Digital platforms will transform ag
In the past, the most wealthy people owned assets such as oil wells, railroads, steel mills, textile factories, and land. These people actually owned the product that they sold. They made lots of money because lots of people wanted the product that they made.
Today, the new wealthy don’t actually own or produce the product they sell. Instead, they own the platforms that enable other people to produce the products sell them to consumers.
Facebook doesn’t create the content on its platform.
Users create the content and videos and other uses consume them. Facebook simply provides a platform that allows producers and consumers to connect.
The products sold on eBay are not produced or owned by eBay. Other people use the platform to sell their new or old stuff.
People wanting to buy things know that eBay is the place to go to find things for sale.
Airbnb doesn’t own the buildings that it rents out, it simply connects homeowners with travellers and clips the ticket on the way through.
Alibaba is a Chinese platform business that allows manufacturers to sell their products, direct to wholesalers or other customers.
These platform business models are asset-light. They don’t need or want to own physical assets.
In fact, owning the physical assets is a huge disadvantage.
Airbnb could never have grown so fast if they had to own the buildings they rented. Instead, they just need to convince the owners to list the buildings on their site. The result is these platform businesses can spread and grow fast.
All successful platform businesses have powerful network effects.
This is where the value of the network becomes so great that people miss out if they are not on the platform.
Sellers list on Trade Me because there are lots of buyers on the platform.
There are lots of buyers on Trade Me because there are lots of sellers.
Most of us joined Facebook because that’s where all our friends and family started sharing stuff.
Apple App Store and Android Play Store are both platform business models with fantastic network effects.
If a platform can successfully create these network effects they end up as a modern-day monopoly business.
There is very rarely more than one dominant platform in any category, platforms have a winner-take-all dynamic.
For example, every country has only one buy/sell platform. In the United States its eBay, in New Zealand it’s Trade Me.
There is really only one accommodation platform for private homes – it’s Airbnb.
It’s for this reason, that venture capitalists are ploughing billions into Uber.
Their hope is that it will become the dominant taxi platform with strong network effects.
If they can achieve it then the prize is they own a monopoly for the decades to come.
The common theme with platform businesses is they commoditise the product they deal in.
Which can have devastating effects on the existing industry.
If you’re a motel owner with a $3 million dollar motel unit, built on inner-city real estate, it’s very disconcerting to have Airbnb turn up and enable any house to become a motel.
News TV businesses are being hit hard on two fronts by platforms.
All the eyeballs used to be on a handful of stations, programmes or newspaper sites.
But the likes of Facebook, YouTube and Instagram have commoditised entertainment. Now anyone can create or broadcast an entertaining show with an iPhone.
These platforms are replacing where we go for entertainment.
Now that these platforms have the eyeballs, they are able to sell highly specific targeted advertising to users.
This advertising is so effective, they’ve commoditised the advertising business too.
MediaWorks announcement last week and the general demise of journalism is the result.
While Agritech gets a lot of attention.
I believe the biggest change to agriculture will be when true platform businesses enter the industry.
These platforms won’t want to own the farms or processing factories like the successful companies in the past have.
They simply want to be the matchmaker between farmers and buyers.
Indigoagis one platform that looks promising and I’m sure more are on their way.