Platform businesses are becoming a more integral part of the world. Some of the largest and most successful businesses of the last decade are platforms. However, what comes next for these platform businesses is always a mystery, as the general business world learns to adapt to the popularity of platforms.
Before the internet, all businesses and industries ran on the pipe model, where value is produced upstream, and consumed downstream in a linear fashion.
It’s a very exciting time in the technology and business worlds, as the relative unpredictability of these massive platforms opens up a world of possibilities for the future. Here are 7 expert predictions for platform businesses in 2017.
1. Acquisitions of platform startups heat up.
In 2016, we saw a handful of big corporate acquisitions of platforms. The most notable was Walmart’s purchase of product marketplace Jet.com for $3.3 billion, while GM bought autonomous-vehicle startup Cruise for more than $1 billion. 2017 may not see acquisitions as large as these two, you can expect a greater number of deals focused around platform startups to happen this year.
As more of these companies in traditional industries start to be threatened by large platform companies or platform startups, you can expect more and more linear companies, just like Walmart and GM, to start looking at platform acquisitions. Some of these companies are too far behind their platform competitors or lack the capability to look at building in-house, so they’ll be forced to acquire instead.
2. First big B2B platform successes start to emerge.
While some companies will stave off disruption through acquisitions and mergers, not all of them will succeed in preventing new platforms from taking over their industries. Chief among these platforms is Amazon Business, which is attacking everything from industrial supplies and chemical to metal and construction goods.
In 2016, Amazon Business surpassed $1 billion in sales, and it’s been growing at 20% month over month. It also has more than 9 million product listings, up from less than 4 million a year ago. If the business unit keeps up its pace, it could surpass $8 billion in sales and 15 million listings in 2017. However, given Amazon’s considerable resources and focus on the B2B (business-to-business) market, those estimates might end up being conservative.
A lot of companies in these B2B, linear-dominated industries think their businesses are immune to disruption by tech competitors, but that point of view will start to change in 2017 as Amazon Business truly takes off. Alongside growth from traditional platform behemoths like Amazon, expect to see more success stories in traditional B2B industries, such as Flexport in freight shipping.
3. Snap Inc. struggles as a public company.
Snap Inc., developers of Snapchat, is aiming to go public this year, and it has set lofty goals for its revenue and user growth to keep public investors excited. However, as I’ve written before, Snap Inc. may struggle to meet these targets. Snapchat still hasn’t figured out a scalable way to make revenue, and public markets will not be very forgiving of the inevitable bumps in the road. Revenue-wise, Snapchat is well behind where Facebook was when it went public, and even Facebook struggled as a public company in its first couple of years.
Accusations also emerged recently, as part of a former employee lawsuit, that Snap Inc. is faking some of its growth numbers to try to bolster its IPO (initial public offering) price. Time will tell if these accusations prove to be true, or Snap Inc. may try to settle quickly to keep key metrics from becoming public before the IPO. Either way, the lawsuit is yet another sign that Snap’s management is likely to struggle under the scrutiny of public markets. Snap may have a bright future ahead of it, but the next couple of years will be bumpy.
4. Platforms and their role become hot-button political topics.
The last few months have not been kind to Facebook. The fake news controversy that has plagued the platform since the election isn’t going away anytime soon. Likewise, Google faces continued antitrust scrutiny abroad, and Uber and Airbnb are both in for more fights with regulators abroad. President Donald Trump has already taken aim at Amazon in the past.
With all this in mind, 2017 will likely be the year that platforms get more public scrutiny. Their role as institutions that govern increasingly large parts of the economy has so far escaped much public comment. And, for the most part, leading platforms like Facebook and Google have tried to avoid addressing these concerns as much as possible, as evidenced by Facebook CEO Mark Zuckerberg’s attempt to shrug off the fake news issue.
However, as the next wave of platform companies starts to go public (likely Snap Inc. and Airbnb this year, among others), the question of how governments should interact with these businesses will come to the forefront of political discussion. As my co-author and I argued in Modern Monopolies, there are very good reasons to view these platform companies differently, and more positively, than the linear monopolies of old.
However, the public discussion hasn’t evolved to a point where it appreciates the nuances of how platforms work. As a result, 2017 could be a difficult year for the top platform companies from a regulatory point of view. Still, expect the conversation to evolve over time as these companies get better at managing and addressing their systemic importance in the economy.
5. The race for fully autonomous vehicles continues.
Autonomous cars were the star of the show at the most recent CES in Vegas. Some 500 auto companies were at CES this year, and most were showing off technology related to smart cars and autonomous vehicles. GM, Ford, Delphi, Intel, NVidia, BMW Toyota and AT&T were among the big names showing off or announcing new self-driving tech at the event.
In 2016, we saw the race for the self-driving car take shape, with several major announcements from big automakers on their plans to have fully self-driving cars on the road within the next few years. 2017 will be the year where that race truly takes shape. Almost all of the major competitors have functioning pilot programs and will start on the path to deployment. Additionally, this year will likely see several major automakers combine their efforts as they strive to own the development platform for autonomous vehicles. On the other side of the aisle are the major tech companies like Apple, Google and Tesla.
So far, Tesla appears to be in the lead, but 2017 could see a new frontrunner emerge.
6. Amazon Echo accomplishes what the Fire (and Fire Phone) never could.
Amazon is gaining traction with the Echo and Alexa. Amazon’s first two attempts at building a development platform were mostly expensive failures, especially the Fire Phone, but Alexa looks like it could succeed where those two failed. Amazon made a big push at the end of 2016 to turn Alexa into a development platform by allowing developers to create third-party “skills” for Alexa – essentially the Echo equivalent of an app. Alexa now has more than 7000 skills, which is a 700% increase from early last year.
Amazon also just announced that Alexa will be available for the first time on a third-party device. It’s partnering with Huawei to make the Huawei Mate 9 the first Alexa-enabled device. Expect to see more deals of this type in 2017, as Amazon makes turning Alexa into a development platform for voice and AI a big priority, especially as new competition is emerging.
Google announced in December of last year that it was opening up its Google Home Assistant to developers who could program what it’s calling “Actions,” the Google answer to Alexa’s skills.
Scale on the consumer side will be a determining factor in terms of who can win over developers. So far, Amazon has a healthy lead, and one it will not want to give up to one of its biggest competitors.
7. VR and AR will see more enterprise success than consumer success.
Virtual reality and augmented reality (VR and AR) were two of the biggest consumer disappointments of 2016. VR and AR were the talk of last year’s CES, but, much like wearables the year before, both categories failed to deliver devices that caught on with consumers. The only true success for either category in 2016 was Pokémon Go, which is only nominally an AR game.
Don’t expect to see this change in 2017. The technology isn’t ready yet to support a new major development platform for consumers for either VR or AR. For most consumers, the technology is still far too expensive. It’s also very big and bulky to use. Google Cardboard aside, most VR and AR tech involve strapping large devices to your face. However, the enterprise applications should start to catch on this year. Expect to see more VR and AR in warehouses and factories, as well as in healthcare. The efficiency gains these technologies can offer to enterprises mean that the cost isn’t an inhibiting factor, like it is for consumers.