Section Two - Platforms, a definition :: Crash Course Seven - Stakeholders and platforms

Section Two - Platforms, a definition

An important and a bit boring story about what a platform exactly is (12 minutes)

In section one we learned about identifying and assessing stakeholders. This was very basic and a lot of common sense. To become good at it, you need to practice. We will do this in section five. The context of section five are platforms. In our modern, digital world, we think it is good to understand a bit more about platforms. That is why we try to combine these things. In section two, three and four we will look at platforms. In section five we will try and do a stakeholder analysis of an imaginary platform.

But first, what are platfoms exactly? And why do they matter?

Meaningless chatter

There are a lot of people talking about the platform economy. They talk about Booking.com, Facebook, Uber, Airbnb, IaaS, PaaS, Amazon, sharing economy, gig economy and so on. Most of the time it is pretty vague.

Just watch this one minute video on the platform economy that will tell you exactly nothing.

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So, before we start talking about platforms and 'the platform economy' let's try to be more precise.

Let's start with the boring but crucial part: a definition. We must first know what we are talking about before we can form an opinion about it and look to the future. When you read books about platforms or the platform economy, the first thing you notice is that there are quite a few attempts at definitions. The second thing to note is that these definitions are often opaque or confusing. For example, the platform economy is often used in the same breath, or as a synonym for the sharing economy. Later in this crash course we will see that these are really completely different things.

A definition of the platform society that is common is the following:

"A technological, economic and sociocultural infrastructure for facilitating and organising online social and economic traffic between users and providers, with (user) data as fuel."

We have read this definition a few times (like, ten times) and we must say: it is pretty good. At the same time: do you feel it? Can you read it and reproduce it? We can't. We think this definition does not immediately provide a clear image of what platforms are. We are not immediately interested. We do not immediately have a clear picture of the framework, the scope, the impact or the different platforms.

So, let's start with this definition and try to breathe some life into it.

Painting a picture

We read a lot of books on platforms. We read a lot of definitions and we made a picture of it. Based on this picture, we will explain what platforms are exactly. The picture looks like this.

Crashcourse_Five_Architecture Platforms.png

Maybe the image looks a bit small on your screen, that's why we have the same image as this PDF (CC7_platform_picture.pdf) or this PowerPoint (CC7_platform_picture.pptx). It is best to print it out and place it next to your screen. Or maybe you can hang it on the wall.

If you want.

To explain this picture we will cover the following topics:

Infrastructure/architecture;
Characteristics;
Categories;
Mechanisms.

Infrastructure/architecture

Let's start with the middle part: architecture (also called: infrastructure).

The infrastructure (or architecture) of platforms is shown in the bottom centre of the picture above (or the one you printed). This part is divided into several blocks. At the very bottom you have the basic infrastructure platforms. You can consider these the same way you consider an electricity network or a road network. They are preconditions for so-called 'higher platforms.'

Without the web there would be no Facebook.

These basic infrastructure platforms are currently the internet and the web, but that too will change someday. You sometimes hear people talking about 'the internet' as if it will always exist, but that's highly unlikely. Blockchain, for example, is an interesting candidate for a new infrastructure platform.

New platforms have been built on top of the basic (or bottom) infrastructure platforms, which are also (kind of) infrastructure platforms. This concerns operating systems, such as iOS (iPhone/iPad) or Android and so-called cloud services, such as IaaS-PaaS-AI. Companies like Amazon, Microsoft, Oracle and Google offer users services such as server capacity (IaaS), database capacity (PaaS) and nowadays, also all kinds of artificial intelligence applications (for example, text or image recognition). In this way, higher platforms can build new services very quickly.

For example, if you have a great idea for a new app, you can program it on iOS, make it available in the App Store, distribute it through the internet and get scalable computer capacity (and some AI) from Amazon.

This also means that there are certain players who are much more powerful than others! These are dominant platforms that people use. For example, Facebook, Google, Amazon, Uber, Taskrabbit, Airbnb and Dutch weather-app: 'buienradar.' Some platforms are an 'end point.' Other platforms actually form a platform themselves.

For example, Facebook offers the possibility to build other platforms on Facebook. Uber, on the other hand, does not offer that option. You can't build a pizza delivery service on Uber yourself. Uber does that themselves (Uber Eats).

It is also important to know that the platforms together form an ecosystem with large and small players. For example, you can log into Zoom (a video conferencing platform) with your Facebook account. Also, mostly, a lot of data is exchanged between platforms. And there is a lot of sharing. For example, you can share your Spotify activity on Facebook.

Below, you can see an overview of the platforms of Fernando van der Vlist (from 2016, so already a bit dated) that makes it clear that there are large and small players and that there really is a large ecosystem.

Fernando van der Vlist.png

(Picture Fernando van der Vlist (2016) A larger picture can be found here)

So, in short, the architecture of platforms consists of basic platforms (like the internet) with, on top of that, other pre-conditional platforms such as operating systems and server capacity and databases on which other platforms are built (such as Facebook). Other platforms can be built on those platforms. Together they form an ecosystem in which some players are a lot bigger then others.

A few researchers in the Netherlands tried to find out what would happen if you block all connections to Amazon, Apple, Facebook, Google and Microsoft. The result was that almost no web services could be used anymore. Even local web services (shops, cities, theatres and so on) run on these platforms.

(Picture from Twitter by Tom Eastman)

Characteristics

Okay, so we looked at the architecture (or infrastructure). Now, let's take a look at the characteristics of the platforms. Looking at these characteristics helps us to understand how these platforms work. Here we go.

Ecosystem. We have already said it, but we would like to repeat it again: the platforms work together in an ecosystem. This is the only way they can be understood;
Data. It's all about data. Most of the time the revenue model has to be understood in terms of data. Platforms share data, but they also make data available to each other. Sometimes they also make data available to the community. By looking at the data and data rules (what is collected, shared and with whom) you start to understand the platforms better;
Coded worldview. The platforms are often market leaders. They match supply and demand, but they do not do it neutrally. They do this based on a certain worldview, which they have translated into code. Understanding those principles is crucial to understanding the platform. However, the platforms are often unclear about their code, especially because this information is important for their competitive position or because there is a difference between their 'message' and their operation;

A simple example: if you order an Uber, does the driver see your ethnicity? Does the driver know your planned route? These simple decisions are very important in terms of fairness and discrimination and far from neutral.

Network effect. Platforms need a network effect to be successful. The network effect works as follows: if a platform gets more users, services will be better, that will draw even more users, which will lead to even better services. This way a platform grows exponentially. The result is, however, that only a few winners remain. The network effect also works the other way around, so you can lose your market share really fast, especially if your company consists only of software (which is easy to 'copy'). Understanding this effect also helps you understand the operation of the platform (growth, growth, growth and fear of competition);
Transaction costs are reduced. An important feature of platforms is that they are able to reduce transaction costs. That is their unique selling point. These costs apply to both money (for example, Uber / Airbnb) and effort. Selling secondhand stuff used to be very complicated, you had to go to a market or wait for Queen's/King's Day or place an advertisement. Now it's click, tap, swipe, tick!

Another example, insulting someone used to be difficult. First you had to write a letter and send it to the newspaper or physically go somewhere with your message. Now it's click, tweet, swipe. Another person offended! To understand platforms you have to look at the reduced transaction costs;

Global. Platforms operate worldwide. This has consequences for regulations (which are often national) and paying taxes (which they often do not);
Prosumers. Not only do platforms match users and providers, they also make these roles very fluid. Consumers are producers and vice versa at the same time (for example, YouTube). The strict thinking in the separation of these roles no longer works.

Mechanisms

Finally, let's look at the three mechanisms that all platforms use:

Commodification. Transforming objects, actions and ideas into tradable goods and products. That sounds like a complex sentence, but think of examples such as: conversations become data (WhatsApp). Free time becomes a paid job (TaskRabbit). Knowledge becomes a value proposition (LinkedIn). Empty real estate become rentable space (WeWork). Empty rooms become hotel rooms (Airbnb);

A great example of commodification is linguistic capitalism. The way that words through Google AdWords have becoming products with a price. First it were only written words (in the Google Search Bar) but with the rise of the smart speakers even our spoken words are commodified (more in the additional materials).

Datafication. Every action on the platform is converted into data. This is used to optimise the platform, but is often also part of the revenue model. The exact datafication is unclear. There is a shadow layer (optional suggestion: read the essay on surveillance capitalism which is part of crash course two).
Selection. The platform also does all kinds of selection mechanisms. It is unclear exactly how that works. This selection often takes place on the basis of reputation (ranking) and by the public. Where previously the selection was made by art connoisseurs, journalists, culinary critics, film connoisseurs, the audience now plays a large role. However, how that works is very unclear (for example, GoFundMe selects charities, but on what grounds?). Trending topics are presented on Twitter, but why is something trending? There is a lot of criticism on selection. Whose goals are served? Who is selected? Why? Does this lead to mediocrity?

These three mechanisms are very important to understand. It also means that non-profit platforms can still generate very commercial behaviour among users or fierce competition in society. So, if the government created a loal version of a platform that works like Airbnb, (one that pays taxes and is non-profit), then still there is competition between house owners.

Take aways from section two:

If you want to talk about platforms, you have to understand what they are;
It is most important understand the infrastructure, the characteristics, the categories and the mechanisms;
It is most important to know that platforms work in an ecosystem and that they are never neutral;
A platform is a coded worldview;
The impact on society is best understood if you look at the mechanisms, especially selection and commodification.
Even non-profit platforms can generate very commercial behaviour.

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