Thoughts on platform products!

This time let’s talk about my views on platform products. Due to my work experience, I haven’t had much opportunity to get in-depth contact with and understand a platform. Here I will sort out some of my thoughts as a bystander.

Definition of Platform

Content (goods, services, articles, videos) is produced by producers (manufacturers, distributors, writers, developers, live streamers) and provided to consumers (buyers, readers) through the platform . Consumers consume (pay, collect, forward) the content and give rewards to producers. The essence of the platform is to obtain corresponding value by improving transaction efficiency.

Based on the above definition, Baidu Search is not a platform because search has consumers but no producers, while Baidu's paid ranking is an advertising platform. JD.com is not a platform, it is a producer (channel) because it gets rewarded from the price difference of transactions. Taobao is a platform.

Characteristics of the platform

In the past, markets were platforms; modern shopping malls are also platforms; and on the Internet, there are a large number of product forms, both large and small, that claim to be platforms. But I think only those with the following characteristics can be called platforms, such as:

1. Bilateral long-tail win-win situation. First of all, bilateral transactions are long-tail, and both parties need a platform to facilitate transactions. A platform built on a single oligopoly will not work. For example, Yitao.com integrates several e-commerce websites; it connects to the food delivery navigation of Meituan , Ele.me, and Baidu Takeaway; it connects to the map applications of Didi, Yidao, and Shenzhou; it connects to the life navigation portal of 58 and Ganji. Secondly, both sides need to achieve a win-win situation. Producers get more traffic at lower costs, producers get more profits (at least not less profits), and consumers get cheaper and higher-quality content.

2. The power effect of scale and profit. When the number of producers and consumers is small, the value is lower than that of general products. As the number of producers and consumers increases, the value of the platform rises exponentially. Even form a monopoly. At the same time, the platform has low marginal costs, high initial investments, and later investments do not grow in proportion to the scale, but rather grow linearly. The intuitive understanding is that the scale profit is y=x^2; the cost is z=kx.

3. It is relatively closed. Either the process is closed (Taobao), or the user base is closed (iOS), or the content is exclusive (Youtube). It is not necessarily the best to be fully enclosed, as fully enclosed areas are prone to have a scale ceiling. So there is a trade-off. At the same time, the difference between closed and open strategies will also affect the quality of content.

Platform Responsibilities

As a platform, the most important thing is to ensure the long-term, stable and efficient operation of the platform. Allow producers and consumers to feel at ease in satisfying their needs on the platform. Therefore, the platform needs to assume the following responsibilities:

1. Create traffic. For a platform, traffic is the amount of “communication” between producers and consumers. The more times communication and display occur, the more consumption will be generated and the more value will be created. This is why platforms and traffic entrances always appear in pairs, and why Taobao blocked Baidu back then. The platform needs to constantly acquire new consumers, purchase new traffic, increase consumer activity through new features and new incentives, and so on.

2. Establish trading rules. The premise for formulating trading rules is that the platform has bargaining power, which is why an oligopoly platform cannot be established. The most basic ability is to neutrally formulate process rules and reward and punishment strategies to ensure efficient and fair execution of transactions. High-level capabilities are to ensure the long-term and stable development of the platform through rules, to focus on supporting high-quality producers and consumers and crack down on low-quality producers and consumers, to ensure that bad money does not drive out good money. At the same time, the formulation of rules cannot be too trivial. Rules that are too detailed, complicated or overly rewarding will limit the subjective initiative of producers and consumers. Their mindset changes from a more long-term state of self-motivation to a passive motivation that loses effectiveness in the short term. When their mentality changes, they will ask the platform for more rewards, which will distort trading behavior.

3. Improve efficiency. Understand the entire transaction chain between producers and consumers, eliminate middlemen, shorten transaction time, improve transaction success rate, improve producer operational efficiency, reduce producer production costs, reduce producer customer acquisition costs, standardize transaction processes, provide guarantees and other methods to improve overall transaction efficiency and reduce transaction costs. This way the platform can make more profits.

4. Service mentality. Adjust your mindset, understand that you are a platform, and provide standardized services. A store cannot bully customers by taking advantage of its size and arbitrarily change the rules. Let producers and consumers develop dependence and trust in the platform, rather than resistance, disgust, or even fear. While providing services for normal processes, fair arbitration must also be carried out for dispute processes to ensure the legitimate rights and interests of producers and consumers. Another interpretation of the service mentality is to only provide good service without facilitating or driving transactions. The platform should believe that good transactions will happen naturally, and it is useless to promote unreasonable transactions.

5. Dystopia. The platform must think about the operation of the system from a bird's eye view and understand that there will be exceptions, loopholes, redundancies, and inharmonious things in the system. Don't aim for perfection when making rules. Instead, we should focus more on improving efficiency and guiding the direction of the group.

Platform evolution experience

1. Generally, the early policies of platforms give priority to supporting producers, especially high-quality producers (such as invitation-based). The quality and quantity of content must be ensured in the early stages. Good content will naturally attract consumers, and producers will also help promote the platform. But on the other hand, if consumers are attracted directly but find that there is no good content, they will leave quickly. Once the snowball starts rolling and the platform enters a period of self-growth, policies can be tilted towards consumers. Used to ensure consumer loyalty and traffic stability.

2. Many platforms first delve into a certain vertical field, and then expand the model horizontally to more fields. For example, Taobao first supported the clothing category, and after its success, it expanded to various categories such as airlines, travel, lottery services, and second-hand goods. Stackoverflow, which started out as a programming Q&A website, has now become a Q&A website with 158 vertical categories.

3. Deepen the upstream and downstream vertically. When occupying the traffic entrance in a certain field. Once Taobao completes the transaction, it can then manage logistics vertically and engage in consumer finance. After the success of the e-book model, Amazon began to eliminate middle publishers and guide readers to self-publish.

4. Being closed in the early stage and then gradually opening up will be praised, while an open platform that is gradually closed will only attract criticism.

If you have more understanding or different opinions on the platform, you are welcome to give feedback and discuss.