Rise and fall of the platform business

The end of platforms as we have known them seems to be around the corner.

During the past years, you have probably seen multiple presentations with this slide:

  • Uber, the world’s largest taxi company, owns no vehicles.
  • Facebook, the most popular media owner, creates no content.
  • Alibaba, the most valuable retailer, has no inventory.
  • Airbnb, the biggest hotel chain, has no rooms.

This is false. The situation radically changed during the fall as these platform giants successively started announcing their future investment plans. Uber stated that they are buying 24 000 cars from Volvo between 2019 and 2021 in order to create a driverless on-demand vehicle fleet. Facebook, on the other hand, is planning on spending $1 billion on original TV shows during 2018, which is by far the largest investment the social media company has ever made on video content. Alibaba is using $2.6B billion for buying physical retail stores in China, and Airbnb is opening co-branded apartment buildings.

What is going on? Why have these companies suddenly started acting like traditional companies making heavy investments? The answer lies in the changing dynamics of business and thus matters to almost every executive.

In the Greek myth, the father of Icarus who flew too close to the sun and fell was Daedalus. Daedalus was an inventor, and more precisely, the creator of the labyrinth. In a fitting metaphor to the point this blog post makes, the first generation platform companies invented a sustainable business model – the way to keep users busy in the labyrinth of data and nudges. This gave the platform companies wings. These wings, however, consist the potential of the demise of the second generation platform companies that try to reach out too close to the sun.

I have answered this question with three short blog posts:

1. The secret ingredient of the first generation platform business

2. Four reasons why competitive advantage from data is disappearing

3. The fall of platform business model

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The blog series “Rise and fall of the platform business” is contributed by senior expert Johannes Koponen. Follow Johannes on Twitter

Article photo: Jannes Glas