1. Multi-sided platforms Russ Abbott Department of Computer Science, California State University, Los Angeles

2. June 28, 2015June 28, 2015June 28, 2015Abbott - Multi-sided platforms2 The USPS “Open at the top; open at the bottom; and continually (but slowly) changing” — IEEE Conference on “Systems of systems.” “Open at the top; open at the bottom; and continually (but slowly) changing” — IEEE Conference on “Systems of systems.” Top: what we do with it. Open to new uses, e.g., the flourishing world of mail-order catalogs; chain letters. Top: what we do with it. Open to new uses, e.g., the flourishing world of mail-order catalogs; chain letters. Bottom: how it is implemented. Open to new implementations, e.g., with changing technologies from the pony express to commercial jets Bottom: how it is implemented. Open to new implementations, e.g., with changing technologies from the pony express to commercial jets (Slowly) changing: the abstractions it defines. Change slowly, e.g., zip codes, second class mail, express mail. (Slowly) changing: the abstractions it defines. Change slowly, e.g., zip codes, second class mail, express mail. Something important. Not quite sure what it was. Not necessarily technological. But a lot like the Internet and Service Oriented Architectures (SOA). Something important. Not quite sure what it was. Not necessarily technological. But a lot like the Internet and Service Oriented Architectures (SOA).

3. June 28, 2015June 28, 2015June 28, 2015Abbott - Multi-sided platforms3 Multi-sided software platforms Evans, Hagiu, and Schmalensee (2006) Invisible Engines: How Software Platforms Drive Innovation and Transform Industries, MIT Press. (freely downloadable) Evans, Hagiu, and Schmalensee (2006) Invisible Engines: How Software Platforms Drive Innovation and Transform Industries, MIT Press. (freely downloadable) Operating systems and game consoles. Operating systems and game consoles. More examples: shopping centers, dating websites, TV channels, TV talk shows, Amazon resellers, telephone & telegraph systems. More examples: shopping centers, dating websites, TV channels, TV talk shows, Amazon resellers, telephone & telegraph systems. The web browser: web sites and surfers. The web browser: web sites and surfers. Google dynamically generates multi-sided platforms of search result pages (sites and searchers. Google dynamically generates multi-sided platforms of search result pages (sites and searchers.

4. June 28, 2015June 28, 2015June 28, 2015Abbott - Multi-sided platforms4 Two- (and multi-) sided markets Markets that connect disparate groups. Markets that connect disparate groups. A stock exchange matches buyers and sellers. A stock exchange matches buyers and sellers. A credit card system matches merchants and cardholders. A credit card system matches merchants and cardholders. Not your usual business model: buy; add value; sell. Not your usual business model: buy; add value; sell. The value to each group increases as the size of the other group(s) grow. (Also known as network effect.) The value to each group increases as the size of the other group(s) grow. (Also known as network effect.) By providing services to two groups of users one can sell access to one group to the other. By providing services to two groups of users one can sell access to one group to the other. A TV station matches creators of programming and viewers, access to which it then sells to advertisers. Google! A TV station matches creators of programming and viewers, access to which it then sells to advertisers. Google! Sometimes both groups can be charged — some credit cards, classified ads. Sometimes both groups can be charged — some credit cards, classified ads. Often the seller pays (eBay). Often the seller pays (eBay). In The Recycler ads are free; the buyers pay. In The Recycler ads are free; the buyers pay. 2001Institut d'Economie Industrielle (IDEI). Jean-Charles Rochet and Jean Tirole (2001) Institut d'Economie Industrielle (IDEI).

5. June 28, 2015June 28, 2015June 28, 2015Abbott - Multi-sided platforms5 Multi-sided platforms as refactorings A multi-sided platform may be understood as the standardization and factoring out (refactoring) of a hard part of an interaction and providing it as a service. A multi-sided platform may be understood as the standardization and factoring out (refactoring) of a hard part of an interaction and providing it as a service. The hard part done by the platform.  USPS: sending & receiving materials.  Credit card: paying and being paid.  Dating service: finding the other party and making an initial contact.  Robert’s Rules of Order : the interaction protocol

6. June 28, 2015June 28, 2015June 28, 2015Abbott - Multi-sided platforms6 Platform operational structure User Implementation Also USPS, a database Robert’s Rules of Order Presiding officer/parliamentarian

7. June 28, 2015June 28, 2015June 28, 2015Abbott - Multi-sided platforms7 Software platforms as refactorings Think about the abstractions (data types and operations on objects of those types) platforms offer and what implements the abstractions. Think about the abstractions (data types and operations on objects of those types) platforms offer and what implements the abstractions. Recall from last year that emergence is a level of abstraction. Recall from last year that emergence is a level of abstraction. Databases: store, modify, and retrieve tabular data — or linked text as in Wikipedia. Databases: store, modify, and retrieve tabular data — or linked text as in Wikipedia. Each platform is a single shared implementation. Each platform is a single shared implementation. File extensions for shared files, e.g.,.doc,.xl. File extensions for shared files, e.g.,.doc,.xl. Each user has his/her own implementation. Each user has his/her own implementation.

8. June 28, 2015June 28, 2015June 28, 2015Abbott - Multi-sided platforms8 File extensions for shared files (.doc,.xl) Each user has his/her own implementation. User Implementation Xyz.doc Representation of internal state for this transation E.g., MS Word Requires import/export capability

9. June 28, 2015June 28, 2015June 28, 2015Abbott - Multi-sided platforms9 Infrastructure platforms The interests of platform owners (maximize profit) are not always the same as those of platform users. The interests of platform owners (maximize profit) are not always the same as those of platform users. Some platforms are so important we don’t want the owner’s interests to take priority. Some platforms are so important we don’t want the owner’s interests to take priority. Publicly owned and operated (or highly regulated) multi-sided platforms: Publicly owned and operated (or highly regulated) multi-sided platforms: USPS. (So important it’s in the constitution.) USPS. (So important it’s in the constitution.) telephone system. telephone system. FDA — an artificial platform imposed between seller and buyer. FDA — an artificial platform imposed between seller and buyer. Not every important platform is multi-sided: power system, roads and highways,... are single-sided. Not every important platform is multi-sided: power system, roads and highways,... are single-sided.

10. June 28, 2015June 28, 2015June 28, 2015Abbott - Multi-sided platforms10 Standards as (ephemeral) platforms Since a platform is a level of abstraction, it can be characterized by a specification. Since a platform is a level of abstraction, it can be characterized by a specification. The specification can then serve as the definition of the platform, e.g., HTML. The specification can then serve as the definition of the platform, e.g., HTML. Multiple vendors can be encouraged to compete to implement it. Multiple vendors can be encouraged to compete to implement it. Defangs the platform owner Defangs the platform owner Favored by platform users. Favored by platform users.

11. June 28, 2015June 28, 2015June 28, 2015Abbott - Multi-sided platforms11 Open source platforms If your business depended on a platform, would you want that platform owned (and controlled) by some other business? If your business depended on a platform, would you want that platform owned (and controlled) by some other business? Open source software. Open source software. Two categories: money driven and other. Iansiti and Richards, http://www.hbs.edu/research/pdf/07-028.pdf Two categories: money driven and other. Iansiti and Richards, http://www.hbs.edu/research/pdf/07-028.pdf Money-driven tend to be multi-sided platforms. Money-driven tend to be multi-sided platforms. Top two in terms of corporate support: Linux and Firefox. Top two in terms of corporate support: Linux and Firefox.

12. June 28, 2015June 28, 2015June 28, 2015Abbott - Multi-sided platforms12 Platforms as environments Sometimes platforms define an environment. Sometimes platforms define an environment. The free market economic system is defined primarily by two platforms. The free market economic system is defined primarily by two platforms. The monetary and banking system. The monetary and banking system. Factors out the economic notion of value. Allows value to be abstracted, stored, exchanged with minimal overhead. Factors out the economic notion of value. Allows value to be abstracted, stored, exchanged with minimal overhead. The legal and judicial system. The legal and judicial system. Factors out agreements (contracts) and enforcement mechanisms. Overhead not so minimal (lawyers) — but better than hiring your own enforcers. Used to rely more on reputation. Still do in eBay. Factors out agreements (contracts) and enforcement mechanisms. Overhead not so minimal (lawyers) — but better than hiring your own enforcers. Used to rely more on reputation. Still do in eBay. Much too important to be controlled privately. Much too important to be controlled privately.

13. June 28, 2015June 28, 2015June 28, 2015Abbott - Multi-sided platforms13 Natural language: the crown jewel of multi-sided platforms. Open at the top: virtually unlimited creativity. Open at the top: virtually unlimited creativity. Open at the bottom: we each build our own implementations. Open at the bottom: we each build our own implementations. Continually (but slowly) changing. Continually (but slowly) changing. It’s a standard. We have dictionaries and grammar books for “standard English.” It’s a standard. We have dictionaries and grammar books for “standard English.” We all implement our versions of the standard. We all implement our versions of the standard. It’s open source. It’s open source. It is continually undergoing modification — but slowly enough so that most of us can keep up. It is continually undergoing modification — but slowly enough so that most of us can keep up.