4 - Growing a Platform

Summary

In this chapter, we consider the strategies that platforms can use first to launch their operations and, later, to expand them. In Section 4.1, we explore the economic trade-offs for a firm of choosing a (two- sided) platform model rather than alternative modes of organization. For firms adopting the two-sided platform model, we then expose the difficulties that they will inevitably face when trying to bring two groups of agents together: we formalize, in Section 4.2, what is known as the “chicken-and- egg problem” and show how an adequate choice of strategies may solve it. In Section 4.3, we discuss the strategies that platforms can implement to increase the level of trust among users, thereby securing their participation and, possibly, intensifying the network effects. Finally, in Section 4.4, we examine why and how a platform may decide to expand the range of services that it offers.