Parasitism in Platforms And How They Will Evolve To Become Free
Platforms can be thought of as marketplaces akin to the medieval market town where goods and services are bought and sold and future deals struck. In a competitive marketplace no single producer or consumer can dictate how the market operates or fix prices.
However, in marketplace platforms such as Justeat, Ebay, Amazon, Etsy and Uber consumers are emburdened with charges which can only be considered to be “usuriously excessive” in nature. Uber recently increased their rates to charge 25% of the cost of the ride chargeable to the driver who must foot all expenses relating to tools of the trade and pay for purchase, maintenance, insurance etc. With Justeast a takeaway is charged 14.5% of every meal that is ordered through the platform in addition to having to pay for delivery, workers salaries, rent, rates, heating etc. Add to this the bloated initial setup fee for a dedicated Justeat terminal (to allow orders to be taken through their system) and the fact that Justeast keep all the money from the sale for up to 6 weeks the platform becomes a double edged sword. In many businesses such as takeaways this seriously stresses the business operation due to cash flow problems.
Recently i spoke with the owner of a Chinese takeaway who told me that the extra business from being on the Justeat platform was not worth her efforts due to all these problems. Ebay and Amazon store owners tell me a similar story where the profits on items the entrepreneur with all their risk taking often makes less than what Amazon does from simply providing them with a digital shopfront.
This state of affairs is ripe for global disruption.
In a truly competitive marketplace, the market stall should be affordable and allow the market trader to make a living wage. This is clearly not the case with the modern platforms that are setup to wring every penny from the trader leaving them barely enough to continue trading.
Such a state of affairs can only be perpetuated due to the massive cost of creating and setting up a platform technology. Uber, Airbnb, Etsy, Ebay etc all cost a small fortune to setup beyond the initial early prototype stage. Furthermore, once outside finance gets involved, maximising ROI becomes the primary driving force for every platform. However, platforms as a service are themselves susceptible to disruption as costs of setting up become lower and access to an audience becomes easier via smartphones and IoT connectivity. Once this happens, platforms themselves open up a vast untapped potential of human activity for commercial and non-commercial exchange of goods and services on a level unseen in human history.
As i see it, the current state of affairs with “juggernaut platforms” can only hold sway temporarily due to the digital nature of platforms that lend themselves to lower costs of ownership that could easily be affordable to any micro-niche.
Once this threshold has been reached in the transition from the “juggernaut platform” to the “almost free platform-as-a-service” we are likely to see multiple platforms appear within every community, withing every town or city as most commercial transactions are local or semi-local. All that is needed is a localised version of the Justeat or Uber platform that can be set up and administered by local entrepreneurs making a “fair” income and providing a service that local people and local economies would derive most benefit from.
Enter The Game Changer: Distributed Platforms
A distributed platform is a platform that serves a niche or a distinct community or is in some way able to leverage its local connections. A distributed platform would charge a fraction of the transaction fees currently taken by the likes of Uber and Amazon yet it would enjoy the support of the community because it is primarily there to serve their interests and anyone is able to setup their own version and compete head on further adding to the value to the local community.
That’s all fine in theory but one major obstacle remains: lowering the barrier to entry onto the digital landscape for a newcomer or ideally a multitude of newcomers. Well that could quite easily change if a technological breakthrough existed that could not only lower the barrier to entry but remove it entirely in one clean move where access to millions of euros was no longer a pre-requisite. Platform businesses are feasible today because of the ease with which one can create a network and the negligible cost of having access to that network. Now imagine if the technical know-how to creating your own ad hoc platform became negligible too with all the benefits belonging to the owner we would arrive at a truly democratic marketplace where each market not only had participants competing against one another but the markets themselves operated against each other. In such a scenario the marketplace that had the best knowledge and connections to their audience would be the winner. This would in time lead to a decentralisation of power and of course the much idealised and talked about but never reached goal of distribution of wealth amongst society.
This is in stark contrast to todays platform businesses which agregate wealth further into the hands of the lucky few to whom everyone else much pander to for their mere attention. The juggernaut platform is destined to disappear as quickly as it came. How this is likely to pan out will be subject of future articles.
Knowledge is power.