What is a platform business model? (A definitive guide)

By Indeed Editorial Team

Published 28 March 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

The platform business model is becoming increasingly popular and has an effect on every aspect of the human experience. It has transformed how people interact with family and friends, how they listen to music and watch movies and how they buy and sell. It also presents a business model based on connecting people and improving various forms of human relationships. In this article, we explore the nature, benefits and examples of this innovative business approach.

What is a platform business model?

A platform business model creates value by bringing people together. This business model is valuable for its ability to connect people who want to engage in various kinds of relationships. This can be a group of buyers and sellers, students and instructors, family and friends, employers and employees, content creators and audiences, or investors and stock traders. Platforms generally don't produce goods, services or content. Instead, they generate profit by growing and managing a community of people with similar interests.

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Benefits of a platform

The platform business model has transformed the way businesses operate with the help of modern technology. Here are a few benefits of following this business model:

  • Quick setup: Operating a platform has few start-up requirements. You can automate most of its operations, making it faster to develop and launch.

  • Regular updates: A platform business model gives you feedback in real-time and employs technology that can quickly implement user recommendations.

  • Easy scalability: Platform businesses don't own the resources that create the value, which allows them to scale rapidly. Their growth is independent of resources or capital.

  • Self-sufficient community: Platforms grow their community organically. This means users often carry the burden of expanding the community for their own benefit, while the business gets to spend less on advertising.

  • Efficient operation: The platform business model can improve productivity, reduce costs, provide flexibility and accessibility for employees.

  • Trusted environment: Platform communities facilitate trust among members than any other business model, as users can easily connect and verify information about each other.

  • Global reach: A platform business employs innovative technology, which allows it to reach people globally, giving users easy access to an international market for their product and service.

  • Rapid innovation: Platform businesses can use technology to advance various aspects of human interaction, which may transform how people conduct business for the better.

Categories of platform business models

All platforms have the same basic business model, but they still have some differences. Four categories of platform models are becoming progressively prominent in the business world.

Aggregation platforms

Aggregation platforms compile a broad range of relevant products and services and help users purchase the most relevant ones. These platforms aim to encourage and foster transactions. You visit them when you have a need, which you express, get a response and make a purchase. Aggregation platforms act as an intermediate between sellers and service providers and buyers. They create the rules for transacting and regulate every transaction. Examples of this platform include online marketplaces, payment gateways and investment exchanges.

Social platforms

Social platforms support engagement among people with common interests. Here, people stay connected and maintain long-distance communication through the internet as they use these platforms. The platform owners try as much as possible not to interfere with how users engage with themselves. Instead, they focus more on encouraging and fostering these engagements. Some of these platforms require members to pay for a few extra services, while others run paid adverts on their sites. Examples of this platform include social media sites, dating sites, social-network games and direct messaging services.

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Mobilisation platforms

Mobilisation platforms organise people to work together to achieve something beyond the capacities of one individual. They provide a means of collaborating and communicating between work teams working from different physical locations. Some physical work environments also include these online workspaces to boost seamless communication among team members. They promote longer-term relationships rather than focus on isolated and short-term transactions or tasks. Examples include popular job boards, content management systems, online workspaces and direct messaging services.

Learning platforms

Learning platforms foster learning by connecting instructors with learners to share insights over time. They focus on providing quality educational material to enhance the skills and knowledge of their users. Some learning platforms allow instructors to issue certificates to participants after they finish a learning course. Others provide learning videos, audio and articles that users can regularly access for free. Examples of this platform include e-learning sites, podcast streaming sites and other content publishing sites.

8 types of platform businesses

Here are eight common examples of platform business and the type of value exchange they perform.

Service marketplace

A service marketplace connects service providers and customers. Here, customers can search for service providers and ask them to send a quote or they can purchase or book the service online. This type of platform is one of the fastest-growing industries in the marketplace sector, which delivers highly skilled services, executes trial tasks, share assets or offers essential services. You can find many examples of this platform online, connecting you with freelancing, laundry, travel and education service providers.

Product marketplace

A product marketplace platform connects buyers and sellers of various or specific goods. It exposes a potential buyer to multiple vendors, who display their stocks for sale and offer delivery services, while the platform handles the payment process and dictates transaction guidelines. Most businesses operating this platform run websites and mobile web applications that have become a typical shopping solution for customers worldwide. They make shopping easy, providing a trusted environment for buyers and sellers and saving both parties money by excluding the middleman.

Payment platform

Payment platforms provide e-commerce businesses with a payment gateway for processing payments from their customers. This gateway is a technology merchants use to accept debit or credit card purchases from their clients. It reads and transfers payment information from a customer to a merchant's bank. Many payment processors offer their clients a gateway service and merchant account, but with a payment platform, merchants have more than one payment service to process payments. This affords their customers a wide range of payment options.

Investment platform

An investment platform allows investors to buy and hold a range of investments in one place. It often offers extensive analysis and data, such as investment news and technical articles, historical and recent performance numbers and breakdown of the investment techniques adopted by fund managers. Here, investors can buy and hold stocks, shares, cryptocurrencies and other financial instruments on the web or through mobile applications. This platform often offers execution-only services, meaning they don't give professional advice and investors take up any investment at their own risk.

Related: How to become an investment analyst (with steps and skills)

Social networking platform

Social networking platforms use internet-based social media sites that allow users to stay connected with friends, family, colleagues, customers or clients. Some networking platforms aim to foster certain kinds of connections, like a social media platform for job applicants and employees or social networks for artists and art lovers. They also offer marketers and brand promoters the opportunity to increase their brand recognition and loyalty, allowing them to engage directly with their customers in real-time. A brand can use a social networking platform to show its customer service level and enhance its relationships with customers.

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Communication platform

A communication platform provides software solutions that enable external and internal messaging. It uses multiple channels, including phone calls, video conferencing, team messaging and task management. Some recent models offer file sharing, project management and customer communication services. With remote work becoming a trend, this platform has become increasingly popular, providing an online workspace for effective, secure employee communication and project management. Messaging platforms that offer emailing services also allow marketers to reach potential customers and maintain contacts with existing customers.

Content platform

A content platform allows content creators to share their content with fans and subscribers. These contents can be articles, blog posts, graphic designs, photographs, songs, podcasts and videos, which users can comment on and share across the web. Some platforms allow content creators to earn from their work by charging subscription fees and accepting advert placement agreements. Some content platforms also require creators to pay to use their website and other online services that expose them to more subscribers and audiences.

Related: 9 essential content writer skills (with useful tips)

Social gaming platform

A social gaming platform offers gaming services that allow players to play through social media. They employ web and mobile applications that share many features of traditional video games, but they also allow multiple users to play and interact from different locations over the Internet. This platform aims to build a growing community of players who constantly engage with the gaming application to meet new players and attain a high status and recognition in the online gaming world.

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