The best platform thinking in 2014
How to grow like Whatsapp and instagram with network effect marketing
Welcome to the age of the zero-dollar marketing.
Airbnb, Instagram, Facebook, YouTube, Snapchat.
Each of these networks piggybacked on top of another pre-existing network.
Much so-called ‘growth hacking’ relies on testing of cause-and-effect and optimization of funnel conversions.
The classic chicken and egg problem cannot be solved by pulling in users and optimizing conversions. Before network effects set in, users will neither get activated nor will they get engaged.
Piggybacking on a thriving network works wonderfully as long as your platform is complementary to that network and delivers additional value to the users there.
Paypal-eBay, Zynga-Facebook, Facebook-Spotify, Youtube-Myspace, AirBnB-Craiglist.
But not all piggybacking is successful.
Being first to piggyback a host network is the most important determiner of success. There is typically a time window while these strategies work.
-> Social media sharing economy platforms
Traditional Media worked like a pipe. There are few better representations of a pipe than TV, radio and newspapers.
Youtube, podcasts and Huffington Post change this model to a platform model.
A hotel is in the business of selling accommodation. Hence, to scale, a hotel usually invests in creating more rooms. It owns all the rooms and optimizes its business to maximize occupancy.
Airbnb is in the same business, except that it doesn’t own any rooms.
The three shifts characterizing movement from Pipes to Platforms
Market: Shift from Customers to Producers
Competitive Advantage: Shift from Resources to Ecosystem
Value Creation: Shift from Processes to Interactions
Data Scientists are the new MBAs.
The Co-creator, and not the Customer, is king in the age of network effects.
Ecosystems are the new scale and the new source of competitive advantage.
Platforms create value through ecosystem interactions unlike Pipes that relied on in-house processes.
-> Google crawlers, Uber drivers and Instagram selfies Platform Economy
CORE VALUE UNIT: THE FUEL THAT RUNS THE PLATFORM ECONOMY
At any given point, a platform is only as useful as it’s ability to match it’s units to the filters that consumers have.
THE UNIQUE CHALLENGE OF PLATFORM BUSINESSES
But value units are especially interesting in the case of platforms. Unlike pipes, platforms don’t control quality and quantity of their core value units. Platforms are information factories without control over inventory.
DISTRIBUTED PRODUCTION IN AN AGE OF PLATFORMS
Successful platforms create the right tools, incentives and rules of participation to attract producers who create units reliably and regularly.
BIG OR SMALL, IT’S ALL ABOUT DATA!
Consider how a YouTube video is served to you.
The video (Core Value Unit) has various forms of data associated that include information on WHAT it is (title, description), HOW GOOD it is (votes etc.) and WHO it can be served to (explicit content etc.).
FILTERS: PUSH AND PULL
Filters, essentially, are data about what the consumer finds relevant. For a location-based application, the location is a filter. For search engines, search queries act as filters. The News Feed creates a filter based on past actions and signals. The Twitter feed’s filter relies almost exclusively on recency.
RUNNING THE PLATFORM ENGINE
The trie framework platforms
Are you building the Airbnb for X, the Uber for Y or the Quora for Z?
Most platforms and networks fail when the startup usually doesn’t control the value that is being created.
Building great technology is absolutely useless unless you can encourage interactions on top of it.
Consider Airbnb without hosts and travelers transacting, or Medium without any writing and reading going on.
3 layers: TRIE framework
Infrastructure, Conditions, Interaction.
The infrastructure and conditions define the kind of interactions that are allowed on the platform.
Value is created and consumed when producers and consumer interact.
Solving the chicken and egg problem is as much about clever marketing as it is about building the Tools and Rules layer in a way that removes friction in usage and encourages interaction.
Twitter’s 140 character limit is a brilliant Rule, in hindsight, as it enables more people to participate because of the much lower investment required in creating content.
If you’re building a platform, you provide the Tools and Rules for Interactions to happen.
Real world constraints on digital platforms
TaskRabbit may suffer from a low interaction limit and will need high liquidity within a short geographical distance to work.
The success or failure of a new platform is heavily dependent on its ability to guarantee the creation of interactions in that market.
Why social networks that pay you may be a bad idea
Social networks like Facebook and Twitter leverage free labor from a global talent pool to deliver a business that has near-zero marginal costs of value creation.
Why New Payment Mechanisms Fail To Take Off
Unless there are enough payers using a particular mechanism, there is no incentive for a receiver to invest in that particular mechanism. And vice versa.
An 8 minute video on Platform Thinking
– An overview of the shift from pipes to platforms
– The three critical components of a platform
– Industries that are most likely to get disrupted and shift to platforms
– Characteristics of firms that get left behind
– Factors that push an industry towards platforms
– A brief overview of aspects of platform architecture beyond technology
City-as-a-platform: Applying platform thinking to cities
Municipalities are beginning to go digital, both for internal workflow processes and for new ways to engage with their citizens.
Cities have traditionally created islands of software that fail to communicate with each other. Police departments had one kind of software. Libraries had another.
Today, Instead of separate islands of software that don’t communicate, cities must imagine a platform that supports and interconnects all the digital functionality the city needs to serve internal operating requirements and to engage with citizens.
Engineering-as-marketing: How startups transform marketing by creating value to educate their prospects and lead them to your prrducts.
Free tools are better lead gen than traditional online ads:
– Hubspot offers a free marketing tool to grade your website seo and get quality prospects emails to followup.
– WP Engine offer a free speed testing tool to differentiate from other hosting services
– DuckDuckGo, a privacy-based search engine, wrote blog posts about search privacy and created a micro-site, DontTrack.us, that showed how Google tracks your searches and why that can harm you.
– RJMetrics is currently offering a free 14 day trial for visitors of CohortAnalysis.com
Uber: The feedback loop disrupting transportation
When Uber was valued at tens of billions of dollars, there was significant criticism from valuation experts and an equally compelling response from one of Uber’s earliest investors.
Uber is a classic two-sided marketplace where more cars on the network attract more travelers and vice versa.
More drivers equals shorter pickup times
More usage leads to higher coverage
Greater liquidity leads to better prices
Will peer lending platforms disrupt banking?
The answer to this question may lie in their ability to build a data-driven feedback loop.
Unlike banks which borrow and lend, while acting as gatekeepers that benefit from the spread, peer lending platforms connect buyers and lenders directly, bypassing the inefficient gatekeeper, much like Amazon’s Kindle Publishing bypasses the traditional editorial control of publishing houses. To their disadvantage, though, peer lending platforms do not have the trusted brands that regulated financial institutions do. But a data-driven feedback loop in peer lending may hold the key to ultimate disruption of the banking industry.
With greater curation, the quality of the core interaction improves. And with greater reliability (as in the case of Airbnb) and higher value generated (as in the case of peer lending platforms), the platform moves from an early adopter group and gains mainstream adoption.