In this article, the
authors reveal how to master the platforms by having the best strategies
against all competitors which will result in a successful company. In order to
do that, the best way to start is by finding the most important challenge in
two-sided markets. They have proposed three challenges but only one is more
significant than the others which is the pricing platform. Pricing platform is
a faster way to gain the maximum profit for a company. Its advantages are to
enable a firm to systematically identify the best opportunities to exercise
power pricing. However, it can be challenging due to the requirement needed to
provide the right pricing. Managing this platform involves gaining massive
information about consumer’s buying behaviors as well as competitors’ pricing.
Two-side markets are
markets with two types of participants where the benefits for one side depends
on the number of participants on the other side of the market. And this is called
cross-side network effects. For instance, as a consumer when buying the gaming
console such as (Xbox, PlayStation etc…) the value for the console is a function
of a number of the interested games that are available for that specific console.
On the other hand as a game developer the value of building a game for the
console is the function of the number of people or consumers who uses that console.
This is a great example that describes the effects of cross-side networking.
Moreover, to make the
best decision in the price platform the authors have provided us with six factors
that will help prevent failure in a company:
Ability to capture cross-side network effects
User sensitivity to price
User sensitivity to quality
Same-side network effects.
User’s brand value
Oppositely, when we look at the differences
that the two-sided markets have with one-sided markets we find a lot of dissimilarities.
The one-side market is a market that develops most of its value from a single
class of users instead of two distinct categories. An example would be instant
messaging (IM), where you choose one IM tool over another based on how many of
your contacts you can reach. Although, this might seem very easy and simple. One-sided
market can have its disadvantages such as paying high prices and losing
revenue. And that is why most companies uses two-sided markets because of its