The middleman game

Every giant you admire, from Visa to Spotify to Uber, has something in common. They don't make the thing you're paying for. They don't own the cars, the music, the apartments, or the movies. They just sit in the middle, connect two sides of a transaction, and take a cut every single time. That's the middleman game, and it is the most reliable way to win in business.

Every platform is a marketplace

It's easy to miss because the branding is so good. Netflix feels like a movie studio. Spotify feels like a music company. Airbnb feels like a hotel chain. But none of them are.

Even platforms that don't look like marketplaces follow the same pattern. The App Store and Google Play connect developers with users and take up to 30% of every sale. Steam does the same for games. Fiverr and Grab connect freelancers and drivers to customers. The structure is always the same: sit in the middle, facilitate the exchange, collect a fee.

The platform is the leverage

What makes the middleman position so powerful isn't just the fee. It's the leverage. Once a platform reaches critical mass, it becomes very hard to leave. Sellers go where the buyers are. Buyers go where the sellers are. This is what economists call network effects, and they create a flywheel that makes the platform more valuable with every new user on either side. Harvard Business School research highlights this as one of the defining advantages of platform businesses: as more users join, the value of the platform increases for everyone, creating a self-reinforcing cycle that traditional businesses can't easily replicate. And because the platform controls the rules, it can adjust the terms whenever it wants. Increase the take rate by a percentage point. Change how search results are ranked. Modify the algorithm that decides who gets visibility. The participants on the platform have to play by whatever rules the house sets, because leaving means losing access to the entire network.

The house always wins

Think of it like a casino. The house doesn't need to win every hand. It just needs to set the rules so that over time, the math works in its favor. Platforms operate the same way. Instagram is a perfect example. It's free to use, which makes it feel like a gift. But the real business is advertising. Every time you scroll, you see ads. There's no way to opt out of them entirely. Content creators make the posts that keep you engaged, but Instagram captures the advertising revenue generated by that attention. The platform profits not from creating content, but from owning the space where content and attention meet. This is the uncomfortable truth about free products: if you're not paying for it, you're the product. Your attention, your data, your behavior, that's what's being sold. Google gives you Chrome for free. Why? Because Chrome feeds data back to Google's advertising machine. YouTube offers unlimited free storage for video creators. Why? Because all that content keeps billions of users engaged, generating ad revenue and, more recently, providing massive datasets that have helped train Google's AI models like Veo. Even universities follow a version of this model. They don't build the houses or write the software. They certify that you passed the exams. The real product isn't the education itself, it's the credential. The university is the middleman between you and the job market, and the tuition is the fee you pay to access that network.

Why middlemen win and makers struggle

The math is brutally simple. When you make a product, you carry inventory risk, production costs, and the constant pressure of competition driving prices down. When you run the marketplace, your costs scale slowly while your revenue scales with every transaction on the platform. A marketplace business model means you don't need to "buy low, sell high." You just enable others to transact and charge fees. The more transactions that happen, the more you earn, without proportionally increasing your costs. This is why platform companies can scale faster than traditional businesses and often reach valuations that dwarf the companies actually operating on them. Platform transaction fees today range anywhere from 3.5% to 30%, depending on the industry. That might sound small on a single transaction, but multiply it by millions of daily exchanges and you have a business that prints money while owning almost nothing.

Build the house, don't play in it

This is the real takeaway. If you want to build something durable, ask yourself: am I making the product, or am I making the place where products get exchanged? The creators on YouTube, the drivers on Uber, the hosts on Airbnb, they're all playing inside someone else's house. They can do well, sometimes very well. But the house can change the rules at any time. Algorithm shifts, fee increases, policy changes, these are risks you accept when you build your livelihood on someone else's platform. The more interesting question is: what house can you build? Not every marketplace needs to be a billion-dollar platform. Even at a smaller scale, the principle holds. If you can position yourself as the connector, the one who brings two sides together and facilitates the exchange, you have leverage that a pure product maker doesn't. The middleman owns nothing. And that's exactly why the middleman wins.

References