Online platforms: Undergoing revolution and making change

by Nicolas Glady , 30.01.17
Follow

Nicolas Glady, Professor of Marketing and Chief Digital officer at ESSEC Business School, explains how online platforms such as AirBnB, Uber and Facebook and disrupted and revolutionized the world of online platforms.

AirBnB, Uber, Facebook. We all know the names of these major companies that have turned our economy and the world on its head. But what do these “unicorns” share in common? And to what extent is what they offer a fundamental revolution in our economic system?

These companies are platforms. This means that they offer content or a service which they did not initially create: AirBnB owns no apartments – but is the first real estate platform in the world. Uber has no cars – but has completely turned upside down the transport and taxi sector. Facebook does not create any content – but is the leading source for information for young Americans.

We’re all players in the sharing economy

A platform is a reversal of logic. In the world of yesterday, content or services were produced by institutional players or professionals. Today, it’s within everyone’s reach to contribute to the sharing economy. With AirBnB, we can put our apartment up for rent when we leave on vacation. We can even become a taxi service thanks to Uber to earn a little extra every month. And we can post content on Facebook to share it with our close ones and the world.

Economy of scale on the demand side

As the book Platform Revolution so well explains, what has changed with the sharing economy is the way of organizing things. Before, a large company typically saved on costs through economies of scale on the side of offer. By proposing s standard product to the greatest number, production and distribution costs decreased over time. The most obvious example is that of the transport sector: if a rail company already transports millions of people every day, transporting one more person costs the company virtually nothing extra…The big challenge for Uber is not only to have the greatest number of clients, but above all to have a maximum number of chauffeurs; for AirBnB to have a maximum number of apartments to rent; and for YouTube to have a maximum number of youtubers.

The sinews of war: volume

In the battle of the platforms, the bigger you are, the stronger you are. If tomorrow I created a competitor to Facebook, more respectful of using data and one’s private life, I would, however, have a lot of difficulty in finding new users because I wouldn’t have the activity and content that Facebook already possesses: because if internet users use Facebook, it’s certainly because they want to have access to the content of other contributors. Already having a great volume of activity is therefore a competitive advantage which is very difficult to undermine! The world of platforms is a world of natural monopolies, where the winner takes all, and where the platforms already there will be increasingly difficult to attack.

Video (please select English subtitles)