A platform business model creates value by enabling interaction between two or more distinct, interdependent groups—such as buyers and sellers—then captures some of that value through its pricing, rules, or related services. The key is not that a business operates online; it is that it coordinates activity among groups whose participation affects one another.
What is a platform business model?
The OECD defines an online platform as “a digital service that facilitates interactions between two or more distinct but interdependent sets of users (whether firms or individuals) who interact through the service via the Internet.” (OECD, 2019.)
In practical terms, a platform helps two or more groups find one another, communicate, coordinate, or transact. A marketplace might connect buyers with independent sellers; a communications service might connect users with one another. The platform supplies the rules and infrastructure for the interaction, but it need not own the goods or services exchanged.
“Platform” is therefore not a synonym for every online business. A retailer with a website is not automatically a platform: the relevant question is whether its service facilitates interaction between distinct user groups, rather than simply selling its own inventory.
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How platforms create value through participation
Platforms address a coordination problem: each group benefits from being able to reach the other. In a marketplace, more relevant sellers can give buyers more choice, while a larger pool of buyers can make the marketplace more attractive to sellers. When participation on one side increases value for another side, economists call this an indirect, or cross-group, network effect.
This can create a reinforcing loop: additional sellers may attract buyers; additional buyers may attract more sellers. But the loop is not automatic. The groups must find the added participation useful, and the platform must make their interaction workable. More users alone do not prove that a service is more valuable, difficult to compete with, or profitable.
Some services also have direct network effects: a user’s value may change with the number of other users on the same side. These effects can be positive, as when a social or messaging service becomes more useful as a person’s contacts join. They can also be negative. The OECD gives dating services as an example where a larger same-side user population may make the service less useful to a user (OECD competition analysis).
How a platform makes money
A platform’s business model includes who pays, what they pay for, and how charges affect participation across the different sides. There is no single standard way to monetise a platform: a fee that works for one group or type of interaction may discourage participation in another.
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One common approach is to charge one side little or nothing while earning revenue from another. The lower-priced side can still contribute economic value by attracting the users who pay. The OECD describes this cross-subsidisation as a common strategy for reaching viable scale (OECD, 2019).
To understand a platform’s revenue model, trace the connection between its prices and participation: who is charged, what activity triggers the charge, and whether that price makes the other group more or less likely to take part. The relevant outcome is not simply how much one side pays, but how the overall price structure affects the interaction the platform exists to enable.
How a platform differs from a reseller
The distinction depends on who controls the transaction and carries responsibility for the customer—not on whether a company calls itself a platform. A marketplace may arrange an exchange while suppliers retain substantial control over their goods and customer obligations. A reseller buys products and sells them on, generally controlling the resale price and assuming customer liability. A vertically integrated firm owns or combines parts of the supply it offers. These models can coexist within one company, so assess the particular service or business activity rather than assigning one label to the whole company (OECD, 2020).
| Business model | What it does | Who controls the sale or service? | Who bears customer liability? |
|---|---|---|---|
| Platform intermediary | Facilitates interaction or exchange between distinct user groups | Suppliers may retain substantial control over the goods or service offered | Suppliers may retain customer obligations; arrangements vary |
| Reseller | Buys products and resells them | The reseller controls resale prices | The reseller assumes customer liability |
| Vertically integrated firm | Owns or integrates supply with the service or product it offers | The firm controls integrated parts of supply | Depends on the specific activity and arrangement |
The OECD’s comparison identifies the general distinctions above; it does not establish the terms or responsibilities for any particular company’s current service.
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A practical framework for analysing a platform
- Identify the user groups. Name each side and note whether its users are individuals, businesses, or both.
- Describe the interaction. State what users find, exchange, communicate, or coordinate through the service.
- Locate control. Ask who sets the offer’s terms and controls the transaction: the intermediary, the supplier, or an integrated business.
- Trace customer responsibilities. Identify who is accountable to the customer for the product or service; this can help distinguish intermediation from resale.
- Map participation and pricing. Ask whether growth on one side helps or harms another, whether same-side effects matter, and which side pays or receives a subsidy.
- Consider participation rules. Look at how the service’s design and governance shape who can participate and how interactions occur. Rules can affect the model even where no goods change hands.
This framework is more reliable than trying to fit every digital business into a short list of platform categories. OECD analysis emphasizes that platform business models vary substantially across activities and sectors (OECD, 2020).
Why platform models matter in competition analysis
A platform may serve multiple connected groups, so analysing only one side can miss how participation and pricing on that side affect the others. OECD antitrust work identifies market definition, market power, efficiencies, exclusionary conduct, and vertical restraints as relevant issues to examine in digital-platform cases (OECD, 2020). These are questions for case-specific analysis, not conclusions that apply to every platform. The framework here is conceptual; it does not determine current legal requirements in any jurisdiction.
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