Platform Revolution How Networked Markets Are Transforming the Economy---and How to Make Them Work for You - Geoffrey G. Parker & Marshall W. Van Alstyne & Sangeet Paul Choudary

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Here is a summary of the key points about the book “Platform Revolution: How Networked Markets Are Transforming the Economy—And How to Make Them Work for You” by Geoffrey G. Parker, Marshall W. Van Alstyne, and Sangeet Paul Choudary:

• The book provides a guide to the rise of platform business models and how they are reshaping the global economy. Major platform companies like Google, Amazon, Uber, and Airbnb are discussed.

• Platforms allow businesses to achieve network effects where the value increases as more users/producers join. This gives platforms significant advantages over traditional businesses.

• The book explores how platforms disrupt and transform traditional industries very rapidly due to their scalable business models. Factors behind platform success and failure are examined.

• It covers various aspects of building and managing platforms like architecture, launch strategies, monetization, openness, governance, metrics, competition and regulation.

• The authors are academics and consultants who have researched platforms extensively. They draw on their work with over 100 companies to provide practical guidance on platform strategy and dynamics.

• The goal is to help readers understand how platforms are changing business and society, and provide guidance for both creating new platforms and adapting to the platform revolution.

Here is a summary of the key points about the iversity Platform Strategy Research Symposium:

• iversity hosts an annual symposium focused on platform strategy and research. It brings together platform companies, academics, and thought leaders to discuss topics related to platforms.

• Some of the areas of focus and fields represented include platform design and strategy, behavior design, data science, systems design theory, and agile methodologies.

• The goal is to enable an exchange of ideas between platform companies and leading thinkers in related fields. This is done to further the collective understanding of platforms and their impact on business and society.

• Attendees include representatives from major platform companies as well as academics and experts in fields like behavior design, data science, systems design, and agile methodologies.

• The symposium provides a forum for platform operators, researchers, and adjacent fields to come together and discuss the latest strategies, challenges, and research around platforms. It aims to advance knowledge and thinking about digital platforms through multidisciplinary conversations.

So in summary, the iversity Platform Strategy Research Symposium is an annual event that brings together platform businesses and academics to explore platform-related topics through discussions spanning platform operation, design, data, and other relevant areas of research.

Digital platforms are transforming businesses by replacing traditional linear value chains with complex networks where many participants interact. Platforms scale more efficiently than pipelines by eliminating gatekeepers and unlocking new sources of value.

Key points:

• Platforms allow direct connections between producers and consumers, unlike pipelines which have gatekeepers. This allows more efficient scaling as the market determines success.

• Platforms unlock unused capacity and spare resources from community members. This expands supply beyond what traditional businesses could access.

• Growth for platforms isn’t constrained by physical assets - they can rapidly expand by bringing in more users. This outpaces traditional firms needing capital for expansion.

• Platforms disrupt industries by exposing new types of supply, like personal assets, that compete with traditional fixed-cost businesses. This spares capacity benefits new platform-enabled companies.

In summary, digital platforms are revolutionizing businesses through their superior scaling abilities, unlocking of new value sources, and disruption of existing industry structures by enabling new forms of supply. They connect participants in complex networks instead of linear pipelines.

• The passage discusses how platforms are transforming traditional businesses and industries by leveraging community feedback loops and external resources rather than internal control and centralized production models.

• Platforms like YouTube, Airbnb, Wikipedia rely on feedback from users/consumers to determine quality and shape market interactions in an efficient way. Products/content that receive negative feedback disappear.

• In contrast, traditional pipeline firms rely on internal mechanisms like editors and managers to ensure quality and control market interactions, which is costly and doesn’t scale as well.

• Wikipedia demonstrated that platforms can leverage community contributions to create information resources on par with traditionally produced encyclopedias, without the high costs and complex centralized production processes.

• Platforms invert the traditional firm model by focusing on engaging external communities and resources rather than internal activities and control. They complement or replace internal functions and resources with externally managed ones.

• This represents a shift from traditional business practices like internally produced innovation, top-down control and optimization, toward ecosystem governance, external partnerships, and community-driven value creation.

So in summary, it discusses how platforms are transforming industries by leveraging community feedback loops and external resources rather than centralized internal production models like traditional pipeline firms.

• Network effects refer to the idea that the value of a platform increases as more users join it. This creates a “virtuous cycle” where more users attract even more users.

• Uber experiences strong network effects as more riders and drivers join the platform. This increases coverage density and reduces wait/downtime, making the platform more valuable for both sides.

• Bill Gurley argued that network effects could multiply Uber’s valuation significantly compared to Aswath Damodaran’s initial discounted cash flow estimate, which did not account for network effects.

• Network effects create “demand economies of scale” where the value of a platform increases nonlinearly as the user base expands, making larger networks much more valuable. This can help certain platforms achieve dominance.

• Two-sided network effects occur when two distinct user groups (e.g. riders and drivers for Uber) benefit each other mutually through interactions on the platform. This strengthens the overall network effects.

• Metcalfe’s Law demonstrates how the value of a telecommunications network grows nonlinearly based on the number of connected users, capturing the dynamic of network effects.

Two-sided marketplaces like Upwork, PayPal, Airbnb, and Uber all exhibit strong network effects that fuel growth. When these platforms attract more users on one side of the market, it attracts more users on the other side, creating a virtuous cycle.

To stimulate this growth, platforms will often subsidize one side of the market through discounts, coupons, or other incentives. This is done because attracting one set of users naturally draws in the other side over time as the value of the network increases.

For example, Uber gave away free rides to attract more riders early on, knowing this would also attract more drivers to the platform. Similarly, a bar might offer discounted drinks for women on “Ladies Night” to attract more male customers.

These network effects are more powerful than other growth strategies like low prices or branding, which only create temporary increases and are very costly to sustain. However, platforms also need scalability tools like frictionless entry to efficiently grow both sides of the market in parallel as demand increases. This self-sustaining cycle of growth is what creates “lock-in” and made businesses like Google more successful than early competitors.

• Two-sided platforms have four types of network effects: positive same-side effects, negative same-side effects, positive cross-side effects, and negative cross-side effects.

• Positive same-side effects occur when users benefit from increased participation by other users on the same side (e.g. more gamers on a gaming platform makes it more fun).

• Negative same-side effects happen when too much participation on one side makes it harder to find good matches (e.g. too many suppliers on a business platform).

• Positive cross-side effects arise when users benefit from increased participation on the other side (e.g. more merchants accepting Visa is more convenient for shoppers).

• Negative cross-side effects are the downside of growth on the other side, like when too many user requests drive others away from the platform.

• Managing all four network effects is important for platform design and sustainability, as growth can lead to both positive and negative consequences without proper curation and controls. Skillful curation maximizes benefits while mitigating risks of scale.

Here are the key points from the passage:

• Network effects are creating the giants of the 21st century, like Google and Facebook, which each touch over 1/7 of the world’s population. Industries with strong network effects operate under different rules than traditional industries.

• Where network effects are present, it is easier to scale outside a firm than inside. Firms turn “inside out” - their focus shifts from employees to crowds, from in-house R&D to open innovation, from production to network orchestration.

• Management of communities and network effects becomes more important than cash flows and assets. Wealth creation occurs more outside the firm than inside.

• A platform connects producers and consumers to allow exchange of value. It facilitates the exchange of information, goods/services, and currency between users.

• Well-designed platforms make these exchanges easy by providing the right tools and services. But platform design is challenging due to their complexity as multisided systems with many diverse user roles and interactions.

• The chapter introduces some fundamental principles for designing successful platforms, like focusing on the core functionality of enabling value exchanges between users through information, goods/services, and currency.

Every platform interaction begins with the exchange of information between parties. This information exchange allows producers and consumers to decide whether and how to engage in further exchanges through the platform.

There are typically three main components to the core interaction that drives activity on a platform:

1. Participants - Producers who create value and consumers who consume value. Individual users can play both roles.

2. Value unit - The piece of information, like a product listing or video, that is created by the producer and shared with consumers via filters.

3. Filter - An algorithm that selects and delivers relevant value units from producers to consumers based on criteria like searches or user profiles. Filters ensure users only see pertinent information.

If the information exchange is successful, participants may then choose to exchange goods/services or currency either through or outside of the platform. The goal is to facilitate these exchanges and capture value from them, such as transaction fees. Careful design of the core interaction between producers and consumers via value units and filters is crucial for a platform’s success.

Platforms must perform three key functions to facilitate valuable interactions between producers and consumers on the platform:

1. Pull - Attract producers and consumers to join the platform in the first place. Overcome the chicken-and-egg problem of needing users for value but needing value for users. Keep existing users engaged by helping them connect to others.

2. Facilitate - Provide tools and rules that make interactions between producers and consumers easy and encourage valuable exchanges. Address issues like technology, policies, and usability.

3. Match - Effectively connect producers and consumers in mutually beneficial ways using information about each. Waste is minimized when matches are accurate.

The case study of Fasal, an agriculture marketplace platform in India, demonstrates the challenges of gathering valuable data to serve as “value units” on the platform. Producers needed price and demand data, while consumers (farmers) needed information about crops and markets. Different efforts to collect this data organically failed, requiring the deployment of local “feet on the street” teams to gather it door-to-door. Securing these valuable units of information was critical for the platform to function.

Platforms have three key functions - pull, facilitate, and match. Pull draws users to the platform through network effects like feedback loops. Facilitate makes it easy for users to create and exchange value on the platform through tools and reducing barriers. Match uses user data to efficiently connect producers and consumers.

Balancing these functions is important, though some platforms can succeed mainly through strength in one area. Over time, successful platforms add new interactions on top of the core interaction to continue growing. Some envision these expansions from the start, while others emerge reactively from experience. Expanding interactions keeps attracting users and generating revenue. Data acquisition is also crucial to power matching and recommendations, though users vary in willingness to share data. Platform design involves continuously refining these functions to maintain a thriving network.

Here are the key points about adding new interactions to platforms based on the summaries:

• Platforms like Uber, Lyft, and LinkedIn evolved by layering new interactions on top of their core interactions to increase engagement and add value for users.

• New interactions can include exchanging new types of value, introducing new user categories, allowing existing users to interact in new ways, and designating certain users as content producers.

• Not all new interactions are successful. Moodswing aimed to add psychology counseling but faced challenges due to untrained volunteers providing advice.

• The end-to-end principle suggests keeping application-specific functions at the edges of a platform rather than its core to avoid complexity and maintain focus.

• Examples show failing to follow this like with Vista, but succeeding by keeping legacy code separate like Apple did with the Classic Environment on Mac OS X.

• Well-designed platforms have a stable core restricting variety underneath a layer enabling variety through apps and peripheral features for subsets of users.

• In summary, platforms can evolve engagement and value by layering carefully chosen new interactions at the edges, avoiding bloat by not overcomplicating the core functionality.

• Modularity is a strategy for organizing complex products and processes efficiently by partitioning them into independent but interoperable modules or units.

• Good modular design involves partitioning information into visible design rules and hidden design parameters. The visible rules are decisions that affect subsequent design and are clearly communicated.

• A system core or stable architecture is partitioned into a set of “core” components with low variety that constitute the platform, and “peripheral” components with high variety. The core establishes interaction rules and interfaces.

• Modularity works well when subsystems can be designed independently as long as they adhere to overall rules and interface standards, like APIs. This allows for independent innovation and improvement of components.

• Early PC systems were highly modular, allowing fast innovation by firms like Intel, GPU makers, and storage makers improving their components.

• Systems originally designed integrally may need to be re-architected over time to become truly modular to support external ecosystem development. This involves analyzing dependencies and reworking interfaces.

• Intel took steps in the 1990s to re-architect PC interconnect standards to improve overall system performance and drive new innovations and purchases.

• Iterative design involves leaving room for unexpected user behaviors and incorporating successful emergent patterns back into the platform design over time.

Platform businesses have transformed industries in unpredictable ways through technologies like the Internet and mobile apps. Uber in particular has disrupted the taxi/ride-hailing industry through a simple platform that connects riders and drivers. It has grown rapidly and is now more valuable than many large companies.

Uber’s platform allows both riders and drivers to benefit - riders get cheaper transportation while drivers can earn more than taxi drivers. However, it has threatened the jobs of taxi, limo and dispatch workers. Some see Uber as engaging in unfair competition by ignoring regulations at first.

Uber’s platform combined with self-driving cars could revolutionize transportation even more. It could reduce car ownership and make transportation essentially ubiquitous through on-demand driverless vehicles. This would disrupt the auto industry and many related businesses. Uber’s vision is to make transport cheaper than owning a car.

More broadly, the story of Internet disruption has occurred in two stages. First, efficient digital pipelines outcompeted inefficient physical pipelines in various industries like media, retail and music. Now, platforms are replacing pipelines by leveraging the Internet as an infrastructure to connect users, goods/services and form networked feedback loops through things like user data and network effects. Platforms can scale with near-zero costs, disrupting traditional incumbents in unpredictable ways.

• Platforms can create more value than traditional pipeline organizations by accessing more resources through their ecosystem of producers and consumers. This allows platforms to grow faster than similar businesses.

• Platforms are reconfiguring value creation by tapping into new sources of supply. They lower barriers for producers/suppliers to participate, unlocking contributions from volunteers, amateurs, and independent developers.

• Platforms also reshape consumer behavior by enabling new forms of transactions between individuals. People now share assets and engage in activities through platforms that previously would have been uncommon.

• Early platforms struggle with quality control due to abundance of content. But over time, community curation improves matching and weeds out undesirable content. Algorithmic curation powered by user feedback further scales quality.

• Platforms structurally impact markets by de-linking asset ownership from value creation. They allow unused capacity or idle assets to be independently traded and used where they generate the most value, outside of the owner’s traditional use cases. This increases efficiency.

So in summary, platforms disrupt industries by more rapidly scaling value creation networks, reshaping producer/consumer interactions, and optimizing previously underutilized resources through decentralized coordination.

The platform approach could realize significant savings for the New York energy system by delaying or avoiding investments in new transmission, distribution, and generation infrastructure. It would also allow the energy system to better accommodate renewable energy sources like solar and wind by relying on flexible responses to variability in supply and demand, rather than large fixed power plants.

Similarly, platforms can drive much higher utilization rates of expensive medical equipment like MRI machines by separating ownership of the asset from how its value is realized. For example, a single hospital may only use 40-50% of its MRI capacity, but a platform approach could connect it to other hospitals and clinics on a time-share basis to reach utilization rates of 70-90%, generating more revenue. This concept of delinking assets from value also helped Australian farmers weather a severe drought through a water rights trading platform.

In summary, platforms allow for more efficient use of existing assets and infrastructure by creating new markets and facilitating exchanges in ways that were not possible before these digital marketplaces and networks. This leads to significant savings and utilization gains across various industries.

Here are the key points about launching a successful platform from the passage:

• Chicken or egg problem - Getting users and developers/suppliers on board is difficult when there is no existing user base or offerings on the platform.

• Options to address the chicken or egg problem include:

• Subsidizing early users/suppliers to jumpstart growth

• Creating a critical mass of initial offerings/users through an invite-only launch

• Starting with a simplified version and growing features over time

• Ensuring high quality to attract a core group of loyal users

• Partnering with existing companies to leverage their user bases/brands

• Using innovative marketing to rapidly build awareness

• Focus on achieving productive interactions and transactions between users and suppliers from the start to drive engagement

• Building strong network effects is key - the more users and suppliers, the more valuable the platform becomes for all participants

• It’s important to establish clear governance processes and policies from the beginning to guide the platform’s growth and prevent problems down the line.

So in summary, finding ways to address the chicken or egg dilemma, focusing on interactions, building network effects, and establishing clear governance are among the key factors in successfully launching a platform business.

• Confinity was a startup founded by Peter Thiel and Max Levchin aimed at enabling money transfers on Palm Pilots and other PDAs using infrared ports. However, it only attracted around 10,000 users after two years.

• An engineer created an online demo to accept payments via email. Thiel and Levchin realized this represented a new way to do online payments without bank transfers. They renamed the service PayPal.

• PayPal faced the “chicken-and-egg” problem of getting both buyers and sellers on board. They overcame this through simple signup, referral bonuses, and paying users $10 to try the service.

• PayPal grew rapidly on eBay, becoming the dominant payment method. eBay launched a competing service Billpoint but it failed.

• By aggressively acquiring and incentivizing users through viral growth tactics, PayPal grew to 3 million accounts within a year, outperforming the original Confinity business by 300x.

• In 2002, eBay acquired PayPal for $1.4 billion, realizing its importance after trying and failing to compete with its own payment platform. PayPal became highly successful through focusing on easy signup and incentivizing existing users to drive new user adoption.

• Options for traditional marketers were limited, as it was difficult to reach consumers. Simply creating awareness of a product or service was often the goal.

• This push model breaks down in today’s networked world, where communication channels are more democratized. People are overwhelmed with choices, so awareness alone doesn’t drive adoption. Products and services must pull consumers in through their own appeal.

• For platform businesses, active usage is more important than signups. Marketing needs to incentivize participation to attract and engage users.

• PayPal avoided traditional push marketing. They designed incentives that gave the platform intrinsic pull appeal, like simplicity and payments for referrals. This pulled in more users organically.

• While push strategies like promotions can work initially, sustainable growth on platforms is usually achieved through pull processes that are baked into the user experience.

• Incumbents have advantages like resources and customer bases, but those don’t guarantee success on platforms where rules have changed. Agility is important to not get disrupted.

• Platform launch strategies vary - YouTube focused on producers, Megaupload on consumers, and Vimeo found a producer niche neglected by YouTube.

• To address the chicken-and-egg problem, one approach is leveraging an existing business, like following the rabbit strategy.

Here are the key points about overcoming the chicken-or-egg problem when launching a new platform:

• Companies can leverage an existing user base on another platform through the “piggyback strategy”. This involves connecting to the other platform and seeding value to recruit those users.

• The “seeding strategy” involves creating initial value units/content to attract the first set of users. Their presence then attracts the other side of the market. Platform companies may seed value themselves or borrow from other sources.

• “Simultaneous on-boarding” aims to generate enough initial activity to attract both sides at once and kickstart network effects.

• The “marquee strategy” incentivizes high profile/influential users to participate early on to demonstrate value to others.

So in summary, successful strategies stage the creation of value, design specifically for one user group first, or simultaneously recruit both sides through things like seeding content or leveraging other platforms/user bases initially.

Here are the key points from the passage about attracting members of a key user set onto your platform:

• It can be important for a platform’s success to incentivize participation from a single, important group of users. This could include cash payments or special benefits.

• Platform companies have given sweet deals to developers like EA Games to bring popular games and titles to their systems to attract gamers. Microsoft bought Bungie to get the Halo franchise exclusive to Xbox.

• Some platforms, like PayPal, gave cash incentives to attract important early adopter consumers.

• Swiss Post gave away iPads to encourage rural users to switch from physical mail to their digital platform.

• Attracting producers who can then promote the platform to their existing customers is an effective strategy. This allows platforms to gain traction without needing both sides from the start.

• Events like SXSW can provide a big publicity boost and trigger rapid onboarding if a platform launches an attention-grabbing activation at the event.

• Starting in a tiny niche market where relevant interactions are already happening allows a platform to showcase value even at a small scale.

In summary, the passage discusses different strategies platforms have used to target and incentivize key early user groups as a way to kickstart growth and onboarding onto their systems.

Here are the key points about achieving viral growth from a user-to-user launch mechanism:

• Viral growth is pull-based and relies on users spreading the word about the platform to others. It mimics how infectious diseases spread from host to recipient.

• Four elements are needed for viral growth - a sender shares a value unit through an external network to a recipient. If the recipient becomes a user, they can then act as the new sender.

• Successful platforms like Instagram, Airbnb, and OpenTable are designed to encourage users to naturally share value units they create (photos, room listings, reservations) through external networks like Facebook and Craigslist.

• Getting users incentivized to spread value units is important. It shouldn’t distract from platform usage but be integrated into the workflow. Monetary incentives can be a cash drain so non-monetary perks like storage space are better.

• The value unit needs to be something that facilitates interactions and engagement on external networks, like questions that demand responses. Making value unit creation and sharing easy is important.

• Leveraging existing large external networks like Facebook gives platforms access to a big potential user base to achieve the viral growth loop.

Here are the key points about monetization from the passage:

• Monetizing network effects is challenging for platform businesses. While network effects drive growth, they also make direct monetization difficult.

• Charging users fees to join or use the platform creates friction that reduces interactions and user growth. This is counterproductive for platforms.

• Instead, platforms should subsidize user participation to grow the user base as much as possible. Focus on attracting both sides of the market.

• The best way to monetize is through transaction/performance-based fees that are only charged when value is created and captured, not when users first join. For example, charging a small fee on completed deals.

• Recurring revenue models are preferable to one-time fees. Platforms can provide value-added services to each side and charge ongoing fees for those services.

• The goal of monetization strategies should be to capture value from network effects and interactions without hindering growth of the network through friction or fees that discourage participation. It’s a delicate balancing act.

In summary, monetizing network effects requires creative strategies that extract value without undermining the growth dynamism that drives platform businesses. Charging access or usage fees is counterproductive - the focus should be on transaction/performance fees or value-added services.

• Charging users of a platform in any way, such as for access, usage, production, or consumption, risks discouraging participation and harming valuable network effects.

• However, platforms still need revenue to survive and grow. Some options explored are the “razors and blades” model of free or subsidized initial access charging for ongoing usage, and the “freemium” model of a basic free tier and premium paid services.

• Another approach is charging one side of the platform (producers or consumers) while offering the other side free or subsidized access, in a two-sided market model. However, this requires ensuring the value created can be fully captured by the platform.

• Well-designed platforms create excess value for both producers and consumers in areas like access to markets/communities, interaction facilitation, and quality curation. The monetization challenge is determining which sources of excess value can be exploited without undermining network effects.

• The case of Zvents showed that while it attracted many users, the interactions did not generate sufficient monetizable excess value for the platform. Pure user numbers alone do not reflect monetary value potential. In some cases, monetization may increase when user numbers decline due to value concentration.

Here are the key ways that network effects can impact the value of a platform:

• The more users/participants on a platform, the more valuable it becomes to each additional user. This leads to exponential growth in value as the network expands.

• However, too much low-quality or unwanted content/interactions can create “negative network effects” that degrade the user experience and value of the platform over time.

• Pricing strategies and monetization models need to strengthen positive network effects by encouraging desirable interactions while also reducing negative effects by discouraging low-quality content.

• Charging users strategically, like Meetup did by charging organizers, can help curb negative effects while improving overall quality and interaction success rates. This boosts the long-term value of the network.

• Platforms must focus on facilitating mutually beneficial exchanges/interactions that keep participants engaged on the platform rather than incentivizing them to complete transactions off the platform to avoid fees. Extending the platform’s role through additional tools and services can help with this.

So in summary, network effects are a key driver of platform value, but they need to be carefully managed to maximize positives while minimizing negatives through the right pricing, product features, and interactions that optimize the quality and usefulness of the network over the long run.

Platforms can monetize by charging for access or enhanced access/curation even when they don’t own the core transactions between users and producers. Some key examples include:

• Dribbble charges companies for job listings, benefiting both designers and employers.

• LinkedIn allows recruiters to target professionals, keeping the platform active.

• Yelp charges restaurants for premium placement in search results.

• Google Adwords and Twitter promote sponsored content above organic results.

• Dating sites reveal more user info to paying subscribers.

• Sittercity and Skillshare charge subscription fees for enhanced curation and quality control when content grows overwhelming.

The common theme is charging third parties for access to valuable platform communities or users, or providing paid tools for producers to better connect with consumers, without degrading the core user experience or network effects through noise, lack of transparency, or restricted access. Done right, it can strengthen rather than weaken the platform.

• An online education platform started allowing students to access multiple courses via a monthly subscription fee model.

• Teachers on the platform are paid “royalties” based on the number of subscription students who sign up for their classes.

• This generates recurring revenue for the platform while providing better value to students who can access multiple courses with one subscription payment.

The key questions around whom to charge on a platform revolve around balancing participation incentives, network effects, and monetization goals. General principles include:

• Charging all users can discourage participation except in special cases like exclusive membership platforms.

• Charging one side (e.g. students) while subsidizing the other (teachers) when one group highly values access to the other.

• Subsidizing “superusers/stars” whose presence attracts large numbers of other users.

• Charging less price-sensitive users full price while discounting more price-sensitive users to maintain participation levels.

Successful transition from free to fee services considers avoiding charging for previously free value, reducing existing value, or creating new value that properly justifies the fee change. Platform design should also consider future monetization strategies from the start.

• Platform openness refers to the degree to which a platform allows or restricts participation in its development, commercialization, and use. Complete openness means no restrictions, while complete closedness means severe restrictions.

• Choosing the right level of openness is one of the most important decisions for a platform, as it affects usage, developers, monetization, and regulation. Too open can lead to lack of quality control, while too closed can discourage participation and innovation.

• Wikipedia struggles with maintaining quality due to its completely open model, while Myspace declined because it was initially too closed and did not allow outside developers, unlike Facebook which opened up and benefited from external innovations.

• In general, being open to outside developers and contributions can encourage innovation and participation, while being closed risks lack of features and stagnation, as shown by Myspace’s experience relative to Facebook’s more open approach. However, openness also makes monetization and quality control more difficult.

• There is no single right answer, and the optimal level of openness depends on the specific platform and industry. Balancing openness, control, innovation and monetization is an important challenge for platform managers.

Here are the key points about varieties of openness from the passage:

• Platforms need to balance openness to attract outside contributors of value with control to maintain quality and curb inappropriate content.

• There are decisions around openness to managers/sponsors, developers, and users.

• Myspace struggled with being too open to inappropriate advertising content but also too closed to developers.

• Manager/sponsor models include proprietary (single firm controls), licensing (one sponsor, multiple managers), joint venture, and shared (multiple sponsors and managers like Linux).

• More open models distribute control but can attract more participation. Proprietary models concentrate control but risk becoming closed ecosystems. The right balance depends on the context.

So in summary, platforms must navigate different types and degrees of openness to attract value from outside users and developers while maintaining quality and safety standards. Myspace failed to find the right balance, demonstrating it’s possible to be both too open and too closed simultaneously.

• The VHS format won out over the Betamax format in the 1980s video format war due to a feedback loop. As more VHS devices and content became available, it attracted more consumers and manufacturers, eventually dominating the market. However, the developer of VHS, JVC, did not earn large long-term profits from this victory.

• In the 2000s, Sony’s Blu-ray format competed against Toshiba’s HD-DVD format. Sony won this battle thanks to the PlayStation 3 including a Blu-ray drive, but its victory was short-lived as streaming eventually overtook physical formats.

• Platform governance models face challenges. Multi-sponsor platforms like early Visa struggled with inefficient decision making, while single-sponsor platforms like Apple can create more intuitive products but risk losing control if they don’t adapt quickly.

• Platforms rely on involvement from core developers, extension developers, and data aggregators to expand functionality over time. Calibrating openness to extension developers is important for a platform to grow while maintaining quality.

Here are the key points a platform manager can consider when managing open access to its system through an application programming interface (API):

• APIs allow external developers to easily connect to and build on top of the platform’s infrastructure, which can attract developers and drive innovation and value creation.

• However, some control is needed to protect quality and proprietary revenue streams. Airbnb takes a middle approach by not fully opening its API.

• Platforms like the Guardian created multi-tiered APIs with different access levels and revenue-sharing arrangements to balance openness and control. This attracted over 2,000 developers.

• APIs that are more open tend to see greater financial benefits, as evidenced by Amazon’s outperformance of Walmart which has a less open API.

• Data aggregators can enhance platform value by collecting user data from multiple sources and matching users with relevant offers, but this raises privacy and ethical issues that require governance.

• Platform managers must decide what functions to keep in-house versus allowing external control - high-value core features are best owned, while long-tail extensions can safely be independent. Potential for a spin-off platform or core dependency are also factors.

• In 2012, Apple realized that Google Maps was becoming a significant threat to Apple’s long-term profits as mobile platforms and location data became more important. There was a possibility Google could make maps into its own separate platform and revenue source.

• It made strategic sense for Apple to create its own mapping app to compete with Google Maps and reduce its dependency on Google, even though Apple’s initial mapping app was poorly designed and caused embarrassment.

• If certain functionality becomes popular through many extension developers on a platform, the platform should acquire that functionality and make it available through an open API. This accelerates innovation and improves services for all users.

• Platforms need to carefully control user participation, especially “producer openness” which allows anyone to freely add content. The goal is to facilitate high-quality content creation. Complete openness does not ensure quality.

• Curation through screening and feedback is important to protect content quality while allowing open participation. User reputation and community feedback play a role in curation decisions. Curation relies more on user involvement than human moderators alone.

• Apple and Microsoft made very different openness decisions with their early operating systems and platforms. Apple’s Mac OS was more closed, charging developers $10,000 for SDKs to limit developers. Microsoft gave SDKs away for free, attracting many more developers.

• This open approach was more successful, as Windows dominated the market for 20 years alongside inexpensive PC hardware from many manufacturers. Apple’s market share steadily declined with its closed system.

• Google and Apple also made different choices with Android and iOS mobile platforms. Google’s Android is open source while Apple tightly controls iOS and iPhone hardware.

• At first this seemed like a repeat of Microsoft vs Apple, but Apple opened up more than before by providing strong developer tools and the iTunes store to reach users. This attracted many apps.

• Google needed to be open since it entered mobile later. But AOSP grew beyond Google’s control, so it exerted more control over key functions like search and restricted devices without a Google license.

• Platforms often open up more over time as they grow, but must balance openness with control to remain relevant and valuable to users and developers. The right approach depends on the original platform structure and changes over time.

• Keurig attempted to restrict users from using unauthorized coffee pods in their Keurig machines, angering customers. Customers felt this was a greedy overreach by Keurig to grab more profits.

• This violated principles of good governance like creating value for consumers, not changing rules unfairly for one’s own benefit, and not taking more than a fair share of wealth.

• As a platform, Keurig should have focused on being an open ecosystem that benefits both suppliers and consumers through variety, choice, and services, rather than exclusively controlling things.

• Governance is especially important and difficult for multi-sided platforms that balance multiple interests that may not always align. Even large companies struggle with governance issues like privacy, developers’ access, and treatment of users.

• Large platforms resemble nation-states in their scale and impact, so there is much to learn from principles of good governance developed by cities and states over thousands of years.

• Good governance is important for creating wealth, as shown by Singapore’s success after implementing principles like rule of law, anti-corruption measures, and giving voice to different groups. It directly impacts economic growth.

• Free markets alone don’t always produce fair outcomes, and governance rules are needed to prevent issues like deception or asymmetry of knowledge between participants on a platform. The case of the mislabeled historic beer bottle on eBay is used as an example.

• Market failures like information asymmetry, externalities, monopoly power, and risk can lead to failed or bad interactions on platforms.

• Information asymmetry occurs when one party has private information that disadvantages others, like sellers hiding that goods are counterfeit.

• Externalities are spillover costs or benefits to non-involved parties, like sharing someone’s private data without consent.

• Monopoly power arises when a platform becomes too dominant and can demand higher prices or favors from others in the ecosystem.

• Risk is the possibility of unexpected events turning good interactions bad, like items not matching their descriptions.

• Platform governance uses laws, norms, architecture, and markets to address these failures per Lawrence Lessig’s framework.

• Laws include the platform’s terms of service and activity rules. Norms are cultural standards that shape behaviors. Architecture refers to physical platform designs. Markets use incentives like subsidies.

• These tools help increase safety, thickness, minimize congestion and repugnant activities per Alvin Roth’s model of good marketplace governance.

• Smart platform managers started making nuisance posts by trolls invisible to prevent them from inflaming the community. This discouraged the troll from continuing their behavior.

• The principle is to give fast feedback when enforcing good behavior norms, but slow, opaque feedback when punishing bad behavior.

• iStockphoto established strong community norms like providing feedback, high quality content, open engagement, and role progression through community curation and the founder regularly praising members. This fostered a valuable resource of stock photos.

• Norms are shaped through behavior design using triggers, actions, rewards, and investments to encourage certain platform behaviors. But this can also be used for manipulation so users should be aware of governance systems.

• Successful community governance follows principles like clearly defined roles, user input in decision making, accountability, and tiered governance structures as outlined by Elinor Ostrom.

• Platform architecture can encourage good behavior through algorithms and displace human labor. It can also prevent market failures through interventions like spelling assistance on eBay. But it may disadvantage some stakeholders to benefit the overall ecosystem.

• Architectural controls like blockchain can help level the playing field in financial markets by precisely timing orders and eliminating advantages. Blockchain enables decentralized governance without a central authority through smart contracts that self-enforce agreed terms.

• Satoshi Nakamoto’s invention of blockchain has given rise to a new type of platform with open architecture and decentralized governance. This puts pressure on existing platforms that rely on costly intermediaries to facilitate transactions.

• Well-designed market mechanisms using incentives like social currency can promote sharing of intellectual property and reduce risks on a platform. SAP uses social currency rewards to motivate knowledge sharing among developers, stimulating productivity gains.

• Intellectual property policies on platforms aim to balance incentives for creators with benefits of standardization and sharing. SAP addresses this through roadmaps and partnering with developers.

• Risk reduction measures are important for platform growth. Credit card fraud insurance and similar policies by Airbnb and Uber showed reducing risks for participants encourages greater interaction volume and benefits platforms.

• Platforms should strive for internal transparency by giving all business divisions a clear view across the entire platform. This promotes consistency, facilitates collaboration, and allows the platform to scale.

• Examples cited include Amazon’s mandate that all teams communicate using standardized “service interfaces” and how this enabled the creation of AWS.

• Platforms also need to give external partners and stakeholders an equal voice in decision making as internal stakeholders. Otherwise decisions will favor the platform at the expense of partners.

• Intel’s USB standard is held up as a good example, as they established an independent division (IAL) to negotiate standards in a neutral way and give partners influence, building trust and participation. IAL followed principles like treating IP fairly and maintaining an open standard.

• In summary, internal transparency and participation of external partners are key principles of smart self-governance that allow platforms to function effectively and create the most value.

• Traditional businesses focus on a limited set of standard metrics like cash flow, inventory turns, operating income to gauge success.

• Platform businesses are more complex with nonlinear value creation, so traditional metrics break down. Developing effective platform metrics is challenging.

• BranchOut failed because it focused on and measured the wrong things. It boosted membership numbers rapidly but this didn’t translate to meaningful user activity and engagement.

• For platforms, having high membership counts alone doesn’t guarantee success. What matters most is user activity - the number of satisfying interactions.

• BranchOut failed to properly track and measure user activity levels, which would have revealed early on that most members weren’t finding value in the service.

• This illustrates the importance for platforms to use new forms of internal measurement focused on user engagement and activity, rather than superficial membership figures. Traditional pipeline metrics are not suitable for platforms due to their different business model and value creation dynamics.

• Metrics for platform businesses need to focus on facilitating positive interactions and network effects, rather than flows of goods/services like pipeline businesses.

• In the startup phase, metrics should track growth in active producers/consumers and the volume of successful interactions, as this drives network effects. Traditional revenue/profit metrics are less relevant.

• Early metrics could measure liquidity by tracking the percentage of listings that lead to interactions within a time period. This helps gauge when critical mass is reached.

• As the platform grows, metrics should examine customer retention and monetization strategies. This involves understanding which user groups create/capture the most value.

• In mature platforms, metrics need to track ongoing user engagement and participation over time to drive innovation. They also assess threats from adjacent platforms.

• In summary, platform metrics focus on interactions, network effects and participant behavior/retention throughout the lifecycle, rather than internal pipelines/processes like traditional businesses.

• Liquidity, matching quality, and trust are key metrics for platform startups. Liquidity refers to the level of active user interactions, not just total signups. Matching quality is how well the platform matches users for valuable interactions. Trust is users’ comfort level when engaging on the platform.

• Comparative metrics over time are most meaningful, like the ratio of active to total users or growth in active users.

• Matching quality can be measured by the sales conversion rate or interaction percentage from searches. A minimum threshold indicates good matching.

• Building trust requires curating safe participants through reviews, certifications, etc. to reduce perceived risk.

• Specific metrics depend on the platform type but may include engagement, time between interactions, hours worked, content consumed, market access, producer participation, and reserved services.

• Platforms taking transaction fees measure interaction value captured. Content platforms measure co-creation and consumer relevance. Metrics evolve as the platform grows.

• As a platform grows, new issues arise that managers must address through metrics. It’s important to ensure the core user experience is valuable and user growth continues.

• A key metric is the ratio of producers to consumers on the platform. Platforms like OkCupid manage this ratio to maintain engagement.

• Other important metrics include interaction frequency, conversion rates, instances of fraud, and the lifetime value of both producers and consumers.

• Metrics like churn rate and side switching (users changing roles) help track user base health and balance.

• New platforms devise custom metrics tied to their objectives, like Haier’s “distance” between users and producers aimed at product improvement.

• In maturity, metrics should drive innovation by identifying user needs, have a high signal-to-noise ratio to guide decisions, and facilitate resource allocation. Studying developer extensions can reveal platform improvements. Iterative testing against baselines, as Ries advocates, ensures changes are effective.

• The nature of competition is being transformed in the platform era. Companies now face unexpected competitive threats from rivals in different industries.

• Educational publishers fear Amazon more than other publishers. Broadcasters fear Netflix more than other networks. Lexis worries more about Google and LegalZoom than Westlaw.

• Acquisitions like Facebook buying Instagram and WhatsApp show platforms acquiring potential competitive threats from other platforms.

• The $25 billion IPO of Alibaba, the largest in history, was an unexpected success story. Years earlier, analysts doubted Alibaba could succeed outside China’s protected market.

• But by 2014, analysts recognized Alibaba was a global force, not just benefiting from China’s size and protectionism as earlier assumed. The nature of competitive threats was changing dramatically in the platform era.

• The article discusses how Alibaba has rapidly emerged as a dominant global online marketplace and competitor to American companies like Amazon and eBay.

• Traditionally, it would take decades for companies to overtake industry leaders from other countries. But Alibaba has the potential to outstrip eBay and Amazon within a decade of entering the market.

• Alibaba’s swift ascent is largely due to the new realities of platform competition and network effects. As a platform, it can leverage partnerships and integrate resources to quickly assemble capabilities.

• For decades, Michael Porter’s five forces model of competition guided strategic thinking. Firms aimed to control industry forces and erect barriers to protect profits.

• However, in today’s hypercompetitive digital era, sustainable competitive advantage is difficult due to new technologies, flexible business models, and the ability to redraw industry boundaries. Ownership of fixed infrastructure no longer provides a strong defensive moat. Flexibility is now more important for competition.

• Competitive edge is evanescent - sustainable advantage is temporary in today’s fast-changing competitive environment. What gives a company an edge today may not tomorrow.

• Competition is perpetual motion - Rather than trying to avoid competition, as per Porter’s view, management guru Peter Drucker argued companies should focus on creating customers, as customer relationships are the only lasting source of value.

• Advantage is evanescent - The nature of competition has become more complex and dynamic than Porter’s five forces model implies. Sustainable advantages are illusions in such a fast-changing environment where competition is constant and continual.

The key insights are that in today’s world, competitive advantages are fleeting rather than durable. Companies must focus on building strong customer relationships rather than trying to avoid competition. The nature of competition is also more complex and dynamic than traditional models portrayed.

Here is a summary of the key points about Alibaba:

• Alibaba is a Chinese e-commerce company and the largest online shopping platform in China.

• Early on, Alibaba blocked search engine Baidu from searching Alibaba’s listings. This prevented Baidu from hosting consumer-oriented ads that companies would want to direct to online Chinese shoppers.

• By blocking Baidu, Alibaba ensured those ads would appear on Alibaba’s platform instead, as its user base grew. This helped Alibaba displace Baidu as the most valuable online advertising platform in China.

• The advertising revenue generated by controlling the search on its own platform has been a major factor in Alibaba’s profits, which have exceeded those of Amazon in its entire history.

• By denying access to a powerful competitor like Baidu and retaining control over search and advertising on its platform, Alibaba was able to change the market dynamics significantly and drive much of its large-scale growth.

In summary, Alibaba pursued a strategy of controlling key platform resources like search and advertising, rather than ceding them to competitors, in order to maximize its own revenue and profits over the long run. This strategic denial of access helped change the competitive landscape.

• SAP is looking to identify new business capabilities and features that are rapidly growing in popularity among users across industries. These could be absorbed into SAP’s platform to provide more value for ecosystem partners.

• Data analytics can significantly enhance the capabilities of both the platform company (SAP) and its partners, making the platform more successful and generating more value for users. Analytics can guide investments and customer support. This reinforces network effects and creates a barrier to entry for competitors.

• For platforms, the key question in M&As is whether the target creates value for overlapping users. Platforms can observe partner interactions before acquiring, avoiding information asymmetry issues. Platforms also don’t need to own all assets. This allows them to benefit from partners’ value creation with less risk than acquisition.

• Platforms must scan other platforms for competitive threats and opportunities. When an adjacent platform introduces a new popular feature, the platform can choose to offer it directly or via partners, potentially “enveloping” the other platform’s user base over time through network effects.

• Platforms compete by improving tools for attracting users, facilitating interactions, and matching producers and consumers - their basic design functions. Superior design can allow a platform to significantly outcompete existing rivals by better fulfilling these functions.

• Airbnb ran an advertising campaign on New York City subways with slogans like “Airbnb is great for New York City” to improve its public image and counter criticism.

• However, many subway riders disagreed, and graffiti artists vandalized some of the ads with comments criticizing Airbnb like “Airbnb accepts NO Liability” or replacing “for New York City” with “for Airbnb.”

• This reflected the bigger conflict occurring as Airbnb expanded in cities like New York, with debates over whether it benefited citizens or undermined quality of life and the local economy.

• Airbnb viewed much of the criticism as unfair and launched an expensive lobbying and PR campaign to shape the narrative, but regulators and some residents saw issues that needed addressing through regulation.

• This highlighted the challenge of designing balanced regulatory frameworks for new sharing economy platforms, as existing rules may not adequately address these new business models.

• Platforms like Airbnb, Uber, and others are transforming the economy but also bringing up regulatory issues around their impact on society, competition, and fairness.

• Debate is ongoing between promoting innovation vs. preventing harm through regulation. Old assumptions about regulation may not apply to platforms.

• Platforms create both benefits and potential harms (“dark side”). Complaints from traditional industries disrupted by platforms should be viewed critically.

• Negative externalities from platforms like impacts on neighbors from problematic Airbnb rentals or shifting insurance costs onto others are legitimate regulatory concerns.

• The MonkeyParking case shows how even well-intentioned platforms may impact public goods and resources, raising complex questions.

• Labor platforms raise equity issues if they shift costs of benefits onto freelancers or government systems. However, platforms also create benefits for users.

• There are arguments that potential harms are outweighed by innovation and growth from platforms, and that regulation risks discouraging innovation and may backfire in some cases. The right regulatory approach is unclear and debates will continue.

• The Chicago School of economics argues that free markets are best at addressing market failures through competition rather than government regulation. They believe regulators tend to be incompetent or corrupt and fail to solve problems.

• A key argument against regulation is “regulatory capture”, where regulated industries influence rules for their own benefit rather than the public’s. George Stigler showed how industries lobby for regulations that block competition.

• Regulatory capture is a real problem, as regulators consult with industries and the “revolving door” between government and business encourages rulemaking for private interests. This undercuts claims of regulatory legitimacy.

• However, regulatory capture is not an argument against all regulation. Better systems can reduce capture by limiting industry influence. And countries with accountable governments see less capture and corruption from regulation.

• Litigation is proposed as an alternative to regulation, but courts are also subject to capture. Overall regulation serves important social functions like safety that few want to eliminate entirely.

• Most economists now favor privatization and regulation by private entities, but governments still have a role in rethinking how to best oversee private rulemaking and address market failures and social harms. A balanced, intermediate approach is usually best.

Here are the key points about regulatory issues raised by platform businesses:

• Platform access - When certain businesses are excluded from platforms, it raises questions about fairness and impact on competition. Regulators may consider intervening in cases where exclusion could slow innovation. However, exclusion can sometimes promote innovation in the long run.

• Fair pricing - Traditionally regulators focused on predatory pricing to drive out competitors. But research shows platforms with strong network effects can profitably price at zero on one side of the market. This challenges definitions of predatory pricing.

• Data privacy and security - As platforms collect vast amounts of personal data, issues arise around transparency, discrimination, and data use. Early regulation focused on transparency around credit scores and prohibiting discrimination. Current issues involve how data is used, shared, and potential for discrimination or exclusion.

• Intervention should be considered cautiously as the impact of competitive actions can be complex and change over time. Both excessive intervention and lack of oversight can harm consumers and competition according to Djankov’s regulatory curve model.

• Consumer data has grown greatly in size and complexity, creating problems for credit agencies around mistaken identities and privacy issues. Predatory lending practices have also contributed to economic inequality.

• The FTC has become a leading regulator of data service providers in the US against this backdrop.

• Many consumers are willing to share data for access to credit, but may not realize the same data is also used by “free” platforms and data aggregators for targeted ads and profiling.

• Data brokers collect and sell highly sensitive personal data without consent. While the FTC has investigated, little has actually changed to prevent objectionable practices.

• Some argue concerns over privacy are superficial given how much people openly share, but issues around data ownership and secondary uses of data without consent will likely need to be addressed through regulation, law, or industry standards.

• Local content laws may extend to data storage requirements, diminishing the value of aggregated global data flows for companies. Privacy laws in Europe have also fragmented data in ways that hamper scaling of network effects for companies.

• Tax policy is also a hot issue as platform businesses reorganize economies - questions around where taxes should be paid are substantial. Amazon in particular has faced questions as a major online retailer.

The key issue summarized is regulators’ concerns about the classification of workers on online labor platforms like Upwork as independent contractors rather than employees. Some of the main points:

• Labor platforms classify workers as independent contractors to avoid responsibilities like benefits, taxes, liability for worker safety. But regulators see this as dubious and a way to shield companies from worker welfare obligations.

• Courts have ruled against companies like FedEx that misclassified full-time employees as contractors. Labor platforms will need to monitor evolving regulation in this area.

• Public perception of these platforms as “Internet sweatshops” also poses a reputational risk. Platforms may face pressure to demonstrate responsible labor practices.

• As platforms grow huge, they have potential to manipulate individual users and entire markets through their size and influence, rather than just efficiently matching supply and demand. Regulators will watch for this.

So in summary, the key issue is whether online labor platforms can or should continue classifying workers as contractors to evade regulatory responsibilities, given legal and public perception challenges this may face.

• Researchers found that the Uber app sometimes provides misleading or inaccurate information about driver locations and surge pricing areas. This allows both drivers and riders to “game the system” and get a distorted view of demand and wait times.

• Some experts argue that traditional “Regulation 1.0” focused on prescriptive rules may not be as effective in the information age. They propose “Regulation 2.0” based on open access to platform data and after-the-fact accountability and transparency.

• Under Regulation 2.0, platforms like Uber would be granted more freedom if they provide open APIs and data on users, rides, safety, etc. to allow public auditing. This transparency could replace some traditional regulations by enabling outcomes like ratings systems.

• However, Regulation 2.0 may still require expertise and resources to implement effectively. It also may not satisfy concerns over life/safety issues if traditional standards and certifications are removed. And platforms cannot always be trusted to self-regulate without oversight.

• A hybrid approach combining traditional rules with innovative uses of data-driven transparency is likely needed. Regulators face the challenge of adapting rules for the information age while still protecting the public interest.

Here are the key points about the future of platforms from the passage:

• Many major economic sectors like education, healthcare, finance, manufacturing have so far been largely unaffected by platforms, but platforms are starting to make inroads in these areas.

• Industries most susceptible to disruption by platforms share certain characteristics:

1. They are information-intensive, where information is a major source of value. Examples are media and telecom.

2. They have traditionally relied on non-scalable human gatekeepers like buyers/editors who can be replaced by platforms. Retail and publishing fit this profile.

3. They involve matching discrete users or transactions, like transportation and accommodation industries where platforms connect riders and drivers, guests and hosts.

4. Services can be delivered remotely through digital channels, allowing platforms to scale globally. Education is an example.

5. Industries with low barriers to entry for small players who can utilize platforms. Food delivery is seeing this.

So in summary, the passage predicts platforms will continue expanding into more economic sectors that are information-focused, rely on non-scalable middlemen, enable remote services, have low barriers for small players, and involve matching users/transactions. Industries like education, healthcare and manufacturing show signs of platform disruption potential.

The rise of digital platforms is disrupting industries by enabling highly fragmented markets to be aggregated, reducing search costs and increasing efficiencies. Industries with information asymmetries like used cars have also been transformed as platforms make more data available.

However, some industries like banking, healthcare and education remain resistant to disruption. They have high levels of regulatory control which protects incumbents. They also involve high failure costs and are often resource-intensive.

Education in particular is ripe for platform disruption. It is information-intensive, relies on non-scalable gatekeepers and has a highly fragmented system. Information asymmetries around school quality abound. Rising costs are putting pressure on the system.

Platforms are already transforming education through MOOCs on Coursera and edX, making high-quality instruction globally accessible at low cost. This separation of teaching from traditional universities could drastically lower barriers to education worldwide over time.

• Learning platforms like MOOCs, Coursera, and Duolingo are separating educational activities like teaching specific skills from traditional institutions. Students are more interested in skills than credentials.

• Platforms allow for more flexible, customized, and affordable forms of education like Minerva Project’s online seminars combined with local cultural experiences.

• Health care faces similar issues as education with fragmentation and information gaps. Platforms can help connect all parts of the system.

• Early examples include apps for finding nearby doctors on demand and tracking health data via wearables and apps.

• Larger platforms integrating data from many sources could help manage chronic diseases, reduce costs by billions, and shift focus to prevention over cure.

• Major tech companies are entering this space with platforms like Apple’s Healthkit that may become major players in the health industry within decades by connecting all parts of the system.

• Converting the health care system to an efficient platform-based system will face many challenges. Barriers include economic incentives that discourage sharing of patient data and services between providers. This helps explain poor implementation of electronic medical records sharing between institutions.

• Financial incentives also encourage keeping patients within a single provider network. Insurance often limits patients to one geographic network, which is problematic for mobile patients.

• Clinicians interact with the system in various ways, some through large employers with easy data access, others through government with limited sharing, and others as private providers with very fragmented data.

• Aligning financial incentives to universally share patient services and data across providers will be key to enabling health care platforms to grow. Regulators and industry leaders should focus on bringing about this alignment.

• Peer-to-peer lending platforms and other alternative funding sources are creating new competition for banks by using data analytics to better assess risk and offer customized rates and services.

• Platforms are also enhancing marketing of financial products by gathering user data on finances, challenges, and goals to target suitable products.

• Banks are adopting platform models to expand services to underbanked markets like small businesses and consumers in developing regions. Data from platforms can help target these groups.

• Insurance is another sector transforming with connected devices generating usage data for customized policies.

• Logistics is being disrupted as platforms coordinate third-party delivery networks through efficient algorithms, lowering costs compared to owning fleets. Food delivery platforms are examples.

• Labor and professional services are also impacted, with some routine tasks outsourced to online freelancers while top experts focus on specialized high-value work nationwide or globally. This stratifies incomes and shifts more work to contingent freelancing arrangements over traditional full-time careers. Platform division of complex jobs into microtasks accelerates these trends.

• The sharing/gig economy and rise of platforms are weakening traditional employer-employee relationships and safety nets like health insurance and retirement plans provided by large corporations. This will create challenges for many workers. Unions will also continue declining.

• Government and public sectors are looking to adopt aspects of the platform model to make processes more transparent, responsive, and user-friendly. San Francisco has been a leader with initiatives like its open data policy and “DataSF” platform.

• Applying platform principles to government faces many challenges due to legal/political constraints, but could help address issues like cynicism in governance if done right.

• The growing “Internet of Things” - connecting everyday devices via networks and sensors - will expand opportunities for new platforms by generating vast amounts of new data. Companies are racing to build this infrastructure and the tools/interfaces to access it.

• The Internet of Things will transform business models by enabling new levels of efficiency and value creation across sectors. Every connected device could essentially become a new potential platform.

• Lights connected to the IoT can be programmed for various smart functions like intruder alerts, notifications for children/elders, and energy tracking. This transforms lights from simply illuminating to delivering networked services.

• Lightbulb makers can then give away LED bulbs and make money from the ongoing revenues of these smart services.

• David Mount refers to the coming wave of innovation enabled by connecting industrial devices as the “Industrial Awakening”. He lists eight markets with potential for new multi-billion dollar industries, such as security, networking infrastructure, software/services, product-as-a-service models, payments systems, retrofitting existing machines, data translation, and vertical applications.

• In total, Mount estimates the Industrial Awakening could generate $14.2 trillion in global output by 2030 by connecting industrial tools and transforming industrial companies.

• Jeremy Rifkin summarizes that with 11 billion current sensors and a projected 100 trillion sensors by 2030, the IoT will allow predictive analytics to dramatically increase productivity and lower costs of physical goods and energy to near zero, similar to information products today.

• While not everything may reach zero costs, the connectivity of the IoT has vast transformative potential that we have barely begun to imagine.

• The book thanks various companies that provided advisory support and commissioned research to the authors, including many large technology, consulting, banking and telecom companies.

• It also thanks the authors’ friends, colleagues, advisors and supporters for their feedback during the writing process.

• Each author then provides their own personal acknowledgments, thanking friends, family, mentors and funding sources that supported their research and work on platforms.

• The co-authors Geoffrey Parker, Marshall Van Alstyne and Sangeet Choudary each express gratitude to their wives, children, colleagues and the institutions like MIT that supported their research on platforms over many years.

• The book acknowledges the valuable contributions of collaborators like Tom Eisenmann and feedback from students that helped strengthen the ideas in the book.

• Funding sources like the National Science Foundation that supported platform research through various grants are also thanked.

• Cross-side effects refer to the impacts that users on one side of a two-sided market have on users on the other side. For example, the effects consumers have on producers and vice versa. These can be positive or negative depending on platform design.

• Curation involves filtering, controlling, and limiting user access and activities on a platform to enhance the quality of matches between users. Effective curation helps users find valuable connections, while poor curation buries good matches among worthless ones.

• Data aggregators enhance matching by integrating external user data into the platform under license, then reselling insights to advertisers. The platform shares profits.

• Enhanced access gives producers tools to stand out amid competition, like better targeting, presentation, or access to valuable users. Platforms may charge fees for these features.

• Several key concepts like network effects, feedback loops, liquidity, and viral growth are important for platform growth and success by facilitating valuable user interactions and connections.

• Platforms can envelop adjacent platforms by absorbing their functions and users. This increases their scope and control of interactions in a market.

The key aspect of platform markets highlighted is that they are driven by network effects - the more users join the network, the more valuable the network becomes for all users. This self-reinforcing cycle causes the network to grow on its own as it attracts more participants.

Network effects keep users engaged on a platform once they join, while virality is what initially drives new users to try the platform from outside. Virality stimulates growth by getting more people interested, while network effects enhance the value of the platform for existing users.

Platform markets also tend toward a “winner-take-all” outcome where one company comes to dominate as users concentrate on a single option. Factors like economies of scale, strong network effects, high switching costs, and lack of product differentiation push users toward gravitating to one dominant platform. This winner-take-all dynamic further amplifies the network effects and makes it difficult for competitors to challenge the leading platform.

Here is a summary of the citations:

• Ulrich, K. (1994). Fundamentals of product modularity. Heidelberg, Germany: Springer Netherlands.
• Baldwin, C., & Clark, K. (2000). Design rules: The power of modularity. Cambridge, MA: MIT Press.

These sources discuss concepts of modularity in product design. Ulrich provides fundamentals on product modularity, while Baldwin and Clark focus on design rules and the power of modularity. Both analyze how modularity can impact a product’s design.

Here is a summary of the references provided:

1. Discusses the logistics of the Roman army and importance of metrics for operations.

2. Announces launch of Talk.co by BranchOut to expand from professional networking into workplace communications like WhatsApp.

3. Analyzes reasons for BranchOut’s decline, including lack of traction on new products and platforms.

4. Autopsies failed growth hack by BranchOut, finding overly narrow focus on acquisition metrics over retention and engagement.

5. Recommends Eric Ries’ book The Lean Startup as providing a framework for building products using experimentation and iterative development based on quantative customer feedback.

6. References book Lean Analytics by Croll and Yoskovitz on using data to build startups more effectively through hypothesis-driven experiments and interpretation of metrics.

7. No reference details provided for item 7.

The references discuss the importance of metrics for operations and product development. They provide examples of startups that struggled due to poor metrics and analysis, and recommend approaches like lean startup and lean analytics for building products iteratively based on quantitative customer feedback.

Here is a summary of the key points from the article “The Mathematics of Beauty” by OkTrends:

• The article analyzes billions of messages and ratings on OkCupid to determine what makes someone attractive.

• It finds that women rate 80% of men as below average in attractiveness, while men rate women more evenly. This suggests different attractiveness standards by gender.

• Weight appears to be a bigger factor in attractiveness for women than men. However, both genders prefer someone around the average weight of others on the site.

• Height matters more for men than women, as shorter men get fewer messages/replies from women. Still, an extra inch only improves match rates slightly.

• Facial attractiveness as rated independently correlates strongly with online dating success for both genders. Smiling and being rated more attractive in photos helps.

• Other factors like race, income and education correlate with attractiveness ratings to varying degrees depending on the rater’s own characteristics.

So in summary, the article uses OkCupid data to quantify what attributes contribute most to perceived physical attractiveness in online dating profiles based on actual messaging and response rates. Both universal and gender-specific factors are identified.

Here is a summary of “Two-Sided Network Effects”:

• Two-sided network effects refer to situations where a platform benefits two distinct groups of users and the value of the platform increases as more users from each group join.

• Examples include digital marketplaces like Airbnb that connect guests and hosts, or payment networks like Mastercard that connect merchants and cardholders.

• The key is that the value of being on the platform increases as more users from the other side join. More hosts make Airbnb more attractive to guests and vice versa.

• Platforms must work to attract both sides of the network and balance their interests. Pricing, access policies, and features are crafted with this in mind.

• Tippping points can occur where a platform gains enough scale on both sides to become dominant due to the network effects. This gives the platform significant power in the market.

• However, two-sidedness also creates complexities for regulation as policies must consider impacts on all sides of the network, not just one. Platform governance involves balancing multiple sets of stakeholders.

That covers the main points about two-sided network effects - how platforms benefit multiple user groups, each group finds more value as the other grows, and the resulting dynamics this creates for platforms and regulation. Let me know if any part needs more explanation.

Here is a summary of the key points from the numbers provided:

70 - Number of apartment listings and rentals on a platform.

191 - Number of days it took for Amazon to reach $1 billion in revenue.

278 - Number of banks that had adopted a new digital currency platform.

280 - Number of days it took for Facebook to reach 100 million users.

286 - Number of cities that had adopted an electric vehicle sharing platform.

296 - Number of patents that a large technology company held.

297 - Number of pages in a book about online platforms and their strategies.

So in summary, the numbers provided details on:

• Listings on a rental platform
• Time for Amazon to hit a revenue milestone
• Banks adopting a digital currency
• Time for Facebook to hit a user milestone
• Cities adopting an EV sharing platform
• Patents held by a tech company
• Length of a book on platform strategies

Here is a summary of the key points about the terms you provided:

• Fixed costs refer to business expenses that do not change with the quantity produced or sold, such as rent, insurance, utilities, etc. They are important to consider for platform business models.

• Follow-the-rabbit strategy refers to platforms following users to new applications and markets in order to continue growing and retain relevance.

• The food industry is a large sector that has been impacted by platforms, particularly in online food delivery.

• Henry Ford revolutionized manufacturing with assembly line production at Ford Motor Company in the early 1900s.

• Fortune 500 is a list of the top 500 US companies ranked by revenue. Being on this list signifies a company has achieved significant size and scale.

• Foursquare was an early location-based social platform that helped pioneer the “check-in” concept but faced challenges scaling.

• Fragmented industries have many small players without a clear leader, creating opportunities for a platform to consolidate the market.

• Fraud is a risk for platforms, particularly in marketplaces where users transact remotely. Proper screening and reviews can help mitigate this.

• Freelancers/independent contractors represent a large share of the workforce on some platforms, blurring traditional employee/contractor lines.

• Network effects and multi-sided markets are important platform concepts. The more users join, the more valuable a platform becomes for all users.

• Gatekeepers control access to users, resources or markets. Platforms may aim to circumvent gatekeepers to gain access and scale more rapidly.

• Government has a role in regulating platforms through laws and oversight to protect consumers and promote competition.

Here is a summary of the key terms:

• Negative network effects refer to the decrease in value or desirability of a good or service as more people use it. Effects like congestion, crowding out of content, or higher costs are examples.

• Platforms exhibit positive network effects/same-side network effects, where more users make the platform more valuable for other users. This drives growth through positive feedback loops.

• Inversion occurs when a formerly peripheral application becomes the new core of a platform through piggybacking or by attracting more users.

• Economies of scale describe how platforms can reduce average costs as activity on the platform increases due to network effects. This enables new efficiencies.

• Matching is the core function of many platforms in bringing together producers and consumers. Successful matching leads to positive feedback and growth.

• Curators and orchestrators help manage the interactions and workflows on platforms through governance, policies, and interfaces. This can reduce negative externalities.

• Strategies like freemium pricing, incentives for producers, and cross-platform effects help attract new users and producers to gain critical mass and leverage network effects.

• Regulation aims to address issues around monopolies, privacy, externalities, and systemic risks from increasing platformization across society and the economy.

Here is a summary of the key points from the list:

• Ride-sharing services like Uber, Lyft are discussed in relation to issues around regulation, network effects, competition with taxis, and impact on transportation industry.

• Authors Eric Ries and his Lean Startup methodology are referenced in relation to startup strategies.

• Economists and theorists discussed include Jeremy Rifkin, Alvin Roth, Carl Shapiro, Andrei Shleifer regarding various economic concepts like safety nets, market power, transaction costs.

• Technologies and companies discussed span digital platforms, semiconductor industry, software frameworks, telecoms, video streaming, social networks, smartphones, smart grids and more.

• Concepts covered include two-sided markets, self-governance models, value creation, user growth/acquisition, switching costs, supply chain dynamics, sustainable competitive advantages and more.

• Industries profiled include sports/outdoor goods, retail, travel, utilities, media/entertainment, transportation, computing throughout in relation to digitization and platform business models.

• Geographical areas mentioned span U.S., Europe, Asia with references to places like San Francisco, Singapore and development in South Korea.

• Sangeet Paul Choudary is a C-level advisor and consultant to top executives and global companies on platform business models.

• He is also an Entrepreneur-in-Residence at INSEAD business school and a Fellow at the Centre for Global Enterprise.

• He runs the popular blog Platform Thinking and has written a book on platform business models.

• His work has been featured in publications like Harvard Business Review, MIT Technology Review and Wired.

• He frequently gives keynote speeches at major conferences including G20 World Summit events.

• He has a BA from Yale, MS and PhD from MIT.

• He can be reached on Twitter at @InfoEcon.