The emporium strikes back

Platforms are the future—but not for everyone

In late 2015 the 44 platform firms based in Silicon Valley alone boasted a combined market capitalisation of $2.2 trillion, according to the Centre for Global Enterprise (CGE), a think-tank. Among them, Apple’s iPhone exemplifies best how to run a platform: anybody can write an app, but it has to pass strict tests and the firm keeps 30% of all sales.
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Second, network effects often fizzle. All sides of an online marketplace have to be nurtured in parallel to avoid imbalances, such as having far more sellers than buyers. During the dotcom bubble most business-to-business marketplaces failed because their pursuit of growth led to such lopsidedness. Even firms that had a head start, such as MySpace and Nokia, a social network and a mobile-phone maker respectively, didn’t manage to turn themselves into fully fledged platforms.
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Third, it is not always easy to make money from platforms. Misjudge how much to charge each group of customers, and the flywheel can come to a juddering halt. What is more, for a platform to make good money, switching to a rival has to be costly, argues Andrei Hagiu of Harvard Business School. This risk even hangs over Uber, the fast-expanding taxi-hailing service: using a competitor is easy for both passengers and drivers.
http://www.economist.com/news/business/21699103-platforms-are-futurebut-not-everyone-emporium-strikes-back