Product or platform?

More and more we see software products that can be categorized as platforms. There are many examples from big tech companies such as:

  • Google, which with two products (Search and AdWords) created a platform connecting people who search information on internet to people who want to advertise things on internet.
  • Facebook, that started as a platform in which friends found each other and exchanged information, and then became a platform in which advertisers can talk to people through ads and fan pages.
  • LinkedIn, a platform for professionals, companies and, most recently, advertisers.
  • Apple, that connect software developers with iPhone, iPad and Macs with their AppStore. Another Apple platform is iTunes, connecting media producers with people interested in music, films, series, and books.
  • Amazon Kindle, a platform that allows publishing houses or authors to publish books for people interested in these contents.

By the way, some of those companies have more than one single platform such as Google, Apple and Amazon.

Besides those big technology companies, there are also the most recent examples:

  • Uber, connecting drivers to people who need transportation.
  • Airbnb, that connects owners of properties for short-period rental to people who want to rent properties in such conditions.
  • Bitcoin, a digital asset and payment system. The more user it has and more companies take Bitcoin as payment, the better.

There are also examples of platforms that are not necessarily based in technology, like shopping malls, which places stores, restaurants and movie theatres next to people who want to buy, eat and have fun.

What are platforms?

Platforms are systems that get more valuable as more people use them.

In other words, they are systems strongly based in the concept of network effect. Network effect is the effect by which a given software is more valuable when more users use the software.

Android explained as a platform

There are two types of platforms:

  • Single-side platforms: are those that, the more users they get, the better. Using an old example, the FAX machine. It was not worth having one if only one person would use it; the more people using it, the better. The same is valid for social networks (Facebook, Twitter, etc.).
  • Cross-side or multi-side platforms: those where it is necessary for two or more different groups of people that use the platform in distinct ways and that benefit from the different ways that each group uses it. This type can be divided into three categories. Technological platform, in which the platform is the operating system and, on one side we have the user and, on the other, we have operational system developers (Linux, Windows, and Android). Exchange platform, gathers buyers and sellers (eBay, Uber, and Airbnb). Content platform, the content is the focus and monetization usually takes place through ads (Google, Facebook, and news portals).

The following is an example of a technological platform with 5 sides:

It is important not to confuse the concept of platform in the product context with the concept of technical or computer platforms. A computer platform is any computer environment where software applications are going to run at. In the product context, as we defined previously, we name it as a product platform when there are gain to users the more users are using the product.

In my next post, I’ll talk about software product management.

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