Interview with Wout: The lessons from years of platformizing

What is your connection with platformization?

“My passion for platforms began at Werkspot, which was founded in 2005”, says Wout Withagen, director of Freshheads. “In the beginning, I handled customer service. One Friday afternoon, a tradesman showed up with a sledgehammer, saying, 'if you don’t remove that bad reference right away, I’ll smash the place to bits.' We offered the man a beer, and when we talked to him, we finally understood how important Werkspot was to him and his family. Due to that one bad reference, he hadn’t had a new job in a month. For me, that was the moment when I thought: these platforms might really become something. And the beauty is that anyone with relatively few resources can start their own platform. If you do it right, they have the potential to grow rapidly because they leverage the network effect.”

At some point, did you develop Werkspot, how did that come about?

“We had already created more marketplaces, for example, specifically for children's clothing and toys. We saw the idea of Werkspot in Germany, where it was called MyHammer. We simply copied it, I can’t make it sound more glamorous. Ironically, Werkspot took over MyHammer in 2017.”

How did it go after the launch?

“In the first few years, not much happened on Werkspot, people didn’t understand what it was. We constantly had to explain how it works, everyone thought it was just a site for cowboys. But after a few years, it really took off.”

How did the wind get in your sails?

“The trigger was introducing a revenue model where a tradesperson had to pay a fixed fee per month to be able to bid. After that, things went quickly, Werkspot grew like crazy, sometimes a few hundred percent per year. By now, over 60,000 tradespeople are registered, and more than 5,000,000 jobs have been completed. Werkspot has been sold and is now part of an international group. More than 380 people work in that group. And the Werkspot.nl platform has served as a model for rolling out to all those countries.”

Did you encounter any surprises along the way?

“We were pioneering, we didn’t really know what we were doing. There were no comparable platforms yet. There were websites where you could request quotes from different parties, but that was more of an online Yellow Pages. We facilitated the entire process via the platform, from quote requests to closing the deal.”

And the competition?

“At a certain point, Marktplaats.nl also started offering services. I remember that moment well. We thought our chances were over. But luckily, the competition was not as fierce as feared. Marktplaats.nl has the image of second-hand goods, you don’t quickly think of a skilled tradesperson. It does show how thinking was at the time. The principle of a demand and supply platform can of course be applied to all markets. So Marktplaats thought: we can also be a marketplace for jobs. Yet you now see that focus is important and there are increasingly more successful niche platforms, because every market has its own dynamics and therefore also its own platform(s).”

''Yet you now see more and more niche platforms that are successful, because every market has its own dynamics and thus its own platform(s).''

The idea exists that platforms are suitable for products, but not for services.

“I understand that this idea exists, but it’s not true. Look at the taxi market (Uber), the housing market (Funda), the vacation market (Booking/Airbnb), all service sectors that have been taken over or at least strongly influenced by platforms. Currently, a transition is taking place in labor market mediation, where traditional intermediaries are rapidly being replaced by platforms. Look for instance at the freelance platform YoungOnes which Freshheads developed together with YoungCapital; it is the second fastest growing company in our country (FD Gazellen 2023). You’ve seen this in e-commerce for a long time now. Bol.com and Amazon have become marketplaces, but many other retailers such as Mediamarkt and Douglas follow the same strategy where they allow other providers on their e-commerce platform. Incidentally, the experience of products and services is very interwoven. Take, for example, Thuisbezorgd; is that a product (food) or a service (food delivery)?”

How do you think platformization will develop in the next 5-10 years?

“If you provide services, in my opinion, you have two options: you create your own platform or you become active on an existing platform. In the latter case, you become dependent. There’s nothing wrong with that, you can build a decent business on it, but you no longer have full control.”

''If you provide services, in my opinion, you have two choices: you create your own platform or you become active on an existing platform. In the latter case, you become dependent.''

How important will technology become?

“New technology, such as AI, will contribute to platforms only getting better. We already apply AI and Machine Learning, for example, to make more relevant matches. When applying these techniques, you need to think carefully about the ethical issues involved. As for commodity services, I think they will become increasingly integrated.”

Can you elaborate on that?

“Take insurance, for example, that’s a commodity. You see that insurance is now being offered in the form of an API. That sounds very technical, but you should see it as a service that you can integrate into a platform. Insurer Alicia insures freelancers working via platforms per hour. The service is fully integrated into the platform where the freelancer manages their working hours. Imagine you apply that idea to moving. In someone’s customer journey who is moving, 'the mover' is one of the many things you need to arrange. I can imagine it might be quite interesting for Werkspot or Funda, where the customer journey begins, to integrate such a service.”

But, a critical entrepreneur might say, a platform affects my unique selling proposition.

“No, platforms actually offer the opportunity to stand out, especially in terms of quality. Platforms operate based on 3 principles: Transparency: for comparing offerings, prices, etc. Trust: building trust between demand and supply, for example, through reviews or facilitating payment. Convenience: everything arranged in one place.”

Critics argue that their quality services degrade to a commodity via a platform, because it ultimately results in a 'race to the bottom' on price.

“This is a frequently heard criticism, but in practice, I have never seen price being the leading factor. At both Werkspot and YoungOnes, you can clearly see from the numbers that customers do not go for the lowest price. They select a provider with good reviews who charges an average price. It’s actually the other way around; new service providers often struggle to get a job, even if they offer a low rate, because people choose providers with a track record (good reviews) and reasonable prices. Quality and experience are actually key.”

''In practice, I have never seen price being the determining factor. At both Werkspot and YoungOnes you can clearly see from the figures that customers do not choose the lowest price.''

How do you do that then?

“In a platform, you can build review mechanisms where both client and provider evaluate each other. You can offer providers the opportunity to build a ‘portfolio’ with completed assignments. You can help the client choose the right party by thoroughly exploring their assignment. What does the client find important? Price, quality, or speed? Or perhaps sustainability? You can match based on that. If your company aims for quality, then you know you will always lose to clients searching for the lowest price and shouldn’t bother creating a quote.”

Sometimes entrepreneurs see a platform in their industry only as a competitor driving up Google Advertising costs.

“In my view, it’s always much smarter to bring all leads to one platform collectively. The best example might be Funda, and Bovag has also made significant strides in the second-hand car market in recent years. But Centraal Beheer is also pushing forward strongly and, together with partners, offers services for making your home more sustainable, provides roadside assistance without a subscription, and even a moving service. There’s only one party that benefits if everyone runs their own campaign individually, and I think I don’t need to name that party. It’s just easier if you only need to activate one platform, if you don’t compete but instead invest time and money together in one good platform that helps customers. Because ultimately, that’s what it’s about: customers have a need, and you want to respond to it as best as possible. It makes more sense not to try and do it all individually but to jointly leverage your resources for the customer. Do it collectively. Eventually, those customers will compare anyway, so it’s better to have control of that yourself.”

Precisely join forces, because in the end, customers will compare anyway.

What advice do you have for service industries that are tentatively testing the waters?

“Of course, it’s preaching to the choir, and I understand that, but I would certainly take action. So many opportunities still exist! Especially for services, both in the business and consumer markets. My advice is to start small, and gradually expand by experimenting and seeing what works, then scale.