Products and services that bring together groups of users in two-sided networks are frequently termed platforms. They provide infrastructure and rules that facilitate the two groups’ transactions and can take many guises. In some cases, platforms rely on physical products, as with consumers’ credit cards and merchants’ authorization terminals. In other cases, they are places providing services, like shopping malls or web-sites such as Monster and eBay.
Two-sided networks can be found in many industries, sharing the space with traditional product and service offerings. However, two-sided networks differ from other offerings in a fundamental way. In the traditional linear value chain, value moves from left to right: To the left of the company is cost; to the right is revenue. In two-sided networks, cost and revenue are both to the left and the right, because the platform has a distinct group of users on each side, (Eisenmann, 2006). The platform incurs costs in serving both groups and can collect revenue from each, although one side is often subsidized (e.g. free use of internet search services and pay-per-click schemes to interested advertisers).
Platform-mediated networks encompass users whose interactions are subject to network effects, along with intermediaries, who provide a platform that facilitates users’ interactions. Such networks comprise a large and rapidly growing share of the world economy.
Firms in platform-mediated networks face distinctive management challenges. For example, traditional barriers to entry may no longer hold. Due to network effects, platform intermediaries often enjoy increasing returns to scale; their industries have room for only a few players. In many platform-mediated markets, network effects are so strong that a single platform prevails. When winners take most, little is left for losers, as evidenced by the spectacular success of some platform providers, for example, Microsoft, eBay, and Google.
Update Jan 2015 Presentation on ‘Rise of the Platform Economy’ by Peter C. Evans, Vice President, Center for Global Enterprise available here: Evans (2015) Rise of the Platform Economy Presentation
Despite the increasing interest in the platform theme the topic requires further research, particularly recognising the developments of the Digital Economy. NEMODE is especially interested in the development of research concerning:
- Platform dynamics: how platforms emerge and evolve over time?
- Economic models articulated around platforms.
- In what contexts are platforms an appropriate economic model?
We anticipate that the output from the research will be a report including cases studies etc., however we are willing to discuss innovative forms of output including videos, workshops etc. Any research publications emerging from this work must acknowledge NEMODE. The lead investigator will also be expected to present their findings at a NEMODE workshop.