Platform business model

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Platform business model Presenter: Thi Nguyen Dang Anh How big companies has elevated the platform business model to dominate the world economy?

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Agenda 1. Overview of the business platform model 2. How to start a platform business?

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The story of mobile phones In 2007, the world was dominated by these phone brands Nokia Motorola Sony Ericson Sam Sung

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Global mobile phone marketshares 2007

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In 2007 Steve Jobs introduce the first iPhone

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After 8 years

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What makes iPhone so successful? In 2008, Steve Jobs introduced the App Store

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Apple iPhone's revenue boosted after 2008

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Platform business

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Uber and airbnb start to replace traditional business models

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Instagram a, platform company was worth $1 billions after two years with only 13 employees

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Top 7/10 most valuable companies are platform based companies

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What make the business platform model so successful?

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1. Business platform model

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Roles in a business model Producer Consumer

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Pipeline business model

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Slow Hard and costly to scale Drawbacks of the Pipeline business model

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Platform business model A user in a platform can play both roles: producer and consumer.

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An example of a platform

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1. Eliminate uneffcient and slow gatekeepers Characteristics of a Platform

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How users know if a product/service is good or not? Ratings define the quality of a good or a service

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2. Reduce the need to own physical infrastructure and assets Characteristics of a Platform

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3. Have matchmaking mechanisms to connect the right producers to the right consumer Characteristics of a Platform Uber matching Youtube recommendation

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4. Govern the platform by rules and standards Characteristics of a Platform Grab ride prices Youtube community rules and policies

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Characteristics of a Platform Summary Eliminate ineffcient and slow gatekeepers Reduce the need to own physical infrastructure and assets Have matchmaking mechanisms to connect the right producers to the right consumer Govern the platform by rules and standards

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Platform network effects

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Positive network effects 1. Direct network effect(same side effect) 2. Indirect network effect(cross-side effect)

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Platform network effects 1. Direct network effect(same side effect) More users lead to more users, the more valuable the network is Example: Social network platform - Facebook, instagram, Snapchat

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Platform network effects 2. Indirect network effect(cross-side effect) The more consumers on the network, the more valuable that network is to producers, and vice versa. Ex: Uber case study

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• Facebook, Twitter: spammy, offensive, rude comments and posts by users • YouTube: Offensive, discriminating, sexual videos • Google: pages optimised for search engines but providing only low-quality content to humans • LinkedIn: Fake profiles, references • AppStores: low-quality apps, bloatware, malware Negative network effects

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• Maximize the number of positive effects • Minimize the number of negative effects A Platform should:

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Feedback loop A feedback loop is what drives users to use the platform more and more

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Types of platform

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Our VNG

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2. How to start a platform business ?

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Design Build Launch Govern Steps to start a platform business

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Step 1: Design

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Type of exchanges in a platform

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Design: The core interaction The core interaction is the single most important form of activity that takes place on a platform

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1. Participants: Producer, Consumer 2. Value units: created by the producers • Videos on Youtube, tweets on Twitter • Profiles on LinkedIn, available cars on Uber 3. Filter: is an algorithmic, software-based tool help consumers receive value units that are relevant and valuable to them • Uber matching algorithm • Youtube recommendation algorithm The core interaction

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Step 2: Build

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Build: Pull, Facilitate, Match The functionalities of a platform should be built to serve one of these purposes:

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Step 3: Launch

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Chicken or Egg, which came first? Solve the problem. Who came first, consumer or producer?

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Solutions Seeding and weeding • Dating apps create fake profiles, fake interactions to attract users Seeding fake demand • PayPal converted a base of eBay sellers, into PayPal users, by faking buyer-side demand for the service Subsiding • Uber paid drivers even when they weren’t transporting customers • Customers get free rides or subsided rides

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Step 4: Govern

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1. Maximize the overall value of the whole network by constantly improve feedback loops. 2. Launch small • Facebook first launched with a narrow focus connecting students within Harvard and then ultimately to everyone. 3. Focus on critical mass and quality ahead of money • It tooks Amazon 10 years to become profitable 4. Create real value and share it fairly with all participants How to govern platforms successfully?

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• A platform is a business model that uses technology to facilitate exchanges, interactions between producers and consumers. • A platform use network efffects to pull more users and keep users stay with a feed back loop. Summary