Peer-to-peer Business Model
Many industries, including music, e-commerce, travel, and others, are being transformed by the internet's digital age. It heralds new business potential for people, as new items are released on a daily basis without the use of intermediaries. The peer-to-peer network (P2P) model is one such business model that has risen as a result of new technology.
If the Internet has altered how we communicate, watch TV, and listen to music, it has also altered how we do business. Every day, new products, services, and business models emerge that we could never have imagined previously. And it is this that has given rise to the peer-to-peer (P2P) business model.
Traditional businesses are directly impacted by several peer-to-peer business models. They alter their methods on a daily basis. Many tech titans, including Lyft, Uber, Airbnb, and Amazon, have successfully adapted this concept. Please tell us more about the peer-to-peer economy and how it operates in business.
What exactly is a peer-to-peer economy?
The peer-to-peer (or P2P) economy is a business model in which two individuals buy (demand) and sell (supply) goods directly in terms of product or service delivery. The seller is a private, self-employed individual who manufactures or provides the service.
Buyer and seller do not require a firm that owns all of the means of production and labor to carry out the entire manufacturing process. On the other hand, they benefit from companies that act as the interface to connect both parties.
Even though the peer-to-peer concept seeks a direct connection between the parties with no middleman, it is not entirely feasible. This link will always be mediated by some form of technology or business.
The Internet has made this peer-to-peer economy a viable system by making transactions more accessible, faster, and safer. And the term "peer-to-peer" has indeed caught on, thanks to Napster.
This file-sharing system, which debuted in 1999, would allow people to share music over the internet. Napster changed the musical landscape by bringing together people who could exchange music files for free. That has never been forgotten in the music industry.
But this "movement" of peer-to-peer (P2P) did not come down to that. It actually allowed millions of users to connect, form groups, and collaborate with one another.
This peer-to-peer economy has enabled a wide range of business models, including multisided platforms, marketplaces, and crowdsourcing.
What exactly is the peer-to-peer business model, and how does it function?
The goal of the peer-to-peer business model is to act as a go-between between people. It connects two parties: those who have something to offer (a product or service) and others who can benefit from it.
Typically, the peer-to-peer business model entails a platform that facilitates communication between both parties while also establishing rules and regulations, payment systems, and any other processes that are required for the transaction to be successful.
This third party decreases the risk of both the seller and the buyer failing to deliver or pay. Furthermore, it lowers consumer prices by lowering production costs and investments.
Some of the most well-known companies that use peer-to-peer business strategies include:
- Uber, Lyft, and Blablacar are ridesharing apps that link drivers and passengers.
- Fiverr, Freelancer, Upwork, Toptal, and Guru are examples of platforms that link freelancers and clients in a variety of fields, including marketing, translation, graphic design, and programming.
- Sellers offer their products for a modest cost (or for free) on eBay, Amazon, Etsy, and Alibaba, and customers purchase through the platform.
- Airbnb, Tripping, and HomeToGo are apps that connect people who want to earn additional money by renting out underutilized property to those who are looking for a place to stay.
In every case, one side of the equation offers the service (vehicle, renting space, item), while the other consumes it. And the business provides the framework for creating the match, complete with all of its structure, mechanisms, and rules.
The canvas of peer-to-peer business models
In an ideal world, the peer-to-peer business model canvas would look something like this: no middlemen, just direct relationships.
However, there is an economic opportunity in arranging this peer relationship (and profit from it). This opportunity spawned marketplaces (or platforms), transforming the peer-to-peer business model canvas into something like this.
The following is how electronic money transfers work:
- Application- For P2P payments, the seller selects an application.
- The bank accounts of the buyer and seller are linked to the P2P payment application.
- On the acquisition of any goods, money is transferred from the buyer's bank to the seller's bank.
- The balance in the account is stored in the P2P application's database after each transaction. The money can subsequently be stored in the seller's payment account or transferred immediately to the bank account.
With these payment structures, the peer-to-peer network has carved itself a place in the business sector since its creation. It has enhanced internet marketing and given buyers more options. Mobile phones have also played a significant part in P2P transaction applications.
The benefits of the peer-to-peer business model
Costs:
On a regular basis, all stages of the production process include a slew of expenses and investments that producers can't always afford, especially when it comes to goods and services offered by individuals.
Traditional businesses must invest in design, manufacturing, recruiting, transporting, negotiating, marketing, advertising, insuring, and a plethora of other assets and transaction costs that are much too many to list here.
However, by providing individuals with the framework they need to supply their goods and services, these P2P enterprises have helped to cut such costs. They make it easy for users to share and filter data in order to discover each other and suit their requirements by providing search engines and platforms.
Labor Specialization: The peer-to-peer business model allows those selling items or services to specialize even more in their field of expertise.
Because the specialist does not have to focus on other duties that are required to commercialize their goods or activities, they may devote all of their capital and attention to honing their skills and enhancing the quality of what they produce.
Labor Specialization:
The peer-to-peer business model allows those selling items or services to specialize even more in their field of expertise.
Because the specialist does not have to focus on other duties that are required to commercialize their goods or activities, they may devote all of their capital and attention to honing their skills and enhancing the quality of what they produce.
Risk Management:
Political, social, and economic factors are inherently uncertain and unstable, posing hazards. It is the producers who must bear the loss when substantial changes in the market, customer behavior, or even crises and natural calamities occur.
In the peer-to-peer business model, in addition to the cost savings mentioned above, the intermediary company also assumes a large portion of the direct risks associated with business management.
These platforms considerably reduce the losses and uncertainties that a manufacturer would have to confront by understanding a big portion of the procedures involved in supplying goods and services.
Wrapping it up:
With the pandemic lockdowns in every country, the P2P e-commerce business model has accelerated. E-commerce has taken a big shift, with most users trusting the online selling platforms' no-contact policy. Consumers now prefer to communicate with sellers directly online rather than visiting physical locations.
It's all about shifting models and adjusting to new ones in today's economic landscape. In the recent decade, the peer-to-peer business model has grown in popularity. This strategy is built on convenience for both the seller and the buyer. Up-and-coming P2P firms will probably continue to transform business circumstances in the future.
