Utilidad en indagar en los orígenes

Modeling two-sided demand and pricing as well as competition between plat-forms has been the focus of most research on two-sided markets (Rochet &

Tirole, 2003, 2004, 2006; Parker & Van Alstyne, 2000, 2005; Rysman, 2004;

Weyl, 2006, 2009; Armstrong, 2006; Armstrong & Wright, 2007). This has led to some criticism that other factors and issues of equal or higher impor-tance for the growth and expansion of two-sided markets have received too little attention. Hagiu (2009), who discusses multi-sided platforms (MSPs) as a generalization of two-sided markets, argues that strategic design defines the relevant space in which the MSP is operating, its multiple constituents and its competitors, both actual and potential, and in short, its relevant ecosystem.

This strategic design, in his view, should precede business model decisions

such as pricing. He argues, however, that designing and expanding MSPs is a complex, daunting, and most importantly a dynamic process, as the most suc-cessful MSPs do not sit still, but rather they are constantly evolving, increasing their depth and/or reach, and in the process, redefining their boundaries and those of entire industries. This is said to be especially true for MSPs in high technology markets, but even very traditional businesses can “unlock powerful sources of indirect network effects with a little technological help and a good amount of creativity” (Hagiu, 2009).

Hagiu (2009) approaches the strategic design of MSPs by defining two types of fundamental functions, namely reducing search costs, and reducing shared costs, arguing that the platform design essentially relies on the choice of its functionalities. Search costs are costs incurred by the various sides before they actually interact, for purposes of determining the best “trading partners”, and they can be further divided into two subtypes, two-sided (or multi-sided) and audience making. This classification depends on whether each of the two (or multiple) sides is searching for each other or only one is, or in other words, whether the cross-side network effects are positive in both (all) directions or only one direction. In the former case, reducing search costs generally means reducing two-sided asymmetric information, which makes “sampling” of candidates for transactions easier. Common examples include various online buyer-seller matching services and dating services.

An example of the latter subtype is a platform that joins consumers and advertisers together. Here, the advertisers obviously value a larger audience of consumers, but consumers do not perceive much added value in a greater number of advertisers and may even perceive excess advertisers negatively. In such cases, the platform provider should be extra careful not to compromise the product or service offered to the side of the market that is indifferent to the presence of the other side or does not strongly benefit from it. Hagiu (2009) mentions Google having made a conscious decision not to allow pictures or videos in the sponsored ad space of search results, in order not to degrade the consumer search experience, for which relevance is key. As such, audience-making MSPs generally reduce search costs by facilitating one side’s provision of information about new products or services to the audience on the other side.

Reducing the costs incurred during the transactions themselves (i.e., after the search is over and the transacting parties have found each other) is the second fundamental function defined by Hagiu (2009). These costs are called shared costs since a portion of them is generally common to all transactions between users on different sides of the MSP. Video game consoles and software operating systems are good examples of MSPs that have lowered shared costs for game and application developers on one side, and end-users of games or PC

applications on the other side. If developers had to separately build a console for each game, development would be rather inefficient indeed.

According to Hagiu (2009), well-established one-sided markets (and the firms running them) can often expand in a powerful way to become two-sided mar-kets without facing the “chicken-and-egg” problem that so commonly plagues nascent providers of two-sided platforms. Firms that have, and are able to leverage, a strong existing relationship with either side (e.g., merchants or consumers) are in a much better position to succeed. The key here is to find the most powerful leverage for a firm’s established one-sided strength, which implies identifying a new side that could create strong cross-side network ef-fects with the existing one. Hagiu (2009) suggests a simple two-step process to achieve this is by:

1. Identifying the fundamental function a business performs for its cus-tomers;

2. Identifying other customer groups with whom the existing customers conduct frequent transactions, for which the existing business can en-hance the value or lower the cost.

One prominent example of a one-sided firm having successfully expanded to become two sided is Google, the company that is credited with pioneering the now established Internet business model of associating sponsored links to search results, enabling targeted search advertising. Despite its beginnings as a one-sided search service, Google quickly realized that its technology allow-ing consumers to search the web could also be used to reduce search costs between advertisers and consumers. It then created AdWord and AdSense, the programs which allow it to offer and charge for search-related advertising.

Compared to traditional, non-targeted advertising (such as ads in the Yellow Pages), this was a major improvement in advertising efficiency. (Hagiu, 2009)

Depth vs. Breadth

When expanding a two-sided (or multi-sided) platform, a key strategic trade-off has to be made between deepening the fundamental functions performed for the existing sides of the market and their users, and expanding to distinc-tively new functions which might bring new sides (and thus new, previously unreached groups of users) on board. However, pursuing new functions and user groups without sufficient depth in the existing functionality risks leaving open opportunities for focused competitors who may occupy a niche in the market. On the other hand, breadth may sometimes be a necessary condition for generating a critical level of cross-side network effects which are required

for the platform to thrive or hold its ground against potential competitors, also players from adjacent industries seeking lateral expansion. (Hagiu, 2009) Depth creates more value for the existing users of the platform and intensifies the cross-side network effects by making transactions between parties more efficient, more frequent, or both. This creates “stickiness” on the existing sides and makes their users less likely to be attracted away to other platforms. In some cases, however, adding too much depth of functionality can be harmful as well, as some additions may not be welcomed by all users and can in fact introduce negative network externalities. As an example, many eBay users were put off by the inclusion of Skype voice communication into the service (Hagiu, 2009).

Breadth is driven by the desire for unlocking new sources of value and cre-ating new cross-side network effects through the addition of new sides to the platform. The need for more breadth can also be driven by competitive dy-namics and survival as rival platforms can also expand their functionalities to new domains, potentially attacking an incumbent platform. Besides the dif-ficulties involved in entering new industries, two other important factors can limit MSP breadth. The first factor, resource constraints, is not specific to MSPs, it may limit a company’s ability to expand by serving new customer groups. The second factor, conflicts of interest, is specific to MSPs and may seriously constrain the platform’s growth well before it has reached the limits of its resources. Should conflicts of interest arise among the parties involved in an MSP, managers are faced with hard decisions which may involve drastic trade-offs. (Hagiu, 2009)

Openness

Rysman (2009) acknowledges that openness, alongside pricing, is one of the two most important strategies that a potential two-sided platform provider needs to choose. He notes that while the pricing decision has been the subject of rigorous research, openness has proven more difficult to analyze. More-over, in the literature on two-sided markets, openness refers to two strategic choices: the number of sides to pursue (as in one-sided, two-sided, or multi-sided markets) and how to relate to competing platforms (aiming for either incompatibility, compatibility, or some sort of integration).

In the example case of computer operating systems, let us consider Apple and Microsoft. Both companies produce their own operating systems, and both rely on ISVs and third-party developers for most of the available soft-ware application offering. A key difference between the two is that Microsoft did not (at least not until the recent Surface line of products, see Microsoft (2012a, 2012b)) produce computer hardware of its own but instead relied on

independent PC manufacturers to supply the hardware, whereas Apple has always been a branded computer vendor. Rysman (2009) argues that in this sense, Microsoft is more open than Apple, as Microsoft can be characterized as managing a three-sided market between consumers, software providers, and hardware providers, whereas Apple manages only a two-sided market between consumers and software providers.

The choice of openness as in the number of sides to support in a platform can be likened to the choice over vertical integration, although the relationship between hardware and operating systems is not strictly vertical. The lesser the extent of integration in a platform, the more sides are potentially introduced to the multi-sided market equation. According to Rysman (2009), the special case of being one-sided is an extreme move away from openness where a firm integrates to the degree that two-sided market interaction ceases. Much like Hagiu (2009), Rysman (2009) perceives it as more natural that firms start out with a one-sided model and switch to a two-sided model as they become more established and seek expansion. In this case, the “chicken-and-egg” problem of getting customers on board can be avoided, since one side of the market is already established, and the platform provider can initially provide the needed complements itself.

A case example of the benefits of openness in transforming a single-sided market into a two-sided one and enabling an open innovation ecosystem is de-scribed in detail by Raivio & Luukkainen (2011). Their paper discusses Open Telco, a concept referring to open network interfaces and APIs on operators’

side of a telecommunications network enabling novel end user services. It al-lows operators to diversify their single-sided business model mainly based on subscriber revenue by becoming the providers of two-sided platforms, serving also application and service developers, content providers and aggregators, advertisers, and other parties in addition to subscribers, the end users. Multi-sided platforms enable operators to reap the benefits of cross-side network effects in addition to the obvious same-side network effects that already en-able their core business in voice telephony, text messages, etc., and enen-able more versatile business innovations. For the operators, this diversification and expansion of their traditional business model and role in the ecosystem is necessary, should they wish to resist being relegated to pure data transport providers (or “dumb bit pipes”, as some industry professionals like to say).

Openness is discussed further in the context of product platforms in Sec-tion 2.5.5.