The rise of the digital economy has brought with it the rise of platform businesses.
For traditional industries, in particular, this trend has been one of disruption. Regardless of where you look in the business and financial news today, platform businesses tend to dominate the headlines.
There is good reason for this, as not only are platform businesses some of the most profitable businesses currently in operation or listed on the global stock exchanges, but they also tend to operate in sectors of the economy that are increasingly important in our modern lives.
Everywhere you look today, the presence of platform businesses can be found: from the plucky start-up disrupting traditional markets to established businesses shifting their business model to a platform-based one.
What is a platform business?
But what exactly is a platform business?
A platform business is, essentially, a business model that helps to facilitate interactions between a goods or service provider and end consumers or customers. These interactions might consist of both longer- and shorter-term interactions, such as transactions or various forms of collaboration.
This contrasts with more traditional or ‘linear’ business models where value is created through goods or services by taking raw material components as ‘inputs’ and creating goods or services which are pushed towards the markets for sale to end consumers.
The difference between the two is that the platform business model never owns the means of production, but rather creates and facilitates the means of connection.
With this basic understanding in mind, a platform business could consist of anything from pure business to leisure, and anything else in-between.
For example, https://www.gig.com/ is a platform business that has been experiencing steady growth in the iGaming sector. GiG is an award-winning platform services provider that provides operators in the iGaming and online betting sector with digital platforms to run their businesses from. GiG is a particularly interesting example as the iGaming sector disrupted a very traditional leisure sector with technological innovations.
What are the different types of platform businesses?
With this basic understanding of what a platform business is in mind, let’s now set out what some of the different types of platform businesses are.
As you will begin to get a sense of, platform businesses are becoming increasingly important to value and revenue creation for a wide range of businesses. However, it is important to remember that different types of platform businesses serve different business needs and functions. As such, it is important to have a sense of the different types of platforms that exist and the functions they serve.
There are broadly four different types of business platforms:
- Learning platforms: This type of platform is used to facilitate learning. It does this by bringing participants together to share insights. Over time, this helps to develop trust-based relationships between these participants. This also allows participants to realize their potential by working together to generate new insights — either individually or collectively. Knowledge learning platforms can help to accelerate performance improvements.
- Mobilization platforms: As the name suggests, a mobilization platform helps to ‘mobilize’ or move people to work together to accomplish something collectively they might have been unable to individually. As above, mobilization platforms generally cultivate long-term relationships rather than a focus on shorter term transactions or tasks. For example, these might include participants in supply chain networks or other distribution networks.
- Social platforms: This type of platform is relatively commonplace in modern society, which speaks to how important platform businesses can be. This includes major social media and gaming platforms, where engagement is encouraged among people with similar interests. On-platform interactions with social platforms are also often symbiotic with off-platform interactions in real-life.
- Aggregation platforms: Aggregation platforms help users with resources to connect with other users with specific needs. These platform types are typically transaction and task-focused, where a specific need that is expressed on the platform is met with an appropriate response. This includes marketplace and broker platforms. Often, the platform owner and organizer will act as a broker in all the transactions. This platform type is essential to eCommerce of all forms.
Platform business types: Advantages and disadvantages?
As we can see, platform businesses form a core part of the digital economy by both creating and facilitating a range of interactions in the commercial world.
In terms of the respective advantages and disadvantages of each platform type, however, phrasing it as ‘advantages and disadvantages’ misdirects where the focus of our attention should be.
In this sense, it is less about what one type does better than the other. Rather, the focus should be more on the commercial function they serve and the types of interactions they encourage.