Invisible Engines: How Software Platforms Drive Innovation and Transform Industries

The idea is initially to subsidize one side (or, more generally, to do whatever it takes) in order to get it on board even though the other side is not yet on board, and to use the presence of the subsidized side to attract the other side.6 This differs from the single-sided penetration pricing strategy discussed above because the key here is to ge

Interestingly, we are aware of no examples of software platforms that initially integrated into the applications/games/content that subsequently exited that business entirely. On the other hand, almost all such platforms have adopted a two-sided strategy and made significant investments in attracting third-party suppliers. Partial integration is th

Palm, on the other hand, regrouped. It surveyed Zoomer buyers to find out what they liked and didn’t like, what they used and didn’t use: What these people said opened the company’s eyes. More than 90% of Zoomer owners also owned a PC. More than half of them bought Zoomer because of software (offered as an add-on) that transferred data to and from

ensure that Apple doesn’t lose revenues to others. Thus Apple has adopted a “give away the blades and sell the razor” strategy. That pricing strategy is unique among the industries we have considered.

The ability to select bundles of features to sell helps firms segment their customers, control costs, and enhance profits. Bundled products offer consumers convenience, lower costs, and products tailored to their needs and wants.

Third, they reduce costs by providing shared facilities for the customers on each side. That’s the shopping mall case with which we began.

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

Multisided businesses can generate profits for themselves and benefits for their customers if they can figure out ways to increase and then capture indirect network externalities. There are three major ways in which they do this. First, they serve as matchmakers.

Components selling occurs when the firm offers A and B separately (cars and bicycle racks). • Pure bundling occurs when the firm only offers A and B together as a single bundled product, AB (men’s laced shoes). • Mixed bundling occurs when the firm offers the bundle AB and either or both of its components, A and B (such as the Sunday New York Times