Digital Platforms: impact and resilience in COVID times

Digital platforms have shown singular resilience at a time when most businesses have been suffering from the COVID pandemic. Why is that? And how structural is this ‘digital interface shift’?

It’s well known that the coronavirus pandemic, and the social and economic measures required to tackle it, accelerated the growth of e-commerce and online retail. Often characterised as a ‘5 in 1’ year: 2020 has propelled platforms industry forward as if we were in 2025. But from a platform perspective, a more nuanced dissection of the developments in 2020 is required.

The impact of COVID on platform businesses is not just profound because of the scale of change but also the nature of the innovations and the speed of that evolution. The longer term consequences of recent shifts, and whether they represent permanent change, also remain unclear. Will the new behaviour of businesses and consumers persist when the pandemic finally passes?

 

 

Impacts differ by sector

Joe Schorge, founder and managing partner at Isomer Capital, has deployed hundreds of millions of euros in the tech sector in Europe and counts more than 40 platforms in its portfolio. He noted that the impact of the pandemic on a given platform business was predominantly determined by the sector in which it operates. Highlighting not just the impact, but the speed, with which it hit, he remarked that one successful and vibrant platform business in the travel sector in his portfolio had its best ever month in January 2020 but its worst ever in March.

Sectors that have performed exceptionally well, unsurprisingly, include homeware and home improvement services such as the French marketplace ManoMano which specialises in furniture. The groceries and essentials sector (whether for delivery or click & collect) has thrived and online marketplaces have also performed strongly for the purchase of physical products. 

Platforms that bring things into the home at a time when movement is limited have seen a significant uplift. Crucially, this isn’t limited to goods and retail but extend to include services that help people stay at home to work, access healthcare and also learn.

 

Digital platforms have resilience built in

The platforms services benefitting from the pandemic are not new but they have experienced a sudden surge. Arun Sundararajan is the author of The Sharing Economy and also Harold Price Professor of Entrepreneurship and Professor of Technology, Operations and Statistics at NYU Stern School of Business. He said: “Because we were forced into certain kinds of behaviour changes, not being able to go and sit at a restaurant, having to order in. This kind of behaviour change forces us to try something new that already was around, but we maybe never got around to.”

Using Uber Eats as a case study, Sundararajan examined order volumes in NYC during two periods pre and post pandemic: from February 1 to March 15 and March 16 until May 1. He reports that order volumes doubled in the second 6 week period. Digital platforms have not only resilience built-in, but they also create resilience for their communities.

This sentiment was echoed by Llibert Argerich, SVP Marketing from learning platform Udemy. He noted that the social measures had essentially required many people to start accessing activities in new ways simply because there was no other way. And that once the benefits of accessing services online, such as learning, are better understood the readiness to embrace the experience increased. Udemy has 57,000 instructors teaching over 130,000 courses in 65 languages to 35 million students and 7,000 corporate customers. During the peak pandemic period Llibert saw a 425% increase in the number of enrolments on the platform.

“There’s a change in behaviour that we’ve seen,” said Argerich. “It is not only the fact that people are forced into online learning, it’s now that they’ve discovered that online learning is there. I don’t have to be physically stuck into a classroom, but I can actually learn on my couch.”   

 

Longer term impacts of the 2020 pandemic

Looking back at the first 12 months since the start of the Covid pandemic, it’s possible to start discerning some of the potential long term changes that we will see. There is evidence that the rebound has been rapid for some platforms that were very hard hit in the first wave. Platforms have generally proven very resilient. Uber bounced back post lock down and AirBnB reported Q3 2020 results totalling 80% of the same period in 2019.

Argerich also predicts permanent transformation. “We don’t know how much of that’s going to stick, but this has been a fundamental shift.” He suggests that one development might be within organisations who have been slow to grasp “digital transformation” over the past 20 years. “It’s still surprising and shocking to me, how alien some big traditional and even small traditional companies that are rooted in the physical world, are from digitalisation.”

 

Adopting a platform strategy

The pandemic experience means that many ‘traditional’ businesses are now reassessing their online and platform strategies. Schorge suggests that most are already at a stage where it is accepted that a platform approach can be successful and suggests there are three ways to approach it.

The first is to start selling to consumers on an existing platform or marketplace and measure and learn. But there are other approaches: “you can engage with platforms by investing in them and learning how they work and playing an active role. And then the third level of engagement is launching a platform within your company for a particular product line or to aggregate demand and supply. ‘Platform as a service’ companies are already available, such as Mirakl, “so you don’t have to write your own software.”

Prof. Sundararajan sounds a note of caution saying that “companies often forget that in this desire to move rapidly and to enter this platform world, they don’t properly leverage the advantages that they already have” in such fields as branding, governance and finance and “they don’t always strike as good a deal with the platforms they’re partnering with them as they should.”

 

The interface shift

Schorge expects we shall experience some returns to pre-pandemic behaviour but believes that the opportunity lies with what he terms an ‘interface shift’. Michelin starred restaurants don’t want to sell on Deliveroo but a high-end takeaway interface might emerge so “it might not be winner-takes-all, but it might be a few winners take most. The platforms will segment in the way that traditional businesses have.”

The profound and rapid changes experienced by platform businesses during 2020 have highlighted the resilience and flexibility of the business model and focused the minds of business leaders who are not yet maximising the opportunities. 

 

To go further 

This panel discussion on the Impact of digital platforms and their resilience was part of the Platform Leaders event organised by Launchworks & Co on 18 November 2020 (full list of speakers and agenda). To watch the full event, play the video below.