Platform Revolution

The three partners started out focusing on events for which hotel space was often sold out, scoring their first big hit at the 2008 South by Southwest festival in Austin. But they soon discovered that demand for friendly, affordable accommodations provided by local residents existed year-round and nationwide—and even internationally. (Location 134)

A platform is a business based on enabling value-creating interactions between external producers and consumers. The platform provides an open, participative infrastructure for these interactions and sets governance conditions for them. The platform’s overarching purpose: to consummate matches among users and facilitate the exchange of goods, services, or social currency, thereby enabling value creation for all participants. (Location 187)

Strategy has moved from controlling unique internal resources and erecting competitive barriers to orchestrating external resources and engaging vibrant communities. (Location 294)

The importance of these effects for stimulating network growth is so great that platform businesses will often spend money to attract participants to one side of the market. They know that, if they can get one side to join the platform, the other side will follow. (Location 451)

It’s important to distinguish network effects from other familiar market-building tools, such as price effects and brand effects. (Location 460)

Whereas giant industrial-era firms were made possible by supply economies of scale, today’s giants are made possible by demand economies of scale—expressed as network effects. (Location 656)

Network effects are not the same as price effects, brand effects, or other familiar growth-building tools. (Location 658)

two-sided market (with both producers and consumers) gives rise to four kinds of network effects: same-side effects (positive and negative) and cross-side effects (positive and negative). A growing platform business must manage all four.     The key to minimizing most negative network effects is quality curation, which increases the chances of a happy match between producer and consumer. (Location 662)

One nuance of platform design is recognizing that the same user may play a different role in differing interactions. (Location 739)

A well-designed platform makes it easy for users to move from role to role. (Location 741)

Participants + Value Unit + Filter → Core Interaction (Location 768)

A valuable core interaction that is easy, even enjoyable, to engage in attracts participants and makes the emergence of positive network effects possible. (Location 779)

The platform must pull the producers and consumers to the platform, which enables interactions among them. It must facilitate their interactions by providing them with tools and rules that make it easy for them to connect and that encourage valuable exchanges (while discouraging others). And it must match producers and consumers effectively by using information about each to connect them in ways they will find mutually rewarding. (Location 822)

Pull. Attracting consumers to platforms presents challenges that pipeline companies don’t face. (Location 831)

In order to make the core interaction easy and even inevitable, a platform must perform three crucial functions: pull, facilitate, and match. (Location 1071)

Successful platforms use one of eight proven strategies for solving the chicken-or-egg problem: the follow-the-rabbit strategy; the piggyback strategy; the seeding strategy; the marquee strategy; the single-side strategy; the producer evangelism strategy; the big bang adoption strategy; and the micromarket strategy. (Location 1818)