All of us quickly recognized that software platform businesses have at least two sides. Software platforms consist of services that are often made available to developers through APIs. They are also made available to computer users, but those computer users typically avail themselves of API-based services by buying applications that in turn use API

Two important factors influence multisided pricing structures. There may be certain customers on one side of the market—Rochet and Tirole refer to them as “marquee buyers”33—who are extremely valuable to customers on the other side of the market. The existence of marquee customers who create strong network effects tends to reduce the price to all c

It is easy to see why application developers find the ability to access system services through APIs appealing. Rather than every application developer writing hundreds of lines of code to allocate memory to an object, to take the example above, the operating system developer writes 116 lines of code and makes the system services this code provides

Palm adopted a sophisticated multisided platform strategy to secure its position in handhelds. According to Dubinsky, “We are a platform business. The idea in the beginning of a platform business is to get as much market share and installed base as possible, to draw as many developers as possible.”26 The tactics were similar to those we have seen a

The modular approach has numerous advantages. If a new program (or other complex system) can be specified as N modules, N teams can work in parallel. Moreover, individual modules can subsequently be improved without touching other parts of the overall program, and they can be used in other programs.

End users apart, every other participating group is a potential complementor, a provider of products or services that are complements to the software platform and that therefore enhance the value of the platform when their quality increases or their price falls.2 Hotel rooms in Las Vegas and flights to Las Vegas are complements; hotel rooms in Las

Second, they build audiences. Advertising-supported media do mainly that: they use content to attract eyeballs and then sell access to those eyeballs to advertisers.

One is familiar: developers. TiVo is evangelizing its software platform by providing tools and offering prizes for the best applications in several categories, including games, music, and photos.

Microsoft focused on providing lots of features. That didn’t help at first. But as happened with Windows, the hardware platform eventually caught up to the software platform. The learning and development of the richer platform eventually paid off, enabling Microsoft’s Pocket PC to close the gap with the Palm OS.