Platform Strategy: How to monetize a market with network effects

In 2016, Peter Evans and Annabelle Gawer published “The Rise of the Platform Enterprise: A Global Survey”. Through collaboration with scholars from Africa, China, Europe, India and the United States, they provided a first systematic identification of leading platform companies that serves as a basis for the creation of an extensive dataset. This thesis has identified 202 digital multi-sided platforms by 168 firms over 16 industries, enabling a quantitative analysis of determinants for monetization strategies. A digital multi-sided platform (DMP) facilitates interactions between two or more partners through a digital platform. Subsequently, the DMP’s monetization strategy is, within the context of this study, the employment of one or more sources of revenue: the access by suppliers to the platform, the access by demand, successful transactions or the presence of the community. The latter referring to the monetization of data generated on the platform or the premium access to the whole community of buyers/users and sellers/content creators that the platform operator enjoys. A multivariate probit analysis, allowing for interdependency between monetization choices, is estimated under two distinct assumptions. The first assumes that transaction fees are ambiguously allocated to both parties that perform the transaction. The second assumes that transaction fees are either a charge to demand or supply, but cannot pass-through to the other. The results support an inverted U-curve relationship between the number of suppliers on a platform and the probability of monetizing suppliers. Another inverted U-curve relationship is found between the price level of payments and the probability of monetizing transactions. Furthermore, the estimations suggest that digital multi-sided platforms may have strategically eliminated charges to suppliers to outcompete traditional intermediaries in their industry. Followingly, we find that platforms operated by firms that operate multiple platforms are better able to monetize suppliers by generating additional surplus of being an integrated one-stop shop of platforms and being better able to employ price differentiations to capture this surplus. Lastly, Asian platforms, in comparison to platforms with headquarters in the rest of the world, are more likely to charge consumers while they are less likely to charge suppliers.