Book Notes: Platform Revolution
Below are some of my takeaways from the book Platform Revolution: How Networked Markets Are Transforming the Economy — and How to Make Them Work for You by Geoffrey Parker, Marshall Van Alstyne, and Sangeet Paul Choudary.
The book was written in 2016 at what I would call the height of the platform optimism. It’s fascinating to read the book in 2020 when the pure-platform companies are still yet to make money (Uber, Lyft) and some might never make money (WeWork).
- Platform purpose: facilitate matches between producers and consumers
- Supply economies of scale were the propulsion of modern traditional industries. Network effects, on the other hand, are demand economies of scale which generate the value of today’s platforms
- Platforms should be designed around the core interaction of participants, value unit, and filter. Key functions: pull, facilitate, match
- Governance: need to prevent market failures such as information asymmetry, externalities, monopoly power, and risk
- Key metrics should explain liquidity, matching and trust. Examples are relative size of various user bases, lifetime value of producers and consumers, sales conversion
- Strategies to capture value: prevent multihoming, foster innovation then monetize, platform envelopment, leverage value of information (advertising)
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