multisided platform
WINTER 2014
V O L . 5 5 N O. 2
Strategic Decisions for
Multisided Platforms
By Andrei Hagiu
Please note that gray areas reflect artwork that has been intentionally removed. The substantive content of the article appears as originally published.
REPRINT NUMBER 55225
S T R AT E G Y
Strategic Decisions for
Multisided Platforms
Multisided platforms such as eBay and Facebook create value by enabling interactions between two or more customer groups.
But building and managing a winning platform isn’t easy.
BY ANDREI HAGIU
MULTISIDED PLATFORMS (MSPS) are technologies, products or services that create value primarily by enabling direct interactions between two or more customer or participant groups.
Prominent examples of MSPs and the participants they connect include Alibaba.com, eBay, Taobao and Rakuten (buyers and sellers); Airbnb (dwelling owners and renters); the Uber app (professional drivers and passengers); Facebook (users, advertisers, third-party game or content developers and affiliated third-party sites); Apple’s iOS (application developers and users); Google’s Android operating system (handset manufacturers, application developers and users); Sony’s PlayStation and
Microsoft’s Xbox gaming consoles (game developers and users); American Express, PayPal and
Square (merchants and consumers); shopping malls (retail stores and consumers); Fandango (cinemas and consumers); and Ticketmaster (event venues and consumers).1
SLOANREVIEW.MIT.EDU
THE LEADING
QUESTION
What are some of the strategic issues that multisided platforms
(MSPs) face?
FINDINGS
Decisions need to be made about governance, platform design, pricing and number of sides. No side of the platform will join without the other or others.
Most MSPs subsidize at least one side of their platform.
WINTER 2014 MIT SLOAN MANAGEMENT REVIEW 71
S T R AT E G Y
As these examples illustrate, MSPs include some of the largest and fastest-growing businesses of the past decade. Why? Successful MSPs create enormous
V O L . 5 5 N O. 2
Strategic Decisions for
Multisided Platforms
By Andrei Hagiu
Please note that gray areas reflect artwork that has been intentionally removed. The substantive content of the article appears as originally published.
REPRINT NUMBER 55225
S T R AT E G Y
Strategic Decisions for
Multisided Platforms
Multisided platforms such as eBay and Facebook create value by enabling interactions between two or more customer groups.
But building and managing a winning platform isn’t easy.
BY ANDREI HAGIU
MULTISIDED PLATFORMS (MSPS) are technologies, products or services that create value primarily by enabling direct interactions between two or more customer or participant groups.
Prominent examples of MSPs and the participants they connect include Alibaba.com, eBay, Taobao and Rakuten (buyers and sellers); Airbnb (dwelling owners and renters); the Uber app (professional drivers and passengers); Facebook (users, advertisers, third-party game or content developers and affiliated third-party sites); Apple’s iOS (application developers and users); Google’s Android operating system (handset manufacturers, application developers and users); Sony’s PlayStation and
Microsoft’s Xbox gaming consoles (game developers and users); American Express, PayPal and
Square (merchants and consumers); shopping malls (retail stores and consumers); Fandango (cinemas and consumers); and Ticketmaster (event venues and consumers).1
SLOANREVIEW.MIT.EDU
THE LEADING
QUESTION
What are some of the strategic issues that multisided platforms
(MSPs) face?
FINDINGS
Decisions need to be made about governance, platform design, pricing and number of sides. No side of the platform will join without the other or others.
Most MSPs subsidize at least one side of their platform.
WINTER 2014 MIT SLOAN MANAGEMENT REVIEW 71
S T R AT E G Y
As these examples illustrate, MSPs include some of the largest and fastest-growing businesses of the past decade. Why? Successful MSPs create enormous
References: 1. MSPs are a straightforward generalization of the twosided platform — from two sides to multiple sides — as defined in Boudreau and Lakhani (2009) selling them to customers. Thus, they are equivalent to resellers as defined by Hagiu and Wright (2013) studied by Gawer and Cusumano (2008). Many industry platforms, such as Windows and PlayStation 3, are MSPs (2009). One example is the electronic ink technology developed by E Ink, which is the key component in no. 4 (summer 2009): 68-76; A. Hagiu and J. Wright, “Do You Really Want to Be an eBay?” Harvard Business Review 91, no Wright, “Multi-Sided Platforms,” working paper no. 12024, Harvard Business School, Boston, October 2011. 5. D. MacMillan, “LivingSocial Falls to a Quarter of 2011 Value in Latest Funding,” February 22, 2013, 6. S. Raice and S. Woo, “Groupon’s Boston Problem: Copycats,” Wall Street Journal, July 8, 2011. 8. See D. Einstein, “Microsoft Betting BIG on Cloud With Windows 8 and Tablets,” October 11, 2012, 9. D. Yoffie and L. Kind, “LinkedIn Corporation, 2012,” Harvard Business School case no Harvard Business School Publishing, 2012). Apple’s own sales. See D.B. Yoffie and M. Slind, “Apple Inc., 2008,” Harvard Business School case no. 708-480 (Boston: Harvard Business School Publishing, 2008). 11. H. McCracken, “Who’s Winning, iOS or Android? All the Numbers, All in One Place,” April 16, 2013, Transform Industries” (Cambridge, Massachusetts: MIT Press, 2006). 15. “eBay Inc. Reports Strong First-Quarter 2013 Results,” April 17, 2013, http://investor.ebayinc.com. 16. K. Regan, “Skype Write-Off Has eBay Seeing Red,” October 18, 2007, www.ecommercetimes.com. Competition Policy International 3, no. 1 (Spring 2007): 150-179.