Start an Online Platform Business

Today we look an an online business that can be mostly run from anywhere. An online platform is a digital service that facilitates interactions between two or more distinct but interdependent sets of users (whether companies or individuals) who interact through the service via the Internet.

We usually define these sets of users as connecting buyers and sellers and I use the term buyers and sellers very loosely. Because a job board that connects employers or recruiters with employees is also an online platform.

I will only be looking at pure play platforms that doesn’t hold any stock and not a hybrid. Because that can be very expensive (holding stock, fulfilling orders etc.).

Examples in South Africa
Gumtree in General Classifieds
PrivateProperty and Property24 in Property
Cars.co.za and AutoTrader in vehicles
bidorbuy auctions platform
SafariNow, Lekkerslaap etc. for holiday accommodation
Etc.

Business Models
There are three predominant business models:
Advertising supported (and usually free to use). Gumtree as example.
Listing fees. Property portals as example where a listing cost over R1000 but it can sustain that as estate agents charge high commissions. And in the case of PrivateProperty was supposed to take them out of the equation but there are mainly estate agents using the platform.
Commission seller only pays on successful sale. bidorbuy and holiday rentals use this on successful booking.

Choosing a niche
I will start by eliminating the obvious. As you will notice in some categories there are space for two or more while on other that depend on network effects (chicken egg problem) there is usually only space for one especially when it comes to free/ad supported low value transaction platforms. Cars for example has one or two more platforms with some traction.
General classifieds and auctions too hard to enter due to entrenched market leaders.  (Even Naspers OLX recently gave up in SA and conceded to Gumtree).
Naspers also gave up in the craft niche (local Etsy). There are one or two players here like Hello Pretty but I doubt this market will boom locally outside of small niche such as markets. People are having less and less disposable income and lots of craft shops have closed.

Recruitment is big in SA, well demand mostly fueled by South Africa’s world leading unemployment rate. Free ad-supported job sites has come and gone over the years most low quality. On the paid side careers24 vs. Pnet. Pnet bought out Jobs.co.za only to kill/integrate the platform let the domain go wasted. I think that is also too saturated due to the fact that like 10 000 people apply for one job.

So what is there left? I don’t know you lazy bum! Go find a niche. I do have some ideas that I may try.

Nanscent niches
There are emerging industries such as web3. We have seen platforms such as LocalBitcoins, this will fall under what is known as P2P or peer-to-peer trading. You not dealing with an exchange you have to wait for a human looking to buy or sell the asset you are buying or selling.

Strategy

Getting traction
One way to get ahead is to become a partner with a company that has lots of stock. WeBuyCars for example advertises on Gumtree and major car sites. Holiday rentals advertise on Gumtree. And we have even seen platforms advertise on other platforms such as Cars.co.za on bidorbuy. If you charge for listings you can give volume discounts. You would need something special or lots of traffic of course to get such a deal.

Platforms that enhance platforms
There has been attempts at auxiliary services such as escrow but its not really suited for many cases and its not suited for 2nd hand classifieds like Sheperd was. Ain’t nobody got time for that when you selling low value items.

Within the property/jobs/vehicles categories and we have also seen aggregators pop up that aggregate listings from existing sites, place ads next to and feed traffic back to the classified sites. Any ad supported businesses depends on successful arbitrage because you need traffic and that traffic must be cheaper than what you are getting back.

Considering foreign competition
Some industries have foreign competition that has gotten some traction locally. Airbnb is a good example of this.

Technical Requirements
Design, development, domain name, hosting. You are probably going to need to have a custom solution developed in this stage of the game.