Platform business model is a business model that makes a profit by providing a “place (platform)” for buying and selling and exchanging information .
Also known as “platform strategy”, “platform model”, or “multi-sided platform” , it attracted attention because it was proposed by Andrei Hagiu, an associate professor at Harvard Business School in 2006. I did.
By creating a “place” for the purpose of buying and selling and exchanging information, we gather people and companies with diverse needs such as sellers and buyers.
The platform itself has existed for a long time, but with the spread of the Internet, new information sites such as online shopping malls, SNS such as Facebook, and search engines have appeared.
- Five features of the platform
- Three features of a successful platform
- Advantages of platform business model
- Disadvantages of platform business model
- Platform business model example
Five features of the platform
1. Matching function
Platform business is a mechanism to make profits by having people and companies work in the “place” and matching users with each other . Match the supply and demand of multiple groups on the platform. Examples are matching retailers and customers in a shopping mall, or matching users on SNS.
2. Cost reduction function
The cost reduction function is that the supply side has various functions at a lower cost than implementing it alone . For example, in the platform business, by “providing a place without selling things”, it is possible to sell a large number of products without the cost and commission of holding inventory. The demand side also has the advantage of omitting individual procedures for the supply side.
3. Branding function
Participating in a certain brand power, that is, a platform with a proven track record and a sense of security, will increase the appeal to users.
A strong branding function is also required to get the supply side to gather. A certain level of quality is required to maintain the brand, and in order to build the brand, it is important to consider the price and image of “what can be done with this platform”.
4. External network function
The reason why many companies enter the platform business is that if they can create “external network functions”, they can make huge profits.
The external network function is “ the more people and companies that gather, the more valuable the platform becomes, and the more people and companies gather “. For example, in a shopping mall, the more good stores gather, the more attractive the mall becomes and the more customers gather. If this happens, you will be able to buy and sell actively, and you will be able to obtain store opening fees and trading fees. Also, if customers gather, other popular stores will want to open.
If you enter such a cycle, sales will increase like a snowball.
It can be said that the rapid growth of SNS is due to the external network function.
5. Triangular prism function
Although we do not make inquiries directly, it is a function that creates interaction by intervening and mediating a third group. An example is that an ad and a reader are not directly attracted to each other, but an article is used to connect the ad to the reader. This does not have the purpose of buying products or services directly like SNS, but it corresponds to products introduced by favorite influencers and products that you want to read articles on SNS.
Three features of a successful platform
1. Is it possible to create the existence value of the platform itself?
The challenge is who to connect with and whether all participants will benefit. It is important that new value is created only through the intervention of platformers.
It is also important how to differentiate from other platforms. The point is to be able to create a catchphrase that can be said in one word, such as “Let’s go to the Tsukiji market when it comes to fish.”
2. Is there an “automatic breeding function” for those who participate in the “place”?
It is important that participants invite other participants more and more without advertising themselves. For example, “How many points do you get when you introduce a friend?” If you implement a function that is prone to word-of-mouth , you can increase the number of users very efficiently. The auto-proliferation feature is said to allow services such as SNS, where users are attracted to users, to do this efficiently.
3. Is the user quality controlled?
Platformers need to make daily efforts such as establishing a quality check mechanism so as not to weaken the platform. At the same time as clarifying the vision of the platform, it is necessary to have rules and norms for that purpose.
For example, “determine business domain”, “identify target group”, “create a mechanism for group interaction on platform”, “build business model”, “establish rules on platform”, “government regulation / guidance / patent infringement” It is necessary to build a platform with “Notes on etc.” and prepare a strategy to constantly evolve even after building .
Advantages of platform business model
You can increase the number of customers
As the platform grows and the variety of products and services increases, it becomes possible to meet diverse customer needs, and “ positive feedback ” that the store calls the customer and the customer calls the store. You can increase the number of customers by creating a virtuous cycle.
Without a platform business, it is not impossible to sell a wide variety of products such as furniture appliances, fashion, and games in one store.
By developing a platform business, anyone looking for furniture appliances, fashion, or games can become a platformer customer, and the companies participating in the platform will also benefit from it.
Effective marketing becomes possible
As the platform grows and the number of members becomes enormous, it will be possible to accumulate consumption behavior data such as customer attributes and purchase history and utilize it for marketing. By accumulating a huge amount of data not only for a specific product category but also across categories, various things such as marketing methods and approaches become efficient.
Easy to develop new business
By becoming the main body and having various companies use the platform, the appeal of the platform itself will be enhanced, many customers will be attracted, and more companies will participate due to the ability to attract customers. By generating such positive feedback and increasing the number of members on major platforms, it will be easier to lead to new and profitable businesses. ..
In addition, if people gather on the platform that the company is developing, new business possibilities will emerge. For example, in the case of shopping malls, it will be easier to develop services related to the services that were originally developed, such as eating and drinking and parking lots, and in the case of SNS and information sites, advertising and paid membership services.
In addition, if the member information registered on the company’s main platform can be used on the company’s other platforms, it will be more convenient for users.
Disadvantages of platform business model
If you don’t keep your charm, you will lose to the later platform
Of course, building a platform like this is not easy. It is essential to enhance the appeal of the platform itself and make people think that there are times when it is good to use this platform. There are also cases where large platforms become unattractive and bring the majority of users to later platforms . I often see such scenes in video games and SNS. From this point of view, it is indispensable to make efforts to keep it attractive to users.
Platform business model example
The most obvious example of a “place (platform)” is a shopping mall. In a place where many customers gather, we gather retail stores that we want to do business with and attract customers who want to shop comfortably in one place. The mall operator at the body is a mechanism that makes a profit from store opening fees and trading fees from retail stores.
Rakuten has stores of various industries and types, and there is a virtuous cycle called “positive feedback” in which many people access Rakuten, new stores are opened, and more customers are attracted. Get up.
Furthermore, in the case of Rakuten, the system called “ Rakuten Super Points ” is working well, and points are earned when shopping, so we encourage customers to purchase products at Rakuten again using those points. increase. Furthermore, we acquired card companies, travel agencies, and insurance companies, and led 40 to 50 million members gathered at the original platform “shopping mall” to our high-margin business. By doing strong>, we have succeeded in raising the profit margin even higher.
Google is developing a search engine called “Google” which is an “open” platform. If you search for any keyword on Google, “Google AdWords”, which is an advertisement for products and services related to that keyword, will be displayed.
In addition, Google is now developing various businesses such as smartphone OS, self-driving cars, and cloud systems, but the main focus is still to collect user needs information and match it with advertisements, advertisements after AdWords. It’s a business model.
Google also has platforms like Google Play that buy and sell apps like Apple, as we’ll see later, but the most important thing for Google is “increasing market share.” By expanding the market share, we are collecting the needs of users and distributing Android as an open source so that anyone can use it, and YouTube, a site and service where you can watch videos for free, which is also a participation of Google. Many are deployed.
For this reason, Google attaches great importance to “open” and “free” profiles .
Apple is developing a platform called the “App Store,” which is “closed.” iPhone users purchase the app from a store provided by Apple. However, the revenue is also distributed to Apple, and every time an app made by a company or user is sold, Apple also makes a profit.
Share is just as important to Apple as it is to Google, but what Apple is good at is its unique “comfort.” By creating it in-house from hardware such as the iPhone, we make it a comfortable experience with a beautiful screen and captivate users. We are particular about quality control of apps, and in order to release apps on the App Store, we have to break through the strict screening imposed by Apple. What fits Apple is to create a “closed” and “paid” platform .