Are digital platforms the future of online business?

6 months ago

Read more: Technology Internet, Business Finance

Some recent news that I read throughout the last couple of weeks got me thinking about the potential future of online businesses: digital platforms.

To start with, I must admit my idea of a digital platform is a bit fuzzy. I started writing this blog by checking Wikipedia to see what a digital platform really is. So before I go on, let me tell you the way I see it: for me, a digital platform is an environment that aggregates several applications. To put it differently, it's like a plate of food where all your favorite dishes are served.
In the online & digital business, this basically means offering a destination site, software or application that puts together several features frequently used by usrs.

Platforms are particularly compelling in today's business environment. For most online & mobile companies, finding the right business model to monetize the service is quite a challenge. Platforms usually have high traffic levels compared to other sites, because users know they can find several useful stuff in the same place. High traffic automatically draws an increased number of advertisers with it. The advertisers are also attracted by the fact that users not only visit the site more often, but they also tend to spend more time online, resulting in an increased exposure to ads. Platforms might also enjoy a more loyal user base, since they will probably appreciate the benefits of finding multiple services and solutions in a single site or software. All in all, platforms are good business.

Perhaps the first real online platform was Yahoo. The site still contains today access to a varied amount of services such as: Mail, Messaging, Weather, Sport, Career, Games, Finance, Travel etc. Yahoo is currently struggling to regain its once privileged position among the online businesses. One of its recent efforts was to redesign its home page, making it more intuitive to users.

I will now take a look at the main online and digital players and asses their capacity to center their business around a platform.

Let's start with...

In Google's case, the first difficult task is to choose the product that they could use as a base for their platform. In my opinion, they have many options at hand. The first obvious choice could be Google's home page, but the search engine alone, while extended across various categories (web, images, videos, maps, news etc) offers a poor user interface and few catchy add-ons. iGoogle partially reduces this shortcoming, by allowing users to customize their search page and include more useful services, such as mail, to do lists, calendar, weather and news updates, live messaging etc.

Another option could be YouTube. It sounds interesting, because users spend a lot of time watching videos, and they are quite captive while doing so. However, a YouTube add-on can be easily used for a more complex platform.

From the existing Google products, perhaps the best choice for a platform is Gmail. And judging from Google's Wave project, Gmail has been used as the backbone. For those of you who want a full update on what Google Wave is, the video below gives you a comprehensive introduction. For the others, I will just briefly enumerate the key idea and features behind this project.

At its core, Google Wave is a real-time communication platform. It's an in-browser client, integrating several features that allow users to: email, instant message, chat, social network and manage projects, share files, all in real-time, and with several others users.

So far, only developers have had access to the Wave platform, but Google announced that it would send out 100,000 invitations to users on September 30th. If you wanna watch out for Wave or subscribe for updates, check out http://wave.google.com/

Let's move on to Apple...

Apple has a great platform, this time based on a software: iTunes. iTunes had a major contribution to iPod's growth and is nowadays also used by the increasing base of iPhone users to sync their PC and phone and manage their apps. A new version of iTunes is expected to be launched no later than this Wednesday, with many features anticipated by bloggers. Of all the predicted features, the ones that really got me started were the integration of several social networking services such as Facebook, Twitter and Last.fm. Because, as MG Siegler from TechCrunch cleverly puts it, this is a great source of making more money.

"And just imagine if Apple made a feature not only to send the name of a currently playing song to Twitter and Facebook, but if it included a link to buy the song on iTunes as well. That could mean some significant sales."

From this perspective, iTunes has perhaps the highest monetization potential, since the user account is already linked to his credit card, making the one-click purchase of a song/ movie that a friend posted on his Facebook account extremely easy. iTunes of course lacks other features such as live messaging, emailing, productivity features etc. It is interesting to see where Apple decides to take it, because in my perspective, iTunes has great potential in becoming a comprehensive platform.

Moving on to...

Facebook has been criticized by many for its incapacity to translate its huge customer base in cash. However, recent product launches show indications that Facebook is finally on the right track in monetizing its 250 million user base.

First, Facebook launched Pages, allowing companies, organizations, athletes, celebrities etc around to world to establish a direct connection with their fans. This different communication channel is enabling marketers to access and target their audience in a novel and highly engaging way.

Reuters claims that Facebook's vision is that of becominga "utility" that offers activities to keep people online for hours". And their recent moves show just that.

Recently, Facebook significantly improve its search engine, by also opening it up to search outside of its page. This move not only counteracted Twitter's longly acclaimed search capabilities, but has also posed some threat to the big guys of search, Google, Bing and Yahoo.

Then they went and bought FriendFeed, a service similar to Twitter. Facebook is also considering launching an electronic payments system. According to Reuters, Facebook could pose some serious threat in the future to eBay's PayPal and to iTunes (if they manage to launch their payments system).

What shows that Facebook is no longer interested strictly in the social media game is its recent launch of a Twitter app, which allows users to simultaneously update their Facebook Page and their Twitter account. Mashable makes a good analysis of the strategic implications of this launch and of how Facebook is trying to preempt Twitter's advantage and become a 3rd party Twitter tool.

Finishing off with Microsoft, it can be said that at this moment in time, MSN is pretty much the only platform they have at hand. However, MSN features are highly similar to the Yahoo portal, so it is not so clear how successful it can be on the long term. I for one am interested to see what software will accompany the newly launched Zune HD and how the long awaited Marketplace for mobile applications will look like. They might constitute interesting candidates for a new platform.

To sum up, as an Orange commercial once put it, "The future is bright"...for online platforms.

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