What is a platform company?
A platform company is a type of business that provides a technical foundation and/or set of applications and tools which can then be used by other companies, either in the day-to-day running of their business, or to create their own products and solutions on top of the platform company’s core offering.
For example, a platform business which provides omnichannel messaging capability may have clients in various market sectors that use their platform in different ways. For example, financial companies would use their technology to communicate with their own customers by SMS for 2FA authentication, by email for monthly account statements, and by messaging app to provide conversational support. The platform company facilitates these interactions, but the end customer may have no knowledge or visibility of the role it plays.
What value do platform companies add?
A business might choose to work with a platform provider for a number of reasons, including:
- so that they don’t have to invest a large amount of time and resources to build their own products and supporting infrastructure, therefore speeding up their time to market.
- in order to unify multiple applications and/or communication channels in one place.
- to get instant access to the latest innovations and features.
- to benefit from the domain knowledge and expertise that the platform provider and their staff possess.
- to simplify their operations by outsourcing the provision and maintenance of the tools they use so that they can concentrate on their core business.
- to take advantage of the depth of resources that a platform provider can provide to help deal with the peaks in business activity during the year, for example for retailers in the lead-up to Black Friday shopping season.
How do platform companies work?
There are many flavors and different sizes of platform company, but in general they must first create a set of tools or infrastructure that is in demand by the organizations in their target market. They can then provide paid access to this infrastructure, either directly or via APIs that they make available to their customers to integrate with.
Some companies may start off in the traditional way by creating products and services that they then sell on to customers, but as they grow and mature, they may move to a platform business model where they provide access to the underlying technology for other companies to build on. They therefore become technical facilitators for other businesses and can benefit from their success indirectly with reduced risk.
Using this model, Airbnb has become the biggest provider of property rentals without owning any properties itself, and Uber sells the most cab rides globally without owning any vehicles.
What are some examples of platform companies?
Some platform companies are household names – on the transactional side Uber and Airbnb we have mentioned already, but we can include Amazon, Alibaba, eBay and many more.
Global tech companies like Microsoft, Oracle, and Cisco can also be considered platform companies as their products and infrastructure are used by thousands of other businesses worldwide.
In niche markets there are countless more platform providers, from online trading platforms that enable anyone to buy and sell shares, to gaming platforms like Nintendo and Xbox which independent games developers can create titles for.
For platform companies we have developed an advanced communication solution called CPaaS X which helps these businesses to provide an expectational service to their own customers via a modular API stack that enables them to scale easily with reduced engineering effort and greater operational efficiency.