Platform markets are multi-sided, create value through network effects, and are asset-light, creating value externally, rather than internally.

Platforms can be digital or physical.

An old school example of a platform was a marketplace or a Bazaar or farmers market, a place where buyers and sellers of services or commodities meet to exchange value. The owner of the Bazaar in this case is the platform operator.

Here is what makes platforms distinct from products

  1. Platforms connect two or more participants

  2. The two or more sides are exchanging something of value on platforms

  3. The platform then creates rules of engagement - royalty arrangements, legal arrangements, arbitration agreements, dispute arrangements.

  4. The platform then runs the underlying infrastructure that facilitates the transaction.

  5. Platforms have both direct and indirect network effects.

  6. Platforms are asset light as they're just facilitators of a transaction/value exchange

Uber, for example, connects riders to drivers, the value exchanged is a ride. Uber handles the transaction end to end. The app and the complex backend of ride matching, surge pricing etc that Uber has built to facilitate this transaction is the underlying infrastructure. Uber doesn't own any of the cars. More riders bring in other riders, but also more drivers bring in more riders because it becomes the most convenient solution to getting around.

To contrast this with products, they're generally one sided markets, where the consumer directly extracts value from the product. They may have network effects to some extent but it's usually direct network effects. Nokia for example was a product company and never transitioned into becoming a platform like what Apple created with iPhone.

Other examples of platforms