Platform Scale: How an emerging business model helps startups build large empires with minimum investment by Choudary Sangeet Paul

Author:Choudary, Sangeet Paul [Choudary, Sangeet Paul]
Language: eng
Format: epub
Publisher: Platform Thinking Labs
Published: 2015-09-14T21:00:00+00:00

DOES THE PLATFORM CONVERT CONSUMERS INTO PRODUCERS?

User-generated content has come a long way on the Internet. At one point, the 90-9-1 rule was often quoted to explain the low levels of contribution in online communities. Online communities were supposed to have 90% of users performing only consumption actions, 9% performing curation, and only 1% performing creation actions. Over the last few years, platforms have emerged with much higher percentages of producers, especially owing to the rise of smartphones, which allow a larger user base to create more often.

The success of a platform still hinges on its ability to maximize the percentage of producers. In its initial days, a platform must focus on attracting producers. But once a minimum number of producers are on board, a second cycle must be started: the platform needs to convert consumers into producers. Two mutually reinforcing mechanisms must work together. Producers coming on board attract consumers, and consumers, in turn, are converted to producers. This ensures that the platform constantly scales the number of producers on board.

HOW DOES THE PLATFORM COMMUNICATE FEEDBACK FROM CONSUMERS BACK TO PRODUCERS?

Producers participate repeatedly on a platform only if they are repeatedly encouraged and motivated. This is achieved through feedback. Every action taken by a producer involves effort. Producers are encouraged to participate repeatedly on a platform when they receive appropriate feedback for their effort. Feedback may take various forms. Producers on Twitter get explicit feedback in the form of retweets and favorites. Sellers on marketplaces may receive ratings and reviews that help them stand out for future transactions. Communicating feedback from consumers to producers is the single most important driver of sustainable and repeatable interactions on the platform.

PLATFORM SCALE IMPERATIVE

Producers power the platform engine by creating value on the platform. The platform must ensure that it bakes in incentives that encourage frequent participation, reward desirable behavior, and discourage undesirable actions. The effectiveness of an incentive should be measured by its ability to power the core interaction and drive higher value creation on the platform.

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