Is Platform Business Model Right For You?

Learn about the platform business model and how it can drive growth and innovation. Explore real-world examples and key success factors.

Halil AksuContent Editor

February 17, 2023
8min read

Platforms can be thought of as ecosystems in which multiple stakeholders, such as users, developers, and partners, can come together to create, share, and consume value. Therefore, the platform business model is different from traditional business models, in which a company creates and sells a product or service to its customers. Instead, the platform business model relies on creating and facilitating interactions and transactions among users, and it generates revenue by taking a cut of the value created and exchanged on the platform.

Some examples of companies that use the platform business model include social media platforms like Facebook and Twitter, marketplaces like eBay and Amazon, and communication tools like Skype and Slack. These companies create platforms that allow users to connect, share, and transact with each other. They generate revenue by providing value-added services, such as advertising, data analytics, and payment processing, to their users.

Platform business models can be applied in many industries.

The platform business model can be applied in a wide range of industries, and companies in many sectors have successfully used it. Some of the industries where the platform business model is commonly used include:

  • Technology and media: Many of the most successful and well-known platform companies are in the technology and media sectors. These include companies like Facebook, Google, Amazon, and Netflix, which have created platforms enabling users to connect, share, and consume content and services.
  • E-commerce and retail: The platform business model is also widely used in the e-commerce and retail industries. Companies like eBay, Alibaba, and Etsy have created platforms allowing buyers and sellers to connect and transact, creating new opportunities for commerce and trade.
  • Transportation and logistics: The platform business model has also been applied in the transportation and logistics industries, with companies like Uber, Lyft, and Airbnb that created platforms for connecting drivers and passengers, or hosts and guests, for transportation and accommodation services.
  • Finance and insurance: The platform business model is also being used in the finance and insurance sectors, with companies like Lending Club, Robinhood, and Lemonade, which are providing platforms that permit users to access financial services, such as lending, investing, and insurance.

All in all, these examples show that the application of the platform business model can be utilized in various industries, and it has already been adopted by many companies. As the digital economy continues to evolve and grow, it is likely that the platform business model will become even more prevalent and vital in the future.

Platforms provide benefits beyond your expectations.

Several key benefits of the platform business model make it an attractive option for companies in many different industries. Some of the most important benefits of the platform business model include the following:

  • Network effects: One of the critical benefits of the platform business model is the potential for network effects, which occur when the value of a platform increases with the number of users. This means that as more users join a platform, the platform becomes more valuable, which can attract even more users, creating a virtuous cycle. In addition, network effects can create powerful competitive advantages for platform companies, as they can make it difficult for competitors to enter the market.
  • Scalability: The platform business model is also highly scalable; thus, it can be easily enlarged to accommodate more users and transactions. The reason for this is that platforms are built on digital infrastructure, which can be easily replicated and expanded. This allows platform companies to grow their user base and revenue quickly and easily without incurring high additional costs.
  • User-generated value: Another key benefit of the platform business model is that it allows users to create, share, and exchange value with each other. This means that platform companies can generate value from their users rather than having to create and sell products or services themselves. It can be particularly advantageous for platform companies, as it allows them to leverage their users’ collective creativity and ingenuity, which can create new and innovative products, services, and experiences.

Overall, the platform business model offers many benefits to companies that can implement it successfully. These benefits can provide a competitive advantage and help companies to grow and succeed in the digital economy.

Interesting Case: Have you heard about Patreon?

One example of a successful platform business that is less well-known than some of the larger and more established platform companies is Patreon. Patreon is a subscription-based platform that allows creators, such as artists, musicians, and writers, to connect with their fans and supporters and earn a steady income from their creative work.

Patreon was founded in 2013 and has grown rapidly in recent years, with more than 200,000 creators and over 10 million active patrons on the platform. Patreon provides a simple and intuitive platform that allows creators to create and share their work with their fans and to receive regular payments from their patrons in exchange for exclusive content, access, and perks.

Patreon’s platform business model has been successful because it provides a unique value proposition that addresses a specific need in the creative community. By allowing creators to connect with their fans and earn a steady income from their work, Patreon has created a robust ecosystem of users, creators, and patrons who are all motivated to engage with and support each other. Additionally, Patreon’s platform is user-friendly and easy to use, which has helped to drive user engagement and growth.

Overall, Patreon is a successful platform business that has leveraged the platform business model to create value for its users and drive revenue and growth.

One more example you may know very well: WordPress

WordPress is a web-based platform that allows users to create and manage their websites, blogs, and online stores. WordPress’s platform provides a simple and intuitive interface that allows users to invent professional-looking websites without the need for technical expertise or coding skills.

WordPress was first released in 2003, and it has grown rapidly in the years since, with more than 60 million websites and over 500 million users on the platform. WordPress provides a comprehensive and easy-to-use platform that allows users to create and manage their own websites and to connect with their customers and audiences online.

In terms of success, WordPress has undoubtedly been successful in terms of user adoption and engagement. With over 60 million websites and over 500 million users, WordPress has become one of the world’s most popular and widely used web-based platforms. Additionally, WordPress’s platform is user-friendly and easy to use, contributing to its success and popularity.

However, regarding financial success, it is difficult to say whether WordPress is successful. As an open-source platform, WordPress is free to use, and it does not generate revenue from user subscriptions or transactions. Instead, WordPress relies on a community of volunteers and contributors to develop and maintain the platform and on a network of commercial partners and third-party developers to create and sell themes, plugins, and other products and services.

Overall, WordPress may not be as profitable as some other platforms, but it has achieved great success in terms of user uptake and involvement and has solidified its position as a leading player in the web platform industry

Consider these critical success factors to ensure your victory.

There are several key success factors for an enterprise when applying the platform business model. Some of the essential success factors include:

  • Identifying a unique value proposition: One of the crucial success factors for a platform business is to identify a unique value proposition that sets it apart from competitors. This value proposition should be based on a clear understanding of the needs and preferences of the target market, and it should provide a compelling reason for users to join and engage with the platform.
  • Building a solid ecosystem: Another vital success factor for a platform business is to establish a robust ecosystem of users, developers, and partners. This ecosystem should be based on trust, collaboration, and mutual value creation, and it should be designed to foster innovation and growth. By building a strong ecosystem, a platform business can create a virtuous cycle of value creation and exchange, which can drive user engagement and revenue.
  • Developing a user-friendly platform: A third key success factor for a platform business is to develop a user-friendly platform that is easy to use and navigate. Therefore, the platform should have a clear and intuitive user interface and should provide users with all the tools and features they need to create, share, and exchange value easily. By providing a user-friendly platform, a platform business can increase user engagement and satisfaction, which can lead to more significant revenue and growth.

Overall, to achieve success in the platform business, it’s crucial to identify a clear value proposition, establish a robust ecosystem, and design an intuitive platform. Emphasizing these success factors gives a platform business a competitive edge and contributes to its success in the digital economy.