In the article of Eisenman et al. (2006), the steps to make or become a succesfull factors are analyzed. To apply the concept I will compare two not so well known platforms for IT savvy people, Experts Exchange and Stack Overflow.
Intro
First I will introduce the two platform, second I will compare them according to the framework made by Eisenman et. al (2006), looking at pricing, winner-take-all dynamics and threat of envelopment.
Experts Exchange or EE was started in 1996, as a platform where technical IT problems could be solved. Mainly made for professionals who had thorough understanding of the field, it required a paid membership to view the content of the website and to use it. By being active and posting answers, the users can get a free membership for that given month. The website is well-kept and as a professional look.
Stack Overflow or SO started in 2008 with 2 programmers who wanted to make a open-source variable of EE. They wanted everybody to be able to learn how to code and at the same time to have “quality” answers for the users. Now, 8 years later, SO employs around 20-30 people has some sister-businesses and is exponentially larger than its competitors in terms of traffic and amount of answers on the website. The website is well-functioning and has multiple income streams.
Pricing & Revenues
EE does not subsidize its users with free memberships, yet it makes this possible. It makes some money from advertising, posting jobs on its platform and offering some learning materials. The core business stays the membership fee though since for easy questions users prefer to go to other free websites.
SO makes mainly money from advertising, since the traffic is very high. Plus the users have a feedback system on their answers which allows users to build up credibility that can be used to apply for jobs and for employers to rate their candidates. This search job function is paid for from the companies who want to hire developers. Plus, the employee work mainly from remote, which saves a lot of costs ( statsexchange, 2014).
In this case we see that the article hit the nails on the head. SO has experience a strong growth r subsidizing its users having stronger same-side effects while EE became a sort of a niche.
Winner-takes-all dynamics
Both websites are profitable and growing, we can conclude there is no proper winner. In fact, multi-homing costs are not high for the users, meaning that using one site does not exclude the other and the sites are quite different from each other, creating a market where the two platforms can co-exist(Quora, 2014).
Again the article makes a good point about the requirements to take over the market.
Threat of envelopment
At this moment, none of the two companies is getting out of the market and there are no apparent threaths. The knowledge and user base they have accumulated over the years is a strong factor for both of them. Also, the margins are not that great, which makes the market not so attractive for other competitors. Websites are flexible so that makes it easy to change if new income streams are thought or for potential adjustments to their business model.
The article puts a multi-bundle platform as a threat for smaller platforms. This could be true for both sides, on the other hand losing control over the feedback system for SO and the quality of the experts for EE could be a risk if they consider to broaden their business model.
Conclusion
Eisenman et al. 2006 describe the platform situation quite accurately. Unfortunately, only 10 years later, all those platforms they mentioned, like Media Player, DIVX are not comparable to the dynamics of everyday websites.
The two businesses analyzed are not swimming in the gold but they are profitable abiding by the framework based on older business models.
Now we look at many businesses that do not charge the final user like Facebook, YouTube and so on. That is radically different from 2006 when free software was mainly of bad quality. It would be interesting to see a framework about this new companies and why some of them succeed and some just go bankrupt after the first VC rounds.
References
Eisenman et al. 2006, Strategies for two-sided markeets,
Quora, 2014. Available at https://www.quora.com/Is-Stack-Overflow-displacing-Experts-Exchange
Statsexchange, 2014. Available at http://meta.stackexchange.com/questions/79435/what-is-stack-overflows-business-model
