Fitting to this week’s subject of platform mediated networks, I’d like to share some experiences I’ve made building my own platform together with a friend back in Maastricht.
Background story
During our Bachelor time in Maastricht, a good friend of mine, Oskar, and I early realised that both of us were fascinated by the idea of starting our own project. So we spent some time brainstorming and went on the hunt to spot some good opportunities. It didn’t take us long until we found a problem that was not only bothering us two, but also many of our other friends:
Since almost every course at university requires you to buy a book and new books are super expensive, the second-hand book market is booming (I guess that’s the case in almost every student city). Almost all of the second-hand books are sold on Facebook, where buyers and sellers connect and communicate via dedicated Facebook groups (e.g. “Second-hand Book Market Maastricht”). The biggest problem with these groups is, however, that the posts appear chronologically, similar to how your personal timeline works. This means that with an increasing amount of listings being created, things quickly become quite messy. Without a search function, you find yourself scrolling through endless posts until you finally find the book you were looking for. And from a seller perspective, you need to ensure that your post stays on top of the list to be found by other students. At this point it was clear to us that we wanted to change something about this annoying and inefficient part of buying used books via Facebook. Determined to make a change, we soon had to make the frustrating realisation that without any programming knowledge whatsoever, it is hard to impossible to build something on your own.
It would take almost until the end of our studies that this situation changed. Coming back from our exchange semesters abroad, we both figured out that there was more than one month left until university would start again. So we decided to move back to Maastricht earlier and learn some programming. After 3 weeks of intense online courses we felt that we were finally able to build the application we envisioned almost 2 years earlier – BookStash was born.
Why am I telling you this story and how does it relate to our course content you might ask? According to Eisenmann, Parker & van Alstyne (2006) “[p]roducts and services that bring together groups of users in two-sided networks are [referred to as] platforms”. The web application we’ve built, BookStash, is a good example of such a platform. On the one side there are the sellers of used books and on the other side students who are looking to buy used books. BookStash serves as the intermediary platform that facilitates the transactions of both sides of the equation. Fitting to this week’s subject of platform mediated networks, I’d like to share some thoughts on this topic and discuss two key points taken from the literature.
1. Pricing the platform
Two-sided networks typically have a “money” and a “subsidy” group of users (Eisenmann, Parker & van Alstyne, 2006) – remember the bar example from the lecture. Ideally, you as the platform provider know which side of your network belongs to which group. Attracting many users on the subsidy side will bring more money-side users to the platform. An increased presence of money-side users, in turn, will drive more subsidy-side users to the platform. Especially for platforms that just launched, this “penguin” problem is particularly challenging though. Why should subsidy-side users sign up when there are few to none money-side users? And why would money-side users pay money when there are almost no customers for them?
Let’s have a look at BookStash. Both sides, sellers and buyers, are students, so their willingness to pay for a service is low anyways (i.e. they are both highly price sensitive). Besides the fact that we built BookStash more as a “fun-but-relevant” learning project and not to make money, it was clear that our main goal in the beginning should be to drive users on both sides to the platform. We decided that this is only possible if the service is free for everyone. Maybe when a critical mass of users is reached, we might think about charging a small fee for the sellers of books (the rationale here is that sellers would potentially just sit on their books if they cannot sell them so they are happy to make any money instead of none).
Taking BookStash as an example, it might make sense for new platforms to delay monetisation on either side until a certain user base is reached. Only then providers can start thinking about the “money” vs. “subsidy” pricing decisions.
2. Website registration: Value vs. Privacy
Most of today’s websites require users to register to access the key functionalities or content on their site (and so does BookStash). Providing personal information such as an email or home address is a very common part of the sign-up process. Disclosing such information is likely to cause some privacy concerns on the user’s side and might even scare people away from registering at all. This is why we don’t ask users to link their Facebook profile in the registration process but leave is as an optional point in your personal settings once registered. In contrast to the privacy concerns, people also know that without registering, they will not be able to take full advantage of the privileges and benefits of the website in question. Thus, there is a personal conflict between privacy concerns and access to value (Li and Pavlou, 2016).
While I certainly agree with everything that is stated in the literature, I’d like to bring up another point regarding the registration discussion. In my opinion you can argue for cases where a mandatory registration on a website actually increases trust and is a sign of quality. Since people have to go through the registration procedure and are willing to provide personal information, they show commitment and an honest intent towards the network they would like to enter. Sure, this argument is somehow weakened by the possibility of creating fake profiles, but I still would prefer to engage with somebody on a marketplace where users have to register with personal information instead of one without this requirement. This is also why sellers of books have to register on the BookStash platform. Interesting side note: Even though you could register on BookStash only indicating your first name, most people use their full name.
It would be great to hear your thoughts on some of the things I discussed in my post! Also if you have any question about the programming or web app project in general, just shoot me a message or leave a comment. Oh, and don’t forget to check out BookStash 😉
PS: The website wasn’t used for quite a while, so don’t be surprised.
References
Eisenmann, T., Parker, G., and Van Alstyne, M.W. 2006. Strategies for Two-Sided Markets. Harvard Business Review 84(10) 92-101.
Li, T., and Pavlou, P. 2016. What Drives Users’ Website Registration? The Network Externalities versus Information Privacy Dilemma. (Working Paper).
