Digital Economy- Driven by Digital Platforms

PRIMER III

Digital Platforms

echnology has revolutionized the go-to-market policy of modern firms. In the past, it has taken an average of 20 years for Fortune 500 firms to achieve a billion dollar valuation.Today’s digital start-ups will become Unicorns in about4 years, according to a new survey. New digital platforms are mainly responsible for this change. Some of the popular digital platforms are:

  • Google — Content and Advertising
  • Apple — Entertainment and Software
  • Facebook — Social & Distribution
  • Amazon — Commerce & Fulfillment

Major companies have seen the phenomenal growth of GAFA (Google, Amazon, Facebook, Apple) and other unicorns, native digital giants, who have built their business model without government funding for many years on a technology foundation.

Many new entrants have recognized the promise of such a model on the basis of GAFA’s success and have started to build their own digital platforms. Some of them such as Netflix, Zoom, Twitter, Whats-app. have become new business unicorns and are further driving the growth of digital market places.

Before giving a summary of what a digital platform is, some examples are as follows:

  1. Search Engine Google: business model of advertising.
  2. Social Media: Facebook, Twitter, Instagram, LinkedIn-the corporate model of “advertising.”
  3. Knowledge platforms, such as EdX, Coursera the business model of “anywhere anytime education”.
  4. Application stores: Apple/Google Play-Business model “digital good.”
  5. Marketplaces: Amazon, FlipKart, Ebay, Alibaba shopping engines: industry concept “e-commerce.”
  6. Media platforms: Spotify, Netflix, Tiktok, -the business model “subscription.
  7. Affiliate platforms: Commission Junction, Amazon Associates — Business model “earn as you perform.”

There are several other network concepts, some too complex and other too simple and easy. However, the main characteristics of a Digital Platforms are as follows:

  1. It is a market concept that is technology-enabled.
  2. It promotes interactions between different groups that do not inherently know each other, such as end consumers and manufacturers.
  3. A benefit that is equal to the scale of the population addressed. Creation of a unique culture which creates a value proposition for a digital platform.
  4. It is an enabler of trust: It must create trust in terms of intellectual property and data rights with specific general terms and conditions.
  5. It has transparent connectivity: It exchanges data with developers from third parties to build new applications and broaden the ecosystem. This is achieved by APIs which is part of the API economy.
  6. It can scale massively to address millions of consumers without reduction of performance parameters.

Advantages of a Digital Platform

1. Generate Revenue

2. Reduce Expenses

3. Nurture collaboration and innovation with new products and services

4. Develop acceleration to deliver commodities to the targeted markets.

The market cumulative valuation of these platforms is about $4.3 trillion, according to Accenture survey. They employ about 1.3 million direct workers and another million indirectly through their affiliate firms or complementing networks.

Conclusion

The Digital Economy is strongly driven by emergence of Digital Platforms, most of which have emerged in last decade or so. Many other platforms to drive shared economy such as AirBnB, Uber, Ola, Oyo are also emerging to occupy pre-eminent space.

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Picture Credit: Google Images

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