The value of platforms

This one is a blow-back from the past. Although related to the online commerce website, AuctionWeb, now known as e-bay, the platform’s value was in the economic activity of online interaction and users transacting on it. The economic impact of platforms is fascinating, and has led to numerous theses and projects around it. Amazon, for example, is a platform. It’s value lies in the visibility of economic interaction by facilitating the exchange. Likewise, other market places rely on social interaction; for example, WhatsApp, which has morphed beyond a chat application and become a vehicle for commercial transactions. The reason why they keep it free for billions is the visibility in the social matrix and interaction between entities.

‘Wallets and eyeballs’: how eBay turned the internet into a marketplace | eBay | The Guardian

The value of AuctionWeb would rely on the contributions of its users. The more they contributed, the more useful the site would be. The market would be a community, a place made by its members. They would become both consumers and producers, as Omidyar hoped, and among the things they produced would be the content that filled the site.

The Guardian chooses to describe its platform as:

None of the metaphors we use to think about the internet are perfect, but “platform” is among the worst. The term originally had a specific technical meaning: it meant something that developers build applications on top of, such as an operating system. But the word has since come to refer to various kinds of software that run online, particularly those deployed by the largest tech firms. The scholar Tarleton Gillespie has argued that this shift in the use of the word “platform” is strategic. By calling their services “platforms”, companies such as Google can project an aura of openness and neutrality. They can present themselves as playing a supporting role, merely facilitating the interactions of others. Their control over the spaces of our digital life, and their active role in ordering such spaces, is obscured. “Platform” isn’t just imprecise. It’s designed to mystify rather than clarify.

The Guardian is welcome to its interpretation, and they choose to describe a problem from their sociological tinted glasses. As such, they can’t reason, fathom or grasp anything beyond a specific narrative. Nevertheless, the objective here is to put an alternative view to help you consider the other ramifications. Google is misleadingly called itself a platform, but it never was one. It’s a bundle of services with specific niches. Amazon, as above, is a clear platform (it’s marketplace) and not phallic rocket, that is a platform. The only thing eBay did was add a digital layer to the existing system of a market place – it is not as romantic as this newspaper is alluding it to be.

There are two important takeaways – network effects of people using it and “habit-shaping”. Majority of VC funding, beyond operations, goes in marketing and pushing users to increase application usage through dark patterns. The inherent value of a platform is how critical is its usage in daily life.

Here’s something more important:

These traces turn out to be very valuable. So valuable, in fact, that amassing and analysing them have become the primary functions of the online mall. Like Omidyar’s community market, the online mall facilitates interactions, writes the rules for those interactions, and benefits from having more people interacting with one another. But in the online mall, these interactions are recorded, interpreted and converted into money in a range of ways. Data can help sell targeted advertising. It can help build algorithmic management systems that siphon more profit out of each worker. It can help train machine learning models in order to develop and refine automated services like chatbots, which can in turn reduce labour costs and open new revenue streams. Data can also sustain faith among investors that a tech company is worth a ton of money, simply because it has a ton of data.

In effect, this explains the massive valuations and accumulated data. The earlier the governments realise, the better to push for data-localisation. EU understands this and has moved proactively. Other countries are wakening up to it.

So this in effect explains about platforms.

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