7 Types of platform business models
Platform business models have become increasingly important in today’s economy, revolutionizing the way businesses and individuals interact with one another. These models have disrupted traditional business models and have become a key driver of economic growth, innovation, and entrepreneurship. Platforms are online marketplaces that connect buyers and sellers, provide access to products and services, and enable users to interact and share information. They create value by facilitating interactions between different groups of users, and generating revenue by charging fees for access, transactions, or data. There are several types of platform business models, each with its own unique characteristics, value propositions, and revenue streams. In this article, we will explore the seven types of platform business models, and discuss their key features and examples. Understanding these different types of platform business models can help entrepreneurs and businesses to identify new opportunities, and choose the right model for their market and users.
Definition of Platform Business Models
A platform business model is a type of business model that uses technology to facilitate interactions and transactions between different groups of users. These interactions can take many forms, such as buying and selling goods and services, sharing information, or collaborating on projects. Platforms create value by connecting users and facilitating interactions, often at scale, while also generating revenue through various fees, such as transaction fees or advertising revenue.
Importance of Platform Business Models in Today’s Economy
The importance of platform business models in today’s economy cannot be overstated. They have disrupted traditional business models and have enabled new forms of entrepreneurship and innovation. Platforms have democratized access to markets, allowing smaller businesses and individuals to compete with larger, established players. They have also enabled the creation of new markets and industries, such as ride-sharing and home-sharing, that were not possible before the advent of digital platforms.
Furthermore, platforms have also enabled greater efficiency and transparency in many industries, reducing costs and improving access to information. They have also facilitated the creation of new business models, such as subscription-based services and on-demand delivery, that have become increasingly popular among consumers.
Overall, the rise of platform business models has had a significant impact on the global economy, and their continued growth and evolution will likely shape the future of business and commerce.
7 Platform Business Models
1. Transaction platforms
Transaction platforms are a type of platform business model that facilitates transactions between buyers and sellers. These platforms create value by reducing transaction costs, improving market efficiency, and expanding access to markets. Transaction platforms are typically designed to be simple and user-friendly, providing an intuitive interface for buyers and sellers to connect and transact.
a) Examples of transaction platforms
Examples of transaction platforms include online marketplaces like Amazon and eBay, payment processors like PayPal and Stripe, and peer-to-peer payment platforms like Venmo and Cash App. These platforms enable users to buy and sell goods and services, transfer funds, and conduct other types of transactions. They typically generate revenue through fees charged on transactions, such as a percentage of the total sale price or a flat fee per transaction.
b) How transaction platforms generate revenue
Transaction platforms can be further classified into two types: vertical and horizontal. Vertical transaction platforms are focused on specific industries or niches, such as Etsy for handmade goods or Zillow for real estate. Horizontal transaction platforms, on the other hand, are designed for a wide range of products and services, such as Amazon or eBay.
Overall, transaction platforms have become increasingly important in today’s economy, providing a convenient and accessible way for buyers and sellers to connect and transact. They have also enabled the growth of new business models, such as the sharing economy, which rely on transaction platforms to facilitate peer-to-peer transactions.
2. Innovation platforms
Innovation platforms are a type of platform business model that facilitate collaboration and innovation among users. These platforms create value by enabling users to share knowledge, resources, and ideas, and to work together to develop new products, services, or solutions. Innovation platforms are typically designed to be open and collaborative, providing tools and resources to support users in their innovation efforts.
a) Examples of innovation platforms
Examples of innovation platforms include crowdsourcing platforms like Kickstarter and Indiegogo, open-source software platforms like GitHub, and innovation management platforms like IdeaScale. These platforms enable users to collaborate on projects, share ideas and resources, and provide feedback and support to one another. They typically generate revenue through a variety of means, such as charging fees for premium features, taking a percentage of funding raised, or charging for access to intellectual property.
b) How innovation platforms generate revenue
Innovation platforms can be further classified into two types: internal and external. Internal innovation platforms are designed for use within a single organization or company, and are typically used to encourage collaboration and innovation among employees. External innovation platforms, on the other hand, are designed to be open to external users and stakeholders, and are typically used to tap into the collective knowledge and creativity of a broader community.
Overall, innovation platforms have become increasingly important in today’s economy, providing a way for individuals and organizations to collaborate and innovate more effectively. They have enabled the development of new products and services, as well as the creation of new business models and industries.
3. Investment platforms
Investment platforms are a type of platform business model that enables users to invest in a wide range of assets and securities. These platforms create value by providing access to investment opportunities that may not be available to the average individual investor, and by reducing transaction costs and improving transparency in the investment process. Investment platforms are typically designed to be user-friendly, providing tools and resources to help users make informed investment decisions.
Examples of investment platforms
Examples of investment platforms include robo-advisors like Betterment and Wealthfront, crowdfunding platforms like SeedInvest and Crowdcube, and online brokerage platforms like Robinhood and E-Trade. These platforms enable users to invest in stocks, bonds, mutual funds, real estate, and other assets, often with low minimum investment requirements. They typically generate revenue through fees charged on transactions, such as management fees, commission fees, or transaction fees.
How investment platforms generate revenue
Investment platforms can be further classified into two types: self-directed and managed. Self-directed investment platforms enable users to manage their own investments, while managed investment platforms provide professional investment management services. Managed investment platforms may also use algorithms and other technologies to provide personalized investment advice and recommendations.
Overall, investment platforms have become increasingly important in today’s economy, providing a convenient and accessible way for individuals to invest in a wide range of assets and securities. They have enabled the democratization of investment, allowing smaller investors to access investment opportunities that were previously only available to larger, institutional investors. Investment platforms have also disrupted traditional financial services, and have enabled the development of new investment products and services.
4. Social platforms
Social platforms are a type of platform business model that facilitate communication and social interaction among users. These platforms create value by enabling users to connect and engage with others, share information and content, and build communities around shared interests or goals. Social platforms are typically designed to be user-centric, providing a personalized and engaging experience for users.
a) Examples of social platforms
Examples of social platforms include social networks like Facebook and LinkedIn, messaging apps like WhatsApp and WeChat, and content-sharing platforms like YouTube and Instagram. These platforms enable users to communicate and interact with others, share photos and videos, and discover and consume content. They typically generate revenue through advertising and data monetization, such as targeting ads based on user behavior and preferences.
b) How social platforms generate revenue
Social platforms can be further classified into two types: general and niche. General social platforms are designed for broad audiences and provide a wide range of features and functionalities, such as Facebook and Twitter. Niche social platforms, on the other hand, are designed for specific communities or interests, such as Goodreads for book lovers or Strava for athletes.
Overall, social platforms have become increasingly important in today’s economy, providing a way for individuals to connect and engage with others, share information and content, and build communities around shared interests or goals. They have also enabled new forms of communication and collaboration, and have had a significant impact on how people interact and communicate with one another.
5. Two-sided marketplaces
Two-sided marketplaces are a type of platform business model that facilitate transactions between two distinct groups of users, often buyers and sellers. These platforms create value by reducing transaction costs and improving efficiency in the marketplace, and by providing a larger pool of potential buyers or sellers. Two-sided marketplaces are typically designed to be easy to use and provide a seamless experience for users.
a) Examples of two-sided marketplaces
Examples of two-sided marketplaces include e-commerce platforms like Amazon and eBay, gig economy platforms like Uber and Airbnb, and job marketplaces like Upwork and Freelancer. These platforms enable buyers and sellers to transact with one another, often through a rating and review system that provides feedback on both parties. They typically generate revenue through transaction fees, such as commissions on sales or a percentage of the transaction value.
b) How two-sided marketplaces generate revenue
Two-sided marketplaces can be further classified into two types: transactional and non-transactional. Transactional two-sided marketplaces facilitate transactions between buyers and sellers, such as e-commerce and gig economy platforms. Non-transactional two-sided marketplaces, on the other hand, facilitate interactions between users without necessarily facilitating transactions, such as dating apps and social networking platforms.
Overall, two-sided marketplaces have become increasingly important in today’s economy, providing a way for buyers and sellers to connect and transact with one another more efficiently. They have also enabled the development of new business models and industries, and have disrupted traditional retail and service industries.
6. Service platforms
Service platforms are a type of platform business model that connect users with service providers, often through an online marketplace. These platforms create value by providing access to a large pool of service providers and by providing a convenient and seamless way for users to find and hire service providers. Service platforms are typically designed to be user-friendly and provide a range of features and functionalities to meet the needs of different users.
a) Examples of service platforms
Examples of service platforms include ride-sharing platforms like Uber and Lyft, food delivery platforms like DoorDash and GrubHub, and home services platforms like TaskRabbit and Thumbtack. These platforms enable users to find and hire service providers for a variety of tasks, such as transportation, food delivery, and home repairs. They typically generate revenue through transaction fees, such as a percentage of the service provider’s earnings or a flat fee per transaction.
b) How service platforms generate revenue
Service platforms can be further classified into two types: on-demand and scheduled. On-demand service platforms enable users to request and receive services immediately, often through a mobile app. Scheduled service platforms, on the other hand, enable users to schedule services in advance, such as booking a cleaning service for a specific date and time.
Overall, service platforms have become increasingly important in today’s economy, providing a way for individuals to find and hire service providers more efficiently. They have also enabled the development of new industries and business models, and have disrupted traditional service industries.
7. Data platforms
Data platforms are a type of platform business model that enable users to collect, store, and analyze data. These platforms create value by providing access to large amounts of data, often from multiple sources, and by providing tools and resources to analyze and extract insights from that data. Data platforms are typically designed to be scalable and flexible, providing a range of features and functionalities to meet the needs of different users.
a) Examples of data platforms
Examples of data platforms include cloud-based data platforms like Amazon Web Services and Microsoft Azure, analytics platforms like Tableau and PowerBI, and data marketplaces like DataRobot and Kaggle. These platforms enable users to collect, store, and analyze data from a variety of sources, such as social media, sensors, and other data feeds. They typically generate revenue through subscription fees or pay-per-use models, where users pay for the amount of data or resources they consume.
b) How data platforms generate revenue
Data platforms can be further classified into two types: data marketplaces and data analytics platforms. Data marketplaces enable users to buy and sell data, often in a secure and transparent manner. Data analytics platforms, on the other hand, enable users to analyze and extract insights from data, often through a range of tools and resources.
Overall, data platforms have become increasingly important in today’s economy, providing a way for businesses and individuals to collect, store, and analyze large amounts of data. They have enabled the development of new business models and industries, and have had a significant impact on how organizations make decisions and operate.
Conclusion
In conclusion, platform business models have become increasingly important in today’s economy, providing a way for businesses and individuals to connect and exchange value more efficiently. The seven types of platform business models, which include transaction platforms, innovation platforms, investment platforms, social platforms, two-sided marketplaces, data platforms, and service platforms, each have their own unique characteristics and revenue models.
Transaction platforms focus on facilitating transactions between buyers and sellers, while innovation platforms enable collaboration and knowledge-sharing among users. Investment platforms connect investors with investment opportunities, and social platforms facilitate communication and networking among users. Two-sided marketplaces bring together buyers and sellers of goods or services, while data platforms provide access to large amounts of data and tools for analysis. Finally, service platforms connect users with service providers for a range of tasks.
Each type of platform business model has disrupted traditional industries and enabled new business models and opportunities. The success of platform businesses depends on their ability to provide value to both sides of the platform, while also managing the risks and challenges that come with operating in a rapidly changing and competitive environment.
Overall, platform business models are likely to continue to play a significant role in shaping the economy and creating new opportunities for businesses and individuals alike.
