The Power is Now

How The Platform Business Model Is Transforming Real Estate – Forbes

Digital platforms are now among the world’s most valuable and influential companies. Whether it’s Airbnb in lodging, Amazon in retail, Haier in home appliances, or Uber in transportation, countless platforms have developed innovative methods to connect supply and demand more intimately than ever before.

Disruptive companies like these—typically unicorn—have upended traditional business models and created new ones in their wake. They’ve consequently changed how we live, work, and play—and in the process, transformed entire industries such as healthcare, education, transportation and even real estate.

In this rapidly changing environment, leaders need to understand how platforms work and differ from traditional business models—critical knowledge for strategists wanting to compete in today’s platform economy.

The Shift From Traditional to Platform Models

The linear value chain is no longer fit for purpose in a world where customer needs and expectations constantly evolve. Thus, to remain competitive, businesses must adopt a more agile approach to value creation based on a continuous cycle of experimentation and learning. This means moving away from the linear value chain toward a more iterative and flexible model: a platform.

Platforms are unique in their ability to create value by connecting different stakeholders, including users, developers, and businesses. This ecosystem allows for a constant flow of feedback and data that can be used to improve the user experience. For example, Haier developed an open platform that allowed third-party developers to create apps and services for its products, which was incredibly successful. The company now has more than 100 million users and over 1,000 developers building apps for its products.

In the past, businesses primarily relied on closed systems, where they controlled all aspects of the value chain. However, this is no longer viable in today’s fast-paced, collaborative economy—platforms can create value by connecting people and resources in new ways, emphasizing collaboration and peer-to-peer interaction. For example, Airbnb connects people who need a place to stay with people who have space to share. Uber connects people who need a ride with drivers who have a car.

MORE FOR YOU

“These platforms provide value to users by connecting them with each other in new and innovative ways,” said Huda Khan, a lecturer at the University of Aberdeen, in an email. “They’re highly scalable and open, allowing them to reach critical mass quickly. And they’re built for two-sided markets, which means they can create value for users and developers.” This is why “platforms are becoming the dominant business model across industries”, according to research published by McKinsey,

Where Platforms Are Making An Impact

There are three primary platform classifications: marketplaces, social networks, and developer platforms.

Marketplaces are platforms that connect buyers and sellers. eBay is one company that recognized the value of an online marketplace, quickly rising to popularity as the go-to digital bridge for consumer goods. Facebook Marketplace and Alibaba soon joined the consumer goods space with their own platforms. Others bypass physical goods and solely focus on the digital marketplace. The Apple App Store and Google Play are top of mind in the digital goods sector, not to mention the Metaverse.

Social networks are platforms that connect people. While Facebook enjoyed dominating their category in the late 2000s, the sector was and is still highly competitive. Instagram, and LinkedIn, are now heavy hitters with their micro-focused platforms based on photo, business networking and video-sharing.

Developer platforms are a niche for many, connecting developers with the tools needed to build applications. The best-known examples are iOS and Android platforms, providing developers with the tools to build apps on their respective devices. However, no-code platforms are quickly gaining popularity, especially among b2b SaaS companies. It’s become commonplace for companies bordering unicorn status to base their entire workflows on no-code platforms like Figma or AirTable.

According to research published by the Harvard Business Review, these three classifications of platforms will upend nearly every industry by “bringing together producers and consumers in high-value exchanges.” This is observable in real estate, where consumers have experienced difficulties, confusion, and expensive logistics for many years.

Untapped Potential Ready for a Modern Platform

Research published by Grand View Research valued the global real estate market at $3.69 trillion last year. Growth is forecast at a compound annual growth rate (CAGR) of 5.2% from 2022 to 2030. Yet, as large as it may be, the industry is famously fragmented, resulting in an inefficient and time-consuming process for both buyers and sellers. However, with the advent of new digital platforms such as Unreal Estate, the process is becoming more efficient and transparent.

Unreal Estate’s founder, Kyle Stoner, said, “I started Unreal Estate because I was sick of seeing people pay incredibly high fees to brokers when it was unnecessary,” in an email. But, he continued, “I knew there had to be a better way, and I was determined to build it.”

Platform businesses like Unreal Estate can often scale quickly and reach a global audience for three reasons. First, they typically have very low fixed costs, effectuating significant value for money compared to traditional market offerings. Second, they often capture substantial user data—which can be used to improve the platform, in turn making it more valuable to its users. Unreal Estate, for example, uses data from over 30,000 homes sold on its platform to create consumer dashboards with step-by-step guidance for buyers and sellers—enabling AI to enhance the home search experience, such as providing buyer recommendations and narrowed search radii.

This has significant implications for leaders. First, to build a platform business, you must deeply understand your users and what they value. Second, you also need to be able to execute quickly and efficiently to reach a global audience. So, if you’re looking to start a platform business, or if you’re already running one, here are three tips derived from Unreal Estate to help you:

1. Focus on your users and what they value: For example, if you’re building a platform for artists, make sure you deeply understand the needs and values of your artist users. What do they care about? What do they need that isn’t being met by existing platforms? Build your platform with those needs and values in mind, and you’ll be more likely to succeed.

2. Execute quickly and efficiently: For example, if you’re building a global platform, you need to be able to execute swiftly and efficiently to reach your audience. That means having the right team in place, with the right skills and knowledge. It also means having the right infrastructure in place so that you can scale quickly and efficiently.

3. Use data to improve your platform and make it more valuable to your users. For example, if you’re building a platform for artists, use data to understand what type of content is most popular with your users. Then, use that data to improve your platform and make it more valuable to your users.

In summary, as platforms disrupt more and more industries, it’s increasingly crucial for businesses to understand how they work. Only then can they take advantage of the opportunities these new platforms present. As we’ve seen, platforms are built around a core interaction between two or more groups of users. This interaction is facilitated by some technology that allows users to connect with each other and exchange value. Platforms use network effects to grow their user base, making the platform more valuable to users. And because platforms often enjoy first-mover advantage and natural monopoly status, businesses need to keep an eye on them.

Platform businesses are changing how we live and work, and we must keep up. After all, platforms are the backbone of the collaborative economy, and the collaborative economy is the future of business.

Help/FAQ

featured

own shows