Hey folks, Pratham here

Welcome to the first edition of the Paradox Weekly, a Masters' Union Newsletter, where we break down the ideas, trends, and contradictions shaping business
today.

Each week, you'll find analysis on what's actually happening in markets, tech,
and strategy.

This week: why the platforms you use every day might be engineering their
own decline.

Last month, I was at a restaurant in Bandra when the owner did something unexpected. Mid-conversation about his Zomato orders, he pulled out his phone and showed me his WhatsApp chat with a regular customer.

The customer replied: "Send location. Coming to pick up."

That's when it hit me.

This restaurant owner was actively sabotaging the platform that brought him the customer in the first place.

But think about it. He's not alone. You’ve probably heard this from at least one of your friends / colleagues / acquaintances in the last year.

The National Restaurant Association of India, which represents 500,000+ restaurants, is openly challenging platforms.



President Sagar Daryani told thousands of owners on a live stream: "99% of restaurant partners in the delivery business don't make money".

The paradox is that every successful marketplace contains the seeds of its own destruction.

It almost felt like a dejavu moment, as I was reading Zero to One on the flight back to Delhi yesterday and he said that the best companies don’t win by squeezing others, but by doing 10X better.

In case you’re wondering:

Managers also have to be coaches. A lot more learnings. Gave this to our whole leadership this week. Worth a read for you too!

At this point, it feels like they’re going to create an operating system

We celebrated foundation day (yup it’s already been 5 years since we started). Some major announcements soon. 



Okay moving back to the platform paradox.

When Zomato launched, restaurants joined because customers were there. Customers came because restaurants were there. Amazing network effects, right?

But network effects work in reverse too.

Meanwhile, commission rates now hit 15-30% depending on your negotiation power.

Do the math: A ₹300 biryani generates ₹90 in platform fees before the restaurant pays for rice, mutton, or rent.

The platform economics look brilliant until you realize you're slowly murdering your supply side.

The restaurant owner in Bandra understood that every transaction creates a relationship.

Every relationship creates an escape route.

And the data proves this: Rapido launched food delivery with 8-15% commission rates, literally half of what incumbents charge. The NRAI publicly endorsed them within weeks.



And why wouldn’t they?



This week itself, this is happening:

While we obsess over app downloads and DAUs, the real disruption is happening in a place platforms can't see: direct messaging.

That Bandra restaurant owner built a WhatsApp broadcast list of 200+ regulars who order directly. 



This way he doesn’t have to pay commission, platform fees or delivery partner cuts.

This is the platform paradox in action: Platforms aggregate demand so efficiently that they make disintermediation inevitable.

Think about it. 



Urban Company connects you to great carpenters, then the carpenter says "call me directly next time."



Airbnb introduces you to amazing hosts, then you book directly for return visits. 



Every platform creates the relationships that eventually replace it.

The only marketplaces that survive this are ones where disintermediation is impossible.

Amazon works because you never meet the seller. 



But service marketplaces? They're structurally vulnerable to their own success.

India's Competition Commission might become the nightmare for these platforms with their approach.

Google already paid ₹2,274 crore in penalties.

Amazon and Flipkart investigations found "ordinary sellers remained as mere database entries."

But the real threat is the Digital Competition Bill 2024. 



Penalties can reach 10% of global turnover for anti-competitive practices.

For context: 10% of Zomato's revenue is ₹2,000+ crore. One penalty wipes out their entire annual profit.

To top it all, the government built ONDC, their replacement, with 3-5% commission caps. And integrated in apps you use daily like paytm. 

The state is literally constructing platform alternatives while incumbents price themselves out of relevance.

On that note, do you remember Groupon? Probably not. That's the point.
In 2011, Groupon was valued at $13 billion. By 2016, it was worth $2 billion.
The commission structure that made it rich: 50% of deal value triggered merchant revolt.

Restaurants realized they were paying Groupon to destroy their margins while attracting price-sensitive customers who never returned at full price.

Sound familiar? 



Replace "subsidies" with "network effects" and you have today's Indian platform playbook.

Foodpanda followed the same trajectory. 

Thailand shutdown after $399 million losses.

India operations collapsed despite reaching 200,000+ daily orders.

Side 1: Investors demand profitability Tiger Global's IRR in India was "way below average": just 20% gross versus mid-30s in the US. VCs won't fund unprofitable growth forever.

Side 2: Merchants demand sustainable economics When 69% of restaurants feel powerless negotiating commission rates, ecosystem collapse becomes inevitable.

Side 3: Customers demand low prices Platform fee increases from ₹2 to ₹10 already triggered user backlash.

You cannot satisfy all three simultaneously. Math doesn't lie.

Most platforms resolve this tension by squeezing merchants, the side with least optionality. But merchants always find escape routes, especially in service marketplaces where relationships matter.

Back in 2018, Zomato launched Hyperpure, a B2B supply business that supplies ingredients directly to restaurants.

This was to make it sticky for not just the customers, but also the restaurants. 



And it’s working. KIND OF.

But….

Will Zomato use this setup to help restaurants save money, or just to squeeze more profit out of them?

Because when you’re both the platform and the supplier, you hold all the cards.

Swiggy’s watching closely. 

Urban Company is testing similar ideas. 



Everyone’s realized: just being a “marketplace” isn’t enough anymore. 



Owning the whole stack is the new moat.

But vertical integration only works if people trust you. 



It needs serious capital, flawless operations, and strong relationships.

The solution is obvious but requires something most platforms lack: long-term thinking.

Instead of extracting value, create it. 

Build tools that make merchants more profitable, not just more dependent.

Their data analytics could optimize menu pricing for higher margins.

Value creation requires investment, patience, and accepting lower take rates. 
Extraction just requires changing the fee structure.

Either platforms evolve (like they are right now into events, concierge, groceries and more) or they go the groupon path: squeeze harder until the ecosystem collapses.