“The Platform Economy” by Scott Annan is licensed under CC BY 2.0
What is Platform Economy?
Nowadays, people’s learning, life, and work are mostly inseparable from the Internet. With the rise of high-tech digital technologies such as big data, cloud computing, and artificial intelligence, many large enterprises tend to conduct their main business transactions and product sales services on internet platforms established by digital technology, forming a flexible business model that is no longer limited to traditional manufacturers, agents, and retailers’ distribution business models in the past, achieving the goal of enabling product suppliers The goal of mutual benefit between customers and platform developers. This economic and business model based on digital technology and relying on digital platforms provided by the Internet is called platform economy.
Three mainstream platform economies and development:
Martin Kenney, and John Zysman（2015）state that They believe that as the number of digital platforms established on the Internet increases and all have different functions, scholars believe that there should be a detailed classification of diverse platform economies. There are currently three types of platforms on the internet. The first type is the Transaction Platform, which aims to provide sellers and customers with opportunities and services for online transactions, represented by large enterprises such as Amazon and Facebook. The second type is Innovation Platform, which aims to provide customers with a technical framework that allows them to use it personally or provide sufficient space for teams or individuals to share resources and ideas. Companies such as Microsoft and Oracle are representatives of this type of platform economy. The third type is integration platform, which can be considered as a new type of platform economy after the combination of the previous two types. It can achieve the goal of streamlining or automating business by merging and coordinating multiple different applications, systems, and data. The application store of Apple products and Google Play, which can provide customers with multifunctional services such as notifications, advertisements, user ratings, and internal payment systems for pushing applications, are representative of the economy of these platforms.
Several Transformations Brought by the Platform Economy:
- Open Ecosystem
The first transformation brought about by the platform economy is the success of enabling some traditional enterprises to cater to market demand and expand their operations beyond the previously closed environment. Relying on internal resources and channels to establish advantages in the market is no longer effective. The birth and rise of the platform economy have enabled current suppliers and customers to closely connect the advantages of the platform and digital technology provided through the Internet, enabling both parties to benefit each other. Product suppliers can attract the attention of internet users worldwide and stimulate their purchasing or consumption desires by showcasing their products and high-quality services on online platforms. And customers can also browse various channels of online platforms on the internet and choose their desired products and high-quality services according to their own needs. This can form a good ecosystem and generate a continuous stream of economic effects. At the same time, This open ecosystem allows different participants to use information sharing and data flow to eliminate trade barriers (Deloitte, 2019). Many large enterprises are now profiting and operating through the ecosystem brought by platform technology. The constantly entering suppliers and customers on eBay are attracting each other, and the endless recruitment information from various companies on Upwork and the increasing number of freelancers have also formed a good cycle. Moreover, Apple’s App Store has nearly 1 million applications, some of which were developed by third-party developers and sold on platforms such as Phone and App Store. These all ensure that the open ecosystem of the platform economy enables both supply and demand sides to mutually benefit and take what they need. However, although many companies are enjoying the convenience brought by an open ecosystem, in fact, there are also some companies that are not prepared and experienced to participate in an open ecosystem. Martin Kenney and John Zysman (2015) emphasized that many companies do not yet have governance related strategies to address and prevent data security and privacy risks. Once these companies recklessly participate in the flow of large amounts of data in open ecosystems solely for profit, it is impossible to ensure that user and company privacy data is not leaked.
- New forms of employment and the prosperity of the gig economy
With the continuous popularity of the platform economy established by digital technology, the traditional full-time employment model in the labor market no longer maintains a deep-rooted position. A variety of internet digital platforms are emerging one after another, and many large enterprises are focusing on using massive data to predict and plan market demand and operational strategies. Therefore, in order to appropriately save fixed costs, the employment scope of online platforms will prioritize hiring temporary workers or freelancers. Many employees under internet platforms may be employed on multiple platforms. For example, many freelance workers will engage in driving services and work, becoming part-time drivers on the uber platform, but this does not prevent them from becoming temporary riders on delivery platforms such as Hungry Panda in the extra time.
However, the new forms of employment brought about by the platform economy and the popularity of gig economy have also brought a series of hidden dangers and troubles to society. Ursula Huws（2016）state that platform economy has led to unstable employment forms in the current market, which have gradually replaced traditional labor and jobs, and a large amount of taxes may be lost due to a large number of freelancers and platform operators falsely reporting their income to the government. Compared to traditional enterprises and full-time employees before the advent of the internet and the establishment of a platform economy through digital technology, the internet and government currently lack corresponding and effective tax policies and regulatory systems to avoid the possibility of tax evasion by online platforms and their freelance workers. At the same time, these freelancers may not be recognized as part-time employees on online platforms, and some countries cannot determine whether their identities should be considered as independent contractors or ordinary employees. Due to the lack of benefits and various types of employee insurance for full-time employees, freelancers may face unstable income at any time. Once they are judged as independent contractors, these freelance workers do not enjoy the protection rights of the National Labor Relations Law, and even do not have the right to establish platforms dictatorship and control over their employees’ salaries, leaving freelancers in a passive position. On September 1, 2021, most Twitch streaming media protested by suspending streaming for a day to counter the behavior of some online platforms on the edge and treating their workers harshly.
This video is an interview on the future prospects of the platform economy, affirming that an open ecosystem has attracted suppliers and customers to each other and established a good cycle of feedback. Digital platforms enable suppliers to showcase their products and high-quality services, thereby more directly attracting a continuous stream of consumers. At the same time, more and more customers are making more suppliers believe that the market for online digital platforms is profitable, and they are eager to enter. But the content of the video also emphasizes the need to establish reasonable regulatory systems and measures for the current proliferation of online digital platforms. As I mentioned earlier, the platform economy has opened up the ecosystem and established new ways of employment. However, the platform economy requires both supply and demand sides to rely heavily on data. The risk of data leakage cannot be ignored during the trading process. The platform economy has led to the proliferation of a large number of freelance and part-time workers, and some countries have not yet introduced corresponding policies to ensure the social security and welfare of these freelance and part-time workers for platform work. Therefore, when people enjoy the positive transformation brought about by the platform economy, they also need to consider how to regulate and repair the shortcomings of the platform economy.
Martin Kenney, John Zysman. (2015). Choosing a future in the platform economy: The implications and consequences of digital platforms. UC Berkeley.
Deloitte. (2019). The rise of the platform economy. pp. 1–5.
Ursula Huws, Neil H. Spencer and Simon Joyce.(2016). Crowd work in Europe. The press of University of Hertfordshire. pp. 10–15.
Laura Fitzgibbons. (2023). Definition: platform economy.
Geoffrey Parker and Marshall Van Alstyne. (2016). Digital Transformation: The Rise of Platform Economics: A seismic shift in business models.
Li Jin, Scott Duke Kominers, and Lila Shroff . (2021). Labor: A Labor Movement for the Platform Economy.
ETF studies. (2021). Future of Work: the platform economy.