Airbnb CTO and 3 Tech CEOs Discuss the Digital Platform Economy at Davos

At last week’s World Economic Forum in Davos, Switzerland, leaders from the world’s most innovative digital and IT companies gathered for a panel discussion focusing on “A New Platform for the Digital Economy.”

Panelists included Nathan Blecharczyk, co-founder and CTO of Airbnb, and the CEOs for YouTube, Cisco, and Accenture. The session was designed to explore the future of the digital platform economy as an “ecosystem of value exchange.”

The biggest value of the panel was bringing hospitality and tourism together with digital media, business, IT, and smart city infrastructure — all in one place.

The idea of cross pollinating disparate industries is fundamental to the platform economy, but it’s rare to find top leaders in the travel industry having a dialogue about that with companies like Cisco in an open forum available to the public.

Jonathan Zittrain, a professor of law and computer science at Harvard University, moderated.

The Rise of Digital Platforms

The digitization of business, and the rise of peer-to-peer merchant systems facilitated by integrated layers of digital platforms, is impacting every business sector, including travel.

Ebay was one of the first mainstream examples of a company providing a public digital platform for user-generated content, so anyone could become an independent merchant and engage the global economy. Around the same time, social media platforms were evolving, where value exchange took the form of online network building for personal and professional development. Then Airbnb, Uber and similar sharing companies gave people a way to monetize their personal assets and services.

Eventually, every aspect of our lives will have an option for peer-to-peer, digital platform engagement. The smart city, or “city as a platform” concept, represents some of those opportunities in the future, which we highlighted in our Skift Megatrends 2016 forecast this month.

“We have two kinds of platforms,” said Zittrain in his introduction. “One is the platform foundational to almost everything digital these days, such as the internet. Un-owned, no particular CEO who runs it. And then, we also have as platforms a more retail conception. [It’s] thoroughly owned with entrepreneurs and others who have on that first platform built new platforms that people at large can use.”

Airbnb’s Blecharczyk then put those levels of platforms into context from a real world perspective. He began by saying that Airbnb has booked 70 million guests into strangers’ homes since 2008, with 40 million of those happening in 2015. Meaning, Airbnb booked more business last year than the previous seven years combined.

“In a sense, we’ve built a platform to facilitate payments, reviews, search, but we’re actually not the provider of the ultimate service, which is the accommodation,” he said. “So we’re not the service provider, we’re the facilitator, but we’ve really made sure that the facilitation we do speaks to the specific customer needs.”

While that seems relatively obvious in 2016, it provides a perfect definition and starting point for a deeper dive into the future of digital platforms that prioritize a personalized, customer-defined commercial transaction.

That customized brand experience, of course, is what every travel brand is trying to deliver as the ultimate goal of their consumer marketing and engagement strategy.

Now imagine a city that could provide the same personalized experience for travelers, where tourism bureaus shared the same platform. Or a conference center or a standalone conference as a platform, which hasn’t really been explored yet to any degree.

Or a travel company. We looked at that recently with our story on the Bokun business-to-business travel platform in Iceland.

[Above: From the Accenture Technology Vision 2016 survey]

Okay, But Now What?

Digital platforms have proven themselves as a new model of economic activity, but right now there’s still a lot of experimentation, explained panelist Arun Sundararajan, professor of business at New York University. He said the success is based on “aggregating providers and giving them access to global markets.”

Zittrain added that there’s a blurring of lines between platforms and government regulators because all of this is new territory and everything is scaling so fast. That’s why Airbnb is helping define regulations for room-sharing providers, sometimes through the court system, because there’s no precedence for any of this.

Adding to the burden of establishing regulatory standards, platform economies are highly decentralized so they require different standards in different markets.

“So the market is setting the standards rather than the regulators doing the same,” Zittrain concluded.

Susan Wojcicki, CEO of YouTube, explained how the consumer community is helping self-regulate itself, based on consumer reviews and viewers flagging questionable material, because YouTube could never supervise 400 hours of video being uploaded every minute.

Zittrain spent a little too much time on conversation around the background of both Airbnb and YouTube’s early days, which ate up valuable time that could have been focused on the future. For the people in the audience paying $27,000 per head to attend the 4-day WEF Davos conference, they probably would have appreciated a little more actionable business intelligence deriving from this session in terms of what’s next.

One thing Wojcicki provided that was compelling: “The line between user generated content and professional content is completely blurred.” That would have been an interesting conversation to have continued.

Chuck Robbins, CEO of Cisco, brought an interesting perspective from the IT sector. Cisco builds some of the hardware that runs the internet and makes cloud-based computing work fast enough to support today’s mobile-first, cloud-first business environment.

“Now we’re transitioning all of our platforms,” he said. “We’re opening up programmability on everything we build, so that you can then develop on top of it, add value [and] build business.”

Therefore companies are adapting to take more advantage of digital platforms by shifting technology from a business component to a business foundation.

“The strategy of every business is going to have technology at its core,” added Robbins. “We’ve gone through this phase where every customer, every company, ever country knows that technology has to enable strategy. Now, I think what many of our colleagues here have proven, is that technology will fundamentally define differentiated business models and differentiated strategies of the future.”

Lastly, Accenture is a fully digital, virtual and decentralized IT services company that doesn’t have a physical headquarters. Pierre Nanterme, chairman and CEO of Accenture, said that 80% of executives surveyed for this year’s Accenture Technology Vision 2016 study confirmed that “platform is going to be key in their growth strategy moving forward.”

Also, he said 75% of executives believe that their digital platforms will cross industry boundaries, expanding into new and uncharted sectors.

The Accenture Technology Vision 2016 survey expands on the themes explored in the panel. It’s broken down into five segments, including Platform Economy, which offers the following additional context around the future of digital platforms.

Three New Rules of the Platform Business

1. Network Effects/Two-Sided Market: Exists when two user groups (typically, producer and consumer) generate network value for each other, resulting in mutual benefits that drive demand-side economies of scale. The network effects of platforms, with more connected users and transactions, drive value creation and scale.
2. Distribution Power Law: Relates to platform business models that enable scale by allowing others to generate profits in the ‘long tail’ of the distribution curve—avoiding diminishing returns associated with traditional (linear) value chain models.
3. Asymmetric Growth and Competition: Based on driving the demand of a core market through complementary markets, which are often subsidized (or free) to users and which cross industry lines. Asymmetric competition exists when two companies go after market opportunities with very different approaches and resources.