Startup Business Models Visualized with the Platform Stack

Startup Business Puzzles
Visualized And Explained1 SANGEET PAUL CHOUDARY
GEOFFREY PARKER
MARSHALL VAN ALSTYNE
Source: PLATFORM THINKING

One compelling framework to
make sense of digital business
models

Why do YouTube and Vimeo coexist
despite being similar offerings?
“
”Source: PLATFORM THINKING

How did Airbnb disrupt
Craigslist?

It was Instagram, before Instagram
existed
Why did it fail?
Ever heard of
Hipstamatic?  

Why did LinkedIn beat
Monster?

“ What's so special about
Medium, isn't it just about
blogging? ”

How did a 3-year old startup like
Mint beat a three-decade old
software like Quicken?

Flickr was doing so well, what
happened?

What's so
revolutionary
about the App
Store model?
“
”

How did Facebook
eat MySpace and build
an entirely different
business?

And ﬁnally...

Airbnb is a platform,  
but so is GE's industrial
internet approach.
Medium is a platform  
but so is Nike.
How do you make sense of
this? What exactly is a
platform?
”
“

Read on to get  
all the answers
”
“Different questions,  
similar answers

Too busy to get all the answers?
Download this deck

Better still,
click here
to get the whole book

What does that even mean?
Let's visualize  
digital business models

The Platform Stack

To start visualizing,
we need a visual framework
Introducing...
The Platform Stack

Wait... What's a platform?

Everyone seems to be building one...

But everyone has a different deﬁnition

The platform stack helps  
us understand this…
... and visualize any digital
business model

So WHAT is a platform?

So what is a platform?
A platform is a plug-and-play
business model that allows  
multiple participants (producers
and consumers) to connect to it,
interact with each other and
create and exchange value.
”
“

A lot of what we see today follows
the platform business model

Buzzword alert...
all of these use
platform business models
Wearables
Sharing Economy
Industrial Internet
3D Printing
Internet of Things
Social media
App economy
Crowdsourcing
Gig economy
Crowdfunding
!

The goal of a platform is
to enable interactions between…
Producers Consumers

To understand platforms, we need to use THE
PLATFORM STACK

Across all platforms, we observe
the following three layers3
Network / Marketplace / Community
Data
Technology Infrastructure

Network / Marketplace / Community Layer
Users may
connect explicitly
Users may
interact without
connecting explicitly
Users may be connected implicitly
E.g. Individual usage is benchmarked against others

External producers build on top of this infrastructure
On Android,
developers
build apps
On Youtube,
video creators
host videos
On Ebay,
sellers create/host
product availability

Data
Data matches users
and content
Data powers
relevance

Different platforms have different
stack conﬁgurations
There are
3 basic
conﬁgurations

Marketplace / Community-Dominant

Infrastructure-Dominant

Data-Dominant

Every platform
is a different
conﬁguration
of this stack

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reading?
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Startup Business Puzzles
Illustrated with the Platform Stack
1 Source: PLATFORM THINKING

YouTube Vimeo
Network / Marketplace /
Community
Data
Community
Data

YouTube Vimeo
Community
Data
Community
Data
Improve viewer engagement and
match-making
Improve hosting
infrastructure

YouTube Vimeo
Community
Data
Community
Data
Youtube and Vimeo co-exist by focusing on different layers
of the stack

Craigslist Early Airbnb Airbnb
Network /
Marketplace /
Community
Technology
Infrastructure
Data
Marketplace /
Community
Technology
Infrastructure
Data
Marketplace /
Community
Technology
Infrastructure
Data

Network /
Marketplace /
Community
Technology
Infrastructure
Data
Marketplace /
Community
Technology
Infrastructure
Data
Marketplace /
Community
Technology
Infrastructure
Data
Strong network layer only, low
focus on tech and data
Started with strong tech and
data layers
Built strong network effects and
community over time

Network /
Marketplace /
Community
Technology
Infrastructure
Data
Marketplace /
Community
Technology
Infrastructure
Data
Marketplace /
Community
Technology
Infrastructure
Data
Airbnb beat Craigslist through superior execution on all layers

Hipstamatic Instagram
Network / Community
Data

Network / Community
Data
Focus on provision of
tools only
Focus on creation of community
through provision of tools

Network / Community
Data
Instagram beat Hipstamatic by focusing on community
and building network effects

Monster LinkedIn
Network / Community
Data
Network / Community
Data

Network / Community
Data
Network / Community
Data
Lower network effects, focusing only
on active job seekers
Much stronger network effects and higher data leverage
lading to activation of passive seekers
Monster LinkedIn

Network / Community
Data
Network / Community
Data
By focusing on overall data acquisition about professionals, LinkedIn
has better data to match the recruitment market
Monster LinkedIn

Wordpress Medium
Network / Community
Data

Wordpress Medium
Network / Community
Data
Infrastructure-only
focus
Less sophisticated infrastructure but
strong network and usage of data

Wordpress Medium
Network / Community
Data
Medium is gaining rapid traction leveraging network effects and
data and a simpler creation infrastructure

Quicken Mint
Network / Marketplace
Data

Quicken Mint
Data
Focused only on provision of
software
Software as a means to build a data driven
business and the creation of a marketplace
between consumers and FIs

Quicken Mint
Data
Mint’s business model leveraged data to subsidize software and
gain rapid adoption

Flickr Facebook
Photos
Network / Community
Data
Network / Community
Data

Flickr Facebook
Photos
Network / Community
Data
Network / Community
Data
Better hosting but lower
community engagement
Stronger network effects and usage data of overall
social network enabled better engagement

Flickr Facebook
Photos
Network / Community
Data
Network / Community
Data
Facebook’s stronger network effects and better capture of data allowed
its Photos feature to power stronger engagement

MS Windows
Android +
Play Store
Network / Community
Data

MS Windows
Android +
Play Store
Network / Community
Data
Focused only on infrastructure for
app development
Combines infrastructure with app store,
enabling creation or marketplace

MS Windows
Android +
Play Store
Network / Community
Data
The app store powers a new market for developers, thereby
attracting a larger ecosystem much faster

MySpace Facebook
Network / Community
Data
Network / Community
Data

MySpace Facebook
Network / Community
Data
Network / Community
Data
Strong network effects but poor usage
of data and lower curation
Much stronger network effects and higher data leverage
through the creation of the news feed

MySpace Facebook
Network / Community
Data
Network / Community
Data
Facebook’s news feed leverages data to drive much stronger
network effects than any social network before it

Your turn:
Analyze your platform using the platform stack
Network / Marketplace / Community
Data

And now,
click here
to get the whole book

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Startup Business Models Visualized with the Platform Stack

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