The Growth Of Platform-Based Businesses
Platform businesses, companies that connect producers and consumers by means of a network, present a growing industry and a promising investment opportunity. This article by WisdomTree examines the advantages that allow platform businesses to thrive.
Platform businesses are scalable.
Platform businesses don't just scale easily; they benefit economically as they grow. For linear businesses, scaling up eventually requires too many costs to be economically feasible. Platform businesses, on the other hand, can scale up without increasing their costs. This allows them to grow larger than linear businesses faster. In addition, as a platform business grows, it becomes more valuable to its users, making it more appealing, more popular, and more likely to continue growing.
Platform businesses are demonstrating remarkable growth.
With 3-year CAGRs of as much as 29.9 percent and 3-year average gross revenue margins of as much as 60.8 percent, platform businesses are thriving in the market.
Platform businesses are disrupting their respective markets.
Wisdom Tree identifies nine models of platform business. Each model is making inroads into its respective markets, taking over market share and changing the way that industry does business. Examples of disruptive platform businesses include the following:
● Amazon
● Microsoft
● Visa
These businesses are disrupting industries such as the following:
● Information Technology
● Communication Services
● Consumer Discretionary Spending
● Financials
● Industrials
● Healthcare
● Real Estate
These wide-ranging impacts on major industries make platform businesses something every investor must consider as they evaluate their investment options.