Publication: The Pandemic's Impact on Digital Platform Businesses
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Date
2021-02-04
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EIX
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Abstract
The 21st century brought about an explosion of businesses built around digital platforms, which transformed markets and economies worldwide. The so-called platform revolution upended entire industries from retail (Alibaba, eBay), deliveries (Amazon), online payments (PayPal), food delivery (Just-Eat, FoodPanda, Deliveroo), freelance jobs (Freelancer, Upwork) to transportation (Uber, Blablacar) and accommodations (Airbnb). Until recently, the success of digital platforms seemed almost unstoppable, as continuously manifested by the number of suppliers, consumers, and transactions on such platforms. However, the Covid-19 pandemic made it painfully obvious that not all platform businesses are equally resilient when a global crisis hits. As Warren Buffett famously noted, “only when the tide goes out do you discover who’s been swimming naked.”
The success of digital platforms has been predicated on the use of information technologies to efficiently connect and match suppliers with consumers. For example, an Airbnb property owner in Sydney can now be easily matched with a German tourist looking for accommodations in Australia, which would have been very difficult to arrange in the past. In this case, the platforms serve as facilitators or intermediaries of transactions between the two sides: setting the rules, providing the IT backbone, safe payment, and generating mechanisms of digital trust in the transaction. For example, Uber drivers and passengers mutually rate each other, which creates greater transparency and ensures quality in a peer-to-peer transaction.
However, the Covid-19 pandemic brought about abrupt changes in the market environment and the economy at large. Shifts in demand and the radical measures taken by governments to combat the spread of the novel coronavirus created massive disruption in the business landscape with particular relevance for digital platforms.
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Attribution-NoDerivatives 4.0 International
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IE Business School
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Citation
Gerwe, O., & Silva Froján, R. (2021, February 4). The pandemic's impact on digital platform businesses. Entrepreneur & Innovation Exchange. Retrieved March 3, 2025.