail were added. Nowadays it’s not really about the products and services anymore, it’s about the Google platform.
So it’s not about Gmail competing with Microsoft email, but keeping users as long as possible on the Google platform. Google Search used to be a portal to websites who hosted the real content. Now it tries to keep users as long as possible on their platform. When you search for “Amsterdam weather” you get immediately the weather forecast. When you are searching for a fact, a Wikipedia encyclopedia article shows up on the right side. When you want to watch a video, a YouTube video is being shown. More and more you don’t need to leave the platform at all.
At the end platforms are competing for your time, anywhere you are.