The Age Of The Platform – Phil Simon
The Age of the Platform explores the lessons of the platform business model. Phil Simon captures some important lessons from platform development and explains why they are relevant to the small business owner.
All Plans Will Fail
The world is changing so fast that “planning” is no longer an effective strategy. By the time a plan comes to fruition, circumstances have likely changed so much as to make the plan obsolete. Nowadays, all businesses operate under a huge cloud of uncertainty.
We are always connected to the technological grid. Our lives and our businesses have changed dramatically in the space of a decade.
The Freemium Model
A freemium is something that’s given away for free in the hopes of creating a customer. Typically, a site will provide basic services for free and require some form of paid subscription for access to enhanced features. It’s a risky strategy. Companies might waste too many resources on free users who will never convert to subscribers.
A Global Marketplace
American companies no longer enjoy local advantages and must now compete against companies from other countries that might have cheaper labour or less regulation.
No business is safe from these changing market forces. Technology has lowered barriers to entry, making it easier and cheaper for new businesses to start up, meaning many businesses are now competing with one another all over the world.
The Apple Platforms: App Store and APIs
The App Store has made a lot of money for Apple.
They opened the Application Programming Interface (API), and now the App Store lets them grow even more without having to pay developers, programmers, servicers, or anyone else for these apps.
Open APIs make innovation happen faster. Like other major platform companies, Apple figured out how to monetize its ecosystem apart from just selling hardware and software.
The Apple Brand: Good Design Everywhere
- Good design is part of the brand; Apple products look good and they don’t have extraneous bells and whistles. They are intuitive and straightforward.
- Simplicity, ease of use, and enjoyment are the qualities that make Apple products great.
- These are also the qualities that make for great platforms.
The Concept of Platforms
A platform is an ecosystem that scales easily and encompasses features, users, and partners. Platforms allow people to contact each other and exchange information. They make third-party collaboration much easier. The platform is a business model. Even large companies can be platforms.
Platforms generate network effects that make the platforms more popular, which generate more network effects.
The DNA: Platform Components and Characteristics
There are many properties these four platforms(Apple, Google, Amazon, and Facebook) have in common.
- They all have dynamic stability, meaning they are stable and yet always changing.
- They are adaptable.
- They’re all dependent on data and technology.
- They collect lots of information about people because that helps them make decisions and function better.
- They understand their customers.
Monopolies: An Idea In Error
Monopolies don’t socially optimize resources. Monopolies create barriers to entry, effectively preventing meaningful competition. There’s the controversial notion of natural monopolies when barriers to entry are so high that really only one company can succeed.
Web 2.0
By 2005, Web 2.0 gave rise to social media websites. Instead of being the occasional source of entertainment or a place to check email, the internet has become integrated into people’s lives.
People’s personal finances and social interactions, to name but two domains, have been transformed. Instead of using the internet occasionally, people essentially live their lives online.
Googling And Facebooking: Verb Branding
Platforms magnify the power of brands. Platform brands can become so powerful that they are verb branded. People use the brand name to describe the very act.
For Google, this happened because they did their job better than their competitors. The brand has become seared into public awareness.
Internet: The Beginning
In 1993, the first web browser was released. Originally known as Mosaic, it was renamed Netscape. The internet grew in popularity as people began emailing each other, browsing the net and creating their own pages.
By the late 90s, there was a wide range of goods and services being offered for sale. Companies like Google, Amazon and Yahoo sprang up.
Facebook: The Perfect Platform
Founder Mark Zuckerberg is a platform genius. He made sure right from the beginning that
- Facebook loaded fast.
- It was scalable.
- It had authentic identities of every user to deter fraud.
- It had various platform planks like games ads, fan pages, messaging and news feed.
The Platform Planks of Google
Google continues to add more products. Like Amazon, Apple, and Facebook did, Google has grown by moving sideways. They also monetized the platform with ads; additionally, they raised revenue by charging to bring up companies on user searches.
The Smart Ways Of Google
- Google offers a diverse range of services.
- It has deep personalization with the users.
- The search algorithm is tailored and fine-tuned to perfection.
- They offer a majority of their services for free.
Taking Care Of Customer Experience
Customer experience is important. Amazon puts lots of effort into providing good customer service. The importance of customer experience is magnified due to the potency of network effects. Amazon asks for permission when it uses people’s info. This is a good thing to do. They also let people opt out of their emails. Users are encouraged to feel that their concerns matter to the company.
Platform Technology: Transactions
How a platform enables smoother and faster transactions is one of the most fundamental ways it can promote customer adoption.
Earlier, it took 12 clicks to buy something on eBay. In 1997, Amazon introduced 1-Click transactions. They managed to reduce a lot of transaction friction, and people gravitated to the site.
The Benefits of Platforms
Platforms can offer multiple products and services, which can save customers time from having to go to different places. This will keep your customers from going over to your competitors.
Your customers will be grateful to have the convenience of having everything in one place, and their loyalty will continue to grow.
Innovations Made Universal
Facebook pioneered the like button, and now it, or something very much like it, is ubiquitous across the internet. Everyone borrows each other’s good ideas.
Platforms should also cultivate stickiness, and provide lots of different features so that it’s convenient for users to stay on the site as they engage in a variety of activities. The longer people are kept on the platform, the better.
Platform Technology: Suggestions, Recommendations, and Ratings
Powerful business intelligence software allows the site to make relevant suggestions to users without the clutter of ads that users might not appreciate.
Users can rate the products they purchase. In fact, they can even rate products that they didn’t purchase on the platform.
The rating system takes advantage of network effects and allows the site to be even more accurate in the products it recommends to individual customers.
Beyond The Computer: Apple
In 1977 Steve Jobs, Steve Wozniak and Ronald Wayne started Apple Computer.
In the mid-1980s, the company started developing other devices in addition to computers. They designed cameras, CD players, speakers, and many other high-tech gadgets. By the early 2000s, the company was much more than a computer manufacturer.
Google: Search Engine Plus Everything Else
Sergey Brin and Larry Page incorporated Google in 1998. It didn’t take them long to realise that their search engine was limited. Even if they could search and index the web with breathtaking speed and efficiency, people would use the site more if it did more than simply search.
Google added lots of features beyond simple keyword searches, sometimes growing so fast that its purposes defied logic or planning.
Platforms vs. Monopolies
- Platforms aren’t monopolies, as they have a low barrier of entry and do not lock users in.
- Platforms don’t have the kind of power in people’s lives the way that monopolies are disposed to have, so they don’t generate the same level of hatred.
- Platform companies tend to have price discrimination. Information technology platform firms are different from monopolies.
The Leaders Of The Platform Age: Amazon
Amazon was predicted to fail in 2001. In response, founder Jeff Bezos decided to grow the company as fast as possible. By 2002, it was the first retailer to make a profit on internet commerce. Today it’s a big success.
Being the first company to make a significant move in a market puts a company at a distinct advantage.
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