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M&E

M&E

M&E

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Kartei Details

Karten 95
Sprache Deutsch
Kategorie Informatik
Stufe Universität
Erstellt / Aktualisiert 09.10.2020 / 04.04.2021
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Which group to attract first

want to attract the user that present the highest ratio between their attraction power (the CGNE they generate for users on the other side of the platform) and the cost needed to attract them.

Solving the chicken-and-egg Problem: Strategies (7)

  • Marquee strategy
  • Offer stand-alone value
  • Tap onto an existing network (piggyback strategy)
  • Generate positive expectations for users: commitment strategy
  • Divide- and-conquer strategy
  • Focus on niche market
  • Start as a pipeline

Marquee strategy (2)

  • Marquee Strategy: users generate large cross-group network effects
    • Allows to attract relatively more users form the other side of the platform
    • generate pos. expectations regarding future growth of the platform
  • Caveat: Input force may also be large because marquee users are also coveted by competing platforms

Marquee Strategy Examples (3)

  • Popular games on videogame consoles
  • Marquee shops in malls primark
  • opinion leaders on social media

Offer stand-alone value

  • Provide value to users even if no one else is on the platform
    • allows to attract users that put relatively lower weight on network benefits
    • Easier to attract: they don't need the other group as much to value platform
  • Stand-alone value: recording capabilty

Offer stand-alone value Example

VCR in 1980's

  • VCR is a platform with content on one side and users on other
    • Useful to users only if they could get enough videocassettes to watch
    • Content owners make tapes only if enough people have VCRs

Expectations are key (solving Chicken- and- egg problem)

  • Multiplicity of equilibria (self-fulfiling prophecies)
    • Pessimistiv expectations -> 'Null equilibrium'
    • Users in one group don't join if they believe that users in the other group won't join, and vice versa
  • If possible, generate positive expectations (for at least one group)
    • Advertising, preannouncements, etc.

Commitment strategy 

  • Platforms can meake large upfront investment to signal that it's safe for a given group to join the platform.
    • Common strategy for platforms where a given group has to make large investments to participate, and fave large switching costs

commitment strategy Example

Microsoft's launch of the Xbox

Microsoft had to convinve video game developers that there would be enough Xbox users for their games:

  • Made a big deal about its commitment to spend $500M promoting the Xbox
  • Committed to sell the Xbox at a low price to convice developers that there would be demand for the console and games

"Divide-and -conquer" pricing strategy

  • A two-sided platfrom serves two distinct groups of users and can therefore set different prices for each group (focus: access fees subscription)
  • This option is key to solving the chicken-and-egg problem, by way of a "divide and conquer" strategy.
  • Divide: "Buy"the participation of one group (Guarantee them the utility they'd obtain if the other group joined)
  • Conquer: Make other group pay to interact- with- certainty- with the first one

Tap onto an existing network (piggyback strategy)

Rather thatn trying a new network, use one that already exists!

Tap onto an existing network (piggyback strategy) Example

Paypal and eBay

  • Paypal relied on the fact that eBay was the palce to be for person-to-person interactions and trade on the web
  • Growing on eBay would guarantee Paypall growth over the Internet.
    • Paypal became the standard payment method on eBay, and successfully expanded beyond, with many websites taking Paypal as a payment system.

Focus on narrow market

Target customers in a relatively narrow market where the platform can more easily build network

Focus on narrow market Example

Yelp review platform

  • Started focusing on ethnic food in San Francisco, which attracted dedicated reviewers and interested readers
  • Word of mouth and participants' travel facilitated growth: other cities and then to sectors other than restaurants.
  • Yelp expanded from reviews to other functions, such as accepting reservations, forwarding online orders, and offering discounts

Start as a pipeline (3)

  • Integration with one side of may be necessary to induce participation on the other side.
    • The first gaming consoles were bundled with their own games
    • amazon started as a reseller before becoming a marketplace
  • Disintegration may come at some later point in time
    • When an installed base of customers has been build or when expanding the supply of complements becomes a necessity.
  • The two strategies often coexist
    • Netflix produces own content, video games consoels also produce their own games along with third parites

 

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