The crucial strategy question is, Which side should you subsidize, and for how long?
Users will pay more for access to a larger network, so margins improve as user bases grow. In traditional businesses, growth beyond some point usually leads to diminishing returns: Acquiring new customers becomes harder as fewer people, not more, find the firm's value proposition appealing.
{ Networked Markets / Side 1 / Side 2 / Platform Providers }
Cross-side network effects: If the platform provider can attract enough subsidy-side users, money-side users will pay handsomely to reach them.
Same-side network effects: snowballing pattern, when drawing users to one side helps attract even more users to the same side.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment