Platform-based business models

Abstract

High-profile companies such as Facebook tend to invest heavily in promoting their business operations. However, given that Facebook was in deficit in 2007, why did Bill Gates and Li Ka-shing invest so heavily in the website? In fact, the sizable investments of both reflected their astute awareness of the site’s potential valuation, despite its early uncertainties. Twitter is yet to have made a profit, but is valued at 3.7 billion;equally,Groupon,whichwasestablishedin2008,recentlyrejecteda3.7 billion; equally, Groupon, which was established in 2008, recently rejected a 6 billion takeover bid from Google. Why do these companies have such high valuations? The answer lies in platform-based business models that engender positive chains of reaction among users and sellers. The stakeholders, except for the central company, are interdependent and complementary. Once implemented, such business models are unrivaled.