The Yellow Pages, One of the Earliest Platforms

Today, the most valuable companies on the planet are all “platforms”, say the authors of The Business of Platforms. Huh, what are platforms? Naming them would make it easier to understand, so let’s list a few: Amazon, Facebook, the app stores of Apple and Android, Microsoft, Uber, Ola, Flipkart, Swiggy and Zomato.

 

Ok, now let’s look at the common theme. First, the platform owner owns very little of the content or assets that are transacted on the platform itself. Other firms produce and sell stuff on Amazon and Flipkart; other folks develop apps for the Apple and Android app stores; other people own the taxis availed via Uber and Ola; other companies develop most applications that run on Windows; other restaurants cook the stuff sold and delivered via Swiggy and Zomato.

 

Second, the platform’s value increases as it “tap(s) the innovation capabilities of outside firms to enhance value” e.g. the more apps that are available for the iPhone/iPad and Android phones, the more valuable their platforms become.

 

Notice how most of the value is being created by that italicized word, “other”? When you see the established platforms, it’s obvious why all those “other” entities are willing to add value to a platform owned by someone else e.g. via Amazon, the seller gets to be seen and bought by millions of customers. That’s what a platform brings to the table: access. Access to customers, to advertisers, to taxis, to restaurants etc. This creates a chicken and egg problem. People will join Facebook only if everyone else is already on Facebook. Sellers will come to Amazon only if there are enough customers, and customers will come only if there are enough sellers. Solving that isn’t easy (obviously), but if you somehow clear that hurdle, then you can become almost invincible. After all, who’ll switch out of Facebook? Or Amazon? Where would you even go?

 

Sometimes, governments intervene to encourage platformization. The US government, for instance, forced the standardization of railway gauges allowing them to interoperate leading to enormous economic benefits. In India, the government forced all major banks onto UPI, which then enabled the creation of those mobile apps for money transactions.

 

But far more common are private companies creating platforms without government help. Let’s look at one such pre-digital era platform, the now almost forgotten Yellow Pages. Yes, that was a platform. Let’s see how it came to be.

 

It started off with AT&T wanting to get more and more phone customers. It decided to give every customer a listing of everyone else’s phone number. If you could find people easily, you’d make more calls and others too would be incentivized to get a phone themselves. As luck would have it, one time, a printer ran out of white pages and thus used yellow pages for the business listings. The benefit of this accident was obvious: it was visually obvious which was which! And then AT&T realized another value of the yellow pages “platform”: customers could find businesses of interest easily, and businesses wanted to be found easily. Who should pay for it? One side or both sides? AT&T came up with a smart idea: they’d give the Yellow Pages freely to all its private customers. This made being on the Yellow Pages very attractive to businesses: in theory, they would be noticeable by everyone with a phone. And so businesses were willing to pay AT&T to be listed on the Yellow Pages.

 

And that is how one of the earliest platforms came to be.