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Freeman Cebu Business

Platform business model

FULL DISCLOSURE - Fidel Abalos - The Freeman

The community pantries set up in several major cities in the country caused quite a stir the past few days.  By the reactions this concept generated, clearly, the citizens embraced it. Surprisingly though, some government officials saw it otherwise. That this is the handiwork of the communist ideologues.  Probably, having that premise, they are requiring proponents to get a permit from the LGU if they wish to undertake it. 

Be that as it may, the best thing that our government officials must do right now is to recognize the fact that they need help. So, while waiting for them to realize it, let us learn something from this concept and know whether this is really a novel idea as some purport it to be or has been existing for years or decades. 

For all intents and purposes, a community pantry is a platform. The only difference when compared to huge money-making and very successful platforms is that, it is not a business outfit at all.  Born out of love, it is a bridge that connects those who have and those in need with no monetary consideration whatsoever.

As a business model, platforms are so dominating. However, make no mistake. The platform business model is not about the technology or the software. A platform business model is all about value creation. The software is just the underlying technology that propels it. Just like the community pantry, the value is created by facilitating exchanges between two interdependent individuals or groups, usually the producers and the consumers. In order to make frequent exchanges happen and consequently create a huge network of both providers or producers and consumers, big platform companies are using technology or software. Simply put, platforms create a place where users (both consumers and producers) can connect, interact and transact. 

Today, these platforms are household names. In fact, to some, they could hardly live without them. Notably, Google, Apple, Facebook, Amazon and Alibaba are easy recall. Other successful platforms and startups include eBay, Instagram, YouTube, Twitch, Snapchat, Slack, WhatsApp, Waze, Uber, Lyft, Airbnb, Pinterest, Square, Social Finance, GitHub, Kickstarter and ZocDoc.

As a testament to this business model’s domination, in just ten years, the composition of the top five global companies changed dramatically. In 2008, the top five were PetroChina, Exxon, General Electric, China Mobile and ICBC.  In 2018, the top five were Apple, Google, Microsoft, Amazon and Facebook. Markedly, these companies are all based on the platform model.

Undeniably, they are just so dominating that more and more venture capitalists that are looking for promising startups are not looking for opportunities somewhere else. The truth is, one of the fast rising companies, Neighbor, got a boost from venture capitalists. A platform business model, it operates a self-storage marketplace. Probably buoyed by the ongoing pandemic, its revenue grew five times this year.

Creatively, Neighbor developed a “unique peer-to-peer model.” It connects “renters” in need of storage space with “hosts” in their neighborhood. Among neighbors who are willing “to lease storage space in their home, garage or even driveway.” It makes money “charging a service fee (a sliding-scale percentage) of each rent.” It said, “Its algorithms provide suggested rental fees for hosts.” 

Here is the catch, Neighbor claimed that “self-storage offered on its marketplace on average is priced about 40% to 50% less than traditional storage facilities.” Why is this pricing possible? The answer is too simple. Neighbor’s unique model “aims to repurpose under-utilized or vacant space — whether it be a person’s basement or the empty floor of an office building — and turn it into storage.”

Simply put, to the owner, it is earning something out of an idle or unutilized or underutilized property. Therefore, any amount is an add-on. To the renter, it is big savings. Apparently, mutually beneficial, thus, bound to last. 

Yes, platform business models will continue to dominate. And to anyone who is game enough to join, listen to Applico, LLC’s (a New York City based consulting firm that provides services for traditional enterprises adapting to a platform business model, to be successful.in this undertaking) advise. “First, you must attract users to join, then you aid them by matching them together by providing the technology to facilitate the transaction and establishing the rules that govern the network in order to build trust and maintain quality.” 

Indeed, if you have the urged to try it, just listen to what the pundits said.

LGU
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