In my last post, I defined what it means to be a platform. One core idea in that piece is the existence of multiple roles, primarily those of consumers and suppliers. Consumers and suppliers are not mutually exclusive, but in reality, it’s often the case that most people on a platform are either consumers or suppliers; the number of people who are both is small relative to the total number of participants. Suppliers are usually a minority with a disproportionate level of influence on other participants and, often, the platform owner as well. In a platform with multiple roles, how does the platform owner decide which constituencies to prioritize? More specifically, to what extent is the platform aligned with its end users, versus its suppliers?
The answer to this question comes from looking at how platforms deliver value, ranging from its single-player mode, to relying on network effects or supplier networks.
In platforms whose primary value comes from network effects (e.g. Facebook), the platform owner needs to balance the needs of end users with the needs of suppliers. End users expect certain things from the product, ostensibly including a product strategy that preserves the privacy of their data. Meanwhile, suppliers (give or take a degree of corporate separation) are generally interested in learning as much as they can about their existing users as well as potential new users. In practice, there is tension here.
On a platform like Facebook, received value is unevenly distributed, with a subset of suppliers receiving the majority of (economic) value generated or unlocked by the platform (e.g. Zynga, BuzzFeed). For the platform itself, most of the value it receives comes from suppliers — in mid-2017, 98% of Facebook’s revenue came from advertising. This puts tremendous pressure on the platform owner to align with suppliers, and, by definition, somewhat in opposition to end users.
This concern is largely theoretical while legions of valuable users continue to voluntarily wander onto the platform. But the network effects that accelerate growth also build a brittle foundation. When DAUs decline, suppliers — many of whom plan to grow with the platform and achieve returns at scale — will question whether it makes sense to build on that foundation. At that point, which side does the platform prioritize?
On the other hand, platforms that begin with the single-player use case (e.g. Salesforce, Slack) build a durable business that remains aligned with all its users. In this case, the product itself becomes increasingly more valuable, both as the platform owner continues to develop the platform, and as users develop systems and processes on the platform. Over time, suppliers began to build on the foundation comprised of a robust user base and extension points exposed by the platform.
In fact, with user-first platforms, the platform itself doesn’t exist until the single-player mode is established on the merits of the core product. In other words, there is no platform until there is a critical mass of users for suppliers to address, and that critical mass must be built and sustained by the strengths of the product itself and the value it unlocks.
In this case, it’s easy for the platform owner to continue investing in their core users. A better experience leads to more valuable customers, more new customers, and a stronger platform — forming a strong feedback and profit loop.
A valuable core product gives power users room to grow and encourages advanced use cases. There’s a natural progression for power users to become suppliers, often starting out by enhancing their own use cases. For example, teams that use Slack extensively eventually start building integrations for their own use cases; many of these integrations are the precursors of utilities and products that get publicly released. The overlap between power users and suppliers creates strong alignment between suppliers and end-user experiences — unlike network-based platforms, where suppliers are often in opposition to end users.
Example: iOS vs Android
The dominant mobile platforms embody each of these models. Android’s commitment to openness makes it a network-first platform, while iOS is committed to the user experience, often at the expense of its suppliers.
In Android’s case, their network includes OEMs and carrier partners, and in particular, allowing manufacturers and partners to make changes to the platform for their end customers. This has lead to a sub-optimal experience along a few dimensions for customers, including the addition of bloatware, privacy concerns, and abysmal fragmentation in hardware capability and software versions. Android’s openness for developers has also led to a proliferation of malware and fraudulent apps.
On the other hand, iOS is strongly aligned with its users, and may even be outright hostile to suppliers where their behaviors conflict. The original iPhone shipped without an App Store, with sales relying entirely on its single-player mode capabilities. Eventually, pressure from those already invested in the platform led to the release of the iPhone SDK a year later. Historically, developers have been limited in the functionality they could access for various, often user-first, reasons, such as privacy and performance. Despite this, Apple’s customer-first narrative has made iOS (and, more specifically, the iPhone) the most successful single product in human history.
Editor @ Disrupt Tech | Professional bug creator @ Trustwork