Multi-sided platforms

1. Multi-sided platforms Russ Abbott Department of Computer Science, California State University, Los Angeles

2. The USPS • “Open at the top; open at the bottom; and continually (but slowly) changing” — IEEE Conference on “Systems of systems.” • Top: what we do with it. Open to new uses, e.g., the flourishing world of mail-order catalogs; chain letters. • Bottom: how it is implemented. Open to new implementations, e.g., with changing technologies from the pony express to commercial jets • (Slowly) changing: the abstractions it defines. Change slowly, e.g., zip codes, second class mail, express mail. • Something important. Not quite sure what it was. Not necessarily technological. But a lot like the Internet and Service Oriented Architectures (SOA). Abbott - Multi-sided platforms

3. Multi-sided software platforms • Evans, Hagiu, and Schmalensee (2006)Invisible Engines: How Software Platforms Drive Innovation and Transform Industries, MIT Press. (freely downloadable) • Operating systems and game consoles. • More examples: shopping centers, dating websites, TV channels, TV talk shows, Amazon resellers, telephone & telegraph systems. • The web browser: web sites and surfers. • Google dynamically generates multi-sided platforms of search result pages (sites and searchers. Abbott - Multi-sided platforms

4. Two- (and multi-) sided markets Jean-Charles Rochet and Jean Tirole (2001) Institut d'Economie Industrielle (IDEI). • Markets that connect disparate groups. • A stock exchange matches buyers and sellers. • A credit card system matches merchants and cardholders. • Not your usual business model: buy; add value; sell. • The value to each group increases as the size of the other group(s) grow. (Also known as network effect.) • By providing services to two groups of users one can sell access to one group to the other. • A TV station matches creators of programming and viewers, access to which it then sells to advertisers. Google! • Sometimes both groups can be charged — some credit cards, classified ads. • Often the seller pays (eBay). • In The Recycler ads are free; the buyers pay. Abbott - Multi-sided platforms

5. The hardpart doneby theplatform. Multi-sided platforms as refactorings • A multi-sided platform may be understood as the standardization and factoring out (refactoring) of a hard part of an interaction and providing it as a service. • USPS: sending & receiving materials. • Credit card: paying and being paid. • Dating service: finding the otherparty and making an initial contact. • Robert’s Rules of Order : the interaction protocol Abbott - Multi-sided platforms

6. Implementation Platform operational structure User User Robert’s Rules of Order Presiding officer/parliamentarian Also USPS, a database Abbott - Multi-sided platforms

7. Software platforms as refactorings • Think about the abstractions (data types and operations on objects of those types) platforms offer and what implements the abstractions. • Recall from last year that emergence is a level of abstraction. • Databases: store, modify, and retrieve tabular data — or linked text as in Wikipedia. • Each platform is a single shared implementation. • File extensions for shared files, e.g., .doc, .xl. • Each user has his/her own implementation. Abbott - Multi-sided platforms

8. Implementation Implementation File extensions for shared files (.doc, .xl) Each user has his/her own implementation. Representation of internal state for this transation User Requires import/export capability User Xyz.doc E.g., MS Word Abbott - Multi-sided platforms

9. Infrastructure platforms • The interests of platform owners (maximize profit) are not always the same as those of platform users. • Some platforms are so important we don’t want the owner’s interests to take priority. • Publicly owned and operated (or highly regulated) multi-sided platforms: • USPS. (So important it’s in the constitution.) • telephone system. • FDA — an artificial platform imposed between seller and buyer. • Not every important platform is multi-sided: power system, roads and highways, ... are single-sided. Abbott - Multi-sided platforms

10. Standards as (ephemeral) platforms • Since a platform is a level of abstraction, it can be characterized by a specification. • The specification can then serve as the definition of the platform, e.g., HTML. • Multiple vendors can be encouraged to compete to implement it. • Defangs the platform owner • Favored by platform users. Abbott - Multi-sided platforms

11. Open source platforms • If your business depended on a platform, would you want that platform owned (and controlled) by some other business? • Open source software. • Two categories: money driven and other.Iansiti and Richards, http://www.hbs.edu/research/pdf/07-028.pdf • Money-driven tend to be multi-sided platforms. • Top two in terms of corporate support: Linux and Firefox. Abbott - Multi-sided platforms

12. Platforms as environments • Sometimes platforms define an environment. • The free market economic system is defined primarily by two platforms. • The monetary and banking system. • Factors out the economic notion of value. Allows value to be abstracted, stored, exchanged with minimal overhead. • The legal and judicial system. • Factors out agreements (contracts) and enforcement mechanisms. Overhead not so minimal (lawyers) — but better than hiring your own enforcers. Used to rely more on reputation. Still do in eBay. • Much too important to be controlled privately. Abbott - Multi-sided platforms

13. Natural language: the crown jewel of multi-sided platforms. • Open at the top: virtually unlimited creativity. • Open at the bottom: we each build our own implementations. • Continually (but slowly) changing. • It’s a standard. We have dictionaries and grammar books for “standard English.” • We all implement our versions of the standard. • It’s open source. • It is continually undergoing modification — but slowly enough so that most of us can keep up. Abbott - Multi-sided platforms