platforms, winner-take-all effects and take rates!
When a market develops around enough liquidity demand (enough buyers of service at any time), the platform business model turns into a sort of state by charging a tax called the take rate!
While everyone wants to build a platform business model, only a few will succeed, and those few will control most of the market access!
That’s the power of built-in winner-take-all-effects intrinsic to industries dominated by platforms!
Before we get there, if you don’t know how platform business models work, jump on our newsletter issue, which explains the details below.
Once you have established a platform business model, its main economic engine is driven by take rates.
Take rates are nothing new and have probably existed for as long as people have come together to conduct business in marketplaces.
If you want to understand more about marketplace business models jump on our newsletter issue here!
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction.
Marketplaces can usually be classified in several ways, such as those selling services instead of products or those connecting buyers and sellers at the B2B, B2C, or C2C levels.
And those marketplaces connecting two core players or more.
In this more traditional scenario, the take rate is usually a fee collected by an intermediary for connecting the buyer and seller.
However, and that is the critical point:
The take rate is only the tip of the iceberg of an economic engine, which is instrumental to an underlying ecosystem that justifies the take rate in the first place. In short, the platform/marketplace can charge a take rate because it kicked off, scaled, and maintained an ecosystem that transformed the platform into the utmost intermediary. Yet, and that’s the exciting part, for it to be successful, rather than making its “intermediation” visible, the platform has to make the whole ecosystem work so smoothly that users don’t even realize there is a major intermediary in the first place. That is what justifies a take rate, which creates winner-take-all effects!
Before we jump into the whole newsletter issue, below is a recap of what it’ll be covered in this newsletter!
