The Rise and Worth of Platform Businesses: Harnessing FOMO for Growth

How many times have you bought things you don’t need but still bought them because you couldn’t resist? You’re not alone.

We’ve all been there, filling our carts with items we didn’t plan on buying. This is called impulsive buying, and it’s driven by sophisticated marketing strategies and platforms that make it easier than ever to shop. Today, we are surrounded by millions of things and persuaded to make a purchase. One of the craziest transformations is Instagram, which went straight from a photo-sharing app in 2010 to being worth over $50 billion. I still remember its old icon; I never imagined it would be so powerful in marketing, collaborations, networking, connections and much more. 

This is just an example of how technology is being modified and what is the importance of platform business. People prefer to reach from A to B in a few easy and quick steps. Platforms like Instagram, Uber, and Airbnb have revolutionized our interactions with services and products. These businesses act as intermediaries, making it easier for people to connect and transact. They simplify our lives, offering convenience and efficiency that appeal especially to younger generations like Gen Z and Millennials, who prefer quick and easy solutions.

Instagram, for example, has over 10 million influencers who shape purchasing decisions worldwide. These individuals have turned their unique skills and personalities into powerful marketing tools, often eclipsing traditional methods. This shift is driven by a psychological phenomenon called FOMO, or the Fear of Missing Out.

FOMO as a trigger!

The Fear of Missing Out drives both buyers and brands. Buyers fear missing out on big sales if they don’t act quickly. Brands fear losing sales or failing to scale if competitors collaborate with high-end influencers. Not only this, but FOMO also drives the public to emulate influencers’ lifestyles and success. It’s a cycle where people use the platform to gain fame, which influences more people to use it. Their lavish lifestyle and brand collaborations create a FOMO, especially among youngsters, and you will find out of every five, one of them works as an influencer. This seems to be the future of most young generations as traditional marketing methods have faded. Brands prefer a face value, mostly fulfilled by these influencers who increase their brand awareness and presence. Not to discuss here that AI is still making innovations as companies use different marketing strategies with the help of it. What do you think the future of marketing looks like? Are we going to witness some more inventions or successes?

Well, Instagram, a simple social media platform, has become a powerful tool. People often use their smartphones to consume content without realizing they are making others famous. It’s a cycle where the platform is used by people, for the people, and back to the people, all driven by FOMO.

Several factors contributed to Instagram’s success:

1. User-Generated Content: Instagram thrives on content created by its users, democratizing content creation so anyone can become an influencer.
2. Engagement and Community: Features like stories, direct messaging, and live videos foster real-time interaction, enhancing user engagement and loyalty.
3. Monetization Opportunities: Partnerships, sponsored posts, and affiliate marketing provide influencers with multiple revenue streams, incentivizing them to grow their followings and create high-quality content.

Influencers driving consumer behaviour

FOMO is a powerful psychological driver that platform businesses exploit. It prompts individuals to take immediate action, such as purchasing or staying engaged with the platform.

1. Scarcity and Urgency: Limited-time offers, flash sales, and exclusive releases create a sense of urgency among consumers.
2. Social Proof: Seeing friends, celebrities, and influencers using a product or service triggers a desire to emulate them.
3. Constant Updates: Platforms like Instagram keep users engaged with a continuous stream of updates, reinforcing the fear of missing out on new content, trends, or opportunities.

Traditional marketing methods, such as TV commercials and print ads, are becoming less effective in an era dominated by digital platforms. Influencer marketing has emerged as a highly effective strategy for reaching and engaging target audiences. Influencers are perceived as more authentic and trustworthy than traditional advertisements, making their recommendations more impactful.

Additionally, influencers have well-defined niches and follower demographics, allowing brands to target specific audiences precisely. Unlike traditional ads, which are often one-sided, influencer marketing fosters interaction and engagement, creating a dynamic and participatory marketing environment.

Now, why did Instagram cross billions?

The valuation of platform businesses has skyrocketed, reflecting their immense potential and market influence. Companies like Airbnb, Uber, and Amazon have achieved multi-billion-dollar valuations. The worth of these platforms is derived from several key factors:

1. Network Effects: As platforms grow, they become more valuable to users, creating a self-reinforcing cycle that attracts more participants.
2. Scalability: Platform businesses can scale rapidly with minimal incremental costs, unlike traditional businesses that require significant physical infrastructure.
3. Data and Insights: Platforms generate vast amounts of data, providing valuable insights into consumer behaviour, preferences, and trends.
4. Diversification: Many platform businesses diversify their offerings to capture more value, like Amazon, which expanded from an online bookstore to cloud computing, streaming services, and more.

All of that to say…

The rise of platform businesses represents a paradigm shift in the global economy. These platforms have reshaped industries and consumer behaviour by leveraging FOMO and creating value through network effects. As we move forward, the influence of platform businesses will only grow, making them central to the modern economic landscape. Whether through Instagram influencers swaying purchasing decisions or companies like Airbnb transforming the hospitality industry, the power and worth of platform businesses are undeniable. The challenge for brands and consumers alike is to navigate this new terrain, harnessing its potential while addressing its complexities.