CATALYST CODE: HOW TO IGNITE A PLATFORM BUSINESS AND RULE A PLATFORM-CENTRIC ECOSYSTEM 20 April 2012 Catalyst Course 2012 David S. Evans Founder | Market.

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Presentation transcript:

CATALYST CODE: HOW TO IGNITE A PLATFORM BUSINESS AND RULE A PLATFORM-CENTRIC ECOSYSTEM 20 April 2012 Catalyst Course 2012 David S. Evans Founder | Market Platform Dynamics Visiting Professor | University College London Lecturer | University of Chicago © Market Platform Dynamics Do Not Distribute Without Permission

Platform Businesses Dominate the Economic Landscape Catalyst Panorama 2

OpenTable: Intermediary between Two Different Kinds of Customers 3 © Market Platform Dynamics Do Not Distribute Without Permission

The OpenTable Business Model Restaurants Pay and Consumers Use it for Free 4 © Market Platform Dynamics Do Not Distribute Without Permission $100 million revenue in 2010 | $1.35 billion markets cap

The Result: Positive Feedback Effects Fuel Open Table Growth 5 © Market Platform Dynamics Do Not Distribute Without Permission  27 million reservations in 2011Q4 a month up from 19 million in 2010Q4  25k restaurants in 2011Q4 up from 20k in 2010Q4  More than 40% yoy growth in revenue

Many “Multi-Sided Platform” Businesses Operate Like This Positive Feedback Effects Fuel Business Growth 6 COMPANYCUSTOMER SIDE ACUSTOMER SIDE B WindowsUsersDevelopers Google SearchSearchersAdvertisers Deutsche BourseLiquidity providersLiquidity takers eHarmonyMenWomen Paris MatchReadersAdvertisers Roppongi HillsShopsShoppers American ExpressCardhodlersMerchants © Market Platform Dynamics Do Not Distribute Without Permission

These Multi-Sided Platforms Include Many Massive Global Businesses 7 © Market Platform Dynamics Do Not Distribute Without Permission

Catalysts Create Real Value Providing a Platform Where Customers Can Meet and Transact 8 Platforms can create tremendous value by eliminating pain points in exchange To ignite, platforms must solve extremely difficult coordination problem But if do, they can generate tremendous profits through positive feedback effects Sustaining those profits requires treacherous navigation in an n-dimensional universe of colliding platforms like Google Search (3-sided), Facebook’s Social Network (4-sided) and Microsoft Windows (3-sided) © Market Platform Dynamics Do Not Distribute Without Permission

Catalysts, Platforms and Two-Sided Markets Defining Terms 9 (Economic) Catalysts are intermediaries that create value by brining two or more types of agents (businesses or people) together. (Multi-sided) Platforms are the virtual or physical places that catalysts create to enable multiple types of agents to find and transact with each other and thereby create and exchange value. Economists sometimes call these platforms Two-sided Markets a term that was introduced in the pioneering work by French economists Jean-Charles Rochet and Jean Tirole. A customer type is sometimes call a platform “side”. © Market Platform Dynamics Do Not Distribute Without Permission

The Catalyst Curriculum 10 Catalyst Panorama How Platform Businesses Dominate the Economics Landscape Catalyst Defined The New Economics of Two-Sided Markets Catalyst Construction How to Use the Catalyst Toolkit to Build a Profitable Platform Business Catalyst Ignition How to Start a Platform Business and Obtain Explosive Growth Catalyst Competition How to Compete When there are Colliding Platform Ecosystems © Market Platform Dynamics Do Not Distribute Without Permission