chapter  3
11 Pages

What is a platform business?

This chapter proposes to define platform businesses as 'businesses creating significant value through the acquisition and/or matching, interaction and connection of two or more customer groups to enable them to transact'. Platforms need to design their pricing strategies in such a way that overall value for the platform is maximized. The three main business types identified were: market makers, audience builders and demand coordinators. Economists also showed that since platforms were connecting two markets, they had a unique ability to price differently from traditional businesses. In fact, they noticed that platform businesses were able to offer free services not simply on a temporary basis or during promotions, but on a sustainable basis. Platforms can connect consumers, or businesses, or a mix. The platform ecosystems leverage the interplay between the various business models that are part of the ecosystem to reinforce customer propositions and create stickiness, often with spectacular success.