9 Types of Software Platforms (+ Examples)
The internet is full of software applications. As a software developer or an entrepreneur, you may desire to develop or own the next unicorn in the IT industry. Focusing on the right sector can be key to building a successful platform.
When creating the best digital platform for your business, understanding how different software platforms work and their business models are essential. You risk choosing the wrong software platform without identifying your ideal target audience and business goals.
This article will teach you how different software platforms work and their core values so you can choose the best platform business model.
Let’s get started.
What is a Software Platform?
Platforms are the foundations on which other technologies, applications, services, components, or processes are developed.
A platform can come as hardware, such as a computer system, or as software, like an operating system on which other software programs run.
Think of it like an Android device, which is the base for additional software to be built on your phone by third-party developers.
A software platform is an application that enables interactions and transactions between users. As a business tool, a platform creates value by bringing together creators and consumers.
Platform business models use network effects to create value by allowing interactions between two or more independent groups. The best platform business model examples include YouTube, Amazon, eBay, WhatsApp, Uber, Github, Baidu, Waze, and Google Search Engine.
Although all platforms have the same basic business model, they differ in many areas:
- How they create network effects
- The interactions they support
- Approaches to solving problems
- Economic value
- Growth analytics
- Monetization methods
- Competitive strategies
Peer-to-peer platforms differ from marketplace platforms, while computing platforms differ from utility platforms.
A successful software platform has a competitive advantage, enabling creators and users to interact and transact.
Functions of Software Platforms
There are four core functions of software platforms.
- Audience building
- Providing core tools and services
- Setting rules and standards for the network
Types of Software Platforms
There are different types of platform businesses.
1. Technology Platforms
A technology platform is an environment for building and managing software systems, operational processes, and applications.
Third-party party developers can integrate the services from technology platforms into their applications or products through open or permissionless innovation.
Examples of technology platforms include:
- Microsoft Azure
- Amazon Web Services platform
Launching a technology platform means you are less concerned about solving direct, multi-sided, or peer-to-peer problems involving end users. Here, the end users are owned by the developers, and the platform holds no relation with the end users.
The technology platform is not two-sided (you do not connect the supply with the demand side participants or any other network). Technology platforms monetize the services they provide to third-party developers and are invisible to the end user.
For example, Lyft is a platform that provides mobility services, while it leverages Twilio to manage its business activities.
However, Twilio has no relation to the end users (Lyft customers); they solely relate to Lyft. Twilio only acts as a building block for Lyft through its platform.
Video streaming services like Amazon Prime and Netflix run on the Amazon Web Services platform (AWS). However, end-users do not interact with AWS. They interact solely with Amazon Prime and Netflix.
Technology platforms can grow depending on their ability to attract more developers to adopt their platform's technology for enhanced business services.
2. Computing Platforms
Computing platforms enable interactions between users and developers. Unlike in technology platforms, where the developers own the users, the platform owns the users.
Examples of computing platforms include:
- Google Android
- Oracle Database
- Microsoft Windows
- Apple iOS
These multi-sided platforms allow developers to use the platform network to develop their software.
For example, through direct partnerships, Apple iOS was initially built with its functionalities. As more users used the platform's services and reached critical mass, Apple extended the platform to involve third-party developers.
Connection in computing platforms happens through a marketplace where users can select from various apps developed by third-party developers. This connection leads to provisions for app monetization and recommendations.
Google took an alternative approach while launching its Android platform. They made provisions for both sides of the platform, the demand side (users) and the supply side (developers).
The tech giant sourced for early developers immediately after the platform grew, before physical android devices were made available.
Launching a computing platform would require creating a rigid bi-directional network effect. You need to attract many users to the platform to attain a critical mass.
You build a part of the platform, the demand side. When it gains critical mass, you open it up for other participants, the supply side.
The users attract developers, developers create apps to attract users, and the apps attract users, attracting more developers to the platform. This connection is the simple operational cycle of computing platforms.
3. Utility Platforms
Examples of utility platforms include:
- Google Search
A unique attribute of utility platforms is that they offer free services to users. Utility platforms have two distribution layers. The first layer connects users to the platforms.
The second layer is needed to expand the number of platform participants. This layer enables them to engage in financial peer-peer transactions while providing systems that keep track of the exchange and engagements.
In other words, the utility platform's business model provides a service. As the number of users increases and reaches the critical mass level, the platform welcomes the other participants.
These participants are advertisers and business owners for Google and Bing, airlines for Kayak and Skyscanner, and insurance companies for Zenefits.
The users attract companies on the platform, but these companies do not necessarily attract users. For example, advertisers come to Google since it is an avenue to reach potential clients.
Developing utility platforms is straightforward. First, provide a value-creation service enabling users to use the platform at no cost repeatedly.
Once you have the audience of a critical mass of users, you can decide to monetize the platform, opening it to advertisers and business owners to leverage these audiences.
Users attract businesses on utility platforms, but businesses do not necessarily attract users.
4. Interaction Network
Interaction networks are social media platforms enabling participants to communicate through digital interactions such as messages, voice or video calls, images, and money transfers.
Examples of interaction network platforms include:
Users join the social platform to interact with other users. More logically, users attract users, who then attract more users.
For instance, Facebook was an interactive platform launched to connect Harvard university students, and then it grew and advanced to other colleges and finally to what we have today.
The core value of these social platforms is identity, enabling interactions by connecting similar people.
To launch an interaction platform, you need to target groups of interacting individuals. Then continue to attract more users or build a network effect. The platform can be upscaled and opened to other users when you attain a critical mass level.
5. Marketplace Platforms
Marketplace platforms involve the supply side (seller) and the demand side (buyer). They enable transactions between buyers and sellers. Sellers attract buyers, who then attract multiple sellers.
Examples of marketplace platforms include:
- Amazon Marketplace
Pricing and product variety is the foundation of these platforms. They play the primary role in the platform, while identity plays a secondary role in the marketplace.
Buyers, not sellers, search for specific services or products on marketplaces. The more varieties of products, the better the platform.
Developing a marketplace platform is a challenging task. Unlike other established companies, platform owners must make systems available to manage the two sides of network effects.
A marketplace platform begins when the owner attracts buyers and allows sellers in specific niches to join. The platform then expands as more efforts are put into attracting more buyers to the platforms.
When this is achieved, it will be followed by a spike in the number of followers willing to sell other products in the marketplace.
However, when Amazon launched its marketplace, it used a different strategy since it already had many customers on its retail platform. Amazon opened the marketplace for third-party sellers, which attracted more buyers.
6. On-Demand Service Platforms
On-demand service platforms are two-sided software applications offering end-to-end services fulfilled by contractors or independent service providers.
Examples of On-demand service platforms include:
These platforms provide the rules on how services are rendered to users, leaving users with little or no freedom in selecting how they want their services delivered.
On-demand service platforms integrate a payment and tracking system. There is also a means for customers to confirm orders and rate service received (ratings). These platforms depend on metrics such as service availability.
Contrary to marketplace platforms, product variety plays a primary role here.
A wider variety of services here will lead to poor management of the platforms. Platform owners will have less control over how services are handled, resulting in poor user experience and low retention.
On-demand service platform users are more concerned about the service providers' availability. The more service providers are on the platform, the better the service availability and quality. It can attract more users and reduce transaction costs for the platform owners.
Developing and launching an on-demand service platform requires owners to take in substantial numbers of service providers to ensure service availability.
The platform grows when the first users vouch for the quality of services provided, and these users will attract more users. As the number of users grows, the platform must multiply the number of service providers to maintain service availability.
7. Content Crowdsourcing Platforms
Content crowdsourcing platforms allow users (creators) to upload content (videos, blog posts, and reviews) for sharing to a broad user base.
Examples of content crowdsourcing platforms include:
In a content crowdsourcing platform, participants interact with the platform, unlike interaction platform companies where users interact with users. This interaction is anchored by the content uploaded on the platform.
The network effect is between content contributors and consumers. More content on the content crowdsourcing platform generates more users to join the platform. There will be more opportunities for content contributors to provide more content.
The platform's business model is to monetize its services when the number of users reaches a critical mass, allowing the platform to promote automated ads.
These automated ads are placed within content shared by contributors. As a result, platform owners and contributors share the revenue generated from the ads.
Launching a content outsourcing platform is simple. First, the platform owners invite content creators for value creation by sharing their valuable content to attract users.
Then, as the platform grows and becomes successful, users start sharing more content to attract others.
8. Data Harvesting Platforms
Data harvesting platforms crawl around the web, gathering information. Such platforms produce data through the platform service.
Examples of data harvesting platforms include:
These platforms generate data by allowing users to enjoy their service and gather data. The data collected is fed back to the platform so other users can benefit from their service.
The network effect of such a platform primarily depends on the data collected rather than the platform's usage.
Developing a data harvesting platform will first require building a vast user base network. However, you may need to do without the service value proposition until the platform can attract many users.
For example, Waze started as a free map app for Nokia phones to build its user base. The mobile app offered free navigation services to users while obtaining its data from crowdsourced maps.
Once it attained its critical mass, its service value proposition shifted from free maps to traffic prediction services from data generated by users of its platform.
9. Content Distribution Platforms
Content distribution platforms connect channel owners to content creators willing to advertise their services to users.
Examples of content distribution platforms include:
- Google AdSense
The network effect in content distribution platforms is between channel owners and content advertisers.
Content distribution platforms connect owners with content. The more users the platform has, the more content creators it attracts. Also, the more content the platforms offer, the more attractive it is to users and channel owners.
For example, Google AdSense connects website owners with independent service providers by publishing ads on various websites, depending on the targeted audience.