Should platform owners be allowed to vertically integrate?

16

September

2021

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Within the dynamics of a multi-sided platform there are three groups present, namely the users, complementors and platform owner. The platform owner provides the infrastructure through which complementors can offer their products to the users. Complementors thus compete with each other to sell their products on the platform to the users, and the platform owner captures value for providing the infrastructure.

Complementors however do not only face competition from their peers, but also from their platform owner since they tend to vertically integrated. Meaning that the platform owners produces a product itself and offers it on its own platform, e.g. Apple developing their own app. When a platform owner enters its own platform it affects complementor’s performance significantly, in some cases even resulting in complementors leaving the affected category or platform in its entirety. There are two main reasons why the vertical integration significantly affects complementors.

Firstly, there is an information asymmetry present between the platform owner and the complementors. It is no secret that platform owners harvest a vast amount of data regarding all the activity on the platform. These data are highly relevant for both the platform owner and the complementors, however they are largely only available for the platform owner. For example, Apple know exactly how much time all users spend on which applications.

Secondly, complementor’s products are sometimes made obsolete. Due to the fact that the platform owner often controls the ecosystem the platform it is in, the platform owner is able to only offer their own products. For example, Apple made walkie-talkie apps obsolete by only making their own version available on the apple watch.

Platform owners themselves argue that capturing value which previously belonged to the complementors is not the incentive of their vertical integrations. Amazon explains that by offering some products themselves, they are able to meet the unmet demand in popular categories. Platform owners also claim that the enter crowded categories to steer complementor’s innovation to other categories. Next to that, platform owners are in some cases able to offer better products to the users due to the information asymmetry with the complementors.

Since the true motivation for the market entry of the platform owner cannot be observed, discussions regarding antitrust regulations and ethics are taking place. However, there has not been an unambiguous answer to the question yet if the vertical integration of platform owners is to be considered fair competition.

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This is technological propaganda. 5/5 (4)

28

September

2019

The results of Brexit or Trump happening were shocking but not surprising. However, a greater concern emerged: the accidental or deliberate propagation of misinformation via social media.

44% of Americans get their news from Facebook (Solon, 2016). Many millions of people saw and believed fake reports that “the pope had endorsed Trump; Democrats had paid and bussed anti-Trump protesters; Hillary Clinton was under criminal investigation for sexually assaulting a minor” (Smith, 2016). If our democracy is built on reliable information, what is real?

The good, the bad and the ugly admission fee

In the Arab Spring campaign, Facebook as well as Twitter were first politicized and used to inspire people as tool for democracy. With Brazil, Brexit, and US we saw the equilibrium shift to the other side. We assume that there is an admission fee to pay before we are allowed to the connected world (Thompson, 2019). How many times a day have you been asked to agree with the terms on a website and clicked accept to only access the data behind it?

The recent Cambridge Analytica scandal exposes Facebook’s rather porous privacy policies and the company’s casual attitude to oversight. By using the platform, Cambridge Analytica, a British data mining firm, was able to extract data of 270.000 people by conducting a survey. People accepted to share details about themselves –and unknowingly about their friends (Economist, 2018). This amounted to information from 50 million Facebook users in overall, which the company happily shared with their customers, including Trump (Economist, 2019).

Full-service propaganda machine and Nazi Germany

In essence, companies like Cambridge Analytica can use Facebook to “target voters who show an interest in the same issues or have similar profiles, packaging them into what it calls ‘lookalike audiences’.” (Economist, 2018). The practice used effectively shaped voting results in several countries such as Argentina, Kenya, Malaysia, and South Africa even before the US presidency in 2016 (Thompson, 2019).

The practice to address certain lookalike audiences with feelings rather than facts, playing up vision to create a fake emotional connection, is not new. Nazi Germany shows this. Yet, we have the internet-driven efficiency (Smith, 2016).

Clickbait

Like the headline of this article, revenue-driven platforms such as Google and Facebook are using news feeds that engage more people, essentially to expose them to more ads. Whether the article is reliable or not does not matter, the algorithm boosts sensational stories that reinforce prejudice in order to draw more clicks (Smith, 2016). As mentioned before, if we use this as our primary information source, how can we assure that we are able to make informed decisions?

To conclude, platforms cannot stand at the sidelines making profit and see how they are used as a stepping stone to the next political victory for the highest bidder. They should be held accountable. Now.

 

References:

Economist (2018) The Facebook scandal could change politics as well as the internet. Data privacy. Available at: https://www.economist.com/united-states/2018/03/22/the-facebook-scandal-could-change-politics-as-well-as-the-internet

Economist (2019) “The Great Hack” is a misinformed documentary about misinformation. The Facebook scandal. Available at: https://www.economist.com/prospero/2019/07/24/the-great-hack-is-a-misinformed-documentary-about-misinformation

Smith A. (2016) The pedlars of fake news are corroding democracy. The Guardian. Available at: https://www.theguardian.com/commentisfree/2016/nov/25/pedlars-fake-news-corroding-democracy-social-networks

Solon O. (2016). Facebook’s failure: did fake news and polarized politics get Trump elected?. The Guardian. Available at: https://www.theguardian.com/technology/2016/nov/10/facebook-fake-news-election-conspiracy-theories

Thompson A. (2019) The Great Hack terrified Sundance audiences, and then the documentary go even scarier. IndieWire. Available at: https://www.indiewire.com/2019/08/the-great-hack-documentary-oscar-cambridge-analytica-1202162430/

Photograph: Dado Ruvic/Reuters

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Shovelware 2.0: a cautionary tale for Steam

21

October

2018

5/5 (1) In 1983, the home video game console market crashed, dropping from 3.2 billion US$ in revenue in 1982 to 100 million US$ in 1985.

The cause?

Due to the rising popularity of gaming and a lack of publisher control, the market became oversaturated with Shovelware: competing home consoles, video games, blatant low quality cash grabs and knock-offs of both. Customers could no longer find good games, and developers struggled to provide those good games when competing with the flood of shovelware. Now, slowly but surely, Steam is poised to undergo the same as the gaming industry in 1983, if only to a lesser degree.

The Steam platform is the current industry leader in providing video game digital distribution, with many pundits, critics and Valve, the developer of Steam, calling it a monopoly (Lockley, 2013). It boasts the biggest user-base and selection of games. However, the most important thing to note is that of Steam’s 19,000 available games in 2017 about 40% of them were released in 2017 (McAloon, 2018). Steam Greenlight, and its successor Steam Direct were designed by Valve to allow small developers to sell their games on the platform with little interference from their part, as they do not wish to be the gatekeepers of PC gaming due to their monopoly (Grubb, 2017). The result, however, is a flood of low-effort and sometimes fraudulent games: shovelware 2.0

These games are often barely functional, illegally resell pre-purchased assets and/or meet requirements for entry by bribing users to rate them favourably. The Steam storefront is a mess when not looking specifically at top sellers or most popular categories, leading many smaller independent developers to move over to other platforms or even other markets. The game Blossom Tales moved away from Steam to the Nintendo Switch which led to a twenty fold increase of lifetime sales for the game (Khan, 2018).

While Valve has taken some steps to remedy this, such as leveraging Steam’s more active community members to curate these games, the problem still remains and threatens to pull Steam into its own video game crisis in the future.

I’m just glad that I have a GOG.com and Green Man Gaming account waiting in the wings…

 

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Happy birthday, Instagram!

6

October

2018

No ratings yet. Happy birthday, Instagram! Today, it is Instagram’s eighth birthday. In the past eight years, many has changed about the app. It has transformed itself to become one of the biggest, most popular social media platforms in the world. What has made the app so significantly big?

On the 6thof October 2010, Instagram was launched, solely being available in the App Store yet. One and a half year later, it became available for Android as well. Its initial purpose was allowing users to share pictures with family and friends, and its competitive edge was the ability to professionally adjust photos by giving filters and frames. (Otto, 2018)

Ever since, Instagram has grown significantly, due to its network effects. Being a platform, Instagram gained great value by its community, i.e. the users of the app. The positive same-sided network effects came at play when an increased number of users attracted an ever-growing number of users. When one did not have Instagram yet, he or she would become very curious what kind of pictures, and later on also videos, users of Instagram shared. Soon, they would start using the app as well.

Currently, Instagram has become a platform where ‘normal’ people can become famous and a role model for many; they become so-called ‘influencers’ and have numerous followers. However, this had led to much critique as well: the lives of influencers seem ever-perfect. They seem to travel nonstop, are always very good-looking, are extremely fashionable, and experience many cool events. One may wonder how ‘true’ this depiction of reality is. Despite their many followers, many users of Instagram may also become annoyed because of the ‘overload’ of Instagram influencers. This, in turn, may lead to negative same-sided network effects: users may stop using the app, because they feel annoyed by those influencers.

What do you think? May the overload of Instagram influencers lead to negative same-sided network effects? Or do you believe the option to ‘unfollow’ those influencers will diminish the negative same-sided network effects sufficiently?

References:

Otto, R., 2018. Acht jaar Instagram: ‘Normale mensen kunnen rolmodellen worden. Nu.nl. Retrieved from: https://www.nu.nl/apps/5498408/acht-jaar-instagram-normale-mensen-kunnen-rolmodellen-worden.html

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Can Lyft take it all against uber?

22

October

2017

No ratings yet. On October 19 Lyft announced in a blog that it received a $1 billion investment from Alphabet inc., Google’s parent company. In January 2014 it very much looked like Uber was going to be the single, dominant platform, as it was sitting at a 91% market share in the US compared to the 8% market share of Lyft.(marketrealist.com). As of August 2017 however, Uber’s US market share seems to have declined to 74.3%, while Lyft’s market share increased to 23.4%. (marketrealist.com) It looks like the momentum lies with Lyft for now, but will the emerging competitor ever be able to take the lead?

 

First of all, let us look at the market for transportation apps and determine whether or not the conditions for a winner takes all market as defined by Eisenmann et al. apply.

Strong positive cross-side network effects are definitely present. More available drivers will mean that consumers are able to more quickly find a ride, while more available customers will mean that drivers endure less idle time.

 

It is unlikely that differentiated platforms will emerge, as differentiation opportunities are virtually nonexistent. Passengers want speed and quality and the only thing drivers care about is making as much money as possible. Currently Lyft and Uber are very similar applications, and I do not see this changing in the future.

 

The only argument against a winner takes all market is the fact that multi-homing costs are not high in this market. It is easy to drive for both Lyft and Uber, and maintaining two mobile applications instead of one does not take much effort. Personally I am of the opinion that this fact is not too relevant, as great monopolies have arisen in the past despite of low multi-homing costs e.g. EBay.

 

I personally think Lyft is more than capable of completely taking over the market, mainly because of how strong network effects are in this market. Lyft definitely has the momentum right now, mainly because of the managerial scandals that are plaguing Uber. Lyft can learn from the mistakes Uber made by professionalizing at an earlier stage, and is doing so. Alongside the investment, David Lawee will be joining Lyft’s board of directors, a man with a lot of corporate experience from working at google. (blog.lyft.com)

 

 

References and sources:

Eisenmann, T., Parker, G. and Van Alstyne, M. (2006). Strategies for Two- Sided Markets. Harvard Business Review, October, pp.8-9.

Alphabet’s CapitalG Leads $1 Billion Round in Lyft. (2017). [Blog] Lyft Blog. Available at: https://blog.lyft.com/posts/alphabet-capitalg-leads-1-billion-round-in-lyft [Accessed 22 Oct. 2017].

marketrealist.com. (2017). Why Uber’s Market Share Has Tanked. [online] Available at: http://marketrealist.com/2017/09/why-ubers-market-share-has-tanked/ [Accessed 22 Oct. 2017].

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GoSpooky! How teenagers disrupt Snapchat marketing

21

October

2016

4.67/5 (3) And again I missed an opportunity to become a millionaire! At the moment millions of people around the world are watching ‘snaps’. For the elderly amongst us (>25): a snap is a photo/video on Snapchat. Snapchat started five years ago as a joke of a few students at Stanford, but today it’s one of the most popular mobile apps among the youth. A unique feature of this app is that snaps are only temporarily available. Snapchat is currently preparing for an IPO that is expected to value the company at $25 billion! That’s even more than for example Facebook ($16 billion) and Twitter ($18 billion).

But how can companies make use of Snapchat? This platform is particularly interesting, because it enables (big) companies to reach teenagers, a target group which barely uses traditional media (e.g. TV, newspapers). But these companies have a problem: they have no idea of how to run a campaign on Snapchat. Two Dutch boys (Tim, 18 and Liam, 19) jumped into this gap and started a company called GoSpooky: the first Snapchat marketing agency in Europe. GoSpooky creates Snapchat campaigns and strategies for advertisers. These lads expect a turnover of €150.000 for 2016 thanks to campaigns for e.g. ABN-Amro, Hema and Albert Heijn.

You might think that their young age is a disadvantage in doing business, but I have some bad news for you guys (BIM/marketing students). According to these chaps, graduates who begin with their job at a big company are chocked up with theories and models. Moreover, they are often not familiar with Snapchat (unless they learned it from their little brother/sister). A mistake that is often made by big companies is that they want to run the exact same campaign on all platforms, but it’s not a bad idea to do it slightly different on Snapchat. It is important to tell a story and to keep it personal.

We can conclude that Snapchat is one of the most interesting platforms of this time. It offers new opportunities for advertisers and the boys of GoSpooky did a great job by taking advantage of this knowledge gap.

Sources:

http://binnenland.eenvandaag.nl/tv-items/69923/waarom_is_snapchat_25_miljard_waard_

http://dewerelddraaitdoor.vara.nl/media/365691

http://leijp.nl/snapchat-bedrijf/

http://gospooky.com/

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Technology of the Week – Platform Mediated Networks In The Education Industry

29

September

2016

No ratings yet. http://https://www.youtube.com/watch?v=i4IVktnCnHY

In this blogpost we will discuss two platform mediated networks in the education industry.

A platform is a community that should have an useful function or service and allow 3rd party access. Furthermore, it is open and encourages regular participation in a multi-sided market between several partners.

Due to advances in technology and the spread of the internet, education is moving to the digital world. With the increase of tuition fees, a recent trend emerging is online education, specifically massive open online courses, short MOOCs, accessible to everyone.

Coursera offers those MOOCs and was founded back in 2012. It is a mediating network platform, connecting learners and academic institutions all over the world. Coursera offers over 2000 courses in a variety of disciplines.

At the moment, the Coursera offers three distinct course enrollment possibilities.

  1. The ‘free’ option includes material, online lessons and graded assignments but asks a  one-time-fee of $49 for an official certificate
  2. The fee-based option offers content for free, but a fee for graded assignments and exams.
  3. The specialized courses option allows users to follow several sub courses, with a total fee range between $300 and $600.

Another education platform is Duolingo, a free language learning platform. While translating the web, the developers discovered a new way to do this. A free gamified language teaching application, Duolingo was born.

Duolingo believes in a fair business model for language education. While using Duolingo, you create value and pay with your time. Duolingo generates some revenues by translating real-world text provided by clients and covers further costs by offering low cost language proficiency tests to users.

Having introduced two mediated network platforms, the question arises what gives them the competitive edge or where they may lack behind? Therefore, one has to look at strengths and weaknesses of both platforms.

Both platforms share the following strength:

  1. Widely accessible
  2. Less expensive than their alternatives
  3. Large variety of content
  4. Big online community

Although both platforms share similar strengths, they each have unique weaknesses.

Duolingo

  1. Content is mostly centered around the English language
  2. Speaking: oral part lacks practice as focus is on written material
  3. The teaching methods can be subverted with other strategies.

Coursera:

  1. Costs for specific courses
  2. No academic feedback from a professor
  3. No official diploma, just certificates who are not yet widely recognized.
  4. Only mediator, no control over content

Education is moving towards digitization and will continue to do so. People will keep searching for cheaper alternatives to get education. Online education platforms will be able to foster its positive network effects due to the increased number of users. As the competition will keep increasing in the following years, differentiation will become more and more important. Online content is becoming more widely available, easily accessible and will forever change the way of learning as we know it now.

 

Group 60

459556 – Moritz Schaifers

460853 – Femke Sytstra

387024 – Max Oudenbroek

380957 – Shichen Yang

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