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Jobtech Alliance Learning Study #1: Platform Cutout

May 15, 2024 | Lessons Learned (the Hard Way)

Jobtech Alliance Learning Studies seek to provide insight into how to build jobtech platforms that are viable, scalable, and deliver quality of work for their users. We’re excited to launch the first of these learning studies, on a common challenge with jobtech platforms in Africa and beyond.

“Cutout” or disintermediation involves users go off-platform to transact directly, avoiding platform fees. Cutout poses an existential risk to these two-sided marketplaces, impacting revenues and viability.

The Learning Study explores various approaches platforms can take to mitigate cutout risk. The first step is enforcement – making it difficult to connect off-platform through restrictions on contact sharing, and penalizing violators. However, enforcement alone is not a sustainable solution.

The main recommendation is to reduce incentives for cutout by adding value that keeps users engaged on the platform. This can be done through alternatives to transaction fees like sliding scales, lead generation models, subscriptions and bundling. Providing fantastic customer service, additional services like finance/insurance, training, portfolio tools, and loyalty rewards can also increase stickiness.

The Learning Study then discusses more fundamental model changes to transcend cutout risk entirely. This includes focusing first on empowering workers so they insist on the platform, shifting to B2B models less prone to cutout, or vertically integrating to control the full supply chain. Alternative models like platform cooperatives owned by workers could also eliminate cutout by design.

African jobtech platforms featured in the learning study include Mon Artisan, Kandua, Runnovate, GoodayOn, Jipamba, Gig Engineer, ArtisanOga, Kolaborate, Fitted, HustleSasa and Klas. The post argues these more ambitious, integrative platform models may represent the future of jobtech on the continent.

In summary, while enforcement has a role, the core solution is relentlessly adding value to maintain user engagement and consider more transformative business models to make cutout risk irrelevant.

Check out the Learning Study here.


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