MOONP :
Hwang bro said appreciation, sharing, and resonance are essential
for a successful platform business.
There is a business platform that has all three of these,
called ‘Share and Care,’ a charity through sharing.
Mr. Heung :
‘Share and Care’ has touted itself as a social charity platform in numerous press releases.
It still has a long way to go, though.
MOONP :
My question is, what the profit model is for ‘Share and Care’
although it has all three gong elements.
Another question is, they created a platform of charity through sharing,
but how do they make money?
These are big question marks for me.
Can we talk about successful platform business models without talking about profits?
Hwang Bro :
Definitely not, for businesses. Let me give you a jaw here.
We need to distinguish between business models and profit models.
Business model means a concept of work.
If you have a well-thought-out idea about what value you provide to whom,
that’s a business model.
Now, profit model is different.
Optimists often think that good business models will naturally lead to profits.
That’s not necessarily a bad approach.
Although we are doing good on this business,
we need to design the entire business process based on Porter’s Value Chain,
and determine which segment of the Value Chain we will tap into to make money.
That’s profit model. Easy peasy, right?
Let’s say there are job seekers and companies in need of people.
Some middlemen can link these two parties.
Now, the business model is the same,
but if you charge job seekers, that’s a job placement agency,
and if you legitimately charge companies looking for people,
that’s a search firm or headhunter.
MOONP :
Based on where you put an emphasis on.
Hwang Bro :
This one great case from 1959 comes to my mind
every time I talk about business models and profit models.
Mr. Heung :
C’mon, stop talking about the old time. Talk about things in 2010 and forward.
Hwang Bro :
It’s Xerox. At the time it was the state-of-the-art equipment.
It was much more expensive and functional than the existing counterparts then.
The sales were dismal, though.
They made a product faithful to a business model of ‘improving work productivity,’
but it failed to bring in money due to its price tag.
So, then-president Wilson, I think, introduced a lease system.
He leased the machines at $95 per month.
Users could use them all they wanted and the company made a lot of money!
When you separate business models and profit models,
it helps you find ways to make real profits.
Apologies for bringing up a specific case,
but you need to make a choice between the two.
You can commit yourself under optimism that you will make money with it
eventually although your business model itself isn’t an easy one.
Or, you can break down the value chain of the overall business
that is built on a robust business model, and figure out fast where you can make profits.
Platform businesses are also a business, which means you need to make profits.
Without that decision, you will remain confused forever.
Mr. Heung :
Some might not know what Value Chain is.
Hwang Bro :
You need to break down your business activities and clarify
which segment will bring you the biggest profits.
What I keep thinking about is, as we said earlier,
platforms need people, a lot of them, a lot of destinations,
a lot of content, many different services and products.
With a variety of unique products and services as well as many users,
mediating them can also be a business.
That’s what’s always on my mind.
You need to secure people first.
Or, to have great products, services, and other content to naturally bring people in.
These two are what you always need to think about.
MOONP :
The conventional school of thought is close to the latter.
Great products and services will naturally draw people in.
Mr. Heung :
That often leads to failures, though.
Hwang Bro :
That’s the stance that content proves itself.
The opposite school of thought is, first and foremost you need to have a lot of people.
That is represented by ‘quantity-quality trade-off.’
If it reaches a critical mass, quantity turns into quality.
Boiling water under 100 degrees C just means a simple increase in quantity or numbers.
Once past 100 degrees C, water changes its state and turns into steam.
Once you have a lot of users in the first place and the number exceeds a certain threshold,
it translates into changes in quality.
That’s why the focus was on gathering as many users as possible.
In the early days of Internet, Daum offered its email service for free to secure many users.
If you offer great content, would people naturally come for it?
That’s the biggest question mark in the mind of people in platform business.
It sounds craven, but unless you seek both of them at the same time,
it’s hard to gather people, it costs money, and content doesn’t prove itself, either.
This remains a dilemma for those in platform business.
Which should they handle first?
Should they do all at the same time?
It sounds like a craven excuse, but that’s the best solution I can offer for now.
(To be continued)