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MULTI-SIDED PLATFORMS

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Multi-sided platforms, known by economists as multi- ously in order to create value. The platform’s value for
sided markets, are an important business phenomenon. a particular user group depends substantially on the
PATTERNS They have existed for a long time, but proliferated with number of users on the platform’s “other sides.” A video
the rise of information technology. The Visa credit card,
game console will only attract buyers if enough games
the Microsoft Windows operating system, the Financial are available for the platform. On the other hand, game
Times, Google, the Wii game console, and Facebook are developers will develop games for a new video console
just a few examples of successful multi-sided platforms. only if a substantial number of gamers already use it.
We address them here because they represent an Hence multi-sided platforms often face a “chicken and
increasingly important business model pattern. egg” dilemma.

What exactly are multi-sided platforms? They are One way multi-sided platforms solve this problem is by
platforms that bring together two or more distinct but subsidizing a Customer Segment. Though a platform
interdependent groups of customers. They create value operator incurs costs by serving all customer groups, it
as intermediaries by connecting these groups. Credit often decides to lure one segment to the platform with
cards, for example, link merchants with cardholders; an inexpensive or free Value Proposition in order to
computer operating systems link hardware manufac- subsequently attract users of the platform’s “other side.”
turers, application developers, and users; newspapers One diΩiculty multi-sided platform operators face is
link readers and advertisers; video gaming consoles understanding which side to subsidize and how to price :$;64<(3=
link game developers with players. The key is that the correctly to attract customers. G(,<(%6=R
platform must attract and serve all groups simultane-

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