Platforms, Micrsoft, and Two-Sided Markets

Understanding the virtuous cycle of platforms.

The following quote is from “Strategies for Two-Sided Markets,” a HBR paper by a number of authors, including my friend Marshall W. Van Alstyne:

When successful, these platforms catalyze a virtuous cycle: More demand from one user group spurs more from the other. For example, the more video games developers (one user group) create for the Microsoft X-Box platform, the more players (the other user group) snap up the latest X-Box. Meanwhile, the more players who use X-Box, the more developers willing to pay Microsoft a licensing fee to produce new games. And as user bases grow, margins fatten.

In a word, yes! Van Alstyne has done some fascinating work on platforms and, if I met him a year ago, I would have quoted him extensively in The Age of the Platform.

In the book, I write about the network effects and virtuous cycle of platforms. (I don’t mention two-sided markets per se but in effect I’m writing about them, especially when I discuss the importance of ecosystems.)

With respect to X-Box, it is the rare Microsoft consumer success, something that it’s clearly trying to replicate with Surface, its new Windows 8 phone, and other products.

Easier said than done, to be sure. At least Microsoft seems to finally get it. It’s all about the platform.

philanimated

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