Don’t let platforms like Amazon own your soul
Sure, they’re sweet to you now, but their real goal is total domination
Once a platform is indispensable to both sides of a transaction, you have a license to print money.
BOSTON During a recent ride with ride-hailing service Lyft, one of us struck up a conversation with the driver, Victor, about how he liked his job. His enthusiasm seemed genuine.
He talked the entire way to the airport about the glories of Lyft — about how it cared about its drivers and wasn’t just transactional, like its competitor, Uber. Lyft paid more, for instance. But only if you logged nearly a full-time job’s worth of hours. So, Victor was working for Lyft exclusively and reaping the benefits.
Lyft had Victor right where it wanted him. It had turned him into a “single homer,” as economists who study platform businesses would call him — a person who uses one service exclusively.
It’s where every platform business — services that connect users on two or more sides of a market, such as Facebook (users and advertisers), Apple’s iPhone (users and content producers), and Amazon (sellers and buyers) — would like to have each of us: locked in, and at their mercy.
Lyft doesn’t pay more than Uber out of the goodness of its heart. Nor is that why credit cards offer cash back. No company wants to be your friend. Each is trying to keep you captive on their app, site or card.
Platforms’ search for ascendancy in any category involves a “virtuous” cycle of ever-more customers, making your platform ever more attractive than alternative options. Think of the telephone: One is useless for making calls, two are only slightly more useful, but a few million and you have a network that everyone wants to join.
Amazon is your go-to e-commerce destination only if it really is the Everything Store and indispensable to merchants precisely because it’s your go-to e-retailer.
Sometimes, though, consumers should spread their business around, despite the allure of free shipping or 1% cash back. Consider the case of Amazon a little more deeply. It’s not trying to be “nice” by offering Prime two-day delivery, offering 35 days of Black Friday discounts or neat new gadgets such as the voice-activated Echo. It’s trying to lock you in.
Despite its $300 billion-plus valuation, the company goes through streaks of making slim or even no profits. Yet it continues to invest in efforts such as Prime. Why? Because once it has enough of us locked in, Amazon is going to raise prices (in fact, it already has raised them for free-shipping minimums).
Because once a platform is indispensable to both sides of a transaction — to the providers of a service and the purchasers — you have a license to print money.
But it’s even more insidious than that. Once a platform vanquishes its competition, it’s nearimpossible for a start-up to come in and challenge its dominance.
We see the homesharing platform Airbnb exploiting its dominance already. It doesn’t offer sweet discounts to lure customers or hosts because it doesn’t have to. It’s twice as big as the nearest competitor, Home-Away, so even without a discount it provides more value, given the greater choice offered to both hosts and guests.
So we, as participants in platforms’ fight for world domination, have two alternatives. First, you can succumb, paying a little more for the convenience that loyalty to one platform can bring. Or second, each of us can do our part to make sure Amazon and others never get to the point of ubiquitous domination. It might introduce a bit of hassle and inconvenience into your life, but only a tiny bit. But by taking on this challenge, you’ll be doing the job anti-trust authorities, in an ideal world, might take care of on our behalf — ensuring consumers and workers, rather than the owners of capital and algorithms — get a piece of the surplus that’s created by new business ideas.
Option one presents us with a pretty dire picture of what the future might look like.
And option two comes with very little downside, it’s easy to do and can also help us to overcome our inertia to find ourselves better deals.