Platform businesses like Airbnb, BlaBlaCar, Facebook, Google or Uber are all the rage among investors, right now. And they are feared by the traditionally structured pipeline businesses they steal business from, fast.
No wonder, the platforms listed on exchanges have out-performed industrials and the general market by over 30% in the past three years. And that is on top of an already buoyant market. And those platforms currently making their initial public offerings achieve valuations that traditional players can only dream of. Uber started to be valued more than the number one Gobal car rental brand Hertz in 2014, already… and that was when its valuation was a ‘mere’ $14 billion, or so. Uber listed in 2019 and its market cap as of June exceeds $70 billion, more than that of Hertz, Hilton and Delta Airlines… combined! (And, yes, AirBnB is valued a lot more than Hilton, too).
“What is a traditional business to do?” Erich is wondering aloud in our discussion on the future of platforms and brands (click below to join the discussion). Everyone ‘takes an Uber,’ (at least in big US metro cities) shops on Amazon (at least in the Western World) and ‘Googles the answer’ (at least outside China) nowadays. Does that mean traditional brands are the walking dead, waiting to be washed away by a platform to eat up their business?
The fact that many of the platform businesses are far from profitable and/or their brands far from being loved points to opportunities to compete. Let’s look at at platforms as a brand: Do you really like or respect or otherwise appreciate Amazon, Facebook or Uber – beyond their omnipresence, unlimited offerings and (thus) convenience? Many don’t. In fact, more and more use these platforms with increasing unease.
That might be because most of these businesses have focused on getting the magic flywheel – ‘network effects’ – to start spinning for them, luring in as many platform participants on the producer (eg. driver, seller) and customer (eg. passenger, buyer) sides as they can – at ‘any cost.’ – Or, as we start to realize, with the money many are eager to invest into the ‘unicorn’ dream and on the backs of under-paid ‘platform participants’ like drivers, small manufacturers or warehouse workers.
While gaining users and familiarity fast, the brand reputations of the winners in these races for quasi-monopolistic dominance are not great. — Even though they could and should be, I think.
Platforms are all about participation and should be about positive relationships – a desirable ingredient for strong brand equity. Airbnb demonstrates the potential behind relationships in the platform model well. Due to its business model – strangers agreeing that one will let the other sleep in their home – it was forced to leverage the positive powers of to create trust (the reciprocal rating system helps). Airbnb added a higher purpose to the transaction which created a meaningful experience rather than just a value exchange. It is summarized in their tagline ‘Belong Anywhere.’
But then, Airbnb was almost forced to think about the powerful, platform-inherent brand building potential behind participation early (as we discussed with the former head of Airbnb Community, here). – Uber and Facebook clearly have not (yet). And traditional pipeline businesses getting into the platform game like John Deere (yes, the tractor maker) seem to miss the opportunity, as well.
John Deere is in transition mode from pipeline to platform business. It is absorbing increasing amounts of data from farmers and their operations through the machinery it sells to them and monetizing it in profitable ways. But is also increasingly facing criticism from their farming community for using data without sharing the bounty, all the while while forcing them – through tracking and even disabling machinery – to only use John Deere-authorized services.
All that to say that platforms are highly fertile territory from both a business and branding building perspective. Dominating platforms emerge covering more and more sectors. But they are not invincible, showing weaknesses in their financials as well as brand building alike. Click Play below to hear Erich and I discus the threats and opportunities for traditional businesses as they deal with platforms and their branding in more detail:
For more insights into what drives the success of purpose-driven brands like Airbnb read our book “Rethinking Prestige Branding – Secrets of the Ueberbrands,” and other posts on this blog-cast.
And here is an article JP wrote on ‘Platforms as Brands’ for the Asian Management Insights magazine published by Singapore Management University.
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