1) Platform businesses have become an important economic force with a total market value of $4.3 trillion and employing millions. However, not all platform businesses are successful. 2) Early platform companies like Google struggled to develop sustainable revenue models but were able to create successful monetization strategies like Adsense that allowed other platforms to generate revenue. 3) Today's platform businesses utilize a variety of monetization methods including commissions, subscriptions, freemium models, in-app purchases, advertising, and more. Combining multiple strategies has helped many platforms become profitable.

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illustrationbydarshansompura

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a sustainable model Trivediplatform business
DR SHEKHAR TRIVEDI
IS PROFESSOR AT DR GAUR
HARI SINGHANIA INSTITUTE OF
MANAGEMENT, KANPUR.
a sustainable model
With a total market value of $4.3 trillion and an employment base of at least 1.3
million direct employees and millions of others indirectly employed, platforms have
become an important economic force.*
Companies today are constantly looking for ways to build platforms—Infosys Ltd
announced its plans of monetizing its platforms to make them a $2 billion business by
March 2021. But are all platform businesses successful?
eople have become used to getting things free
on the internet. The common thinking is that ‘if
it’s on the internet, it ought to be free’. So, while
they pay for everything from soaps to sanitary
ware, and from detergent to dish TV in the real world, they
expect non-tangible products for free in the virtual world.
P
Since its beginning, people have considered the internet
as a platform for information dissemination, information
exchange, and aggregation. Think of the 1.86 billion
monthly active Facebook users (as of February 2017)—
what would this number shrink to if they were shift to be
a paid platform? Similar would be the case with Whatsapp.

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ad sense, the lifeline
Google can be accepted as the father of all platform
businesses. Before strategizing for the success of any other
platform business, it was necessary for Google to have
a revenue model for its free search queries business—a
monetization model on which their business can survive
and thrive. Their automated Adwords model quickly
replaced the method of manually placing display ads on
websites in 2000. It further improvised to cost per click
genre in early 2002.
Another effective enabler has been Google Ad Sense—
this tool has the potential to help small e-entrepreneurs
become Goliath. Ad Sense—like Chitika and Viglink—
helps bloggers, content creators, and site owners monetize
their internet pages. Once registered with Google Ad
Sense, the blog and sites would show the native or
remarketing ads on one’s page and thus generate money
for the owner of the page. Google Ad Sense in 2015 paid
$10bn to its Ad Sense users. That is the power Ad Sense
commands. Thus, the Ad Sense monetization model paved
way for budding entrepreneurs to get money trickling in.
Display ads, of late, have acquired a bigger canvas
comprising in-feed ads, in-mail ads by Google and others,
sponsored and branded content, and many more. It was
the natty Ad Sense through which millions of sites were
able to generate revenue. It created ad efficiencies for both
advertisers and website owners. With Ad Sense in place,
platform businesses now have a revenue stream to rely on.
featured listing
When I give search for ‘turntable’ in Google, it gives
5,26,000 results with 15 searches on the first page. Only
a few people go to the second page but the probability of
expecting somebody to go to the third page is negligible.
But the fact is that everybody does not have the patience
and capability to appear on the first page by following good
SEO practices. So Google or any platform, which works
on providing listings on customer request, makes provision
for some paid advertisers’ names to appear on the first page
or on top of the first-page listings. Zomato, OLX, Taobao
(Alibaba), and Quikr use featured listings as one of the
options to generate revenue.
A few in the business
fumbled because of
the lack of a right
monetization strategy,
but many are now
making waves, with
the right monetization
model.
But neo platform entrepreneurs were ingenious enough
to make provisions for ways to monetize to make them
profitable businesses.
how to monetize?
Pricing in the last 100 years has not witnessed as much
change as it is going through today. The last fifteen years
of businesses in the internet environment have faced
immense challenges to find ways to make the business
proposition viable. Creative seekers have found out
plethora of ways to monetize internet-based businesses
thus giving rise to different types of monetization
strategies.
This is the era of startups—many have been successful,
but some had to shut shop soon. All these businesses are
creating value by bridging the gaps or have been successful
in creating an information highway between the seller and
the buyer through an internet portal. A few in the business
fumbled because of the lack of a right monetization
strategy, but many are now making waves, with their hands
on the right monetization model. Case in point: Zomato,
Uber, Facebook, Foursquare, OLX, Dropbox, and Redbus.
The list is endless and lessons to learn are lot.
From hopelessness to wisdom, they, over the period
tinkered and tested with different monetization methods.
Now their feet are wet and they have a clearly laid out
pricing strategies for the world’s platform businesses
to follow. So what they did now should be known and
leveraged by other startup platform entrepreneurs. The
whole jigsaw puzzle is finding its groove—fitting in the
grooves, internet businesses slowly, but surely have found
the path.

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a sustainable model Trivedi
One of the featured listing variations used by social
sites like Facebook and Twitter is promoted post or
promoted tweets. Here, the promoted posts can appear
in the newsfeed of the users. Specific targeting of such
users, where one wishes to have more exposure of the post
or tweets, can be done. This lends users great scope to
make their point, which in turn is a revenue generator for
Facebook and Twitter.
location-based advertising
‘Wherever we go it is with us’, is not your pet, but your
mobile. It is now an extension of our body, and a mark of
our presence. Most of us are more than happy to share
our location. With this has come a big opportunity in the
form of location-based advertising, location-based services/
offers, yellow pages, localized ads, weather, dating, etc.
Location-based advertising combines mobile advertising
with location-based services. Many of the apps like
Foursquare use this as one of the monetization methods, by
selling their location data to companies for their real-time
usage. Foursquare has accumulated 65 million locations
around the world, derived from its seven billion consumer
check-ins, reviews of stores, and ratings. Companies look
for location-based information and extend their offer to
those who share their location information with the mobile
app platform. People get personalized offers, based on the
location they are in. Timeliness is what makes location-
based targeting an effective proposition.
subscription model
The age-old model of subscription has been accentuating
the benefits for regular users, for decades. The best use
ever of this model has been exhibited by Reader’s Digest,
wherein readers could save cost by subscribing to the
magazine. This model has a benefit which ensures certain
sales for the company and also saves money for its loyal
readers. It had merit and it smoothly made its way into the
internet sphere too. The basic modus operandi they adopt
is a free trial period followed by subscription on monthly
or yearly basis. The trick they adopt is to ask you pay R0
through your credit card and then wait for the conversions
to happen. It is same as sampling in the FMCG domain,
Location-based
advertising combines
mobile advertising with
location-based services.
pay channels in satellite television, and invitation pricing in
newspaper and print industry.
Netflix follows the same model for their movie rentals.
The same is being followed by Hootsuite, social-post
management system company. As it is a serious business
for digital marketing pros, many subscribe to Hootsuite’s
various monthly plans for managing their different social
sites through a single platform.
freemium model
Another variation of the subscription model is freemium.
There is a lot of brouhaha over it among the ecommerce
fraternity. The basic premise of this model is to give the
basic product free, and charge for the advance features.
This strategy provides the particular internet service
word-of-mouth publicity. As the product/platform
service becomes a habit and worthwhile for a few, they

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of thinking—if not executed in the right manner, it may
result in bad reviews and frustrated users.
commissions in ecommerce
These are widespread, widely accepted, deep-rooted
ecommerce platforms who act as e-marketplaces between
supplier and the customer. Platforms like Flipkart,
Amazon, and Uber charge commissions in lieu of their
services; they bridge the distance between the two and
extend value, by way of providing variety to the customers.
Platforms which act as an agent for the purchase of goods
or tangible services opt for this monetisation strategy.
Uber and Ola take commissions from drivers who have
been aggregated under their banner. They provide value
to customers by being available at a click, and ensuring
real-time availability of drivers and real-time tracking by
family members. Drivers willingly pay aggregators the
commission amount, as they earn more by getting a regular
stream of customers.
Alibaba, on the other hand, relies on featured listing
when a buyer searches for any product on their website.
Businesses who pay would appear on top of the search.
They also follow the internet version of the physical
shop-in-shop concept wherein brands pay annual user fees
for their dedicated pages on Alibaba’s portal. T Mall and
Taobao, Alibaba’s ecommerce portal, use a variety of the
aforementioned monetisation methods.
monetisation mix
Instagram, which was once established purely for fun,
never thought about how they would make profit.
would then upgrade to paid versions of the services for
advanced features.
This helps the company serve amateur users free—
like students may start using a platform free during their
college days, and later on subscribe to it through corporate
accounts during their work life. This works out as a
‘catch them young’ strategy. Zapier, MailChimp,
Dropbox, and Linkedin are leveraging this model.
The freemium model has all the richness, through the
variety it provides. Free offerings may be limited by
features, customer access, bandwidth, storage capacity,
customer class, etc.
in-app purchases
Now, one can obtain free lives or buy ‘gems’ to use it as a
virtual currency in Candy Crush. A game player does this
because of addiction—something he craves for—and then
he goes for such in-app purchases. Angry Birds, Subway
Surfer, Farmville, and Diablo have made millions of
dollars from these cravers. It is like the freemium model
but interestingly, here, the player makes in-app purchases
much frequently.
Millions of apps are downloaded free on the internet;
it is through in-app purchases that they make money.
This in-app purchase may vary from $1 to $10. This may
seem to be a small number but if we see the amount of
downloads of Candy Crush and Angry Birds, it makes
quite a sense.
There were five crore downloads of Angry Birds
in a span of 35 days. Right now, it boasts of ten crore
downloads. Angry Birds makes more money from the
free Android version than from the paid ones—as much
as 5-8% of the free download go for in-app purchases.
Thus, for in-app purchases to work, the game app or any
other app should fare well on free downloads. Angry Birds’
revenue in 2014 was 110 million euros. In early 2014, in-
app purchases represented 79% of all mobile app revenue.
Of the free downloads, only 35% of users return eleven
times or more. Meet Me, an app where one can chat and
browse profile, is also freely downloadable; here, one can
purchase credits to enhance one’s visibility and gain new
ways to interact with people. In-app purchases involve a lot
Platforms like Flipkart,
Amazon, and Uber
charge commissions
in lieu of their services;
they bridge the distance
between the two and
extend value, by way
of providing variety to
the customers.

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a sustainable model Trivedi
However, now under Facebook, through display and
sponsored post ads, they have made around $700 million
in 2015. Coursera, by virtue of students enrolling for their
online programs, leverage their rich database.
They also follow the freemium model, rendering
verified certificates to only paid participants. Airbnb, a
homestay network, charges 6-12% of room charges from
travelers and 3% from the host. Higher the booking
amount, lower are the charges from the traveler. The
company must be having a revenue above $1 billion.
Dating sites, too do the same, they charge lesser from the
women and more from the men. Myntra, an ecommerce
company totally depends upon commission from the sale
on their platform. Commission varies from 5% to 2%
depending on the product.
Classified ad sites, Quickr and OLX, make their
revenue through display ads which are of contextual and
remarketing genre. Featured listing and database form
two other revenue sources for both. Wikipedia, on the
other hand, totally depends on donations. Wikimedia
Foundation, the parent company, gets about $75 million
to support its different products. Estimate suggests that if
Wikimedia uses display advertising, affiliate marketing, and
other methods, it would be making $2.3 billion a year, but
its basic philosophy, and crowdsourcing knowledge render
it to remain donation-based business model.
Going through the whole canvas of the revenue model
it is commission on product or services sold that make
most of the platforms viable. Second could be display ads,
only if the platform generates hits in millions. Rest, wait
for the value of business to increase and then getting sold
to big business. For the platform business model to survive
and live up to decades, they still have to search for more
credible monetization options, which may not only make
them viable, but also fattens their bottom lines. 
* http://thecge.net/wp-content/uploads/2016/01/PDF-WEB-Platform-Sur-
vey_01_12.pdf