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What Is The Platform Business Model?

What do Airbnb, Uber, Google, YouTube , Spotify, PayPal, Amazon Marketplace have in common apart from the fact that they are some of the fastest-growing of recent years (or already largest players in their field)?

@copyright – pMurat Uenlue

They are all based on the platform business model!

Some scholars argue that the platform business model existed for a long time. As an example, traditional shopping malls brought together sellers and buyers. But anyone can see the huge difference between traditional brick-and-mortars malls and Amazon Marketplace.

The latter can increase their reach with little marginal investment in their IT infrastructure globally, where the same is costly and risky for the former. While it is true that the platform business model existed for a long time, we can all agree on the fact that the internet and technology has

put it on steroids. And this makes all the difference!

What constitutes its success are fundamentally different characteristics of the platform business model compared to linear business models under which a far majority of traditional business models fall under.

Notably, platform business models enable value-adding transactions between a supply and a demand side.

The supply side on Uber are drivers, on Google website owners, on Spotify artists, on Amazon Marketplace sellers, on Airbnb hosts to mention just a few examples.

A considerable portion of the value for the end-user is created and/or provided by others on this very supply side whereas in linear business models this was done by the respective business itself.

The platform then monetises on these value-adding transactions between the supply and the demand side.

 

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