Multi-sided platforms

Multi-sided platformsMulti-sided platforms

Russ AbbottRuss AbbottDepartment of Computer Department of Computer Science, California State Science, California State University, Los Angeles University, Los Angeles

April 19, 2023April 19, 2023 Abbott - Multi-sided platformsAbbott - Multi-sided platforms 22

The USPSThe USPS ““Open at the top; open at the bottom; and Open at the top; open at the bottom; and

continually (but slowly) changing” continually (but slowly) changing” — IEEE Conference on — IEEE Conference on “Systems of systems.”“Systems of systems.”

Top: what we do with it. Open to new uses, e.g., the Top: what we do with it. Open to new uses, e.g., the flourishing world of mail-order catalogs; chain letters. flourishing world of mail-order catalogs; chain letters.

Bottom: how it is implemented. Open to new Bottom: how it is implemented. Open to new implementations, e.g., with changing technologies from implementations, e.g., with changing technologies from the pony express to commercial jetsthe pony express to commercial jets

(Slowly) changing: the abstractions it defines. Change (Slowly) changing: the abstractions it defines. Change slowly, e.g., zip codes, second class mail, express mail.slowly, e.g., zip codes, second class mail, express mail.

Something important. Not quite sure what it was. Something important. Not quite sure what it was. Not necessarily technological. But a lot like the Not necessarily technological. But a lot like the Internet and Service Oriented Architectures (SOA).Internet and Service Oriented Architectures (SOA).


Multi-sided software Multi-sided software platformsplatforms

Evans, Hagiu, and Schmalensee (2006)Evans, Hagiu, and Schmalensee (2006) Invisible Engines: Invisible Engines: How Software Platforms Drive Innovation and How Software Platforms Drive Innovation and Transform IndustriesTransform Industries, , MIT Press. (freely downloadable) MIT Press. (freely downloadable)

Operating systems and game consoles.Operating systems and game consoles.

More examples: shopping centers, dating More examples: shopping centers, dating websites, TV channels, TV talk shows, websites, TV channels, TV talk shows, Amazon resellers, telephone & telegraph Amazon resellers, telephone & telegraph systems.systems.

The web browser: web sites and surfers.The web browser: web sites and surfers.

Google dynamically generates multi-sided Google dynamically generates multi-sided platforms of search result pages (sites and platforms of search result pages (sites and searchers.searchers.


Two- (and multi-) sided Two- (and multi-) sided marketsmarkets

Markets that connect disparate groups. Markets that connect disparate groups. A stock exchange matches buyers and sellers.A stock exchange matches buyers and sellers. A credit card system matches merchants and cardholders. A credit card system matches merchants and cardholders.

Not your usual business model: buy; add value; sell.Not your usual business model: buy; add value; sell. The value to each group increases as the size of the The value to each group increases as the size of the

other group(s) grow. (Also known as other group(s) grow. (Also known as network effectnetwork effect.).) By providing services to two groups of users one can By providing services to two groups of users one can

sell access to one group to the other. sell access to one group to the other. A TV station matches creators of programming and A TV station matches creators of programming and

viewers, access to which it then sells to advertisers. viewers, access to which it then sells to advertisers. Google!Google!

Sometimes both groups can be charged — some Sometimes both groups can be charged — some credit cards, classified ads. credit cards, classified ads. Often the seller pays (eBay).Often the seller pays (eBay). In In The RecyclerThe Recycler ads are free; the buyers pay. ads are free; the buyers pay.

Jean-Charles Rochet and Jean Tirole (20012001) Institut d'Economie Industrielle Institut d'Economie Industrielle (IDEI). (IDEI).


Multi-sided platforms as Multi-sided platforms as refactoringsrefactorings

A multi-sided platform may be understood A multi-sided platform may be understood as the standardization and factoring out as the standardization and factoring out ((refactoringrefactoring) of a hard part of an ) of a hard part of an interaction and providing it as a service.interaction and providing it as a service.

The hardpart doneby theplatform.

USPS: sending & receiving USPS: sending & receiving materials.materials.

Credit card: paying and being Credit card: paying and being paid.paid.

Dating service: finding the otherDating service: finding the otherparty and making an initial party and making an initial contact.contact.

Robert’s Rules of Order Robert’s Rules of Order : the : the interaction protocolinteraction protocol


Platform operational Platform operational structurestructure

User User

ImplementationAlso USPS, a database

Robert’s Rules of OrderRobert’s Rules of Order

Presiding officer/parliamentarianPresiding officer/parliamentarian


Software platforms as Software platforms as refactoringsrefactorings

Think about the Think about the abstractionsabstractions (data types and (data types and operations on objects of those types) operations on objects of those types) platforms offer and what implements the platforms offer and what implements the abstractions.abstractions. Recall from last year that emergence is a Recall from last year that emergence is a

level of abstraction.level of abstraction. Databases: store, modify, and retrieve Databases: store, modify, and retrieve

tabular data — or linked text as in Wikipedia. tabular data — or linked text as in Wikipedia. Each platform is a single shared implementation.Each platform is a single shared implementation.

File extensions for shared files, e.g., .doc, .xl. File extensions for shared files, e.g., .doc, .xl. Each user has his/her own implementation.Each user has his/her own implementation.


File extensions for shared files File extensions for shared files (.doc, .xl) (.doc, .xl)

Each user has his/her own Each user has his/her own implementation.implementation.

User User

ImplementationImplementation

Xyz.doc

Representation of internal state for this transation

E.g., MS Word

Requires import/export capability


Infrastructure platformsInfrastructure platforms The interests of platform owners (maximize profit) The interests of platform owners (maximize profit)

are not always the same as those of platform are not always the same as those of platform users.users.

Some platforms are so important we don’t want Some platforms are so important we don’t want the owner’s interests to take priority.the owner’s interests to take priority.

Publicly owned and operated (or highly regulated) Publicly owned and operated (or highly regulated) multi-sided platforms:multi-sided platforms: USPS. (So important it’s in the constitution.)USPS. (So important it’s in the constitution.) telephone system.telephone system. FDA — an artificial platform imposed between seller and FDA — an artificial platform imposed between seller and

buyer.buyer. Not every important platform is multi-sided: Not every important platform is multi-sided:

power system, roads and highways, ... are single-power system, roads and highways, ... are single-sided.sided.


Standards as (ephemeral) Standards as (ephemeral) platformsplatforms

Since a platform is a level of abstraction, Since a platform is a level of abstraction, it can be characterized by a it can be characterized by a specification.specification.

The specification can then serve as the The specification can then serve as the definition of the platform, e.g., HTML. definition of the platform, e.g., HTML.

Multiple vendors can be encouraged to Multiple vendors can be encouraged to compete to implement it.compete to implement it.

Defangs the platform ownerDefangs the platform owner Favored by platform users. Favored by platform users.


Open source platformsOpen source platforms If your business depended on a platform, If your business depended on a platform,

would you want that platform owned (and would you want that platform owned (and controlled) by some other business?controlled) by some other business?

Open source software.Open source software. Two categories: money driven and other.Two categories: money driven and other.

Iansiti and Richards, http://www.hbs.edu/research/pdf/07-028.pdfIansiti and Richards, http://www.hbs.edu/research/pdf/07-028.pdf Money-driven tend to be multi-sided Money-driven tend to be multi-sided

platforms. platforms. Top two in terms of corporate support: Top two in terms of corporate support:

Linux and Firefox.Linux and Firefox.


Platforms as environmentsPlatforms as environments Sometimes platforms define an environment.Sometimes platforms define an environment. The free market economic system is defined The free market economic system is defined

primarily by two platforms.primarily by two platforms. The monetary and banking system.The monetary and banking system.

Factors out the economic notion of value. Allows Factors out the economic notion of value. Allows value to be abstracted, stored, exchanged with value to be abstracted, stored, exchanged with minimal overhead. minimal overhead.

The legal and judicial system.The legal and judicial system. Factors out agreements (contracts) and enforcement Factors out agreements (contracts) and enforcement

mechanisms. Overhead not so minimal (lawyers) — mechanisms. Overhead not so minimal (lawyers) — but better than hiring your own enforcers. Used to but better than hiring your own enforcers. Used to rely more on reputation. Still do in eBay.rely more on reputation. Still do in eBay.

Much too important to be controlled privately.Much too important to be controlled privately.


Natural language: the crown Natural language: the crown jewel of multi-sided jewel of multi-sided

platforms.platforms. Open at the top:Open at the top: virtually unlimited virtually unlimited

creativity.creativity. Open at the bottom:Open at the bottom: we each we each build our build our

ownown implementations. implementations. Continually (but slowly) changing.Continually (but slowly) changing.

It’s a standard. We have dictionaries and It’s a standard. We have dictionaries and grammar books for “standard English.”grammar books for “standard English.”

We all implement our versions of the standard.We all implement our versions of the standard. It’s open source.It’s open source.

It is continually undergoing modification — but It is continually undergoing modification — but slowly enough so that most of us can keep up.slowly enough so that most of us can keep up.

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Multi-sided platforms