The traditional business model of pipes has been replaced by the new online platform business model. The pipe’s model of building a business involved producers offering their service or product in the same location where the consumer was. However, the internet has altered the way people conduct business, view media and communicate with one another.
Unlike the pipe model, platforms are available online and allow any user to exchange products or services with another, regardless of their location, through online markets.
Additionally, companies are increasingly outsourcing their production to achieve cheaper costs, thus creating a gap between production and consumption. Subsequently, this situation has led to the rise of the new online platform business model.
Unlike the pipes business model, platforms allow users to create value, through buyers and sellers, as seen on Amazon, Craigslist or Uber.
User Friendly platforms allow users to add value
The key to platforms is that they are designed in such a way which makes the exchange between producers and consumers easier and faster, through simple user interfaces.
Some of the most popular platforms, such as Telegram, Viber or Skype, are very easy to use, by allowing users to send and receive free calls and SMS messages in a simple way. User-friendly and easy-to-use platforms attract users, as consumers tend to use platforms that are quick and easy to understand.
User friendly platforms allow consumers to tinker and experiment with the platform in ways that the creators may have never thought of, allowing the user to add value.
For example, Facebook started out as a platform to connect people. Soon enough, users began using the platform to buy and sell products and services through online posts. Facebook is now one of the largest market places for businesses and users as they can buy, sell and advertise products and services.
A successful platform is designed in a way that users can interact and get what they want
The initial formation of a platform entails creating a set of core values and then adding content and features to the initial base.
For Example, Uber’s core value is to offer rides to users and costumers to drivers. However additional content and features have been added. Now the user is able to acknowledge who is going to be their driver/rider is and also able to rate him/her.
The core of foundations of any platform is the services and products it offers. The more the services and products that are offered on a platform, the bigger it will become. Thus, creating an appealing platform is essential, as it allows for the expansion of products and services offered and subsequently for a bigger user base.
How does an appealing platform appear?
For a platform to be truly appealing, it needs to provide users with the possibility to realize exchanges in a simple and easy way.
Exchanges usually take two distinct forms: first is the creation, that allows any producer to generate something of value and increases the platform’s content supply. This could be a post on Facebook, or a posting on Tumblr.
The second is administration, a process that allows users to distinguish good content from bad content, thus making the platform more appealing for all users. The latter is done, for example, on Facebook where users are able to “like” comments or share a specific post.
Subsequently, an organized and appealing platform can face a big issue, when the content generated is so much that users have trouble finding what they want.
Therefore, a well-organized platform must have consumption filters in order to control the amount of excess content. Consumption filters work by connecting data to the content generated by users, which makes it easier for the rest users to find what they want.
An example would be when searching for a YouTube video; you can filter through the number of views, the titles and likes in order to sort out the good from the bad. By applying those filters, you can find the best rated video for you.
A successful platform entices users to generate new valuable content
Before the onset of platforms, the internet comprised of 90% of people consuming content, 9% of people administrating content, while only 1% creating content. However, the success of platforms has urged a larger percentage of users to generate content.
In order for platforms to effectively create producers, they need two things; methods of content creation and networks to show it.
A successful platform which utilizes both methods is Instagram, as the latter platform allows users to post photos or videos, with filters and editing options, through an easy-to-access and widespread network. Instagram is now the most prominent photo and video sharing platform.
Interaction failures may cause difficulties for platforms, but they can be solved
An example of interaction failures is when you post a new photo on Facebook but you get no likes, or apply for a job on Reedsy but you get no responses. The reasons for an interaction failure may be that you posted a bad picture or sent a weak CV; however it can also be the platform’s fault.
Users often take advantage of multiple platforms which offer the same service. This means that no platform owns the entire market share of a particular service.
Take messaging platforms for example. Skype, Facebook Messenger and WhatsApp are all similar platforms. However, they are used by people interchangeably as they can use all those platforms to stay in contact with their entire social circle.
The best way to overcome interaction failures is by creating a precise metric system to discover the problems which hinder interactions and approval of your platform.
For Reedsy which helps Freelancers find employment, an effective metric system can count the amount of freelancers who haven’t gotten a job in a specific time, or the number of job postings that aren’t filled. Reedsy will then be able to evaluate the problem and offer a precise solution for users, which are experiencing interaction failures.
How to avoid the consequences of not having content when first starting a platform
When a platform begins to work, there is usually no content. However there are ways to avoid the initial repercussions of this lack of content.
Additionally, if the platform is functioning within a market where it’s easier to attract one group of consumers than another, there are effective ways to entice the latter group to use the platform as well.
For example, on match-making apps and websites: there are always more men than women registering. When men realize that there are not enough women registered they stop using the specific website. To avoid this, matching-making sites and apps often advertise free promotions and special offers to women, so that they join the site and prevent men from leaving.
Another tactic to entice users, is offering incentives for existing users to invite other users to join the platform. For example, various mobile games offer rewards to users, whenever they get their friends to join the game or when they make in-game purchases.
The new business model of platforms has replaced the traditional one, which used to offer limited options in terms of selling products or services. Platforms now offer a myriad of options for consumers and producers, including the ability of interaction, regardless of where they are located. Additionally, platforms now allow any user to create content and value, revolutionizing the way business can grow.