Executing a successful product platform strategy takes significant planning on the back end, but it doesnt necessarily require a huge upfront investment. In the case of software platforms, the platform developer wants to attract both application developers and end users. The antitrust economics of multisided platform markets. Although the platforms that businesses create to serve multisided markets. Stanford bus21 martin westhead mastering marketing platforms twomultisided markets how to make money by giving things away 2.
It shows that it is not possible to know whether standard economic models, often relied on for antitrust analysis, apply to multi sided platforms. Multi sided platforms andrei hagiuyand julian wrightz march 2015 abstract we study the economic tradeo s that drive organizations to position themselves closer to or further away from a multi sided platform msp business model, relative to three traditional alternatives. However, the success of a multisided platform strategy is rare because companies must deploy many resources to implement the platform technologically. How etsy solved its chicken and egg problem by targeting an overlapping market share this. They aim to connect all global internet users more than 2 billion in number. Publishing is already familiar with some types of multi sided platforms. Multisided markets bring together two or more interdependent groups who need each other in some way. It is the foundation of product strategy because in high tech companies, many products are typically built from a core technology. How to win with a multisided platform business model.
While just about a month ago, commuting for a week in suburban paris, i was completely dependent on uber for even the shortest of distances. Companies such as facebook, alibaba, and uber are competing in a new multi sided platform world. Multisided platforms harvard business school working knowledge. Multisided business models how to break the chicken and. A product platform is not what is sold to customers. A two sided market, also called a two sided network, is an intermediary economic platform having two distinct user groups that provide each other with network benefits. Multisided platforms andrei hagiuyand julian wrightz march 2015 abstract we study the economic tradeo s that drive organizations to position themselves closer to or further away from a multisided platform msp business model, relative to three traditional alternatives. Online marketplaces can be classified under two broad categories.
A twosided marketplace lets parties of producers and consumers interact with one another, and creates network effects between them through a platform intermediary. A dozen things ive learned about multisided markets platforms. Some of the major markets that have two sided networks are payment systems, media resources, the software market, and other markets for information goods where there is not physical product. Where traditional business strategy focused on creating a solid product, new business strategy is increasingly focusing on creation of platformsespecially an exponentiallyvaluable form of platform called a multisided platforman extension of the concept of a twosided market. Hagiu and wright 2015a present a definition for multi sided platforms msps also sometimes referred to as multi sided markets or multi sided networks suggesting msps are organizations that enable. Overview theory of twosided markets platforms platform examples strategic challenges free. They are also useful in explaining many free pricing or freemium strategies where one user group gets free use of the platform.
Hagiu and wright 2015a present a definition for multisided platforms msps also sometimes referred to as multisided markets or multisided networks suggesting msps are organizations that enable. The multi sided platform msp model allows all parties to both create and extract value. Multisided platform markets crossover effects to determine the overall effect of a price change on profits. Similarly, a shopping mall developer needs to incentive both merchants and shoppers to use the mall. Multi sided platforms, known also as multi sided markets, are an important business phenomenon that has proliferated with the rise of information technology and the internet. How etsy built the network effect by targeting one single market share this. In it, hagiu and wright define what makes a platform multi sided and offer a set of use cases in which a multi sided platform msp might be better or worse than a traditional reseller model. This connection is a twoway street and enables businesses to develop smart ways to better. Walmart and target or sell the products on consignment e. A multisided business model is undeniably more difficult than a direct one. Pieter ballon, platform types and gatekeeper roles. There are two key characteristics of a multisided platform. Platform strategy is the clearest, most comprehensive and most practical book about platform businesses available today what they are, why theyre important and how to create them.
Readers commonly find the full page glossy ads in fashion magazines to be just as interesting as the articles. The term is often applied to a product, service or platform that has benefits for both firms and their customers. Antitrust economics of multisided platform markets, the. It does not make sense to say that a product is a twosided platform for one user who enjoys the advertising and not a twosided platform for another user who dislikes the advertising. A multi sided business model is undeniably more difficult than a direct one. One big global success is airbnb, which calls itself a community marketplace.
A multisided market is sometimes called a platform. Its written by practitioners who have a background of working within platform businesses and now help companies incorporate their approaches. Amazon quickly developed a platform envelopment strategy r. Sep 29, 2017 a multisided business model is undeniably more difficult than a direct one. It links travelers to rental properties, including many private homes. The antitrust analysis of multisided platform businesses david s. Product platform strategy sits between the product vision and product line strategy which guides individual product development. The authors look at software platforms and multisided markets through an economic lens. Twosided platforms are specific multisided platforms that bring together two distinct but interdependent groups of customers. Salehnejad, 2012, note 4 as it had such a large buyer and seller base.
What is a product platform strategy product development. Multisided platform markets have two or more different groups of customers that businesses have to get and keep on board to succeed. And the products features could be customized on the manufacturing side to cater to each user type. The organization that creates value primarily by enabling direct interactions between two or more distinct types of affiliated customers is called a multi sided platform. The diversity of possibilities in twosided markets does not eliminate the theorys predictive. Jan 19, 2016 multi sided businesses like uber, airbnb or ecommerce marketplaces create a high barrier to entry once established.
In it, hagiu and wright define what makes a platform multisided and offer a set of use cases in which a multisided platform msp might be better or worse than a traditional reseller model. Facebook strategy is to design social products and enter into partnerships that drive engagement levels of these users even further. Two sided platforms are specific multi sided platforms that bring together two distinct but interdependent groups of customers. Andrei hagiu, an associate professor at harvard business school, and julian wright, an economics professor at the national university of singapore, recently published a working paper on multisided platforms available as a pdf. A twosided market, also called a twosided network, is an intermediary economic platform having two distinct user groups that provide each other with network benefits. The multisided platform msp model allows all parties to both create and extract value. A platform strategy is the mobilization of a networked business platform to expand into and operate in a given market.
Multisided platform msp businesses are hot, no question. The multisided platform business model connects customers to sellers directly. Multisided platform strategies architecture, data and. I went lower because i expect search engine users to behave very differently from social network users and that difference was still highly uncertain for advertisers at the time. Where traditional business strategy focused on creating a solid product, new business strategy is increasingly focusing on creation of platformsespecially an exponentiallyvaluable form of platform called a multisided platforman extension of the concept of a twosided market the multisided platform is perhaps best modeled by apples expansion of their shiny, well. Oct 22, 2016 multisided markets bring together two or more interdependent groups who need each other in some way. Multi sided platforms msps value captation and monetization. Some empirical aspects of multisided platform industries. Therefore, like any monopolist who must choose a single quality as well as quantity, the platform internalizes network effects to marginal rather than average participating users spence 1975. A twosided market is a platform that provides benefits to two distinct groups. The ultimate customer is not a customer of the platform provider. What matters is whether consumers in aggregate respond positively to the advertising by being more willing to buy or just use the product.
Didier rappaport, ceo of happn and founder of dailymotion over the past 20 years, i have witnessed firsthand how platform businesses like ebay and turo unlocked the power of communities and created enormous value for millions of people. Strategy for information marketsnetwork externalitiestwo. These industries range from dating clubs men and women, to video game consoles game developers and users, to payment cards cardholders and merchants, to operating system. No longer the sole domain of social media, travel, books or music, platform business models have made inroads into transportation, banking and even. Multi sided platform markets crossover effects to determine the overall effect of a price change on profits. Predatory pricing in multisided platforms platform. Hundreds of big and small firms fail trying to create multisided markets in different categories every year. A business model framework to characterize digital. Multisided businesses like uber, airbnb or ecommerce marketplaces create a high barrier to entry once established. Andrei hagiu and julian wright study firms strategic positioning decisions between a multisided platform msp mode and three alternative modes.
Use features like bookmarks, note taking and highlighting while reading matchmakers. Platform strategy provides unique and practical insights for all platform entrepreneurs. Heres a list of ways to grow both buyer and seller on your platform. When growing a twosided platform, entrepreneurs must ensure that both sides expand proportionately. This was a strategic way to ease itself into a multi sided platform between 20002001. A dozen things ive learned about multisided markets. Professor andrei hagiu explains the potential and the. As a result, apple manages only a twosided platform between consumers and software providers, while microsoft manages a threesided platform between consumers, software providers, and hardware providers. Professor andrei hagiu explains the potential and the pitfalls for life as an msp. There are many different examples of industries and markets that have two sided networks. A business platform, in turn, is a nexus of rules and infrastructure that.
Jan 09, 2007 multi sided platforms msps, which bring together two or more interdependent groups of customers, have recently risen to economic and business prominence in many industries. The company transformed this twosided platform into a threesided platform in. You can see why governance over the platform is crucial to building your platforms indentity. It helps you validate, explain and focus your business planning efforts without going down rabbit holes or wasting time on the wrong planning efforts. Jul 03, 2016 you can see why governance over the platform is crucial to building your platforms indentity. In it, hagiu and wright define what makes a platform multisided and offer a set of use cases in which a multisided platform msp might. Multisided markets and the challenge of incorporating. A two sided market is a platform that provides benefits to two distinct groups. Done right, companies competing as a multisided platform often win with higher percentage profit margins than those enjoyed by traditional resellers. As a result, apple manages only a two sided platform between consumers and software providers, while microsoft manages a three sided platform between consumers, software providers, and hardware providers. Lineofbusiness restrictions in regulation as well as theories of market leveraging in antitrust are other areas that the economics of multi sided platform markets illuminates. Facebook has built a multisided platform msp with strong network effects. But theyre also incredibly hard to build, due to the chickenandegg problem both buyers and sellers need to be on the platform at the same time. Make the mindset shift, get clear on your true value proposition, develop a community marketplace strategy, and build a roadmap.
Multi sided platforms, ecosystems, and complementors across platform related research, the term platform is used with varying definitions. Multisided platforms harvard business school working. Whether you are technologydependent or a physical multisided platform, or interact with one, this is a valuable book. Nov 26, 2014 when growing a twosided platform, entrepreneurs must ensure that both sides expand proportionately. You can see why governance over the platform is crucial to building your platform s indentity.
A multisided platform msp is a business concept that allows its users to reach a wider assortment of offers, and in its most basic form, it connects consumers and producers in a simple way. The organization that creates value primarily by enabling direct interactions between two or more distinct types of affiliated customers is called a multisided platform twosided networks can be found in. This paper first lays out a simple microfounded framework which aims to organize academic and managerial thinking about msps. For instance, in the personal computer market, apple produces its own hardware, whereas microsoft leaves this to independent manufacturers.
Competition in the multisided platform market channel. October 6, 2009 i develop a general theory of monopoly pricing of networks. This is why the divide and conquer strategy, in other words, the strategy to challenge an established platform by subsidizing agents that are the most pricesensitive, and using them to draw participants to the other side of the platform, can be highly valuable for new entrants in multisided markets. The platforms business model is to take a percentage of the transacted value for connecting producers and consumers.
The problem is that a winning strategy is far from selfevident. Multisided platforms msps, which bring together two or more. Multisided markets typically serve distinct sets of users, all of whom benefit from having each other on the platform. Overview theory of twosided markets platforms platform examples strategic challenges free platforms 3. However, as amazon grew it began to consider another platform, the buyer. Platforms use insulating tariffs to avoid coordination failure, implementing any desired allocation. Multisided platforms msps, which bring together two or more interdependent groups of customers, have recently risen to economic and business prominence in many industries. Predatory pricing in multisided platforms over the last few days, living and commuting in nuremberg, i realised that i was not missing uber. The new economics of multisided platforms kindle edition by evans, david s. Dependency challenges, response strategies, and complementor. Download it once and read it on your kindle device, pc, phones or tablets. Multisided platforms, known also as multisided markets, are an important business phenomenon that has proliferated with the rise of information technology and the internet.
Multisided platforms, ecosystems, and complementors across platformrelated research, the term platform is used with varying definitions. The multisided platform is perhaps best modeled by apples. Make the mindset shift, get clear on your true value proposition, develop a community marketplace strategy, and build a roadmap for data and infrastructure to support that vision. Done right, companies competing as a multi sided platform often win with higher percentage profit margins than those enjoyed by traditional resellers. This book covers the fundamentals of how business models work, including modern business models like the multi sided platform, app sales and the like.
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