Era of Platform-nomics

I have never used the-nowadays-hot-startups like Uber and AirBnB yet, especially since I don’t think it’s already available in my hometown (Surabaya). Well, I have read that Uber will open its service here. Hopefully I will be able to experience those services by myself near the future.

There is a common characteristic of those 2 services (not only limited to those, though). It provides crowd-sourcing platform, which the startups will build a good platform that connects customers and service providers (taxi drivers, home owners) via mobile/web apps and internet. Since I do think that mobile phones and internet connection is able to be considered as our primary needs (besides of food, home, clothes), this business model become very popular and make the service provided become more economical for customers.

In traditional economics, when we want to provide a service, it seems that we have to prepare a huge financial capital to fund assets. Imagine Uber like a taxi company. How much cars do they will have to buy to operate in such many countries world wide? I haven’t heard a taxi company able to expand regionally, even internationally with conventional business model. How much do they have to pay drivers wage, benefits, etc? From other side, we have seen that maybe there are some people whose work is a freelance driver. They are not tied to corporate. They work and provide service independently. How can they find a customer? Well, the traditional way will be write down and put an simple ads everywhere. But still, do we really trust this ads? Do we want to use un-guaranteed and unknown services like that? For majority, I believe the answer is No. And now, what if, the driver connects to a trustable company like Uber which customer love? More income, right? More important, it provides a simple and better way for customer to find the nearest transportation available. Everyone happy 😀

Imagine AirBnB as a chain of hotels which according to Wikipedia now is operating in 192 countries. How much money will they have to spend to build a hotel, which maybe won’t reach 90% occupancy rate, remembering that there are so many new hotels right now, budget or expensive one? (In my city, maybe there are 5-10 new hotels each year, for the last 2-3 years). How much money will they have to spend for operating the hotel? Then, there are somebody out there who have unused rooms in their home, but do not know that it can be a money-generator too, at least before AirBnB tells us that their business model works almost perfect nowadays. Yes, as customers, we don’t know the host in person, but at least, through AirBnB services, we feel more safe and comfortable because we know their reputation. Another win-win solution?

This is a new era, which I call platform-nomics. The best platform that can connect service providers and customers is having a good chance to become a huge company. The revenue, mostly, will come from small amount of commission charged through each transaction. But, this low margin compensated with very huge users base (remember economics of scale). We don’t always need to provide everything (physical assets, such as taxi car or hotel buildings) in our own to offer a service like traditional companies. We can rely on the crowd (that’s why it is called crowdsourcing, right?) to provide the service. Our duty is to make a better platform for customers and a fair profit-sharing with the service provider.