Mass market mobile phone usage and home broadband were so important for connectivity providers because they were the replacement products for fixed network voice service decline. Keep in mind that voice services were the revenue and profit driver for the global telecom industry. So the demise of voice would have been the demise of the industry had new replacement products not developed.
A person might well wonder what comes next, as mobile service begins to saturate. There are many proposed candidates that represent parts of the solution. Private networks, edge computing and internet of things are among the common answers. Those will help, but nobody really believes any of those sources are big enough to displace mobility services as the core driver of revenue and profit.
Platform business models might not be a general answer, either. But at least some connectivity or data center interests might emerge in such roles.
Platform business models in the data center and connectivity business hinge on creation of marketplaces or ecosystems that connect participants. That might not apply to the core businesses (connectivity services and server colocation). Those businesses are examples of the traditional “pipeline” where a firm creates a product and then sells it to customers.
Where the platform revenue comes in is when the data center or connectivity provider creates ways for customers to connect with third parties. In a data center, that might operate by allowing a colocation customer to buy security or other services from third party app providers.
E-commerce marketplaces are the classic examples of platform business models.
In a connectivity business the process might involve allowing customers to buy roaming services from any number of providers in hundreds of countries, with revenue paid to the transaction platform by both participating service providers and end user retail customers.
Some platform business revenues have been earned in the connectivity business in the past. Linear video subscriptions might be examples of pipeline model. But advertising sales to customers of those services are a platform model.
Connectivity providers sell subscriptions to retail customers, and advertising to business partners. In the mobile business, a firm might sell roaming services to retail customers that are sourced from mobile operators in dozens to hundreds of countries. As in the video advertising example, the packager and platform earns money from retail customers and the wholesale service providers.
Platforms often are referred to as “two-sided marketplaces.” There are any number of key attributes, including payments flow, fragmented suppliers and fragmented buyers. Other attributes, including network effects, might also apply to traditional “pipeline” models as well.
The simplest, classic test of whether a platform business model operates is when the host makes its money facilitating transactions between third parties. Other classic examples are payment systems that enable transactions between retailers and shoppers.
GigSky provides an example. It enables mobile roaming service in some 190 countries, hosting a platform that allows travelers to purchase temporary internet access service when outside their home countries.
Some might view that as similar to the way any mobile virtual network operator conducts business: buying wholesale capacity from a facilities-based wholesaler and then retailing service under the MVNO’s own brand name.
But the resemblance is deceiving. A firm such as TruConnect buys wholesale from T-Mobile, then sells its branded service to customers. But TruConnect does not use a platform business model. It creates its own service and sells that service to customers. It does not connect potential buyers with many sellers.
Most platforms are exchanges, according to Applico.
Services marketplace: a service
Product marketplace: a physical product
Payments platform: monetary payment
Investment platform: an investment/financial instrument (i.e., money exchanged for a financial instrument, be it equity or a loan, etc.)
Social networking platform: a double-opt-in (friending) mode of social interaction
Communication platform: 1: 1 direct social communication (messaging)
Social gaming platform: a gaming interaction involving multiple users, either competing or cooperating
Platform business models are important in the data center and connectivity businesses precisely because that model provides an answer to the question of how growth can be created in a business with commodity pressures.
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